Comparison of CVRD's corporate governance practices with the New by few71840

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									      Comparison of CVRD’s corporate governance practices with the New York Stock
        Exchange corporate governance requirements applicable to U.S. companies
         Under the rules of the New York Stock Exchange (“NYSE”), foreign private issuers are subject to a more
limited set of corporate governance requirements than U.S. domestic issuers. As a foreign private issuer, CVRD
must comply with four principal NYSE corporate governance rules: (1) CVRD must satisfy the requirements of
Exchange Act Rule 10A-3; (2) CVRD’s Chief Executive Officer must promptly notify the NYSE in writing after
any executive officer becomes aware of any material non-compliance with the applicable NYSE corporate
governance rules; (3) CVRD must provide the NYSE with annual and interim written affirmations as required under
the NYSE corporate governance rules; and (4) CVRD must provide a brief description of any significant differences
between its corporate governance practices and those followed by U.S. companies under NYSE listing standards.
The table below briefly describes the significant differences between CVRD’s domestic practice and the NYSE
corporate governance rules.


Section        NYSE Corporate Governance Rule for               CVRD’s Approach
               U.S. Domestic Issuers

303A.01        A listed company must have a majority of         CVRD is a controlled company because more
               independent directors.                           than a majority of its voting power is
                                                                controlled by Valepar S.A. (“Valepar”). As a
               “Controlled companies” are not required to
                                                                controlled company, CVRD would not be
               comply with this requirement.
                                                                required to comply with the majority of
                                                                independent directors requirements if it were a
                                                                U.S. domestic issuer. There is no legal
                                                                provision or policy that requires CVRD to
                                                                have independent directors.


303A.03        The non-management directors of a listed         The non-management directors of CVRD do
               company must meet at regularly scheduled         not meet at regularly scheduled executive
               executive sessions without management.           sessions without management.


303A.04        A listed company must have a                     CVRD’s Governance and Sustainability
               Nominating/Corporate Governance                  Committee is an advisory committee to the
               Committee composed entirely of independent       Board of Directors. It has three members, one
               directors, with a written charter that covers    of whom is a director. According to its
               certain minimum specified duties.                charter, this committee is responsible for:
               “Controlled companies” are not required to       •   evaluating the effectiveness of, and
               comply with this requirement.                        proposing improvements to, CVRD’s
                                                                    corporate governance practices and the
                                                                    functioning of the Board of Directors;
                                                                •   recommending improvements to the code
                                                                    of ethics and management’s systems in
                                                                    order to avoid conflicts of interest
                                                                    between the company and its shareholders
                                                                    or management;
                                                                •   reporting on potential conflicts of interest
                                                                    between CVRD and its shareholders or
                                                                    management; and


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                                                               •   issuing reports on other matters relating to
                                                                   corporate governance and sustainability
                                                                   that are submitted for its review.
                                                               Moreover, the committee’s charter requires at
                                                               least one of its members to be independent.
                                                               For this purpose, an independent member is a
                                                               person who:
                                                               • does not have any current relationship with
                                                                 CVRD other than being part of a
                                                                 committee, or being a shareholder of the
                                                                 Company;
                                                               • does not participate, directly or indirectly,
                                                                 in the sales efforts or provision of services
                                                                 by CVRD;
                                                               • is not a representative of the controlling
                                                                 shareholders;
                                                               • has not been an employee of the controlling
                                                                 shareholder or of entities affiliated with a
                                                                 controlling shareholder;
                                                               • has not been an executive officer of the
                                                                 controlling shareholder.
                                                               CVRD does not have a nominating committee.
                                                               All but one of the members of the Board of
                                                               Directors are nominated by Valepar, CVRD’s
                                                               controlling shareholder.
                                                               As a controlled company, CVRD would not be
                                                               required      to      comply      with       the
                                                               nominating/corporate governance committee
                                                               requirements if it were a U.S. domestic issuer.


303A.05        A listed company must have a compensation       CVRD’s Executive Development Committee is
               committee composed entirely of independent      an advisory committee to the Board of
               directors, with a written charter that covers   Directors. It has four members, three of whom
               certain minimum specified duties.               are directors. According to its charter, this
                                                               committee is responsible for:
               “Controlled companies” are not required to
               comply with this requirement.                   • reporting on general human resources
                                                                 policies submitted by the CVRD’s
                                                                 executive officers to the Board of
                                                                 Directors;
                                                               • analyzing and reporting on the adequacy of
                                                                 compensation levels for CVRD’s executive
                                                                 officers;
                                                               • proposing and updating guidelines for
                                                                 evaluating the performance of CVRD’s
                                                                 executive officers;
                                                               • reporting on policies relating to
                                                                 institutional responsibility, such as
                                                                 environmental, health, safety and social
                                                                 responsibility reports submitted by the
                                                                 executive officers; and
                                                               • other    matters    relating   to   executive


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                                                                development submitted for its review.
                                                             Under the committee’s charter, at least one of
                                                             its members is required to be independent, as
                                                             defined above.
                                                             As a controlled company, CVRD would not be
                                                             required to comply with the compensation
                                                             committee requirements if it were a U.S.
                                                             domestic issuer.
303A.06        A listed company must have an audit           In lieu of appointing an audit committee
               committee with a minimum of three             composed of independent members of the
303A.07
               independent directors that satisfy the        Board of Directors, CVRD has established a
               independence requirements of Rule 10A-3       permanent conselho fiscal, or fiscal council, in
               under the Exchange Act, with a written        accordance with the applicable provisions of
               charter that covers certain minimum           the Brazilian Corporate Law and provided the
               specified duties.                             fiscal council with additional powers to permit
                                                             it to meet the requirements of Exchange Act
                                                             Rule 10A-3(c)(3).

                                                             The fiscal council currently has four members.
                                                             Under the Brazilian Corporate Law, which
                                                             provides standards for the independence of the
                                                             fiscal council from CVRD and its
                                                             management, none of the members of the
                                                             fiscal council may be members of the Board of
                                                             Directors. The fiscal council is not elected by
                                                             management and none of its members are
                                                             executive officers of CVRD.

                                                             The responsibilities of the fiscal council are set
                                                             forth in its charter. CVRD’s bylaws require
                                                             the fiscal council’s charter, at a minimum, to
                                                             give the fiscal council responsibility for the
                                                             matters required under the Brazilian Corporate
                                                             Law as well as responsibility for:

                                                                  •    establishing procedures for the
                                                                       receipt, retention and treatment of
                                                                       complaints and concerns regarding
                                                                       accounting, internal controls and
                                                                       auditing matters as well as
                                                                       procedures      for  ensuring   the
                                                                       confidentiality and anonymity of
                                                                       persons submitting such complaints
                                                                       and concerns;
                                                                 •    making recommendations to the
                                                                      Board of Directors regarding the
                                                                      selection, remuneration and dismissal
                                                                      of the external auditors;
                                                                 •    deciding which new services may be
                                                                      provided by the external auditors;
                                                                 •    supervising and evaluating the work
                                                                      of the external auditors, including
                                                                      possibly directing management to
                                                                      withhold payment of the external
                                                                      auditor’s fees; and
                                                                 •    resolving       disputes        between


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                                                                        management and the external auditors
                                                                        regarding    CVRD’s        financial
                                                                        statements.
303A.08        Shareholders must be given the opportunity      Under the Brazilian Corporate Law,
               to vote on all equity-compensation plans and    shareholder pre-approval is required for the
               material revisions thereto, with limited        adoption of any equity compensation plans.
               exemptions set forth in the NYSE rules.
303A.09        A listed company must adopt and disclose        CVRD does not have formal corporate
               corporate governance guidelines that cover      governance guidelines that address all of the
               certain minimum specified subjects.             matters specified in the NYSE rules.


303A.10        A listed company must adopt and disclose a      CVRD has adopted a formal code of ethics that
               code of business conduct and ethics for         applies to its directors, officers and employees.
               directors, officers and employees, and
                                                               CVRD reports each year under Item 16B of
               promptly disclose any waivers of the code for
                                                               our annual report on Form 20-F any waivers of
               directors or executive officers.
                                                               the code of ethics in favor of our chief
                                                               executive officer, chief financial officer, chief
                                                               accounting officer or controller. CVRD’s code
                                                               of ethics has a scope that is similar, but not
                                                               identical, to that required for a U.S. domestic
                                                               company under the NYSE rules.
                                                               CVRD has also adopted a specific code of
                                                               ethics that applies to employees in its
                                                               corporate finance, investor relations and
                                                               accounting departments.


303A.12        Each listed company CEO must certify to the     CVRD’s CEO will promptly notify the NYSE
               NYSE each year that he or she is not aware      in writing after any executive officer of CVRD
               of any violation by the company of NYSE         becomes aware of any material non-
               corporate governance listing standards.         compliance with any applicable provisions of
                                                               the NYSE corporate governance rules.




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