Corporate Governance

Basic Concept of Corporate Governance

Basic Concept

Idemitsu, a company originating in Japan which co-creates energy, will continue to strive to create new value together with its customers and stakeholders, while aiming to harmonize with the environment and society in the spirit of diversity and inclusion.

With this aim in mind, the Company recognizes the importance of constructing positive relationships with all stakeholders, including customers, shareholders, business partners, local communities and employees, by fulfilling its social responsibility as a good corporate citizen, improving management transparency, and promoting sound and sustainable growth.

Japan’s Corporate Governance Code is aimed at achieving sustainable corporate growth and increasing medium to long-term corporate value by maintaining dialogue with shareholders. The Company, which strives to be both socially respected and highly trusted, believes that it must comply with the code in principle.

The Company attaches great importance to being self-governing, thinking for itself and judging itself in accordance with its vision. In addition, the Company openly discusses its business status and management circumstances with Independent Outside Directors and Independent Outside Audit & Supervisory Board Members who bring a wide range of knowledge and backgrounds. The Company sincerely takes heed of their unrestricted views, as it endeavors to continue operating in a transparent and fair manner.

出光興産, DFF Inc.

Outline of Corporate Governance System

The Board of Directors of the Company shall make important business decisions and supervise the execution of business. As a company with an Audit & Supervisory Board, the Company shall ensure that the execution of duties by officers and employees is audited by Audit & Supervisory Board Members and the Audit & Supervisory Board, which remain independent of the Board of Directors.

The Board of Directors shall, in accordance with laws, regulations, the Articles of Incorporation, and other rules set down by the Company, make decisions on business strategy, business planning and other key business matters for the Company and supervise the execution of business.

In order to increase the objectivity of the Board of Directors, the Company has made it possible to separate the roles of the chairperson and the CEO by revising a clause in the Articles of Incorporation, which previously stipulated that the CEO serve as the chairperson of the Board of Directors, to instead mandate that the chairperson will be determined by the Board of Directors.

With regard to matters other than those mentioned above, the Company shall delegate authority for business execution to the Representative Director and CEO, Directors who also serve as Executive Officers, Executive Officers and General Managers, with a view to facilitating decision making on the execution of business.

Corporate Governance Structure
Figure
出光興産, DFF Inc.

Changes in Corporate Governance Structure

There are 12 Directors, five of whom are Independent Outside Directors with diverse backgrounds, including women and non-Japanese nationals. The term of Directors shall continue until the conclusion of the annual shareholders meeting for the final business year that ends within one year of their election pursuant to the provisions of the Articles of Incorporation. In FY2019, the Board of Directors met 16 times.

There are four Audit & Supervisory Board Members, two of whom are Independent Outside Audit & Supervisory Board Members, and we have established a system that allows them to fully perform management oversight functions from outside.

The term of Audit & Supervisory Board Members shall continue until the conclusion of the annual shareholders meeting for the final business year that ends within four years of their election pursuant to the provisions of the Articles of Incorporation. The Audit & Supervisory Board works to improve the level of auditing by sharing issues and information among Audit & Supervisory Board Members and, when necessary, requesting information from the Directors and departments. In FY2019, the Audit & Supervisory Board met 16 times.

Fiscal Year Form of Organization Number of Directors of Which, Number of Independent Outside Directors Number of Audit & Supervisory Board Members of Which, Number of Independent Outside Audit & Supervisory Board
FY2015 Company with Audit & Supervisory Board 10 people 2 (One woman) 5 people 3 people
FY2016 Company with Audit & Supervisory Board 10 people 2 (One woman) 5 people 3 people
FY2017 Company with Audit & Supervisory Board 12 people 4 (One woman and one foreigner) 4 people 2 people
FY2018 Company with Audit & Supervisory Board 11 people 4 (One woman and one foreigner) 4 people 2 people
FY2019 Company with Audit & Supervisory Board 13 people 5 (One woman and one foreigner) 4 people 2 people
FY2020 Company with Audit & Supervisory Board 12 people 5 (One woman and one foreigner) 4 people 2 people
ColumnStatus of the Board of Directors’ Operations during the COVID-19 Pandemic

The COVID-19 pandemic emerged in January 2020 and caused the Japanese government to declare a state of emergency. Despite this, the Board of Directors was able to meet as scheduled during FY2019 and recorded no absences attributable to the pandemic. As usual, discussion was brisk at each meeting and various measures aimed at preventing infection have since been implemented. These measures included the use of web conferencing systems, the practice of social distancing in the Board room and the installation of acrylic partitions between seats.

出光興産, DFF Inc.

Each Committee

List of Committees
Committee name Chairman Members Meeting frequency Roles
Management Committee President Individuals appointed by the committee chair based on deliberation by the Human Resource Committee In principle, three times a month To discuss and consider management strategies and issues for the entire Group and for each division To deliberate the execution of business
Enterprise Risk Management Committee President Individuals appointed by the committee chair In principle, twice a year To discuss and consider management strategies and issues for the entire Group and for each division To determine policies for and monitor the tatus of risk management
Investment and Finance Committee President General managers of relevant departments As needed To deliberate and report on investmentrelated matters and to establish investment standards
Derivatives Committee The general manager of Corporate Planning
Department
General managers of relevant departments In principle, once a month To deliberate and consider basic policies on derivatives for the entire Group as well as the status of relevant audits and transactions
Procurement Committee Director or Executive Officer General managers of relevant departments In principle, once a month To deliberate and consider matters related to the procurement of materials as well as construction work and other services
Credit Committee Director or Executive Officer General managers of relevant departments In principle, once a month To deliberate and consider basic policies on credit management for the entire Group and measures to collect non-performing loans
Research & Development Committee Director or Executive Officer General managers of relevant departments In principle, four times a year To consider matters related to the direction, strategies, and issues pertaining to companywide research and development
Risk Management Committee Director or Executive Officer General managers of relevant departments In principle, four times a year To deliberate and prepare important policies to promote business risk management
Compliance Committee Director or Executive Officer General managers of relevant departments In principle, twice a year To address compliance concerns and to formulate compliance promotion plans To monitor the status of compliance activities
Internal Control Evaluation Committee over Financial Reporting Director or Executive Officer Directors or Executive Officers in charge of relevant departments In principle, twice a year To deliberate and consider matters related to internal controls regarding financial reporting
Information Disclosure Committee Director or Executive Officer Directors or Executive Officers in charge of relevant departments and general managers of these departments As needed To deliberate matters related to the external disclosure of information
Management Advisory Committee / Safety & Security Advisory Committee

To secure advisory bodies to the Board of Directors, we have established two committees: the “Management Advisory Committee” and the “Safety and Security Advisory Committee.” Both committees are attended by outside experts to ensure the reception of frank opinions on the Company from a third-party perspective and reflect them in management improvements.

The “Management Advisory Committee” is positioned as a body that advises on issues related to overall management reform. In principle, it meets once every six months and receives recommendations from two outside advisors.

The “Safety & Security Advisory Committee” consults on security issues, particularly technical issues, to prevent serious accidents at refineries and complexes. Recent changes in the business environment have increased the importance of ensuring safety in business deployment, new businesses, and overseas expansion. Therefore, we have set up a working group within the Safety & Environmental Protection Headquarters to select themes appropriate to the business development and receive recommendations from outside experts for each theme.

Nomination Advisory Committee and Compensation Advisory Committee

To enhance the transparency and objectivity of its nomination and compensation functions, as advisory bodies to the Board of Directors, the Company has established the “Nomination Advisory Committee” and “Compensation Advisory Committee” which are composed of Independent Outside Directors and Independent Outside Audit & Supervisory Board Members, and chaired by Independent Outside Directors.

The “Nomination Advisory Committee” reports on proposals, made by the President and Representative Director, that will be submitted to a General Meeting of Shareholders, for the election of candidates for Directors and Audit & Supervisory Board Members as well as on candidates for President and Representative Director and Executive Officer positions. The “Compensation Advisory Committee” reports on matters related to the remuneration of Directors and Executive Officers.

Management Committee, Enterprise Risk Management Committee, and Other Committees

In addition to examining management issues such as the Group’s strategy and governance, the “Management Committee” has been established to deliberate on important business execution issues. In addition, the “Enterprise Risk Management Committee” has been established as an organization to discuss and decide matters related to the Group’s risk management and to monitor them as necessary.

Under the “Management Committee,” there are five specialized committees established to discuss specialized risks in business execution: the “Investment and Finance Committee,” the “Derivatives Committee,” the “Procurement Committee,” the “Credit Committee,” and the “Research & Development Committee.”

In addition, we have established the “Risk Management Committee” and the “Compliance Committee” under the “Enterprise Risk Management Committee” in order to strengthen our response to business risk cases and develop a framework for reviewing and drafting risk management policies. To strengthen J-SOX compliance, we have also established the “Committee for the Evaluation of Internal Controls over Financial Reporting” within the Internal Audit Department. Furthermore, we have established the “Information Disclosure Committee” to provide timely and appropriate information disclosure based on the Group’s information disclosure policy.

出光興産, DFF Inc.