Corporate Governance

A decision making process which is transparent and relies on clear and objective rules enhances stakeholders’ confidence in the company. It also contributes to the protection of shareholders’ rights, improving the overall performance of the company, offering better access to capital, and risk mitigation. Petrom has therefore always attached great importance to the principles of good corporate governance and has constantly aimed at adhering to the applicable Code of Corporate Governance.

As of April 2007, our company’s governance has followed the two-tier system, comprising of an Executive Board, which manages the daily operations, and a Supervisory Board elected by the shareholders to act as a monitoring body. The powers and duties of such corporate bodies are detailed in the company’s Articles of Association, available on our website, Corporate Governance Section, and in the relevant internal regulations.

The approval requirements, powers of individual Executive Board members, procedures and the approach to conflicts of interest are governed by the Internal Rules of the Executive Board. The Internal Rules of the Supervisory Board contain detailed procedures for the treatment of conflicts of interest and own account dealing on the part of the members of this corporate body. Other provisions regarding the operation of the two corporate bodies are included in both sets of rules, complementary to those already existing in the Articles of Association. This entire regulatory framework which applies to Petrom’s governance system was revised at the end of 2009 so as to take into consideration the latest developments in domestic and European corporate legislation, but also to address the expiry of some clauses included in the Privatization Agreement of Petrom.

In accordance with the principles of good corporate governance, Petrom is managed in a climate of openness, based on honest discussions between the Executive Board and the Supervisory Board, as well as within each of these corporate bodies. Members of the aforementioned corporate bodies have a duty of care and loyalty towards the company. Hence, the Executive Board and the Supervisory Board pass their resolutions without conflict of interests, as required for the welfare of the company, primarily in consideration of the interests of shareholders and employees.

The Executive Board coordinates the strategic orientation of Petrom with the Supervisory Board and reports to the latter regularly, in a timely and comprehensive manner, about all relevant issues concerning the course of business and strategy implementation. In this context, any deviation from expected performance, as well as circumstances which are of considerable importance for the profitability and liquidity of the company are immediately communicated to the Supervisory Board. As required by the Companies Law, none of the Supervisory Board members holds an executive position in the company. Moreover, some of the Supervisory Board members were identified as meeting the independence criteria of the Companies Law, having no connection with core shareholders.

An Audit Committee comprised of four Supervisory Board members was established to provide assistance to the governing bodies of Petrom in the area of internal control and financial reporting. This committee is in charge of preparing the adoption of the annual accounts and the proposal for profit distribution. Moreover, the committee supervises Petrom’s risk management strategy and its financial performance, and examines the reports of the internal auditors. In line with the Companies Law, the Audit Committee also includes members that have the necessary expertise in the area of financial audit and accounting. Furthermore, at least one of the committee members meets the independence criteria laid down by the Companies Law.

In 2009, the Executive Board held its meetings almost every week in order to exchange essential information about the daily operation of the company and take decisions on all matters requiring its approval. During the reporting period the Supervisory Board met seven times. Additionally, in urgent cases, both the Executive Board and the Supervisory Board took decisions by circulation, without an actual meeting being held. Three meetings of the Audit Committee were held during the year under review.

Rights of the company’s minority shareholders are properly protected according to the relevant domestic legislation. Hence, an extraordinary general meeting must be convened at the request of shareholders holding at least 5% of the shares. Such shareholders can also submit resolutions to the general meeting. All duly registered shareholders are entitled to attend general meetings in person or by proxy representation and vote during the actual meeting or by correspondence. Petrom actively promotes the participation of its shareholders in the general meetings as they are invited to raise questions concerning items to be debated during such meetings.

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