The corporate governance system in KMG ensures proper management and control of activities, and aims at increasing long-term value and sustainable development.
CORPORATE GOVERNANCE STRUCTURE IN KMG
Consulting stakeholders on economic, environmental and social topics
In KMG, there are various ways of communication, which allow to properly build a dialogue with stakeholders and the company, and in the prescribed manner to bring their content to KMG BoD. Thus, discussion of problem issues with a shareholder is carried out within the framework of the meetings of the Board of Directors and its Committees through representatives of the shareholder who are members of the BoD and its relevant committees. In addition, members of the Board regularly meet with potential investors in the road show. In addition, the BoD carries out communications with stakeholders through the organization of such work through structures directly subordinate to the BoD – the Corporate Secretary, the Ombudsman, the Internal Audit Service, the Compliance Service. On a monthly basis, information on sustainable development is included in the report of the Chairman of the Board.
Receipt of feedback is carried out by discussing problem issues at meetings of the Board and its Committees, meetings of the Chairman and members of the BoD with the CS, Ombudsman, IAS and Compliance.
Executive level responsibility for economic, environmental and social topics
Responsibility for solving economic, environmental and social problems is assigned to the respective heads of the blocks for strategy, finance, human resources management and labor and environment protection, which in turn report to the Chairman of the KMG Management Board. The issues are submitted for consideration to the members of the Management Board, Committees of the Board of Directors and the Board of Directors on a regular basis in accordance with plans and schedules for consideration.
Responsibility for sustainable development in KMG is distributed in the following order:
Corporate Governance in Subsidiaries
Note: Information on SDEs whose shares (participatory interests) are owned directly or indirectly by KMG are prepared by analyzing the existing corporate governance system in KMG group companies that significantly affect KMG’s activities. These companies are represented both in the organizational and legal form of the joint-stock company (AO) and limited partnership (LLP). The list of the main SDEs included in the perimeter of the analysis: KazMunayGas EP JSC, KazTransGas JSC, KazTransOil JSC, AR LLP, PPCP LLP, PKOP LLP.
Delegation of authority
Delegation of powers from the head of the Executive Body to other employees of SDEs is usually carried out on the basis of an order on the distribution of duties or provisions on the powers of the company’s management (for internal use) and powers of attorney (representing the company’s interests to third parties).
Responsibility of the executive power in SDEs for economic, environmental and social issues
In all SDEs that have entered the perimeter of the analysis, there are separate management positions, whose competence includes making decisions on economic, environmental and social issues (usually the level of deputy heads of the executive body). These officials are directly subordinate to the first head of the executive body.
Interaction in SDEs on economic, ecological and social directions of development
Among the SDEs that have entered the perimeter of the analysis, the procedure for consultations on economic, environmental and social issues between stakeholders and the supreme body of corporate governance is available at KazTransOil JSC. In order to identify and select stakeholders in the company, an analysis of the internal and external environment is conducted on an annual basis. Thus, the relationship between the company and individuals whose interests are affected by the company’s activities, as well as having or considering that they have legitimate requirements for certain aspects of the company’s activities are analyzed. Based on the results of the analysis, the list of stakeholder groups of the Company is reviewed and updated. Powers for consultations are not delegated.
KMG is developing an action plan for sustainable development in the framework of improving the corporate governance system on an annual basis. In addition to monitoring the activities of the Company in implementing measures for the three components of sustainable development, KMG is committed to:
KPI System for Sustainable Development
In order to promote the principles of sustainable development, the Board of Directors has a decisive responsibility for promoting the principles of sustainable development. BoD of KMG:
- Controls implementation of the Company’s Strategy based on analysis of short-term and long-term efficiency.
- Determines the importance of sustainable development principles for the Company and ensures their effective communication to all stakeholders.
- Actively reviews the principles of corporate governance, social issues and ecology enshrined in the Code when forming the Company’s strategy, business plan and investment strategy.
- Ensures a clear link between sustainable development activities and the Company’s strategic goals.
- Conducts analysis and approves key principles for sustainable development in the Company and its subsidiaries.
- Monitors the Company’s performance in the field of sustainable development by establishing appropriate efficiency and monitoring the achievement of targets.
- Monitors implementation of the sustainability program throughout the Group.
Our key performance indicator for the functional of sustainable development is the achievement of the following main criteria:
- The Company ensures the consistency of its economic, environmental and social objectives for long-term sustainable development, which includes the growth of the Company’s long-term value.
- The Company implements a system that allows consistent and continuous follow the principles of sustainable development.
Corporate Governance Diagnostics
In 2017, KMG conducted a diagnosis of corporate governance, which resulted in a rating for the “Sustainable Development” component. The corporate governance diagnostics for sustainable development in KMG included performance analysis in all relevant functional areas, including risk management, planning, human resources management, investments, operations, safety and health, environmental protection, corporate security and procurement management.
Diagnostics of Sustainable Development in KazMunayGas
On October 6, 2017, JSC NC “KazMunayGas”, chaired by Vice President for Strategy Assiya Narymanovna Syrgabekova, held a working seminar of JSC NC “KazMunayGas” (KMG) on the implementation of the Samruk-Kazyna (SK) Reference Model for Sustainable Development for Samruk-Kazyna JSC portfolio companies. More than 35 managers representing representatives of KMG structural units took part in the seminar, the goal of such an event was facilitating the implementation of sustainable development with the participation of independent consultants of PriceWaterhouseCoopers (PWC).
The concept of sustainable development in KMG, as a national oil and gas operator, in the economic and social well-being of Kazakhstan is unique, as is the Company’s contribution to global initiatives for sustainable development. At the seminar, representatives of the PWC spoke about the SK project on implementation of the reference model of sustainable development, as part of a comprehensive transformation program for the second half of 2017. Benchmarking of the world’s best practices of leaders of the oil and gas sector on sustainable development management was held, as well as presentation of the vision and approach of the SK to sustainable development. Also within the framework of the facilitation session, the employees conducted a group exercise to identify the main aspects of sustainable development, their assessment of the importance for the KMG Group of companies and the formation of a matrix of significant aspects. Such a method is a collection of the collective opinion of internal stakeholders, whereas for an objective compilation of a complete matrix, it is also planned to conduct a survey on an external group of interested parties in the future.