Sumitomo Corporation Corporate Governance Principles

The following is an unofficial English translation of “Sumitomo Corporation Corporate GovernancePrinciples.” The Company provides this translation for your reference and convenience only and without any
warranty as to its accuracy or otherwise. Please also refer to “Terms and Conditions of Use” of Sumitomo
Corporation website.

Item

Content

1 Purpose
The purpose of Sumitomo Corporation Corporate GovernancePrinciples (hereafter, “these Principles”) is to set out the fundamental
principles relating to corporate governance at Sumitomo Corporation(hereafter, “the Company”).
2 Circumstances
Leading to Adoptionof these Principles
2.1
The circumstances leading to adoption of these Principles are
as follows:(1) The business spirit of Sumitomo is a business and management
concept that has continued to flow throughout Sumitomo’s
operations for over 400 years. The Sumitomo Spirit was embodied
in the “Business Principles” drafted in 1891 (in the 24th year of
Meiji). Namely:
1. Sumitomo shall achieve strength and prosperity by placing prime
importance on integrity and sound management in the conduct of its
business.
2. Sumitomo shall manage its activities with foresight and flexibility
in order to cope effectively with the changing times. Under nocircumstances, however, shall it pursue easy gains or act
imprudently.
(2) In 1998, the Company adopted the following “Management
Principles” together with its “Activity Guidelines”, based on the
Sumitomo Spirit:
We aim to be a global organization that constantly stays a stepahead in dealing with change, creates new value, and contributes
broadly to society.
・To achieve prosperity and realize dreams through soundbusiness activities.
・To place prime importance on integrity and sound managementwith utmost respect for the individual.
・To foster a corporate culture full of vitality and conducive toinnovation.
(3) The Sumitomo Spirit and Management Principles are the ethicalbackbone of the Company and serve as the unwavering truths that
support corporate governance. Realizing that, the Company has

1repeatedly engaged in studies concerning an optimal managerial
system, namely a method of governance which is responsive to thetrust placed in us by our shareholders while at the same timemaking management that takes in the interests of all stakeholders areality.
(4) Based on the above, the Company views the essence of corporate
governance as being the “improvement of management
efficiency” and the “maintenance of sound management,” as wellas the “securing of managerial transparency” which is required toaccomplish the same. The Company therefore established these
Principles as its principles concerning corporate governance.
2.2
The Company realizes that following these Principles toestablish and maintain better governance and pursue its businessactivities will help it to grow and develop sustainably as acorporation. In addition, such efforts will help the Company toenhance its corporate value over the medium-to-long term and tofulfill its social mission as a corporation. Realizing, moreover, that
this will also serve the interests of its shareholders and all its otherstakeholders, including clients, employees, and local communities,
the Company plans to maintain unstinting efforts to improve its
governance still further in future.
3 Board of Directors
3.1 Role
3.2 Composition

3.3 Administration•

The board of directors renders decisions concerning key
management matters and oversees the operation of the business by
the directors and the executive officers.
(1) The board of directors is comprised of all directors and audit &supervisory board members. The number of directors shall be set
within a scope which enables due deliberation and speedy andreasonable decision making by the board of directors. Currently,
around 15 directors or less is considered an appropriate number.
(2) The composition of the board of directors shall be diverse in termsof experience, knowledge, specialty, gender, etc.
(3) Two or more outside directors shall be elected so that theCompany can ensure appropriate decision-making in meetings ofthe board of directors and further enhancement of supervisory
functions.
(1) In principle, a meeting of the board of directors shall be convened
once each month.
(2) In order to ensure the attendance of directors and audit &supervisory board members at meetings of the board of
directors, notice of the convening of regular meetings of theboard of directors for the following year (from January to
December) shall be provided by late October each year.
(3) Matters related to resolutions of the board of directors and specific23.4 Advisory Body

3.5 Evaluation
4 Directors(Board Members)
4.1 Qualifications

4.2 Representative
Directors
4.3 Chairman

standards for submitting matters for deliberation, as well as key
points regarding the administration of board of directors meetings,
shall be prescribed in the Company’s internal rules “Matters
Related to the Administration of Board of Directors.”(4) In order to fully promote the function of the board of directors andrecognizing the need for all directors and audit & supervisory board
members to have accurate and complete information regarding
items on the agenda, materials required for consideration of theagenda items shall, except in emergencies, be provided beforehand
to all directors and audit & supervisory board members.
• A Nomination and Remuneration Advisory Committee
shall be established to serve as an advisory body for the board of
directors, where more than half of the members of the Nomination
and Remuneration Advisory Committee are comprised ofoutside directors.
Every year the board of directors shall analyze and evaluate its
own effectiveness as a whole.
(1) <Internal Directors>• Candidates for internal directors shall be honest in character,highly insightful and capable and shall have expert businessknowledge and extensive experience including management
experience. Gender and nationality, etc. shall be of noconsequence.
(2) <Outside Directors>• Candidates for outside directors shall be honest in character, highly
insightful and capable and with a view to bringing in diverse
perspectives, shall have knowledge of their particular area ofexpertise as well as extensive knowledge and experience. Genderand nationality etc. shall be of no consequence.
• Except for the Chairman and outside directors, in principle, alldirectors shall be representative directors.
(1) In principle, based on checks and balances, there shall be both a
Chairman and a President and Chief Executive Officer, and no one
individual shall serve as both the Chairman and the President andChief Executive Officer.
(2) Role and Responsibilities• The Chairman shall convene a meeting of the board of directors andpreside as chairman at the meeting. The Chairman shall also be
engaged in external activities, such as activities in business
communities and activities related to the Sumitomo Group.
• The Chairman shall supervise the management of the Company andhave no representative powers and no authority to execute business
operations.
(3) Policy and Procedure for Appointment
A new Chairman shall be appointed by a resolution of the board of
directors after the Nomination and Remuneration Advisory
Committee deliberates on, and recommends to the board of
directors, the person who is considered best suited to fulfill the roleand responsibilities stipulated under Item 4.3(2) above, at theappropriate timing in light of such term of office of the Chairman as
stipulated under Item 4.4(2) below.
(4) Policy and Procedure for Dismissal
If the Chairman is considered not properly fulfilling his/her role andresponsibilities, the Nomination and Remuneration Advisory3

4.4 Term of Office

4.5 Remuneration

4.6 Duties

Committee shall, at a meeting to be convened by its chairman(which meeting shall not be attended by the Chairman), deliberate
whether or not to dismiss the Chairman and shall report thedeliberation results to the board of directors. The board of directors
shall then decide by a resolution whether or not to dismiss the
Chairman.
(5) Policy and Procedure for Appointment of Successor Chairman after
Dismissal• A successor Chairman shall be appointed by a resolution of theboard of directors after the Nomination and Remuneration Advisory
Committee deliberates on, and recommends to the board of
directors, the person who is considered best suited to serve as the
successor Chairman.
• However, if the board of directors cannot immediately decide on a
successor Chairman, another director shall act as the convener andchairman of meetings of the board of directors in place of the
Chairman, in the order which shall be separately decided by theboard of directors and in which the directors shall exercise theirauthority to act on behalf of the Chairman, and the procedure forappointing a successor Chairman shall be carried forward as
promptly as possible.
(1) The term of office for a director shall be one year, but this shall notpreclude reelection.
(2) Notwithstanding the foregoing, in principle, the term of officeof the director serving as the Chairman shall not exceed six
years in total. The term of office serving as outside directors
shall not exceed six years in total.
• Remuneration provided to directors shall be within the monetaryamount approved by a general meeting of shareholders and shall bedecided by the board of directors, to which the Nomination andRemuneration Advisory Committee will report the results of its
study with respect to remuneration.
(1) Directors shall comply with laws, ordinances and the articles ofincorporation and shall exercise the duty of a good manager tofaithfully fulfill their duties while taking into consideration theinterests of all stakeholders.

4(2) Directors shall not engage in activities contrary to the interests of
the Company. Moreover, the Company shall be prohibited frommaking monetary loans to individual directors.
(3) Directors, when trading stocks and the like, shall comply with laws,
ordinances, and the internal regulations “Rules for the Prevention of
Insider Trading,” and shall exercise due care not to cause any
suspicions of insider trading.
(4) Absent the consent of the Company, internal directors shall not
engage in their own businesses or concurrently serve in other posts.
5 Nomination andRemuneration Advisory
Committee
5.1 Deliberation mattersof the Nomination andRemuneration Advisory
Committee

The Nomination and Remuneration Advisory Committee shall deliberate
the matters 1 through 8 below and shall report the outcome of suchdeliberation to the board of directors. Additionally, the committee shallalso deliberate and determine any matters delegated by the board of
directors that are not included in following matters, and report theoutcome of such deliberation or decision to the board of directors.
1. Policy and procedure for appointment and dismissal of the President
and Chief Executive Officer
2. Policy and procedure for appointment and dismissal of the Chairman
3. Nomination criteria for directors and audit & supervisory board
members
4. Appointment and dismissal of the President and Chief Executive
Officer (including nominating successors to the President and Chief
Executive Officer)
5. Nominations of candidates for directors and audit & supervisory board
members (including deciding representative directors and executive
directors)
6. Appointment of members of the Management Council
7. Structure and level of remuneration and bonuses for directors andexecutive officers, as well as limits for remuneration of audit &supervisory board members
8. Advisor system
5.2 Composition of the (1) The Nomination and Remuneration Advisory Committee shall becomprised of internal and external members.
Nomination andA majority of the committee members shall be external members. The
Remuneration Advisory
number of committee members shall be set within the range which
Committee
allows the committee to carry out thorough consultations and to makeprompt and reasonable decisions.
Specifically, the committee shall have a total of five members,
including two internal members who are the Chairman and thePresident and Chief Executive Officer and three external members
who are outside directors.
(2) The committee chairman shall be an external committee member.
(3) The Chief Administration Officer (HR Strategy Dept.) shall serve as
the secretariat.
The external members shall be those of the outside directors who
5.3 Selection Criteria
specifically have an extensive knowledge and experience and deepfor External Members
insight, both in and outside the Company, about the types of matters tobe deliberated by the committee. The composition of external members
shall ensure diversity in terms of knowledge, experience, specialty andso on.
The external members shall be appointed by a resolution of the board of
5.4 Procedure fordirectors.
Appointment ofExternal Members

55.5 Procedure for
Appointment ofCommittee Chairman

The committee chairman shall be appointed by a resolution of the boardof directors based on the outcome of election by the committee
members’ mutual vote.

5.6 Consequences ofCommittee Chairman’s
Inability to Act or Other
Unavailbility

If the committee chairman is unable to act or otherwise unavailable,another external member shall act in place of the chairman in the orderdecided by a resolution of the board of directors in which the external
members shall exercise their authority to act on behalf of the chairman.

5.7 Term of Office ofExternal Members andCommittee Chairman

The term of office of an external member and the committee chairman
shall be the same as the term of office of a director.

5.8 Procedure for
Passing a Resolution

Decisions of the Nomination and Remuneration Advisory Committee
shall be made by a majority vote of the members present at a meeting
attended by a majority of the members.
The Nomination and Remuneration Advisory Committee shall be
convened by its chairman.

5.9 Convener
6 Executive Officers
6.1 Qualifications

6.2 Executive Officer
SystemCandidates for executive officers shall be honest in character, highly
insightful and capable and shall have expert businessknowledge and extensive experience including management experience.
Gender and nationality etc. shall be of noconsequence.

(1) With the approval of the board of directors, the following
executive officers shall be appointed and delegated the execution ofwork:
President and Chief Executive Officer
Executive Vice President
Senior Managing Executive Officer
Managing Executive Officer
Executive Officer(2) With the exclusion of the Chairman and outside directors, alldirectors shall concurrently serve as executive officers.

6.3 President and Chief (1) The President and Chief Executive Officer shall be responsible for
Executive Officer
the overall management of the Company.
(2) Selection criteria (qualities, competences, experience, etc.)
The President and Chief Executive Officer shall be a person who
personifies the Sumitomo business philosophy, has the following
qualities and competences required for the President and Chief
Executive Officer, and has global and diverse experience andachievements in business operation and company management: Being fair and impartial and being disciplined and selfcontrolled
 Having leadership and the ability to get messages across Having foresight and the ability to develop strategies
 Having the ability to get things done and to make innovativechanges Possessing perseverance and mental fortitude
Any revision of the selection criteria described above shall be
determined by a resolution of the board of directors following theNomination and Remuneration

66.4 Appointment/
Dismissal
6.5 Term of Office

Advisory Committee’s deliberations and submission of thedeliberation results to the board of directors.
(3) Policy and Procedure for Appointment
A new President and Chief Executive Officer shall be appointed by aresolution of the board of directors after the Nomination andRemuneration Advisory Committee nominates candidates for thepost of President and Chief Executive Officer based on the selection
criteria listed in Item 6.3(2) above and selects from among thenominated candidates the person who is considered best suited toenhance the Company’s corporate value as the new President andChief Executive Officer, at the appropriate timing in light of suchterm of the President and Chief Executive Officer as stipulated under
Item 6.5(2) below and submits nominations to the board of directors
as recommendations.
(4) Policy and Procedure for Dismissal
In light of the appropriate evaluation of the Company’s performanceand other aspects, if the President and Chief Executive Officer isconsidered not properly fulfilling his/her function, the Nomination andRemuneration Advisory Committee shall, at a meeting to be convened
by its chairman (which meeting shall not be attended by the President
and Chief Executive Officer), deliberate whether or not to dismiss the
President and Chief Executive Officer and shall report the deliberation
results to the board of directors. The board of directors shall thendecide by a resolution whether or not to dismiss the President andChief Executive Officer.
(5) Policy and Procedure for Appointment of Successor President andChief Executive Officer after Dismissal• A successor President and Chief Executive Officer shall be appointed
by a resolution of the board of directors after the Nomination andRemuneration Advisory Committee deliberates on, and recommends
to the board of directors, the person who is considered best suited toserve as the successor President and Chief Executive Officer.
• If the board of directors cannot immediately appoint a successor
President and Chief Executive Officer, the person who is required toexercise the authority to act on behalf of the President and Chief
Executive Officer stipulated under an internal rule, shall exercise theauthority to execute operations on behalf of the President and Chief
Executive Officer, and the procedure for appointing a new President
and Chief Executive Officer shall be carried forward as promptly as
possible.
• Executive officers shall be appointed and dismissed by resolution of
the board of directors.
(1) The term of office for an executive officer shall be one year, but
this shall not preclude reelection.
(2) Notwithstanding the foregoing, in principle, the term of office of theexecutive offer serving as the President and Chief Executive Officer
shall not exceed six years in total.

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6.6 Remuneration

6.7 Duties(1) Remuneration of executive officers shall be set as a position-based
amount and shall reflect the Company’s performance and theevaluation of the executive officer. These standards shall beapproved by the board of directors, to which the Nomination andRemuneration Advisory Committee will report the results of its study
with respect to remuneration.
(2) The amount of remuneration for an executive officer position shallbe determined by the President and Chief Executive Officer basedon the foregoing standards, pursuant to the authorization of theboard of directors.
(3) Remuneration provided to executive officers also serving as
directors shall be included in the remuneration provided as adirector.
• Executive officers shall assume the same duties as the directors(see foregoing Item 4.6).

7 Management Council
7.1 Role
7.2 Composition

7.3 Administration

The management council deliberates on and renders decisions
regarding specific key matters related to management within thescope of its mandate from the board of directors.
(1) The management council shall be comprised of the President andChief Executive Officer and specific executive officers.
(2) The President and Chief Executive Officer shall preside aschairman at meetings of the management council.
(1) In principle, a meeting of the management council shall be
convened once each week.

8(2) Matters related to resolutions of the management council andspecific standards for submitting matters for deliberation, as well
as details relating to administration of meetings, shall be prescribedin the Company’s internal rules “Matters Related to the
Administration of the Management Council.”
8 Committees
Committees shall be established as advisory bodies to the President
and Chief Executive Officer or the management council etc. withregard to specific matters that are important from the perspective of
the Company as a whole. Such committees shall include the following:• The Company Investment Committee shall deliberate on importantmatters, such as investment and financing.

8.1 Company
Investment
Committee
8.2 Corporate Strategy •Promotion
Committee
8.3 Internal Control
Committee•

8.4 Compliance
Committee•

The Corporate Strategy Promotion Committee shall prepare anddevelop the company-wide management plan and measures
based on the review of the management plan and its status andanalysis of the internal and external environment.
The Internal Control Committee shall strive for the planning,
implementation, evaluation and improvement of effective internal
control across not only the Company but also all subsidiaries andaffiliate companies in the group to procure the improvement ofmanagement efficiency and the maintenance of managementsoundness.
The Compliance Committee shall strive for thorough compliancenot only by the Company but by all subsidiaries and affiliatecompanies in the group, based on the maintenance of managementsoundness.

9 Audit & Supervisory
Board
9.1 Role•

9.2 Composition•

9.3 Administration•

The audit & supervisory board holds the authority prescribed bylaw and ordinances. In addition, decisions concerning auditing
policies, methods for examining the status of the business andassets of the Company, and other matters related to the executionof the duties of audit & supervisory board members shall bemade by resolution of this board.
There shall be five audit & supervisory board members, with threeof these being outside audit & supervisory board members.
In principle, the audit & supervisory board shall meet once eachmonth.

10 Audit & Supervisory
Board Members
10.1 Role(1) Each audit & supervisory board member shall audit the executionof duties by directors as members of the board of directors and as
executive officers (representative directors).
(2) Audit & supervisory board members may attend all otherinternal meetings, including those of the management council.
Audit & supervisory board members may also request directors,
executive officers or employees to report about the business andmay examine the status of the business and assets of theCompany. In addition, audit & supervisory board members may
request any subsidiary to report about its business and may
examine the status of any subsidiaries’ businesses and assets.

910.2 Qualifications

10.3 Term of Office(1) <Internal Audit & Supervisory Board Member>•
Candidates for internal audit & supervisory board members
shall be honest in character, highly insightful and capable,
and shall have expert business knowledge and extensive
experience. Gender and nationality etc. shall be of noconsequence.
(2) <Outside Audit & Supervisory Board Members>• Candidates for outside audit & supervisory board members shall behonest in character, highly insightful and capable, and hold a highdegree of specialized knowledge and a wealth of experience in
specific fields such as law, accounting, business management, andthe like.
Gender and nationality etc. shall be of no consequence.
•
In principle, the term of office for serving as outside audit &supervisory board members shall not exceed eight years in total.

10.4 Remuneration•

Remuneration provided to audit & supervisory board members shallbe within the monetary amount approved by a general meeting ofshareholders, and shall be decided upon mutual consultation of theaudit & supervisory board members.

10.5 Duties(1) Audit & supervisory board members shall attend meetings of theboard of directors, and when necessary shall express their opinions
thereat.
(2)Audit & supervisory board members shall observe laws, ordinances
and the articles of incorporation, and shall exercise the care of agood manager in the faithful execution of their duties.
(3) Audit & supervisory board members, when trading stocks and thelike, shall comply with laws, ordinances, and the internal
regulations “Matters Related to Insider Trading,” and shall exercise
due care not to cause any suspicions of insider trading.

11 Standards for
IndependenceStandards for independence of outside directors and outside audit &supervisory board members shall be prescribed in the Company’s
internal rules “Standards for Appointment and Independence of Outside
Directors and Outside Audit & Supervisory Board Members.”
12 Council of Outside
Directors andOutside Audit &Supervisory Board
Members
12.1 Purpose

12.2 Composition

In principle, outside directors and outside audit & supervisory board
members shall convene a meeting of the council of outside directors
and outside audit & supervisory board members once each month toenable them to contribute actively to debates at board of directors
meetings.
The council of outside directors and outside audit & supervisoryboard members shall be comprised of outside directors and outside
audit & supervisory board members.
The council of outside directors and outside audit & supervisoryboard members may call the Chairman, the President and Chief
Executive Officer, or internal audit & supervisory board members toattend meetings as required.

13 Disclosure ofInformation

1013.1 Basic Policy
Relating toDisclosure ofInformation
13.2 Basic Policy
Relating to
Dialogue with
Shareholders•

In an effort to bring an accurate understanding of the Company’s
management policies and business activities to all stakeholders, theCompany shall strive to make full disclosure, not limiting itself tothe disclosure of information required by law, but also actively
pursuing the voluntary disclosure of information.
(1) The Company endeavors to explain its business management andactivities, holding a range of meetings as opportunities forcommunication with shareholders and investors. These include thegeneral meeting of shareholders, quarterly financial results
briefings, and individual meetings.
(2) Dialogue with shareholders and investors is supervised by a specificexecutive officer assigned to act as the person responsible for suchdialogue, while the relevant departments within the Company liaise
to distribute information and gather opinions from shareholders andinvestors.
(3) When conducting dialogue with shareholders and investors, insider
information is managed appropriately in accordance with theinternal regulations “Rules for the Prevention of Insider Trading.”

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