Petrobras - 2009 Sustainability Report

Board of Directors

The Board of Directors is responsible for guiding and giving direction to P etrobras. This includes setting the general direction of the company’s business, defining its mission, strategic objectives and guidelines; approving the strategic plan, the pluriannual plans and the annual expenditure and investment programs; assessing performance results; setting the company’s overall policies, including those for strategic trade, financial, investment, environment, and human resources management, among other assignments.

Composed by nine members, the board has seven controlling shareholder representatives, one representative from the minority common stock shareholders, and one representative from the preferred stock holders. Pursuant to the Corporate Governance Guidelines, the positions of chairman of the Board and CEO of Petrobras should not be held by the same person in order to promote the independence of the Board. The only councillor who can perform such executive roles is the company’s CEO.

The members of the senior management are employees who are appointed by shareholders and, therefore, are in accordance with internal policies, which define fixed monthly salaries without variations related to Petrobras’ performance. Among the qualifications and experience expected of the members, are alignment with the company’s values, knowledge of the best corporate governance practices, knowledge of finance and accounting, expertise in the energy sector, familiarity with the domestic and international markets, and strategic vision, among other requirements.

To avoid conflicts of interest, the members of the board are elected with no interference from the Executive Board, they follow the Good Practice Code dealing with issues related to insider trading (such as a ban on trading in securities in certain periods) and to the conduct of Petrobras Senior Management’s managers and employees. One of the Board’s principles is to monitor and manage potential conflicts of interest among stockholders, its members and managers. Furthermore, it must assess its own performance annually, based on criteria it defines and aiming to improve its performance. The Board must also assess the performance of Petrobras’ CEO and officers to ensure the alignment of the interests of the members of the Executive Board with the shareholders’ long-term interests.

Learn more about the members of the Board of Directors and of the Executive Board at www.petrobras.com.

Board Advisory Committees

The Board of Directors has committees that are formed solely of directors to assist it with analyses and recommendations on matters that require more time than is available during the meetings. The Audit Committee, for example, monitors and evaluates the activities of the Internal and Independent Auditors, contributes to the company’s financial statements being prepared in accordance with legal requirements, monitors the financial statement preparation process and the process of improving the internal control systems. There are also two other advisory committees: the Remuneration and Succession Committee, and the Environmental Committee.

In addition to these committees, a corporate governance advisory committee composed of nonmembers of the board follows-up on and monitors the legislation and other relevant regulations, reviewing the adequacy and application of the governance instruments the company uses.

Audit Committee

The Audit Committee is composed of five members and their substitutes and is responsible for monitoring the company’s management and reviewing the activities report and the financial statements, among other assignments. As required by Brazilian law, the Audit Committee is independent from the management and external Petrobras auditors.

General Ombudsman’s Office

The General Ombudsman’s Office is connected to the Board of Directors and serves as the official channel to receive opinions, suggestions, criticism, complaints and denunciations from the company’s stakeholders. Based on this information, it undertakes actions to deal with them and define the measures to be taken. The Ombudsman’s Office meets the requirements of the Sarbanes-Oxley Act, including receiving, through the Denunciation Channel, reports of irregularities or fraud in accounting, internal controls or internal and external audits, ensuring the anonymity of any member of our workforce and, as such, avoiding retaliation.

Audits

The Internal Audit plans, executes and assesses the internal audit activities and meets the demands of the Senior Management and of the external control bodies. The company also has an Independent Auditor, and restrictions are imposed on it regarding the provision of consulting services. This Auditor is defined by the Board of Directors and must be replaced every five years.

Executive Board

Elected by the Board of Directors, the Executive Board comprises a CEO of Petrobras (also a councilor) and up to six officers, who are responsible for managing the company’s Finance, Services, and Business areas. In the selection and election of executive directors, their professional competence, outstanding knowledge, and expertise in their respective areas of contact are taken into account.

Board Advisory Committees

Seeking to promote alignment among business development, company management, and the Strategic Plan’s guidelines, the Business Committee assists the Senior Management’s decision-making process. Its performance includes analyzing relevant issues and recommending actions to be undertaken by specific company areas, as well as discussing, formulating, and proposing the guidelines to be applied in several areas. This committee is composed by the CEO, the officers, the managing directors, the CEO of Petrobras Distribuidora, and the holder of the Corporate Strategy organizational unit.

Additionally, there are 12 management committees which discuss and further detail issues to structure the information to be submitted to the Business Committee. They act in coordination and in an integrated and complementary manner with the Business Committee, with the other management committees, and with the Board of Directors’ Committees. Petrobras also has the Downstream, Organization and Management Analysis, Internal Controls, E&P, Gas & Energy, Marketing & Brand, Social Responsibility, HR , Risk, HSE, Information Technology, and Petrobras Technology management committees.

The Ethics Commission is connected to the CEO and consists of seven members appointed by the Executive Board. It seeks to promote ethics management at Petrobras and one of its functions is to propose the creation or the updating of company standards focused on improving ethical management. Using these standards as a parameter, it advises the Board when making decisions regarding the breach of the Code of Ethics. It also oversees the observance of the Code of Conduct of the High Federal Administration and notifies the Commission of Public Ethics about situations that may constitute breaches of its rules.