Corporate governance

As at the date of the publication of this report, the following Shareholders hold directly or indirectly through subsidiaries at least 5 percent of the total number of votes at the General Meeting of PGE S.A.

As at the date of the publication of this report, the Supervisory Board of the 12th term was composed as follows:

As at 1 January 2023, the permanent committees of the Supervisory Board functioned in the following compositions:

On 6 June 2023, the Supervisory Board of PGE S.A., by resolution No. 162/XII/2023, appointed Mr Cezary Falkiewicz to the following Committees: the Appointment and Remuneration Committee, the Strategy and Development Committee and the Audit Committee of the Supervisory Board of PGE Polska Grupa Energetyczna S.A.

As at 31 December 2023, the permanent committees of the Supervisory Board functioned in the following compositions:

As at the date of the publication of this statement, the committees of the Supervisory Board were composed as follows:

As at 1 January 2023, the Management Board was composed as follows:

On 4 January 2023, as a result of the recruitment procedure, the Supervisory Board adopted resolution no. 107/XII/2023 on the appointment of Mr Rafał Włodarski to the Management Board of PGE S.A., entrusting him with the function of Vice President of the Management Board for Support and Development as of 9 January 2023.

On 28 March 2023, Mr Ryszard Wasiłek resigned from his position as Vice President for Operations with effect from 30 April 2023.

On 19 April 2023, as a result of the recruitment procedure, the Supervisory Board adopted resolution no. 155/XII/2023 on the appointment of Mr Przemysław Kołodziejak to the Management Board of PGE S.A., entrusting him with the function of Vice President of the Management Board for Operations as of 1 May 2023.

On 23 November 2023, the Supervisory Board adopted resolution no. 253/XII/2023 on the dismissal of Mr Paweł Śliwa, Vice President for Innovation, from the Management Board, as of 23 November 2023. The Supervisory Board did not indicate any reasons for the dismissal.

As at 31 December 2023, the Supervisory Board was composed as follows:

On 7 February 2024, the Supervisory Board adopted the following resolutions:

• no. 287/XII/2024 on the dismissal of Mr Wojciech Dąbrowski, President of the Management Board, from the Management Board,
• no. 288/XII/2024 on the dismissal of Ms Wanda Buk, Vice President for Regulations, from the Management Board,
• no. 289/XII/2024 on the dismissal of Mr Rafał Włodarski, Vice President for Support and Development, from the Management Board.

In addition, on 7 February 2024, the Supervisory Board also adopted resolutions to delegate the following Supervisory Board Members to temporarily perform the duties of Management Board Members:

• resolution no. 290/XII/2024 delegating Mr Eryk Kosiński to temporarily perform the duties of a Member of the Management Board of the Company for a period of 3 months and entrusting him with the duties of the President of the Management Board,
• no. 291/XII/2024 delegating Ms Małgorzata Banasik to temporarily perform the duties of a Member of the Management Board for a period of 3 months.

On 28 February 2024, the Supervisory Board adopted resolution no. 304/XII/2023 on the dismissal of Mr Lechosław Rojewski, Vice President for Finance, from the Management Board, as of 28 February 2024. The Supervisory Board did not indicate any reasons for the dismissal.

On 6 March 2024, as a result of the recruitment procedure, the Supervisory Board adopted the following resolutions:

• no. 312/XII/2024 on the appointment of Dariusz Marzec to the Management Board of PGE S.A., entrusting him with the function of the President of the Management Board as of 18 March 2024,
• no. 313/XII/2024 on the appointment of Marcin Laskowski to the Management Board of PGE S.A., entrusting him with the function of the Vice of the Management Board for Regulations as of 18 March 2024.

Simultaneously on 6 March 2024, the Supervisory Board adopted the following resolutions:

• nr 314/XII/2024, on the termination, as of 17 March 2024, of the delegation of Mr Eryk Kosiński, Member of the Supervisory Board, to temporarily perform the duties of Member of the Management Board of PGE S.A. acting as President of the Management Board,
• nr 315/XII/2024, on the termination, as of 8 March 2024, of the delegation of Ms Małgorzata Banasik, Member of the Supervisory Board, to temporarily perform the duties of Member of the Management Board of PGE S.A.

On 21 March 2024, as a result of the recruitment procedure, the Supervisory Board adopted the following resolutions:

• no. 326/XII/2024 on the appointment of Robert Piotr Kowalski to the Management Board of PGE S.A., entrusting him with the function of the Vice of the Management Board Support and Development.

On April 4, 2024 the Supervisory Board adopted the resolution No. 343/XII/2024 on dismissal of Przemysław Kołodziejak, Vice-President of the Management Board for Operations.

On May 20, 2024, following the qualification procedure, the Supervisory Board adopted the resolution No. 368/XII/2024 on appointing Maciej Górski to the Management Board of PGE S.A., entrusting him the position of Vice-President of the Management Board for Operations as from June 24, 2024.

On June 24, 2024 , following the qualification procedure, the Supervisory Board adopted the resolution No. 378/XII/2024 on appointing Przemysław Jastrzębski to the Management Board of PGE S.A., entrusting him the position of Vice-President of the Management Board for Finance as from July 15, 2024.

As at the date of the publication of this integrated report, the Management Board was composed as follows

The Supervisory Board

According to PGE’s current Statutes, the members of the Supervisory Board are appointed for a joint three-year term of office. The Supervisory Board consists of between five and nine members appointed and dismissed by the General Meeting. Elected by group voting, the Supervisory Board has five members. With the exception of a member of the Supervisory Board appointed by the State Treasury, a member of the Supervisory Board may be appointed and dismissed at any time by the General Meeting on the basis of a written declaration submitted to the Management Board. This power is vested in the Treasury as long as it remains a Shareholder. Furthermore, half of the Members of the Supervisory Board (excluding the Supervisory Board Member referred to above) are elected from among persons designated by the State Treasury as long as the State Treasury’s participation in the share capital does not fall below 20 percent. Upon the expiry of this power held by the State Treasury, this power will be acquired by another Shareholder representing the highest share in the Company’s share capital, provided that such a Shareholder holds at least 20 percent of the Company’s share capital.

According to the provisions of the Statutes, the Supervisory Board should be composed of at least one person appointed by the General Meeting from among those meeting the independence criteria set out in the corporate governance rules adopted by the Board of the Stock Exchange. A Shareholder designating a candidate for this position is required to submit such a candidate’s written declaration confirming their independence to the minutes of the General Meeting.

The failure of the State Treasury to appoint, or of the General Meeting to elect, the Supervisory Board Members referred to above, as well as the fact that there are no such persons in the composition of the Supervisory Board, does not prevent the Supervisory Board from adopting valid resolutions.

Each year, the issue related to the fulfilment of the independence criteria by the Members of the Supervisory Board is addressed in the annual report on the activities of the Supervisory Board. On the basis of principle 2.3 of the Best Practices, the Supervisory Board assesses whether there are any relationships or circumstances that may affect a given Board Member’s fulfilment of the independence criteria. An evaluation of the fulfilment of the independence criteria by the Members of the Supervisory Board is presented by the Supervisory Board pursuant to principle 2.11.1.

Management Board

The Management Board of PGE Polska Grupa Energetyczna S.A. may comprise between one and seven members. The Management Board consists of the President, the other Members of the Management Board fulfil the function of Vice Presidents. The Management Board or individual Management Board Members are appointed and dismissed by the Supervisory Board, following a competitive procedure. Its purpose is to verify and assess the qualifications of candidates and to select the best candidate for a Member of the Management Board, whereby candidates for a Member of the Management Board of the company must fulfil the conditions set out in the PGE Statutes: Members of the Management Board are appointed for a joint three-year term of office. A member of the Management Board should meet the conditions specified in Article 22 of the State Property Management Act.

A candidate for a Member of the Management Board must meet jointly the following conditions:

• a candidate has higher education or higher education acquired abroad and recognised in the Republic of Poland on the basis of separate regulations,
• a candidate has at least a five years’ period of employment on the basis of an employment agreement, appointment, selection, nomination, a cooperative employment agreement, or providing services on the basis of other agreements, or conducting business activities in the capacity of a self-employed entrepreneur,
• a candidate has at least three years’ experience of working at managerial or independent positions, or experience resulting from business activities conducted in the capacity of a self-employed entrepreneur,
• a candidate fulfils requirements other than those mentioned in the items above, set out in separate regulations, and in particular does not violate restrictions or prohibitions related to the holding of a position of a member of a management body in commercial companies.

A candidate for a Member of the Management Board must not meet any of the following conditions:

• a candidate holds a position of a social coworker or is employed in an office of a Member of the Parliament, a Member of the Senate or a Member of the European Parliament on the basis of an employment agreement or performs work on the basis of a contract of mandate or any other contract of a similar character,
• a candidate is a member of a political party’s body representing a political party and authorised to incur liabilities,
• is employed by a political party on the basis of an employment agreement or performs work on the basis of a contract of mandate or any other contract of a similar character,
• a candidate holds an elective position in a trade union functioning in the company or a trade union functioning in a company belonging to the capital group,
• a candidate’s social or business activities are in conflict with the interests of the company.

Any Member of the Management Board may be dismissed or suspended by the General Meeting or, for important reasons, suspended by the Supervisory Board. A resolution of the Supervisory Board to suspend a Member of the Management Board must be justified. A member of the Management Board submits their resignation to another member of the Management Board or a commercial proxy, and notifies the Chairperson of the Supervisory Board of such resignation. If, in consequence of the resignation of a Member of the Management Board, all seats on the the Management Board were to be left vacant, a member of the Management Board submits their resignation to the Supervisory Board. The Supervisory Board may delegate its Members to temporarily perform the duties of the Members of the Management Board.

The Supervisory Board conducts a recruitment procedure in the event of circumstances justifying the appointment of a Member of the Management Board. When initiating the recruitment procedure for the position of a Member of the Management Board, it determines, by way of a resolution, the detailed principles and rules of the procedure, including in particular: the position which is the subject of the procedure, the date and place for accepting applications, the date and place of an interview, the scope of issues which are the subject of an interview, the requirements and the manner of candidate appraisal.

An announcement of the recruitment procedure is published on the company’s website and in the Public Information Bulletin of the entity entitled to exercise the rights attached to shares belonging to the State Treasury. The Supervisory Board notifies shareholders about the results of the recruitment procedure and provides them with the minutes of the recruitment procedure.

Chairperson of the highest governance body

The chairperson of the highest governance body is not at the same time a representative of the top management. The Chairperson of the Supervisory Board is elected from among the Supervisory Board Members designated by the Shareholder.

The Chairperson convenes and presides over meetings of the Supervisory Board, and the Vice Chairperson deputises for the Chairperson. The Supervisory Board is convened by a written invitation sent to all Supervisory Board Members at least 7 days before the scheduled meeting date. The Chairperson or Vice Chairperson of the Board may, for important reasons, reduce the time limit for convening a Supervisory Board meeting to two days. It also determines the appropriate way to communicate the invitation. When ordering a vote in writing or by means of direct remote communication, the Chairperson of the Board indicates by which of these means a resolution is to be adopted. The vote of the Chairperson of the Board is decisive in the event of a tie. In the event of a proposal to amend a draft resolution voted on by means of direct remote communication, the Chairperson makes the final draft and orders the vote in the manner of their choice. The Chairperson also sets a deadline for the Board Members to cast their votes.

A Supervisory Board meeting may be attended by those invited by the Chairperson or Vice Chairperson of the Board: Members of the Management Board, employees of the company and other persons whose attendance at the meeting is justified. The Chairperson may order that audio and video recording equipment, including but not limited to a telephone, a dictaphone, an MP player, a camera or other recording equipment, belonging to the Board Members or other persons participating in a Board meeting be left in a deposit.

The Chairperson of the Supervisory Board decides on access to materials and attendance during the discussion of a matter, in the event of ascertaining a conflict of interest. If a conflict of interest concerns the Chairperson of the Board, the Vice Chairperson decides in this respect. Statements addressed to the Board between meetings are made to the Chairperson of the Board or, if this is not possible, to the Vice Chairperson or the Secretary.

The work of the Management Board is managed by the President of the Management Board, who coordinates the activities of the individual Board Members. On a motion put forward by the President, the Members of the Management Board present information on the status of particular affairs. On their own initiative or at the request of other Management Board Members, the President resolves doubts as to the scope of matters falling within the division of the areas of organisational supervision and the areas of responsibility of individual Management Board Members.

The President of the Management Board develops and coordinates a policy and practices related to contacts with public administration institutions and the management of other business entities. In the fulfilment of their duties, the President may issue orders.

During the absence of the President of the Management Board lasting continuously for at least five business days, the work of the Management Board is managed by a Member of the Management Board appointed by the President. In the event that the President of the Management Board fails to appoint a Management Board Member to replace them, the other Members of the Management Board, at the proposal of the director of the unit responsible for providing services to the company’s governing bodies, elect from among themselves a person to manage the work of the Management Board in place of the President.

In the event of planned absence of a Member of the Management Board lasting longer than five business days, the President of the Management Board may appoint another Member of the Management Board to exercise supervision over the area assigned to the absent Member of the Management Board.

The Management Board’s meetings are convened by the President of the Management Board on their own initiative or on a motion put forward by a Member of the Management Board. The President of the Management Board determines the agenda of a meeting on the basis of motions submitted by individual Members of the Management Board.

Meetings of the Management Board are chaired by the President of the Management Board or by a Member of the Management Board appointed by the President. In their absence, meetings are chaired by a Management Board Member authorised to deputise for the President of the Management Board.

The President of the Management Board decides on the attendance of persons who are not Members of the Management Board at a meeting of the Management Board.

When adopting resolutions, in the event of a tie, the President of the Management Board has the casting vote.

The President of the Management Board or a person appointed by the President and duly authorised acts on behalf of the company with respect to the labour law.

The amounts of the remuneration and other benefits received by the Members of the Management Board of PGE S.A. in 2023 (in PLN)

The total value of remuneration received in 2023 by the Members of the Management Board of PGE S.A. amounted to PLN 8.33 million (according to PIT 11 tax return). In 2023, in cost terms (including surcharges and provisions), the cost of remuneration of all persons who fulfilled the function of Members of the Management Board of PGE S.A. totalled PLN 9.04 million.

The Remuneration Policy is available at the following location on the PGE S.A. website: https://www.gkpge.pl/en/for-investors/corporate-governance/remuneration-policy

The remuneration of all Members of the Company’s Management Board for 2023 was awarded in accordance with the provisions of the Remuneration Policy. The remuneration included only the components provided for in the Remuneration Policy, was paid in accordance with the principles set out therein, in the correct amount, on the applicable legal basis and taking into account clear, comprehensive and differentiated financial and non-financial performance criteria for the variable remuneration components.

Besides the fixed and variable components of the remuneration, the Supervisory Board may additionally:

• enter into a non-competition agreement with a Member of the Management Board and grant such a Member a benefit in this respect;
• grant such a Member a right to additional benefits.

Only the fixed remuneration is obligatorily paid to the Members of the Management Board.

The amount of the monthly fixed remuneration of a Member of the Management Board is determined each time by the Supervisory Board within the amount range resulting from the Remuneration Act, with the proviso that the fixed remuneration of a Member of the Management Board will be determined within the amount range of from 7 to 15 times the assessment basis referred to in Article 4 of the Remuneration Act, taking into account the applicable detailed legal regulations determining its amount.

THE CONDITIONS FOR AWARDING VARIABLE REMUNERATION:

• The variable remuneration of a Member of the Management Board depends on the degree to which Managerial Objectives have been achieved and may not exceed 100 percent of the fixed remuneration received by a Member of the Management Board in the financial year for which the variable remuneration is to be granted.
• The catalogue of general Managerial Objectives includes in particular the following:
  • the achievement of EBITDA for the PGE Capital Group at the level specified in the approved material and financial plan for a given financial year,
  • compliance with the covenants under credit agreements – (net debt/EBITDA),
  • the achievement of the required availability indicator for the selected power generation units of the Capital Group,
  • the implementation of particular strategic investment projects and programmes,
  • adaptation to the essence of structural changes in the sector through the implementation of strategic programmes and projects other than in the item above;
  • the effective utilisation of the potential of innovation,
  • the development of a systemic approach to communication within the PGE Capital Group with respect to projects.
• In each financial year, additional Managerial Objectives are established whose achievement determines the possibility of achieving the Variable Remuneration. Such additional Managerial Objectives include in particular the following:
  • the development and application of the principles of establishing remuneration for Members of management and supervisory bodies in subsidiaries in accordance with the principles specified in the Remuneration Act;
  • the fulfilment of the obligations referred to in the Act of 16 December 2016 on the principles of state property management.
• The Supervisory Board is authorized to determine detailed Managerial Objectives, their respective weights, as well as objective and measurable criteria of their accomplishment and settlement (KPI – key performance indicators), subject to the following conditions:
  • a given Member of the Management Board is entitled to the variable remuneration after the approval of the Management Board’s report on the Company’s activities and the Company’s financial statements for a given financial year and after the acknowledgement of their discharge of duties in a given financial year by the General Meeting;
  • the payment of a part of the variable remuneration may be delayed for up to 36 months depending on the fulfilment of conditions, by a specified deadline, in accordance with the established Managerial Objectives; then such a part of the variable remuneration may be paid in full or in part at the end of a settlement period;
  • the variable remuneration is calculated on a pro-rata basis. Proportionality depends on the number of days on which a Member of the Management Board has provided their services in a given financial year;
  • the Supervisory Board ascertains the fulfilment of the conditions for the granting of the variable remuneration by particular Members of the Management Board for whom Managerial Objectives have been established for a given financial year and who have performed their functions in the year under assessment, determining the due amount on the basis of financial statements checked by certified auditors as well as other documents, depending on the established Managerial Objectives. Issues related to the recovery of the variable remuneration are regulated by the binding provisions of the law.
• The expiry of the mandate of a Member of the Management Board during the financial year under evaluation in terms of the performance of the Managerial Objectives does not result in the loss of the right to the variable remuneration, under the conditions set out above, provided, however, that the time in office during the financial year under evaluation was longer than three months.
• The criteria for the award of the variable remuneration (as defined above by the general Managerial Objectives) also relate (at a detailed level – determined by the Supervisory Board) to the consideration of social interests, the Company’s and the Group’s contribution to environmental protection and the taking of measures aimed at preventing and eliminating the negative social effects of the Company’s and the Group’s activities through the modernisation of the Company and the Group (ESG). The criteria set out in the Managerial Objectives are intended to contribute to the achievement of the objectives set out in the Public Offering Act by linking the remuneration to the execution of management processes involving the implementation of the Company’s and the Group’s Business Strategy. In 2023, 33 percent of the variable remuneration of the Members of the Management Board of PGE S.A. depended on the achievement of objectives in the ESG area.

The amounts of the remuneration received by the Members of the Supervisory Board of PGE S.A. who fulfilled their functions in 2023 (in PLN).

The total remuneration received in 2023 by the Members of the Supervisory Board of PGE S.A. amounted to PLN 630,000. In 2023, in cost terms (including surcharges), the cost of remuneration of all persons who fulfilled the function of Members of the Supervisory Board of PGE S.A. totalled PLN 705,600.

The full content of the Remuneration Policy adopted in 2022 is available on the company’s website at: https://www.gkpge.pl/en/for-investors/corporate-governance/remuneration-policy

The details of remuneration of the governance bodies are presented in the Report on Remuneration of the Members of the Management Board and the Supervisory Board of PGE Polska Grupa Energetyczna S.A. published by the company and posted on its website together with the Auditor’s Report on its evaluation, in time for shareholders to become acquainted with its content prior to the General Meeting. Among other things, the Remuneration Report is prepared in accordance with the current Global Reporting Initiative standards.

In 2023, the Company engaged in multi-channel communication with capital market participants – through the website and a dedicated Investor Relations tab, email correspondence to investors following significant events at PGE Group and meetings with analysts and investors.

After the pandemic, the Company returned to participating in stationary investor conferences in Poland and abroad, among others in London and Prague.

Each time before the publication of a periodic report, PGE S.A. published estimated results, together with information on one-off events. In addition, a presentation detailing the presented estimated results and key factors influencing the change in the result y/y was published on the website.

Following the publication of its results, the Company held four Management Board conferences for journalists and analysts to discuss the operating and financial results for the period and the Company’s growth prospects. The conferences were also broadcast live online, after which a transcript of the broadcast was posted on the corporate website. An opportunity was provided each time for participants to ask questions.

The publications on the website also included:

• periodic result presentations together with the analyst package and a supplement to the presentation in the form of an xls file;
• investor presentation – updated periodically;
• presentation on the acquisition of PKP Energetyka S.A. by PGE S.A.;
• presentation PGE Group’s Decarbonisation Pathway;
• editable xls file, which includes financial and operating data presented in the form of time series starting from the first quarter of 2011 until the latest reporting period;
• consensus of analysts’ forecasts;
• calendar of events.

With a view to transparency in the implementation of the concept of sustainability and presentation of the Company’s impact on its environment, PGE Group’s Integrated Report was published online. The report for 2022 is available at: https://raportzintegrowany2022.gkpge.pl/en/

Principles that were in force when performing functions in the Management Board and the Supervisory Board:

• Management Board and Supervisory Board members hold the adequate competences, skills and experience necessary to perform the entrusted functions;
• performing functions in the Management Board of the Company was the main area of professional activity of the Members of the Management Board;
• at December 31, 2023 4 members of the Supervisory Board met the independence criteria;
• Members of the Supervisory Board devoted the necessary amount of time to perform their duties;
• The Chairwoman of the Supervisory Board did not combine her function with managing the work of the Audit Committee;
• The Company delegated administrative and financial resources necessary to ensure the efficient functioning of the Supervisory Board.

• PGE maintained efficient internal control, risk management and compliance systems and an efficient internal audit function;
• PGE’s organisation included units responsible for the tasks of individual systems and functions;
• the operation of the internal audit was independent, the head of the Audit Department reported to the Member of the Management Board and functionally to the Chairman of the Audit Committee;
• the remuneration of persons responsible for risk and compliance management and the head of the internal audit was dependent on the implementation of the assigned tasks and not on the short-term results of the Company.

• There was one General Meeting of the Company in 2023 – the Ordinary General Meeting on 28 April and the proceedings were broadcast live;
• General Meeting was convened on date in accordance with the provisions of law, and the Company selected the place and date of the General Meeting in a way that enabled the largest possible number of Shareholders to participate in the meeting;
• Media representatives were allowed to attend the General Meeting;
• Members of the Management Board and Supervisory Board participated in the General Meeting in composition that allowed them to comment on the matters being discussed during the General Meeting and to provide substantive answer to the questions asked;
• At the Ordinary General Meeting on April 28, 2023, the Company’s Management Board presented and discussed the financial and operating results for 2022 comparing the figures presented with previous years.

• Company had in place transparent procedures for managing conflicts of interest and for related party transactions where a conflict of interest may occur;
• Members of the management board and members of the supervisory board refrained from professional or other activities which might cause a conflict of interest or adversely affect their reputation as members of the corporate body;
• The Regulations of the Management Board and the Supervisory Board contained provisions obliging Members of the governing bodies to inform about the conflict of interest of other Members of the governing bodies;
• No Shareholder was privileged over other Shareholders with regard to related party transactions. The company has a section on significant related party transactions on its website: https://www.gkpge.pl/dla-inwestorow/lad-korporacyjny/istotne-transakcje-ustawa-o-ofercie – there were no such transactions in 2023.

• The Company has a Remuneration Policy for the Members of the Management Board and Supervisory Board of PGE S.A. adopted by the Ordinary General Meeting of the Company on June 26, 2020 and modified by the Ordinary General Meeting on June 22, 2022;
• The content of the Remuneration Policy and the report together with the Auditor’s Report regarding the assessment of the report on remuneration of PGE Management Board and Supervisory Board Members for 2019-2020, 2021 and 2022 are available on the company’s website at: https://www.gkpge.pl/en/for-investors/corporate-governance/remuneration-policy
• Remuneration of members of the Management Board and Supervisory Board as well as key managers is sufficient to attract, retain and motivate people with competences necessary for proper management and supervision of the Company;
• The amount of remuneration of the Members of the Supervisory Board is not dependent on the Company’s short-term results – in accordance with the resolution of the General Meeting, the monthly remuneration of the Members of the Supervisory Board was determined as the product of the average monthly remuneration in the enterprise sector without payments of rewards from profit in the fourth quarter of the previous year, announced by the President of the Central Statistical Office and the multiplier: 1.7 (for the Chairperson of the Supervisory Board), 1.5 (for other Members of the Supervisory Board).