Basic approach to corporate governance

Basic approach to corporate governance

Based on our management philosophy: “To contribute to the realization of comfortable, affluent lives and the advance of society through the production and sale of natural gas,” we shall establish the following systems and strive to discuss or improve them as appropriate, in order to establish reliability in all aspects of our business and to properly execute business operation.

1. 1.A system to ensure that the execution of duties by our company’s directors complies with laws, regulations and the Articles of Incorporation
   1. (1)The Board of Directors shall establish the Compliance Committee consisting of the president of our company and the presidents of our subsidiaries, etc., to ensure that the “Basic Compliance Policies” and the “Code of Conduct” established to be followed by all executives and employees as our fundamental pledge are thoroughly implemented, and to promote corporate activities based on legal compliance principles and corporate ethics.
   2. (2)The Board of Directors shall meet once a month in principle, and as necessary, in accordance with laws, regulations and the “Regulations of the Board of the Directors,” and strive to make decisions on our business administration, and supervise the execution of duties by the directors in an appropriate manner.
   3. (3)The Board of Directors shall consult on important matters related to the execution of the company’s business in a timely manner, and report the status of the execution of duties on a regular or as-needed basis.
   4. (4)The members of the Board of Directors shall always strive to collect information and communicate with each other, in order to make proper management decisions.
   5. (5)We have established an internal Audit Office as our internal audit organization, which evaluates internal controls under the Financial Instruments and Exchange Law and reports the results of such evaluations to the Internal Control Council, Which is composed of all directors and corporate auditors of the Company.
   6. (6)The Company has established a Nominating Committee consisting of the President and independent outside directors. From a standpoint independent of other internal bodies, the committee deliberates on proposed candidates for directors and corporate auditors, the Committee obtains the consent of the Board of Corporate Auditors in accordance with Article 343, Paragraphs 1 and 3 of the Companies Act), and submits its recommendations to the Board of Directors.
   7. (7)The Company has established a Compensation Committee consisting of the President and independent outside directors. The committee deliberates on director compensation proposals from a standpoint independent of other internal bodies and submits them to the Board of Directors.
2. 2.A system for the storage and management of information related to the execution of duties by our company’s directors
   We shall properly store and manage information including the minutes of the Board of Directors meetings and approval documents related to the execution of duties by the Directors, based on laws and regulations, and the “Document Regulations.”
3. 3.A system for and regulations on the risk management concerning loss to our company
   1. (1)Directors shall identify and evaluate risks surrounding our company’s business comprehensively, and incorporate them into medium-term management plans, departmental goals, etc., and respond to them in a timely and appropriate manner.
   2. (2)In order to cope with a large-scale earthquake or other disaster, we shall take appropriate anti-disaster measures by formulating a disaster countermeasures manual, establishing a disaster communication system, producing emergency material procurement means, and conducting disaster drills in accordance with these items, mainly focusing on our subsidiaries.
   3. (3)Other risks associated with the business execution shall be properly managed after specialized studies are done by each responsible department, and shall be supervised by the directors in charge, and reviewed by the Board of Directors as necessary.
   4. (4)Whether or not the risk management system is functioning effectively shall also be checked by the Audit Office, which reports to the president in an appropriate manner, and improvements shall be made when necessary.
4. 4.A system for ensuring efficient execution of duties by our company’s directors
   
   1. (1)Directors shall appropriately manage departmental goals to ensure the execution of medium-term management plans and annual budgets, and the progress of these business goals shall be checked and reviewed from time to time at the Board of Directors meetings and other meetings.
   2. (2)Directors shall make prompt and accurate decisions, after evaluating matters to be proposed to the Board of Directors or matters to be approved internally, in accordance with the “Regulations of the Board of the Directors” and the regulations concerning authority of duties.
5. 5.A system to ensure that the execution of duties by our company’s employees complies with laws, regulations, and the Articles of Incorporation
   
   1. (1)In order to ensure that employees comply with laws and regulations in the execution of their duties, our company shall promote awareness-raising campaigns and educational activities by the Compliance Committee, while thoroughly enforcing the “Basic Compliance Policies” and the “Code of Conduct.”
   2. (2)Our company shall establish a system where the Compliance Committee can promptly receive reports from employees who discover any matters that may violate laws, regulations, the Articles of Incorporation, or ethics, through compliance consultants assigned to their workplaces.
   3. (3)Our company shall strive to identify potential problems as early as possible, and resolve them in an appropriate manner, through decisions on corrective measures by the Compliance Committee and cooperation with corporate lawyers.
   4. (4)Our company shall establish the Audit Office as an internal audit organization to ensure that employees execute their duties properly, and to promptly take corrective measures if any problems are discovered in the execution of their duties.
6. 6.A system to ensure the appropriateness of business operations of the corporate group consisting of our company and subsidiaries
   
   1. (1)Our corporate group shall collect information on group companies and communicate with each other, and establish a system to ensure that information on subsidiaries is promptly and accurately reported to the Board of Directors of their parent company, through the Board of Directors meetings of each company and the liaison meetings of the group executives.
   2. (2)The directors of subsidiaries shall make decisions promptly and accurately by determining which matters are to require approval from the parent company, which matters are to be decided based on instructions from the parent company, and which matters are to be decided at each subsidiary, in accordance with the regulations concerning authority of duties. Moreover, important matters approved by subsidiaries are reported to the parent company on a regular basis, in accordance with the regulations concerning authority of duties and the “Affiliated Company Management Regulations.”
   3. (3)The directors of subsidiaries shall identify and evaluate the risks surrounding the business of each company comprehensively, incorporate them into medium-term management plans, departmental goals, etc. based on the unified policies, and respond to them in a timely and appropriate manner. Whether the risk management system is functioning effectively or not shall be checked by the Audit Office, the internal audit department of the entire group, and improvements shall be made when necessary, after appropriately reporting to the presidents of the group companies.
   4. (4)Our corporate group shall clarify the direction and positioning of each group company based on the “Affiliated Company Management Regulations,” apply the “Basic Compliance Policies” and the “Code of Conduct” to all subsidiaries, and provide active support and guidance to ensure the appropriateness of operations at subsidiaries.
7. 7.Matters concerning employees to assist our company’s Audit and Supervisory Committee members in their duties, matters concerning the independence of such employees from directors, and matters concerning the effectiveness of the instructions given by the Audit and Supervisory Committee members to such employees
   Our company shall designate the General Affairs Department as the organization to assist the duties of the Audit and Supervisory Committee, and in the event that full-time assistants are assigned as needed by the Audit and Supervisory Committee, the directors and the Audit and Supervisory Committee members shall discuss their abilities, qualifications, authority, direction, and treatment.
8. 8.A system to ensure that the directors and employees of our company, directors, the Audit and Supervisory Committee members and employees of subsidiaries, or persons who receive reports from them report to the Audit and Supervisory Committee of our company, and a system to ensure that persons who make such reports do not receive hostile treatment because they have made such reports
   Our company shall establish a system under which the Audit and Supervisory Committee of group companies work together to conduct audits that cover the entire group. In our corporate group, the directors and employees of each group company promptly report to the Audit and Supervisory Committee any matters that may have significant impact on our company, and matters to be discussed at the Compliance Committee, in addition to the matters required by law, and provide necessary information at the request of the Audit and Supervisory Committee. At the same time, our company shall establish a system to ensure that reports from the directors and employees of group companies are promptly reported to the Compliance Committee and the Audit and Supervisory Committee, while maintaining anonymity of the reports by assigning compliance consultants in workplaces and establishing an anonymous mail system and a whistle-blowing system.
9. 9.Matters concerning procedures for advance payment or reimbursement of expenses incurred in the execution of duties by the Audit and Supervisory Committee of our company, or policies concerning the treatment of expenses or liabilities incurred in the execution of other duties
   Our company assigned the General Affairs Department to handle expenses incurred in the execution of duties by the Audit and Supervisory Committee of our company, and includes expenses that are deemed necessary in the execution of their duties in the budget as appropriate, and quickly reimburses emergency or extraordinary expenses subsequently.
10. 10.A system to ensure that audits are effectively performed by the Audit and Supervisory Committee of our company
    
    1. (1)Directors shall maintain a system that allows the Audit and Supervisory Committee members to attend the Board of Directors meetings and other important meetings, and express their opinions as necessary.
    2. (2)Directors shall maintain a system that allows the Audit and Supervisory Committee members to coordinate and consult with accounting auditors and the Audit Office.

Organizational chart for governance