MANAGEMENT AND SUPERVISORY BODIES

The Annual General Meeting of June 5th 2020 introduced a new provision in the Company’s Articles of Association, stating that a member of the Management Board is appointed following a recruitment process performed to verify and evaluate qualifications of candidates and to select the best candidate for a Management Board member. When initiating a recruitment process for the position of a Management Board member, the Supervisory Board shall determine the detailed terms and procedure of recruitment, the place and deadline for accepting applications, the place and time of the interview, the matters to be covered during the interview, as well as the criteria to be met by and method of evaluating a candidate.

Pursuant to the Act on State Property Management, the Company’s Articles of Association define the requirements for candidates for members of the Management Board.
In accordance with the effective Articles of Association, a Management Board candidate is required to meet all of the following criteria:

• he/she has a university degree obtained in Poland or a university degree obtained abroad and recognised in Poland under separate legislation;
• he/she has at least five years of employment under a contract of employment, election or appointment, an employment contract for cooperative members, other agreement for the provision of services, or as a business owner;
• he/she has at least three years of experience serving in managerial or independent positions or as a business owner;
• he/she meets requirements stipulated in separate legal regulations – other than the requirements listed in items 1−3 above; in particular, he/she is not in breach of any limitations or prohibitions on serving on the management bodies of commercial-law companies.

The Articles of Association provide that a Management Board candidate may not be a person who meets at least one of the following criteria:

• he/she works at the office of a member of the lower or upper house of the Polish Parliament (Sejm or Senate) or of a member of the European Parliament as an assistant or under an employment, temporary employment or similar contract;
• he/she is a member of a political party’s body representing the party before third parties and authorised to assume obligations;
• he/she works for a political party under an employment, temporary employment or similar contract;
• he/she holds an elected position in a trade union operating at the Company or any Group company;
• his/her social activities or profession give rise to a conflict with the interests of the Company.

The term of office of the Management Board Members is a joint term, ending on the date of the Annual General Meeting approving the financial statements for the full second financial year of such term of office.

The Supervisory Board may suspend the President, Vice Presidents, individual Members of the Management Board and the Management Board as a whole from their duties for valid reasons. Should the Management Board President be removed or suspended from duties or should his/her mandate expire before the end of the term of office, all his/her powers, except for the casting vote referred to in Art. 9.5.2 of the Articles of Association, are to be exercised by the person appointed by a resolution of the Supervisory Board as acting President of the Management Board until a new Management Board President is appointed or the current one is restored to his/her position.

The current term of office of the Management Board began on June 6th 2020 and ends on the date of the General Meeting of PKN ORLEN approving the Company’s financial statements for the financial year 2022.

Detailed rules for the convening of Management Board meetings are set out in the Rules of Procedure for the Management Board, available on the Company’s website.

Meetings of the Management Board are held at least once every two weeks. For Management Board resolutions to be valid, a scheduled meeting has to be notified to all Members of the Management Board and at least half of the Management Board Members have to be present at the meeting. Management Board resolutions are passed by a simple majority of votes (in the event of a voting tie, the President of the Management Board has the casting vote) provided that for resolutions to grant a commercial power of proxy, unanimity of all Members of the Management Board is required. A Management Board Member who voted against a resolution that was carried may communicate his/her dissenting opinion, which, however, needs to be justified.

Resolutions are voted on by open ballot. A secret ballot may be ordered at a request of each Member of the Management Board. Resolutions are signed by all Members of the Management Board who were present at the Management Board meeting on which a given resolution was passed. A resolution is also signed by the Member of the Management Board who filed a dissenting opinion, with a note: “dissenting opinion” or “votum separatum”.

The Rules of Procedure for the Management Board also provide for the possibility of Management Board resolutions being adopted using means of remote communication. Resolutions voted on under such procedure are only valid if all Management Board Members have been notified of the contents of the draft resolutions, with the proviso that such notification may also be made using means of remote communication. A resolution may be passed under such procedure on condition that all members of the Management Board cast their votes within the time limit set by the person managing the vote. If any Management Board member does not vote within the time limit specified in the notice or objects to the form of voting, the draft resolution will be considered at the next Management Board meeting. Resolutions adopted under such procedure are signed by a Management Board member present at the Company’s registered office or at its Warsaw office.

According to the Rules of Procedure for the Management Board, the Management Board Members must notify the Supervisory Board of any actual or potential conflict of interest which has arisen or may arise in connection with the positions held by them. Should the Company’s interest be in conflict with the personal interests of a Management Board Member, the Management Board Member in question should abstain from deciding on such matter and request that a relevant note be made in the minutes of the meeting. In the case of doubt as to whether a conflict of interest exists, the matter is resolved by the Management Board by way of a resolution. According to the Rules of Procedure for the Management Board, a conflict of interest is understood as a circumstance in which a decision made by a Member of the Management Board may be influenced by a personal interest of the Management Board Member or his/her close person, i.e. their spouse, children, persons related to them through blood or marriage in the first or second degree, or any persons to whom the Member is personally related.

All matters going beyond the ordinary course of business are subject to resolutions of the Management Board. Matters falling within the scope of ordinary business are those related to trading in fuels within the meaning of the Company’s Articles of Association (i.e. crude oil, petroleum products, biocomponents, biofuels and other fuels including natural gas, industrial gas and fuel gas) or energy, and any other matters not expressly specified in the Rules of Procedure for the Management Board. In addition, the Management Board’s consent is not required to perform an action which is an integral part of any other action for which the Management Board already gave its consent, unless the Management Board’s resolution states otherwise.

A resolution of the Management Board is required, among other things, to:

• adopt and amend the Rules of Procedure for the Management Board,
• adopt and amend the Organisational Rules and Regulations of PKN ORLEN,
• adopt motions to be submitted to the Supervisory Board and/or to the General Meeting,
• convene the General Meetings and adopt their proposed agendas,
• adopt annual and long-term financial plans as well as the Company’s development strategy,
• approve investment projects and corresponding liabilities if the resulting expenditures or charges exceed PLN 10,000,000,
• incur liabilities, dispose of property rights and encumber in any way the Company’s assets with a value exceeding PLN 20,000,000 (subject to certain exceptions),
• sell and purchase real property, perpetual usufruct or an interest in real property, and create limited property rights,
• dispose of, purchase and encumber shares or other equity instruments of other entities, including shares admitted to public trading,
• issue the Company’s securities,
• authorise the Company’s and the ORLEN Group’s financial statements,
• adopt and change the employee remuneration scheme, and make decisions regarding the introduction and design of incentive schemes,
• conclude, amend and terminate a collective bargaining agreement applicable at the Company, and other agreements with trade unions,
• establish the principles of granting and revoking powers of attorney,
• formulate the so-called donation policy of the Company,
• grant a commercial power of proxy,
• establish the internal division of remits between the Members of the Management Board,
• set up establishments/offices abroad,
• resolve other matters which at least one Member of the Management Board requests to be resolved by way of a resolution,
• take decisions on payment of interim dividends.

The following activities undertaken in the ordinary course of management also require resolutions of the Management Board:

• incurring liabilities in legal transactions involving trade in crude oil or hydrocarbon raw materials used to produce fuels in a refinery, excluding biocomponents and fuel additives if the transaction volume exceeds 165,000 tonnes of crude oil or 165,000 tonnes of hydrocarbon raw materials used to produce fuels in a refinery, excluding biocomponents and fuel additives;

• incurring liabilities in legal transactions involving natural gas trading, trading capacity in natural gas transmission, distribution and storage grids/networks in Poland or abroad, and trading in natural gas storage capacities in Poland and abroad if the transaction volume exceeds 100m Nm³;

• incurring liabilities in legal transactions involving the acquisition of biocomponents and biofuels, including raw materials for the production of biocomponents and biofuels, if the transaction value exceeds PLN 200,000,000 (two hundred million złoty);

• incurring liabilities in legal transactions involving trade in fuels, within the meaning of the Company’s Articles of Association, other than those referred to in Section 5.6.1–3 if the transaction value exceeds PLN 200,000,000 (two hundred million złoty);

• incurring liabilities in legal transactions involving sale or purchase of refining products in international trade if the transaction volume exceeds 90,000 tonnes, excluding heavy fuel oil;

• incurring liabilities in legal transactions involving participation in a public procurement/tender procedure for contract award (including participation in negotiations concerning the subject matter of the contract) in the area of wholesale trade in refining products and fleet cards if the transaction value exceeds PLN 200,000,000 (two hundred million złoty);

• incurring liabilities in legal transactions involving trade in energy, property rights under energy origin certificates and energy efficiency certificates, guarantees of origin and documents confirming their issue, the related system services and energy ranges, as well as all activities related to switching electricity suppliers if the transaction volume exceeds 300 GWh;

• incurring liabilities in legal transactions involving participation in tender procedures (including those subjected to the Public Procurement Law) relating to trading in (separately or jointly) energy, energy-related services or products (including participation in negotiations and other factual and legal acts related to the subject matter of the contract) and any activities related to switching electricity suppliers if the transaction volume exceeds 300 GWh.

The Management Board is obliged to provide regular and exhaustive information to the Supervisory Board on all matters of importance and risks connected with the business of PKN ORLEN, as well as the manner of managing such risks.

MR ANDRZEJ SZUMAŃSKI
Deputy Chairman of the Supervisory Board (Independent Member of the Supervisory Board)

Andrzej Szumański is an attorney-at-law, full professor from the Jagiellonian University in Kraków, Department of Private Business Law. One of the three authors of the Polish Commercial Companies Code of September 15th 2000. He was involved in the work to draft the OECD Principles of Corporate Governance, 1999. As an expert of the Association of Stock Exchange Issuers, he prepared a draft of the Rules of the Corporate Governance Committee, enabling implementation of the principles of Corporate Governance for Public Companies adopted by the Warsaw Stock Exchange. Currently, he chairs the Expert Group on Corporate Law of the Corporate Governance Reform Commission at the Polish Ministry of State Assets. Since 1995 he has been an arbitrator of the Arbitration Court at the Polish Chamber of Commerce in Warsaw, and since 2015 – a member of the Court’s Arbitration Council. He has been President of the Exchange Court at the Warsaw Stock Exchange since 2007. From 2005 to 2011, he served two terms as President of the Arbitration Court at the Lewiatan Polish Confederation of Private Employers. He participated in numerous restructuring and privatisation projects. He sat on the Supervisory Boards of Południowy Koncern Energetyczny S.A. of Katowice, Małopolska Agencja Rozwoju Regionalnego S.A. of Kraków, and Polimex-Mostostal S.A. of Warsaw, among others. He prepares legal expert reports in the fields of private business law, contract law and arbitration law. He has authored textbooks and commentaries on the companies and securities law, as well as numerous articles, glosses and reviews in the field of commercial law. He was involved in legislative work on an amendment to the Code of Commercial Companies of March 2020 regarding the online form of meetings held by corporate bodies and an amendment to the Code of Civil Procedure of 2019 regarding corporate arbitration.

MS BARBARA JARZEMBOWSKA
Independent Member of the Supervisory Board

Graduate of the University of Warsaw. Holds an MBA certificate. She has experience in financial consulting, foreign aid coordination, and foreign investment promotion, among other fields. Since 2000, she has been a director at Bank Pekao S.A. in charge of various areas including operational risk, transaction banking, FMCG key account management, sales monitoring, and budget planning and implementation.

MR MICHAŁ KLIMASZEWSKI
Independent Member of the Supervisory Board

Attorney-at-law, doctor of law, assistant professor at the Department of Administrative Science and Environmental Protection at the Faculty of Law and Administration of Cardinal Stefan Wyszyński University. Member of the Warsaw Seminar on Administration Axiology. Graduate of the Faculty of Law and Administration at the University of Warsaw. Author and co-author of publications on law and administrative proceedings. Author of expert opinions and studies for public and private sector entities. Member of supervisory boards of private-capital corporations.

MS JADWIGA LESISZ
Member of the Supervisory Board

Jadwiga Lesisz graduated in Foreign Trade from the Faculty of International Relations of the Wrocław University of Economics. She has also completed a post-graduate course in Real Estate Management at the Wrocław University of Technology, and a Master of Business Administration (MBA) programme run by the WSB School of Business in partnership with Franklin University USA. She has over 20 years of professional experience, including extensive practical experience in the SME sector.

As a business owner and manager, she has many years’ experience in designing and organising business processes.

In 2012–2016, at PKO Bank Polski S.A. she was in charge of property lease operations related to the bank’s branches, supervising and participating in negotiation processes. She was involved in business controlling activities related to the optimisation of the bank’s branch network.

In 2016–2017, she was Director of the Project Management Department and member of the Audit Committee at the Polish Ministry of Development. She was responsible for the preparation and implementation of a uniform methodology and culture of project management and for the coordination of key projects.

She served as Vice President of the Polish Agency for Enterprise Development (PARP), responsible for public tasks supporting the implementation of innovations in enterprises. Her work at the Agency included initiating cooperation for the building of the start-up ecosystem in Poland. She also supervised public procurement, and management of assets and IT resources.

She has experience in the public administration sector in the director general role.

MS ANNA SAKOWICZ-KACZ
Independent Member of the Supervisory Board

Graduate of the Faculty of Law and Administration of Maria Curie-Skłodowska University in Lublin. Post-graduate studies in real estate appraisal. She holds the licence of a restructuring advisor from the Minister of Justice. She has experience in the roles of bankruptcy administrator, court supervisor and curator under the bankruptcy and restructuring law, as well as supervisory board experience.

PKN ORLEN’s Supervisory Board is composed of six to ten Members. The Shareholder State Treasury, represented by the entity authorised to exercise the rights attached to the shares held by the State Treasury, shall have the right to appoint and remove one member of the Supervisory Board, with the other members of the Supervisory Board appointed and removed by the General Meeting. Members of PKN ORLEN’s Supervisory Board are appointed for a joint term of office, ending on the date of the Annual General Meeting approving the financial statements for the full second financial year of such term of office. Individual Members of the Supervisory Board and the entire Supervisory Board may be removed at any time before the end of their term of office. The General Meeting of PKN ORLEN appoints the Chair of the Supervisory Board, whereas the Deputy Chair and the Secretary are appointed by the Supervisory Board from among the other Members of the Board.

At least two Supervisory Board Members must meet the independence criteria specified in PKN ORLEN’s Articles of Association. In accordance with the Code of Best Practice, independent Supervisory Board Members are not employees of the Company, its subsidiary or associate, do not have a similar contractual relationship with any of these entities, and have no ties to a shareholder that would preclude their independence.

Before being appointed to the Supervisory Board, independent Members of the Supervisory Board should submit to the Company a written statement to the effect that they meet the criteria set out in the Articles of Association and in the Code of Best Practice. Moreover, candidates to the Supervisory Board should submit statements based on which it would be possible to determine whether they meet the requirements for members of the Audit Committee of the Supervisory Board, as set out in the Act on Statutory Auditors, Audit Firms, and Public Oversight of May 11th 2017, including the requirements concerning independence of the Audit Committee Members. Statements on meeting the independence criteria are submitted to the other Supervisory Board Members and to the Management Board.

If the independence criteria are not met, a Member of the Supervisory Board is obliged to immediately notify the Company of the same. The Company then informs the shareholders of the current number of independent Members of the Supervisory Board.

If the number of independent Members of the Supervisory Board is less than two, the Company’s Management Board is obliged to immediately convene a General Meeting and put an item concerning changes in the composition of the Supervisory Board on the agenda of the General Meeting. The Supervisory Board will continue to operate as then composed until changes in the composition of the Supervisory Board are made, i.e. the number of independent Members is adjusted to the requirements set forth in the Articles of Association, and the provisions of Art. 8.9a of the Articles of Association (containing a list of resolutions which must be passed with the consent of at least half of independent Supervisory Board Members) will not apply.

In accordance with the Rules of Procedure for the Supervisory Board, a Supervisory Board Member should not resign mid-term if this could prevent the Supervisory Board from performing its duties, and in particular from timely passing a resolution on any matter material to the Company. If a Supervisory Board Member has resigned or is unable to perform his/her duties, the Company should immediately take appropriate steps to fill the vacancy or change the composition of the Supervisory Board.

Organisation of the Supervisory Board, in accordance with the principles outlined in PKN ORLEN’s Articles of Association and the Rules of Procedure for the Supervisory Board, is described on the corporate website.

Meetings of the Supervisory Board are held when necessary, but at least once every two months. The Supervisory Board may adopt resolutions:
a) at a meeting – if all its members participating in the meeting are present at the venue of the meeting or if all or some of its members participate in the meeting by means of remote communication, or
b) outside a meeting – by written ballot or by means of remote communication, including by telephone or by other means, provided the identity of a Supervisory Board member can be verified.

The Supervisory Board may pass resolutions if at least half of its Members participate in the meeting. A resolution of the Supervisory Board shall also be valid if passed outside a meeting, by written ballot or using means of remote communication, provided that all Supervisory Board members have been notified of the contents of the draft resolution and at least half of Supervisory Board members have participated in the vote.

Resolutions of the Supervisory Board shall be passed by an absolute majority of votes cast, provided that at least half of the Supervisory Board members are present, and provided further that votes cast shall be deemed to comprise votes ‘in favour of’, votes ‘against’ and abstentions. This does not apply to resolutions to remove or suspend from duties any Members of the Management Board or the entire Management Board during the term of their office, in which case at least two-thirds of all the Supervisory Board Members must vote in favour of a given resolution.

Members of the Supervisory Board may vote on resolutions of the Supervisory Board by casting their votes in writing through another member of the Supervisory Board. Matters placed on the agenda during the Supervisory Board meeting may not be voted on in writing through another member of the Supervisory Board.

Passing resolutions on the following matters:

• any performance to be rendered or benefits to be granted by the Company or any of its related entities to members of the Management Board;
• approval of material transactions (as defined in the Articles of Association) executed by the Company with its related parties, taking into account the exemptions and detailed arrangements provided for in Section 4b of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies, and of agreements concluded by the Company or its subsidiary with a Management Board member or Supervisory Board member, save for agreements commonly concluded in petty current matters of everyday life,
• appointment of an auditor to audit the Company’s financial statements requires the consent of at least half of the independent Members of the Supervisory Board. The foregoing provisions do not exclude the application of Art.15.1 and Art. 15.2 of the Commercial Companies Code.
• the Supervisory Board selects an auditor after having received a recommendation from the Audit Committee.

• The Supervisory Board of PKN ORLEN exercises ongoing supervision over the Company’s operations, in all fields of its activity, specifically, the Supervisory Board is authorised to act as set out in generally applicable laws, including, without limitation, the Commercial Companies Code and the Company’s Articles of Association, in conformity with the Rules of Procedure for the Supervisory Board and – where generally applicable laws so stipulate – resolutions of the General Meeting and the Supervisory Board as well as other internal organisational documents in place at the Company. To ensure the highest standards of corporate governance and in order to enable shareholders to form a true and fair view of the Company, the Supervisory Board of PKN ORLEN has the additional obligation to submit to the General Meeting: assessment of PKN ORLEN’s standing, including internal control, risk management, compliance and internal audit function,

• annual report on its work,

• assessment of how the Company’s corporate governance disclosure obligations are fulfilled,

• assessment of the soundness of the Company’s sponsorship, charity and similar activities,

• remuneration report compliant with the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies,

• analysis and assessment of the activities of the Group companies, based on assessment of the Group’s consolidated financial statements,

• assessment of the use of non-current assets by the Company.

Pursuant to Sections 8.1 and 8.2 of the Rules of Procedure for the Supervisory Board, in order to discharge its duties, the Supervisory Board may inspect all the Company’s documents, request the Management Board and employees to provide reports and clarifications, and review the Company’s assets. To enable the Supervisory Board to perform its duties, the Management Board gives it access to information on matters concerning the Company. In order to guarantee the proper discharge of its duties, the Supervisory Board may request that the Management Board prepare, at the expense of the Company, expert and other opinions for the Supervisory Board, or employ an adviser.

Pursuant to Sections 27.1 and 27.2 of the Rules of Procedure for the PKN ORLEN Supervisory Board, a Supervisory Board Member should inform the other Members of the Supervisory Board of any conflicts of interest which have arisen or may arise, as well as abstain from taking the floor when the matter which has given rise to the conflict is being discussed, abstain from voting on the relevant resolution and request that the fact be recorded in the minutes. No breach of the provisions of the preceding sentence may render the Supervisory Board’s resolution invalid. In the case of doubt as to whether a conflict of interest exists, the matter is resolved by the Supervisory Board by way of a resolution.

The Supervisory Board of PKN ORLEN may appoint standing or ad hoc committees, which act as its collective advisory and opinion making bodies.
The following standing committees operate within the Supervisory Board of PKN ORLEN:

• The Audit Committee,

• The Strategy and Development Committee,

• The Nomination and Remuneration Committee,

• The Corporate Governance Committee,

• The Corporate Social Responsibility Committee (CSR Committee).

Tasks of the Audit Committee are to advise the Supervisory Board of PKN ORLEN on matters related to the proper implementation of budget and financial reporting rules and internal control within the Company and the ORLEN Group, as well as cooperation with the Company’s qualified auditors. The Audit Committee meetings are held at least once per quarter, prior to each publication of the Company’s financial statements.

Pursuant to the Rules of Procedure for the PKN ORLEN Supervisory Board, the majority of the Audit Committee Members, including its Chair, should satisfy the independence criteria defined in the Company’s Articles of Association, the Code of Best Practice and the Act on Statutory Auditors, Audit Firms, and Public Oversight. At least one Member of the Audit Committee should have the expertise and competence in accounting or financial auditing. At least one Member of the Audit Committee or individual Members of the Committee should have the expertise and competence specific to the industry in which the Company operates. PKN ORLEN’s Audit Committee performs all duties required under the Act on Statutory Auditors, Audit Firms, and Public Oversight of May 11th 2017.
In 2020, the Audit Committee held nine minuted meetings.

Also, permitted non-audit assurance services and related services were provided to PKN ORLEN and selected ORLEN Group companies in 2020 that had been contracted in compliance with the applicable procedure, i.e. each non-audit service had been preceded by an independence assessment and approved by the Audit Committee, including:

• confirmation of calculation of the electricity use intensity (EUI) indicator for PKN ORLEN,
• confirmation of calculation of the electricity use intensity (EUI) indicator for Anwil S.A. and IKS Solino S.A.,
• review of a report on solvency and financial condition of ORLEN Insurance Limited,
• review of separate accounting performed by ORLEN Aviation Sp. z o.o. with regard to ground handling activities,
• review of documents necessary for ORLEN Lietuva to recover funds from Public Service Obligation.

The Corporate Governance Committee is responsible for assessing the implementation of corporate governance standards, providing the Supervisory Board with recommendations on the adoption of corporate governance standards, giving opinions on corporate governance documents, assessing reports on compliance with corporate governance standards drafted by the Warsaw Stock Exchange and statements of compliance with the best practices referred to in Art. 7.3 of the Act on State Property Management, giving opinions on proposed amendments to the Company’s corporate documents and drafting such amendments for the Supervisory Board’s own documents, monitoring Company management procedures in terms of their compliance with legal and regulatory requirements, including disclosure requirements of the capital market as well as compliance with the Core Values and Standards of Conduct of PKN ORLEN and corporate governance principles.

In 2020, the Corporate Governance Committee held three minuted meetings.

Tasks of the Strategy and Development Committee are to provide opinions and submit recommendations to the Supervisory Board on proposed investments and divestments which may have a material impact on the Company’s assets.

In 2020, the Strategy and Development Committee held five minuted meetings.

Tasks of the Nomination and Remuneration Committee are to help attain the Company’s strategic goals by providing the Supervisory Board with opinions and proposals on how to shape the management structure, with regard to organisational solutions, remuneration schemes and selection of staff with the skills required to ensure the Company’s success. Following amendment of the Public Offering Act, the Nomination and Remuneration Committee is also tasked with issuing opinions on remuneration reports prepared in accordance with statutory requirements and the remuneration policy in place at the Company.

The majority of the Nomination and Remuneration Committee Members should be independent. Where the Nomination and Remuneration Committee is not composed of the majority of independent Members of the Supervisory Board, the Committee is chaired by the Chair of the Supervisory Board. At least one member of the Nomination and Remuneration Committee should have knowledge of and experience in remuneration policy.

In 2020, the Nomination and Remuneration Committee held eight minuted meetings.

Tasks of the CSR Committee are to support the Company’s strategic objectives by taking due account of social, ethical and environmental aspects in the Company’s operations and its interaction with stakeholders (including employees, customers, shareholders, and local communities).

In 2020, the Corporate Social Responsibility Committee held eight minuted meetings.