JXTG Group Basic Policy on Corporate Governance
JXTG Holdings prescribes its basic approach to corporate governance in the JXTG Group as well as matters pertaining to its establishment and operation in the JXTG Group Basic Policy on Corporate Governance.
Please See here for the Basic Policy.
Basic Approach to Corporate Governance
By appropriately establishing and operating corporate governance, the JXTG Group works to realize the JXTG Group Philosophy, to achieve sustained growth, and to increase corporate value over the medium to long term. Based on this recognition, the Company establishes and operates the corporate governance of the JXTG Group in accordance with the following policy.
Policy on Establishment and Operation of Corporate Governance
- 1.The JXTG Group is a group of companies whose core business consists of three business fields: the Energy business, the Oil and Natural Gas E&P business and the Metals business. In view of the fact that these three businesses are so distinct, the JXTG Group has established a structure under which the Company serves as a holding company and three Core Operating Companies, which promote each core business, are placed thereunder. Under this structure, in light of optimizing the value of the JXTG Group as a whole, the Company takes charge of formulating the medium-term management plan, allocating management resources, and overseeing the management of each Core Operating Company. On the other hand, each Core Operating Company shall agilely execute the business activities in accordance with the medium-term management plan.
- 2.The Board of Directors of the Company consists of the chairman, the president, more than one full-time director, and part-time directors concurrently serving as the chief executive officer of each Core Operating Company and outside directors, as well as full-time corporate auditors and outside corporate auditors. With such a composition, the Board of Directors of the Company shall ensure consistency of the business operations of each Core Operating Company with the medium-term management Plan of the whole JXTG Group, and shall appropriately control the business risks. With respect to decision-making regarding the execution of material operations of each Core Operating Company, the decision is required to be made by or reported to the Board of Directors of the Company. With respect to other operations of each Core Operating Company, the Company shall delegate such operations to the relevant Core Operating Company pursuant to the medium-term management plan utilizing the management resources, as are allocated to each Core Operating Company by the Company. The Company shall oversee operations by receiving reports on the status of business operations from the president of each Core Operating Company.
- 3.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 medium-term management plan at meetings of 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 the execution of material operations, fully verify consistency with the medium-term management plan, taking opinions of outside directors into account; and
- (2)In determining personnel affairs and compensation of directors at meetings of the Board of Directors of the Company, ensure transparency of the decision-making process by consulting with the advisory committee for nominations and the advisory committee for compensation, half of whose members are outside directors.
- 4.The Company is a company with a board of auditors as defined in the Companies Act of Japan. The full-time corporate auditors, who are given extensive autonomy to gather information under the Companies Act of Japan, and outside corporate auditors, who have a high degree of independence, in addition to a wealth of knowledge and experience, shall cooperate with each other appropriately and carry out audits with a high degree of effectiveness and objectivity. Each auditor shall conduct audits in an organized and systematic fashion, through the Board of Corporate Auditors.
- 5.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 risks of the business and verify the conformity of the execution of operations to the medium-term management plan. The Company shall also dispatch its full-time corporate auditors to each Core Operating Company as its part-time corporate auditor, and have such auditors audit the execution of duties by the directors of each 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 System
Method of Appointing Director Candidates and Corporate Auditor Candidates
As directors, the Company has appointed people who have such characteristics as high ethical standards, strategic thinking ability, superior decision-making capabilities, and flexible attitudes toward change, as well as the ability to supervise decision-making and management from the viewpoint of what is best for the Group as a whole. Two or more of the directors are independent, outside directors who meet the Company's Standards for Consideration of the Independence of Independent Directors and Corporate Auditors.
As corporate auditors, the Company has appointed people who have such characteristics as high ethical standards and a certain level of specialized knowledge in such areas as legal, financial, and accounting matters, as well as the ability to appropriately audit the business execution of the directors. The majority of the corporate auditors are independent, outside corporate auditors who meet the Company's Standards for Consideration of the Independence of Independent Directors and Corporate Auditors.
Standards for Consideration of Independence of Independent Directors and Corporate Auditors
JXTG Holdings considers outside officers (outside directors and outside corporate auditors) who meet the following requirements to be independent officers (independent outside directors and independent outside corporate auditors) 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 four outside directors and the three outside corporate auditors 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 and outside corporate auditors, in principle, three days before the meeting, and the Company ensures that there are opportunities to provide explanations to the outside directors and outside corporate auditors about important agenda items before the meeting. Furthermore, to enhance the auditing function by all corporate auditors, including outside corporate auditors, the Company has established the Auditors Affairs Office, 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 corporate auditors. Moreover, to support the outside directors in business execution, the Board Members' Support Office was established and full-time staff members were assigned.
Training of Directors and Corporate Auditors
The directors and corporate auditors 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 JXTG 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 and corporate auditors 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 and outside corporate auditors 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 and outside corporate auditors to deepen their understanding of the JXTG Group.
Training of Internal Directors and Internal Corporate Auditors (Fiscal 2016 and Fiscal 2017)
|Theme||Intended for||Timing (fiscal year)||Content of training|
|Newly appointed directors and corporate auditors||2016, 2017||Basic knowledge regarding the duties and responsibilities of directors and corporate auditors, the role of the Board of Directors, corporate governance, etc.|
|All directors and corporate auditors||2016||Corporate scandals and corporate governance|
|Roles and actions of directors and corporate auditors in regard to the business integration||All directors and corporate auditors||2017||Lectures and group discussions regarding the themes on the left|
|Internal control||Newly appointed directors and corporate auditors||2016, 2017||Basic knowledge about internal control|
|Management framework||Newly appointed directors and corporate auditors||2016, 2017||The JXTG Group's frameworks for business management and investment management|
|Finance / investor relations||Newly appointed directors and corporate auditors||2016, 2017||Current status and issues regarding the Company's financial affairs, opinions of institutional investors, etc.|
|All directors and corporate auditors||2016||Viewpoints/approaches regarding financial indicators, using case studies|
Training of Outside Directors and Outside Corporate Auditors (Fiscal 2016 and Fiscal 2017)
|Theme||Intended for||Timing (fiscal year)||Content of training|
|Corporate governance||Newly appointed directors and corporate auditors||2016, 2017||JXTG Group corporate governance|
|Internal control||Newly appointed directors and corporate auditors||2016, 2017||JXTG Group internal control systems|
|Overview of the holding company and core operating subsidiaries||Newly appointed directors and corporate auditors||2016, 2017||Basic knowledge about the holding and the core operating subsidiaries|
|Subsidiaries||All directors and corporate auditors||2016||(Energy) Kawasaki Natural Gas Power Generation, Central Technical Research Laboratory, Yokohama Minami Hydrogen Station, Ulsan Aromatics (South Korea)
(Metals) Hitachi Works, LS-Nikko (South Korea)
|2017||(Energy) Kawasaki refinery, Kawasaki plant, Bulga coal mine (Australia)
(Oil E&P) Nakajo oil and gas field
|Investor relations||All directors and corporate auditors||2017||Opinions of institutional investors (expectations of the JXTG Group)|
Evaluation of the Effectiveness of the Board of Directors
From May to June 2016, 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 corporate auditors; and conducted interviews with outside directors and outside corporate auditors. 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 and corporate auditors pointed out certain issues, such as the roles of the holding company and the core operating subsidiaries and the provision of information to outside directors and corporate auditors in regard to Board meeting agenda items. Moving forward, the Company will work to make improvements in these areas.
Results of questionnaire
Of all questions (30 questions), the majority of opinions were positive for approximately 80% of the questions.
|Items||Number of questions (A)||Number of questions for which the majority of responses were positive (B)||Ratio (B)/(A)|
|Board of Directors' System||1||1||100.0%|
|Board of Directors' meeting agenda items, etc.||13||9||69.2%|
|Operational effectiveness of the Board of Directors||7||6||85.7%|
|Provision of information to the Board of Directors||7||5||71.4%|
|Support for knowledge acquisition and awareness enhancement by directors and corporate auditors||2||2||100.0%|
Principal Results of Interviews with Outside Officers
- Outside directors with diverse experience have been appointed, and a variety of opinions are presented.
- The Board of Corporate Auditors is fulfilling the monitoring function.
- Easy-to-understand materials and advance explanations are provided, with indicators from a wide range of perspectives. In this way, management information is being provided in a comparatively appropriate manner.
- Questions at Board of Directors' meetings are answered carefully. The Company has established an atmosphere that makes it easy to speak out.
- Outside directors and corporate auditors share concerns about an information gap between internal and outside directors and corporate auditors.
- Discussion of the medium-term management plan at Board of Directors, meetings has been insufficient.
The Basic Policy on Internal Control System
JXTG Holdings has established the Basic Policy on Internal Control System to ensure appropriate operations throughout the JXTG Group.
Corporate Governance Report
Based on stock exchange rules, JXTG Holdings submits and discloses a report that describes its approach to corporate governance.