Comparison between Local and NYSE Practices
Among the corporate governance principles that are applicable at Pampa Energía S.A. (‘Pampa’ or the ‘Company’) are several provisions of Argentine law, including, but without limitation: (i) the Argentine Organizations Law, No. 19,550, as amended (the ‘ABOL’); (ii) the Capital Markets Act, as amended (the ‘CMA’); and (iii) the regulations of the Argentine Securities and Exchange Commission (‘CNV’) approved on 2013, as amended (the ‘Regulations’).
In addition, we follow certain corporate governance guidelines and practices that prevail in the international markets and in international regulations applicable to us (sometimes mandatory), including United States law. On August 27, 2009, we registered with the Securities and Exchange Commission (‘SEC’) as a ‘foreign private issuer’ and began to trade American Depositary Shares on the New York Stock Exchange (‘NYSE’).
Thus, we are subject to the provisions of Section 303A.11 of the NYSE’s Listed Company Manual (‘LCM’) and Item 16.G of Form 20-F of the SEC, which require foreign issuers to disclose the differences existing between their corporate governance practices and the corporate governance requirements for U.S. domestic companies under their applicable listing standards. The following table provides the comparison required under the aforementioned Section 303A.11 of the NYSE LCM and Item 16.G of the SEC’s Form 20-F:
|NYSE Requirements for Domestic Companies||Requirements and Our Practices|
|NYSE LCM: Section 303A.01|
|Independent directors must constitute the majority of a listed company’s board of directors.||Under Argentine law, the board of directors of a listed company need not be composed of a majority of independent directors. Nonetheless, the CMA and the CNV’s Regulations require listed companies to have a sufficient number of independent directors to form the audit committee, which must be composed of a majority of independent members.
Although not required by Argentine law, and in accordance with our audit committee’s regulations, all the members of our audit committee must qualify as independent.
|NYSE LCM: Section 303A.02|
|This rule establishes the standards that determine whether a director qualifies as independent.
It provides that directors cannot qualify as independent unless the board of directors finds them to have no material relationship with the listed company. A number of per se exclusions from independence apply, generally triggered by having a connection, individually or through an immediate family member, to the listed company or to a company that has a material relationship with the listed company as a shareholder, employee, officer, or director of the listed company.
|The CNV’s Regulations, specifically Article 11 of Section III, Chapter III, Title II, indicate the criteria for establishing independence of a director. They provide that any director who does any of the following is not independent: (i) has been a member of the management body for the controlling entity or another company belonging to the same economic group of the issuer by a preexistent relationship to the moment of his/her election, or if said relationship had ceased to exist during the previous three years; (ii) is associated to the issuer or any of its shareholders that have significant participation, directly or indirectly, with the issuer; or with companies with which they have significant participation, directly or indirectly; or if he/she was associated to them by an employment relationship for the past three years; (iii) has professional relationships or is affiliated to a professional organization or entity that maintains a frequent professional relationship of such nature and of relevant volume with, or that entitles him or she to a remuneration or fees (different from those corresponding to the functions that he/she fulfills in the management body), from the issuer, the issuer’s shareholders that have directly or indirectly “significant participation” or with companies in which these too have, directly or indirectly, “significant participation”. This prohibition comprises the professional relationships and affiliation during the last three years prior to the appointment as director; (iv) holds 5% or more, directly or indirectly, of shares attached with voting rights and/or capital stock of the issuer or any company with a “significant participation” in it; (v) directly or indirectly, sells and/or provides goods and/or services – different from those accounted for in subsection iii) – frequently and in such nature and volume relevant to the issuer or its shareholders that have a “significant participation” with it, directly or indirectly, for which he or she has perceived amounts substantially superior to those perceived for his or her functions as a member of the management body. This prohibition comprises the commercial relationships that took place during the last three years prior to his/her appointment as director; (vi) has been director, manager, administrator or principal executive of nonprofit organizations that have been benefited from funds proceeding from the company, its controlling company and any other company belonging to the same organization, by an amount superior to those described in article 12 subsection I) of the Resolution UIF Nº 30/2011 and its amendments thereto; (vii) receives any payment, including the participation in plans or stock option schemes, from the company or from another company belonging to the same economic group, other than the compensation paid as a member of the board of directors, except dividends paid as a shareholder of the company in the terms of paragraph iv) and the corresponding to the consideration described in paragraph v); (viii) has been a director for the issuer, the controlling entity or another company belonging to the same economic group of the issuer for more than ten years. If said relationship had ceased to exist during the previous three years, the independent condition will be recovered; (ix) is spouse or a legally recognized partner, up to the third grade of consanguinity or second grade of affinity, of the members of the management body of the company that do not comply with the conditions described in the previous points; (x) is a member of the board of directors or supervisory committee in one or more companies registered as Agente de Negociación, Agente de Liquidación y Compensación and/or Agente de Corretaje de Valores Negociables, which are members of the respective stock exchange market or depend on members of such stock exchange market; and (xi) directly or indirectly, maintains a significant participation in one or more companies registered as Agente de Negociación, Agente de Liquidación y Compensación y/o Agente de Corretaje de Valores Negociables, which are members of the stock exchange market.
In addition, Section 4 of Title III, Chapter I, Part XII of the CNV’s Regulations provides that at each election of directors, the non-independence or independence of any candidates proposed at the shareholders’ meeting must be disclosed. Moreover, after the shareholders’ meeting in which directors are appointed, the personal data of the appointed directors and their qualification as independent or non-independent (in the latter case in the form of an affidavit executed by each director) must be disclosed to the CNV and the exchanges where the company has its securities listed.
|NYSE LCM: Section 303A.03|
|This rule requires regularly scheduled meetings of non-executive management to increase the involvement and efficiency of such directors.||Argentine law does not require that non-executive directors hold separate meetings. Non-executive directors attend the general board meetings, which must be held at least every three months pursuant to Section 267 of the ABOL.|
|NYSE LCM: Section 303A.04|
|Listed companies must organize a Nomination and Corporate Governance Committee composed entirely of independent directors.||The organization of an Appointment and Corporate Governance Committee is not mandatory. In most cases, the functions of such committee are functions that the Audit Committee is already required to perform. Nonetheless, the CNV’s Regulations suggest (among its non-binding recommendations) that an Appointment and Corporate Governance Committee be organized.
Pampa has a Nomination Committee, whose president must be an independent member of the Board of Directors. Additionally, and with respect to corporate governance matters, the Legal Corporate Department of Pampa oversees this area.
|NYSE LCM: Section 303A.05|
|Listed companies must organize a Compensation Committee composed entirely of independent directors, which satisfy additional independence requirements specific to Compensation Committee membership.||The organization of a Compensation Committee is not mandatory under Argentine law. In most cases, some of the functions of such a committee are included in the functions that the Audit Committee is required to perform. However, the CNV’s Regulations suggest (among its non-binding recommendations) that a Compensation Committee be organized.
Pampa has a Compensation Committee that is currently composed entirely of independent directors.
|NYSE LCM: Section 303A.06|
|Listed companies must organize an Audit Committee that meets the requirements set forth in the Securities Exchange Act of 1934.||Pursuant to Section 303A.00, Pampa, as a foreign private issuer, is subject to Rule 303A.06, and we are in full compliance.|
|NYSE LCM: Section 303A.07|
|The Audit Committee must have at least three members, all of whom must qualify as independent.
In addition, the audit committee must have written regulations establishing: (i) the purpose of the committee; (ii) the annual assessment of the committee’s performance; and (iii) the committee’s duties and responsibilities.
Finally, the rule establishes that listed companies must have internal audit functions within their organization in order to assist both the audit committee and the company’s management in matters related to risk and internal control processes.
|Section 109 of the CMA and Section 16, Title 5, Chapter III, Part II of the CNV Regulations provide that the audit committee must have at least three board members, the majority of whom must qualify as independent. All the members of our audit committee qualify as independent.
Argentine law requires the audit committee to issue its own regulations. The scope of the committee’s powers and obligations is detailed in Section 110 of the CMA and Section 17 and following sections of Title 5, Chapter III, Part II, of the CNV’s Regulations. Such obligations and responsibilities are similar to those attributed to this body under the U.S. law.
Our audit committee has approved its own written regulations.
Argentine law does not require the audit committee to conduct an annual self-assessment. However, the CNV’s Regulations recommend that all directors (i.e., not only the independent directors who are members of the audit committee) complete a self-assessment.
We have adopted this recommendation and have developed a self-assessment form to be completed by all our directors at the close of each fiscal year.
Argentine laws contain no rules regarding internal audit functions. However, Pampa has an internal audit department that is supervised by, and reports to, Pampa’s Audit Committee. Additionally, Pampa’s audit committee regularly reviews, during its meetings, the internal audit reports submitted to it.
|NYSE LCM: Section 303A.08|
|The shareholders must be given the opportunity to vote on equity-compensation plans and their material revisions, although there are exceptions to this requirement, such as when these compensation plans serve as labor incentive tools.||Directors’ compensation is fixed at the ordinary shareholders’ meeting (Section 234, Subsection 2, of the ABOL). That compensation is for national currency cash. With the aim of aligning personnel performance, on February 8, 2017, Pampa’s Board of Directors approved the creation of stock-based compensation plan in accordance with Section 64 of CMA and CNV’s regulations. See 20-F “Item 6. Directors, Senior Management and Employees—Stock-Based Compensation Plan”.|
|NYSE LCM: Section 303A.09|
|Listed companies must adopt and disclose their corporate governance guidelines.||Listed companies must meet the annual disclosure requirements of the CNV’s Regulations. Listed companies must issue a report stating whether and how they followed the recommendations provided by the CNV’s Regulations or explaining the reasons for their failure to adopt such recommendations, and/or whether they plan to adopt them in the future. This information must appear in their annual report, attached to the financial statements for the relevant fiscal year as a separate exhibit. Once filed with the CNV and the exchanges where the company is listed, the CNV’s Regulations report qualifies as public information.
We comply with the CNV’s Regulations annual disclosure requirements and disclose our corporate governance policies and practices. This information may be viewed on the Company’s website, www.pampaenergia.com.
|NYSE LCM: Section 303A.10|
|Listed companies must adopt and disclose to the market a Code of Ethics and Business Conduct which is applicable to their directors, officers and employees. In addition, any waiver of the provisions contained in this Code in favor of any of the parties that are subject to it must be immediately disclosed.||Under Argentine law there is no requirement that listed companies adopt a Code of Ethics and Business Conduct.
Nonetheless, in 2008, our Board of Directors approved a Code of Business Conduct applicable to all the employees, interns and trainees of Pampa and of its controlled and related companies and subsidiaries. This Code is applicable to all directors and statutory auditors of Pampa and its controlled and related companies and subsidiaries, as well as to their suppliers and consultants. Additionally, in 2010, Pampa approved the implementation of the Ethics Hotline as a channel to be solely used for reporting, in the strictest confidentiality, any presumed irregularity concerning the Business Conduct Code and/or violations thereof. In 2021, our Board updated the Code of Conduct.
|NYSE LCM: Section 303A.12|
|The Chief Executive Officer (CEO) of a listed company must certify on a yearly basis that he or she has no knowledge of any violation or default of the corporate governance listing standards.
Additionally, the CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any non-compliance with any provision of the governance listing standards.
Finally, listed companies must file an annual statement and updated reports with the NYSE disclosing any changes in the composition of their board of directors or any of the committees described in Section 302A of the NYSE LCM.
|Pursuant to Section 303A.00, Pampa, as a foreign private issuer, is subject to Section 303A.12, with the exception of the annual CEO certification. Pampa is in full compliance with the applicable provisions.|