The amount
of remuneration and compensation of BoD members is determined by decision of the shareholders at the Company’s
AGM.
Prior
to 2007 the amount of remuneration was set in conditional
monetary units (1 unit was the rouble equivalent of 1
USD at the RF Central Bank exchange rate as at the AGM date). From
the AGM held on June 28, 2007 the amount of remuneration of the BoD
members is set in roubles.
The
amount of remuneration paid to each BoD member for performing the
duties of a member of the BoD was 4,300,000 roubles in 2008 and
4,470,000
in 2009.
In
addition to a basic sum, Board members receive extra remuneration for assuming
the responsibilities of Board Chairman and Chairman of a Board Committee, for
attending Board Committee meetings in person, and for attending meetings of the
Board or Board Committees where attendance requires a transcontinental flight. The AGM also determines a list of reimbursable expenses
associated with duties of the BoD members.
The AGM held on June 24, 2010 also established additional
remuneration which is paid to BoD members for their participation in conferences
and other events on written instructions of the Board
Chairman.
Remuneration
of Management Committee Members consists
of:
- remuneration
in accordance with an agreement signed with members of the Management
Committee, which is paid in the
amount of one monthly salary for primary employment depending on the
achievement of corporate-wide key performance indicators during the reporting
period;
- basic
remuneration (salary as set out in the employment contract);
- annual performance
bonuses for the previous year;
- annual
long-term incentive bonuses under the Long-term Incentive Program for
Employees of OAO LUKOIL and its Subsidiaries;
- additional
social benefits.
Total
remuneration paid to all members of the BoD and Management Committee for 2009
was 943.8 million roubles.
The
Company has established long-term incentive programs for employees of the
Company and its subsidiaries. These programs involve Company executives, heads
of subsidiaries and individual employees by the decision of the
BoD.
The
current program covers the period from 2010 to 2012. A certain number of
shares (phantom shares) is nominally assigned to each person involved in the
program.
Long-term
bonus payments to those involved in the program consist of two
parts:
- a bonus
in the form of nominal dividends paid annually on employees’ phantom
shares;
- a bonus
paid at the end of the program in the amount which depends on the number of
phantom shares and the spread in the price of a LUKOIL share in the beginning
and in the end of the program. To stimulate the employees’ interest in the
growth of the Company’s capitalization, within 30 days after the bonus
payment, a share purchase agreement is concluded between the employee and the
Company or its agent for the maximum number of full shares (after withholding
income tax and other due payments). The share price should be determined as
the weighted average price on the MICEX Stock Exchange on the date preceding
the date of the share purchase agreement.
