ENEOS Group Basic Policy on Corporate Governance
ENEOS Holdings prescribes its basic approach to corporate governance in the ENEOS Group as well as matters pertaining to its establishment and operation in the ENEOS Group Basic Policy on Corporate Governance.
Please See here for the Basic Policy.
Basic Concept for Corporate Governance
By establishing and operating the Corporate Governance appropriately, ENEOS Group shall realize the ENEOS Group Philosophy and achieve its sustainable growth and increase its corporate value over the medium to long term. Based on this recognition, the Company shall establish and operate the Corporate Governance of ENEOS Group as follows:
Basic Matters on the Establishment and Operation of Corporate Governance
- 1.Roles of the companies under the holding company system
- ENEOS Group is a group of companies whose core business consists of three business fields: energy business, oil and natural gas exploration and production business and metals business. In view of the fact that these three businesses are so distinct, ENEOS Group has established a structure, under which the Company serves as a holding company and three Core Business Companies which promote each core business are placed thereunder. Under this structure, from the perspective of optimizing the value of ENEOS Group as a whole while the Company takes charge of formulating the ENEOS Group Philosophy, ENEOS Group Code of Conduct, basic management policies such as medium-term management plans and budgets (hereinafter referred to as "Basic Management Policies"), allocating management resources and overseeing the management of each Core Operating Company, each Core Operating Company shall agilely execute the business activities in accordance with the Basic Management Policies.
- The Company is a company with audit and supervisory committee.
- 3.Board of Directors
- The Board of Directors of the Company consists of the Chairman, the President, more than one full-time directors, and part-time directors concurrently serving as the President of each Core Operating Company and outside directors. With such composition, the Board of Directors of the Company shall manage the Company in accordance with the following policies.
- (1)Focus on deliberation and decision of the Basic Management Policies and oversight of the execution of operations.
- (2)As an effort to improve agility of the execution of operations, delegate part of decision-making on the execution of material operations to the President of the Company.
- (3)With respect to the material matters such as appraisal of return on investment, risks, progress of execution of material operations of the Company and the Core Operating Companies, the Board of Directors shall receive reports from persons such as the President of the Company and the President of each Core Operating Company, verify its consistency with the Basic Management Policies and oversee such matters.
- 4.Audit and Supervisory Committee
- (1)The Audit and Supervisory Committee shall carry out audits with a high degree of effectiveness and objectivity conduct audits in an organized and systematic fashion through appropriate collaboration between the full-time audit and supervisory committee members, who are given the strong power to gather information, and the audit and supervisory committee members who are outside directors, who have a high degree of independence, in addition to a wealth of knowledge and experience.
- (2)The Audit and Supervisory Committee shall oversee the execution of operations through each audit and supervisory committee member exercising the voting right that he or she has as a director at the Board of Directors meetings as well as exercising the right to state his or her opinion on personnel affairs and compensation of directors who are not audit and supervisory committee members.
- 5.Outside directors
- To take advantage of a wealth of knowledge and experience of outside directors and to ensure transparency and objectivity in decision-making, the Company shall take the following measures:
- (1)In determining the Basic Management Policies at the Board of Directors of the Company, request outside directors to be involved, from the stage of consideration and to fully discuss it from multiple points of view; and in decision-making on and overseeing execution of material operations, fully verify its consistency with the Basic Management Policies, taking opinions of outside directors into account; and
- (2)In determining personnel affairs and remuneration of directors at the Board of Directors of the Company, ensure transparency of the decision-making process by consulting with the Nomination Advisory Committee and the Compensation Advisory Committee, a majority of whose members are outside directors, and which are chaired by an outside director.
- 6.Executive officers and the Executive Council
- (1)The Company shall appoint executive officers who execute operations agilely pursuant to a decision of the Board of Directors.
- (2)For the President to make decisions on execution of operations as President and Executive Officer, the Company shall establish the Executive Council as a consultative body for matters to be decided by the President, which shall consist of Director and Chairman of the Board, President and Executive Officer, Executive Vice Presidents, Senior Vice Presidents who have been appointed by President and Executive Officer, and the President of each Core Operating Company, and have the Executive Council make decisions through careful deliberations.
- (3)A full-time audit and supervisory committee members shall attend the Executive Council, grasp a process of important decision-making, and the status of execution of operations, and share such process and status with other audit and supervisory committee members.
- 7.Corporate governance framework of Core Operating Companies
- (1)Each Core Operating Company is a company with board of corporate auditors (as defined in the Companies Act of Japan). Each Core Operating Company has a Board of Directors to enable directors to oversee each other’s performance of duties. Each Core Operating Company shall fully analyze the risk of the business and verify the conformity of the execution of operations performance to the Basic Management Policies. The Company shall also dispatch its full-time audit and supervisory committee member to each Core Operating Company as its part-time corporate auditor, and cause such corporate auditor to audit the execution of the duties by the directors of the Core Operating Company.
- (2)Any decision-making regarding the matters related to the execution of material operations of a Core Operating Company (including matters on the execution of material operations of a subsidiary of such Core Operating Company) shall be in principle subject to the decision made by, and reported to, the Board of Directors of the Company after the decision-making by the board of directors of such Core Operating Company. The execution of the other operations by the Core Operating Companies shall be delegated to the relevant Core Operating Company to the extent consistent with the Basic Management Policies and the allocation of management resources determined by the Company, and decided by the President of such Core Operating Company after deliberations by the executive council of the Core Operating Company.
Policy on Dealing with the Corporate Governance Code
The Company adopts all of the principles of the Corporate Governance Code established by the Tokyo Stock Exchange as basic policy, since the Company considers it effective in order to establish and operate the corporate governance framework. The Company implements the Code on a Groupwide basis.
Corporate Governance Framework
Method of Appointing Director Candidates
With respect to the directors of the Company who are not audit and supervisory committee members, the Company shall nominate as a candidate a person who has high level of professional ethics, superior ability in strategic thinking and judgment, and flexibility to changes, and is also capable of decision-making and supervision of management in the light of the whole group optimization. Among the directors, two (2) or more directors shall be independent outside directors who meet the Company's Standards for Consideration of the Independence of Independent Directors.
With respect to the directors of the Company who are audit and supervisory committee members, the Company shall nominate as a candidate a person who has high level of professional ethics and expert knowledge such as for law, finance, accounting, and are capable of auditing the performance of duties by directors appropriately and overseeing the execution of operations by the directors appropriately. The majority of the directors who are audit and supervisory committee members shall be independent outside directors who meet the Company's Standards for Consideration of the Independence of Independent Directors.
Standards for Consideration of Independence of Independent Directors
ENEOS Holdings considers outside officers who meet the following requirements to be independent officers who are not likely to have any conflicts of interest with the general shareholders.
- 1.The outside officers do not presently fall, nor have they during the past three years fallen, into the following categories:
- (1)A main customer*1of the Company or any person who executes the business of such a customer ("business executor");
- (2)A business operator of which the Company is a main customer*2or a business executor of such a business operator;
- (3)A main lender to the Company*3or a business executor of such a lender;
- (4)A legal expert, a certified public accountant, or a consultant, who receives from the Company a large amount of fees, other than compensation for officers*4(where the person who receives such fees is a corporation, an association, or any other body, then a legal expert, a certified public accountant, or a consultant who belongs thereto);
- (5)The Company's accounting auditor or a certified public accountant who belongs to an auditing firm that is the Company's accounting auditor;
- (6)A person who receives a large donation from the Company*5(where the person who receives such a donation is a corporation, an association, or any other body, then a person who runs the business thereof); or
- (7)One of the Company's major shareholders*6or a business executor of such a shareholder.
- 2.None of the relatives within the second degree of kinship of an outside officer presently falls, nor have any of them during the past three years fallen, into the following categories (excluding those who are not material):
- (1)A business executor of the Company or a subsidiary of the Company; or
- (2)A person who falls into the categories of 1. (1) through 1. (7) above.
- *1A customer to which the Company and its Core Operating Companies' total amount of net sales in any of the latest three business years has exceeded 2% of the Company's consolidated net sales.
- *2A business operator whose total amount of net sales to the Company and its Core Operating Companies in any of the latest three business years has exceeded 2% of the business operator's consolidated net sales.
- *3A lender to which the amount of the Company's loans payable on a consolidated basis as of the last day of any of the latest three business years has exceeded 2% of the consolidated total assets of the Company.
- *4A person who receives fees from the Company and its Core Operating Companies, the total amount of which has exceeded \10 million in any of the latest three business years.
- *5A beneficiary who receives a donation from the Company and its Core Operating Companies, the total amount of which has exceeded 2% of the total revenue of the beneficiary in any of the latest three business years.
- *6A person who holds 10% or more of the total votes of the Company.
Support System for Independent Officers
Each of the three outside directors who are not audit and supervisory committee members and three outside directors who are Audit and Supervisory Committee members meet the independence standards based on the rules of the Tokyo and Nagoya stock exchanges on which the Company is listed and the Company's Standards for Consideration of Independence.
The Company sends materials regarding the agenda of meetings of the Board of Directors to the outside directors, in principle, three days before the meeting, and the Company ensures that there are opportunities to provide explanations to the outside directors before the meeting. Furthermore, to enhance the auditing function by all Audit and Supervisory Committee members, including outside directors, the Company has established the Office of Audit and Supervisory Committee, which is clearly independent from the chain of command for divisions responsible for business execution (including personnel evaluations). Full-time staff members have been assigned to the office to assist with the duties of the Audit and Supervisory Committee members. Moreover, to support the outside directors who are not Audit and Supervisory Committee member in business execution, the Board Members' Support Office was established and full-time staff members were assigned.
Training for Directors and the Corporate Auditors of the Core Operating Companies
The directors of the Company and its core operating subsidiaries have the duty of working toward the realization of the Group Philosophy, the recording of sustained growth by the ENEOS Group, and the achievement of increased corporate value over the medium to long term. To that end, they must strive to enhance the necessary knowledge and skills. To support those efforts, the Company and its core operating subsidiaries provide opportunities for directors to receive training related to the Companies Act, internal control systems, accounting and finance, business strategies, organizations, etc. In addition, the Company also pays for expenses arising from self-study initiatives. Furthermore, when outside directors are appointed, we provide explanations of basic matters regarding the Company's businesses, and after their appointment, we offer business presentations, worksite tours, etc. In these ways, we are providing opportunities for outside directors to deepen their understanding of the ENEOS Group.
Training of Internal Directors (Fiscal 2018 and Fiscal 2019)
|Theme||Intended for||Timing (fiscal year)||Content of training|
|Newly appointed directors||2018, 2019(expected)||Basic knowledge regarding the duties and responsibilities of directors, the role of the Board of Directors, corporate governance, etc.|
|Roles and actions of directors in regard to the business integration||All directors||2018, 2019(expected)||Lectures regarding the themes on the left|
|Internal control||Newly appointed directors||2018, 2019(expected)||Basic knowledge about internal control|
|Management framework||Newly appointed directors||2018, 2019(expected)||The ENEOS Group's frameworks for business management and investment management|
|Finance / investor relations||Newly appointed directors||2018, 2019(expected)||Current status and issues regarding the Company's financial affairs, opinions of institutional investors, etc.|
Training of Outside Directors (Fiscal 2018 and Fiscal 2019)
|Theme||Intended for||Timing (fiscal year)||Content of training|
|Corporate governance||Newly appointed directors||2019(expected)||ENEOS Group corporate governance|
|Internal control||Newly appointed directors||2019(expected)||ENEOS Group internal control systems|
|Overview of the holding company and core operating subsidiaries||Newly appointed directors||2019(expected)||Basic knowledge about the holding and the core operating subsidiaries|
|Business management||Newly appointed directors||2019(expected)||The ENEOS Group's frameworks for business management and investment management|
|Finance / Investor relations||Newly appointed directors||2019(expected)||Current status and issues regarding the Company's financial affairs, opinions of institutional investors, etc.|
|Worksite tours||All directors||2018||(ENEOS) Oita refinery, Malaysia LNG plants
(Metals) Kurami factory pf Toho Titanium Co., Ltd, Saganoseki Smelter & Refinery
|2019(expected)||(ENEOS) Central Technical Research Laboratory, Negishi refinery, TAIWAN NISSEKI Co., Ltd., JX Specialty Chemical & materials (Taiwan) Co., Ltd.
(Metals) Nikko Metals Taiwan Co., Ltd.
Evaluation of the Effectiveness of the Board of Directors
From November to December 2018, the Company conducted an evaluation of the effectiveness of the entire Board of Directors. To that end, the Company employed an external consultant; implemented a questionnaire for all directors; and conducted interviews with the same. The results were analyzed, and as shown in the table below, the Board was generally evaluated as effective for each evaluation item.
On the other hand, some directors pointed out certain issues, such as the roles of the holding company and the core operating subsidiaries, the organization of matters for the deliberation, and improvement of monitoring. Moving forward, the Company will work to make improvements in these areas.
Results of questionnaire
The score has improved for all the questions that were same as last year (25 questions).
|Items||Number of questions (A)||Number of questions for which the score has improved compared to last year (B)||Ratio (B / A)|
|Board of Director's structure, Governance||2||2||100%|
|Board of Director's Operation||14||14||100%|
|Board of Director's Tradition||2||2||100%|
|Supervision by Board of Directors||2||2||100%|
|Discussion regarding the management strategy||4||4||100%|
|Communications with shareholders||1||1||100%|
- *Other than the above, we have added 11 new questions in the 2018 evaluation.
Examples of opinions that were given in the interview
- The speed of decision making has improved since the company moved to a company with an audit and supervisory committee.
- Beneficial remarks are made by the directors from a company-wide perspective, not limited to their own duties.
- It is positively viewed that the criteria of risk has been strictly considered in the process of decision making.
The Basic Policy on Internal Control System
ENEOS Holdings has established the Basic Policy on Internal Control System to ensure appropriate operations throughout the ENEOS Group.
Corporate Governance Report
Based on stock exchange rules, ENEOS Holdings submits and discloses a report that describes its approach to corporate governance.