Nippon Kayaku Group understands that disclosing information to our stakeholders and investors in a timely and fair manner is an important issue, as is strengthening check functions in order to ensure management transparency. We believe that consensus-based decision-making by our Board of Directors, operating under the oversight of our auditors, is a corporate governance system that will allow our management to function very effectively.

Status of Programs

To remain a nimble business in this rapidly changing business environment, we use an Executive Directors System that separates the function of conducting affairs and the function of oversight and decision making. Each function is strengthened to ensure effective decision-making and agile operations.

Board of Directors Meeting (Once a month)

To ensure speedy decision-making, the Board is limited to 10 members. Decisions related to important matters are made through the stipulation of the Board of Directors in conformity to the laws and articles of the corporation. Operational oversight functions also are being strengthened.

Management Meeting (Once a week)

Deliberating important matters related to management and conducting of affairs, or receiving reports. The President, as the chairman of the meeting, makes decisions after thorough deliberation among the constituent member.

Executive Directors Meeting (Once a quarter)

The meeting is chaired by the President, and attended by all Executive Directors (up to 25) appointed by the Board of Directors. Executive Directors report on the status of the businesses they have been entrusted with from the Board of Directors and the President as well as other necessary matters.

Management Strategy Meeting (Twice a year)

Important management matters at the Board Meeting such as basic policy of our group and management strategy are distributed to management personnel to ensure thorough understanding and grasp.

Board of Auditors Meeting (Once a month)

The Board of Auditors consists of five auditors (three external). The members monitor and oversee the Directors from an independent position to ensure compliance with stipulation of the Board of Auditors.

In addition, the company clarifies the management position's authority and responsibility, segregation of duties and company organization structure, setting rules on stipulation of duty and powers. It promotes organized and efficient operation and establishing a responsibile framework.

Internal Control Systems and Risk Management System

On June 1, 2006, we established the Risk Management Division consisting of compliance and risk management sections. However, on February 24, 2009, the Board of Directors reached a resolution on basic policies related to the restructuring of the internal control systems. Effective March 1, 2009, the former Risk Management Division was renamed Internal Control Management Division and became responsible for overseeing the internal controls of the entire Nippon Kayaku Group. They now have specific personnel in charge of J-SOX related matters.

Personnel responsible for compliance matters generate and execute a compliance action plan. They also hold regular compliance training sessions to raise employee awareness on compliance matters. Those responsible for risk management are tasked with holding regular risk management training sessions, while also assessing risks for the entire company and designating a department responsible developing specific action plans for each risk factor. Whenever new risk factors are identified, a responsible department will promptly be assigned to address such factors. Personnel responsible over J-SOX matters shall work to ensure that a structure is in place to facilitate reliable financial reporting by assessing the appropriateness of the design and application of such structure, and by reporting its findings to the President of the Board.

Status of Internal Audits and Audits by the Auditors

An Audit Division has been established as an internal organization separate from the Board of Auditors. Its purpose is to conduct internal audits that will contribute to the prevention of improper behavior and errors in the performance of duties by management and employees. With work scheduled over a fiscal calendar, this division conducts audits of operations, including those of Group companies.

As for audits by the auditors, the auditors monitor and oversee the business conducts of the directors from an independent position through activities such as attendance at Board of Directors Meeting and audits of business affairs. Auditors activities are governed by audit policies, audit plans, and auditor role descriptions resolved by the Board of Auditors.

Establishment of Various Committees

Ethics Committee

Works to formulate policies and measures for compliance and implementation of the Charter of Business Conduct and Code of Business Conduct and to evaluate companywide compliance.

Risk Management Committee

Develops and maintains a risk management structure for risk preventive measure, damage control and damage remediation over the full range of management issues.

Disclosure Committee

Scrutinizing important managerial information of the company and maintains and improves the structure for timely and proper external disclosure.

Environment, Safety, and Quality Assurance Management Committee

Presents its fiscal year policies on environment, safety, and quality assurance matters. Assesses results, and devises plans for improvement.

Energy Conservation and Global Warming Prevention Committee

Established in April 2009 reflecting the social awareness of issues related to energy conservation and global warming prevention, and to promote individual department level activities on these issues at a corporate level.

Research & Development Management Committee

Develops company-wide research and development policies and strategies. A forum to report, discuss and make decisions on important research and development matters.