Corporate GovernanceStrengthening the Effectiveness of the Board of DirectorsIn 2016, Tokai Carbon established the Nomination Committee, Remuneration Committee, Management Committee, and Risk Management & Compliance Committee 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.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.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.In addition, at the March 2020 Annual Meeting of Shareholders, a proposal was approved for the payment of compensation to targeted directors, none of whom are external directors. This compensation is part of a plan to provide the targeted directors with restricted stock as a form of remuneration separate from the existing total remuneration approved at a previous Annual Meeting of Shareholders. 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. In addition, we have prepared the Compliance Manual as a code of conduct to be practiced by all officers and employees in their daily work activities. Internal reporting systemTokai Carbon has implemented an internal reporting system to encourage employees to report legal or regulatory violations, and improprieties, that have occurred or are thought to have occurred. Employees can submit reports and request advice through either internal or external contact points and can remain anonymous. The Company’s Guidelines on Handling 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.Prevention of bribery and other corrupt behaviorOur Code of Ethics states that we will conduct business activities through fair competition and maintain sound and normal relations with politicians, government officials, suppliers, etc. It also states that we will comply with all laws and conduct business activities based on social norms and common sense. Tokai Carbon, therefore, prohibits, and takes positive action to prevent, the payment or acceptance of bribes, and behavior arousing suspicion of such activities. We also prohibit conspiracy to embezzle company funds or commit money laundering.Tokai Carbon is raising awareness of the prevention of this kind of behavior, familiarizing employees with our anti-corruption policy through training courses and in our in-house magazine so that all employees are able to avoid actions that could lead to corrupt behavior.Moreover, we have made no political contributions in fiscal 2019.WEB “Notice of FY2019 Annual Meeting of Shareholders”https://contents.xj-storage.jp/xcontents/AS04435/ebab62ff/8e5f/4da8/8c43/1e15717dbde0/20200312092948015s.pdf42TOKAI CARBON ANNUAL REPORT 2019
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