REMUNERATION OF MANAGEMENT AND SUPERVISORY BOARD MEMBERS

General terms of remuneration,conditions for granting annual bonuses, and non-competition agreements

Remuneration Policy

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 Rules of Remunerating Persons Managing Certain Companies (the Salary Cap Act) and recommendations of its Nomination and Remuneration Committee. The main components of the Management Board Members’ remuneration system include:

  • a monthly fixed base salary (fixed 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.

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 bonus amount, 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 six quantitative targets for all Members of the Management Board for 2020:

  • Reported EBIT of the Group,
  • LIFO EBITDA of the Group,
  • Maintenance CAPEX of the Group + general and personnel costs of the Group,
  • Growth CAPEX of the Group,
  • 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 also set two qualitative targets for each Member of the Management Board, associated with the Group’s key challenges in a given year.

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) within 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 of the ORLEN Group

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 achievement is assessed after the end of the year for which they were assigned.

Compensation for non-compete obligations and for termination of employment

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 benefit amounts to three times the 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. The non-compete clauses come into force only after a Management Board Member had held their position for at least three or six 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.

For more information on the terms of remuneration, conditions for granting annual bonuses, and non-competition agreements, seesection ‘Corporate governance’ of this Report.

Remunerationof Management and Supervisory Board members

Remuneration paid to Members of the Company’s Management Board for their service in 2020 and 2019 [PLN ‘000]

Item

2020

2019

Daniel Obajtek

 1,286

 1,206

Armen Artwich

 969

 925

Adam Burak 1)

 885

 -

Patrycja Klarecka

 993

 921

Zbigniew Leszczyński

 985

 929

Wiesław Protasewicz 2)

 -

 834

Michał Róg

 1,010

 975

Jan Szewczak 1)

 881

 -

Józef Węgrecki

 1,003

 952

Total:

8,012

6,742


1)
Remuneration for service on the Management Board from February 3rd 2020.
2) Remuneration for service on the Management Board from November 28th 2019.

Bonuses potentially due to Members of the Company's Management Board for their service in a given year, to be paid in the following year [PLN '000]

Item

2020

2019

Daniel Obajtek

 966

 913

Armen Artwich

 966

 913

Adam Burak 1)

 877

 -

Patrycja Klarecka

 966

 913

Zbigniew Leszczyński

 966

 913

Wiesław Protasewicz 2)

 -

 831

Michał Róg

 966

 913

Jan Szewczak 1)

 877

 -

Józef Węgrecki

 966

 913

Total:

7,550

6,309


1)
Remuneration for service on the Management Board until February 3rd 2020.
2) Bonus potentially due for service on the Management Board until November 28th 2019.

Termination benefits for former Members of the Management Board [PLN ‘000]

Item

2020

2019

Wiesław Protasewicz 1)

 457

 228

Total:

 457

 228


1) In 2020: payment of non-compete compensation; in 2019: severance payment.

 

Remuneration of Members of the Management Board and the Supervisory Boardfor serving on the Management or Supervisory Boards of subsidiaries, jointly controlled entities and associates (PLN ‘000)

The Members of the PKN ORLEN Management Board did not receive remuneration for holding positions on the governing bodies of the Company’s subsidiaries within the group of companies as defined in Art. 4.14 of the Act on Competition and Consumers Protection of February 16th 2007.

Remuneration of Members of the PKN ORLEN Supervisory Board [PLN ‘000]

Item

2020

2019

Wojciech Jasiński 1)

 116

 

Izabela Felczak-Poturnicka 2)

 6

 133

Agnieszka Biernat-Wiatrak 3)

 -

 60

Mateusz Bochacik 4)

 -

 15

Barbara Jarzembowska 5)

 129

 67

Dominik Kaczmarski 6)

 106

 

Andrzej Kapała

 129

 123

Michał Klimaszewski 5)

 129

 67

Wojciech Kryński 7)

 -

 55

Roman Kusz 8)

 129

 21

Radosław Kwaśnicki 7)

 -

 55

Jadwiga Lesisz

 129

 122

Małgorzata Niezgoda 9)

 23

 122

Anna Sakowicz-Kacz 5)

 129

 67

Andrzej Szumański 5)

 129

 67

Anna Wójcik

 129

 122

Ogółem:

1,283

1,096


1)
For service as Chairman of the Supervisory Board from March 5th 2020.
2) For service as Chairwoman of the Supervisory Board until January 16th 2020.
3) For service until June 14th 2019.
4) For service until February 15th 2019.
5) For service from June 14th 2019.
6) For service from March 5th 2020.
7) For service until June 14th 2019.
8) For service from October 29th 2019.
9) For service until March 5th 2020.

Remuneration of key management personnelat the ORLEN Group

Remuneration of key management personnel at the ORLEN Group [PLN ‘000]

Item

2020

2019

Remuneration and other benefits of key management personnel:

- other key management personnel at the Company

30,616

 30,585

- key management personnel at ORLEN Group subsidiaries

252,762

155,118

Total:

283,378

185,703


The higher amount of remuneration of key management personnel is attributable mainly to the acquisition of the Energa Group in 2020 and the effect of changes in the organisational structures which caused an increase in the number of managers reporting directly to members of the Management Board, new appointments to the Management Boards of the Group companies, and the cost of one-off severance payments.

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