IV.1. Governance
IV.1.1. Corporate Governance
The Ecopetrol Group and Ecopetrol’s
Governance Structure
For the Ecopetrol Group, Corporate Governance is the set of rules and practices that govern the decision-making process among the governing bodies of a company for the generation of value. The corporate governance model materializes the set of rules and practices applicable to the decision-making process of the governing bodies at Ecopetrol and defines the articulation and engagement mechanisms with the Group’s companies.
Accordingly, the corporate governance model establishes the decision-making framework for the 2040 Strategy and its short and long term business plans, and also promotes monitoring, strategic articulation, and the materialization of synergies and efficiencies within the Group, pursuant to the purpose and direction that unites them.
Ecopetrol in dual in nature; on the one hand, it is (a) a company operating in the oil and gas, and low emission solutions industries; and on the other, it is (b) the parent company of, or investor in, the companies that make up the Ecopetrol Group, whose relationship is that of:
- (i) Direct or indirect control.
- (ii) Business group.
- (iii) Shareholding without control.
The corporate governance model is defined based on the applicable law, international standards, the corporate governance principles of the Organization for Economic Cooperation and Development (OECD), good corporate governance practices, and the Group’s strategy.
In 2022, under the framework provided for in the corporate governance model, decisions continued to be made to move towards the goals outlined in the Ecopetrol Group’s 2040 Strategy, with a structure leveraged on guidelines that ensure decision-making geared towards the generation of value and sustainability.
(GRI 2-9-a) (WEF 6E) (SFC 7.4.1.3.II)
Board of Directors
Ecopetrol’s Board of Directors is its highest management body and defines the strategic direction for the Ecopetrol Group, acting in the best interest of society, considering the rights of shareholders, and based on the sustainability and growth of the Company. All of the above, in accordance with applicable regulations, which guide directors to perform their duties in good faith, independently, and with due diligence.
Article 23 of the bylaws establishes the duties under the responsibility of this corporate body, in addition to those allocated by law and other statutory provisions.
(GRI 2-9-b, 2-12) (WEF 2, 6E) (SFC 7.4.1.3.II)
Board of Director Committees
The committees support the management efforts of the Board of Directors and are governed by internal regulations, without prejudice to the provisions set forth in the bylaws and the applicable law, especially in the case of the Audit and Risk Committee.
Each of these bodies supports the Board of Directors in the exercise of its duties, with the primary objective of analyzing the issues that the Board should be aware of in advance and issue the corresponding recommendation. For operation purposes, in addition to the provisions of applicable regulations, each committee has an internal regulation establishing its objectives and duties.
The six (6) Committees supporting the management of the Board of Directors are made up of its own members, appointed by the Board.
Audit and Risk Committee
It is the highest control body of the Board of Directors and it is responsible for the surveillance, management, and effectiveness of the Ecopetrol Group’s Internal Control System.
Corporate Governance and Sustainability Committee
It is a body that supports the management efforts carried out by the Board of Directors to ensure the good governance and sustainability of the Company. Its duties include recommendations to the Board of Directors regarding the adoption of specific measures associated with the governance of the Company, the sustainability agenda, and the governance model applicable to the Ecopetrol Group, among others.
Business Committee
It is the management support body for the Board of Directors, responsible for the budget and investment plan, investment projects, and the incorporation of subordinate companies and new businesses, among others.
Compensation, Nomination, and Culture Committee
This management support body assists the Board of Directors in duties such as studying and making recommendations to the Board of Directors on the approval of the President’s succession policy, the compensation policy for Company workers, the compensation guidelines for the Group, and the top-level organizational structure.
HSE Committee (health, safety, and environment)
This management support body assists the Board of Directors in the monitoring of the HSE management model adopted by Ecopetrol and the Ecopetrol Group, as well as the Group’s HSE strategy, and others.
Technology and Innovation Committee
This management support body assists the Board of Directors in matters related to business technology, development, and innovation in the use of emerging technologies, the Group’s digital strategy, among others.
| Committee | President |
|---|---|
| Audit and Risks | Sergio Restrepo Isaza |
| Business | Carlos Gustavo Cano Sanz (until October 26, 2022) Luis Santiago Perdomo Maldonado |
| Corporate Governance and Sustainability | Esteban Piedrahíta Uribe |
| Compensation, Nomination, and Culture | Juan Emilio Posada Echeverri (until June 6, 2022) Cecilia María Vélez White Gabriel Mauricio Cabrera Galvis |
| HSE | Hernando Ramírez Plazas (until October 23, 2022) Sandra Ospina Arango |
| Technology and Innovation | Luis Guillermo Echeverri Vélez (until October 23, 2022) Saúl Kattan Cohen |
* To date: as of December 31, 2022.
Composition of the Board of Directors
Ecopetrol’s Board of Directors is made up of nine (9) main members, without substitutes. The composition of the Board of Directors meets the following legal and statutory criteria, as well as best corporate governance practices:
(GRI 2-10, 405-1) (WEF 2, 11)
| Profile | International expertise or experience in the activities under the Company’s corporate purpose and/or expertise and experience in the industrial and/or commercial field, or in financial, business risk, stock market, administrative, legal activities, or related sciences. |
| More than 15 years of professional experience. | |
| Good reputation and well-renowned for their professional suitability and integrity. | |
| Not simultaneously belong to more than five (5) boards of directors of different corporations, including Ecopetrol. | |
| Appointment | At least three (3) current members will be included in the list of candidates presented for consideration by the General Shareholders’ Meeting, without considering the candidates for the eighth and ninth rows, who will be nominated in accordance with the provisions set forth in the bylaws. |
| Independent | Most of the members of the Board of Directors are independent. |
| Experts | At least one of the members must be an expert in financial matters, in accordance with applicable regulations in the US stock market. |
| Production departments and minority shareholders | The list of candidates will include candidates proposed by the hydrocarbon production departments exploited by Ecopetrol and by minority shareholders in the 8th and 9th rows. |
| Gender, diversity, and inclusion | Gender, diversity, and inclusion criteria will be considered in the composition of the Board of Directors, with at least one (1) of the nine (9) members being a woman. The criteria of gender, diversity, and inclusion will be, in any case, concurrent with the provisions on the profiles of the members of the booard of Directors. The Company will seek to increase the participation of women, in line with its diversity and inclusion objectives. |
Click here to learn more about the Diversity and Inclusion policy adopted by Ecopetrol’s Board of Directors.
(GRI 2-10) (SFC 7.4.1.3.II)
Appointment and Composition
of the Board of Directors
According to the bylaws, the members of Ecopetrol’s Board of Directors are elected by the General Shareholders’ Meeting through the electoral quotient system for institutional periods of four (4) years and may be re-elected more than once for the same period of time, without exceeding three (3) periods in total.
This period responds to the need of guaranteeing the execution of the Ecopetrol Group’s strategy, adding long-term value, and giving continuity to the strategic direction of Ecopetrol and its companies. It also strengthens the preservation of the Company’s historical memory, and this period falls within the average of 4.4 years of other companies in the oil and gas sector.
If, for any reason, any of the members of the Board of Directors loses their status as independent, they shall notify the Secretary in writing, who shall then inform the Board of Directors of this situation.
Should the minimum number of independent member be reduced, the president of Ecopetrol shall summon an extraordinary General Shareholders’ Meeting for the reinstatement of the Board of Directors.
The list of candidates is submitted by the Nation, represented by the Ministry of Finance and Public Credit in its capacity as majority shareholder of Ecopetrol. Notwithstanding the foregoing, the other shareholders have the same right to submit alternative lists other than the one proposed by the majority shareholder. Any list submitted for consideration by the General Shareholders’ Meeting must meet the requirements set forth in the bylaws.
The current members of the Board of Directors were elected by the General Assembly on October 24, 2022. Their term extends until the ordinary General Shareholders’ Meeting to be held in 2025, and it is currently composed as follows:
(GRI 2-9-c-ii, 2-10-b-iii) (SFC 7.4.1.3.II)
| BOARD OF DIRECTORS | |
|---|---|
| AS OF DECEMBER 31, 2022 | |
| 9 MEMBERS (Order according to the List approved by the General Shareholders’ Meeting) | |
| INDEPENDENT MEMBERS | NON-INDEPENDENT MEMBERS |
| Gabriel Mauricio Cabrera Galvis | Gonzalo Hernández Jiménez |
| Saúl Kattan Cohen | Mónica de Greiff Lindo |
| Luis Santiago Perdomo Maldonado | |
| Sergio Restrepo Isaza | |
| Esteban Piedrahíta Uribe | |
| Sandra Ospina Arango | |
| Carlos Gustavo Cano Sanz | |
| PRESIDENT AND VICE PRESIDENT OF THE BOARD OF DIRECTORS | |
| Saúl Kattan Cohen (presidente de la Junta Directiva) | |
| Gabriel Mauricio Cabrera Galvis (vicepresidente de la Junta Directiva) | |
| FINANCIAL EXPERTS | |
| Sergio Restrepo Isaza | |
| Luis Santiago Perdomo Maldonado | |
From April 2021 to October 23, 2022, the Board of Directors was made up as follows:
(GRI 2-9-c-ii, 2-10-b-iii) (SFC 7.4.1.3.II)
| BOARD OF DIRECTORS (Order according to the List approved by the General Shareholders’ Meeting) | |
|---|---|
| INDEPENDENT MEMBERS | NON-INDEPENDENT MEMBERS |
| Cecilia María Vélez White | Germán Eduardo Quintero Rojas |
| Luis Guillermo Echeverri Vélez | |
| Juan Emilio Posada Echeverri (hasta el 6 de junio de 2022) | |
| Sergio Restrepo Isaza | |
| Luis Santiago Perdomo Maldonado | |
| Esteban Piedrahíta Uribe | |
| Hernando Ramírez Plazas | |
| Carlos Gustavo Cano Sanz | |
| PRESIDENT AND VICE PRESIDENT OF THE BOARD OF DIRECTORS | |
| Luis Guillermo Echeverri Vélez (presidente) | |
| Carlos Gustavo Cano Sanz (vicepresidente) | |
| FINANCIAL EXPERTS | |
| Sergio Restrepo Isaza | |
| Luis Santiago Perdomo Maldonado | |
(GRI 2-9) (WEF 2) (SFC 7.4.1.3.II, V)
Integration and Tenure
of the Board of Directors
At the beginning of 2022, the Board of Directors was made up of nine (9) members appointed by the General Shareholders’ Meeting at its ordinary session on March 26, 2021. On June 6, 2022, director Juan Emilio Posada submitted his resignation after three (3) years and two (2) months in office.
Accordingly, from June 6 to October 23, 2022, the Board of Directors was made up of eight (8) members: four (4) of them had completed a tenure of three (3) years and seven (7) months; one (1) member completed a tenure of four (4) years and three (3) months, including periods prior to the current one; one (1) member completed a tenure of four (4) years and seven
(7) months; one (1) member completed a tenure of four (4) years and nine (9) months, including periods prior to the current one; and one (1) member completed a tenure of five (5) years and seven (7) months.
On October 24, 2022, the General Shareholders’ Meeting appointed nine (9) members, in an extraordinary meeting, to form the Board of Directors. Between that date and December 31, 2022, the Board of Directors was made up as follows: four (4) members with a tenure of two (2) months; one (1) member with a tenure of two (2) years and two (2) months, including periods prior to the current one; two (2) members with a tenure of three (3) years and nine (9) months; one (1) member with a tenure of four (4) years and eleven (11) months, including periods prior to the current one; and one (1) member with a tenure of five (5) years and nine (9) months.
(GRI 2-9-c-i, 2-9-c-ii) (SFC 7.4.1.3.II, V, VI)
Most members of the Board of Directors are independent, in accordance with the independence criteria enshrined in Paragraph two of Article 44 of Law 964 of 2005.
As of December 31, 2022, none of the independent members of the Board of Directors lost their status, that is, 78% of the members (7 out of 9) are independent in compliance with the independence criteria. The foregoing exceeds the minimum required under the Colombian securities market law, which is 25%, as well as the independent majority requirement established by statutory provisions.
(GRI 2-9-c, 2-10-b-iii) (SFC 7.4.1.3.II, V, VI, VII)
(abril de 2021 a 23 de octubre de 2022)
| Name | ¿Es miembro independiente? | Is he/she an independent member? | Is he/she president of the Board of Directors? | Committees in which he/she participates | Attendance at Committee meetings | Does he/she own shares at Ecopetrol S.A.? | Member of other Boards | Stakeholder Groups that he/she represents |
|---|---|---|---|---|---|---|---|---|
| Luis Guillermo Echeverri Vélez | Yes | Yes (until October 23, 2022) | Corporate Governance and Sustainability Committee Technology and Innovation Committee | Corporate Governance and Sustainability Committee: 100% (8/8 sessions) Technology and Innovation Committee: 100% (3/3 sessions) | 100% (22/22 sessions) | No | During his term on the Ecopetrol Board, he also participated in the following Boards of Directors: Chamber of Commerce of Bogota. | |
| Germán Eduardo Quintero Rojas | No | No | Corporate Governance and Sustainability Committee Technology and Innovation Committee HSE Committee | Corporate Governance and Sustainability Committee: 100% (8/8 sessions) Technology and Innovation HSE Committee: 100% (2/2 sessions) | 95% (21/22 sessions) | No | During his term on the Ecopetrol Board, he also participated in the following Boards of Directors: Financiera de Desarrollo Nacional (FDN) | |
| Juan Emilio Posada Echeverri (He was a member of the Board of Directors until June 6, 2022) | Yes | No | Audit and Risk Committee Business Committee Corporate Governance and Sustainability Committee Compensation, Nomination, and Culture Committee | Audit and Risk Committee: 100% (10/10 sessions) Business Committee:100% (8/8 sessions) Corporate Governance and Sustainability Committee: 100% (5/5 sessions) Compensation, Nomination, and Culture Committee: 100% (4/4 sessions) | 100% (13/13 sessions) | No | During his term on the Ecopetrol Board, he also participated in the following Boards of Directors: Financiera de Desarrollo Nacional (FDN). Sociedad de Acueducto, Alcantarillado y Aseo de Barranquilla S.A. E.S.P. | |
| Cecilia María Vélez White | Yes | No | Corporate Governance and Sustainability Committee Technology and Innovation Committee Compensation, Nomination, and Culture Committee | Corporate Governance and Sustainability Committee: 88% (7/8 sessions) Technology and Innovation Committee: 100% (3/3 sessions) Compensation, Nomination, and Culture Committee: 100% (5/5 sessions) | 100% (22/22 sessions) | Yes | During her term on the Ecopetrol Board, she also participated in the following Boards of Directors: Suramericana de Seguros S.A. | |
| Hernando Ramírez Plazas | Yes | No | Business Committee Audit and Risk Committee HSE Committee | Audit and Risk Committee: 93% (14/15 sessions) Business Committee: 93% (13/14 sessions) HSE Committee: 100% (2/2 sessions) | 95% (21/22 sessions) | No | N/A |
(GRI 2-9-c, 2-10-b-iii) (SFC 7.4.1.3.II, V, VI)
| Name | Is he/she an independent member? | Is he/she president of the Board of Directors? | Committees in which he/she participates | Attendance at Committee meetings | Attendance at Board meetings | Does he/she own shares at Ecopetrol S.A.? | Member of other Boards | Stakeholder Groups he/she represents* |
|---|---|---|---|---|---|---|---|---|
| Gonzalo Hernández Jiménez | No | No | Business Committee Corporate Governance and Sustainability Committee | Business Committee: 100% (4/4 sessions) Corporate Governance and Sustainability Committee: 100% (1/1 session) | 100% (4/4 sessions) | No | Member of the Boards of Directors of: Administrator of the Healthcare Social Security Resources (ADRES) | Not applicable |
| Mónica de Greiff Lindo | No | No | Corporate Governance and Sustainability Committee Compensation, Nomination, and Culture Committee HSE Committee | Corporate Governance and Sustainability Committee: 100% (1/1 session) Compensation, Nomination, and Culture Committee: 100% (2/2 sessions) HSE Committee: 100% (1/1 session) | 100% (4/4 sessions) | No | Member of the Boards of: Directors of: Lagos de Aurea S.A.S. | Not applicable |
| Gabriel Mauricio Cabrera Galvis | Yes | No | Business Committee Corporate Governance and Sustainability Committee Compensation, Nomination, and Culture Committee | Business Committee: 100% (4/4 sessions) Corporate Governance and Sustainability Committee: 100% (1/1 session) Compensation, Nomination, and Culture Committee: 100% (2/2 sessions) | 100% (4/4 sessions) | Yes* | Financiera de Desarrollo Nacional (FDN) Association for the Promotion of the Arts – PROARTES LLOREDA S.A. | Not applicable |
| Saúl Kattan Cohen | Yes | Yes | Business Committee Technology and Innovation Committee Compensation, Nomination, and Culture Committee | Business Committee: 100% (4/4 sessions) Compensation, Nomination, and Culture Committee: 100% (2/2 sessions) Technology and Innovation Committee: did not meet in the last quarter of 2022. | 100% (4/4 sessions) | No | Tikva S.A. | Not applicable |
| Luis Santiago Perdomo Maldonado | Yes | No | Audit and Risk Committee Business Committee Technology and Innovation Committee | ComAudit and Risk Committee: 100% (18/18 sessions) Business Committee*: 100% (4/4 sessions) *Member since October 27, 2022 Technology and Innovation Committee: 100% (3/3 sessions) | 88% (23/26 sessions) | No | Mineros S.A | Not applicable |
| Sergio Restrepo Isaza | Yes | No | Audit and Risk Committee Business Committee HSE Committee Corporate Governance and Sustainability Committee Technology and Innovation Committee Compensation, Nomination, and Culture Committee | Audit and Risk Committee: 100% (18/18 sessions) Business Committee: 100% (18/18 sessions) HSE Committee*: 100% (1/1 session) *Member since October 27, 2022 | 100% (26/26 sessions) | No | Grupo BIO S.A.S Odinsa S.A. Mineros S.A. | Not applicable |
| Esteban Piedrahíta Uribe | Yes | No | Business Committee Corporate Governance and Sustainability Committee Technology and Innovation Committee Audit and Risk Committee Compensation, Nomination, and Culture Committee HSE Committee | Business Committee: 83% (15/18 sessions) Corporate Governance and Sustainability Committee: 100% (9/9 sessions) Technology and Innovation Committee*: did not meet in the last quarter of 2022. *Member since October 27, 2022 | 96% (25/26 sessions) | No | Cementos Argos S.A. Seguros Comerciales Bolívar Compañía Seguros Bolivar Governing Councils of Fundación SIDOC Centro Internacional de Entrenamiento e Investigaciones Médicas (CIDEIM) Advisory Council of Fundación Panthera | Not applicable |
| Sandra Ospina Arango | Yes | No | Business Committee Technology and Innovation Committee HSE Committee Audit and Risk Committee Corporate Governance and Sustainability Committee Compensation, Nomination, and Culture Committee | Business Committee: 100% (4/4 sessions) HSE Committee: 100% (1/1 session) Technology and Innovation Committee: did not meet in the period of October to December 2022. | 100% (4/4 sessions) | No | None | Not applicable |
| Carlos Gustavo Cano Sanz | Yes | No | Audit and Risk Committee Business Committee Corporate Governance and Sustainability Committee Technology and Innovation Committee Compensation, Nomination and Culture Committee HSE Committee | Audit and Risk Committee*: 100% (3/3 sessions) *Member since October 27, 2022 Business Committee: 100% (18/18 sessions) Corporate Governance and Sustainability Committee: 100% (9/9 sessions) | 100% (26/26 sessions) | No | Inversiones Minka S.A.S | Not applicable |
* Indirectamente.
Click on the following links to see the resumes of each of the members of the Board of Directors.
The Board of Directors is currently made up of two (2) women, in compliance with its gender, diversity, and inclusion criteria.
(GRI 2-9-c) (SFC 7.4.1.3.1.IV)
Experience of the Board of Directors
The Board of Directors, with the support of its Corporate Governance and Sustainability Committee, analyzes the competence, training, and/or expertise of its members to fulfill their duties and lead the Company’s strategy. To strengthen the profiles and diversity of the members of the Board of Directors, this body has therefore adopted the Skills and Experience Matrix, which includes the following:
(GRI 2-9-c, 102-19, 2-13) (WEF 2) (SFC 7.4.1.3.1.V)
| Skills and experience | N.º of directors |
|---|---|
| Energy industry and/or energy transition | 4 |
| Administration, senior management, and/or leadership | 9 |
| Government affairs and/or public policy | 6 |
| Financial and/or stock market | 8 |
| Corporate risk management | 4 |
| Human resources and/or talent development | 7 |
| Legal and/or corporate governance | 7 |
| Technology and/or innovation | 6 |
| Health, safety, and/or environment | 6 |
| Sustainability | 6 |
| Business strategy and/or project management | 8 |
(GRI 2-9-c, 102-19, 2-13) (WEF 2) (SFC 7.4.1.3.1.V)
| Skills and experience | N.º of directors |
|---|---|
| Energy industry and/or energy transition | 6 |
| Administration, senior management, and/or leadership | 9 |
| Government affairs and/or public policy | 7 |
| Financial and/or stock market | 8 |
| Corporate risk management | 5 |
| Human resources and/or talent development | 8 |
| Legal and/or corporate governance | 8 |
| Technology and/or innovation | 4 |
| Health, safety, and/or environment | 3 |
| Sustainability | 5 |
| Business strategy and/or project management | 9 |
The members of the Board of Directors boast diverse skills, experience, and strong entrepreneurial qualities. In 2021, the Board implemented its Succession Policy, as well as the Skills and Experience Matrix, in order to determine the requirements for the fulfillment of its duties, classifying them as basic and complementary. The complementary requirements associated with climate change include:
- (i) Health, safety, and/or environment
- (ii) Energy industry and/or energy transition
- (iii) Sustainability
- (iv) Technology and/or innovation
The Board recurrently strengthens its competence and expertise in the field of climate change. In March 2022, for example, the directors attended the 40th edition of CERAWeek, a five-day program held annually, which provides a comprehensive framework to discuss ideas, solutions, and challenges for the future of the global energy market.
(GRI 2-12) (WEF 1E) (SFC)
Role of the Board of Directors
and Senior Management in the
Oversight of Impact Management
The Board of Directors performs various duties associated with value or mission statements, as well as sustainability strategies and objectives.
In 2020, the Board approved the Ecopetrol Group’s Declaration of Culture, containing the purpose and the six (6) cultural principles that guide the Group. In 2021 and 2022, the Compensation, Nomination, and Culture Committee analyzed the advances made in the appropriation of the Declaration of Culture among workers.
On the other hand, the Board has periodically reviewed and updated the Group’s corporate strategy, containing TESG objectives, among others. In June 2021, it analyzed the TESG strategy and made some recommendations on the matter. After two (2) strategic sessions analyzing the components and goals of the proposed strategy, the Ecopetrol Group’s 2040 Strategy: “Energy that Transforms” was approved in December 2021 and published in February 2022. The strategy consists of four (4) pillars, one of them known as “Generating value with TESG,” which seeks to strengthen the bonds of trust with the Stakeholder Groups by applying high standards of corporate governance, in order to achieve environmentally responsible, safe, and efficient operations, with innovation and technology acting as catalysts to accelerate solutions to future challenges. In August 2022, said governing body analyzed the progress made towards this strategy.
Finally, in accordance with Ecopetrol’s bylaws, the Board has the responsibility of “approving the Ecopetrol Group’s strategy and business plan while ensuring corporate responsibility, by including environmental, social, governance, technology, and innovation criteria.” This is how this body incorporates elements of TESG in its monitoring and approval of the Ecopetrol Group’s objectives.
Senior management ensures compliance with the objectives and goals associated with TESG, the energy transition, occupational health, industrial and process safety, corporate responsibility, and the management of the operations environment, with the conviction that the sustainability of the Company and its operations is only possible in a sustainable environment in which technology plays a relevant role.
The Board of Directors involves the Stakeholder Groups in the identification and management of Ecopetrol’s positive and negative impacts on the economy, the environment, and on people. Ecopetrol periodically conducts Stakeholder Group perception and expectation surveys. The consultation includes their assessments on material economic, social, and environmental issues, and the results are presented annually to the Board of Directors’ Corporate Governance and Sustainability Committee. To give continuity to this exercise, the Board of Directors is periodically informed of the trends of these Stakeholder perceptions and expectations.
(GRI 2-12-a, 2-12-b, 2-24) (TCFD G-1.3, G-1.1) (SFC XVII)
The Board of Directors incorporates a perspective of Responsible Business Conduct through its focus and review of the different issues analyzed by the support committees according to their duties.
Economic matters are presented to the Board of Directors’ Audit and Risk Committee, which analyzes the following topics, among others: the profit distribution project; additional reserve funds; the reacquisition of the Company’s own shares; the interim and year-end financial statements, both separate and consolidated; the Company’s debt situation and the acquisition of additional financing; and the issuance and placement of shares and bonds.
The impacts on the environment are the subject of analysis by the HSE Committee. For example, it analyzes the proposed annual HSE objectives and goals, as well as associated strategic business risks, and monitors the HSE strategy defined for the Ecopetrol Group.
In terms of people, all issues related to Ecopetrol’s human talent are under the responsibility of the Compensation, Nomination, and Culture Committee, including the following: the Company’s relationship with workers, retirees, and their beneficiaries; the organizational culture and the training processes for the staff; the workers’ compensation policy, including long-term variable compensation; and the compensation guidelines for the Ecopetrol Group.
In turn, the Corporate Governance and Sustainability Committee is in charge of analyzing the sustainability agenda adopted by Ecopetrol and the Ecopetrol Group. Human Rights are a relevant issue for all Stakeholder Groups and are cross-cutting to the TESG pillar under the Ecopetrol Group’s 2040 Strategy. Accordingly, this Committee is also responsible for Human Rights management and the progress made in this regard.
On the other hand, by virtue of applicable Colombian regulations, every year, the Board of Directors has approved Ecopetrol’s partaking in the Works for Taxes mechanism, which has enabled projects around the Colombian territory, with initiatives associated with energy transition, road infrastructure, education, access to drinking water, and basic sanitation.
The Board of Directors incorporates a perspective of Responsible Business Conduct through its focus and review of the different issues analyzed by the support committees according to their duties.
On the other hand, the internal regulations of all Committees, in general, grant them the power to intervene in actions related to their duties, geared, in their opinion, towards the best deployment of Ecopetrol’s activities, for which they may ask Management to issue the relevant reports. In this sense, the directors can request detailed information on specific topics, such as those related to Ecopetrol’s impact on the economy, the environment, and on people.
Delegation of the Responsibility
of Managing Impacts
The Company strives to manage its impacts on the economy, the environment, and on people through the clear assignment of responsibilities to its employees. This assignment is specified in the job descriptions and in a decision and attribution matrix containing the most relevant key decisions for the Group, as well as the people responsible for making such decisions in the Company, and their scope with respect to the Ecopetrol Group.
Ecopetrol’s Board of Directors annually approves its meeting schedule with the dates on which this corporate body and each of its Support Committees will meet, as well as the thematic work agenda with the relevant issues that must be included by legal requirement, and the different issues suggested by the different areas of Company according to the needs of the business.
Based on this thematic agenda, Senior Management and the work teams responsible for the different subject areas report on the results and the management efforts exerted on issues with economic, social, and environmental impacts.
The Board of Directors’ Corporate Governance and Sustainability Committee is responsible for studying and issuing recommendations for the consideration and decision of the Board on the Company’s Integrated Management Report prepared for the General Shareholders’ Meeting.
To ensure the relevance, quality, and veracity of the information, the Report is reviewed by the Vice Presidency of Corporate Affairs and Secretary General, the Management Committee, and the President of the Company before presenting it to the Board of Directors’ Corporate Governance and Sustainability Committee.
Management of the Board of Directors
A total of 23 Board of Directors meetings were held during the period, broken down as follows: twelve (12) ordinary, eleven (11) extraordinary, one of them to analyze the progress made on the Company’s 2040 Strategy, and three (3) to deliberate and reach a decision by outstanding votes.
Of the 23 meetings, 11 were completely virtual, that is, 48%; 11 were hybrid (some directors attended in person and others virtually), also 48%; and 1 was held in person, equivalent to 4%.
Total attendance at the sessions by the directors accounted for 98%. The schedule for the sessions was previously approved by the directors, and their notification ratified with due time by the Vice Presidency of Corporate Affairs and Secretary General, which interacted permanently with the president of the Board of Directors.
The deliberations of the Board of Directors took place with a number equal to or greater than five (5) of its members.
The decision-making process in the Board of Directors allows decisions to be made in an informed manner at each of the stages, based on the powers of the different instances, in such a way that its management efforts can focus on strategic issues.
Relevant Decisions of the Board of Directors
Some of the most relevant decisions made by the Board of Directors in 2022 include the following:
Approval of the 2023 Investment Plan, by means of which the Ecopetrol Group will invest between 25.3 TRILLION COP and 29.8 TRILLION COP in 2023 to accelerate the path towards energy transition and sovereignty.
Approval of financing operations with the update of the 2022 and 2023 financing plans.
Approval of the updated guidelines for the retention, transfer, and mitigation of the Ecopetrol Group’s financial risks.
Approval of the 2021 statement of resources and reserves.
Approval of interim and year-end financial statements, both separate and consolidated.
As part of the duties of the Audit and Risk Committee, the Board approved Ecopetrol S.A.’s updated General Audit Plans for 2022 and 2023.
In consideration of the contributions to the country and the benefits obtained by the Ecopetrol Group by partaking in the Works for Taxes mechanism, the Board approved Ecopetrol’s participation in this mechanism as a method of paying income tax for taxable year 2022.
In terms of compensation matters for 2023, the Board approved the variable compensation model for that year, as well as the Ecopetrol Group’s balanced management board (TBG) for the period of 2023-2025.
In 2022, each of the Board of Directors’ support committees met periodically and especially,
but not exclusively, analyzed the topics below:
| Total number of sessions held in 2022 | Committee |
|---|---|
| Audit and Risk Committee | |
| 18 sessions |
|
| Business Committee | |
| 18 sessions |
|
| Corporate Governance and Sustainability Committee | |
| 9 sessions |
|
| Compensation, Nomination, and Culture Committee | |
| 7 sessions |
|
| HSE Committee | |
| 3 sessions | 2021 HSE Performance. Management, results, and projections arising from the pandemic. Water neutrality roadmap. Follow-up on climate change roadmaps, integrated water management, and industrial safety. Analysis of the methane reduction goal. |
| Technology and Innovation Committee | |
| 3 sessions |
|
Notification of Critical Concerns
to the Board of Directors
According to Board regulations, different subjects may be submitted for consideration, such as critical concerns or issues, and the areas will analyze the relevance and frequency in which these matters are brought to the attention of this body.
In the event of any critical situation that requires the intervention of the Board, the bylaws grant it the power of serving as a consultative body for all matters required by the President of the Company.
The issues raised by the Stakeholder Groups serve as input for the analysis of trends and expectations, which are presented to Ecopetrol’s Board of Directors, as well as opportunities for improving Stakeholder engagement plans.
For this reporting period, two (2) critical concerns associated with Human Rights issues and the climate change roadmap were communicated to Ecopetrol’s Board of Directors.
The mechanisms used to address and solve critical concerns involved the adoption of due diligence measures for the prevention and mitigation of risks, as well as the evaluation of scenarios, risks, and opportunities.
Conflicts of Interest
The bylaws, the Code of Good Governance, the Internal Regulations of the Board of Directors, the Code of Ethics and Conduct, and the Instructions for the Management and Prevention of Conflicts of Interest and Ethical Conflicts at Ecopetrol, all define the internal policy and procedures applicable to knowledge management, administration, and the resolution of situations under the conflicts of interest regime. Rejection and zero tolerance shall apply to any behavior that may constitute a breach of said regime, either due to the existence of particular (direct) circumstances, or due to indirect issues (related to third parties: related parties, shareholders, suppliers, customers, and contractors).
Should an Ecopetrol administrator, including members of the Board of Directors, be in a situation of conflict of interest, he/she shall comply with the provisions of the aforementioned regulations, including the duty to disclose the conflict of interest to the Board of Directors and withdraw from the matter, and the situation shall be recorded in the corresponding minutes.
Moreover, they must periodically sign and update the Independence Document – Declaration of Conflicts of Interest or the form indicated by the Corporate Vice Presidency of Compliance, as applicable, in order to report situations of conflict, affiliation to different boards of directors, or any occurrence that they might be exposed to that may influence their decision-making or fulfillment of duties, as well as any direct or indirect relationship among them or with Ecopetrol, or other entities or structures belonging to the Ecopetrol Group, or with the issuer, the suppliers, clients, or with any other Stakeholder Group. However, this provision expressly warns that the periodicity determined shall not be an obstacle for any conflict of interest to be disclosed immediately, much less that it excludes the duty to disclose the situation if it occurs in the interregnum between one update and another.
The Corporate Vice Presidency of Compliance has a matrix of related parties to monitor any potential conflicts. Chapter 3.2.7 of the Business Group’s Accounting Policy Manual is applicable to related parties, which provides for the determination and disclosure requirements in separate and consolidated statements, the duty and the procedure to identify them, and the disclosure requirements, among others.
In cases involving workers who are not administrators, the employee shall report the situation of conflict in writing to the immediate superior and send a copy to the Corporate Ethics and Compliance Affairs Management team. In contractual procedures, an informative copy of the statement must also be sent to the designated authorized official. The immediate boss shall adopt a substantiated decision, which must be recorded in writing, indicating whether or not the conflict exists and, if it did, the boss shall order the worker to refrain from taking action, appoint his/her replacement, and send a copy of all proceedings to the aforementioned Management.
Ecopetrol’s guidelines pertaining to conflicts of interest extend to bidders, contractors, suppliers, customers, partners, or allies by means of the Code of Ethics and Conduct; these parties are subject to the clauses and contractual forms applicable to them, and they therefore agree and accept that they will take actions in accordance with Ecopetrol’s ethical principles, without engaging in situations of conflict.
In the event of any potential conflict with the counterparts, the designated authorized official, or whoever acting as such, shall be informed of said situation and shall analyze and issue a written and substantiated response resolving the matter and adopting the pertinent mitigation measures. A copy will be similarly sent to the Corporate Ethics and Compliance Affairs Management. If deemed necessary, a consultation may be raised with the aforementioned Management, which shall issue an opinion prior to making the relevant decision.
The instructions define the characteristics and classification of conflicts according to their nature and temporality (permanent, sporadic, direct, indirect, real, supervening, potential, and apparent), with examples of situations that materialize them and events in which they are elevated to the categories of inabilities, incompatibilities, and prohibitions, among other aspects.
Ecopetrol's guidelines pertaining to conflicts of interest extend to bidders, contractors, suppliers, customers, partners, or allies by means of the Code of Ethics and Conduct; these parties are subject to the clauses and contractual forms applicable to them, and they therefore agree and accept that they will take actions in accordance with Ecopetrol's ethical principles, without engaging in situations of conflict.
Operating Relations with Related Parties
In accordance with the Bylaws, the Board of Directors is responsible for ensuring that Ecopetrol’s economic relations with its shareholders, including the majority shareholder, and with its subsidiaries, take place within the limitations and conditions established by law and by the regulations on the prevention, management, and resolution of conflicts of interest, and in any case, under market conditions.
The transfer pricing guide between Ecopetrol’s economic related parties determines the parameters to be considered when determining the remuneration for operations, be it of goods or services, between Ecopetrol and its subsidiaries, in such a way that the conditions set forth in the operations under analysis are consistent with those agreed with or determined between independent third parties, thereby avoiding any impacts on the income statements by control or subordination relationships.
In this sense, the economic relations with the Nation and with the subordinate companies, consolidated during 2022 by means of agreements or contracts, were conducted under the above parameters. These relationships are not intended to benefit the Nation or the subordinate companies, nor are they detrimental to the interests of minority shareholders.
Every six months, the Tax Consulting and Planning Management submits a report to the Board of Directors on the operations, agreements, or contracts entered into between the Company and its subsidiaries within said period, confirming that the conditions thereof correspond to market conditions.
In the event of a conflict of interest between the companies of the Ecopetrol Group, the parties involved shall comply with the corresponding procedure according to applicable regulations.
Collective Understanding
of Sustainable Development
In order to contribute to the permanent training of the Board of Directors and to created spaces for debate and construction of joint knowledge, some of the directors attended the following sess ions in 2022:
- CERAWeek
- Corporate Governance Effectiveness and Accountability in the Boardroom- Kellogg School of Management
- League of Directors Training Program- Kearney, Universidad de los Andes and the Center for Corporate Governance Studies
As part of the education and training plan for the members of the Board of Directors, the directors also attended talks on risk management by Deloitte and by Miller & Chevallier, and on stock market regulation in the US by Shearman & Sterling, and participated in a few ethics and conduct, and cybersecurity training sessions organized by Ecopetrol.
For their part, the current members of the Board of Directors participate in different induction sessions and operating visits in order to learn about the Ecopetrol Group’s strategy, the operation of the Board of Directors and its support committees, the Group’s new businesses, the duties, organizational structure, and objectives of the business areas, as well as the main production and refining activities taking place in the areas of operation.
The nine (9) members of the Board of Directors are periodically trained in risk management. In 2022, the directors completed their
risk management education pertaining to:
- i) The Board as a key player in risk oversight.
- ii) Navigating US Securities Laws and Regulations: risk-based analysis of business partners and intermediaries, risk assessment for an effective anti-corruption compliance program, traditional high-risk areas for non-US persons.
- iii) Conscious challenges for the transformation of the business towards a higher purpose, including case studies of companies related to the risks applicable to the business in terms of “Impact on financial sustainability and value generation” and HSE events due to operating causes.
- iv) Podcast “Understanding the risk landscape in the world of O&G”.
Performance evaluation of the Board of Directors
(GRI 2-18-a, 2-18-b) (SFC VIII)
To ensure alignment between the interests of shareholders and the performance of the Board of Directors, and in accordance with the best corporate governance practices, Ecopetrol has implemented the following evaluation mechanisms for its Board of Directors:
(qualitative)
Annual measurement, both at the individual level as well as that of the collegiate body, of the desirable behaviors for proper operation, such as expertise, quality of the information, management results, exercise of duties, leadership, and engagement.
Annual measurement of the indicators defined in the TBG.
(external)
Rates the management efforts exerted by an independent third party every two or three years. It alternates with the annual evaluations conducted on the Board of Directors.
(qualitative)
Peers conducting an annual examination to identify opportunities for improvement.
Gathers the perception of the Administration on the performance of the Board of Directors.
The recommendations made by the external advisor in the evaluation of the Board of Directors, served as input for the construction of the Skills and Experience Matrix, which helped in determining the skills and experience required for the Board of Directors as a collegiate body.
(GRI 2-18) (SFC VIII)
Board of Directors’ Evaluation Results
The Board of Directors’ evaluation results were reported by its Corporate Governance and Sustainability Committee in February 2022, which consisted of self-assessment, peer evaluation, and a 360 evaluation by the Administration to understand the latter’s perception of its performance. The results show and highlight the teamwork and trust inspired by the relationships and the alignment of interests between the Board of Directors and the Administration with regard to the Company’s strategy.
The evaluation of the Board of Directors yielded outstanding results based, among others, on the following elements:
- (i) Its members acknowledge teamwork and harmony, and also the performance and contribution of their peers.
- (ii) The Administration appreciates the teamwork with the Board, characterized by trust and the concurrence of interests with regard to the Company’s strategy.
- (iii) The Board has adequate experience and competencies to fulfill its duties.
- (iv) The individual work of each member contributes to the proper operation and harmony of said team as a collegiate body.
Moreover, the Board of Directors underwent the self-assessment process in March 2022, conducted by the General Directorate of State Interests (DGPE, as per its Spanish acronym) of the Ministry of Finance and Public Credit (MHCP), whose results were reported to the directors in July 2022.
As for the management efforts in 2022, the members of the Board of Directors will conduct their qualitative evaluation in February 2023 and the results will reflect both their behavior as a collegiate body, as well as that of each individual member. The performance of the President and Secretary of the Board will be assessed over the course of 2022.
(GRI 2-19-a, 2-20) (WEF 3E) (SFC 7.4.1.3.I)
Remuneration Policies
Remuneration of the Board of Directors
The fees payable to the directors for attending the meetings of the Board of Directors and/or the support committees are set by Ecopetrol’s General Shareholders’ Meeting. In the ordinary meeting of March 22, 2012, as stated in Minutes 026 of 2012, the General Shareholders’ Meeting, after the analysis presented by the Administration on the fees paid to directors at a national and international level, the necessary conditions required to exercise as a member of Ecopetrol’s Board of Directors, and a study by the Hay Group, decided to set the fees at six (6) current legal monthly minimum wages, a sum that equivalent to 6 MCOP in 2022 for each Board or committee session.
The General Shareholders’ Meeting can set the fees in another unit of value, considering the nature of the Company, the responsibility entailed in the position, and market guidelines.
Furthermore, as set forth in the internal regulations of the Compensation, Nomination, and Culture Committee, the Committee may propose the remuneration policy for the Board of Directors, considering the nature of the Company, the responsibility entailed in the position, and market guidelines, which will be submitted for approval by the General Shareholders’ Meeting.
Composition of Senior Management
- President – Felipe Bayón Pardo
- Vice President of Corporate Affairs and Secretary General – Mónica Jimenez González (July 26, 2016, to August 17, 2022) and María Paula Camacho Rozo (in office since August 18, 2022, and formally appointed since August 27, October 2022)
- Internal Audit Corporate Manager – Ricardo Augusto Montes
- Corporate Vice President of Compliance – María Juliana Albán Durán
- Legal Vice President – Fernán Ignacio Bejarano Arias
- Commercial and Marketing Vice President – Pedro Fernando Manrique Gutiérrez
- Vice President of Supply and Services – Carlos Andrés Santos Nieto
- Vice President of Sustainable Development – Diana Patricia Escobar Hoyos
- Corporate Vice President of Strategy and New Businesses – Nicolás Azcuénaga Ramírez
- Vice President of Science, Technology, and Innovation – Ernesto José Gutiérrez de Piñeres Luna
- Corporate Vice President of Finance – Jaime Eduardo Caballero Uribe
- Corporate Vice President of Human Talent – Alejandro Arango López
- Executive Vice President of Operations – Alberto Enrique Consuegra Granger
- Vice President of Low Emission Solutions – Yeimy Patricia Báez Moreno
- Upstream Vice President – Jorge Elman Osorio Franco
- HSE Vice President – Mauricio Jaramillo Galvis
- Vice President of Refining and Industrial Processes – Walter Fabian Canova
Senior Management Duties
Define, guide, and evaluate the long-term strategy for the Company, for the Ecopetrol Group, and for the function, segment, and/or business line, guided by the environment, the guidelines of the
Board of Directors, and the legal framework.
Formulate the policies for the function, segment, and/or business line in the Company and/or the Ecopetrol Group, anticipating future conditions and global complexities.
Create future scenarios and opportunities for the sustainability of the Company and of the Ecopetrol Group.
Ensure compliance with the objectives and goals set, in terms of TESG, energy transition, occupational health, industrial and process safety, corporate responsibility, and the operations environment under its scope of management, focusing on sustainable operations leveraged on technology, free of occupational, process safety, and environmental incidents, and in harmony with the environment.
Duties of the Steering Committee
In accordance with Circular GOC-J-001, the Steering Committee is the body responsible for follow-up and alignment on matters relevant to the management of the President and the Ecopetrol Group. This body enables the cross-cutting communication of these topics. It is also the forum for its members and guests to inform the President of the progress and evolution of relevant issues, as it is responsible for exerting monitoring efforts.
- Until December 19, 2022, the members of the Steering Committee were:
- President (Chair)
- Executive Vice President of Operations
- Vice President of Exploration
- Vice President of Development and Production (now Upstream Vice President)
- Midstream Segment Vice President
- Vice President of Refining and Industrial Processes
- Vice President of Transportation Operations and Logistics
- Commercial and Marketing Vice President
- Vice President of Projects and Drilling (now Vice President of Development and Projects)
- Corporate Vice President of Finance
- Corporate Vice President of Strategy and New Businesses
- Digital Vice President (now Vice President of Science, Technology, and Innovation)
- Corporate Vice President of Human Talent
- Vice President of Sustainable Development
- Vice President of Supply and Services
- Legal Vice President
- Secretary General (now Vice President of Corporate Affairs and Secretary General)
- Corporate Vice President of Compliance
- Vice President of Gas (now Vice President of Low Emission Solutions)
- HSE Vice President
- Director of the Center for Innovation and Technology – ICP
As of December 19, 2022, the members of the Steering Committee are:
- President of Ecopetrol (Chair)
- Executive Vice President of Operations
- Upstream Vice President
- Midstream Segment Vice President
- Vice President of Refining and Industrial Processes
- Commercial and Marketing Vice President
- Corporate Vice President of Finance
- Corporate Vice President of Strategy and New Businesses
- Vice President of Science, Technology, and Innovation
- Corporate Vice President of Human Talent
- Vice President of Sustainable Development
- Vice President of Supply and Services
- Legal Vice President
- Vice President of Corporate Affairs and Secretary General
- Corporate Vice President of Compliance
- Vice President of Low Emission Solutions
- HSE Vice President
Duties of the Executive Committee
According to Circular GOC-J-001 (version 6 of 18/02/2021) issued by the President of Ecopetrol (circular 01), the Executive Committee (ExCo) is the body through which Ecopetrol’s Senior Management monitors or approves (specifically those matters defined in the Decisions and Attributions Matrix) several strategic matters related to Ecopetrol’s corporate and support areas, as well as business goals, objectives, and initiatives that cut across more than one of the segments of the Ecopetrol Group. It exerts approval and monitoring responsibilities.
On December 19, 2022, the president of Ecopetrol approved Version seven (7) of Circular 01 that modified its scope as follows: “The Executive Committee (ExCo) is the instance which:
- (i) Monitors the pillars of the Ecopetrol Group’s strategy, the long and short term Business Plan, and the strategic issues that also span across the business lines.
- (ii) Approves the strategic plans of the business lines, as well as those defined in the Decisions and Attributions Matrix. It exerts approval and monitoring responsibilities.
Composition of the Executive Committee
In accordance with Circular GOC-J-001 (version 6 of 18/02/2021) issued by the President of Ecopetrol (Circular 01), below are the members of the ExCo:
- President of Ecopetrol
- Executive Vice President of Operations
- Corporate Vice President of Finance
- Upstream Segment Vice President
- Midstream Segment Vice President
- Downstream Segment Vice President
- Commercial Segment Vice President
- Legal Vice President
- Corporate Vice President of Strategy and New Businesses
On December 19, 2022, the President of Ecopetrol approved Version seven (7) of Circular 01, which modified its composition with the following members:
- President of Ecopetrol
- Executive Vice President of Operations
- Corporate Vice President of Finance
- Vice President of Corporate Affairs and Secretary General
- Commercial Segment Vice President
- Legal Vice President
- Corporate Vice President of Strategy and New Businesses
- Vice President of Low Emission Solutions
* In addition to its composition, the leader of the transmission and toll roads business line also attends as a participant in the Executive Committee, as well as other guests according to the different topics discussed in the committee.
In accordance with Article 44 of Law 965 of 2005, with regard to the boards of directors of securities issuing companies such as Ecopetrol, whoever holds the capacity of legal representative of the entity may not act as president of its board of directors. Similarly, Article 22 of the Company’s bylaws establish that in no case may the President of Ecopetrol be appointed as president of its Board of Directors.
(GRI 2-19-a, 2-20-a) (WEF 3E)
Remuneration Policies
A reference study is conducted every year, facilitated by consulting firms specializing in the use of quantitative methodologies for the evaluation of job positions, best compensation practices, and organizational issues. This reference study is compared against the national mining-energy market.
Based on the conclusions of the study, actions are reviewed and adopted to define a competitive compensation policy for Ecopetrol, in order to attract and retain the required talent according to the strategy and needs of the Company.
Senior Management Remuneration
The purpose of the compensation policy is to maintain a competitive scheme vis-à-vis the Colombian sector and executive market, in order to attract and retain the best talent to guarantee the long-term sustainability of the Company.
To monitor Ecopetrol’s ranking in the reference market, a salary competitiveness study is commissioned every year to a firm specializing in the use of a quantitative methodology for the evaluation of job positions, best compensation practices, and organizational issues. Based on the conclusions of the study, actions are reviewed and adopted to maintain competitive remuneration, in order to attract and retain the required talent to the strategy and needs of the Company.
For the compensation of Senior Management, the comparison is made against a select market of business groups and/or large national companies to monitor their level of competitiveness.
(GRI 2-19-b) (WEF 3E) (SFC 7.4.1.3.I) (TCFD G-2.3)
Ecopetrol’s compensation scheme includes two (2) components associated with the achievement of business results:
- (i) Short-term variable compensation payable to the entire team of direct workers based on the achievement of the strategic objectives defined in the Ecopetrol Group’s Balanced Management Board – TBG.
- (ii) Long-term incentives payable to management and some critical positions associated with the achievement of long-term objectives that guarantee the sustainability and protect the value and future of the Company.
Short-term variable compensation recognizes the achievement of annual objectives; it is reviewed and defined based on business results associated with the achievement of the strategic objectives established in the Ecopetrol Group’s TBG. At the end of every year, the variable compensation for each worker is calculated based on their individual target, which corresponds to a percentage of their annual salary; business results are reviewed, and discounts are made for HSE events and issues associated with adherence to internal control, to then assign the final amount, differentiated by individual performance.
For 2022, the Ecopetrol Group’s TBG integrates the relevant topics of the Business Plan and reflects the main focuses aligned with the strategic challenges and the Declaration of Culture of the Group, prioritized as follows: Life first – HSE (10%), Growing with the energy transition (35%), Competitive returns (30%), Decarbonization (10%) and expertise (15%).
Long Term Incentives (ILP, as per its Spanish acronym):
- these are associated with the achievement of strategic objectives that guarantee the sustainability of the Company and encourage the cohesion of the management team. This element of compensation seeks to recognize and encourage the achievement of extraordinary long-term business results and favor the interests of shareholders.
- Long term incentives consist of a percentage of the annual salary of the workers; this money is handed over to an authorized financial institution to invest it in Colombia in Ecopetrol’s ordinary shares and it only becomes part of the workers’ equity if the goals established in the plan are met.
- Long term incentive plans are valid for three (3) years. Each year, a new edition of the plan is launched, with demanding objectives associated with the Group’s strategy, and the participants are also defined. At this moment there are three (3) plans implemented for the periods of 2020-2022, 2021-2023, and 2022-2024, which will be recognized between January and April 2023, 2024, and 2025 respectively, if the defined goals are met.
- The Ecopetrol Group’s 2022 TBG and the current ILP plans include climate change objectives, focused on accelerating and prioritizing the decarbonization of operations through the implementation of energy efficiency projects and initiatives, as well as the reduction of fugitive emissions, venting, and flaring, and the incorporation of renewable energies, hydrogen, CCUS, and SNC, with a GHG reduction goal that measures the Ecopetrol Group’s cumulative reduction of CO2 equivalent emissions, in line with the long-term goals of net zero CO2e emissions by 2050 (Scopes 1 and 2) and zero routine gas flaring by 2030.
Benefits:
The Company has adopted a portfolio of benefits to improve the quality of life of workers and their families, covering aspects such as health, education, savings and investments, and non-monetary benefits. The benefits are granted to workers who meet the requirements established for each benefit under the portfolio. Detailed descriptions can be found in the Human Talent section of this Report.
The total compensation for the President of Ecopetrol consists of an estimated ratio of 40% fixed compensation and 60% variable compensation. The President’s short-term variable compensation is subject to compliance with the annual business results defined in the Ecopetrol Group’s balanced management board, which includes financial and sustainability metrics (EBITDA and operating cash flow). The Long-Term Incentives (ILP) consider triennial extraordinary business metrics, with priority given to the Ecopetrol Group’s strategic focuses.
Fixed compensation for the President of Ecopetrol in 2022 was 7.9 times the average fixed compensation of a company worker, and a general 7.32% wage increase was paidto all workers.