Effective August 7, 2007

McDERMOTT INTERNANTIONAL, INC.

Corporate Governance Guidelines

            These Corporate Governance Guidelines have been adopted by the Board of Directors of McDermott International, Inc. to assist in the performance of its duties and the exercise of its responsibilities and in accordance with the listing requirements of the New York Stock Exchange.  The Corporate Governance Guidelines reflect the Board’s current thinking with respect to corporate governance issues and will be periodically reviewed and are subject to change from time to time by the Board.

            In general, the Corporate Governance Guidelines are just that – guidelines.  Except where the Corporate Governance Guidelines reflect requirements of the New York Stock Exchange for listed companies, they are neither intended to be, nor are they, rigid rules that govern the Board’s activities.  The Corporate Governance Guidelines do not, and are not intended to modify or to constitute an interpretation of the Panama General Corporation Law, the Company’s Articles of Incorporation or By-Laws, or any Federal, state or local law or regulation.

1.                  Director Qualifications

The Board of Directors will have a majority of directors who meet the criteria for independence required by the New York Stock Exchange.  The Governance Committee is responsible for assessing, on an annual basis, the skills and characteristics that candidates for election to the Board at its next annual meeting should possess, as well as the composition of the Board as a whole, and for making appropriate recommendations to the Board.  This assessment will include the qualifications under applicable independence standards and other standards applicable to the Board and its committees, as well as consideration of skills and experience in the context of the needs of the Board.  The Board has adopted the categorical standards for director independence set forth on Exhibit A to assist it in making independence determinations.  The Board shall consider on a case by case basis the independence of each director, assisted by any categorical standards adopted.  The Company may make a general disclosure in its annual proxy statement with respect to any director meeting these categorical standards.  The Governance Committee, in accordance with the policies and principles in its charter, will recommend nominees for directorship to the full Board.  The invitation to join the Board should be extended by the Chairman of the Board or the Lead Director, on behalf of the Board.

Periodically, the Governance Committee shall consider the size of the Board and report to the Board the results of its review and any recommendations for change.  It is the sense of the Board that a size of 7 to 10 directors is appropriate for the Company at this time.  However, the Board, at its sole discretion, may consider increasing its membership in order to accommodate the availability of an outstanding candidate or candidates.

It is the sense of the Board that an individual director who changes his or her professional occupation or association, including the acceptance or termination of employment or a significant consulting arrangement, in each case that he or she held when last elected to the Board (other than a change anticipated and disclosed to the Board at the time of nomination for the last election), or breaches an ethical standard set forth in the Company’s Code of Business Conduct, should advise the Chairman of the Governance Committee and the Company’s General Counsel and, if requested, volunteer to resign from the Board and any committees of the Board on which he or she serves.  It is not the sense of the Board that every such change in position or breach by a director should necessarily result in the director’s stepping down from the Board or its committees.  There should, however, be an opportunity for the Board, through the Governance Committee, to review the continued appropriateness of Board and committee membership under the circumstances and to avoid any potential conflicts of interest or inadvertent impairments to a director’s independence.

No director should serve on so many other public company boards or have such other obligations that his or her ability to devote the time and attention to duties to the Board or to the Company’s affairs would be compromised.  Determination of the existence of such a situation would be subject to the discretion of the Governance Committee.  Directors should advise the Chairman of the Board, the Chairman of the Governance Committee and the Company’s General Counsel in advance of accepting an invitation to serve on another company’s board (whether public or private) to determine that the new directorship would not cause any issues under section 8 of the Clayton Act, the Company’s Code of Ethics (including the conflict of interest policy) and other applicable governance principles. 

The Company’s By-Laws include a mandatory retirement provision that prohibits the nomination of any director for a new term if he or she would be age 72 or older prior to the date of election and requires a director to resign at the next annual meeting of stockholders following the date he or she turns 72 years of age.  The Board does not believe it should otherwise establish limits on a director’s term.  While term limits could help ensure that there are fresh ideas and viewpoints available to the Board, they present the disadvantage of causing the loss of the contributions of directors who have been able to develop, over a period of time, extensive insight into the Company and its operations and who are capable of providing continuing contributions to the Board.  As an alternative to term limits, the Governance Committee will review each director’s qualifications, suitability and willingness to continue on the Board in connection with the selection of nominees to take office when the director’s term expires.  This review will allow each director the opportunity to confirm his or her desire to continue as a member of the Board.

2.                  Director Responsibilities

The basic responsibility of the directors is to exercise their business judgment to act in what they reasonably believe to be in the best interests of the Company and its shareholders.  In discharging that obligation, directors should be entitled to rely on the honesty and integrity of the Company’s senior executives and its outside advisors and auditors.  The directors shall also be entitled to have the Company purchase reasonable directors’ and officers’ liability insurance on their behalf, to the benefits of indemnification to the fullest extent permitted by applicable law and the Company’s charter, By-Laws and any indemnification agreements approved by the Board, and to exculpation as provided in the Company’s charter.

Directors are expected to attend Board meetings and meetings of committees on which they serve and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities.  Information and data that are important to the Board’s understanding of the business to be conducted at a Board or committee meeting should ordinarily be distributed in writing to the directors before the meeting, and directors should review these materials in advance of the meeting to be prepared to contribute substantially at the meeting.

The Board has no policy requiring either that the positions of the Chairman of the Board and of the Chief Executive Officer should be separate or that they should be occupied by the same individual.  In addition, the Board has no general policy on whether, if such offices are separate, the Chairman of the Board should be selected from the non-employee directors or be an employee.  The Board believes that these issues are properly addressed as part of the succession planning process and that it is in the best interests of the Company for the Board to make a determination on these matters when it elects a new chief executive officer or at other times consideration is warranted by circumstances.

The Board shall meet at least five times per year.  Additional meetings may be scheduled as necessary or appropriate in light of circumstances.  The Chairman of the Board, together with the CEO (if these offices are held by two individuals) and the Corporate Secretary, will prepare an annual schedule of meetings for the Board and the standing committees of the Board.  To the extent practicable, the schedule shall reflect agenda subjects that are generally of a recurring nature and are expected to be discussed during the year in question.

The Chairman of the Board, together with the CEO (if these offices are held by two individuals) and Corporate Secretary, will establish the agenda for each Board meeting.  Each Board member is free to suggest the inclusion of items on the agenda.  Each Board member is free to raise at any Board meeting subjects that are not on the agenda for that meeting.  The Board will review the Company’s long‑term strategic plans and the principal issues that the Company will face in the future during at least one Board meeting each year.

The non-management directors will meet regularly in executive session without management participation at least semiannually.  In addition, if the group of non-management directors includes a director who is not independent under New York Stock Exchange listing standards, the independent directors will meet in executive session at least annually.  The director who presides at these meetings will be chosen by a vote of the non‑management directors and his or her name will be disclosed in the Company’s annual proxy statement and shall be designated the “Lead Director”.  In addition, interested parties may communicate directly with the independent directors by submitting a communication in an envelope addressed to the “Lead Director, Board of Directors (independent members)” in care of the Company’s Corporate Secretary or, for Company employees only, by complying with the procedures set forth in the Company’s Code of Business Conduct.

The Board believes that management should speak for the Company.  Individual Board members may, from time to time, meet or otherwise communicate with various constituencies that are involved with the Company.  However, it is expected that Board members would do this with the knowledge of management and, absent unusual circumstances or as contemplated by the committee charters, only at the request of management.  Accordingly, Board members shall promptly advise management if approached by outside constituencies regarding Company business.

The Board also has a policy that each director should make reasonable efforts to attend the annual meetings of shareholders of the Company.

In an election of directors where the number of director nominees does not exceed the number of directors to be elected, the Board expects any incumbent director nominee who does not receive a “for” vote by a majority of shares present in person or by proxy and entitled to vote on the matter to promptly tender his or her resignation to the Governance Committee.  The Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken.  The Board will consider the recommendation and take appropriate action within 120 days from the date of the certification of the election results.  The resignation of a director pursuant to this paragraph shall not be effective unless and until it is accepted by the Board. 

3.                  Board Committees

The Board will have at all times an Audit Committee, a Compensation Committee and a Governance Committee.  In addition, the Board may, from time to time, establish or maintain additional committees as necessary or appropriate.  Members of these committees will meet the requirements of “independent directors” as required under the New York Stock Exchange listing standards.

Members of these committees will be appointed by the Board following receipt of the recommendations of the Governance Committee and with consideration given to the desires of individual directors.  Each committee shall have one member of the committee as its chairman as designated by the Board.  However, no member may serve as chairman of that committee for more than five consecutive years.  Each of the committees referred to above will have a written charter adopted by the Board.  The charters will set forth the purposes and responsibilities of the committees as well as qualifications for committee membership, procedures for committee member appointment and removal, committee structure and operations and committee reporting to the Board.

The chairman of each committee in consultation with other committee members and management will determine the frequency and length of the committee meetings, consistent with any requirements set forth in the committee’s charter.  The chairman of each committee, together with other members and senior management as appropriate, will develop the committee’s written agenda for each meeting.  Committee members and other directors may suggest the addition of any matter to the agenda for any committee meeting.  Any committee member may raise at any committee meeting subjects that are not on the agenda for the meeting.

At the beginning of the year, to the extent possible, each committee referred to above will establish a schedule of agenda subjects to be discussed during the year.  The schedule for each committee will be furnished to all directors.

Each committee referred to above shall have the authority, to the extent it deems appropriate, without consulting or obtaining the approval of any officer of the Company in advance, to engage and obtain advice and assistance from legal, accounting or other advisors.  The Company shall provide for appropriate funding for payment of compensation to any such advisors, as well as administrative expenses necessary or appropriate in carrying out committee duties.

4.                  Director Access to Officers, Employees and Other Advisers

Directors have full and free access to officers and employees of the Company.  Any meetings or contacts that a director wishes to initiate may be arranged through the CEO or the Corporate Secretary or made directly by the director.  The directors will use their judgment to ensure that any such contact is not disruptive to the business operations of the Company and will, to the extent not inappropriate, copy the CEO on any written communications (including email) between a director and an officer or employee of the Company.  The Board also welcomes regular attendance at each Board meeting by senior officers of the Company.  If the CEO wishes other Company personnel to be in attendance at Board meetings on a regular basis, this suggestion should be brought before the Board for approval.  To the extent they consider it necessary and appropriate, directors also have access to the Company’s independent advisors using the same procedures.

5.                  Director Compensation

The Governance Committee, in accordance with the policies and principles set forth in its charter, will determine or recommend to the Board the form and amount of director compensation.  Directors who are Company employees shall not be separately compensated for their services as directors.  The Governance Committee will consider that directors’ independence may be jeopardized if director compensation and perquisites exceed customary levels, if the Company makes substantial charitable contributions to organizations with which a director is affiliated, or if the Company enters into consulting contracts with (or provides other indirect forms of compensation to) a director or an organization with which the director is affiliated.  The Board believes that an alignment of director interests with those of shareholders is important. Accordingly, the Board believes that a portion of directors’ compensation should be paid in stock, stock options or other forms of compensation that correlate with the market value of the Company.

6.                  CEO Evaluation

The Compensation Committee, in conjunction with the Governance Committee, will oversee the annual assessment of the performance of the CEO, as provided in its charter.  The Board of Directors will review the Compensation Committee’s report with a view to ensuring that the CEO is providing appropriate leadership for the Company in the long- and short-term.

7.                  Annual Performance Evaluation

The Board of Directors will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively.  In accordance with its charter, the Governance Committee will oversee such annual evaluation, solicit comments from all directors and report annually to the Board with an assessment of the performance of the Board, its committees and individual directors.  This assessment will then be discussed and taken into account by the full Board in its consideration of any appropriate action or response.

8.                  Stock Ownership Guidelines

The Board of Directors believes that, in order to align the interests of directors and shareholders, directors should have a significant financial stake in the Company.  To further that goal, the Board of Directors adopted Stock Ownership Guidelines effective January 1, 2006, requiring generally that the non-management directors retain ownership of at least 6,000 shares of Company common stock.

Directors have five years from the effective date of the Stock Ownership Guidelines or their initial election as a director, whichever is later, to comply therewith.  The Compensation Committee of the Board of Directors has discretion to waive or modify the Stock Ownership Guidelines for eligible directors. 

9.                  Director Orientation and Continuing Education

Each new director should participate in an orientation program, which should be conducted promptly after his or her initial election or appointment.  This orientation will include presentations by senior management to familiarize new directors with the Company’s operations, its significant financial, accounting and risk management issues, its compliance programs, its Code of Business Conduct, its principal officers and its internal and independent auditors.  Other directors are also welcome to attend any of these orientation programs.

The Board believes it is appropriate for directors, at their discretion, to have access to educational programs related to their duties as directors on an ongoing basis to enable them to better perform their duties and to recognize and deal appropriately with issues that arise.  The Company will provide appropriate funding for any such program in which a director wishes to participate.

10.              Management Succession

The Governance Committee shall periodically review succession planning with the CEO, and the Governance Committee should make an annual report to the Board on succession planning with respect to the CEO and other executive officers of the Company, it being understood that the scope and detail of the report will vary depending on the age, tenure and other circumstances relating to the incumbent CEO and other executive officers.  The entire Board will work with the Governance Committee and the incumbent CEO to identify potential successors to the CEO.  The designation of the CEO, as in the case of other officers, is a decision for the Board. 

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These guidelines are intended to ensure that the interests of directors and management are aligned with those of McDermott’s shareholders.  They also assure the Board will have the necessary authority and practices in place to review and evaluate the Company’s business operations as needed and to make decisions that are independent of the Company’s management.