Annual Report 2010

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CORPORATE GOVERNANCE REPORT 2010 Evaluation of the Board’s Work A formal review of the work of the Board was conducted in November 2010 through a questionnaire submitted to all Board members. Several aspects of the Board’s work were considered and individual feedback from all of the Board members was received. The overall conclusions were the following: » Board structure The Board as a whole possesses the right skills and background for addressing issues facing the Company; the composition of the Board and the Board committees is appropriate; the Board committees have clear scopes of responsibilities and charges; there should be no term limits or a ﬁxed retirement policy. » Board meetings The number of Board meetings is appropriate; the meetings are well planned with clear agendas and the Board generally receives adequate materials in advance of the meetings; the meetings are chaired eﬀectively and the time at the meetings is used eﬃciently; the members prepare for meetings and participate constructively; the Board focuses properly on competitive, ﬁnancial and other challenges that the Company faces and is adequately involved in determination of the Company’s strategy; the Board eﬃciently monitors the Company’s operating performance and implementation of the strategy. » Other Information provided between meetings is adequate and timely and the staﬀ and related support to the Board and the committees functions adequately; there is generally suﬃcient time for committee meetings and the committee reports give appropriate information to the Board; new members are oriented and briefed before joining the Board; the CEO performance review is adequate; the Board is well organised to handle a crisis situation; holding Board meetings in various regions in conjunction with site visits is beneﬁcial; the Board focuses on activities that help maximise shareholder value; the Board members are appropriately compensated for their work. The results and conclusions of the review were presented to the Nomination Committee. Remuneration of Board Members The remuneration of the Chairman and other Board members follows the resolution adopted by the AGM. The 2010 AGM decided that the Board shall receive a total compensation equal to SEK 3,500,000. The Chairman was awarded an amount of SEK 800,000 and each other Board member, with the exception of the CEO, an amount of SEK 400,000. The AGM further decided to award SEK 100,000 for each Board committee assignment, however, limited to a total of SEK 700,000 for committee work. In addition, the 2010 AGM approved an amount of SEK 2,500,000 to be paid to Board members for special assignments outside the directorship. The remuneration of the Board of Directors is detailed further in the schedule on pages 50–51 and in the notes to the ﬁnancial statements – see Note 45 on page 89. BOARD COMMITTEES The Board has established a Compensation Committee, an Audit Committee and a Reserves Committee. The terms of reference of each committee are included in the Rules of Procedure of the Board. Compensation Committee The function of the Compensation Committee is to receive information and prepare the Board’s and the AGM’s decisions on issues concerning the Policy on Remuneration and compensation of the CEO and the management of the Company. The objective of the Committee in determining compensation for management is to provide a compensation package that is competitive and motivating, will attract and retain qualiﬁed individuals and will encourage and promote performance. The Committee regularly evaluates the terms of employment of management, taking into account individual performance, responsibilities, length of service and levels of compensation provided by industry companies. The Compensation Committee shall according to the terms of reference be composed of four non-executive Directors and the members during 2010 were William A. Rand, Chairman of the Committee, Lukas H. Lundin, Magnus Unger and Dambisa F. Moyo. All Committee members were independent of the Company and the Group management. William A. Rand has presided the Compensation Committee since its inception in 2002 and thus possesses extensive experience in compensation matters. In addition, considering the varied backgrounds and experience of the Committee members in general, the Compensation Committee has ample knowledge and experience of management remuneration issues. The Compensation Committee held four meetings in 2010. Audit Committee The function of the Audit Committee is to assist the Board in ensuring that the Company’s ﬁnancial reports are prepared in accordance with the Swedish Annual Accounts Act and accounting practices applicable to a company incorporated in Sweden and listed on the NASDAQ OMX Stockholm. The Audit Committee supervises the Company’s ﬁnancial reporting and the eﬃciency of the Company’s internal controls, internal audit and risk management. The Audit Committee reviews, on behalf of the Board, the Company’s quarterly (Quarter 1 and Quarter 3) interim ﬁnancial statements, reviews and makes recommendations to the Board in relation to the Company’s six month and yearly ﬁnancial statements and ensures maintenance of, and compliance with, the Company’s internal control systems. The Audit Committee regularly liaises with the Group’s external auditors as part of the annual audit process and also reviews the audit fees and the auditors’ independence and impartiality. In addition, the Board of Directors meets at least once a year with the auditors without management, including the CEO, present at the meeting. 46 Lundin Petroleum ANNUAL REPORT 2010

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