Corporate Governance

To build a relationship of cooperation with its stakeholders and enhance its corporate value in the medium and long term in accordance with its Corporate Philosophy, the TonenGeneral Group has reviewed and strengthened its corporate governance systems along with its response to the implementation of Japan’s Corporate Governance Code.

Basic philosophy

The TonenGeneral Group believes that high ethical standards, effective corporate governance, sound financial controls, operational integrity, and due consideration for safety, health and the environment are the basics to being a “good corporate citizen” and that it is of the utmost importance to build a straightforward business model, foster a corporate culture of integrity, comply with laws, practice corporate governance, and implement key management control systems in order to achieve sustainable long-term performance goals.
The directors, statutory auditors and employees of the Company Group are responsible for developing, approving, and implementing plans to achieve the goals of the Company. In doing so, the methods employed to obtain results are just as important as the results themselves. Directors, statutory auditors and employees of the Company are expected to comply with the highest ethical standards in performing their duties. In addition, the Company strives to maintain fairness, honesty, and integrity when reporting to its shareholders.
The Company believes that sharing its corporate philosophy with stakeholders and properly disclosing not only financial but also non-financial information are important to building a relationship of cooperation with stakeholders. For this purpose, the Company makes its corporate philosophy available to the public through its company brochures, corporate social responsibility (CSR) reports, website, etc. In addition, medium-term business plans are actively disclosed and published via announcements of financial results, information meetings for analysts and financial institutions, our website, etc.

Basic Policy on Corporate Governance

The Company has set forth this “Basic Policy on Corporate Governance” in order to build an appropriate cooperative relationship with its stakeholders, including customers, employees, shareholders, business partners and local community members, and to enhance its corporate value in the medium and long term.

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  1. Chapter 1 Corporate Philosophy of the Company Group

    The philosophical framework of the TonenGeneral Group is as follows.
    (For more information, please visit
    http://www.tonengeneral.co.jp/english/about/missionstatement/.)

    TonenGeneral Group Corporate Philosophy Structure [Slogan] - Expression of our determination and commitment [Solutions] - Commitment to provide unique value through our products and services → Committed Action [Mission] - Our responsibility to society [Values] - Our code of conduct, an important criterion in the Group's decision-making processes →Corporate Philosophy

    The Company Group defines its mission in terms of a mission for society, a mission for the environment, and a mission for stakeholders. These three aspects are as follows.

    Mission for Society

    • Contribute to the development of a vibrant society by maintaining a stable supply of energy and high-quality products and services.
      • We will make our best effort to maintain and secure our supply chain, not only for the daily energy supply, but also for emergency situations and in times of large-scale disasters, to support the infrastructure of society in Japan. We will also contribute to the realization of a more convenient and more affluent society by developing and providing a stable supply of leading products and services.

    Mission for the Environment

    • Make effective use of limited resources and seek to maintain a sustainable environment.
      • We will commit ourselves to reducing impacts on the environment by persistently pursuing energy conservation, ensuring safe operations, and preventing environmental incidents.
        We will preserve the environment and seek to maintain the global environment throughout the supply chain, ranging from the procurement of crude oil to the consumption of end products.

    Mission for Stakeholders

    Create value that is chosen and appreciated by customers, employees, shareholders, business partners and local communities.

    Mission for Customers
    We will thoroughly consider and seek to understand the needs and interests of our customers, and develop and provide products and services that effectively meet their requirements.
    Mission for Employees
    We will provide a work environment where individual employees can exercise their diverse abilities to the fullest and achieve their full potential because people are essential to the success of the TonenGeneral Group.
    Mission for Shareholders
    We aim to continually increase shareholder value through the accurate and highly transparent disclosure of information and proactive communication.
    Mission for Business Partners
    We will deepen mutual trust with our business partners throughout the supply chain and create sustainable win-win relationships.
    Mission for Local Communities
    We will contribute to the development and vitalization of local communities through activities related to such diverse areas as culture, the arts, sports, education, and the environment.

    In order to achieve these missions, all directors, statutory auditors and employees share the following seven elements, which we have designated as our values.

    [Focus on Cutomers] [Growth] [Diversity] [Take Action] [Take on Challenges] [Safety, Health, Environment] [Honesty, Integrity, Fairness]
  2. Chapter 2 Basic Concepts of Corporate Governance

    The Company Group believes that high ethical standards, effective corporate governance, sound financial controls, operational integrity, and due consideration for safety, health and the environment are the basics to being a “good corporate citizen” and that it is of the utmost importance to build a straightforward business model, foster a corporate culture of integrity, comply with laws, practice corporate governance, and implement key management control systems in order to achieve sustainable long-term performance goals.

    The directors, statutory auditors and employees of the Company Group are responsible for developing, approving, and implementing plans to achieve the goals of the Company. In doing so, the methods employed to obtain results are just as important as the results themselves. Directors, statutory auditors and employees of the Company are expected to comply with the highest ethical standards in performing their duties. In addition, the Company strives to maintain fairness, honesty, and integrity when reporting to its shareholders.

    The Company believes that sharing its corporate philosophy with stakeholders and properly disclosing not only financial but also non-financial information are important to building a relationship of cooperation with stakeholders. For this purpose, the Company makes its corporate philosophy available to the public through its company brochures, corporate social responsibility (CSR) reports, website, etc. In addition, medium-term business plans are actively disclosed and published via announcements of financial results, information meetings for analysts and financial institutions, our website, etc.

  3. Chapter 3 Securing the Rights and Equal Treatment of Shareholders, Communication with Shareholders

    1. Securing the Rights and Equal Treatment of Shareholders

    Building proper relationships with a broad range of stakeholders is important in order to achieve sustainable growth. Cooperation with shareholders, in particular, is crucial. For this purpose, the Company takes care to ensure that shareholders are treated equally according to the number and class of shares they own, and that their rights as shareholders are fully secured so they can properly exercise their rights.

    2. Exercise of Rights at General Meetings of Shareholders

    The general meeting of shareholders is positioned as an important forum where the Company can constructively communicate with its shareholders. Once all shareholders are fully prepared, it is very important that they properly exercise their voting rights in order to ensure their rights are protected, and if they choose to do so, attend the general meeting of shareholders and voice their opinions. For this reason, the Company seeks to disclose information in a timely, accurate, and highly transparent manner on a regular basis so that shareholders and investors can fairly evaluate the Company’s value. It gives consideration to the timing and method by which the Convocation Notice of Ordinary General Meeting of Shareholders is sent so that its shareholders can fully examine the general meeting of shareholders agenda and properly exercise their voting rights, and it also establishes the method for exercising those voting rights. In addition, it establishes procedures for properly responding to so-called beneficial shareholders who wish to exercise their voting rights at the General Meeting of Shareholders.

    3. Communication with Shareholders

    The Company endeavors to maintain the high level of competitiveness and capital efficiency of the Company Group while working to improve sustainable growth, medium- and long-term corporate value, and shareholder value on a daily basis. In order to keep its shareholders and investors up to date on these efforts by the Company, it has established a “Basic Policy to Facilitate Constructive Communication with Shareholders and Investors,” discloses the details of such policy, and actively pursues communication with its shareholders and investors.

    4. Basic Policy on Capital Policy

    The basic capital policy of the Company is to maintain a healthy financial condition and offer stable dividends, taking into account factors such as mid- to long-term cash flow, changes in business results, and capital investment plans.

    In order to maintain and improve shareholder value on an ongoing basis, it is necessary to secure means of financing that can promptly and reliably take advantage of attractive investment opportunities and respond flexibly to changes in the business environment. Therefore, the Company believes it is important to maintain a certain level of shareholder equity as well as a sound financial condition. The level of shareholder equity required to maintain a sound financial condition is reviewed from time to time in consideration of maintaining a credit rating that allows diverse means of financing, as well as present and future business risks, etc.

    The Company discloses operating income, investments, free cash flow, dividends, and its dividend policy as management benchmarks indicating the progress of its medium-term management plan.

    With regard to capital policies that will result in a change of control or significant dilution, in order to avoid unduly harming the interests of existing shareholders, and from the perspective of fulfilling their fiduciary duty to shareholders, the directors and statutory auditors will consider the necessity and reasonableness of such policies, ensure the proper procedures are in place, and provide sufficient explanation to shareholders. In addition, the necessity and reasonableness of such policies will be checked from an objective viewpoint by obtaining opinions from impartial third parties, as necessary.

    5. Policy on Cross-shareholdings

    The Company may invest in cross-shareholdings only if it finds that such shareholdings have strategic significance in conducting its business and will contribute to the increase of medium- and long-term corporate value. With regard to all listed shareholdings including cross-shareholdings, it has established a system for discussing the pros and cons of such shareholdings on a regular basis and for reporting to the Board of Directors. In addition, the voting rights for the shares held by the Company are exercised appropriately based on a judgment that is made from the perspective of whether or not the exercise of such voting rights meets the purpose of holding the shares.

    6. Related-party Transactions

    In order to secure the full rights and equal treatment of shareholders, it is necessary to properly manage related-party transactions.

    Approval procedures have been established to prevent any inappropriate related-party transactions. The Company has put a system in place to report any transactions that fall under the category of related-party transactions in advance and to disclose, in its Annual Securities Report, etc., the conditions of such transactions and the policies, etc. for making decisions thereon, in accordance with laws and regulations.

    Furthermore, the Company has established a “Conflicts of Interest Policy” stipulating that the directors, statutory auditors and employees of the Company Group shall not take advantage of opportunities that may be gained through the use of assets of the Company or through their position in the Company.

  4. Chapter 4 Relationships with Customers, Employees, Business Partners, and Local Communities

    The Company has established the “Standards of Business Conduct” (SBC), consisting of basic policies that embody the management philosophy of the Company Group. The SBC also stipulates guidelines related to the relationships with stakeholders (customers, employees, business partners, local communities) of the Company Group.

    We have a system in place to ensure that all directors, statutory auditors and employees of the Company Group have a deep understanding of the SBC and that the Board of Directors verifies compliance with the SBC on a regular basis.

    Building a relationship of cooperation with local communities is essential for the Company Group to continue growing and developing its business in a sustainable way. The Company Group aims to be a good corporate citizen in all areas where it conducts business.

    Moreover, maintaining and further improving the environment is one of the major prerequisites for the sustainable growth of business entities. The Company has established a basic environmental policy, strives to eliminate incidents that could adversely impact the environment, and works to achieve continuous improvement in its environmental performance. A department in charge of safety, health and the environment has been established to properly address environmental issues, and the SSH&E Committee has been established under the CSR Promotion Council to monitor and improve safety, health and environment-related activities. Environmental improvement initiatives of the Company are disclosed in CSR reports and elsewhere.

    The Company Group believes that customer satisfaction is extremely important for success in business. The Company seeks to pursue the interests of its customers by keeping in mind its responsibility to customers, understanding their demands and issues of concern, and properly meeting their needs.

    The Company seeks to build stronger trust-based relationships with our business partners because it understands that the business of the Company Group would be impossible without the cooperation of a number of business partners. At the same time, in order to ensure that both the Company Group and its business partners are good corporate citizens, business partners are required not only to comply with laws and regulations but also to understand, and act on, the high ethical standards of the Company Group.

    With regard to its relationship with employees, the Company aims to create a workplace in which a diverse range of personnel can achieve their full potential, and to develop and expand an environment in which they can express a wealth of ideas and creativity that are enriched by diversity, in order to achieve sustainable growth.

    Furthermore, the Company Group has established a basic policy on whistleblowing that clearly states that whistleblowers will not suffer any disadvantageous treatment as a result of making reports. Multiple contact points for whistleblowing, which allow anonymous reporting, including those that are independent of the management team, have been established so that employees can report issues without fear of retaliation. The Company ensures that the basic policy on whistleblowing and the whistleblowing system are well known by employees and encourages them to actively use the system. The utilization of the system is reported to the Board of Directors on a regular basis to ensure its effectiveness.

  5. Chapter 5 Responsibilities of the Board of Directors, etc.

    1. Corporate Governance Structure of the Company

    As the structure for corporate governance, the Company has chosen to be a company with a board of statutory auditors. It finds the current structure, in which the statutory auditors, including outside statutory auditors, understand and oversee the details of the execution of business through auditing, to be optimal for taking full advantage of the expertise it has in business and efficiently executing its business operations while ensuring effective corporate governance. In addition, corporate governance is reinforced by the outside directors, who are elected with the expectation that they will participate in the decision-making by the Board of Directors from an independent, neutral standpoint.

    2. Roles and Responsibilities of Board of Directors and Securing Effectiveness

    (1) Roles and Responsibilities of Board of Directors

    The Board of Directors makes decisions on significant managerial matters, including management strategies and business plans, oversees the performance of duties by directors, and maximizes long-term corporate value by fulfilling the Company’s missions for society, the environment, and stakeholders.

    With regard to the medium-term business plan, the Company makes the utmost effort to achieve the plan and to provide an explanation of its progress in the financial statements, etc. that it releases. The Company seeks to increase corporate value in a sustainable way over the long term by applying the experience and knowledge obtained in executing each medium-term business plan to the following one.

    (2) Authority of Directors

    The Board of Directors makes decisions on any matters that may have a significant impact on the Company, including the establishment, revision, or elimination of basic policies and significant rules; transactions beyond the prescribed size; and investments in other business entities, in addition to matters that are stipulated by law or the Company’s articles of incorporation. Matters that should be decided by the Board of Directors are set forth in the “The Board of Directors Rules”.

    With regard to any matters other than those that should be decided by the Board of Directors, the Company has established the Delegation of Authority Guide, and has put mechanisms in place to make appropriate decisions according to the content and scope of the matter.

    (3) Election and Training of Directors

    It is vital that the Board of Directors consist of the appropriate directors to uphold the basic principles when conducting the business of the Company, including high ethical standards, effective corporate governance, sound financial management, operational integrity, and due consideration for safety, health and the environment.

    The Company appoints those who meet the criteria set forth in the “Policy for Nominating Directors and Statutory Auditors Candidates” as director candidates. The reasons for such nominations are disclosed in the nomination agenda item at the relevant general meeting of shareholders.

    In order to ensure that nominated directors can effectively fulfill their duties, the Company has put a training system in place to give them a deeper understanding of the roles and responsibilities of directors, and to acquire or update the necessary knowledge.

    Moreover, the appropriate compositional balance of the Board of Directors in terms of knowledge, experience, etc. is important in order to ensure that its duties will be fulfilled. For the purpose of incorporating the opinions of those who have extensive experience and knowledge outside the Company, at least two independent outside directors are included among the board members.

    For the appointment of directors, The Board Affairs Committee, consisting of independent outside directors and representative directors, has been established to nominate director candidates, and the Board of Directors determines the actual candidates after deliberating in said committee.

    The representative director and president is responsible for developing his/her potential successors. The President Appointment Committee, consisting of outside directors and the representative director and president, properly supervises the successor appointment and training plan, as well as the succession plan, and provides the necessary advice to the representative director and president position.

    (4) Concurrent Posts Held by Directors

    The Company has established a mechanism for checking whether a director is serving as a director or statutory auditor in another company to ensure that the director can fulfill his/her roles and responsibilities as a director for the Company. The status of concurrent posts held by directors is disclosed in business reports, annual securities reports, etc.

    (5) Remuneration for Directors

    A remuneration system for directors is in place to ensure that directors will fulfill their responsibilities for achieving the sustainable growth of the Company; specifically, remuneration for directors who execute the business of the Company comprises basic remuneration and variable remuneration based on business results. In addition, the Company has introduced a system for using Company shares as part of the remuneration for directors that execute the business of the Company so that they have a shared interest in share price fluctuations, and to further enhance their morale and willingness to contribute to increasing corporate value. Remuneration for independent outside directors includes only basic remuneration. The Remuneration Committee, delegated by the Board of Directors and consisting of the independent outside directors and the representative director and president, will determine the remuneration for directors in a fair and transparent manner.

    (6) Systems for Compliance and Risk Management

    Since the Company’s basic policy is to conduct operations in compliance with all applicable laws, the Board of Directors has put systems in place for compliance and risk management in order to ensure said policy is carried out.

    (7) Securing the Effectiveness of the Board of Directors

    Because it is extremely important for the sustainable growth of the business that the Board of Directors be effective in fulfilling its duties, a system has been put in place to ensure its effectiveness. More specifically, due consideration is given to the setting of meeting dates, the period of deliberation, the time and method of material distribution, etc. In addition, the Company holds meetings to facilitate information exchange between directors and others. It is also developing a system for evaluating the effectiveness of the Board of Directors and disclosing a summary thereof.

    3. Roles and Responsibilities of Statutory Auditors and the Board of Statutory Auditors

    (1) Roles and Responsibilities of Statutory Auditors and the Board of Statutory Auditors

    The Company has put a system in place to allow its statutory auditors and the Board of Statutory Auditors to independently and objectively make appropriate decisions in fulfilling their roles and responsibilities based on their fiduciary duty to shareholders.

    We have established the “Rules for the Board of Statutory Auditors” and “Auditing Guidelines for Statutory Auditors”, stipulating the responsibilities and attitudes of statutory auditors, the auditing system, the scope and method of auditing, etc.

    In order to ensure proper auditing, the Board of Statutory Auditors of the Company establishes criteria for evaluating the eligibility of accounting auditors, and evaluates their independence, auditing capability and reliability based on such criteria.

    (2) Effectiveness and Independence of Audits

    In order to enhance the effectiveness of auditing, at least half of the statutory auditors are independent outside statutory auditors, and there are full-time statutory auditor(s) who have a high level of information-gathering capability. In addition, the statutory auditors seek to interact with independent outside directors by sharing information and exchanging opinions as required.

    (3) Nomination and Training of Statutory Auditors

    The Company appoints those who meet the criteria set forth in the “Policy for Nominating Director and Statutory Auditor Candidates” as statutory auditor candidates. The reasons for such nominations are disclosed in the nomination agenda item at the relevant general meeting of shareholders.

    For the nomination of statutory auditors, the Board Affairs Committee prepares a proposal for statutory auditor candidates to be nominated and the Board of Directors decides on the actual candidates with the consent of the Board of Statutory Auditors.

    The Company has also put a training system in place to give statutory auditors a deeper understanding of their roles and responsibilities, and the means to acquire or update the necessary knowledge so that they can effectively fulfill their duties.

    (4) Support System and Information Exchange for Statutory Auditors and Board of Statutory Auditors

    The Company has established a system to enable statutory auditors and the Board of Statutory Auditors to easily acquire the information and support they need for auditing.

    In addition, by providing a system that enables statutory auditors and the accounting auditor to exchange suitable information and exchange opinions, it ensures proper auditing through the cooperation of both parties.

  6. Policy for Nominating Director and Statutory Auditor Candidates

    1. 1.
      The Company nominates those who meet the following criteria as Directors and Statutory Auditors suitable for conducting business with high ethical standards, effective corporate governance, sound financial management, operational integrity, and due consideration for safety, health and the environment as its basic policy.
      • Sound mental and physical health
      • Reputability, dignity, and a sense of ethics
      • The ability to make objective management decisions, excellent foresight and insight
      • Understanding of the separately stipulated Standards of Business Conduct (SBC) and willingness to comply with the individual policies contained in the SBC
      • For independent outside directors and independent outside statutory auditors: considerable experience and in-depth knowledge in management, a good track record and insight in their fields of specialization, the ability to secure sufficient time to perform duties as an officer, fulfillment of the separately established criteria for independence
    2. 2. As a basic policy, at least two independent outside directors are included among the board members, and at least half of the statutory auditors are independent outside statutory auditors.
    3. 3. Directors and statutory auditors both have an appropriate compositional balance in terms of knowledge, experience, etc.
    4. 4. The Board Affairs Committee, consisting of independent outside directors and representative directors, has been established to nominate director candidates, and the Board of Directors determines the actual candidates after deliberating in said committee.
    5. 5. The Board Affairs Committee, consisting of independent outside directors and representative directors, prepares a proposal for statutory auditor candidates to be nominated and the Board of Directors determines the actual candidates with the consent of the Board of Statutory Auditors.
  7. Criteria for the Independence of Outside Directors and Statutory Auditors

    The Company has established the following independence criteria for nominating outside director and outside statutory auditor candidates to avoid any potential conflicts of interest with general shareholders. An outside director or outside statutory auditor (or candidate therefor) will be regarded as being independent if such outside director or outside statutory auditor does not fall under any of the following categories. In addition, there must be no question as to the ability of an outside director or outside statutory auditor to maintain his/her independence in the execution of duties as an outside officer, even if he/she does not fall under any of the following categories.

    1. (1)
      Executive of a business entity or the like, who falls under any of the following categories:
      1. 1)Major shareholder of the Company
        Person who has at least 10% share of the total voting rights of the Company
      2. 2)Major business partner of the Company Group
        Person with whom the annual transaction volume is more than 2% of the consolidated net sales of the Company in any of the three most recent fiscal years
      3. 3)Person whose major business partner is the Company Group
        Person whose annual transaction volume with the Company is more than 2% of its consolidated net sales in any of the three most recent fiscal years
      4. 4)Major lender to the Company Group
        Person whose loan amount to the Company on a consolidated basis is more than 2% of the consolidated total assets of the Company as of the end of a fiscal year among the three most recent fiscal years
    2. (2)Legal expert, certified public accountant (CPA) or consultant who receives a large amount of compensation other than the remuneration of an outside director or outside statutory auditor from the Company
      Person whose total remuneration from the Company Group exceeds 10 million yen in any of the three most recent fiscal years; or if the person who receives such remuneration is a corporation, association or any other organization, or a legal expert, CPA or consultant who belongs to such organization.
    3. (3)Accounting auditor of the Company, or CPA who belongs to the auditing firm that serves as such accounting auditor
    4. (4)Person who receives a large donation from the Company
      A person to whom a donation from the Company Group is more than 2% of his/her total revenue in any of the three most recent fiscal years (if the receiver of such donation is a corporation, association or any other organization, then a person who manages the affairs of such organization)
    5. (5)
      Outside director and outside statutory auditor of whom a relative within the second degree of kinship currently falls, or fell in any of the three most recent fiscal years, under either of the following categories:
      1. 1)Executive of the Company or its subsidiaries (excluding non-critical positions)
      2. 2)Person who falls under any item (1) to (4) above
  8. Basic Policy to Facilitate Constructive Communication with Shareholders and Investors

    1. Basic Concept

    As its basic policy, the Company communicates with its shareholders and investors in a timely, accurate, and highly transparent manner so that they can fairly evaluate the value of the Company.

    To this end, the Company endeavors to provide opportunities for shareholders and investors to obtain information about the Company in a fair and equitable manner.

    The management team and the Board of Directors of the Company values communication with shareholders and investors; has established and enhanced an internal system to allow the provision of useful information regarding company performance and the future outlook; and has created a mechanism for efficiently sharing such communications as appropriate.

    In disclosing the management strategies and business plans of the Company, the content for shareholders shall be specific and straightforward, and the Company shall select the appropriate means for such disclosure.

    2. Internal System for Communicating with Shareholders and Investors

    A director in charge of IR-related matters is appointed and under his/her supervision, the department in charge of IR endeavors to engage in constructive communication with shareholders, investors, etc.

    3. Efforts to Enrich Communication with Shareholders and Investors

    The department in charge of IR leads communication with shareholders and investors through general meetings of shareholders, financial results briefings, conference calls on financial results, small meetings, individual interviews, and periodical publications and questionnaires.

    4. Internal Feedback

    The department in charge of IR, on a regular basis, briefs the directors and statutory auditors in terms of its efforts toward constructive communication with shareholders and investors as well as the outcomes thereof.

    5. Managing Insider Information

    Recognizing the importance of having timely, appropriate information when engaging in constructive communication with shareholders and investors, the Company has established “Rules for Preventing Insider Trading” to prevent the inappropriate disclosure of information and thoroughly manages insider information through in-house training and the like.

Relevant policies under the Standards of Business Conduct (SBC)

  • Directorships Policy
  • Ethics Policy
  • Conflicts of Interest Policy

Implementation of Corporate Governance Code

The Company has implemented all of the principles set forth in the Corporate Governance Code, which includes 73 requirements. The implementation status has been disclosed in the Basic Policy on Corporate Governance, as well as the Corporate Governance Report, which has been submitted to the Tokyo Stock Exchange.
A summary of the results of the analysis and evaluation the effectiveness of the Board of Directors conducted by the Company as part of the above implementation process is as follows.

Analysis and evaluation of effectiveness of Board of Directors: Summary of Results

The Company has analyzed and evaluated the effectiveness of the Board of Directors in the following manner, obtaining advice from a third-party consultant.
It carried out a survey using a questionnaire targeting all directors and statutory auditors in August 2016. A comments column was included for every question to obtain more candid opinions, and direct submission of the response forms from directors and statutory auditors to the third-party consultant ensured anonymity.
Following the September 2016 meeting of the Board Affairs Committee, comprising independent outside directors and representative directors, a meeting of the Board Affairs Committee members and statutory auditors, and a meeting of all directors and statutory auditors were held in order to ensure ample opportunity to discuss the effectiveness of the Board of Directors and its challenges based on the results of the questionnaire. The summary of the outcomes of the questionnaire and the discussions was reported in the Board of Directors meeting held in January 2017.
Judging from the results of the questionnaire and the outcomes of the discussions, the Board of Directors concluded that it is functioning soundly and effectively, taking into consideration factors such as the number of members, diversity and knowledge of directors and statutory auditors, prevailing perspectives on the overall optimization of the Group, opportunities for discussion on several occasions, including the Management Committee and off-site meetings, strong commitment to participation and involvement in discussion in the Board of Directors, and a sense of speed in decision-making.
In particular, the Board of Directors judged that the outcomes of the opportunities to appropriately share and discuss major business and management matters, such as meetings among all directors and statutory auditors, including independent outside directors and statutory auditors, were effectively reflected in the discussion at the Board of Directors meetings. This framework was determined to have significantly contributed to the improvement of the effectiveness of the Board of Directors.
On the other hand, suggestions for improving the effectiveness of the Board of Directors, including increasing the number of independent outside directors, strengthening the supervisory function of executive directors, and focusing further on mid-term and strategic discussions from a company-wide perspective, were discussed. The Board of Directors will continue working to further strengthen its effectiveness.
Based on the outcomes of this evaluation, the Board of Directors will carefully consider the challenges identified and promptly respond to them to improve the effectiveness of the Board of Directors, ensuring the enhancement of our corporate value.

Overview of corporate governance

[General Meeting of Shareholders] → Election / dismissal → Board of Directors → Representative director and president → Management and  supervision → Management Committee or Divisions responsible for executing operations. [General Meeting of Shareholders] → Election / dismissal → Board of Directors → Board Affairs Committee, Remuneration Committee, President Appointment Committee, CSR Promotion Council. [General Meeting of Shareholders] → Election / dismissal → Board of Directors → Board of Statutory Auditors → Board of Directors or Divisions responsible for executing operations. [General Meeting of Shareholders] → Election / dismissal → Board of Directors → Accounting auditor → Audit Department → Divisions responsible for executing operations. Corporate Governance Systems

Independence of outside directors and outside statutory auditors

The Group has adopted its own standards of independence for appointing outside directors and outside statutory auditors. There are no business, capital or personal relationships among the Group and its outside directors, its outside statutory auditors and the Companies to which they belong, which risk having an impact on the independence of the relevant persons, for whom there is no risk of conflicts of interest with general shareholders.

Board of Directors

The Board of Directors makes decisions on significant managerial matters, including management strategies and business plans, oversees the performance of duties by directors, and maximizes long-term corporate value by fulfilling the Group’s missions for society, the environment, and stakeholders. With regard to the medium-term business plan, the Group makes the utmost effort to achieve the plan and to provide an explanation of its progress in the financial statements, etc., that it releases. The Group seeks to increase corporate value in a sustainable way over the long term by applying the experience and knowledge obtained in executing each medium-term business plan to the following one.
The Board of Directors as approved by the Ordinary General Meeting of Shareholders in March 2016 consists of eight directors, who execute the business of the functions to which they are assigned in roles described as “in charge” or “coverage”, and two outside directors. We consider the size and configuration of the board appropriate because it allows each director to participate meaningfully and exercise effective business judgment through free and vigorous discussion from an independent perspective.

Number of Board of Directors meetings and attendance of outside directors and outside statutory auditors in 2015
Number of meetings 16
Attendance 100%

The Board Affairs Committee, the President Appointment Committee and the Remuneration Committee

As an advisory body to the Board of Directors, the Board Affairs Committee, consisting of representative directors and outside directors, and the President Appointment Committee, consisting of the representative director and president and outside directors, have been established to ensure transparency and objectivity in decision-making processes for management structure, nomination of director and statutory auditor candidates, and nomination of the representative director and president. Remuneration for directors is determined in a fair and transparent manner by the Remuneration Committee, delegated by the Board of Directors and comprising outside directors and the representative director and president.

Remuneration for directors and statutory auditors

A remuneration system for directors is in place to ensure that directors will fulfill their responsibilities for achieving the sustainable growth of the Group; specifically, remuneration for directors who execute the business of the Group comprises basic remuneration and variable remuneration based on business results. In addition, we have introduced a system for using TonenGeneral Sekiyu K.K. shares as part of the remuneration for directors that execute the business of the Group so that they have a shared interest in share price fluctuations, and to further enhance their morale and willingness to contribute to increasing corporate value. Remuneration for outside directors and statutory auditors includes only basic remuneration.

Remuneration for directors and statutory auditors in 2015
Directors and statutory auditors (excl. outside directors and outside statutory auditors) Number of recipients: 11 Total remuneration 277 million yen
Outside directors and outside statutory auditors Number of recipients: 8 Total remuneration 50 million yen

Management Committee and CSR Promotion Council

The Management Committee consists of eight directors, who deliberate important matters regarding business operations, including resolution items of the Board of Directors, to ensure expeditious and effective decision making. We have established the CSR Promotion Council (chairperson: The Company president) to further our efforts as a good corporate citizen.

Statutory auditors and Board of Statutory Auditors

The statutory auditors and the Board of Statutory Auditors are independent from the Board of Directors. In order to carry out their role of auditing directors’ business execution, they monitor the establishment and state of implementation of corporate governance and internal controls systems and ensure that business decisions and execution by the Board of Directors comply with laws and regulations and the Company’s Articles of Incorporation as well as internal standards of business conduct, and that shareholder interests are appropriately secured. Statutory auditors attend meetings of the Board of Directors and express their opinions when needed.
Currently there are four statutory auditors, including two outside statutory auditors, as approved by the Ordinary General Meeting of Shareholders in March 2016.

Number of Board of Statutory Auditors meetings and attendance of outside statutory auditors in 2015
Number of meetings 16
Attendance 100%

Link between statutory auditors, accounting auditors and internal auditors

The statutory auditors, in close coordination with the Audit Department and accounting auditors, audit various accounting statements, the maintenance and operation of internal controls systems, the maintenance of company assets and the status of subsidiary and affiliated companies. The statutory auditors review in advance the accounting auditors’ annual audit plan, ask for explanations of financial results from relevant departments, observe inspections by accounting auditors, and discuss other important issues as necessary with the accounting auditors. The audit results, which include the audit scope and opinions, are received in writing.
Upon their request, the statutory auditors receive assistance in the execution of their duties from all Group employees, including those in the Audit Department. The Audit Department reports to the statutory auditors on the audit plan for the coming year and audit results.