2013 Annual Report

nder CORPORATE GOVERNANCE directing and supervising the performance of the Executive Board which, in turn, is in charge of managing the Bank activities. These bodies are in charge of approving and/or updating the Organizational Principles such as Mission; it also defines strategies, policies and goals in economic, social and environmental topics. G4-42 G4-45 G4-46 Corporate Governance / Santander Brazil Structure General Shareholders' Meeting 5 COMMITTEES UNDER THE BOARD OF DIRECTORS Encontro com Acionistas Santander Seja bem vindo. Santander Executive vice-president Carlos Galán during a presentation to shareholders 100 % TAG ALONG RIGHTS TO MINORITY SHAREHOLDERS STRONG GOVERNANCE Good governance practices are key to ensure both smooth operations and business survival in the long run. As a global company, the adherence to good business practices in Corporate Governance is key to ensure smooth operations and business survival in the long run, while catering to shareholder needs. This is the reason why Santander Brazil abides by a set of legal and voluntary practices recognized as benchmarks by the market. Among them are the recommendations issued by the Instituto Brasileiro de Governança Corporativa (IBGC) and the Level 2 requirements on BM&FBOVESPA(1). As an example, the Bank provides 100% tag along rights to minority shareholders; the positions of CEO and Chairman cannot be held simultaneously by the same person; the Bank appointed three Independent Directors who currently represent 37.5% of the members in the Board of Directors; the Board of Directors is requested to provide their opinion on material topics; and has in place four Committees reporting to the Board of Directors. G4-39 G4-41 The Bank's Corporate Governance structure relies on two main bodies: the Board of Directors and the Executive Board. The first is the main decision making body of the Bank and represents the shareholders; it is responsible for both Board of Directors Members: 8 members, 3 of which are independent members Audit Committee Members: 4 independent members Compensation and Appointment Committee Members: 3 independent members Risk Committee Members: 3 members, 2 of which are independent members Governance and Sustainability Committee Members: 5 members, 4 of which are independent members 1. The Executive Board is supported by 8 non- statutory Committees: Financial Committee, Human Resources Committee, Facility Management Committee, Regulations and Standards Committee, Business Committee and Quality Committee The aim is to ensure that decision-making by the Executive Board complies with the guidelines and aspirations of the organization in a consistent and transparent manner. Executive Committee Members: CEO, Senior Executive Vice-Presidents, and Executive Vice-Presidents The Executive Board (1) Members: CEO, Senior Executive Vice-Presidents and Executive Vice-Presidents, Executive Directors and Directors with no specific designation. ד THE ORIGIN OF GOOD GOVERNANCE Conceptually, Corporate Governance was created to overcome potential "agency conflicts" between a firm's ownership and management. Under the circumstances the owners (shareholders) delegates the power to make decisions involving owners' assets to specialists (officers). However, management interests are not always aligned with the interests of ownership, which may result in agency conflicts or agent-principal conflicts. Corporate Governance created an efficient set of mechanisms, comprising incentives and monitoring, in order to ensure that officer behavior is at all times aligned with shareholder interest. The good corporate governance provides owners (shareholders or members) with a strategic management for the firm while monitoring the behavior of the firm's officers. The main tools that ensure ownership control of management are the Board of Directors, the Independent Accountants and the Fiscal Council. The firms that embrace good Corporate Governance practices rely on transparency, accountability, and corporate fairness and responsibility. To that effect, the Board of Directors is required to perform its role by setting out strategies, electing and removing the CEO, supervising management performance and hiring independent accountants. The absence of competent board members and good Corporate Governance systems has led firms to failure in connection with an unlawful overreach (by controlling shareholders against minority shareholders, by the Board of Directors against shareholders and by officers against third parties); strategic errors (as a result of concentration of power on the CEO); and frauds (the use of insider information to benefit oneself and conflicts of interest). 28 Annual Report 2013 (1) Recommendations by the Instituto Brasileiro de Governança Corporativa (IBGC) and protocols Level 2 issued by BM&FBOVESPA available on: http://tinyurl.com/reanual2. Source: Instituto Brasileiro de Governança Corporativa - http://tinyurl.com/artigoibgc 29

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