Editor’s Note: The following is a letter that Clare Spottiswoode, the chair of Naftogaz’s supervisory board, sent to Kyiv Post chief editor Brian Bonner in response to a story about Naftogaz management concealing multimillion-dollar bonuses to top executives. Yuriy Vitrenko, Naftogaz’s CEO, issued a response hours later.
Dear Mr. Bonner,
Your article “Naftogaz under Kobolyev conceals multimillion-dollar bonuses to top executives” published in Kyiv Post July 6, 2021 does not contain all relevant facts, which are critical for the reader to understand how and why relevant principles of management compensation disclosure are applied in Naftogaz, but provides several inaccurate conclusions. In order to fill the above-mentioned gaps and provide the reader with comprehensive and accurate picture, I am kindly asking you to publish this letter explaining logic of the company in relation to management remuneration disclosure in the 2020 annual report.
1. Naftogaz was and continues to be the pioneer in corporate governance reform amongst Ukrainian state-owned enterprises. Despite all well-known manipulations and populistic rhetorics of various politicians, the company has been voluntarily (even when it was not required by applicable legislation) publishing detailed information on monetary compensation of its top management, relying on voluntary consent of every employee or supervisory board member, whose personal data was to be disclosed.
2. 2020 annual report does disclose the amount of remuneration paid to all members of the executive board and all directors of the company. The reason for inclusion of director compensation into disclosure is obvious – in 2020 average compensation of a director exceeded average compensation of an executive board member. Thus, disclosing executive board members’ compensation only would have constituted a non-compliance with the substance of OECD Corporate Governance Standards.
3. It is also important to note that Naftogaz always (since it started publishing top management compensation numbers) discloses numbers, which were paid out during the relevant reporting financial year. Thus, all remuneration that was accrued in relation to 2020, but was or will be paid out in 2021, will be reflected in the year 2021 annual report, which is due to be published in 2022. For example, all payments that were received by the former CEO Andriy Kobolyev, including those that were paid out by the company following his dismissal by the shareholder in April 2021, will be reflected in the year 2021 annual report. (Editor’s Note: However, earlier Spottiswoode told the Kyiv Post that only the aggregated remuneration amount was disclosed because personal payments are “politically sensitive” information.) This approach is not only consistent with applicable Ukrainian regulatory requirements but addresses Ukrainian reality when state officials may intervene into remuneration matters of management of Ukrainian SOEs by blocking or suspending compensation accrued or due for payment (as was the case with bonuses for Stockholm in 2018-2019).
Thus, the conclusion publicized in your and several related articles published by other media that “Naftogaz concealed” bonuses for 2020 is completely inaccurate – this data was never meant to be in the year 2020 annual report in the first place.
4. Data on compensations of top management in the year 2020 annual report is presented in a consolidated form since the company did not receive consent of Mr. (Yuriy) Vitrenko, who was dismissed in 2020 and received, among other payments, duly allocated to him the share of the second part of Stockholm bonus. The amount paid by the company to Mr. Vitrenko represents the lion’s share of the total compensation paid by the company to the top management in 2020. The position taken by the company, which I fully agree with, was such that personalized disclosure of much smaller amounts (compared to the one paid to Mr. Vitrenko) without disclosure of the name of the biggest recipient would not only be unfair but might also provoke public manipulations in light of then declared intention to appoint Mr. Vitrenko as a member of the Ukrainian government.
5. However, if Mr. Vitrenko would be ready to give his consent to such a disclosure now, I would be happy to suggest the supervisory board to issue a separate remuneration report that would disclose all payments made by the Company in the year 2020 to those members of the top management team, who will be willing to grant their individual permissions too.
I hope that the above clarification will not only help correct one of the inaccurate conclusions publicized but will also help to protect one of the most important achievements of corporate governance reform of state-owned enterprises in Ukraine – transparency.
Yours sincerely,
Clare Spottiswoode
