REMUNERATION POLICY
The remuneration policy in place at PKN ORLEN supports the achievement of the Company's goals, in particular long-term increase in value for Shareholders and stability of the company's operations.
Remuneration policy(Recommendations VI.R.1, VI.R.2, VI.R.4)
Remuneration for Members of the Management Board at PKN ORLEN is determined by the Supervisory Board taking into account the relevant resolution of the General Meeting, in connection with the Act on the Rules of Remunerating Persons Who Direct Certain Companies, and recommendations of its Nomination and Remuneration Committee. The main components of the Management Board Members’ remuneration system include:
- fixed monthly base pay,
- annual bonus (variable pay) depending on their performance against certain quantitative and qualitative targets and achievement of identifiable separate objectives,
- severance pay for contract termination by the Company,
- non-compete compensation.
All components of the remuneration are governed by a contract between a Member of the Management Board and the Company.
Additional benefits for directors reporting to the PKN ORLEN Management Board may include, in particular, a company car, variable universal life insurance, additional medical cover for the director and their closest family, including the right to preventive healthcare, sports programmes and rehabilitation, partial coverage of rented accommodation costs, coverage of relocation costs if the relocation takes place during the director’s employment, benefits defined in the Rules of Participation in the Company Social Benefits Fund, the right to participate in the Employee Pension Plan on the terms applicable at the Company, and the right to participate in the Employee Capital Plan subject to generally applicable laws, and – where a director performs work or additional duties outside the territory of Poland – assistance with the preparation of the annual personal income tax assessment and support during tax proceedings or checks.
The remuneration policy in place at PKN ORLEN supports the achievement of the Company’s goals, including in particular a long-term increase of its shareholder value and stability of operations.
General terms and conditions of the annual bonuses
Members of PKN ORLEN’s Management Board are entitled to an annual bonus (variable pay) on the terms set out in their respective contracts, which include the Rules of the Incentive Scheme for the Management Board as an appendix. The level of annual bonus depends on the performance against individual targets (both qualitative and quantitative), set by the Supervisory Board for individual Members of the Management Board. Based on the general set of Management Objectives established by the PKN ORLEN General Meeting, the Supervisory Board sets from four to ten individual bonus targets per year, which are recorded in a Member’s MBO Sheet. The Supervisory Board may also set a separate objective or objectives for a particular year, which must be met as a precondition to bonus payment for that year.
Assessment of a Management Board Member’s performance against individual bonus targets (both quantitative and qualitative) and achievement of separate objectives is made on an annual basis by the Supervisory Board, on the President of the Management Board’s recommendation which contains an assessment of individually performed bonus targets for all Members of the Management Board, the Management Board’s recommendation regarding achievement of the separate objective/objectives, reports on the performance against individual bonus targets by Members of the Management Board, PKN ORLEN’s financial statements and other documents which the Supervisory Board considers appropriate to examine.
The Supervisory Board passes a resolution to grant a Management Board Member an annual bonus (variable pay) for a given financial year, specifying the amount of the bonus, or a resolution not to grant the annual bonus. Such resolution is the basis for payment of the annual bonus provided that the Company’s consolidated financial statements for the financial year have been approved by the General Meeting and provided that the Management Board Member has been granted discharge in respect of his duties.
The Supervisory Board set the following seven quantitative targets for all Members of the Management Board for 2020:
- Reported EBIT of the Group,
- LIFO-based EBITDA of the Group,
- Group’s growth CAPEX, including development expenditure,
- Group’s maintenance CAPEX,
- Group’s general and personnel costs,
- Stock performance ratio: TSR of PKN ORLEN relative to the market,
- Accident rate: TRR of the Group and its external contractors,
and assigned relevant bonus thresholds to these targets. The Supervisory Board additionally set two qualitative targets for each Member of the Management Board associated with the Group’s key projects and challenges.
Additionally, in accordance with the resolutions of the PKN ORLEN General Meeting, the Supervisory Board set the following separate objectives, which must be met as a precondition to receipt of an annual bonus for 2020:
- compliance with the principles of remuneration for members of management and supervisory bodies in line with the Act across all Group companies,
- discharge of the obligations referred to in Art. 17-20, Art. 22 and Art. 23 of the Act on State Property Management of December 16th 2016 (Dz.U. of 2019, item 1302, as amended) at the Company’s subsidiaries within the meaning of Art. 4.3 of the Act on Competition and Consumer Protection of February 16th 2007 (Dz.U. of 2019, item 369, as amended).
Rules for awarding bonuses to key management personnel (including Members of the Management Board)
The regulations on bonuses applicable to the PKN ORLEN Management Board, directors reporting directly to the Management Board, and other key positions within the Group have certain common features. Persons covered by these schemes are remunerated for their performance against individual targets set at the beginning of a bonus period by the Supervisory Board for the Management Board Members and by the Management Board for key executive personnel. The bonus systems are consistent with the Company's Values, promote cooperation between particular employees, and motivate them to achieve the best possible results for the ORLEN Group. The targets are both qualitative and quantitative, and their performance is assessed after the end of the year for which they were assigned.
Remuneration of Members of the Management Board and the Supervisory Board for serving on the Management or Supervisory Boards of subsidiaries, jointly controlled entities and associates
Members of the PKN ORLEN Management Board who in 2020 served on the Management or Supervisory Boards of subsidiaries, jointly controlled entities and associates of the ORLEN Group did not receive any remuneration for such service.
Provisions of contracts with Members of the Management Board regarding non-competition and termination
In accordance with the contracts, Members of PKN ORLEN’s Management Board are required to refrain from any activities that are in competition with the Company’s business for a period of six months after the contract termination. During that period, they are entitled to receive a compensation equal to six times their monthly base pay, payable in six equal monthly instalments. Provisions of the contracts regarding non-competition after termination as a Management Board Member come into force only after a Management Board Member has held their position for at least three months.
In addition, the contracts provide for a severance payment in the case of termination by the Company for reasons other than a breach of primary, essential obligations under the contract, provided that the position of Management Board Member is held for a period of at least 12 months. Such severance pay is equal to the three-fold monthly base pay.
In accordance with the contracts, Members of the Management Boards of ORLEN Group companies are typically required to refrain from any activities that are in competition with the respective company’s business for a period of six months after the contract termination. During that period, they are entitled to receive a compensation equal to 50% or 100% of six times their monthly base pay, payable in six equal monthly instalments. Provisions of the contracts regarding non-competition after termination as a Management Board Member come into force only after a Management Board Member has held their position for at least three months. Severance payments for Members of the Management Boards of ORLEN Group companies are typically governed by the same rules as those applicable to Members of the PKN ORLEN Management Board.
Directors reporting directly to the PKN ORLEN Management Board are, as a general rule, bound by non-compete clauses for a period of six months after the contract termination. During this period they receive a salary equal to 50% of six-month base pay, payable in six equal monthly instalments. The severance pay for termination of contract by the Company is typically equal to six-fold monthly base pay.
