Management and supervisory bodies

Apart from generally applicable laws, the operating procedures of PKN ORLEN’s Supervisory Board, its Committees and Management Board are set out in PKN ORLEN’s Articles of Association and the Rules of Procedure for the Supervisory Board or the Management Board, as appropriate. In their operations PKN ORLEN’s management and supervisory bodies also comply with the corporate governance principles set out by the Warsaw Stock Exchange.

In order to achieve the highest standards in the performance of the Management Board’s and Supervisory Board’s duties defined in the generally applicable laws and internal regulations, as well as to ensure that these duties are discharged effectively, the Management Board and Supervisory Board Members must possess extensive qualifications and experience. The current composition of the Management and Supervisory Boards ensures a good balance and diversity in terms of gender, educational background, age and professional experience.

Any outside employment of the Management Board Members is assessed by the Supervisory Board, which − pursuant to the Company’s Articles of Association − grants permission to Management Board Members to serve on the supervisory or management bodies of any other entities and to receive remuneration for such service.

Composition of PKN ORLEN Management Board as at January 1st 2019

At its meeting on November 28th 2019, the PKN ORLEN Supervisory Board removed Wiesław Protasewicz from the Management Board, with effect from November 28th 2019.

Composition of PKN ORLEN Management Board as at December 31st 2019

At its meeting on January 30th 2020, the Supervisory Board of PKN ORLEN appointed Jan Szewczak as Member of the Management Board for Finance and Adam Burak as Member of the Management Board for Communications and Marketing, with effect from February 3rd 2020.

Composition of PKN ORLEN Management Board as at March 18th 2020

The current division of remits between Members of the PKN ORLEN Management Board is also available on the Company’s website.

The Management Board of PKN ORLEN consists of five to nine members, including the President, Vice Presidents and other Members of the Management Board. Members of the Management Board are appointed and removed by the Supervisory Board. One member of the PKN ORLEN Management Board is appointed and removed by the entity authorised to exercise the rights attached to the shares held by the State Treasury as long as the State Treasury holds at least one share in 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 30th 2017 and ends on the date of the General Meeting of PKN ORLEN approving the Company’s financial statements for the financial year 2019.

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.

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 Members of the Management Board are obliged and authorised to manage PKN ORLEN’s affairs.

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 paragraph 6 Section 1),Section 2) and Section 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 subject 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.

Composition of PKN ORLEN Supervisory Board as at January 1st 2019

On February 15th 2019, Mateusz Henryk Bochacik resigned as Member of the Supervisory Board of PKN ORLEN.

On March 20th 2019, the Supervisory Board appointed Ms Anna Wójcik, Member of the Supervisory Board, as Secretary of the Supervisory Board.

On June 14th 2019, Mr Radosław L. Kwaśnicki, Deputy Chairman of the Supervisory Board, resigned as Member of the Supervisory Board of PKN ORLEN S.A.

On June 14th 2019, the Annual General Meeting of PKN ORLEN appointed the following persons to the Supervisory Board for a new term of office: Izabela Felczak-Poturnicka, Chair of the Supervisory Board; Supervisory Board members: Małgorzata Niezgoda, Andrzej Kapała, Jadwiga Lesisz, Anna Wójcik, Andrzej Szumański, Barbara Jarzembowska, Anna Sakowicz-Kacz, and Michał Klimaszewski.

On June 27th 2019, the Supervisory Board appointed its members Mr Andrzej Szumański and Ms Anna Wójcik as, respectively, Deputy Chair and Secretary of the Supervisory Board.

On October 29th 2019, acting on behalf of the State Treasury and pursuant to Art. 8.2.1 of the Company’s Articles of Association, the Head of the State Treasury Department at the Chancellery of the Prime Minister appointed Roman Kusz to the PKN ORLEN Supervisory Board.

In 2019, the PKN ORLEN Supervisory Board held 15 minuted meetings and passed 193 resolutions. The attendance of PKN ORLEN Supervisory Board Members at Supervisory Board meetings was 99%. In the case of absence of a Supervisory Board Member from a meeting, the Supervisory Board passed a resolution to authorise the absence.

As at December 31st 2019, the Supervisory Board consisted of six woman and four men. The age structure of Supervisory Board members: 40−49 years: 6 members, 50−60 years: 1 member, over 60 years: 3 members.

The General Meeting of the Company appointed the Supervisory Board for a new term of office on June 14th 2019. The current term of office of the Supervisory Board ends on the date of the PKN ORLEN General Meeting approving the Company’s financial statements for the financial year 2021.

The Supervisory Board of the current term is composed of Members with educational background in law, economics and finance (including a law professor) and diverse professional experience, who completed specialist courses and training programmes.

The qualifications of individual Members of the Supervisory Board are described in the first section of the Directors’ report on the operations of the ORLEN Group in 2019 and on the corporate website. In 2019, there were six independent Members on the Supervisory Board.

Composition of PKN ORLEN Supervisory Board as at December 31st 2019

Ms Izabela Felczak-Poturnicka resigned from her position as Chair of the Supervisory Board with effect from January 16th 2020.

On March 5th 2020, an Extraordinary General Meeting of PKN ORLEN S.A. removed Ms Małgorzata Niezgoda from the Supervisory Board and appointed Mr Wojciech Jasiński and Mr Dominik Kaczmarski to the Board. Mr Wojciech Jasiński was also appointed Chair of the Supervisory Board.

Composition of PKN ORLEN Supervisory Board as at March 18^th 2020

PKN ORLEN’s Supervisory Board is composed of six to ten Members. The State Treasury as a shareholder is authorised to appoint and remove one Member of the Supervisory Board, while other Members of the Supervisory Board are 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. 8.9 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 pass resolutions if at least half of its Members participate in the meeting. Subject to the provisions of the Commercial Companies Code, a resolution of the Supervisory Board may be passed in writing or with the use of direct means of remote communication. Resolutions of the Supervisory Board are passed by an absolute majority of the votes cast in the presence of at least half of the Members of the Supervisory Board. 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.

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 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 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 the internal control, risk management, compliance and internal audit function,
• an 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,
• review and assessment of the operations of the Group companies in the 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:

• Audit Committee,
• Strategy and Development Committee,
• Nomination and Remuneration Committee,
• Corporate Governance Committee,
• Corporate Social Responsibility Committee (CSR Committee).

Composition of PKN ORLEN Supervisory Board Committees as at January 1st 2019

Composition of PKN ORLEN Supervisory Board Committees as at December 31st 2019

Composition of PKN ORLEN Supervisory Board Committees as at March 18^th 2020

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. The qualifications of individual Members of the Audit Committee are described in the first section of the Directors’ report on the operations of the ORLEN Group in 2019 and on the corporate website.

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 2019, the Audit Committee held 10 minuted meetings.

In 2018, the Audit Committee formulated a recommendation with respect to the appointment of an auditing firm in accordance with the Supervisory Board-approved updated auditor selection and appointment policy and procedure, non-audit services policy, and auditor independence monitoring and oversight procedure. Key provisions of the document are as follows:

• the auditor is selected in advance in accordance with the auditor rotation rules, by way of requests for proposals issued by the Supervisory Board based on the Audit Committee’s recommendation,
• the auditor is selected based on clear and non-discriminatory criteria, in a manner ensuring that the audit services provided to the Company are of the highest quality and that all criteria and standards of the auditor’s and the auditing firm’s independence and impartiality are met,
• the first audit engagement letter is signed with an auditing firm for at least two years, subject to the rules on rotation of the auditing firm and lead auditor stipulated under applicable laws,
• the principle of objectivity is met by analysing any non-audit services provided by the auditor that extend beyond the scope of the audit engagement letter in order to avoid any conflicts of interest.

Also, permitted non-audit assurance services were provided to PKN ORLEN and selected Group companies in 2019 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:

• assurance service – confirmation of calculation of the electricity use intensity (EUI) indicator for PKN ORLEN,
• assurance service – confirmation of calculation of the electricity use intensity (EUI) indicator for Anwil S.A. and IKS Solino S.A.,
• assurance service – review of a report on solvency and financial condition of ORLEN Insurance Limited.

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 2019, the Corporate Governance Committee held five 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 2019, the Strategy and Development Committee held ten 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.

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 2019, 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 2019, the Corporate Social Responsibility Committee held four minuted meetings.