Application of corporate governance rules

Information policy and communications with investors

• PZU sees to it that there is due communications with stakeholders by having a clear and reliable information policy. Investors’ expectations as to the preferred access to information, communication channels and investor relations tools used are analyzed and satisfied on an ongoing basis. The Rules of PZU’s Information Policy towards Capital Market Players are available on the Company’s website https://www.pzu.pl/_fileserver/item/1543244.
• PZU maintains a corporate website at http://www.pzu.pl, which features all disclosures required by the law and indicated in WSE BP 2021. The “Investor Relations” tab at https://www.pzu.pl/en/investor-relations, dedicated to investors, features not only disclosures and reports required by law, but also presentations on results drawn up and published on a quarterly basis as well as recordings and transcripts of result conferences and other important corporate events. Every year, PZU publishes PZU Group’s Annual Report online. The Investor Relations page and online Annual Reports are available in both Polish and English.
• PZU strives to make available its interim reports much before the deadlines arising from the law.
• Questions of ESG, including the environment, climate change risks and indicators, sustainable development, as well as social and labor issues, constitute an integral part of the PZU Group’s business strategy (the applicable strategy is available at Presentation – PZU Group Strategy for 2021-2024.
• On its website, PZU publishes information concerning strategy assumptions, targets – in particular long-term targets – efforts planned and progress made defined through financial and non-financial indicators, as well as information concerning the ESG Strategy. Detailed information in this regard, such as efforts (including the way in which climate is accounted for in the decision-making processes), targets, indicators (including equal pay), and initiatives, are presented in online annual reports and in nonfinancial statements published on the PZU’s website.
• The statement of expenses incurred by the PZU Group to support culture, sport, physical activity, social organizations and foundations, charities, media, and trade unions is presented by PZU since 2022 in online annual reports and in non-financial statements published on the PZU’s website.
• Every quarter, PZU organizes result conferences for investors and analysts involving representatives of the Management Board and chat sessions for retail investors held by the CFO. The meetings are to discuss financial results, the degree to which the strategy is implemented, and the most important events affecting the PZU Group’s operations.
• PZU representatives regularly contact investors (both institutional and retail) and analysts, allowing them to ask questions and obtain clarifications pertaining to matters of their interest (subject to prohibitions under law). Contact occurs both within modern electronic communication channels and through in-person meetings during investor conferences organized by Polish and foreign brokerage houses as well as on-site meetings.
• PZU endeavors to respond to investors’ questions immediately, and with respect to e-mail questions – within three working days.

Management Board and Supervisory Board

• Members of the PZU Management Board and Supervisory Board strive to apply the rules applicable to them to the fullest possible extent, which include:
  • in 2022, functions on the PZU Management Board were the main area of the professional activity of PZU Management Board Members,
  • a consent from the PZU Supervisory Board is required for PZU Management Board Members to hold positions in corporate bodies outside of the PZU Group,
  • PZU Supervisory Board Members devoted the time necessary to perform their duties,
  • The PZU Supervisory Board Chairman does not combine this function with that of chairperson of the Audit Committee operating within the PZU Supervisory Board,
  • the required number of PZU Supervisory Board Members meet the independence criteria laid down in the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Supervision and have no actual and material relations with any shareholder holding at least 5% of the total vote in the Company.
• PZU sets aside administrative and financial resources required to ensure the efficient operation of the Company’s Supervisory Board.
• PZU Supervisory Board reports contain all elements specified under Principle 2.11 WSE BP 2021.
• As regards Principle 2.1 & 2.2, PZU employs a diversity policy towards members of PZU governing bodies, adopted by the PZU Supervisory Board and Shareholder Meeting, which specifies the diversity targets and criteria in such areas as gender, education, specialist knowledge, age, and professional experience, and lays out the timeline and method for monitoring the achievement of those targets. In line with the policy, the Shareholder Meeting and Supervisory Board, in selecting the members of the Supervisory Board and the Management Board, respectively, strive for gender parity in PZU governing bodies, with the minimum gender minority participation at 30%. The gender diversity condition for the minority share of no less than 30% is not satisfied in the PZU Supervisory Board. The condition is met in the PZU Management Board. The foregoing notwithstanding, PZU points to the following issues:
  • as regards qualifications and requirements for those occupying positions in management and supervisory bodies, PZU in particular takes into account the statutory criteria for education and professional experience adequate to the functions discharged on such positions in the entity conducting insurance activity,
  • in shaping the membership of the Company’s corporate bodies, PZU applies the diversity policy while also maintaining an objective approach and being guided by substantive criteria,
  • the diversity targets and criteria in such areas as education, specialist knowledge and professional experience, as well as the timeline and method for monitoring the achievement of those targets are laid out in the Suitability Assessment Rules of the Supervisory Board and Audit Committee as well as of the PZU Management Board, adopted by the virtue of resolutions of the PZU Shareholder Meeting and Supervisory Board, respectively

Internal systems and functions

• PZU maintains effective internal control, risk management and compliance systems as well as an effective internal audit function, corresponding to its size as well as the nature and scale of operations.
• The PZU Group’s internal control system has been developed at the level of the leading entity (i.e., PZU) and is applicable to all members of the PZU Group, in consideration of their distinct nature, proportionality and adequacy.
• PZU exercises supervision over the entire PZU Group’s risk management system. This supervision is based on mutual cooperation agreements entered into with the subsidiaries and the information provided thereunder. PZU manages risk at the Group level on an aggregate basis, especially with respect to capital requirements. In addition, PZU, as a leading entity, manages risk concentration on the level of the whole financial conglomerate. PZU makes efforts aimed at ensuring adequate and uniform standards of compliance solutions in all subsidiaries and monitors compliance risk throughout the entire Group.
• PZU’s structure features separate units responsible for individual systems and functions.
• The Managing Director on Audit, who heads the Internal Audit Department, reports functionally to the Audit Committee and organizationally directly to the CEO. The appointment and dismissal of the person managing the internal audit unit must be consulted with the Audit Committee. The person managing internal audit may directly contact the Supervisory Board and Audit Committee Chairperson, and in particular immediately provide the Audit Committee with material information with respect to material irregularities found.
• The Managing Director on Regulations, within whose remit falls supervision over the Compliance Department, organizationally reports directly to the CEO of PZU. The selection, appointment and dismissal of the person managing the compliance unit must be consulted with the Audit Committee. The Managing Director on Regulations, as well as the Director of the Compliance Department, have direct access to the Management Board and Supervisory Board Members to whom the compliance function reports.
• The Director of the Risk Department organizationally directly reports to a PZU Management Board Member.
• The annual activity report concerning the Internal Audit Department, featuring among others an assessment of the internal control system, including compliance and risk management system, is adopted by the virtue of the resolution of the PZU Management Board. The report is presented to the Supervisory Board’s Audit Committee. The assessment presented in the report is discussed by the Audit Committee Chairman at the meeting of the Supervisory Board.
• The PZU Supervisory Board monitors the efficiency of internal control, risk management, and compliance, along with the efficiency of the internal audit function based on, among others, the interim reports it receives; it also carries out an annual assessment concerning the efficiency of those systems and functions and includes relevant disclosures in its annual report.
• At PZU, an assessment of the internal audit function is carried out internally (annually) and by third parties (no less than once every five years). A third-party assessment of the internal audit function at PZU conducted by PwC Advisory in 2020 and an analysis of coordination of the Group’s internal audit together with the annual assessment run by the Internal Audit Department demonstrated general compliance with the International Standards for the Professional Practice of Internal Auditing and the Code of Ethics developed by the Institute of Internal Auditors (IIA).

Shareholder Meeting and relations with shareholders

• On 29 June 2022, the PZU Shareholder Meeting adopted a resolution on the adoption of WSE BP 2021 in which it declared that, acting within its powers, it will be guided by WSE BP 2021 to the extent that it is addressed towards the Shareholder Meeting and shareholders, taking into account the generally applicable provisions of the law and PZU’s Articles of Association.
• In determining the time and place for the Shareholder Meeting, PZU ensures that as many shareholders as possible may take part (Shareholder Meetings take place in Warsaw).
• With respect to Principle 4.1, PZU does not allow shareholders to participate in the shareholder meeting using means of electronic communication. However, PZU shareholders have not raised expectations regarding the need or rationale to organize e-Shareholder Meetings. Moreover, PZU believes that there are many technical and legal factors that may affect the proper course of the shareholder meeting if an e-Shareholder Meeting is introduced. The legal doubts pertain to the ability to identify shareholders and check the legitimacy of participants in the shareholder meeting. The risk of the occurrence of technical difficulties, e.g. with the internet connection or possible external interference in the IT systems may disrupt the work of the shareholder meeting and evince doubts concerning the efficacy of the resolutions adopted during its course. The appearance of these risks may affect the proper application of this rule to a full extent.
• PZU ensures that livestreams of Shareholder Meetings are widely available, and that information concerning the planned broadcast is published in advance on the Company’s website. After the Shareholder Meeting concludes its session, the recording is published on the PZU’s website under the Investor Relations section (https://www.pzu.pl/en/investor-relations/shares-and-bonds/shareholdersmeetings).
• Media representatives may be present at a PZU Shareholder Meeting;
• PZU Management Board and Supervisory Board Members take part in the PZU Shareholder Meetings. The Management Board presents the participants of the Ordinary Shareholder Meeting with the Company’s financial results and other material information, including non-financial information, found in the financial statements to be approved by the Shareholder Meeting.
• PZU endeavors to ensure that draft resolutions be submitted no later than three days before the shareholder meeting. The PZU Management Board appends justifications to its draft resolutions on matters and decisions which do not pertain to the business of the meeting, unless such justifications arise from the documentation presented to the Shareholder Meeting. Draft resolutions submitted by shareholders should also be submitted with justifications. PZU publishes draft resolutions with justifications on the PZU website under the Investor Relations section (https://www.pzu.pl/en/investorrelations/shares-and-bonds/shareholders-meetings).
• In 2022, Principle 4.9.1 was incidentally violated. The principle states that where the shareholder meeting deliberates on the appointment of a person to the supervisory board or the appointment of a supervisory board for a new term, candidates for the board shall be put forward within a timeframe allowing the shareholders present at the shareholder meeting to make a decision with due consideration, but no later than three days prior to the shareholder meeting; candidate submissions, together with the complete documents concerning them, shall be immediately published at the Company’s website. Seeing that a candidate for the PZU Supervisory Board was put forward by a PZU shareholder on 31 August 2022, i.e., one day before the PZU Extraordinary Shareholder Meeting, there has been an incidental violation of Principle 4.9.1. PZU published the complete documents concerning the candidate at its website immediately upon their receipt. The report concerning the incidental violation of Best Practices was published by PZU on 1 September 2022.
• PZU strives to pay out the dividend to its shareholders in line with PZU’s dividend policy and KNF’s position. Since its first listing at WSE, PZU has been paying out the dividend every year, except for 2020, when KNF and EIOPA recommended that insurers temporarily suspend the payment of dividend.

Conflict of interest and transactions with related parties

• PZU has internal regulations on the management of a conflict of interest and conclusion of transactions with related parties in the event that a conflict of interest may arise, which guarantee compliance with the principles found in Chapter 5 WSE BP 2021.
• No PZU shareholder is treated preferentially in relation to other shareholders with respect to transactions with related parties.
• PZU has regulations concerning transfer pricing. The general rule is that transactions between related parties should be concluded on an arm’s length basis. As a rule, an analysis confirming that the transaction is concluded on an arm’s length basis is drawn up for each such transaction.
• In mitigating the conflict of interest risk, members of PZU’s corporate bodies are obliged to:
  • avoid actions which may give rise to a conflict of interest;
  • undertake actions necessary to identify a conflict of interest;
  • obtain consent (of the Management Board, Supervisory Board or Shareholder Meeting) for their membership in management boards and supervisory boards of listed companies other than PZU Group companies and of entities whose business may be considered in competition;
  • seek to eliminate or mitigate the adverse impact of a conflict of interest on the operations of a PZU Group company and its relationship with other PZU Group companies, clients, and third parties;
  • inform the Management Board, Supervisory Board or Shareholder Meeting about a conflict of interest that has arisen or may arise, and refrain from speaking out or voting on matters which involve the conflict of interest;
  • inform the compliance unit about a potential conflict of interest and actions taken.
• Potential conflicts of interest involving Management Board or Supervisory Board Members are analyzed within the framework of suitability assessment before these persons are appointed to those bodies, and within cyclical suitability reassessments. An annual analysis of additional actions taken by members of corporate bodies is also carried out.
• The PZU Supervisory Board and its committees may use the services of experts and consulting firms.
• PZU has not engaged in share buybacks.
• PZU Group companies have regulations governing the management of a conflict of interest, adjusted to standards set out by PZU and adequate to its profile and scope of operations.

Remunerations

• PZU has a remuneration policy for PZU Management Board Members and PZU Supervisory Board Members, adopted by the PZU Shareholder Meeting. It satisfies the requirements of Chapter 6 of WSE BP 2021.
• The compensation policy implemented supports the achievement of targets laid out in the PZU Group’s business strategy, both as regards financial results as well as the Company’s contribution into sustainable development; it also helps motivate and retain members of the supervisory and management bodies, senior management, and key employees.
• Supervisory Board Members receive monthly remuneration which is not dependent on the Company’s short-term results or the number of sessions held. The chairpersons of committees operating within the Supervisory Board receive higher remuneration.
• Under the remuneration principles applicable to Management Board Members, the value of variable compensation for the given financial year depends on the achievement of management targets selected by the Supervisory Board from a list, including the improvement of economic and financial indicators, and actions of social interest, including those which makes the Company contribute to environmental protection.
• Remuneration rules do not provide for long-term incentive plans.

Organization and organizational structure

• PZU has relevant rules and regulations concerning its organization and organizational structure. PZU’s organization is adapted to the strategic objectives and methods of their implementation, as well as to the need to independently monitor operational and strategic risks concerning its business. The strategic objectives, taking into account the nature and scale of operations, are laid down in the PZU Group Strategy adopted by the Management Board and approved by the Supervisory Board.
• PZU’s organization is reflected in PZU’s organizational structure. For the organizational structure, please consult Investor Relations in PZU’s website: (https://www.pzu.pl/en/investor-relations/ about-the-group/group-structure). The organizational structure features distinct functions divided by duties and responsibilities between Management Board Members, as well as the division of duties and responsibilities between the headquarters’ organizational units, local structures, and individual position groups.
• PZU has a Business Continuity Plan. PZU also has a Crisis Management Team, the purpose of which it is to exercise oversight over the business continuity management system and to manage crises.
• Irregularities at PZU may be reported anonymously. The Whistleblowing Procedure ensures confidentiality, discretion and personal data protection for whistleblowers. An employee who reports a potential irregularity in good faith is not at risk of any sanctions; nor does he or she incur any consequences pertaining to his or her employment relationship due to that report

Relations with shareholders of a regulated institution

• PZU operates with the interests of all stakeholders in mind, unless they are contrary to the interests of PZU. To this end, PZU has developed Best Practices of the PZU Group, Rules of PZU’s Information Policy towards Capital Market Players, and Rules for the Management of a Conflict of Interest.
• PZU ensures that shareholders have equal access to information, including such featured on shareholder meetings. All disclosures are published under Investor Relations in PZU’s website.
• PZU does not allow active electronic participation in Shareholder Meetings due to reasons presented with respect to the application of Principle 4.1 WSE BP 2021. PZU shareholders may watch online livestreams of the Shareholder Meeting.
• In the view of certain capital and personal links, PZU pays particular attention to the relationships and transactions within the PZU Tax Group and with related parties. For this purpose, it applies relevant policies and procedures. All transactions are carried out in line with tax and legal requirements, transparently, and in line with market standards. Transactions with related parties are described in PZU’s financial statements.
• Decisions concerning the payout of dividend are taken in line with the Capital and Dividend Policy of the PZU Group and the recommendations of KNF. In line with the policy, PZU endeavors to maximize the rate of return on equity for the parent company’s shareholders, in particular by maintaining the level of security and retaining capital resources for strategic growth objectives through organic growth and acquisitions.

Management

• The PZU Management Board is a collegiate body.
• Management Board Members meet legal criteria (including those in the Insurance and Reinsurance Activity Act and Act on the Management of State Property), regulatory requirements, WSE BP 2021, and CGR. Management Board Members share between them the adequate knowledge, experience and skills to manage PZU’s operations. The Supervisory Board assesses and reassesses the suitability of candidates for and members of PZU Management Board – individually and jointly. Verification is based on the criteria of competence, guarantee (of reputation and reliability), independent judgment (including no conflict of interest) and sufficient time dedication to the position of the Management Board Member.
• The Management Board is the sole body authorized to manage PZU’s operations and the sole to be responsible for it. The Management Board acts in the interest of PZU, guided by law, recommendations of supervisory authorities, and internal regulations, having the safety of the Company in its mind.
• The Management Board Members are jointly responsible for the decisions which are reserved for their remit, regardless of the internal division of responsibility for the respective areas of operations. PZU Management Board Members exercise oversight with respect to processes within their area, the scope of which is set out by the CEO in an order. The document clearly and unambiguously regulates the responsibility of the respective Management Board Members for oversight with respect to individual PZU organizational structures.
• Management Board Members are not involved in social or profit-making activity which could lead to a conflict of interest with respect to PZU’s operations, or adversely affect their reputation as a Management Board Member. The rules for mitigating conflicts of interest are laid out in the Management Board’s Rules and Regulations and the Code of Ethics for Members of Management Boards of PZU Group Companies.

Supervisory body

• Members of the Supervisory Board meet legal criteria (including those in the Insurance and Reinsurance Activity Act and Act on the Management of State Property), regulatory requirements, WSE BP 2021, and CGR. Supervisory Board Members share between them the adequate knowledge, experience and skills to supervise PZU’s operations. The Shareholder Meeting assesses and reassesses the suitability of candidates for and members of the Supervisory Board – individually and jointly. Verification is based on the criteria of competence, guarantee (of reputation and reliability), independent judgment (including no conflict of interest) and sufficient time dedication to the position of the Supervisory Board Member.
• The Supervisory Board continually supervises PZU’s operations in all areas and may undertake necessary supervisory action in an ongoing manner.
• The Supervisory Board and respective Members thereof are guided by objective assessment and judgment, and among others may avail themselves of the services of experts and advisory companies.
• Over half of the Members sitting in the Supervisory Board meet the independence criteria laid out in the Statutory Auditor Act (including all members of the Audit Committee).
• The scope of the Audit Committee’s duties includes monitoring the performance of financial audit activities at PZU, in particular, the conduct of the audit by the audit firm, taking into account the findings and conclusions of the Polish Audit Supervision Agency following from an inspection carried out in the audit firm. A statutory auditor provides the Supervisory Board with their opinion on the conduct of the audit of the statements. • Supervisory Board Members exercise their functions actively, as testified to by the number of and high attendance rate at sessions of the Supervisory Board and separately held sessions of the Supervisory Board Committees. The competences, qualifications, and professional experience of the Management Board Members and their guarantee of due oversight ensure the due performance of the Supervisory Board’s duties.
• Supervisory Board Members are not involved in social or profit-making activity which could lead to a conflict of interest with respect to PZU’s operations, or adversely affect their reputation as a Supervisory Board Member. The rules for identifying, managing and preventing conflicts of interest concerning PZU Supervisory Board Members have been set out in the Code of Ethics for PZU Supervisory Board Members.
• The PZU Supervisory Board assesses compliance with CGR, and the statement in this regard is included in the PZU Supervisory Board’s annual report, made available at (https://www.pzu.pl/grupa-pzu/spolki/pzu-sa/zasady-ladu-korporacyjnego).

Remuneration policy

• The rules governing the compensation for Management Board and Supervisory Board Members are laid out in the Remuneration Policy for PZU Management Board and Supervisory Board Members, adopted by the Shareholder Meeting.
• The Supervisory Board prepares and presents to the Shareholder Meeting a Report on Remuneration Policy at PZU, which constitutes a part of the Supervisory Board’s Report.
• The compensation for Management Board Members is set by the Supervisory Board in a resolution, whereas the compensation for the Supervisory Board Members is determined directly by the Shareholder Meeting.
• PZU Management Board determines the rules for remunerating PZU Group Directors who are, at the same time, Members of the Management Board at PZU Życie, as well as the remuneration policy for senior management and Entitled Persons.
• The remuneration policy established is not an incentive to take excessive risk within PZU’s operations. The rules governing variable compensation aim to support proper and efficient risk management, discourage excessive risk-taking, and assist in the implementation of the PZU Group’s Strategy.
• The award of the variable compensation to the Management Board Members depends on the achievement of management targets selected by the Supervisory Board from a list, including the improvement of economic and financial indicators, and actions of social interest, including those which makes the Company contribute to environmental protection.
• The remuneration of the Management Board Members and persons exercising key positions is financed and paid out form PZU funds.

Information policy

• PZU has a transparent information policy that takes into account the needs of shareholders and customers. The PZU website publishes: The rules of PZU’s information policy towards capital market players (in the Investor Relations section) and information to support clients in their contact with PZU, including: GTCI of insurance products, rules for handling complaints, PZU Best Practices.
• Since 2014, PZU has published interactive annual reports.
• In terms of the financial information made available, in addition to the periodic reports required by law, PZU prepares quarterly result presentations, which are posted on the company’s website along with recordings of result conferences and other important corporate events.
• PZU provides investors with equal access to information, among other things: it ensures proper execution of information obligations obligatory for listed companies, all materials after being sent to the WSE via the ESPI system are published immediately in Polish and English on the PZU website in the Investor Relations section.
• PZU’s information policy with respect to capital market players specifies deadlines for responding to questions submitted by e-mail and telephone – PZU makes efforts to respond promptly, in the case of questions submitted by e-mail within a maximum of 3 working days.

Promotional activities and client relations

• PZU has internal regulations, including The PZU Code of Ethics in Advertising and the PZU Group Marketing Policy, adopted by a resolution of the PZU Management Board, which cover, among other things, issues related to ensuring compliance of marketing activities with the law, in particular with the laws on competition and consumer protection and on combating unfair competition.
• The process of offering products is conducted in a way that ensures the reliability of the information provided to clients and the provision of understandable explanations.
• The process and rules for handling complaints, including issues of timeliness and quality of processing of client requests, are defined in PZU’s internal regulations. The rules for handling complaints are available on the PZU website (https://www.pzu.pl/kontakt-i-pomoc/skargi-reklamacje/jak-rozpatrujemy-skargireklamacje).
• In 2017, a Client Ombudsman position was established at PZU which, among other things, participates in mediations before the Financial Ombudsman and the KNF, and conducts individual meetings and negotiations with customers on disputes. In addition, a Health Ombudsman position was established at PZU in 2020, which, among other things, conducts individual meetings and negotiations with clients on health insurance disputes.

Key internal systems and functions

• PZU has an adequate, effective and efficient internal control system covering all levels in PZU’s organizational structure.
• A Compliance Department has been separated at PZU in terms of organization and competence, which performs tasks in ensuring compliance of the insurance company’s activities with the law and internal regulations.
• An effective internal audit function operates at PZU, which involves a regular and orderly assessment of the adequacy and effectiveness of the internal control system and other components of the management system.
• PZU ensures the objectivity and independence of the internal audit and compliance functions.
• The Managing Director on Audit reports functionally to the Audit Committee and organizationally directly to the President of the PZU Management Board. The appointment and dismissal of the head of the internal audit function must be consulted with the Audit Committee. The Managing Director on Regulations, whose responsibilities include overseeing the activities of the Compliance Department, reports organizationally directly to the President of the PZU Management Board. The appointment and dismissal of the head of the compliance function requires the opinion of the Audit Committee. The head of the internal audit function and the supervisor of the compliance function attend all meetings of the Audit Committee and the Management Board, and have the opportunity to report and communicate directly with members of the Management Board and the Supervisory Board of PZU.
• PZU’s risk management system is organized adequately to the nature, scale and complexity of PZU’s business, taking into account the company’s strategic objectives, risk management strategy taking into account risk tolerance.
• The member of the Management Board responsible for the risk management area in PZU is not responsible for other areas.
• The Supervisory Board supervises the risk management process and evaluates its adequacy and effectiveness – it performs its tasks within the framework of the decisions set forth in the Articles of Association, the Rules and Regulations of the Supervisory Board and through the Audit Committee.
• The Audit Committee monitors the effectiveness of PZU’s internal control, internal audit and risk management systems.

Exercise of rights from assets acquired at the client’s risk

• PZU does not offer products that involve asset management at the client’s risk.

The rule laid down in § 8 section 4 of the Corporate Governance Rules reading as follows: “The supervised institution, when justified by the number of shareholders, should strive to facilitate the participation of all shareholders in the meeting of the constituent body of the supervised institution, including by providing opportunities for electronic active participation in meetings of the constituent body.”

• PZU shareholders can watch (in real time online) the broadcast of the General Meeting. PZU, however, has not decided to introduce a so-called e-Shareholder Meeting. PZU believes that there are many technical and legal factors that may affect the proper course of the Shareholder Meeting. The legal doubts pertain to the ability to identify shareholders and check the legitimacy of participants in the shareholder meeting. The risk of the occurrence of technical difficulties, e.g. with the internet connection or possible external interference in the IT systems may disrupt the work of the Shareholder Meeting and evince doubts concerning the effectiveness of the resolutions adopted during its course. The appearance of these risks may affect the proper application of this rule to a full extent.

The rule laid down in § 21 section 2 of the Corporate Governance Rules reading as follows: “In the composition of the supervising body, there should be a separate function of a chairperson who directs the work of the supervising body. The election of the chairperson of the supervising body should be based on experience and leadership skills, taking into account the criterion of independence.”

• In accordance with the Commercial Companies Code and the Articles of Association of PZU, the function of Chairperson was separated in the composition of the PZU Supervisory Board. The composition of the PZU Supervisory Board, including the function of Chairperson, is shaped in accordance with the independence criteria indicated in the Act of 11 May 2017 on auditors, audit firms and public supervision. The election of the Chairperson of the Supervisory Board is made on the basis of the criterion of their knowledge, experience and skills, which confirm the competence necessary for the proper performance of supervisory duties. The application of the independence criterion in the case of the chairperson, according to the KNF Office’s explanation of the rule in question, may raise questions about potential conflicts with the law on shareholder rights.

The rule laid down in § 49 section 3 of the Corporate Governance Rules reading as follows: “In a regulated institution, the appointment and removal of the head of the internal audit function and the head of the compliance function shall be made with the approval of the supervising body or the Audit Committee.”

• PZU applies the rules set forth in § 14 of the Corporate Governance Rules in full, which means that PZU’s Management Board is the only body authorized and responsible for managing the company’s operations. In addition, according to labor law, labor law activities are performed by the managing body. In view of the above, a solution has been adopted in PZU, which stipulates that the selection and dismissal of the head of the internal audit function is made taking into account the opinion of the Audit Committee of the Supervisory Board. The head of the compliance function is appointed and dismissed in the same way. The Management Board consults with the Audit Committee on these decisions.