Comparison between Local and NYSE Corporate Governance Practices

Among the corporate governance principles that are applicable at Pampa Energía S.A. are several provisions of Argentine law, including, but without limitation: (i) the Argentine Business Organizations Law, No. 19,550, as amended (the ‘ABOL’); (ii) the Capital Markets Act No. 26,831 (the ‘CMA’); and (iii) the regulations of the Argentine Securities and Exchange Commission (‘CNV’) approved on September 5, 2013 (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 its 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 I, indicate the criteria for establishing independence of a director. They provide that any director who does any of the following is not independent: (i) Is a member of the board of directors of or employee of any of the shareholders with material holdings in the company (under Argentine law, a “material holding” is defined as any shareholding equivalent to at least 15% of a company’s capital stock) or of other companies whose shareholders have direct or indirect material holdings; (ii) works at the company in an employment relationship or worked in an employment relationship at any time in the past 3 years; (iii) performs professional services or belongs to a company or professional association that provides such services to the company or its shareholders with material holdings; (iv) directly or indirectly has a material holding in the company; (v) directly or indirectly sells or supplies goods or services to the company and/or its direct or indirect shareholders with material holdings; (vi) is spouse, relative to the fourth degree of consanguinity, or relative to the second degree of affinity of any individuals who would qualify as non-independent if they were members of the management body.

In addition, Article 4 of Section III, Chapter I, Title 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.

On April, 16, 2018, the CNV issued Resolution No. 730, which modifies the criteria to determine if a director for the board of directors of companies under public regime shall not be considered independent. Companies under the control of the CNV have to adequate the composition of its board to this new criteria once the annual Shareholder Meeting for the year 2018 is held (see 20-F “Item 6. Directors, Senior Management and Employees—Independence of the Members of Our Board of Directors”.)

NYSE LCM: Section 303A.03
This rule requires regularly scheduled meetings of non-executive directors to increase the involvement and efficiency of such director. 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. Notwithstanding the aforementioned, our by-law in article 20 thereof, set forth that the board meetings must be held at least once a month.
NYSE LCM: Section 303A.04
Listed companies must organize an Appointment 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.

We have determined not to organize an Appointment and Corporate Governance Committee because its functions are already covered by the Audit Committee. Additionally and with respect to corporate governance matters, the Legal and Compliance Corporate Department of Pampa Energía S.A. oversees this area.

NYSE LCM: Section 303A.05
Listed companies must organize a Compensation Committee composed entirely of independent directors. The organization of a Compensation Committee is not mandatory under Argentine law. In most cases, 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.
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 Energía S.A., 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 3 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 obligations 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.

Article 109 of the CMA and Article 16, Section 5, Chapter III, Title II of the CNV Regulations provide that the audit committee must have at least 3 board members, the majority of whom must qualify as independent. All the members of our audit committee qualify as independent.

Argentine law does not require the audit committee to issue its own regulations. The scope of the committee’s powers and obligations is detailed in Article 110 of the CMA and Article 17 and following sections of Section 5, Chapter III, Title 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 its own written regulations, adopted by the shareholders’ meeting.

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, in 2010 Pampa hired, as a new staff member, a professional to perform the duties of an internal auditor who is supervised by, and reports to, Pampa’s Audit Committee. Additionally, Pampa’s internal auditor relies on the aid of Abelovich, Polano y Asociados, the professional services firm that performs the field work in terms of internal controls. 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 director approved the creation of stock-based compensation plan in accordance with Section 64 et al. of Law No. 26.831 and CNV rules (see 20-F “Item 6. Directors, Senior Management and Employees—Compensation Plans”.)
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, either fully or in part, 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 fully disclose all 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, managers 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 Energía S.A. and of its controlled and related companies and subsidiaries. This Code is applicable to all directors and statutory auditors of Pampa Energía S.A. and its controlled and related companies and subsidiaries, as well as to their suppliers and consultants. Additionally, in 2010, Pampa’s Management Committee 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.

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 standards.

Additionally, the CEO must report any default or violation of the corporate governance standards contained in the NYSE LCM by any of the company’s executives to the NYSE immediately.

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 Energía S.A., as a foreign private issuer, is subject to Section 303A.12, with the exception of the annual CEO certification. Pampa Energía S.A. is in full compliance with the applicable provisions.