Corporate Governance Policy

Chapter 1: Corporate Governance Principles

Article 1 (Principles)

The Company regards that, under the management philosophy (i.e. the Management policy, Creed and Vision) of Toyo Seikan Group (the “Group”), the enhancement of corporate governance is one of the most important management issues to increase its corporate value and keep developing and evolving while contributing to the society through business activities. The Company will make a continuous effort to pursue this management goal.

Management Policy

We will constantly create new and innovative values, aspire to achieve a sustainable society and contribute to people’s happiness.

Creed

• We will honor dignity and always strive to be fair and unbiased in every way.
• All of us will fully demonstrate our own strengths and expertise, and contribute to social prosperity while we grow and thrive as an individual, a corporation or a group.

Vision

• We will aim to become the Group which can provide unique and innovative technologies and products that will meet global expectations.

Chapter 2: Corporate Governance System

Article 2 (Corporate Governance System of the Company)

• As the Company adopts an audit and supervisory board system, the Board of Directors shall determine the execution of important business matters and supervise Directors’ performance of their duties, while the Audit and Supervisory Board and its members, which are independent from the Board of Directors, shall monitor Directors’ business execution. In order to ensure the effectiveness of management monitoring and supervisory functions, the Board of Directors and the Audit and Supervisory Board shall appoint outside Directors and outside Audit and Supervisory Board Members, respectively, who are independent from the Company.
• The Company adopts an operating officer system in order to clearly distinguish the management decision-making and supervisory functions from the business execution functions.

Article 3 (Role of the Board of Directors)

• In order to allow the Company to continuously grow and increase its corporate value over the mid- to long-term, the Board of Directors shall determine the execution of important business matters for the Company and the Group, including management strategies and plans, and shall supervise Directors’ performance of their duties.
• The Board of Directors shall determine the execution of particularly important matters that are specified in laws and regulations, the Articles of Incorporation and the Board of Directors Rules.
• The President and operating officers, etc. shall be granted authority to make decisions on the execution of important business matters other than the items set forth in the previous clause and exercise their authority pursuant to the relevant rules of the Company, including through deliberation at the Executive Management Meeting or Management Strategy Meeting comprised of Directors and operating officers, etc.

Article 4 (Composition of the Board of Directors)

• The Board of Directors shall be comprised of members with the right mix of knowledge, experience and competence, regardless of gender, nationality or age. The number of Directors shall be no more than 15 including independent Outside Directors as set forth in the Articles of Incorporation.
• An “Independent Outside Director” shall be an Outside Director of the Company who meets the “Independence Criteria for Outside Directors and Auditors”, which are separately set by the Company.

Article 5 (Policy and Procedures for Appointing Senior Management and Directors)

The Company understands that candidates for director and senior management positions shall have a sufficient understanding of business environment to develop management strategies, the experience and competence to properly implement management strategies formulated by the Board of Directors, and the experience and expertise necessary for discussing the appropriateness of, and potential risks in, the management strategies from various perspectives. Based on these points and the conditions set forth in the preceding article, the candidates shall be nominated by the President of the Company and approved by the Board of Directors with appropriate involvement and advice of Independent Outside Directors through prior discussions at the Company’s Governance Committee, which consists of the President and Independent Outside Directors. The appointment and dismissal of senior management members shall be resolved by the Board of Directors with consideration of the evaluation of the Company's business performance and other factors, with appropriate involvement and advice of Independent Outside Directors through the Governance Committee.

Article 6 (Successors to Senior Management)

The Company shall develop successors to senior management, including the chief executive officer position, in a planned manner by conducting systematic management training programs for potential candidates and providing them with opportunities to participate in key management projects.

Article 7 (Evaluation of the Board of Directors' Effectiveness)

The Board of Directors shall analyze and assess its own effectiveness through several methods, including the hearing of opinions of individual Directors and Audit and Supervisory Board Members concerning the Board as a whole, and shall disclose the assessment results.

Article 8 (Related Party Transactions)

• When a Director engages in any competitive transaction and/or conflicting interest transaction, the Company, pursuant to laws and regulations, shall obtain an approval of the Board of Directors for such transaction and report its important facts to the Board of Directors after the completion of the transaction.
• The Company shall disclose related-party transactions pursuant to laws and regulations and report material related-party transactions to the Board of Directors. The Company shall also have a regular inspection every year on whether or not Directors, Audit and Supervisory Board Members, operating officers or their relatives within the second degree of kinship have any related-party transaction with the Company.

Article 9 (Role of the Audit and Supervisory Board Members and Audit and Supervisory Board)

• The Audit and Supervisory Board and its members shall supervise Directors’ performance of their duties from a standpoint that is independent from the Board of Directors, in accordance with its auditing standards.
• In selecting the Accounting Auditor, the Audit and Supervisory Board shall establish standards to appropriately evaluate candidates for the Accounting Auditor and shall confirm, after the selection, that the appointed Accounting Auditor maintains independence and professionalism.

Article 10 (Composition of the Audit and Supervisory Board)

The Audit and Supervisory Board shall be comprised of members with the right mix of knowledge, experience and competence, regardless of gender, nationality or age. The number of Audit and Supervisory Board Members shall be no more than 15 as set forth in the Articles of Incorporation, and at least half the members shall be Outside Audit and Supervisory Board Members.

Article 11 (Policy and Procedures for Appointing Audit and Supervisory Board Members)

Candidates for the Audit and Supervisory Board Members shall be well-versed in the Company’s business or have knowledge of key areas, including financing, accounting and legal affairs, or abundant experience of business management. Based on these points and the conditions set forth in the preceding article, the candidates shall be nominated by the President of the Company and approved by the Board of Directors with the consent of the Audit and Supervisory Board as well as appropriate involvement and advice of Independent Outside Directors in the Governance Committee.

Article 12 (Role of the Accounting Auditor)

The Accounting Auditor shall be independent and have professional competence to ensure the reliability of the Company’s financial reporting.

Article 13 (Policy and Procedures for Appointing Operating Officers)

Operating officers shall, regardless of gender, nationality and age, be well-versed in the company’s business and determined to be qualified to execute important business matters. The candidates for operating officers shall be nominated by the President of the Company and approved by the Board of Directors.

Article 14 (Policy and Procedures for Determining Compensation of Directors, etc.)

• Compensation of Directors is comprised of base compensation and bonus. The base compensation is paid according to their titles, etc. under fixed payment schemes which are respectively set for inside and outside Directors. The bonus is paid under a performance-based payment scheme which reflects the target management indices defined in the management plan, etc.
• The Compensation of Directors shall be within the amount resolved by the General Meeting of Shareholders and determined by the Board of Directors with appropriate involvement and advice of Independent Outside Directors in the Governance Committee.
• Compensation of Audit and Supervisory Board Members consists of base compensation and bonus and shall be determined within the amount resolved by the General Meeting of Shareholders, through discussion among the Audit and Supervisory Board Members.
• Compensation of operating officers shall be determined by the Board of Directors.

Article 15 (Education and Training of Directors, etc.)

The Company shall provide Directors, Audit and Supervisory Board Members and operating officers, upon their appointment, with training opportunities as necessary, and shall provide Outside Directors and Outside Audit and Supervisory Board Members, upon their appointment, with briefing on the Company’s business, finance, organization, etc. The Company shall also provide them, after their assumption of office, with opportunities to acquire necessary knowledge to perform their duties and responsibilities, including external training programs with financial support by the Company.

Chapter 3. Relationships with Stakeholders

Chapter 4: Miscellaneous