Zhongzhi Vision | Corporate Governance of LyondellBasell Industries and Lessons Learned

IV. Implications for Corporate Governance of State-Owned Energy and Chemical Enterprises in China As a global leader in the chemical industry, LyondellBasell’s corporate governance practices offer valuable insights and reference points for state-owned energy and chemical enterprises in China—particularly regarding the full establishment and strengthening of boards of directors, such as instituting mechanisms for director selection and development, risk prevention and control by the board, and regular board evaluation. (1) Emphasizing the Establishment of Director Selection and Development Mechanisms to Ensure Effective Director Performance The appointment and composition of board members constitute one of the most critical prerequisites for fully staffing and strengthening the board of directors in state-owned enterprises. Directors with strong political integrity, robust professional competence, and extensive management experience serve as a vital foundation for scientifically informed decision-making by the boards of state-owned energy and chemical enterprises. Regarding director appointment, greater attention could be paid to directors’ length of service within the company; term limits could be relaxed to ensure relative stability in board composition over a given period. This continuity enables directors to develop a deep understanding of the company’s core operations and key challenges—thereby laying the groundwork for scientific, targeted, and effective board decisions. Moreover, for newly appointed directors, pre-appointment training frequency could be increased. A variety of approaches—including joint internal and external expert instruction, on-site research visits, and thematic seminars—could be explored to familiarize directors with the enterprise’s strategic plans, corporate regulations, and relevant policy documents. Directors should also be encouraged to pursue self-improvement through in-depth study in areas such as corporate strategy, corporate governance, risk prevention, and HSE (Health, Safety, and Environment) management. Financial subsidies for directors’ participation in training programs would further enhance their professional management capabilities and optimize the overall composition of the board. (2) Clarifying Risk Management Responsibilities of the Board and Strengthening Communication with the Management Team Per the Interim Rules for the Work of Boards of Directors of Central SOEs, boards must promote the improvement of enterprise risk management systems, internal control systems, compliance management systems, and accountability mechanisms for non-compliant business investments—effectively identifying, assessing, preventing, and mitigating major risks. For state-owned energy and chemical enterprises, safety, environmental, and compliance risk management are paramount. To better implement the board’s “risk prevention” responsibilities, LyondellBasell’s practices provide useful reference. First, clearly define the respective risk management responsibilities of each specialized board committee—delegating oversight functions related to corporate governance, auditing, compensation, safety, finance, and other domains to the corresponding committees to enable more professional and effective decision support and supervision. Second, proactively engage in enterprise risk management activities and external consultant-led risk management workshops, and maintain regular communication with the enterprise’s management team to timely identify, review, and address key risks—thus reinforcing the enterprise’s risk defense system for healthy and sustainable development. (3) Prioritizing Board Effectiveness Evaluation to Strengthen Oversight of Board Construction and Operational Quality Board effectiveness evaluation is a crucial step in ensuring that boards function substantively. Key questions include whether the board truly plays a substantive role in decision-making and whether it collaborates effectively with other governance bodies—both essential to achieving boards that are both structurally sound and functionally robust. For state-owned energy and chemical enterprises in China, board evaluation processes could be further optimized institutionally, procedurally, and substantively. A formal board evaluation system should be established, specifying evaluation cycles, organizational methods, implementation procedures, and other elements—ultimately forming a comprehensive board effectiveness evaluation framework and establishing a long-term, sustainable evaluation mechanism.

Executive Compensation and Incentive Mechanism Design?

1. Annual Salary: Fixed cash compensation paid by the company over a one-year period. Base salary is typically disbursed at the beginning of the year. 2. Annual Bonus: Additional cash rewards granted to executives when the company’s annual performance exceeds predetermined financial and non-financial targets. The bonus amount is usually expressed as a percentage of base salary, bounded by a company-guaranteed minimum and a stipulated maximum. 3. Stock Options: The right to purchase or sell company stock at a specified exercise price on or before a future date. The exercise price is generally set equal to the stock price on the grant date. Stock options typically carry vesting conditions (e.g., executives may exercise 25% of their options annually over four years) and expire after ten years (seven years being the second most common expiration period). Some companies impose additional requirements—for instance, mandating that executives “hold until retirement” or “continue holding post-retirement.” These features foster long-term equity-based incentives, aligning executive interests with those of shareholders. 4. Restricted Stock: Shares directly awarded to executives but subject to transfer restrictions and contingent upon continued employment. Once granted, the economic value of restricted stock equals that of a direct investment in the company’s shares. 5. Performance Shares (or Units): Awards—either in shares or cash—that are granted only if executives achieve specified financial and non-financial goals over a three- to five-year period.

Kamsky Receives 720 Shares Instead of Cash for Quarterly Director Pay at LyondellBasell (LYB)

Oct 3, 2026

LyondellBasell director Virginia A. Kamsky elected to receive 720 Class A ordinary shares instead of cash for her quarterly retainer, based on an average price of $61.22. The filing also disclosed tax withholdings and 2,321 restricted stock units vesting in May 2027.

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