Blue Square Corporate Governance Practices

Summary of Significant Differences between Blue Square�s Corporate Governance Practices and Those Required of Domestic Companies under NYSE Listing Standards

As an Israeli company listed on the New York Stock Exchange (�NYSE�), we are subject to NYSE corporate governance rules to the extent that these rules are applicable to foreign private issuers.� The following summarizes significant ways in which our corporate governance practices differ from those required to be followed by domestic companies under NYSE listing standards.

Our corporate governance practices are derived from (i) the Israeli Companies Law, 1999 and the regulations promulgated thereunder, (ii) our Articles of Association and (iii) the rules of the NYSE applicable to foreign private issuers.� Foreign private issuers such as Blue Square are permitted to follow home country practice in lieu of certain provisions of Section 303A of the NYSE Corporate Governance Rules.

Majority of Independent Directors:� Under NYSE Rule 303A.01, domestic listed companies must have a majority of independent directors.� We do not have a similar requirement under Israeli practice or the Israeli Companies Law, and we do not have a majority of independent directors serving on our board of directors, although all of our audit committee members are independent directors.

Separate meetings of non-management directors: Under NYSE Rule 303A.03, the non-management directors of each domestic listed company must meet at regularly scheduled executive sessions without management.� We do not have a similar requirement under Israeli practice or the Israeli Companies Law, and our independent directors do not meet separately from directors who are not independent, other than in the context of audit committee meetings.

Nominating/corporate governance committee:� Under NYSE Rule 303A.04, a domestic listed company must have a nominating/corporate governance committee composed entirely of independent directors.� We are not required to have such a committee under the Israeli Companies Law, and we do not have such a committee.

Compensation Committee:� Under NYSE Rule 303A.05, a domestic listed company must have a compensation committee composed entirely of independent directors.� We do have a compensation committee although there is no requirement for a compensation committee under Israeli practice or the Israeli Companies Law.� However, this committee is not composed entirely of independent directors.����

Audit Committee: Under NYSE Rule 303A.06, domestic listed companies are required to have an audit committee that complies with the requirements of Rule 10A-3 of the Securities and Exchange Act of 1934.� Rule 10A-3 requires the audit committee of a U.S. company to be directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review, or attest services, and that each such firm must report directly to the audit committee.  Among other exceptions, Rule 10A-3 provides an exception to such standards for foreign private issuers where applicable home country law (i) requires or permits shareholders to appoint the auditors or (ii) prohibits or limits the delegation of responsibility to the issuer�s audit committee.�

Pursuant to the Israeli Companies Law, our auditors are appointed by the shareholders at the annual meeting of shareholders. Our shareholders have delegated to the board of directors and audit committee the authority to determine the amount to be paid to our auditors. Our audit committee is responsible for recommending to the shareholders the appointment of our auditors and for assisting the board of directors in overseeing the work of our auditors. In addition, pursuant to the Israeli Companies Law, our financial statements must be approved by our board of directors.

Equity Compensation Plans: Under NYSE Rule 303A.08, shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with certain limited exemptions as described in the Rule.
Pursuant to the Israeli Companies Law, transactions with officers, directors, and controlling shareholders regarding the terms of their office and employment, including any compensation in securities, require special approval (including approval of the board of directors in the case of officers, and including approval of the board of directors and shareholders in the case of directors and controlling shareholders).

Corporate governance guidelines: Under NYSE Rule 303A.09, domestic listed companies must adopt and disclose their corporate governance guidelines.� We do not have a similar requirement under Israeli practice or the Israeli Companies Law. We have adopted a written Policy Regarding the Usage of Insider Information as well as Code of Ethics.

Last updated on July 06, 2008.