Report on Compliance with the Principles and Provisions of the Corporate Governance Code of Kazakhtelecom JSC in 2023
This Report is prepared in accordance with clause 15 of chapter 5 of the Corporate Governance Code of Kazakhtelecom JSC “Effectiveness of the Board of Directors and Executive Body”.
Kazakhtelecom JSC’s activity and its corporate practice show full compliance with the principles and provisions of the Corporate Governance Code.
Principles of corporate governance of joint-stock company Sovereign Wealth Fund Samruk-Kazyna
Chapter 1. Government as a shareholder of the Fund
The Development Strategy of the Fund and the Companies reflects the main strategic objective being the growth of long-term value and sustainable development of the Fund and the Companies. All decisions and actions should be in line with the development strategy.
The Company’s bodies are wholly autonomous and independent in deciding and acting within their competence. The Company shall perform relations (interaction) with shareholders through the Board of Directors in accordance with the principles of good corporate governance.
The Company discloses information on the its activities in accordance with the Law On Joint-Stock Companies and the Company’s Charter by placing the necessary information in the mass media (Internet resources of the depository of financial statements, stock exchanges). Shareholders received some information personally upon requests.
The Company has an Internal Audit Service, a Compliance Service, a Corporate Secretary and an Ombudsman exercising their powers, realising their tasks stipulated by the legislation and internal documents of the Company.
This Report discloses these provisions in more detail below.
Chapter 2. Interaction between the Fund and organisations. Role of the Fund as a national holding manager
The corporate governance system is a set of processes ensuring management and control over the Company’s activities, as well as a system of relations between the Management Board, the Board of Directors, shareholders and stakeholders. These issues are clearly regulated in the Charter, regulations on the Shareholders General Meeting, the Board of Directors, the Management Board and other internal documents.
Samruk-Kazyna JSC (hereinafter – the Fund) participates in the management of companies by exercising the functions of a major shareholder, as well as through the Board of Directors.
The Board of Directors of the Company is wholly independent in decision-making within its competence. The Fund’s representatives in the Board of Directors communicate the Fund’s position on certain issues.
The Company is managed by its bodies in accordance with legislation and the Charter.
Chapter 3. Sustainable Development
The Corporate Governance Service coordinates sustainable development activities. In 2021, following the state climate agenda “Achieve carbon neutrality by 2060” and in accordance with the instructions of Samruk-Kazyna JSC, Kazakhtelecom JSC started introducing ESG principles and transition to low-carbon development.
In 2023, in February and April, the Board of Directors approved the Roadmap for the development of ESG practices in Kazakhtelecom JSC and adopted a number of regulatory documents: Kazakhtelecom JSC Environmental Policy, Kazakhtelecom JSC Sustainable Development Policy, the Policy on Equal Opportunities, Inclusiveness and Diversity, Kazakhtelecom JSC Policy on interaction with local communities, Human Rights Policy.
The Company set a goal to obtain ESG rating being an important tool for increasing investment attractiveness. Kazakhtelecom JSC intends to obtain ESG-rating from the leading rating agency Sustainalytics, and therefore, the Company takes further measures and initiatives to strengthen its rating positions.
Chapter 4. Rights of shareholders (participants) and fair treatment of shareholders (participants)
Respect for shareholders’ rights is a key obligation of the Company. The Company strictly complies with the rights of its shareholders, as set forth in legislation and internal documents, and ensures fair treatment of its shareholders. Shareholders receive notifications on the events affecting their interests in proper time, such as meetings of shareholders, decisions made, etc. The Company promptly provides the shareholders with the necessary information on the Company’s activities upon their request.
Chapter 5. Effectiveness of the Board of Directors and executive body
The Board of Directors is a management body reporting to the General Shareholders Meeting ensuring strategic management of the organisation and control over the Management Board activity.
The Management Board reports to the Board of Directors, manages the day-to-day activity of the organisation, and ensures its compliance with the strategy, the Development Plan and the decisions made by the General Shareholders Meeting and the Board of Directors.
The powers of the Board of Directors and Management Board are clearly defined and delineated.
The Board of Directors and its committees are balanced in terms of skills, experience and expertise to ensure making independent, objective and effective decisions in the best interests of the Company and with due regard to the fair treatment of all shareholders and the principles of sustainable development.
The Company’s Board of Directors is represented by specialists in various fields of knowledge (telecommunications, finance, marketing, technical sphere, etc.) with extensive experience, including international. The number of independent directors corresponds to the recommended by law (at least 30%) and even exceeds it (43% as of 2023).
The Board of Directors’ election takes place exclusively within the framework of the procedures established by law and the Company’s Charter. The Company’s internal documents regulate the procedure for election, term of office, and activities of the Board of Directors. There is an induction programme for newly elected members of the Board of Directors.
The Chairman of the Board of Directors is responsible for the overall management of the Board of Directors, ensuring full and effective implementation of the Board of Directors’ main functions and building a constructive dialogue between the Board of Directors’ members, major shareholders and the Management Board.
The role and functions of the Board of Directors’ Chairman and the Executive Body’s Head are clearly delineated and enshrined in the Company’s Charter, the Regulations on the Board of Directors and the Management Board.
The Committees of the Board of Directors contribute to a deep and thorough consideration of issues within the competence of the Board of Directors and improve the quality of decisionmaking, especially in such areas as audit, risk management, strategic planning, human resources and social issues. In 2023, the Company had three effective committees: Audit and Sustainable Development Committee, Human Resources, Remuneration and Social Affairs Committee, and Strategic Planning Committee. Their role is clearly regulated in their regulations, they consider a wide range of issues and make necessary recommendations to the Board of Directors. The Board of Directors reviews the results of the Committees’ activities on a regular basis and evaluate them positively.
Preparation and holding of the Board of Directors’s meetings contribute to maximising the efficiency of its activities. To fulfil their duties, the Board of Directors’ members have access to complete, relevant and timely information.
The Board of Directors holds regular meetings for the effective performance of its functions. The Board of Directors holds its meetings in accordance with the work plan approved before the beginning of the calendar year. Meetings of the Board of Directors and its committees are held both in presentia and in absentia, with the minimum meetings in absentia. In 2023, Board of Directors held 14 meetings and only one of them held in absentia. The Board of Directors considers and decides on issues of important and strategic nature only at meetings with voting in presentia.
The Corporate Secretary duly minutes the meetings of the Board of Directors and its committees, indicating the results of discussions and decisions made.
To efficiently arrange the activities of the Board of Directors and the interaction of the Board of Directors and the Management Board with shareholders, the Board of Directors appointed a corporate secretary, who performs his functions in accordance with the law, the Charter and other internal documents.
The Company has a collegial executive body – the Management Board. The Management Board reports to the Board of Directors and manages the daily operations of the Company, is responsible for the implementation of the strategy, development plan and decisions made by the Board of Directors and the General Shareholders Meeting.
The Board of Directors elects the head and members of the Management Board, determines the term of office, salary, and terms of their remuneration. The Company complies with the recommendation to elect the head and members of the executive body for a term of up to three years.
The Board of Directors approves the incentive KPIs of the director and members of the executive body on annual basis.
In case of corporate conflicts, the participants seek ways to resolve them through negotiations to ensure effective protection of the interests of the organisation and stakeholders.
To comply with the principles of business ethics and optimal regulation of social and labour disputes the Company appointed an Ombudsman. The Ombudsman’s role is to advise the employees, participants of labour disputes and conflicts who have applied to him and assist them in developing a mutually acceptable, constructive and feasible solution taking into account compliance with the legislation of the Republic of Kazakhstan (including confidentiality, where required), to assist in resolving problematic social and labour issues, as well as to ensure compliance with the principles of business ethics by the Company’s employees.
The Compliance Service functions actively and effectively, aimed ensuring compliance with mandatory regulatory requirements and international best practices on anti-corruption and formation of internal corporate culture of the Company and its subsidiaries to ensure transparency, honesty among employees, as well as to create conditions for doing business in accordance with the best international standards, internal policies and legislation of the Republic of Kazakhstan.
Chapter 6. Risk management, internal control, and audit
The Company has a risk management and internal control system in place. The Board of Directors plays an active role in risk management.
On a quarterly basis, the Audit and Sustainability Committee and the Board of Directors reviewed risk management reports. If necessary, they adjust measures and processes in this area.
The Company has an effective Internal Audit Service reporting to the Board of Directors. The Audit and Sustainability Committee and the Board of Directors also review the IAS reports on a quarterly basis.
Chapter 7. Transparency
To respect the interests of stakeholders, the Company discloses information on all important aspects of its activities, including its financial condition, performance, ownership and management structure in a timely and reliable manner. The relevant information is posted on various resources, including the Internet resources of the financial statements depositary and the stock exchange.
The Company annually audits its financial statements by engaging an independent and qualified auditor. The General Shareholders Meeting approves annual financial statements audited by an external auditor on an annual basis.
The Company also annually approves an integrated annual report, which discloses all aspects of the Company’s operation for the previous year, including sustainable development activities.