Corporate governance statement

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KGHM Polska Miedź S.A., whose shares are listed on the Warsaw Stock Exchange, in the period from 1 January 2021 do 30 June 2021 was compliant with the corporate governance principles described in the document „Best Practice for GPW Listed Companies 2016”, which was adopted by the Warsaw Stock Exchange Supervisory Board on 13 October 2015 (this document is available on the official website of the Warsaw Stock Exchange and in the archives of KGHM Polska Miedź S.A.’s corporate website.

On 29 March 2021, the Supervisory Board of the Warsaw Stock Exchange via a Resolution No 13/1834/2021 adopted the document „Best Practice for GPW Listed Companies 2021” (hereafter “Best Practices”), in force from 1 July 2021. The content of the principles is available on the website of the Warsaw Stock Exchange devoted to this subject , as well as on the corporate website of KGHM Polska Miedź S.A. in the corporate governance section. Due to the above, a number of measures were taken to adjust KGHM Polska Miedź S.A. to the current trends in the area of corporate governance and market expectations, expressed in the content of the new Best Practices. KGHM Polska Miedź S.A. strives at every stage of its operations to apply the principles contained in the „Best Practices”, taking into account the principles of proportionality and adequacy to the greatest possible extent. In accordance with the published statement on the Company’s compliance with the principles contained in the „Best Practices”, the following principle does not apply to the Company:

Principle

Explanation
Principle 3.7 which states that principles 3.4 to 3.6 apply also to members of the company’s group which are material to its activity if they appoint persons to perform such tasks.

(see principles 3.4. – the remuneration of persons responsible for risk and compliance management and of the head of internal audit should depend on the performance of delegated tasks rather than short-term results of the company

Principle 3.5. – persons responsible for risk and compliance management report directly to the president or other member of the management board.

Principle 3.6. – the head of internal audit reports organisationally to the president of the management board and functionally to the chair of the audit committee or the chair of the supervisory board if the supervisory board performs the functions of the audit committee)

This principle is not applicable to the Company. The Company has not appointed persons to perform the tasks specified in principles 3.4-3.6. in entities of the Group, but has appointed persons in Group entities who serve as risk coordinators and report directly to persons responsible for risk management and compliance in the Parent Entity (i.e. in the Company). Moreover, in 2022, following completion of the development of an IT tool for the compliance function, it is expected that compliance coordinators will be appointed in these companies. The Company will also consider, in respect of group companies, the development of a structure which would meet the criteria of principles 3.4.-3.6. in terms of the risk management and compliance function. In Group entities the audit function is fulfilled by the Internal Audit Department of the Parent Entity (the Company).

In accordance with the published statement on the Company’s compliance with the principles contained in the „Best Practices”, the following principles are not applied:

Principle

 Explanation
Principle 1.3.1 on integration of ESG factors in the business strategy, including in particular environmental factors, including measures and risks related to climate change and sustainable development. The principle is partially applied. The Company includes ESG and environmental themes in its business strategy, and is fully conscious of its impact on its surroundings and on the need for the Company to develop in compliance with the principles of sustainable development. The Company regularly reports on risk analysis, emissions (scope 1, 2 and, since July 2021, scope 3), energy usage, water intake and many other GRI indicators in the non-financial and integrated reports published by the Company. At present KGHM is developing more detailed solutions in terms of developing plans and strategic goals as regards climate, among others in the form of a Climate Policy which will include emissions reduction targets, yardsticks and emissions scopes and scenario analyses, as well as detailed descriptions of the risks and opportunities related with climate change.
Principle 1.3.2 on integration of ESG factors in the business strategy, including in particular social and employee factors, including among others actions taken and planned to ensure equal treatment of women and men, decent working conditions, respect for employees’ rights, dialogue with local communities, customer relations. The principle is partially applied. The Company regularly publishes a broad range of information on its actions as regards social and employee issues, proper working conditions, respecting employee rights, dialogue with local communities and relations with its customers and stakeholders. In accordance with planned regulations, such as the SFDR, the Company will soon be providing information regarding employment at senior management levels broken down by gender as well as information on current and planned actions aimed at ensuring gender equality.
Principle 1.4.1 according to which a company publishes on their website information concerning the framework of the ESG strategy that should explain how the decision-making processes of the company and its group members integrate climate change, including the resulting risks. At present the Company is developing more detailed solutions in terms of developing plans and strategic goals as regards climate change, among others in the form of a Climate Policy. This work includes, among others, detailed descriptions of the risks and opportunities related to climate change as well as the modelling of decision-making processes in the Company and Group entities in terms of questions related to climate change. The completion of this work will enable the appropriate information to be provided on the website.
Principle 2.1. which states that a company should have in place a diversity policy applicable to the management board and the supervisory board, approved by the supervisory board and the general meeting, respectively. The diversity policy defines diversity goals and criteria, among others including gender, education, expertise, age, professional experience, and specifies the target dates and the monitoring systems for such goals. With regard to gender diversity of corporate bodies, the participation of the minority group in each body should be at least 30%. The principle is partially applied. While the Company does not have a Diversity Policy as regards the Management Board and Supervisory Board, due to the international scope of its operations, cultural differences and the nature of the sector in which the Group operates, the „Declaration of Diversity of KGHM Polska Miedź S.A.” has been implemented. In its operations the Company complies with discrimination prohibitions and undertakes actions aimed at respecting diversity in the workplace. An organisational culture is nurtured based on mutual respect, equality, access to development opportunities and optimal use of employee talent regardless of, among others: ethnic origin, age, gender, sexual orientation, nationality, citizenship, religious orientation, political convictions or trade union membership. The Company aims at ensuring reasonable diversity in the selection of persons to the management board and supervisory board. The practical application of the „Declaration of Diversity” results in fully respecting gender equality and sufficient selection in terms of expected skills, knowledge, experience and education. The management and supervisory teams are consequently composed of persons of various genders, ages and experiences. More information on the Company’s approach to diversity in the management and supervisory bodies is presented further in this Corporate Governance Statement.
Principle 2.2. according to which persons taking decisions to elect members of the management board or the supervisory board of companies should ensure that the composition of those bodies is diverse by appointing persons ensuring diversity, among others in order to achieve the target minimum participation of the minority group of at least 30% according to the goals of the established diversity policy referred to in principle 2.1. The principle is partially applied. As described in reference to principle 2.1, the Company does not currently have a Diversity Policy. Nonetheless the Company aims at ensuring reasonable diversity in terms of the members of the supervisory board and management board. The management and supervisory teams are composed of persons of various genders, ages and experiences. More information on the Company’s approach to diversity in the management and supervisory bodies is presented further in this Corporate Governance Statement.
Principle 2.11.6. according to which, in addition to its responsibilities laid down in the legislation, the supervisory board prepares and presents an annual report to the annual general meeting once per year, includes the information regarding the degree of implementation of the diversity policy applicable to the management board and the supervisory board, including the achievement of goals referred to in principle 2.1. The principle is not applied at present due to a lack of a Diversity Policy (see the explanation regarding the non-application of principle 2.1.)
Principle 3.3. according to which a company participating in the WIG20, mWIG40 or sWIG80 index appoints an internal auditor to head the internal audit function in compliance with generally accepted international standards for the professional practice of internal auditing. In other companies which do not appoint an internal auditor who meets such requirements, the audit committee (or the supervisory board if it performs the functions of the audit committee) assesses on an annual basis whether such person should be appointed. The principle is partially applied. The Company has an Executive Director for Audit. As not all of the criteria for independence as understood in generally-recognised international internal audit standards are complied with, the Company partially applies the principle.
Principle 3.4. concerning the remuneration of persons responsible for risk and compliance management and of the head of internal audit should depend on the performance of delegated tasks rather than short-term results of the company. The principle is partially applied. The remuneration of persons responsible for risk and compliance management and of the head of internal audit in the Company results from the Company’s internal rules and from the Collective Labour Agreement, which links a part of the remuneration to the Company’s profit for a given year as well as to EBITDA. At present, remuneration is partially linked to the achievement of specific tasks.
Principle 3.5. which states that persons responsible for risk and compliance management report directly to the president or other member of the management board. The person responsible for risk and compliance management reports organisationally to the Executive Director for Audit, but in accordance with the Company’s Organisational Regulations this person is ensured autonomy which is expressed among others by directly reporting to the Management Board and the Supervisory Board’s Audit Committee.
Principle 4.1. according to which a company should enable their shareholders to participate in a general meeting by means of electronic communication (e-meeting) if justified by the expectations of shareholders notified to the company, provided that the company is in a position to provide the technical infrastructure necessary for such general meeting to proceed. The principle is not applied at present. In the Company’s opinion, introduction of the possibility of participation in general meetings using electronic means of communication may carry risks of a legal and technical nature leading to interference with the efficient conduct of General Meetings, and as a result to the possible questioning of any resolutions adopted. In the Company’s opinion, the principle of participation in the general meetings of KGHM Polska Miedź S.A. enables all shareholders to exercise the rights attached to owning the shares and protects the interests of all shareholders. The Company’s Statutes do not restrict the participation of shareholders in general meetings in terms of the use of electronic means of communication, and the Company is able to ensure the requisite technical infrastructure to conduct such general meetings. The Company will consider the implementation of the principle if the technical and legal aspect no longer raise any doubts, and when such introduction will be justified by a real need for this form of communication with shareholders. Since 2016 KGHM Polska Miedź S.A. has been providing real-time streaming webcasts of its General Meetings.
Principle 4.8. according to which draft resolutions of the general meeting on matters put on the agenda of the general meeting should be tabled by shareholders no later than three days before the general meeting. The Company applies the Commercial Companies and Partnerships Code in this regard. In the Company’s opinion, this principle restricts the rights of shareholders to propose items for the agenda during general meetings.
Principle 4.9.1. which states that the candidates for members of the supervisory board should be nominated with a notice necessary for shareholders present at the general meeting to make an informed decision and in any case no later than three days before the general meeting; the names of candidates and all related documents should be immediately published on the company’s website. Years of practical experience by the Company have shown that proposals of a shareholder (pursuant to the shareholder’s rights arising from the Commercial Companies and Partnerships Code) of candidates to the Supervisory Board usually occur during the course of a General Meeting, i.e. in breach of principle 4.9.1. In the Company’s opinion, despite the fact that such announcements are made during the course of a General Meeting, candidates are assessed with due consideration, based on complete materials regarding the given candidate.
Principle 6.4. according to which as the supervisory board performs its responsibilities on a continuous basis, the remuneration of supervisory board members cannot depend on the number of meetings held. The remuneration of members of committees, in particular the audit committee, should take into account additional workload on the committee. The Company partially applies the principle. The members of the Supervisory Board are remunerated regardless of the number of meetings officially convened and held in a given calendar month. The Members of the Supervisory Board do not however receive remuneration if, for unjustified reasons, they do not take part in any of the meetings of the Supervisory Board officially convened and held in a given month. The members of the Committees do not receive additional remuneration. The partial lack of application of the principle is also due to implementation of the act dated 9 June 2016 on the principles of setting the remuneration of individuals managing certain companies.

Corporate governance structure in KGHM Polska Miedź S.A

To ensure reliability and accuracy as well as compliance with general laws in force and internal regulations, the process of preparing the separate and consolidated financial statements is subject to internal audit and risk management systems, comprised of the following:

Supervision of the application of uniform accounting principles by the Parent Entity and the companies of the KGHM Polska Miedź S.A. Group during the process of preparing reporting packets to prepare the consolidated financial statements of the KGHM Polska Miedź S.A. Group In order to ensure truthfulness and accuracy in the keeping of the accounting records of the Parent Entity and the uniformity of the accounting principles applied when preparing the financial statements of Group subsidiaries, the Management Board of the Parent Entity has introduced for continuous use an Accounting Policy for the Group in accordance with International Financial Reporting Standards approved by the European Union which is regularly updated in compliance with new regulations.

Control over the accounting policies applied in the process of preparing the financial statements of KGHM Polska Miedź S.A. and of the Group subsidiaries is based on the control mechanisms embedded in the functioning of the reporting systems.

The reporting packets of subsidiaries are also reviewed by appropriate services in the Parent Entity.
Centralised financial and accounting services KGHM Polska Miedź S.A. performs its accounting activities within a centralised financial and accounting services structure. Bookkeeping in the Parent Entity is performed by the Accounting Services Centre under the Head Office of KGHM Polska Miedź S.A. The centralisation of accounting services under a process model which provides for the transparent breakdown of duties and responsibilities ensures minimisation of the risk of bookkeeping errors and high-quality of financial statements. Actions are systematically being taken aimed at optimising the functioning of the accounting services structures and enhancing the security of the process of bookkeeping accounting services.
Finance and accounting systems

 

 KGHM Polska Miedź S.A. keeps accounting records in an integrated IT system. The modular structure of this system ensures a transparent segregation of processes and duties, coherence of accounting records and control over ledgers: special purpose ledger, general ledger and sub-ledgers. Access to this data at various levels and in various units is available via a well-developed reporting system. The Parent Entity continuously adapts the IT information system to changing accounting principles or other legal standards. The Parent Entity’s solutions are implemented in the IT systems of the Group’s entities.

To ensure the legitimate utilisation and protection of systems, data, secure access to data and computer equipment, appropriate organisational and systemic solutions have been introduced. Access to the resources of the financial and accounting system, as well as financial reporting, is limited by a system of authorisations that are granted to authorised employees solely with respect to the duties which they carry out. These entitlements are subject to regular review and audits. Control over this access is carried out at each stage of financial statements preparation, beginning with the entering of source data, through the processing of data, to the generation of output information.

A key element in limiting the risk of errors and misstatements in accounting for economic activities are the actions taken which are aimed at increasing the use of IT tools to automate control over and the settlement of purchases by the Company. These actions include:

–    the Workflow system of electronic document settlement and approval,

–  the system for transmitting data between the system in the Parent Entity and IT systems in Group companies, and

–    customer settlement based on e-invoices for procurement and sales.
Corporate risk management

 

 Under the Corporate Risk Management Policy and Procedures and the Corporate Risk and Compliance Committee Rules, corporate risk management is an on-going process in the KGHM Polska Miedź S.A. Group. Risk factors associated with the Group’s various operations are continuously identified, assessed and analysed in terms of their possible limitation.

The Corporate Risk and Compliance Management Department is responsible for coordination of the entire corporate risk management process and for developing the methods and tools used by managers in the Parent Entity, its subsidiaries and projects, as well as for risk monitoring and escalation, and for reporting incidents.

These activities also comprise risk management with respect to the process of preparing the consolidated financial statements of the Group.

The process of corporate risk management is annually subjected to an effectiveness audit (in compliance with the guidelines of “Best Practice for GPW Listed Companies 2021”).

Detailed information regarding the risk management system applied in the KGHM Polska Miedź S.A. Group is presented in section 12 of this report.
Internal audit A fundamental element of risk management with respect to the functioning of control mechanisms and the existence of risks in the operations of KGHM Polska Miedź S.A. is the work carried out by the Internal Audit Department. This work also indirectly strengthens the process of preparing financial statements as well as their accuracy.

The Internal Audit Department carries out its tasks based on the ”Audit Plan” for the given calendar year approved by the Management Board of KGHM Polska Miedź S.A. and assessed by the Audit Committee of KGHM Polska Miedź S.A.

The goal of an audit is to provide the Management Board and the Audit Committee of the Supervisory Board of KGHM Polska Miedź S.A. with independent and objective information on internal control and risk management systems as well as with analyses of business processes within KGHM Polska Miedź S.A. and in the Group’s companies. Independently from internal audit and institutional control, the obligation fully remains in KGHM Polska Miedź S.A. for each employee to exercise self-control in respect of their duties and for all levels of management to exercise their control as part of their coordination and supervision duties.
External audit In accordance with prevailing law, consolidated financial statements of the KGHM Polska Miedź S.A. Group are submitted for half-year review and annual auditing by a certified auditor. The Supervisory Board selects the certified auditor through a tender process, based on the recommendations of the Supervisory Board’s Audit Committee and the report on the tender conducted by the Committee.

The appropriate entity to audit the financial statements of KGHM Polska Miedź S.A. for the years 2019-2021 is PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp.k. As part of the audit work performed the certified auditor performs, on the basis of prevailing audit methodology, an independent evaluation of the accounting principles applied by Parent Entity in preparing the financial statements and the accuracy and reliability of the consolidated financial statements.

The effectiveness of the internal control system and the risk management system in the process of preparing the financial statements is confirmed by the unqualified report on the audit issued by the certified auditor from its audit of the separate and consolidated financial statements of KGHM Polska Miedź S.A.
Supervision over the process of financial reporting

 

 The body which supervises the process of financial reporting in KGHM Polska Miedź S.A. and which cooperates with the independent auditor is the Supervisory Board’s Audit Committee, which is appointed by the Supervisory Board of the Parent Entity. The Audit Committee, in accordance with its duties as set forth in the Act dated 11 May 2017 on certified auditors, auditing firms and public oversight, in particular:

–    monitors the process of financial reporting in terms of compliance with the Accounting Policy approved by the KGHM Polska Miedź S.A. Group and prevailing laws,

–    monitors the effectiveness of internal control systems, internal audit and risk management,

–    monitors the independence of the certified auditor and of the entity entitled to audit financial statements, and,

–    conducts the process of selecting the entity entitled to audit financial statements of the Parent Entity to provide a recommendation to the Supervisory Board.

Monitoring of the process of financial reporting and assessment of the financial statements by the Supervisory Board is the final step of the review and control carried out by this body, ensuring the reliability and accuracy of the data presented in the separate and consolidated financial statements of the KGHM Polska Miedź S.A. Group.

Proper management of the process of keeping records and preparing financial statements ensures the security and the high quality of the information.

The General Meeting (GM) of KGHM Polska Miedź S.A. is the Company’s highest authority. It meets in either ordinary or extraordinary form, based on generally prevailing law, the Statutes of the Company and the “Bylaws of the General Meeting of KGHM Polska Miedź S.A. with its registered head office in Lubin”. A General Meeting is convened by the Company’s Management Board. In situations defined by the Commercial Companies and Partnerships Code, General Meetings may be convened by the Supervisory Board or by shareholders. The Statutes of KGHM Polska Miedź S.A. also authorise the Polish State Treasury to convene a General Meeting. The General Meeting of the Company is convened by an announcement published on the Company website and in the manner set forth in the Act dated 29 July 2005 on public offerings and conditions governing the introduction of financial instruments to organised trading, and on public companies. A General Meeting may adopt resolutions if at least one-fourth of the share capital is represented. Resolutions are adopted by a simple majority of votes cast, unless the law or the Company’s Statutes state otherwise. The principles for conducting a General Meeting are set forth by the Commercial Companies and Partnerships Code and the Company’s Statutes. Additional issues related to the functioning of the General Meeting are regulated by the “Bylaws of the General Meeting of KGHM Polska Miedź S.A. with its registered head office in Lubin” adopted by the GM on 17 May 2010, which are available on the Company’s website, www.kghm.com.

The duties of the General Meeting include in particular:

  • examining and approving the report of the Management Board on the Company’s activity and the financial statements, including the financial statements of the Group, for the past financial year,
  • adopting resolutions on the distribution of profits or coverage of losses,
  • acknowledging the fulfilment of duties performed by members of the bodies of the Company,
  • changing the subject of the Company’s activity,
  • changes in the Company Statutes,
  • increasing or decreasing the share capital,
  • the manner and conditions for retiring shares,
  • merging, splitting and transforming the Company,
  • dissolving and liquidating the Company,
  • issuing convertible bonds or senior bonds,
  • consenting to the disposal and lease of an enterprise or of an organised part thereof, as well as the attachment of limited property rights to same,
  • all decisions relating to claims for redress of damage suffered during the foundation of the Company, or from management or supervisory activities,
  • purchase of the Company’s own shares, which are to be offered to employees or persons who were employed by the company or by related companies for a period of at least three years,
  • establishing principles of the remuneration of members of the Supervisory Board,
  • establishing principles of the remuneration of members of the Management Board.

The schedule of work on organising the General Meetings of the Company is planned in such a way as to ensure that the obligations towards shareholders are properly met and to enable them to exercise their rights.

The introduction of changes to the Company Statutes requires a resolution by the General Meeting and an entry in the register of entrepreneurs of the National Court Register. Changes in the Company Statutes are made by the General Meeting in accordance with generally prevailing laws, in the manner and form prescribed by the Commercial Companies and Partnerships Code, i.e. by a majority three-fourths of the votes cast in the presence of persons representing at least half of the share capital.

Amongst the regulations of the Commercial Companies and Partnerships Code, in respect of the organisation of General Meetings and shareholder rights, the Company applies only those regulations which are obligatory, i.e. those which require the publication of announcements and relevant materials for the General Meeting on the Company website and the use of electronic forms of contact with shareholders. Regulations enabling shareholders to participate in General Meetings using electronic means of communication are not applied.

Detailed information on the ownership structure is presented in Section 11 of this report.

Shareholders of the Company exercise their rights in a manner and within the limits prescribed by prevailing law, the Statutes of the Company and the Bylaws of the General Meeting of KGHM Polska Miedź S.A.

Shareholders are entitled to exercise their voting rights either personally or through a proxy. The authority to participate in a General Meeting and to exercise voting rights should be granted in writing or in electronic form. All shares are bearer shares. Each share represents one vote.

There is no limitation to the transfer of ownership rights to the shares of the Company or with respect to the execution of voting rights on the shares of the Company, other than those generally prescribed by laws in force.

The Company has not issued securities which would grant special control rights in respect of the Company.

A shareholder is entitled in particular to the following:

  • to convene an Extraordinary General Meeting if the said shareholder represents at least half of the share capital or has been authorised by a court of registration and represents at least one-twentieth of the share capital,
  • to announce draft resolutions and their justification during a General Meeting which are in regard to matters introduced to the agenda,
  • in accordance with the Statutes, the Polish State Treasury as a shareholder may convene an Ordinary General Meeting if the Management Board does not do so in the statutory timeframe as well as an Extraordinary General Meeting if it considers its convening as warranted,
  • to request that a matter included in the agenda be removed or not considered,
  • to order the inclusion of specified matters on the agenda of the next General Meeting, if the shareholder or shareholders represent at least onetwentieth of the share capital.

The Supervisory Board of KGHM Polska Miedź S.A. is the permanent supervisory authority of KGHM Polska Miedź S.A., in all of the Company’s functional areas. According to the Statutes of the Company, the Supervisory Board is composed of 7 to 10 members appointed by the General Meeting, 3 of whom are elected by the Company’s employees. The Members of the Supervisory Board are appointed for a mutual term in the office, which lasts three years. The Supervisory Board selects from among its members a Chairman of the Supervisory Board, his Deputy and, if needed, a Secretary. The Supervisory Board should meet at least once a quarter. For resolutions of the Supervisory Board to be valid all of the members of the Supervisory Board must be invited to attend and resolutions must be adopted by an absolute majority of votes in the presence of at least onehalf of the members. Voting shall be open unless otherwise provided for by law or if any member of the Supervisory Board requests a secret ballot. The duties of the Supervisory Board include in particular the following:

  • evaluation of the separate and consolidated financial statements and the report of the Management Board on the Company’s activities for the financial year,
  • evaluation of the Management Board’s proposals for the distribution of profit or coverage of losses,
  • report annually in writing to the General Meeting on the results of the evaluations referred to in points 1 i 2,
  • submitting annual proposals to the General Meeting to discharge the members of the Board of Directors for the performance of their duties in the financial year,
  • examination and control of the Company’s activities and financial status, and submission to the General Meeting of a concise assessment of the Company’s situation on an annual basis,
  • selecting a certified auditor to audit the accounts referred to in point 1,
  • determining the number of members of the Management Board for a given term of office,
  • appointment and dismissal of Management Board Members, subject to the provisions of Clause 12 of the Company’s Statutes,
  • suspending individual or all Members of the Management Board for important reasons,
  • delegating a Member or Members of the Board to temporarily perform the duties of Members of the Company’s Management Board who are unable to perform their duties,
  • fixing remuneration for members of the Management Board and other terms and conditions of their agreements or contracts,
  • approval of the Regulations of the Company’s Management Board,
  • approval of the Company’s annual and multiannual business plans, including the Company Strategy and the annual budget,
  • giving its opinion on the Board’s proposals to the General Meeting,
  • at the request of the Management Board giving its consent to:
    • acquisition and disposal of real estate, perpetual usufruct or share in real estate (no resolution of the General Meeting is required in this respect),
    • granting of sureties and loans to business entities in which the Company holds less than 1/3 of the votes from shares or stocks at the General Meetings / Shareholders’ Meetings of such entities,
    • formation of and participation in commercial companies,
    • disposal of shares in the Company’s subsidiaries,
    • establishment abroad of departments, companies, representative offices and other business units or entities,
    • subscription for or acquisition of shares in another Company,
    • establishment and winding-up of foundations,
    • entering into contracts for legal services, marketing services, public relations and social communication services and management consulting services, if the total remuneration for the services provided exceeds the net amount of PLN 500,000, on an annual basis,
    • entering into an amendment to a contract for legal services, marketing services, public relations and communication services and management consulting services, which increases the remuneration above the amount referred to in point (h),
    • entering into contracts for legal services, marketing services, public relations and communication services and management consulting services where no maximum remuneration is provided for,
    • entering into a donation or another similar agreement with a value exceeding PLN 20,000 or 0.1% of the total assets within the meaning of the Accounting Act of 29 September 1994, as determined on the basis of the last approved financial statements,
    • entering into a debt waiver or another similar agreement with a value exceeding PLN 50,000 or 0.1% of the total assets within the meaning of the Accounting Act of 29 September 1994, as determined on the basis of the last approved financial statements
  • defining the manner of exercising voting rights by the representative of KGHM Polska Miedź S.A. at the General Meeting of companies with respect to which the Company is a dominant enterprise within the meaning of Article 4 (3) of the Act of 16 February 2007 on Competition and Consumer Protection on the following matters:
    • incorporation by the company of another company;
    • amendments to the company’s Memorandum or Articles of Association and objects of business;
    • merger, transformation, division, dissolution and liquidation of the company;
    • increase or reduction of the company’s share capital;
    • sale and lease of the company’s undertaking or its organised part and the creation of a limited right in rem thereon;
    • redemption of shares;
    • determination of remuneration of members of the Management Board and the Supervisory Board;
    • provisions concerning claims for damage caused by the formation of the company or by its management or supervision;
    • in the matters referred to in Article 17 of the Act of 16 December 2016, on the principles of state property management, subject to § 34 (4) of the Statutes.
  • expressing opinions on the Company’s investments in fixed assets that meet one of the conditions:
    • an investment with a value exceeding 10% of the Company’s fixed asset capital expenditure budget for the financial year,
    • an investment of more than 5% of the Company’s capital expenditure budget in fixed assets for a given financial year, if the investment does not meet the criterion of planned efficiency in comparison with the Company’s assumed rate of
  • giving an opinion on reports drawn up by the Management Board on representation expenses, expenses for legal services, marketing services, public relations and communication services and management consulting services,
  • giving its opinion on the principles of sponsorship activities and assessing the effectiveness of the Company’s sponsorship activities,
  • giving an opinion on the change in the rules for disposing of fixed assets, as laid down in §331 of the Statutes,
  • approving the remuneration policy for the Group,
  • acceptance of a uniform text of the Company Statutes, prepared by the Management Board,
  • drawing up and submitting to the Ordinary General Meeting for approval the annual report on the activities of the Supervisory Board,
  • examining the assessment, submitted to the Supervisory Board, of the effectiveness of the internal control, risk management and compliance systems, as well as the internal audit function and the Management Board’s report in this regard.

The Supervisory Board operates on the basis of generally prevailing law, the Statutes of the Company and the Bylaws of the Supervisory Board. The Bylaws and Statutes of the Company are available on the Company’s website www.kghm.com.

The composition of the Supervisory Board in 2021 was as follows:

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The composition of the Supervisory Board in 2021 was as follows:

1 January – 20 April 20 April – 6 July 6 July – 16 August 16 August – 25 October 25 October – 31 December
Agnieszka Winnik- Kalemba ✓ ✓ ✓ ✓ (Chairwoman) ✓ (Chairwoman)
Bartosz Piechota ✓ ✓ ✓ ✓ ✓
Marek Pietrzak ✓ ✓ ✓ ✓
Bogusław Szarek 1 ✓ ✓ ✓ ✓ ✓
Jarosław Janas ✓ ✓ ✓ ✓ ✓
Józef Czyczerski 1 ✓ ✓ ✓ ✓ ✓
Andrzej Kisielewicz ✓ (Chairman) ✓ (Chairman) ✓ (Chairman) ✓ ✓
Katarzyna Lewandowska ✓
Przemysław Darowski 1 ✓ ✓ ✓ ✓ ✓
Robert Kaleta ✓ ✓ ✓
Katarzyna Krupa ✓ ✓ ✓
1) elected by Employees

 

As of 31 December 2021 the Members of the Supervisory Board of KGHM Polska Miedź S.A.: Andrzej Kisielewicz, Jarosław Janas, Agnieszka Winnik – Kalemba and Robert Kaleta submitted declarations on meeting independence criteria, specified in the Act of 11 May 2017 on Auditors, Audit Firms and Public Supervision, and have no actual and material relations with any shareholder who holds at least 5% of the total vote in the Company (principle 2.3. of Best Practices).

Within the structure of the Supervisory Board are three committees which serve in an auxiliary role to the Supervisory Board in the preparation of assessments, opinions and other actions aimed at reaching decisions which must be made by the Supervisory Board.

Audit Committee

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The composition of the Audit Committee in 2021:

1 January – 20 April 20 April – 23 August 23 August – 25 October 25 October – 20 December 20 December – 31 December
Agnieszka Winnik-Kalemba ✓ (Chairwoman) ✓ (Chairwoman) ✓ ✓ ✓
Bartosz Piechota ✓ ✓ ✓ ✓ ✓
Marek Pietrzak ✓ ✓ ✓ (Chairman)
Bogusław Szarek ✓ ✓ ✓ ✓ ✓
Jarosław Janas ✓ ✓ ✓ ✓ ✓ (Chairman)
Katarzyna Lewandowska ✓
Przemysław Darowski ✓ ✓ ✓ ✓ ✓
Robert Kaleta ✓ ✓ ✓
Katarzyna Krupa ✓ ✓ ✓

In accordance with the Bylaws of the Supervisory Board the tasks of the Audit Committee are as follows:

  • monitoring of:
    • the financial reporting process,
    • the effectiveness of internal control systems and risk management systems, compliance monitoring as well as internal auditing, including financial reporting,
    • the conduct of financial review, in particular the conduct of audits by the auditor, reflecting all of the conclusions and recommendations of the Polish Audit Supervision Agency arising from audits conducted in the auditing firm,
  • conducting reviews of transactions carried out by the Company, which the Audit Committee considers as significant for the Company,
  • providing an opinion on the Company’s internal audit plan and the internal audit bylaws, as well as changes in the position of Internal Audit Director who reports directly to the President or other Member of the Management Board,
  • analysis of the conclusions and recommendations of the Company’s internal audit from monitoring the degree of implementation of recommendations made by the Company’s Management Board,
  • auditing and monitoring the independence of the certified auditor and the auditing firm, in particular if the auditing firm provides services to the Company apart from auditing,
  • informing the Supervisory Board of audit results and explaining to what degree such audits have resulted in the transparency of financial reporting in the Company, and also the role of the Audit Committee in this process,
  • assessing the independence of the certified auditor and expressing consent for the certified auditor to provide permitted non-auditing services in the Company,
  • developing a policy to select the auditing firm for conducting audits,
  • developing a policy for the auditing firm conducting audits, through entities related to the said auditing firm and by a member of the auditing firm’s network, to provide permitted non-auditing services,
  • setting forth the Company’s procedures for selecting an auditing firm,
  • presenting the Supervisory Board with the recommendations referred to in art. 16 section 2 of Decree No. 537/2014 (i.e. recommendations regarding the appointment of a certified auditor or auditing firms), in accordance with the Policies in points 8 and 9 above,
  • submitting recommendations aimed at ensuring the transparency of the Company’s financial reporting process,
  • making a recommendation to the Supervisory Board on the appointment of an independent auditor to review the internal audit function,
  • other tasks ordered by the Supervisory Board.

Members of the Audit Committee that met the criteria for independence as defined by art. 129 sec. 3 of the Act dated 11 May 2017 on certified auditors, auditing firms and public oversight:

  • Agnieszka Winnik-Kalemba, Bartosz Piechota and Jarosław Janas serving in the functions from 1 January 2021 to 31 December 2021,
  • Marek Pietrzak serving in the function from 1 January 2021 to 25 October 2021,
  • Robert Kaleta serving in the function from 23 August 2021 to 31 December 2021.

The qualifications of the Committee’s members in the areas of accounting or the auditing of financial statements, as well as knowledge and skills in the sector in which KGHM Polska Miedź S.A. operates, resulted from the education, experience and professional practice of the Committee’s members. Following is detailed information on their qualifications in the areas of accounting or the auditing of financial statements as well as their knowledge and skills in the sector in which KGHM Polska Miedź S.A. operates.

In the period from 1 January 2021 to 25 October 2021 Marek Pietrzak was selected as a member possessing qualifications in the field of accounting or the auditing of financial statements, resulting from his education (among others the title of legal adviser and Executive Master of Business Administration and completion of post-graduate studies in accounting and corporate finance at the SGH Warsaw School of Economics), experience and professional practice (among others supervision and management of commercial law companies).

In the period from 25 October 2021 to 31 December 2021 Bartosz Piechota was selected as a member possessing knowledge and skills in accounting resulting from his education (among others, graduation from IESE Business School within the Advanced Management Program (AMP) experience and professional practice – performing the function of a member of the management board in commercial law companies, including the one responsible for the area of finance, performing the function of a member of supervisory boards, including the function of a member of audit committees of supervisory boards, consulting in restructuring processes and performing the function of a chairman of creditors’ committees in restructuring proceedings.

Bogusław Szarek was selected as a member possessing knowledge and skills in the sector in which KGHM Polska Miedź S.A. operates resulting from many years of employment (since 1982) in KGHM Polska Miedź S.A. as well as being a member of the Supervisory Board of KGHM Polska Miedź S.A. since 2012, as a Member of the KGHM Polska Miedź S.A. Supervisory Board elected by employees.

In 2021 there were 11 meetings of the Audit Committee.

 

Remuneration Committee

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The composition of the Remuneration Committee in 2021:

1 January – 20 April 20 April – 23 August 23 August – 25 October 25 October – 31 December
Józef Czyczerski ✓ ✓ ✓ ✓
Marek Pietrzak ✓ ✓ ✓
Bogusław Szarek ✓ ✓ ✓ ✓
Andrzej Kisielewicz ✓ (Chairman) ✓ (Chairman) ✓ (Chairman) ✓ (Chairman)
Jarosław Janas ✓ ✓ ✓ ✓
Katarzyna Lewandowska ✓ ✓ ✓
Przemysław Darowski ✓ ✓ ✓ ✓
Katarzyna Krupa ✓ ✓
Agnieszka Winnik – Kalemba ✓ ✓
Bartosz Piechota ✓ ✓

 

In accordance with the Bylaws of the Supervisory Board the tasks of the Remuneration Committee are as follows:

  • the management of issues related to the recruitment and employment of members of the Management Board by preparing and arranging draft documents and processes to be submitted for the acceptance of the Supervisory Board,
  • the preparation of draft contracts/agreements and other sample documents related to the establishment of an employment relationship with Members of the Management Board and oversight of the execution of the contractual obligations by the parties,
  • oversight of the execution of the Management Board remuneration system, in particular the preparation of settlement documents with respect to variable/exchangeable bonus elements of the remuneration in order to submit recommendations to the Supervisory Board on the remuneration of Members of the Management Board and Supervisory Board,
  • monitoring and periodic assessment of the remuneration system for the Company’s senior management and, if necessary, the preparation of recommendations for the Supervisory Board,
  • oversight of the proper execution of additional benefits for Members of the Management Board arising from agreements binding Members of the Management Board with the Company, such as insurance, company cars, housing, etc.,
  • other tasks ordered by the Supervisory Board.

 

Strategy Committee

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The composition of the Strategy Committee in 2021:

1 January – 20 April 20 April – 23 August 23 August – 25 October 25 October – 31 December
Józef Czyczerski ✓ ✓ ✓ ✓
Marek Pietrzak ✓ ✓ ✓
Bogusław Szarek ✓ ✓ ✓ ✓
Bartosz Piechota ✓ (Chairman) ✓ (Chairman) ✓ (Chairman) ✓(Chairman)
Agnieszka Winnik-Kalemba ✓ ✓ ✓ ✓
Katarzyna Lewandowska ✓
Przemysław Darowski ✓ ✓ ✓ ✓
Robert Kaleta ✓ ✓

 

In accordance with the Bylaws of the Supervisory Board the tasks of the Strategy Committee are as follows:

  • execution on behalf of the Company’s Supervisory Board of tasks in the area of oversight of issues associated with the Company’s strategy and the annual and long-term operating plans of the Company,
  • monitoring execution of the Company’s strategy by the Management Board and issuing opinions on the degree to which the existing strategy is able to deal with changes in the actual situation,
  • monitoring execution of the annual and long-term operating plans of the Company by the Management Board, and assessment of whether these plans need to be modified,
  • assessment of the consistency of the annual and long-term operating plans of the Company with the Company’s strategy as executed by the Management Board, and the presentation of any proposed changes in all such Company’s documents,
  • submission to the Company’s Supervisory Board of its opinions regarding the draft strategies of the Company and any changes thereto and of the annual and multiyear operating plans of the Company, as presented by the Company’s Management Board, including budget,
  • other tasks ordered by the Supervisory Board.

The detailed rights, scope of activities and manner of work of these Committees are described by bylaws approved by the Supervisory Board. After the end of the year the Audit, Remuneration and Strategy Committees submit reports on their activities to the Supervisory Board.

The duties of the Management Board include all matters pertaining to the functioning of the Company which have not been reserved by the Commercial Companies and Partnerships Code and the Statutes of the Company to the duties of the General Meeting and the Supervisory Board. A detailed description of the Management Board’s scope of duties and obligations and the manner in which it functions may be found in the Bylaws of the Management Board.

According to the Statutes of KGHM Polska Miedź S.A., the Company’s Management Board may be composed of 1 to 7 persons, appointed for a mutual term of office. The term of office of the Management Board lasts three consecutive years. The number of members of the Management Board is set by the Supervisory Board, which appoints and dismisses the President of the Management Board and the Vice Presidents. The Supervisory Board appoints the members of the Management Board following the conduct of qualification proceedings, the goal of which is to review and evaluate the qualifications of candidates and to select the best candidate for Member of the Management Board, with due regard being given to sec. 5 and sections 7 to 12 of Statutes concerning the appointment or recall of an employeeelected member of the Management Board. The members of the Management Board, including any such chosen by the employees, may be recalled by the Supervisory Board prior to the expiration of their term, which in no way shall interfere with their rights arising from their employment contract or other legal relationship relating to their functioning as a member of the Management Board. The result of elections of an employee-elected member of the Management Board, or the result of voting for their recalling, shall be binding upon the Supervisory Board, as long as in the said voting for either their appointment or recalling at least 50% of the Company’s employees have participated. The election and recall of an employeeelected member of the Management Board requires an absolute majority of the votes cast.

The Management Board operates based on generally prevailing law, the Statutes of the Company and the Bylaws of the Management Board of KGHM Polska Miedź S.A. For resolutions of the Management Board to be valid at least two-thirds of the members of the Management Board must be present. Resolutions of the Management Board are approved by a simple majority of the votes cast. In the case of a tie vote being cast either for or against a given resolution, the President of the Management Board casts the deciding vote. Resolutions of the Management Board shall be adopted in open voting unless otherwise provided for by law or if any member of the Management Board requests a secret ballot.

A detailed list of the matters requiring a resolution of the Management Board is included in the Bylaws of the Management Board of KGHM Polska Miedź S.A. approved by the Supervisory Board.

The authority of the Management Board to pass decisions on the issuance or redemption of shares is statutorily limited. The shares of the Company may be redeemed given shareholder consent through their acquisition by the Company (voluntary redemption). Redemption may not be carried out more than once per financial year. A resolution of the General Meeting on the redemption of shares may be preceded by an agreement entered into with a shareholder whose shares are to be redeemed. In accordance with §29 sec. 1 point 6 of the Statutes of the Company, any increase in share capital or issuance of shares requires the approval of the General Meeting. The same holds true for the issuance of bonds (§29 sec. 1 point 10 of the Statutes of the Company). The Management Board of the Company does not have the authority to increase the share capital or issue the shares of the Company under conditions specified in art. 444-446 of the Commercial Companies and Partnerships Code.

The delegation of duties of the Management Board is presented in Section 17 of this report. In 2021 there were following changes in the Management Board and the composition of the Management Board:

  • On 23 March 2021 the Supervisory Board of the Company, having the intention to synchronize the term of office and the mandate, adopted resolutions on dismissing, as of 15 April 2021, of all members of the 10th-term Management Board of KGHM Polska Miedź S.A., listed as follows:
    • Marcin Chludziński (President of the Management Board of KGHM Polska Miedź S.A. appointed as of 6 July 2018),
    • Adam Bugajczuk (Vice President of the Management Board (Development) appointed as of 24 August 2018),
    • Paweł Gruza (Vice President of the Management Board (International Assets) appointed as of 10 September 2018), Katarzyna Kreczmańska-Gigol (Vice President of the Management Board (Finance) appointed as of 6 July 2018),
    • Radosław Stach (Vice President of the Management Board (Production) appointed as of 6 July 2018).
  • on 23 March 2021 the Supervisory Board of the Company adopted resolutions on the appointment, as of 16 April 2021, to the 11th-term Management Board of KGHM Polska Miedź S.A., the following Members of the Management Board:
    • Marcin Chludziński (President of the Management Board of KGHM Polska Miedź S.A.),
    • Adam Bugajczuk (Vice President of the Management Board (Development)),
    • Paweł Gruza (Vice President of the Management Board (International Assets),
    • Andrzej Kensbok (Vice President of the Management Board (Finance)).
  • on 14 May 2021 the Supervisory Board of the Company adopted a resolution on the appointment of Dariusz Świderski as of 15 May 2021, as Vice President of the Management Board (Production) of KGHM Polska Miedź S.A.,
  • on 25 October 2021 the Supervisory Board of the Company adopted a resolution on the appointment of Marek Pietrzak as of 26 October 2021, as Vice President of the Management Board (Corporate Affairs) of KGHM Polska Miedź S.A.,
  • on 21 February 2022 the Supervisory Board of the Company adopted a resolution on dismissal of Dariusz Świderski serving in the function of Vice President of the Management Board (Production) of KGHM Polska Miedź S.A.,
  • on 22 February 2022 the Supervisory Board of the Company adopted a resolution on temporary assignment of duties of Vice President of the Management Board (Production) to Marek Pietrzak until the settlement of qualification proceedings for the function of Vice President of the Management Board (Production),
  • On 14 March 2022, the Supervisory Board of the Company, following the qualification proceedings for the position of Vice President of the Management Board (Production), adopted a resolution on appointing Marek Świder as of 15 March 2022 to the Management Board of KGHM Polska Miedź S.A., granting him the function of Vice President of the 11th term Management Board (Production) of KGHM Polska Miedź S.A.

Permitted non-auditing services were provided to the Company by the firm auditing its financial statements. In each case the Audit Committee evaluated the independence of the auditing firm and expressed its consent to the provision of these services.

Detailed information on remuneration of the entity entitled to audit the financial statements for the review and audit of financial statements and other remuneration is presented in note 12.10 of the separate and consolidated financial statements.

In 2021 the Company implemented an updated Policy of KGHM Polska Miedź S.A. for the selection of the auditing firm to conduct audits of the financial statements, adopted by Resolution No. 151/X/21 of the Supervisory Board of KGHM Polska Miedź S.A., dated 22 October 2021 (hereafter: Selection Policy) and an updated Policy for permitted non-auditing services to be provided by the auditing firm conducting audits of the KGHM Polska Miedź S.A. Group through entities associated with the auditing firm and through members of the auditing firm’s network, adopted by the Resolution No. 152/X/21 of the Supervisory Board of KGHM Polska Miedź S.A. dated 22 October 2021 (hereafter: Services policy).

Main tenets of the Selection Policy:

  • maximum uninterrupted period of providing services by a given auditing firm of audits of the financial statements amounting to 10 years, followed by a grace period of at least 4 years, with the provision that the key certified auditor may not carry out the statutory audit for more than 5 years,
  • transparency, accuracy and honesty in all procedures involving the selection of the auditing firm,
  • equal opportunity for all of the auditing firms meeting the Company’s requirements to be selected,
  • appropriate substantive preparation and due diligence of persons selected within the Company to carry out the Selection Policy,
  • documentation of selection procedures performed and evaluation of offers in a manner which ensures the transparency of the actions taken.

Main assumptions of the Services policy:

  • limitation of the scope of permitted nonauditing services ordered from the auditing firm or a related entity thereof; maximum total remuneration for the services provided in this regard is limited to 70% of the average remuneration paid out during the last three financial years due to providing statutory auditing services,
  • need to review the purpose and necessity for purchasing permitted non-auditing services from the auditing firm or a related entity thereof on an individual basis,
  • active participation of the Audit Committee in the process of evaluating threats to and the security of the independence of the auditing firm in providing permitted non-auditing services,
  • signing of an agreement and the providing of services, as well as any change in the scope of the services or remuneration thereof, will be possible only after the Audit Committee has provided the requisite consent.

The entity authorised to audit the financial statements for the years 2019-2021 is PricewaterhouseCoopers Polska Spółka z ograniczoną odpowiedzialnością Audyt sp.k. The selection of the auditing firm was made as a result of an organised procedure of selection, which met the existing criteria.

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