TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

9CONTENTS
CONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Review of Operations
and Business Outlook

Financial Section

Corporate GovernanceCorporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate GovernanceCorporate Governance
Against a backdrop of ongoing business globalization, Tokyo

clearly define management accountability, the term of office forconsolidated return on equity (ROE), two performance

Internal Control System and Risk Management

Electron maintains a management philosophy that places

directors is set at one year.

indicators of consolidated business results. Necessary

Tokyo Electron is implementing measures related to Internal

adjustments are then made when there are special factors

Controls Over Financial Reporting based on the Financial

that should be taken into account, such as principal

Instruments and Exchange Act. In response to the May 2015

emphasis on improving corporate value for its shareholders
and all other stakeholders. To this end, the Company

The Audit & Supervisory Board

considers it important to strengthen corporate governance. InThe Company has five Audit & Supervisory Board Members,

performance indicators for the term under review, includingchanges to the Companies Act and the Ordinance forline with the following three basic principles, the Company

three of whom are outside Audit & Supervisory Board

profits and losses, and so on. In principle, performance-

Enforcement of the Companies Act, the Company has updated

works to maintain a highly effective, optimized corporate

Members. The Audit & Supervisory Board Members attend

linked compensation comprises cash bonuses and stock-

the Fundamental Policies Concerning Internal Controls withingovernance structure while upgrading and strengthening its

meetings of the Board of Directors and other important

based compensation. Performance-linked compensation isthe Tokyo Electron Group and is working to strengthen internalinternal control systems and risk management system.

business meetings, audit the performance of duties bylimited to five times the fixed yearly remuneration. The ratio

control systems as a corporate group and to improve thedirectors, determine audit policy and the division of auditingof cash bonuses to stock-based compensation has

audit system of the Audit & Supervisory Board in terms ofTokyo Electron’s Basic Principles of Corporate

duties among Members at Audit & Supervisory Board

generally been one to one. Stock-based compensation

concreteness and robustness.

Governancemeetings, and examine the Group’s execution of operations.

consists of granting share subscription rights with a set

1. Ensure the transparency and soundness of business operations

Through these and other measures, Audit & Supervisory

strike price of one yen per share and a three-year vesting

2. Facilitate quick decision-making and the efficient execution

Board Members work to provide effective auditing. During

period before the granted stock options may be exercised.

fiscal 2015, the Audit & Supervisory Board met seven times.

3. T he performance-linked compensation of outside directorsof business operations
3. Disclose information in a timely and suitable manner

Risk Management System
To more effectively strengthen the internal control and risk
management systems of the entire Group, Tokyo Electron has

does not include stock-based compensation.
Outside Directors and Outside Audit & Supervisory
Board Members

established a dedicated risk management and internal control

4. The compensation for Audit & Supervisory Board Membersfunction within the General Affairs Department under theconsists only of a monthly fixed remuneration, to maintainexecutive officer in charge of compliance and internal control.

independence from management.

This function analyzes the risks which could affect the GroupThe Corporate Governance Framework

From the viewpoint of objectively ensuring the effectiveness ofTokyo Electron uses the Audit & Supervisory Board system

the decision-making of the Board of Directors, Tokyo Electron

5. Retirement allowance systems for corporate directors andbased on the Companies Act, and furthermore has

has appointed two outside directors to the Board: Mr. Hiroshi

Audit & Supervisory Board Members have been abolishedreduce risk, such as requiring self-assessments from relevant

established its own Compensation Committee* andInoue, who is Chairman of the Board at Tokyo Broadcastingsince the end of fiscal 2005, as part of the revisions todepartments related to identified key risk factors. It also

Nomination Committee** to increase the transparency andSystem Holdings, Inc., and Mr. Masahiro Sakane, who isTokyo Electron’s executive compensation program.

reports on risk management activities to the Audit &objectivity of management. The members of theseCouncilor at Komatsu Ltd. Additionally, to objectively ensurecommittees are directors or Audit & Supervisory Board

the reasonableness of the audits, Tokyo Electron hasMembers, excluding the representative directors. Also, toappointed three outside Audit & Supervisory Board Members:

more clearly define the roles of the Board of Directors and theMr. Mikio Akaishi, Mr. Takatoshi Yamamoto and Mr. Ryuji

executive body and to facilitate quick decision-making, Tokyo

Sakai, who is an attorney at law of Nagashima Ohno &Electron has adopted the executive officer system since 2003,

Tsunematsu. Mr. Mikio Akaishi conducts audits of the Tokyoand in 2015 established the Corporate Senior Staff (CSS),Electron Group as a full-time Audit & Supervisory Board

composed mainly of executive officers, as a deliberative bodyMember.

Supervisory Board Members and the Board of Directors.

Diagram of the Corporate Governance Framework, Internal Control System and Risk Management System
Shareholders' Meetingfor the Group’s global strategy. Moreover, Tokyo Electron has
been disclosing the individual remuneration of representativeCompensation for Corporate Directors and Audit &directors since 1999 in recognition of the importance ofSupervisory Board Members

managerial transparency for shareholders.
* 	Compensation Committee: This committee makes recommendations to theBoard of Directors on the director remuneration system as well as
representative director remuneration itself.
** 	Nomination Committee: This committee nominates director- and CEOcandidates, and submits them to the Board of Directors for approval.

compensation more closely to financial results andshareholder value, raising corporate competitiveness, andenhancing management transparency.
1. The compensation for corporate directors consists of a

The Board of Directors
The Board of Directors consists of 13 directors, two of whom
are outside directors. In principle, the Board of Directors meets

Board of Directors

Compensation Committee
Nomination Committee

monthly fixed remuneration and a performance-linkedcompensation.
2. The performance-linked compensation system foronce a month. During fiscal 2015, the Board of Directors met

corporate directors is designed to align compensation moreon 12 occasions. In order to ensure that the Company canclearly with financial results and increases in shareholder

respond quickly to changing business conditions, and to morevalue. It takes into account consolidated net income andAudit & Supervisory
BoardChief Business Ethics DirectorChief Internal Control Director
Chief CSR Promotion Director

Tokyo Electron has adopted the following executive
compensation program with the intention of tying

and, as necessary, promotes measures to manage andRequest for improvement/Report

Representative Directors

Confirm the progress of improvements and give instructions
Audit and improvement reports

Request for improvement/ReportCompliance & Internal Control Executive Officer
CSR Promotion Executive Officer

Internal Audit Dept.
(Global Audit Center)

Executive Officers

Committees Ethics Committee
Information Security Committee
Export Trade Control Committee

Independent Auditors

Request for improvement/Report

CSR Promotion Council
Risk Management & Internal Control Function(General Affairs Dept.)
Request for improvement/Report

Monitoring

Administrative Depts.

Check and balance

Business Depts.

Audit

TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

10CONTENTSCONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Review of Operations
and Business Outlook

Financial Section

Corporate GovernanceCorporate GovernanceCorporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate GovernanceBusiness Ethics and Complianceinternational standards and internal company rules, andoversee the meeting. Under the leadership of the CSRThe Global Audit Center oversees the internal auditing

Stakeholder trust is the cornerstone of business activities. In

continuously apply them in all of their activities.

Promotion Executive Officer, the Group is working to further

activities of the entire Tokyo Electron Group. The Center isorder to maintain trust, it is necessary to continuously act inAuditing by the Internal Audit Department

enhance CSR activities.

responsible for auditing the business activities of the Group’s

rigorous conformity to business ethics and compliance. In line

domestic and overseas bases as well as their compliance andwith the Fundamental Policies Concerning Internal Controls

The Tokyo Electron Group uses its e-learning system tosystems, and for evaluating the effectiveness of internal

within the Tokyo Electron Group, all Group executives andprovide mandatory web-based training covering the basics ofcontrol systems. As necessary, the Global Audit Center also

employees are required to maintain high standards of ethics

compliance, export-related compliance and other topics for all

provides guidance to operating divisions.

and to act with a clear awareness of compliance.

executives and employees. The Group also implementsCompliance EducationConstituent of theFTSE4Good Global Index

specialized web-based training on insider trading and otherCoordination between Audit & Supervisory Board

Business Ethics

Members and Internal Audit Department

In 1998, Tokyo Electron formulated the Code of Ethics of theThe Audit & Supervisory Board Members coordinate with theTokyo Electron Group to establish uniform standards toGlobal Audit Center, a department responsible for internal

govern all of its global business activities. In the same year,

auditing activities, primarily by attending its report meetings.

subjects that is tailored to particular job positions andfunctions.

since September 2003. The FTSE4Good Global Index is a social
responsibility investment (SRI) index provided by the FTSE Group,Internal Reporting System

the Company appointed a Chief Business Ethics Director andThe Group operates an internal reporting system that

established the Ethics Committee, which is responsible foremployees can use to report concerns related to any activity

Coordination between Audit & Supervisory Board

promoting business ethics awareness throughout the Group.

which may violate laws, regulations or principles of businessMembers and Independent Auditors

The Ethics Committee comprises the Chief Business Ethicsethics. The entire Group has established an ethics hotline andDirector, the Ethics Committee Chairman and the presidents

a compliance hotline, and this reporting system is also inThe Audit & Supervisory Board Members receive audit plans

Tokyo Electron has been a constituent of the FTSE4Good Global Indexa world-leading index firm wholly owned by the London Stock Exchange.

Dialog with Investors
IR Activities

for the fiscal year from the independent auditors, as well asof major Group companies in and outside Japan. The

place at each overseas base. In all cases, this system ensures

Striving to maintain dialog with investors, Tokyo Electron

explanations regarding auditing methods and particular areascommittee meets semiannually to report on ethics-related

that strict confidentiality is maintained to protect

appoints an executive officer in charge of IR and maintains aof focus, among other matters. The independent auditors

matters at Group companies and discuss such matters as

whistleblowers and ensure that they are not subject to any

dedicated Investor Relations Department under the direct

audit the year-end financial statements and review themeasures to promote ethics and compliance.

disadvantage or repercussions.

control of the president & CEO.
Tokyo Electron holds earnings release conferences forquarterly financial statements, and report the results of theiraudits to the Audit & Supervisory Board Members.

Compliance Systemsecurities analysts and institutional investors with such

Tokyo Electron has appointed an executive officer in charge ofCSR (Corporate Social Responsibility)

speakers as the CEO and the executive officer in charge ofcompliance and internal control as part of ongoing efforts toThe Tokyo Electron Group regards as its greatest socialaccounting. The Group also participates in IR conferences inthat it can conduct its audits during the fiscal year promptly

raise awareness of compliance across the Group and to further

responsibility achieving sound and sustained corporate growthand outside Japan, at which the executive officer in charge ofand correctly.

improve its implementation. In addition, Tokyo Electron has

in order to contribute to the development of society throughIR speaks, and holds individual meetings.

drawn up the Compliance Regulations setting out basic

the provision of superior products, technologies and services.

The spokespersons for the IR Department hold individualcompliance-related requirements in line with the Code ofTo further promote CSR initiatives, the Group has establishedmeetings with investors and periodically relay the opinions ofEthics. The Compliance Regulations are intended to ensure

a CSR Policy as well as dedicated CSR promotion structure.

investors at these events to the CEO and the executive officer

The Company provides KPMG AZSA LLC, its independent
auditors, with all necessary information and data to ensurein charge of IR so that feedback can be of use inthat all individuals who take part in business activities for theGroup clearly understand pertinent laws, regulations,

CSR Policy

management.

In 2013, Tokyo Electron adopted a CSR Policy based on theDoes Tokyo Electron have these major components of corporate governance?
Compensation Committee

Yes

Composed of directors, excluding representative directors,
or Audit & Supervisory Board Members

Nomination Committee

Yes

Composed of directors, excluding representative directors,
or Audit & Supervisory Board Members

Company’s Corporate Philosophy and Management Policies,

Shareholders’ Meeting

codifying its basic stance and values with regard to CSRTokyo Electron mails a Notice of Annual General Meeting ofactivities and concretely stating its corporate social

Shareholders to shareholders more than three weeks inresponsibility and policies. By understanding its duties as aadvance of the meeting as one of its measures to vitalize

good corporate citizen and earnestly responding to thethese meetings and to promote smooth and efficient voting. It

demands of society, the Tokyo Electron Group seeks toalso sets the date of the Company’s meeting to avoid days oncontribute to society and create hope for the future.

which many such meetings are concentrated. In addition,

Outside directors

Yes

Two of the 13 directors are outside directors

Outside Audit & Supervisory Board Members

Yes

Three of the five Audit & Supervisory Board Members areoutside Audit & Supervisory Board Members

Executive officer system

Yes

Disclosure of individual remunerations of representative directors

Yes

Performance-linked compensation system

Yes

Stock options system

Yes

Retirement allowance system for executives

Noformulate and review CSR promotion plans and indicators,

initiatives, Tokyo Electron’s website carries notices,

Anti-takeover measures

Noand newly appointed a Chief CSR Promotion Director toresolutions, and voting results of shareholders’ meetings.

shareholders are free to cast their votes via the Internet.
Disclosed since 1999
Does not apply to outside directors andAudit & Supervisory Board Members

CSR Promotion Council, Chief CSR Promotion

Moreover, Tokyo Electron participates in the web-based voting

Director, CSR Promotion Executive Officer

platform for institutional investors operated by ICJ, Inc.

In 2014, the Group established the CSR Promotion Council toTo supplement the above shareholder meeting-related