The adoption of good governance practices is deemed as essential by Brasil Telecom to increasing its credibility, consolidating its corporate image, and adding value. In 2007, Brasil Telecom invested in establishing a new governance standard, supported by four basic principles: clear role delegation and definition; equality in the treatment of shareholders; transparency; and accountability. The goal is make Brasil Telecom a governance benchmark. Among the initiatives adopted, we highlight the following:

• Amendment to the Bylaws: among other features, the establishment of the model of deliberative management for Executive Officers;
• The creation of Technical and Consulting advisory committees and an assessment of the Board of Directors’ performance;
• The implementation of the risk management model;
• A revision of policies for the disclosure and use of information, and the trading of the Company’s securities;
• Redesign of the area of authority, with clear, detailed definition of the area of authority of the President and each director, and the creation of an area of authority for the Board of Directors as a collegiate structure.

ORGANIZATIONAL STRUCTURE

Governance at Brasil Telecom is structured as follows:

Board of Directors
In 2007, Board of Directors activities became regulated by an internal control system, providing a clear definition of its duties and responsibilities, as well as solutions for situations involving conflict of interest.

Two technical and consulting committees were established to advise the Board of Directors: (i) the Remuneration and People Development Committee, which analysis matters related to development, compensation, and general human resources policies; and (ii) the Committee of Risks and Processes, which assesses matters related to internal and external auditing and monitors the systems of control and risk management.

The Board of Directors has also decided to perform annual assessments of its performance. The first assessment took place in the first half of 2007.

Audit Committee
The Audit Committee of Brasil Telecom Participações S.A., the board responsible for monitoring the company's administration, is comprised of four active members and four substitutes. Its decisions are reached by an absolute majority of votes. The company's by-laws stipulate monthly meetings, which demonstrate active involvement.

Executive Officers
Brasil Telecom's executive officers are responsible for implementing business strategies defined by the Board of Directors and by the Company's operating and financial performance.

With the amendment to the Bylaws, the number of Executive Officers increased (from four to six), who now make decisions in a deliberative manner, at weekly meetings. This model increases diversity from the point of view of discussions, reduces the risk level, and improves transparency in the Company's decisionmaking process.

Another important innovation was the creation of the positions of Vice President of Governance and Corporate Business and of Vice President of Supplies.

Director's Board

Advisory Committees
In 2007, Brasil Telecom continued its process of improving the efficiency of the Company's management. Among the instruments supporting the decision-making process are the committees. In addition to the Investments and Purchases and Ethics Committees, two new committees were established in 2007: Business Sustainability and Corporate Risk Management.

SHAREHOLDERS' COMPENSATION POLICY

In accordance with the provisions set forth in Law 6,404/76 and in the Bylaws, Brasil Telecom shareholders are paid dividends and interest on equity of at least 25% of adjusted net income. Preferred shares are entitled pre-emptive rights in receiving minimum, non-cumulative dividends, and the greater of the following: six percent (6%) per year, calculated over the resulting amount from the division of the capital stock by the total shares of the Company; or three percent (3%) per year, calculated over the resulting amount from the division of the net equity value by the total number of the Company's shares.

Dividends are paid primarily to preferred shares, up to the preemptive limit. Next, they are paid to common shareholders up to the limit of preferred shares, the balance of which is divided by all shares, in equal conditions.

Dividends provisioned by the Company integrate the proposal of the allocation of results to be submitted to approval by the General Shareholders' Meeting.

Dividends and Interest on Equity (JSCP)