Corporate governance

The fundamental principles of management are the basis for the efficient functioning of an organisation and the achievement of its financial and non-financial objectives. They have a special dimension in such a complex Group as PGE.

PGE Polska Grupa Energetyczna S.A. is a joint stock company. Pursuant to the Polish Commercial Companies Code, a joint stock company has the following corporate bodies:

Competences of the governing bodies are specified in the company’s statutes, the content of which is established by the company’s general meeting.

The following diagram presents a simplified management structure:

The Management Board of PGE SA conducts the company’s affairs and represents it in all activities in and out of court. Statements of will on behalf of the company must be made by two management board members or a management board member and a proxy. May consist of 1 to 7 members, including the president may consist of 1 to 7 members, including the president; the remaining members act as vice-presidents. Members are appointed board for a joint three-year term. 

The Management Board and particular members are appointed and dismissed by the supervisory board, following a competitive procedure intended to test and evaluate the candidates’ qualifications and to select the best candidate for the position of Management Board member, with the stipulation that candidates for this post must meet the conditions specified in § 15 sec. 2, 3 and 4 of PGE’s Statutes. In addition, each member of the Management Board may be recalled or suspended by the General Meeting or, for major reasons, suspended by the Supervisory Board. A resolution of the Supervisory Board on the suspension of a member of the Management Board must include a justification. The Supervisory Board may delegate members of the Supervisory Board to perform activities of the members of the Management Board on a temporary basis. A member of the Management Board submits his/her resignation in writing to the Supervisory Board at the address of the registered office of the Company.

At the date of publication of the report, the management board comprised six members (five appointed for a joint term in February 2020 and one appointed in September 2020) and the supervisory board comprised eight members (seven members elected by the shareholders at the General Meeting and one member appointed by the State Treasury by declaration). The Supervisory Board of the 12th term was appointed with effect from June 22, 2022.

PGE Polska Grupa Energetyczna S.A. is the dominant entity in the PGE Capital Group. Furthermore, it acts as the Corporate Centre that manages the Group. The Corporate Centre makes important decisions concerning the activity of particular business lines and the strategic directions of their development.

Companies managing business lines are responsible for:

• introduction of segment strategies compliant with the PGE Group’s strategy;
• focusing on carrying out operating and investing activities;
• striving to improve the efficiency of operational processes;
• supporting decision-making processes at the Corporate Centre.

The company’s governing bodies oversee the anti-corruption policy, which covers the types of corruption, including bribery, and a comprehensive set of anti-corruption rules.

Detailed competences of the general meeting of PGE Polska Grupa Energetyczna S.A. include:

Resolutions of the General Meeting are passed with an absolute majority of votes, subject to other provisions of the Code of Commercial Companies and the Company’s statutes. One share entitles to one vote at the General Meeting.

Detailed rules for the General Meeting are specified in the Polish Commercial Companies Code and the Company’s statutes. Additional issues related to General Meetings are regulated by the General Meeting Rules.

The Company’s statutes and the General Meeting Rules are available at:

• The Statutes of PGE Polska Grupa Energetyczna S.A.
• Regulations

Two PGE’s General Meetings were held in 2021 and three PGE’s General Meetings were held in the first half of 2022.

The supervisory board of a public limited company is a control body in relation to the company’s management board and exercises continuous supervision over the company’s activities in all of its operating areas.

According to the statutes, PGE’s Supervisory Board includes from five to nine members, who are selected by shareholders during a general meeting. In the case of PGE, the largest shareholder – State Treasury – holds additional authorisation to appoint one supervisory board member through a decision delivered to the Management Board.

In 2021, PGE’s Supervisory Board held 13 meetings and adopted 144 resolutions.

PGE fulfiled the rule of Best Practices for WSE-Listed Companies, pursuant to which at least two Supervisory Board members should meet the independence criteria – in our case, the number of members who declared compliance with independence criteria was six.

Supervisory Board members’ independence

• DPSN 2021

According to Best Practices for WSE-Listed Companies (DPSN), a person who is an employee of a company, subsidiary or affiliate, as well as a person associated with such entities with a similar agreement, cannot be deemed as meeting the criteria of independence. Association with a shareholder excluding the attribute of independence of a supervisory board’s member within the meaning of the DPSN rule is also understood as actual and essential relations with a shareholder with at least 5% of the total number of votes in the company 

• Act of May 11, 2017 on statutory auditors, auditing companies and public supervision (Polish Journal of Laws; Dz. U. of 2017, item 1089), (“Statutory Auditors Act”) 

In terms of the criteria of independence of the supervisory board’s audit committee members, Article 129 paragraph 3 of the Statutory Auditors Act applies, stating that most audit committee members, including the chairman, is independent of the given public interest entity (in this case, the issuer of securities).

PGE’s Supervisory Board has the following permanent committees: Audit Committee, Strategy and Development Committee, Nomination and Remuneration Committee, Corporate Governance Committee.

A detailed scope of competences for each of the Supervisory Board’s permanent committees is presented in the Supervisory Board Regulations, available at Regulations.

• Audit Committee
  The task of the Audit Committee is assessment of the correctness and effectiveness of internal control at PGE S.A. and PGE Group and cooperation with the statutory auditors of the Company. The Audit Committee’s tasks include in particular defining the rules for selecting an audit firm to audit the Company’s financial statements and monitoring the Company’s financial reporting.The Committee held 11 meetings in 2021.3 members of the Audit Committee (Janina Goss, Grzegorz Kuczyński, Artur Składanek) met the criterion of independence according to the requirement resulting from the Act on statutory auditors, auditing companies and public supervision (Polish Journal of Laws; Dz. U. of 2017, item 1089).

• Corporate Governance Committee
  The Corporate Governance Committee evaluates implementation of corporate governance principles at the Company and presents the Supervisory Board with initiatives in this area, provides opinions on normative acts and other documents of the Company presented to the Supervisory Board, which considerably affect the corporate governance, initiates and prepares proposals of changes in normative acts of the Supervisory Board. The Committee did not hold meetings in 2021.

• Strategy and Development Committee
  The Strategy and Development Committee provides opinions and recommendations to the Supervisory Board regarding planned investments that considerably affect the Company’s assets. In particular, the tasks of the committee include providing opinions on strategy and strategic plans submitted to the Supervisory Board by the Management Board.The Committee held 2 meetings in 2021.
• Nomination and Remuneration Committee
  The Nomination and Remuneration Committee is responsible for facilitating achievement of strategic goals of the Company by presenting the Supervisory Board with opinions and motions on the development of the management structure, including remuneration system and selection of properly qualified personnel.The Committee held 5 meetings in 2021.

On December 31, 2021 the committees worked in following compositions:

As at the publication date of this report, the the committees work in following composition:

Currently, at the date on which this report is published (August 2022), the Management Board of PGE Polska Grupa Energetyczna S.A. consists of 6 members.

The management board of a public limited company conducts the company’s affairs and represents it in all activities in and out of court. The management board is responsible for managing the company’s on-going business, e.g. making economic decisions, representing the company before administrative or government authorities and signing agreements with other entities. The activities of the management board and the achievement of objectives are monitored by the supervisory board, and the company’s annual ordinary general meeting adopts resolutions on votes of approval – an evaluation of the work performed by management board members in the most recent financial year.

At PGE Polska Grupa Energetyczna S.A., the Management Board’s competences include all matters related to conducting the Company’s affairs such as are not reserved by law or the statutes for the General Meeting or the Supervisory Board.

The modus operandi of the Management Board and internal division of competence among Management Board members as regards managing the Company’s affairs are specified in regulations of the Management Board available at the Company’s website.

Management Board resolutions are required in the following instances:

• the Company’s acquisition or disposal of the following components of assets: real property, perpetual usufruct, interest in real property or perpetual usufruct, shares, interests or other participation rights,
• incurring credits and loans,
• granting sureties and guarantees by the Company and issuance of promissory notes,
• making donations and releasing from debts,
• concluding agreements not related to the Company’s business activities specified in § 3 sec. 1 of the articles of association,
• appointing commercial proxies,
• appointing Company proxies authorised to incur liabilities with a value exceeding PLN 400 000, excluding:
  • the powers of attorney to conclude agreements or incur liabilities related to trade in electricity and gas, related products and rights related thereto, and related to the purchase and sale of fuels and raw materials,
  • powers of attorney ad litem,
• adopting the Regulations of the Management Board,
• approving the Company’s Organisational Regulations,
• forming other companies,
• adopting the Company’s annual and multi-year financial plans, including investment, marketing and sponsoring plans,
• approving rules for conducting sponsorship activity,
• adopting the Company’s growth strategy,
• determining the method of exercising the voting right at general meetings or general meetings of the companies in which the Company holds shares or interests,
• approving the materials submitted by the Management Board to the Supervisory Board.

Irrespective of the above-mentioned matters, resolutions of the Management Board are required for any matter referred by the Management Board to the Supervisory Board or the General Meeting.

The PGE Group operates in the energy industry, where long-term planning is extremely important, especially in terms of investments in generation sources, the construction of which may take several years, and the lifetime of such assets is counted in dozens of years. Therefore, an Investment Committee operates at PGE – an opinion-giving body that acts as a decision-making support for the Management Board of PGE S.A. and management boards of PGE Group companies. The main task of the Committee is to provide opinions on investments, assuming that the investment eligibility criteria for consideration are met.

The Investment Committee consists of more than ten people. These are members of the Management Board, directors of divisions, directors of organizational units of PGE S.A., as well as members of the management board from subsidiaries directly responsible for individual investments. The work of the Committee is managed by the Vice President of the Management Board of PGE responsible for the investment area.

As part of its work, the Committee:

• as a result of the analyzes, gives opinions on the economic and technical advisability of the investment and recommends it to the Management Board of PGE S.A. and management boards of PGE Group companies – investments with the highest efficiency ratios, with particular emphasis on the compliance of the planned investment with the PGE Group’s Strategy, the current possibilities of financing the investment by the PGE Group and the degree of economic efficiency of the investment,
• issues recommendations on the transition of investments to the next phases of the investment life cycle,
• gives opinions on the consolidated investment plan,
• monitors the so-called mega-investments, i.e. strategic investments with the value of investment outlays exceeding PLN 1 billion or other investment tasks of particular importance for the PGE Group.

As a company listed on the Warsaw Stock Exchange, we apply the corporate governance rules specified in Best Practices for WSE-Listed Companies (DPSN). 

More on corporate governance rules and best practices on the  website https://www.gpw.pl/best-practice2021.

In 2021 Best Practices 2021 were introduced – the next version of the set of corporate governance rules that have been in force for companies from July 1, 2021.  The new Best Practices reflect current trends and follow European regulations in the area of corporate governance. The changes made take into account the current legal status and the latest trends in the area of corporate governance, as well as respond to the demands of market participants interested in better corporate governance in listed companies.

In line with market expectations, new good practices include ESG issues, including climate protection, sustainable development, diversity in the composition of company bodies and equal remuneration. The updated rules also cover such topics as: the expected profit distribution, issue of shares with the exclusion of pre-emptive rights or buy-back. Also new are more precise rules for submitting draft resolutions for the general meeting and proposing candidates for the supervisory board.

As a result of the work consisting in identifying the current status of the application of Best Practices 2021, at the end of July 2021, a report on the application of the best practice principles by PGE was prepared and published. The report is available at available at the following web address.

Aside from the rules specified in Best Practices, PGE tries to maintain the best possible communications with capital market participants by publishing materials that respond to investor needs, such as:

• Presentation of 2030 strategy along with one pager containing summary of strategic objectives
• Multiple-year file with the Group’s quarterly data, available in the analyst section
• Analyst tool kit with a release for investors after each earnings publication and key financial data for the period, e.g. after Q1 2022 results

The Company also publishes estimated financial and operating data for each reporting period in the form of current reports.

We also publish other materials in the analytics’ zone – in response to the increasing interest in the solution of the capacity market, we published 4 presentations concerning the main capacity market auctions for 2021, 2022, 2023 and 2024. Following the announcement of the offshore programme execution, we published a presentation concerning the Offshore Wind Farm Construction Programme in the Baltic Sea.