(c) Management CommitteeThe Company has established the Management Committee under the Board of Directors. This committee deliberates and makes decisions on important management matters in accordance with basic policies adopted by the Board of Directors. The Management Committee meets once a week, in principle, with participation by executive officers and Audit & Supervisory Board members. To assist the Management Committee with its work, we have also established committees to deliberate particular types of matters and report their findings to the Management Committee for higher-level consideration.Management Appointment ProcessThe appointment of Directors, Audit & Supervisory Board Members, and Executive Officers begins with the formulation of recommendations by the Nomination Committee, which is an advisory body to the Board of Directors and consists of one internal board member two external board members. The Nomination Committee prepares its recommendations by comprehensively considering the experience, knowledge, expertise, and other qualities of internal and external candidates. After approval by the Board of Directors, candidates for Director and Audit & Supervisory Board positions are submitted to the General Meeting of Shareholders for approval.The Company discloses the reasons for nominating internal and external candidates for Director and Audit & Supervisory Board positions in reference materials provided for the General Meeting of Shareholders. To see an example, please refer to pages 4 to 16 of the Notice of FY2018 Annual Meeting of Shareholders.“Notice of FY2018 Annual Meeting of Shareholders”https://ssl4.eir-parts.net/doc/5301/announcement9/48713/00.pdfStrengthening the Effectiveness of the Board of DirectorsIn 2016, Tokai Carbon established the Nomination Committee, Remuneration Committee, Management Committee, and other organs to ensure strong governance led by the Board of Directors. As a result, significant improvements compared to the previous year were noted on various fronts. These improvements became apparent in the annual Board of Directors effectiveness evaluation.At Tokai Carbon, the two External Directors deepen their understanding of key issues by actively attending important meetings other than those of the board. That the nonpartisan, objective opinions of the External Directors have greatly contributed to enhancing the oversight function of the Board of Directors was pointed out in board effectiveness evaluations.The new more-robust governance system has largely taken hold. Evaluation results indicate that initial benefits are being appropriately maintained and further improvements in board effectiveness are being achieved.Establishing an internal control systemTo ensure that Tokai Carbon Group properly executes business operations in accordance with relevant laws, regulations and the Articles of Incorporation, the Company continuously improves its internal control system. Improvements are undertaken in accordance with the “Basic Policy for Establishing an Internal Control System,” which was adopted at the May 2006 meeting of the Board of Directors and is revised as necessary.Executive remunerationAt Tokai Carbon, executive remuneration is composed of basic remuneration, which is a fixed amount, and performance-based remuneration, which varies depending on achievement of performance objectives. For directors with executive responsibilities, the proportion of total remuneration that is variable is designed to rise with executive rank. This is in consideration of the significance of management responsibilities borne.Revisions and decisions regarding the executive remuneration system, and the performance evaluations and remuneration for individual executives, are based on deliberations by the Remuneration Committee, which is chaired by an external director and includes external officers as members.ComplianceThe Company has outlined a Basic Policy, Guidelines, and a Corporate Code of Ethics. We conduct corporate activities in accordance with these policies and based on a strong ethical viewpoint while also complying with the relevant laws, rules, and regulations.(a) Compliance manualThe Compliance Manual was prepared based on the Tokai Carbon Corporate Code of Ethics and our Ethical and Compliance Conduct Standards. The manual outlines the conduct standards that all officers and employees are required to maintain as they carry out their everyday duties, and is intended to help everyone in the Company understand compliance properly.(b) Internal reporting systemThe Company has an internal system for reporting improprieties. This system has both internal (Legal Affairs Department and Audit & Supervisory Board Members) and external (an advising attorney) contact points. It allows employees to make reports and receive consultation by various means including telephone, fax, email, and postal mail. The Company’s Guidelines on Handing Internal Reports clearly states that, apart from cases when the system is deliberately misused, informants will not be dismissed or subjected to unfair treatment under this system.43TOKAI CARBON ANNUAL REPORT 2018Vision and StrategyBusiness ReportFinancial ReportData SectionSustainability Report
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