Annual Report 2010

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CORPORATE GOVERNANCE REPORT 2010 Rand, Lukas H. Lundin, C. Ashley Heppenstall, also CEO of the Company, Asbjørn Larsen and Dambisa F. Moyo were re-elected at the 2010 AGM for the period until the next AGM. There are no deputy members and no members appointed by employee organisations. The Chairman of the Board, Ian H. Lundin, is not employed by the Company, does not receive any salary from the Company and is not eligible for participation in the Company’s incentive programmes. The Chairman is responsible for ensuring that the Board’s work is well organised and conducted in an eﬃcient manner. He further upholds the reporting instructions for management, as drawn up by the CEO and as approved by the Board of Directors, however, he does not take part in the day-to-day decision-making concerning the operations of the Company. All Board members elected at the 2010 AGM have extensive experience from the world of business and several members are also highly experienced within the oil and gas ﬁeld. The Nomination Committee considered, taking into account the business operations of Lundin Petroleum and its current phase of development, that the Board is composed of multi-faceted individuals who are well-suited for the job with breadth in expertise, experience and background. Further, in preparation of the elections at the 2010 AGM, the Nomination Committee considered the independence of each (proposed) Board member and determined that the composition of the Board met the independence requirements of the Code of Governance both in respect of independence towards the Company and the Group management and towards the Company’s major shareholders. For further details hereon, please refer to the schedule on pages 50–51. Board Meetings and Work In its work, the Board is guided by the Rules of Procedure, which set out how the Board is to conduct its work. The Board of Directors generally holds at least ﬁve ordinary meetings per calendar year. At the meetings, the following matters are addressed: » Review and approval of the minutes from the preceding meeting » Report of the CEO regarding: - status of the business - prospects - economic and commercial report - ﬁnancial report » Reports from the committees of the Board of Directors » Items related to decisions (e.g. concerning investments, acquisition and sale of assets, loans and guarantees and structural and organisational matters) » Miscellaneous issues of material importance to the Company During 2010, seven board meetings took place, including the statutory meeting, and a ﬁeld trip to Norway was carried out. In addition, one executive session was held in Malaysia, in connection with a Board meeting, whereby the Board was given the opportunity to interact directly with management, as well as with local staﬀ. At the executive session, an operational up-date and a ﬁnancial overview for the entire Group were presented and a detailed review of the South East Asian assets and operations was given. Members of management further attended a number of Board meetings to present and report on speciﬁc questions, as and when required. The Board’s work in 2010 included strategic discussions on proposed asset disposals and acquisitions, including in respect of the EnQuest and Etrion transactions. The Board considered several management proposals, regarding for example, signiﬁcant drilling rig commitments and development plans to be submitted, and reviewed and discussed the auditors’ report regarding the auditors’ work. The Board continuously monitored the Company’s operations and ﬁnancial position and reviewed and approved the Company’s six month and year end reports. The Board further regularly received updates from management on the 2010 operations and ﬁnancial status and reviewed and approved the 2011 budget and work programme. The Board is also responsible for evaluating the work of the CEO on a continuous basis and shall at least once a year, without management present at the meeting, speciﬁcally consider this issue. In 2010, the Compensation Committee, on behalf of the Board, undertook a review of the work and performance of management, including the CEO, and presented the results thereof at a Board meeting, including proposals regarding the compensation of the CEO and management. Neither the CEO nor other management were present at the Board meetings when such discussions took place. Functions of the Board The Board of Directors’ primary duties are the organisation and management of the Company’s operations and include the following: » Decisions regarding the focus of the business and adoption of Company policies » Decisions regarding supply of capital » Appointment and regular evaluation of the work of the CEO and the management » Approval of the reporting instructions for the management » Ensuring that the Company’s external communications are open, objective and appropriate for target audiences » Ensuring that there is an effective system for follow-up and control of the Company’s operations and financial position vis-à-vis established goals » Monitoring that operations are carried out within established limits in compliance with laws, regulations, stock exchange rules and generally acceptable behaviour in the securities market » Ensuring that the necessary guidelines governing the Company’s ethical conduct are established » Ensuring that the Company’s organisation in respect of accounting, management of funds and the Company’s financial position in general include satisfactory systems of internal control 45

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