Source: http://raportroczny2016.pkobp.pl/en/corporate-governance/rules-corporate-governance-and-scope-use
Timestamp: 2019-04-21 12:29:09+00:00

Document:
In connection with Good Practices for Companies Listed on the WSE 2016, which entered into force on 1 January 2016, the Bank adopted the rules and recommendations contained there, with the reservation that recommendation IV.R.2., concerning the possibility of participating in the General Shareholders’ Meeting with the use of the means of electronic communication will not be applied unless the General Shareholders’ Meeting makes appropriate amendments to the Bank’s Articles of Association authorizing the Management Board to organize the General Shareholders’ Meeting with the use of electronic communication. Recommendation IV.R.2 is applied by the Bank in the part concerning real-time broadcast of the proceedings of the General Shareholders’ Meeting. According to the Bank’s experience, its shareholders do not expect more extensive use of the means of electronic communication during General Shareholders’ Meetings. PKO Bank Polski SA makes sure that the dates and times of General Shareholders’ Meetings are convenient for the shareholders who want to physically participate in such meetings.
In 2016, the Bank incidentally violated rule IV.Z.17 contained in Good Practices for Companies Listed on the WSE 2016, ‘The General Shareholders’ Meeting and Investor Relations’, which says that ‘A resolution of the General Shareholders’ Meeting on the payment of contingent dividend may only contain conditions that will be satisfied before the ex-dividend date.’ In the resolution of the Annual General Meeting on distribution of profit for 2015 and unappropriated profit of prior years, dated 30 June 2016, the Bank did not apply this principle, because it contained conditions which could materialize after the dividend date. According to the aforesaid resolution, the decision on profit distribution was supposed to apply, unless the conditions stipulated in the resolution (‘Meeting the Dividend Conditions’) are met by 8 December 2016.
At the same time, the resolution set out the dividend date for 30 September 2016, and 9 December 2016 was the latest date by which the Management Board was obliged to adopt the resolution on Meeting the Dividend Conditions or failing to meet them. The deadlines set for Meeting the Dividend Conditions were determined taking into account all possible deadlines for presenting new supervisory requirements in respect of own funds and determining their impact on capital adequacy ratios as at 30 September 2016, which was, in turn, necessary to determine whether the Dividend Conditions were met or not. The dividend payment date could not be earlier than the date of verification of whether the conditions for its payment had or had not been satisfied. Taking above into consideration, the dividend payment date was set on 20 December 2016. The Bank informed about the fact that this rule would not be observed in a report dated 30 June 2016.
Since 1 January 2016 the information about the status of the application by the Bank of recommendations and principles contained in the Best Practices 2016 is available at the Bank's website (https://www.pkobp.pl/pkobppl-en/investor-relations/corporate-governance/best-practice-of-gpw-listed-companies-2016/). This information is drawn on the form established by the Stock Exchange. It shows the detailed status of compliance or non-compliance with each of the recommendations and principles and is direct settlement of the rule I.Z.1.13.
The Bank took actions aimed at ensuring that the recommendations and rules contained in this section of Good Practices 2016 of WSE listed companies are applied as extensively as possible, both in the area of communication with investors and providing modern communication channels for their use, and in the area of information policy and publication of the required information on the website.
PKO Bank Polski SA regularly contacts investors in various forms preferred by them. They can ask questions by e-mail, by telephone or during face-to-face meetings with the Bank’s representatives. The Bank makes every effort to provide the financial results to investors as soon after the end of a reporting period as possible. Moreover, in accordance with the Good Practices 2016 of WSE listed companies, the financial statements of PKO Bank Polski Group contain information on sponsorship and charitable activities.
The Bank has also implemented internal regulations in respect of providing explanations and rectifying untrue, inaccurate or detrimental information published in the media.
In accordance with the Good Practices 2016, the Bank maintains its corporate website in two language versions: Polish and English. All information and corporate documents required by the Good Practices are published on the website, including the information on the application of the recommendations and rules provided in the Good Practices for Companies Listed on the WSE 2016.
The rules and recommendations contained in this section were followed. Both the Management Board and the Supervisory Board adopted the Good Practices 2016 of WSE listed companies.
In particular, the members of the Bank’s Management Board and Supervisory Board are highly qualified and experienced. The internal division of responsibilities for individual areas of the Company’s business between the Management Board members is published on the Bank’s website. Performing their functions in the Bank’s Management Board was the main professional activity of the Bank’s Management Board members in 2016. The Supervisory Board members devoted a sufficient amount of time to performing their duties in 2016; 12 Supervisory Board meetings were held.
The required number of Supervisory Board members meets the independence criteria in accordance with the rules. In accordance with the Supervisory Board members’ declarations, 7 members of the Supervisory Board, which consists of 9 members, are independent.
Furthermore, the Supervisory Board prepared and presented to the Annual General Shareholders’ Meeting the required assessment of the Company’s condition, the report on the activities of the Supervisory Board, the assessment of the fulfilment of the Bank’s information obligations in the area of corporate governance, the assessment of the Bank’s policy in the area of sponsoring and charitable activities.
The internal regulations and practices of the Bank satisfied all the requirements provided in this section of Good Practices 2016 of WSE listed companies.
In particular, the Bank’s organizational structure is adequate to the scale and nature of its activities and risks. There are separate units dedicated to the individual systems and functions or parts thereof.
The Bank’s internal regulations specify: the Management Board’s responsibility for the internal control system and risk management system, direct subordination of persons responsible for risk management, internal audit and compliance to the President or another Management Board member, the possibility of reporting directly to the Supervisory Board or the audit committee, the application of independence rules with regard to the manager of the internal audit function and other persons responsible for that function.
With respect to the organization of General Shareholders’ Meetings, the Bank decided not to apply the recommendation concerning the opportunity to participate in General Shareholders’ Meetings with the use of the means of electronic communication, unless the General Shareholders’ Meeting makes appropriate amendments to the Bank’s Articles of Association authorizing the Management Board to organize General Shareholders’ Meetings with the use of electronic communication. This decision was made taking into account the organizational and legal risks associated with such method of communication.
In other respects the Bank General Shareholders’ Meetings were organized in accordance with the requirements of the Good Practices 2016 of WSE listed companies.
he Bank also made available a real-time broadcast of both the Annual General Shareholders’ Meeting and the Extraordinary General Shareholders’ Meeting and allowed the media to be present.
The internal regulations of PKO Bank Polski SA guarantee compliance with the recommendations and rules contained in this section. The Bank has adopted regulations concerning the management of conflict of interest, including the regulations concerning professional or other involvement that could lead to a conflict of interests. The Management Board and Supervisory Board rules and regulations define the principles for excluding their members from participation in matters associated with conflicts of interest.
If a situation that could lead to a potential conflict of interest has occurred, the persons concerned are obliged to disclose the situation.
Moreover, the Bank has internal regulations in place for monitoring and restricting the possibilities of receiving benefits or gifts which could affect the independence and objectivity of decision makers or have an adverse effect on the independence of opinions and judgements.
Transactions with related parties and significant shareholders are concluded on an arm’s length basis, in accordance with consistent and uniform policies, based on the Bank’s internal regulations. Furthermore, at the Annual General Shareholders’ Meeting in 2016 some amendments were made to the Articles of Association, in accordance with which the Bank cannot conclude a significant agreement with a shareholder holding at least 5% of the total number of votes at the Bank without the prior approval of the Supervisory Board. This requirement is not applicable to typical transactions or transactions concluded on an arm’s length basis in the course of the Bank normal operating activities, if they are concluded with members of the Bank’s group.
The Bank follows the principles of the Code of Good Practice of WSE Listed Companies 2016 with regards to remuneration. In accordance with the requirements of the Code, The Bank’s Directors’ Report includes a report on the remuneration policy with the elements specified in the Code of Good Practice of WSE Listed Companies and in the Decree of the Minister of Finance on current and periodical information submitted by issuers of securities and conditions for considering as equivalent, the information required under the legislation of a non-Member State.
In the Bank’s opinion, the remuneration policy is connected with the strategy and short- and long-term goals, long-term interests and financial results, and takes into account solutions aimed at avoiding discrimination for any reason.
Remuneration of the Bank’s Management Board members and key managers is directly linked to the Bank’s financial situation and the growth of its value through appropriate bonus targets and payment deferral and suspension mechanisms.
In accordance with the Good Practices 2016 of WSE listed companies, the remuneration of the Supervisory Board members is not linked to any options, other derivatives or any other variable factors, nor is it dependent on the Bank’s results.
Moreover, the Bank’s Supervisory Board has appointed a Remuneration Committee, which applies the principles defined in the Good Practices.
According to the current PKO Bank Polski SA principles of Corporate Governance for supervised institutions, issued by the PFSA, the Supervisory Board will assess the functioning of the company payroll system and the results of this evaluation are presented to the Annual General Meeting.
On 9 December 2014, the Bank’s Management Board adopted for use the Corporate Governance Principles for supervised institutions (adopted by the Polish Financial Supervision Authority at the meeting on 22 July 2014) concerning the responsibilities and obligations of the Management Board, i.e. conducting the Bank’s affairs and representing it, in compliance with the generally binding laws and the Bank’s Memorandum of Association, with the provision that paragraph 8, clause 4 of the Principles, insofar as it relates to allowing the shareholders the possibility to participate in the meetings of the decision-making authority electronically, will not be applied unless the General Shareholders’ Meeting makes appropriate amendments to the Bank’s Memorandum of Association authorizing the Management Board to organize the General Shareholders’ Meeting using electronic means of communication. Chapter 9 of the Principles, concerning the managing of assets at the customer’s risk, will not be applied due to the fact that the Bank does not conduct such activities.
§ 28 clause 4 Principles of assessing by the decision-making body whether the determined remuneration policy promotes the development and security of the institution supervised.
Withdrawal from the application of principles set out in § 8 clause 4 was in line with the prior decision of the AGM of PKO Bank Polski SA dated 30 June 2011, expressed through the failure to adopt the resolution on amendments to the Statute of the Bank, whose aim was to enable participation in the General Meeting through electronic means of communication. The decision ruling out rule was taken because of legal and organizational-technical risks, which could jeopardize the proper conduct of the general meeting. Exclusion of the application of this principle by the AGM was consistent with the opinion of the Management Board not to use it, adopted due to the fact that the current rules of the Bank about participation in General Meetings allow shareholders the effective implementation of all rights from shares and protect the interests of all shareholders.
Withdrawal from other ‘Principles of Corporate Governance for supervised institutions’, indicated in the resolution of OGM, was due to issuing of these proposals by a qualified shareholder of the Bank - Treasury and then adoption by the OGM through the adoption of resolution no. 50/2015. According to the substantiation presented by the State Treasury along with a proposal for draft resolutions of the OGM, resignation from application of the principles set out in § 10 clause 2 and § 12 clause 1 was justified by unfinished privatization process of the Bank by the Treasury.
Withdrawal from applying of principles set out in § 28 clause 4 was substantiated, according to the request of the Treasury, with too wide range of remuneration policy evaluated by the decision-making body. In the opinion of the above mentioned shareholder, remuneration policy of the employees performing key functions but not being members of the governing body, should be subject to an assessment of their employer or principal that is the Bank represented by the Management Board and controlled by the Supervisory Board.
PKO Bank Polski SA has an internal control system in place, which is aimed at ensuring: effective operation of the Bank, the reliability of financial reporting, compliance with the risk management rules, compliance of the Bank’s operations with generally applicable laws, the Bank’s internal regulations, supervisory recommendations and market standards adopted by the Bank.
Within the system of internal control the Bank identifies risk: connected with every operation, transaction, product and process, resulting from the organizational structure of the Bank and the Group, it also estimates the risk of not achieving the internal control system goals.
an independent internal audit organization unit with the task of independently and objectively test and evaluate the adequacy and effectiveness of risk management and internal control system, with the exception of the internal audit unit.
In order to limit irregularities and fraud, ensure appropriate quality and correctness of the executed tasks, ensure compliance with risk management policies, generally applicable laws, internal regulations and market standards adopted by the Bank, as well as the reliability of its accounting and financial reporting, the Bank applies control mechanisms adjusted to its operations. The application of control mechanisms by the Bank’s employees is verified as part of functional internal controls and internal audits. The issues, operations and transactions that are important for the individual areas of the Bank’s operations are identified and subsequently monitored as part of the functional internal control.
Significant issues concerning the performance of functional internal control and control mechanisms are presented in periodical management reports submitted to the Risk Committee, the Bank’s Management Board, the Supervisory Board Audit Committee and the Supervisory Board.
In order to ensure the accuracy and correctness of preparation of financial statements, the Bank designed and implemented a number of control mechanisms built into the functionality of reporting systems and internal regulations concerning this process. These mechanisms involve among others the use of a continuous verification and reconciliation of reporting data with accounts, analytical data and other documents which are the basis for preparing financial statements as well as with applicable regulations in the field of accounting policies and financial reporting.
The process of financial statements preparing is periodically subjected to a multi-functional internal control, in particular with regard to the correctness of the accounting arrangements, substantive analysis and reliability of the information. According to the internal regulations, financial statements are accepted by the Board of PKO Bank Polski SA and the Audit Committee of the Supervisory Board appointed by the Supervisory Board of PKO Bank Polski SA in 2006.
significant adjustments resulting from the audit and the auditor’s opinion on the audit of financial statements, discuss any problems, concerns and doubts resulting from the audit of financial statements and analysis of the external auditor’s recommendations addressed to the Management Board and the response of the Management Board in this regard.
Description of cooperation between the Audit Committee and the external auditor and its assessment is drawn up in the annual report on the activities of the Audit Committee annexed to the report of the Supervisory Board on the activities of that body.
On 11 March 2015 the Supervisory Board of PKO Bank Polski SA selected KPMG Audyt Spółka z ograniczoną odpowiedzialnością spółka komandytowa as an entity authorized to audit the financial statements of PKO Bank Polski SA and consolidated financial statements of the PKO SA Group. KPMG Audyt Spółka z ograniczoną odpowiedzialnością spółka komandytowa with its registered office in Warsaw, Inflancka 4a Street is entered in the list of entities authorized to audit financial statements run by the National Council of Statutory Auditors under the number 3546. The choice of the entity authorized to audit and review financial statements was made by the Supervisory Board in accordance with applicable regulations and professional standards, on the basis of § 15 clause 1 pt.3 of the Statutes of the Bank.
On 10 April 2015, PKO Bank Polski SA and the entity authorized to audit financial statements KPMG Audyt Spółka z ograniczoną odpowiedzialnością spółka komandytowa concluded an agreement for audit and review of financial statements of the Bank and the PKO Bank Polski SA Group for years 2015-2016.
The total amount of net fees for KPMG Audyt Sp. z o.o. Sp.k for audit of the financial statements and the consolidated financial statements of PKO Bank Polski SA Group in 2016 amounted to PLN 1.25 million (in 2015 PLN 1.25 million). Fees for assurance services, including the review of financial statements amounted in 2016 PLN 2.38 million (in 2015 PLN 0.97 million). Net fee for other services in 2016 amounted to PLN 0.07 million.

References: § 28
 § 8
 § 10
 § 12
 § 28
 § 15