Corporate governance principles and a statement on the application of corporate governance

FFiL Śnieżka SA, as a listed company, is responsible for shaping corporate governance. It ensures compliance with the law and consistency of normative acts of the Śnieżka Group and maintains effective systems: internal control, risk management and compliance supervision.

Corporate Governance is composed of two categories of internal acts:

describing static aspects of the organization: articles of association, organizational regulations, document circulation regulations;
describing dynamic aspects: strategies, policies, codes (rules), standards (soft law), procedures, instructions.

Documents are produced according to a hierarchy and they are closely related in such a manner that higher-level documents form a context (formal support) for lower-level ones.

Corporate Governance defines a number of processes implemented in all areas of the Śnieżka Group’s operations Access to the current version of documents is provided by an electronic system for documentation supervision and management.

The compliance supervision system is used to test the compliance
The compliance supervision system is used to test the compliance of the company’s operations in all areas and aspects of this activity with applicable law, internal regulations and voluntarily adopted standards, taking into account:
- supranational regulations,
- domestic law – acts and lower-ranking documents;
- corporate internal regulations.

A number of processes implemented within all areas of the Śnieżka Group’s operations are defined by numerous policies, procedures, instructions and regulations. Thus, establishing the framework of the Group’s operations, we do maximize their efficiency, consistency and transparency.

The key due diligence policies and procedures will be presented in the sections that follow, while this chapter is dedicated to the general practice indicating the Group’s care for observance of the strictest due diligence standards in all aspects of the organization’s activities. The Book of Organizational Values adopted by the Company (described in section 10.5.1.2 of the Report) and the Code of Ethics of the Śnieżka Group (described in section 10.5.1.1 of the Report) are also of key importance herein.

Internal normative acts, such as: policies, regulations, procedures or instructions are developed, registered and made available to employees in the electronic system supporting the management and supervision of documentation, in a separate module. The publication of new regulations is preceded by a message specifying the scope and subject of the adopted document. Manual workers, who do not have access to the system, are informed about the adoption of new documents by their superiors.

Access to knowledge about the adopted documents is a condition for their proper implementation. Employees are automatically notified of any change in the documentation and have quick access to its current version at any time.
As regards the documents considered to be of key importance, the principle of obligatory familiarization with them is additionally applied – this should be confirmed in the monitoring system.

Owing to the internal document management system and other electronic solutions implemented within the group, it is possible to rapidly develop the due diligence procedures, establishing new practices which constantly improve the Group’s efficiency and transparency.

Examples of such solutions of this type include, inter alia, the system for supervision and management of internal documentation used in the Śnieżka Group. It is an advanced tool to control access to current versions of documents and eliminate errors resulting from working with incorrect (out-dated) versions of documents. It also effectively reduces the time spent on transferring information between employees when creating documentation. It provides confirmation of the adoption of a given regulation.

Other information on due diligence procedures

The application of due diligence procedures at the level of the entire Group takes place in all departments in relation to the issues managed by them. The source of the due diligence principles are numerous instructions, thanks to which it is possible to ensure continuity and quality of processes, also in volatile market conditions, or when changing personnel handling a given case.

Best Practices of WSE Listed Companies

FFIL ŚNIEŻKA SA applies recommendations and principles of corporate governance specified in “Best Practices of WSE Listed Companies 2021” document. Its content is available at.

From the date of entry into force Best Practices of WSE Listed Companies 2021, the Management Board of FFiL Śnieżka SA strives to ensure that the principles and recommendations referred to in this document are applied to the Company to the widest possible extent. At the same time, the Management Board declares that in 2022 the Company withdrew from applying or applied partially the following principles/ recommendations:

Principle/Recommendation	FFIL ŚNIEŻKA SA’s comment
1. INFORMATION POLICY ANG COMMUNICATION WITH INVESTORS
1.2. A company facilitates to get acquainted with its financial results included in the periodic report as soon as possible after the end of the reporting period, and if it is not possible for justified reasons, it publishes at least preliminary estimated financial results as soon as possible.	The principle is applied.
1.3 In its business strategy, a company also takes into account ESG issues, in particular including:
1.3.1. environmental issues, including measures and risks related to climate change and sustainable development issues;	Company’s comment: The Company did not disclose the business strategy document to the public. Concurrently, the Company developed the Śnieżka 2023+ Sustainable Development Strategy (hereinafter referred to as the Sustainable Development Strategy, Strategy), which is described in the Statement on non-financial information for 2022. The shape of the Sustainable Development Strategy is the result of previous activities, external analyses, involvement of employees, management staff and the Management Board, as well as research of the Company’s stakeholders. The final step was to develop a materiality matrix, which was the starting point for defining strategic objectives. The strategy includes 3 key pillars of responsibility towards the environment and actions for sustainable development. As part of them, a total of 9 areas were determined that define the priorities for the further development of Śnieżka in the spirit of sustainable development. As part of the Strategy, 21 strategic and 71 operational objectives have been defined, which will be implemented by FFiL Śnieżka SA and Śnieżka ToC Sp. z o.o., both in the short and long term. In order to effectively implement the Strategy, responsibility has been assigned at the level of specific organizational units. By implementing the assumptions of the new Strategy, the Company is performing selected UN Sustainable Development Objectives for 2030: „Good health and quality of life”, „Clean and accessible energy”, „Less inequalities”, „Responsible consumption and production” and „Climate action”. Information on the implementation of the Strategy and on sustainable development (including ESG indicators and data) will be published on the Company’s website and in annual reports of the Management Board on the activities of the Śnieżka Group (part of the annual report).
1.3.2. social and employee matters, concerning, inter alia, actions taken and planned to ensure gender equality, proper working conditions, respect for employees’ rights, dialogue with local communities, relations with clients.	The principle is not applied, see the comment to item 1.3.1 above.
1.4. In order to ensure proper communication with stakeholders, in the scope of the adopted business strategy, a company publishes on its website information on the assumptions of its strategy, measurable goals, in particular long-term objectives, planned activities and progress in its implementation, determined by means of financial and non-financial measures. Information on the strategy in the ESG area should, inter alia:	The principle is not applied, see the comment to item 1.3.1 above.
1.4.1. explain how the decision-making processes in a company and its group entities take account of climate change issues, pointing to the resulting risks;	The principle is not applied, see the comment to item 1.3.1 above.
1.4.2. present the value of the equal wage ratio paid to its employees, calculated as the percentage difference between the average monthly remuneration (including bonuses, awards and other allowances) of women and men for the last year, and provide information on actions taken to eliminate any inequalities in this respect, along with with the presentation of related risks and the time horizon in which it is planned to achieve equality.	The principle is not applied, see the comment to item 1.3.1 above. In addition, the Company indicates that its objective is to maintain the comparability of salaries of women and men employed in similar positions. This objective is monitored gradually, starting with FFiL Śnieżka SA and Śnieżka ToC Sp. z o. o. In 2023, the adjusted wage gap was 3,41% (this indicator means the difference between the average remuneration of men and women, expressed as a percentage of the average remuneration of men by employment category).
2. MANAGEMENT BOARD AND SUPERVISORY BOARD
2.1. A company ought to have a diversity policy towards the management board and supervisory board, adopted respectively by the supervisory board or the general meeting. The diversity policy defines the diversity objectives and criteria in such areas as gender, field of education, specialist knowledge, age and professional experience, as well as indicates the date and method of monitoring the achievement of the objectives in question. In terms of gender diversity, the condition for ensuring the diversity of the company bodies is the participation of the minority in a given body at a level not lower than 30%.	The principle is not applied. The Company has not developed and does not apply any diversity policy towards the management board and supervisory board. The fundamental criteria for selection for management and supervisory positions in the Company are competences and meeting the requirements for a given position. Characteristics such as gender or other factors, such as age, do not influence the evaluation of candidates as they may lead to discrimination. Diversity in the Group has a practical aspect. For example, women hold (and have historically held) managerial and supervisory positions within the Group companies. At the end of 2023, the number of women managers was 63, which constituted a total of 32% of all staff hired in these positions. According to the definition adopted in the Company, only persons managing teams of employees are classified as managerial positions.
2.2. The decision-makers on the appointment of members of the management board or supervisory board of a company should ensure the versatility of these bodies by selecting persons who ensure diversity in their composition, enabling, inter alia, achieving the target minimum minority participation rate set at a level of not less than 30%, in line with the objectives set out in the adopted diversity policy referred to in principle 2.1.	The principle is not applied. In the Company’s opinion, the right to appoint members of the supervisory board lies upon the shareholders, and members of the management board – upon the supervisory board.
2.11. In addition to the activities resulting from legal provisions, once a year the supervisory board draws up and presents an annual report for approval to the ordinary general meeting. The report referred to above contains at least: 2.11.6. information on the degree of implementation of the diversity policy in relation to the management board and the supervisory board, including the achievement of the objectives referred to in principle 2.1.	The principle is not applied. The Company does not apply this principle due to the waiver of principle 2.1.
3. INTERNAL SYSTEMS AND FUNCTIONS
3.1. A listed company maintains effective systems of: internal control, risk management and supervision of compliance with the law, as well as an effective internal audit function, appropriate to the size of the company and the type and scale of activities, for which the management bears responsibility.	The principle is not applied. The Company maintains internal control, risk management and compliance systems, but no internal audit unit has been organisationally separated.
3.3. A company belonging to the WIG20, mWIG40 or sWIG80 index appoints an internal auditor in charge of the internal audit function, acting in accordance with generally recognized international standards of the professional practice of internal audit. In other companies where no internal auditor was appointed to meet the above-mentioned requirements, the audit committee (or the supervisory board, if it serves as an audit committee) assesses annually whether there is a need to appoint such a person.	The principle is not applied. The Company maintains internal control, risk management and compliance systems, but no internal audit unit has been organisationally separated.
3.4. Remuneration of persons responsible for risk management and compliance and the head of internal audit should depend on the performance of assigned tasks, and not on the short-term performance of the company.	The principle is not applied. There are designated persons responsible for risk management and compliance in the Company, but there is no person in charge of internal audit.
3.6. The head of internal audit reports organisationally to the president of the management board, and functionally to the chairman of the audit committee or the chairman of the supervisory board, if the board performs the function of the audit committee.	The principle is not applied. The Company has no person in charge of internal audit.
3.7. Principles 3.4 – 3.6 are also applicable to entities comprising the company’s group that are significant for its operations, if they have designated persons to perform these tasks.	The principle is not applied. The Company does not apply this principle due to the waiver of principle 3.4. and 3.6.
3.10. At least once every five years in a company belonging to the WIG20, mWIG40 or sWIG80 index, an independent auditor, appointed by the audit committee, reviews the internal audit function.	The principle is not applied. The Company does not apply this principle due to the waiver of principle 3.1.
4. SHAREHOLDER MEETING AND SHAREHOLDER RELATIONS
4.1. A company should enable its shareholders to participate in the general meeting by means of electronic communication (e-general meeting), if it is justified in view of the shareholders’ expectations reported to the company, and if it is able to provide the technical infrastructure necessary to conduct such a general meeting.	The principle is not applied. In the Company’s opinion, the current mode of holding general meetings, carried out pursuant to the provisions of the Commercial Companies Code, is sufficient.
4.3. A company provides publicly available real-time broadcast of the general meeting.	The principle is not applied. The Company strives to conduct general meetings as efficiently as possible. Due to efforts to limit additional technical and organizational burdens, the Company does not broadcast the proceedings in real time.
6. REMUNERATION
6.4. The Supervisory Board performs its tasks continuously, therefore the remuneration of board members cannot depend on the number of meetings held. The remuneration of committee members, in particular the audit committee, should take into account the additional workload related to work in these committees.	The principle is not applied. The remuneration of Supervisory Board members is determined in accordance with the Remuneration Policy for Members of the Management Board and Supervisory Board of Fabryka Farb i Lakierów Śnieżka S.A. adopted by the resolution of the Ordinary General Meeting of June 16, 2020. The remuneration of the Supervisory Board members is, as a rule, permanent, related to the continuous performance of supervisory tasks. The amount of remuneration of the Supervisory Board members does not depend on the number of meetings of the Supervisory Board held in a given calendar month. The Supervisory Board members delegated to perform supervisory activities independent are entitled to additional remuneration. The lack of the principle application is related to the fact that the Supervisory Board members are not entitled to remuneration for a given calendar month if, for unjustified reasons, they did not participate in any of the meetings of the Supervisory Board formally convened in a given calendar month and the lack of additional remuneration in connection with work in Supervisory Board committees.

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Internal control and risk management systems in relation to the processes of preparing financial statements