Governance to support the group’s ambition
A fully committed Board of directors
Comprising 13 directors as of March 17, 2021, including eight independent members, the Board of Directors reflects the diversity and complementary experience, expertise, nationalities and cultures that are critical to addressing the interests of all of the Group’s shareholders and stakeholders.
The Board of Directors defines TotalEnergies’ strategic vision and supervises its implementation in accordance with its corporate interest, taking into consideration the social and environmental challenges of its business activities. It approves investments or divestments for amounts greater than 3% of shareholders’ equity and it is informed of those greater than 1%. The Board may address any issue related to the company’s operations. It monitors the management of both financial and nonfinancial matters and ensures the quality of the information provided to shareholders and financial markets.
The Board of Directors is assisted by the four committees it has created: Audit, Governance & Ethics, Compensation, and Strategy & CSR.
A unifed management structure, tailored to the Group’s requirements
Mr. Patrick Pouyanné has been Chairman and Chief Executive Officer of TotalEnergies SE since December 18, 2015. At the Board of Directors meeting of March 17, 2021, the Lead Independent Director indicated that the discussions held with the Governance and Ethics Committee in the best interests of the Company had led to a firm proposal to continue to combine the functions of Chairman and Chief Executive Officer. Indeed, this management form of the Company is considered to be the most appropriate for dealing with the challenges and specificities of the energy sector, which is facing major transformations.
More than ever, this context requires agility of movement, which the unity of command reinforces, by giving the Chairman and Chief Executive Officer the power to act and increased representation of the Company in its strategic negotiations with States and partners of the Group.
The Lead Independent Director also recalled that the unity of the power to manage and represent the Company is also particularly well regulated by the Company’s governance. The balance of power is established through the quality, complementarity and independence of the members of the Board of Directors and its four Committees, as well as through the Articles of Association and the Board’s Rules of Procedures, which define the means and prerogatives of the Lead Independent Director, notably:
- in her relations with the Chairman and Chief Executive Officer: contribution to the agenda of Board meetings or the possibility of requesting a meeting of the Board of Directors and sharing opinions on major issues;
- in her contribution to the work of the Board of Directors: chairing meetings in the absence of the Chairman and Chief Executive Officer, or when the examination of a subject requires his abstention, evaluation and monitoring of the functioning of the Board, prevention of conflicts of interest, and dialogue with the Directors and Committee Chairpersons;
- in her relations with shareholders: the possibility, with the approval of the Chairman and Chief Executive Officer, of meeting with them on corporate governance issues, a practice that has already been used on several occasions.
The balance of power within the governance bodies, in addition to the independence of its members, is further strengthened by the full involvement of the Directors, whose participation in the work of the Board and its Committees is exemplary. The diversity of their skills and expertise also enables the Chairman and Chief Executive Officer to benefit from a wide range of contributions.
In addition, the Board’s internal rules provide that any investment or divestment transactions contemplated by the Group involving amounts in excess of 3% of shareholders’ equity must be approved by the Board, which is also kept informed of all significant events concerning the company’s operations, in particular investments and divestments in excess of 1% of shareholders’ equity.
Lastly, the Company’s Articles of Association provide the necessary guarantees of compliance with good governance practices in the context of a unified management structure. In particular, they provide that the Board may be convened by any means, including orally, or even at short notice depending on the urgency of the matter, by the Chairman or by one third of its members, including the Lead Independent Director, at any time and as often as the interests of the Company require.
The Lead Independent Director, reflecting a balanced distribution of power
Listening of investors and stakeholders, the Board of Directors pays special attention to the balance of power within the Group. It was for that reason that in 2015 the Board of Directors amended the provisions of its Rules of Procedure to provide for the appointment of a Lead Independent Director in the event that the positions of Chairman of the Board of Directors and Chief Executive Officer are combined.
The Lead Independent Director’s duties, resources and prerogatives are set out in the Rules of Procedure of the Board. The Chairman and Chief Executive Officer and the Lead Independent Director are the shareholders’ dedicated contacts on issues that fall within the remit of the Board of Directors. Since 2016, the Lead Independent Director has organized executive sessions with the independent directors so that they may discuss the Group’s strategic challenges and working practices. The directors are also in regular contact with the members of the Group’s management team, including members of the Executive Committee during Board meetings and operational managers during Group site visits. Through those interactions between directors and managers, the directors gain a practical understanding of the Group’s activities.
A compensantion policy aligned with the Group’s strategic objectives
The compensation awarded to the Chairman and Chief Executive Officer is indexed to key performance indicators used to measure the success of the Group’s strategy.
In order to determine a compensation aligned with the Group’s performance, the variable portion of the Chairman and Chief Executive Officer’s compensation reflects both quantifiable targets (financial and HSE parameters) and qualitative criteria (personal contribution).
At its meeting on March 17, 2021, the Board of Directors decided to adapt the parameters for granting the variable portion of the Chairman and Chief Executive Officer in order to take into account the Company’s transformation strategy towards carbon neutrality as well as its societal responsibilty in general and in particular diversity.
In view of the importance of climate change challenges, the Board of Directors had decided starting in 2019 to change the criteria for determining the variable portion of the Chairman and Chief Executive Officer’s compensation for the year 2019, in part by applying a quantifiable criterion related to the change in GHG emissions (Scopes 1 & 2) on operated oil & gas facilities. This criterion supplemented those introduced since 2016 to reflect more closely the fulfillment of Corporate Social Responsibility (CSR) objectives and the Group’s HSE targets.
The granting of performance shares also include since 2020 a quantifiable criterion relating to the evolution of GHG emissions (Scopes 1 & 2) on oil & gas facilities operated by the Group. At its meeting on March 17, 2021, the Board of Directors also decided to introduce a new criterion to grant performance shares to the evolution of the indirect GHG emissions (Scope 3) related to the use by customers of energy products sold for end use (Scope 3) in Europe.
Collective expertise for tackling the strategic challenges facing the Group
The Governance & Ethics Committee operates in accordance with a formal procedure to ensure that the directors’ areas of expertise are complementary and that their profiles are diverse, to maintain an overall proportion of independent members that is appropriate to the Company’s governance structure and shareholder base, to obtain a balanced representation of women and men on the Board and to promote an appropriate representation of directors of different nationalities. Those principles govern the selection process for Board members.
As part of an effort that began several years ago, the composition of the Board of Directors has changed significantly since 2010 to achieve a better gender balance and to reflect openness to more international profiles.