The practice of corporate governance

The practice of corporate governance

In accordance with the Corporate Governance Code, the relationship between the main management bodies of the company - the Management Board, the Board of Directors and the Sole Shareholder of the Company is carried out within the framework of approved corporate procedures, through the relevant authorized bodies. Following the generally accepted principles of corporate governance, the Company actively operates institutions of Independent Directors, the internal audit service, established committees under the Company's Boards of Directors, and established the work of the Corporate Secretary.

Principles and practices.

The Company considers Corporate Governance as a means to enhance the efficiency of the Company, strengthen its reputation, and reduce the cost of attracting capital. The Company considers a proper corporate governance system as its contribution to ensuring the rule of law in the Republic of Kazakhstan and a factor determining its place in the economy and society as a whole.

The corporate governance of the Company is based on the principles of justice, honesty, responsibility, transparency, professionalism and competence. An effective corporate governance structure implies respect for the rights and interests of all interested parties of the Company and contributes to the successful operation of the Company, including the growth of its value, maintaining financial stability and profitability.

The principles of corporate governance are aimed at creating trust in relations arising in connection with the management of the Company and are the basis of all the rules and recommendations of the Corporate Governance Code. The fundamental principles of the Code are:

  1. The principle of protecting the rights and interests of the Sole Shareholder;
  2. The principle of effective management of the Company by the Board of Directors and the Management Board;
  3. The principle of independent activity of the Company;
  4. The principle of transparency and objectivity of disclosure of information on the activities of the Company;
  5. The principle of legality and ethics;
  6. The principle of responsibility to stakeholders.

Improvement of the Corporate Governance System

One of the factors of successful development of the Company is continuous work on improving the corporate governance system.

In 2018, measures were taken aimed at improving the level of corporate governance, which allowed to increase the corporate governance rating to 89.7%. In addition, based on an independent assessment, KazAgroFinance JSC was included in the top 15 transparency ratings of the largest companies in Kazakhstan, which was a result of the Company's efforts to develop transparency standards and the quality of information disclosure. In order to further improve the corporate governance system, a Plan of Measures was developed to improve the corporate governance system of KazAgroFinance JSC for 2019–2021.

Also, in order to qualitatively monitor the improvement of the corporate governance system, the key performance indicator “Corporate governance rating,%” is included in the Development Strategy of KazAgroFinance JSC for 2020-2029.

The company will continue to carry out planned work to improve the level of corporate governance by bringing the management system to international standards of best corporate governance practices. The development of corporate governance will have a significant impact on improving the Company's efficiency, and will allow it to become a successful company operating in accordance with recognized international standards.

Diagnostics of the Corporate Governance

In 2014, the Sole Shareholder of the Company, KazAgro Holding, approved the methodology for assessing the level of corporate governance of subsidiary joint-stock companies. Considering the fact that the implementation of best corporate governance practices in a group of companies is carried out in stages, the current methodology is aimed primarily at building a corporate governance system, and is more simplified in comparison with world standards.

According to the results of diagnostics conducted in 2015, the level of corporate governance of KazAgroFinance JSC was rated as “LOW” and amounted to 58.3 %.

According to the results of the 2016 diagnostics conducted by the Holding in accordance with the current methodology, the level of corporate governance reached the “AVERAGE” rating – 82.8%. The implementation of the strategic plan for this key indicator in the reporting year amounted to 113.0%.

In accordance with the best global corporate governance practices, in 2018, independent diagnostics of corporate governance was conducted by “Expert RA Kazakhstan” Rating Agency” LLP in accordance with their own methodology, which significantly differs from the previously used methodology for assessing corporate governance of “KazAgro” Holding” JSC. Thus, according to the rating agency's Methodology, the level of corporate governance is measured not as a percentage, but by a certain rating class from 1 to 10.

Based on the results of the RAEX diagnostics, the Company was assigned the corporate governance level “Corporate Governance Rating - 7. The Сompany complies with the requirements of Kazakhstani legislation in the field of corporate governance, follows certain recommendations of international best practice of corporate governance. The company is characterized by low risk of loss of ownership associated with the quality of management.”

This level was measured on a scale from -100 to 100 points and amounted to 71.8 points, however when converted to a percentage, the level will be 85.9% (171.8 / 200 * 100).

Following the results of 2018, “KazAgro” Holding” JSC in 2019 carried out diagnostics of corporate governance of KazAgroFinance JSC according to the Holding’s internal methodology. Based on the results of the analysis, the level of corporate governance was rated as “Average”. In comparison with the previous assessment conducted by the Holding in 2018 following the results of 2017, the level increased by 4 percentage points.