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Corporate Governance

Basic Stance

Since its founding, Idemitsu has consistently maintained the utmost respect for people and has worked diligently to be a socially respected and highly trusted company. With this aim in mind, the Company recognizes the importance of maintaining positive relationships with all stake holders, including customers, shareholders, business partners, local communities and employees, by fulfilling its social responsibility as a good corporate citizen, improving management transparency and promoting sound and sustainable growth.

 

Corporate Governance Structure Check List

Type of governance structure: Company with an Audit & Supervisory Board
Number of executives set in the Company’s Articles of Incorporation 20, at most
Length of term set in the Company’s Articles of Incorporation 1 year
Head of Board of Directors Representative Director & CEO
Number of directors 10
Outside directors appointed or not Appointed
Number of outside directors 2
Number of independent officers among the outside directors 2
Audit & Supervisory Board established Yes
Number of Audit & Supervisory Board members set in the Company’s Articles of Incorporation 6, at most
Number of Audit & Supervisory Board members 5
Outside Audit & Supervisory Board members appointed or not Appointed
Number of outside Audit & Supervisory Board members 3
Number of independent officers among the outside Audit & Supervisory Board members 3

Outline of the Corporate Governance Structure

Idemitsu has adopted the structure of a company with an audit & supervisory board, established a robust corporate governance system and continues to engage in activities aimed at improving its capabilities in this area. The Board of Directors consists primarily of directors who are conversant with the Company's businesses from the viewpoint of improvements in management efficiency. To ensure that objective perspectives are taken into account by management, the Company has appointed two outside directors (independent officers) to the Board since the 99th Ordinary General Meeting of Shareholders on June 26, 2014.

The Board of Directors is presently composed of 10 members, including the Representative Director & Chief Executive Officer. The functions of the Board include decision making with regard to management matters as well as managing and supervising business execution. Each member's term lasts one year, and elections are held every year at the General Meeting of Shareholders. The Board of Directors meets once a month in principle to decide important matters and oversee the execution of operations. In fiscal 2015, the Board of Directors met 16 times.

On April 1, 2017, the Remuneration Advisory Committee was reorganized as the Nomination and Compensation Advisory Committee with the added function of preparing reports on matters concerning the election of director candidates proposed by the President at the General Meeting of Shareholders, should such reports be requested by the Board of Directors. The committee is composed of independent outside directors and independent outside Audit & Supervisory Board members.

Idemitsu has appointed executive officers to make the execution of operations more efficient. Executive officers are appointed by the Board of Directors and have authority over and responsibility for business execution of the multiple operating divisions which they control or supervise.

Idemitsu appointed independent Audit & Supervisory Board members as a way to oversee management. Of the five Audit & Supervisory Board members, three are outside members and there is a system in place to allow them to carry out their function of external oversight of management. Meetings of the Audit & Supervisory Board are held once a month in principle. At these meetings, the board strives to share issues and information among the Audit & Supervisory Board members and requests information from the directors and operating divisions as necessary in order to improve the level of oversight. In fiscal 2015, the Audit & Supervisory Board met 13 times.

 

Management Policy Corporate Governance

Corporate Governance Structure

As of April 1, 2017

Corporate Governance Code

Japan’s Corporate Governance Code, which took effect in June 2015, aligns with Idemitsu’s goal of meeting the high expectations of society and earning its trust. With due consideration given to its philosophy and the external environment, Idemitsu applies a principles-based approach and appropriately discloses information pertinent to its position.

Officer Remuneration

Remuneration for directors was set at no more than ¥1.2 billion annually at the 91st Ordinary General Meeting of Shareholders on June 27, 2006. The Board of Directors sets individual amounts in consideration of the report submitted by the Nomination and Compensation Advisory Committee. Remuneration for fiscal 2015 amounted to ¥684 million for 18 individuals, including outside directors and Audit & Supervisory Board members. Outside of basic remuneration, the Company provides no stock options, bonuses, employee salaries, retirement allowances or other forms of remuneration.

Management Committee and Other Committees and Headquarters

Idemitsu established the Management Committee to discuss and consider management strategies and issues for the Group as a whole and for each operating division. Furthermore, the Risk Management Committee and the Compliance Committee were established as subordinate organs to the Management Committee.

Idemitsu has also established the Committee for the Evaluation of Internal Controls over Financial Reporting, which considers and deliberates on items concerning annual preparations, operating policies and evaluation plans as well as decisions on the scope of evaluations.

The Company has established the Safety & Environmental Protection Headquarters, which plans basic policies and important matters related to environmental management and ensures safety and security in the business operations of Idemitsu and the Idemitsu Group. The Company has also established the Quality Assurance Headquarters, which plans basic policies and important matters related to quality assurance for Idemitsu and the Idemitsu Group.

The Management Committee meets twice a month in principle and operates with the Representative Director & Chief Executive Officer as its committee chairman and with the Corporate Planning Department as its secretariat.

The chair of each committee and the head of each headquarters, with the exception of the Management Committee, is in principle a director other than the Representative Director & Chief Executive Officer and plays a cross-divisional role as part of Company-wide internal controls in order to implement effective operations of committees.

Advisory Committees

In order to maintain the transparency and soundness of the management, the Company has established the following two committees consisting of external experts as advisory organs to the Board of Directors. Both committees provide frank opinions from the perspective of third parties and reflect these opinions in recommendations to the management.

Management Advisory Committee

The Management Advisory Committee is an advisory organ that discusses issues related to management policies from various viewpoints, including management, technological innovation and environmental management. The committee, which meets once every half-year period in principle, engages five external advisers who express their opinions and provide advice.

Safety & Security Advisory Committee

The Safety & Security Advisory Committee provides valuable independent guidance and advice on matters concerning the safety and security assurance of the Idemitsu Group, especially with regard to strengthening security to prevent large-scale disasters at refineries and petrochemical plants.
The committee meets once every year in principle and, in fiscal 2015, provided recommendations regarding the Group’s response to intensifying natural disasters.

Management Supervision Mechanisms

The mechanism to monitor management encompasses supervision by the Board of Directors, auditing by Audit & Supervisory Board members and accounting audits by accounting auditors. In support of these, the Company has established an Internal Audit Office made up of specialist staff, which remains independent of the divisions and is under the direct control of the Representative Director & Chief Executive Officer. This office conducts internal audits based on the Internal Audit Regulations and the evaluation of internal controls based on the Regulations for Internal Control over Financial Reporting.

Internal Auditing

The Internal Audit Office periodically audits and confirms the legality of the business operations, the status of risk management and the business execution of each division based mainly on each operation’s self-directed internal auditing in accordance with the Self-control Regulations.
The results of the internal audits are reported to the Representative Director & Chief Executive Officer, the director in charge of the relevant division or business area and Audit & Supervisory Board members. If necessary, the Representative Director & Chief Executive Officer or the director in charge gives instructions to the division in question.
Any division that receives advice or recommendations in the course of an internal audit prepares a remediation plan for submission to the general manager of the Internal Audit Office and undertakes improvements.
The Internal Audit Office then conducts follow-up audits as needed.

Evaluation of Internal Controls over Financial Reporting

The Internal Audit Office evaluates and confirms the preparation and implementation of internal controls in each division based on the Regulations for Internal Controls over Financial Reporting in order to ensure the reliability of financial reporting for the Group as a whole. Each division prepares a remediation plan to address any shortcomings discovered during the evaluation and undertakes improvements. Each division submits improvement plans and the results of executed plans to the general manager of the Internal Audit Office. The Internal Audit Office reevaluates plans based on results to gauge progress. The results are analyzed and discussed by the Committee for the Evaluation of Internal Controls over Financial Reporting, confirmed by the Representative Director & Chief Executive Officer and, finally, submitted to the Audit & Supervisory Board members.

Auditing by Audit & Supervisory Board Members

All of the Company's five Audit & Supervisory Board members attend board meetings and conduct audits of the business reports, non-consolidated financial statements and consolidated financial statements presented at the General Meeting of Shareholders as well as of the day-to-day execution of the duties of the directors. Standing Audit & Supervisory Board members attend important internal meetings, including meetings of the Management Committee, and execute their auditing duties by interviewing directors, general managers, overseas business office managers and the presidents of subsidiaries. Non-standing Audit & Supervisory Board members carry out audits by visiting major departments and branches. Meetings are held between Audit & Supervisory Board members and representative directors on a quarterly basis in principle. These meetings serve as forums for raising and deliberating on pertinent issues.

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