CORPORATE GOVERNANCE

Tokyo Electron maintains a management philosophy that puts
emphasis on maximizing corporate value and enhancing shareholder
satisfaction. To this end, the Company is striving to enhance corporate governance by building an optimal corporate governance structure and managing it effectively. Efforts in this regard are founded on
three basic principles.
Tokyo Electron’s Basic Principles of Corporate Governance
1. Ensure the transparency and soundness of business operations
2. Facilitate quick decision-making and the efficient execution ofbusiness operations
3. Disclose information in a timely and suitable manner

The Corporate Governance Framework
Tokyo Electron uses the statutory auditor system, and has also
adopted the executive officer system to separate the businessexecution function from the board of directors.
The Board of Directors
The board of directors consists of 13 directors, two of whom areexternal directors. During fiscal 2009, the board of directors met on
11 occasions. In order to ensure that the Company can respondquickly to changing business conditions, and to more clearly define
management accountability, the term of office for directors is set atone year.
The board of directors has two committees: the Compensation
Committee and the Nomination Committee, whose activities areintended to improve corporate governance. The Compensation Committee proposes the remuneration to be paid to the Chairman & CEO
and the President at the board meeting for approval. The Nomination Committee selects candidates for directorships for submission
at the annual shareholders’ meeting, as well as candidates for CEO,which it submits at the board meeting for approval. Each of thesecommittees is composed of members of the board of directors,
excluding the Chairman & CEO and the President.
The Board of Statutory Auditors
The Company has four statutory auditors, two of whom are outside
auditors. The statutory auditors not only attend meetings of the boardof directors and other important business meetings, but also conduct
operations audits and accounting audits, and evaluate risk management, in addition to auditing the performance of duties by directors.
During fiscal 2009, the board of statutory auditors met six times.
The Executive Officer System
In order to further clarify the roles of the board of directors and executives in charge of business operations, Tokyo Electron adopted theexecutive officer system in April 2003. This system promotes fast
decision-making and the quick establishment and execution ofbusiness strategies.

Internal Control and Risk Management System
In order to enhance corporate value and ensure that all businessactivities are carried out responsibly, in the interests of all stakeholders, Tokyo Electron is taking steps to strengthen its internal control
systems, and make them more effective. The Company is implementing practical measures in line with the basic policy for internal
control systems established in May 2006, which was partially revisedin April 2008. It is also developing a system of internal control overfinancial reporting based on the Financial Instruments andExchange Law.
Chief Internal Control Director
Tokyo Electron considers the improvement of internal control systems and the management structure to be of great importance. In
June 2008, the Company appointed a Chief Internal Control Director

Diagram of the Corporate Governance Framework, Internal Control System and Risk Management System
Annual Shareholders’ Meeting
Board ofDirectors

Statutory Auditors

Compensation Committee
Nomination Committee
Chief Business Ethics Director
Chief Internal Control Director

Independent Auditors

Confirm the progress of improvements and give instructions
Request for improvement/Report

Representative Directors
Audit and improvement reports

Request for improvement/ReportCompliance & Internal Control Executive Officer

Executive Officers

Committees Ethics Committee
Information Security Committee
Export Transaction Monitoring
Committee

Internal Audit Dept.
(Global Audit Center)

Request for improvement/Report

Audit

Risk Management & Internal Control Dept.
Request for improvement/
ReportMonitoring

Business Depts.

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Tokyo Electron Limited  Annual Report 09

Check and balance

Administrative Depts.

who is working to strengthen internal control based on the basic
policies for internal control decided by the Board of Directors.
Compliance & Internal Control Executive Officer andSection for Risk Management
To structure its internal control and risk management systems more
effectively and improve them further, Tokyo Electron appointed aCompliance & Internal Control Executive Officer in April 2009, atthe same time establishing the Risk Management & Internal
Control Department.
The Risk Management & Internal Control Department evaluates
and analyzes the various risks which could affect the Group, andmanages major risks from a Group-wide perspective.
Internal Audit Department(Global Audit Center)
The Global Audit Center oversees the internal auditing activities ofTokyo Electron and its corporate group. The Center is responsible for
auditing the business activities of the Group’s domestic and overseas
bases, as well as their compliance and systems, and evaluating theeffectiveness of internal control systems. When necessary, the Global
Audit Center also provides guidance to operating divisions.
Coordination Between Statutory Auditors andInternal Audit Department
The statutory auditors coordinate with the department responsible forinternal auditing activities primarily by attending the Global Audit
Center’s report meetings, which are held 22 times per year.
Coordination Between Statutory Auditors andIndependent Auditors
The statutory auditors receive audit plans for the fiscal year from theindependent auditors, as well as explanations regarding auditing
methods and particular areas of focus, among other matters. The
independent auditors audit the year-end financial statements andreview the quarterly financial statements, and report the results of
their audits to the statutory auditors.
The Company provides KPMG AZSA & Co., its independent auditor, with all necessary information and data to ensure that it canconduct its audits during the fiscal year promptly and correctly.

Compliance Framework
Trust is the cornerstone of Tokyo Electron’s business foundation. The
fundamental requirements for maintaining trust are rigorous conformity to ethical standards and compliance with the law, by individual
employees and by each of our organizations. The Group maintains
high standards of ethics and a clear awareness of compliance, placing the utmost priority on compliance with laws, regulations andinternational business standards in all of its corporate activities.
Ethical Standards, Chief Business Ethics Director andEthics Committee
Recognizing the need to establish uniform standards to govern all of
its global business activities, in 1998, the Company formulated the“Tokyo Electron Code of Ethics,” which concretely describes theCompany’s basic views on ethics. The same year, the Company
appointed a Chief Business Ethics Director and established theEthics Committee, which is responsible for promoting businessethics awareness throughout the Company.
In June 2007, the Tokyo Electron Code of Ethics was rewritten tomake it easier to understand, and to reflect the changing ethicalnorms of the current era. To ensure full awareness of the Code, it
was compiled into a booklet, which the Company distributes to all
Group employees, including those overseas.
Compliance & Internal Control Executive Officer
In April 2009, Tokyo Electron appointed a Compliance & Internal
Control Executive Officer to raise awareness of compliance acrossthe Group, and further improve its implementation.
Compliance Regulations
Tokyo Electron has drawn up compliance regulations setting out
basic compliance-related requirements in line with its code of ethics.
The compliance regulations are intended to ensure that all individuals who take part in business activities for the Group clearly
understand the pertinent laws, regulations, international standards
and internal company rules, and continuously apply these rules in allof their activities.
Compliance Education for Employees
Information on compliance issues is available to employees via theCompany intranet. The Company also conducts web-based training
programs for employees, and takes other steps to promote broad
awareness of compliance throughout the Company.
Internal Reporting System: Hotline
In the event that an employee becomes aware of any activity which
may violate laws, regulations or principles of business ethics, theCompany operates an internal reporting system (Hotline) that
employees may use to report their concerns. Strict confidentiality is
maintained to protect the whistleblower, and ensure that they are notsubject to any disadvantage or repercussions.

Remuneration for Directors, Executive Officers andStatutory Auditors
The Company and its subsidiaries (excluding listed companies) haveintroduced incentive systems, such as business results-based remuneration, and stock options linked to share prices. Effective fromfiscal 2006, the Company revised its executive remuneration system
to link remuneration more closely to financial performance andshareholder value and also improve management transparency andits competitive strength.
Remuneration System for Executives
1. The remuneration for Company directors and executive officers iscomposed of two elements: a fixed monthly salary, and an annualbonus which is linked to earnings performance.

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Tokyo Electron Limited15

2. The total amount of performance-linked remuneration (annualbonuses) for directors and executive officers of the Group is set at
a maximum of 3% of consolidated net income. This remunerationis split between cash bonuses and stock-based remuneration(stock options), at a ratio of roughly two to one. The stock-based
remuneration takes the form of new stock warrant contracts withan exercise price of one yen per share. This is because current
securities and exchange regulations make it difficult to introduce
and implement direct share issuance, or the sort of transferrestricted shares that are used in countries such as the UnitedStates. The restricted period on exercising stock options is set atthree years.
3. The earnings-linked remuneration (annual bonuses) of external
directors does not include stock options.
4. In order to ensure that statutory auditors maintain full independence from management pressures, the compensation of statutory auditors consists of a fixed monthly salary only.
5. Retirement allowances for directors, statutory auditors and executive officers were abolished at the end of fiscal 2005, as part of therevisions to Tokyo Electron’s remuneration system for executives.
Remuneration linked to corporate performance comprises a relatively large share of executives’ total remuneration. Tokyo Electron
believes this will give executives a strong incentive to improve theCompany’s earnings performance and elevate the share price,
since they share in both the benefits and the risks experienced
by shareholders.

manner if the information is deemed useful in providing stakeholders
with an accurate understanding of the Company.

Disclosure of the Individual Compensation ofRepresentative Directors
In order to increase transparency and reflect shareholders’ interests,
Tokyo Electron discloses the remuneration paid to each representative director (Chairman & CEO and President & COO), as well as theaggregate remuneration paid to directors and statutory auditors, in its
business report, which is sent to shareholders along with the Noticeof Annual General Meeting of Shareholders.

IR Spokespersons
To ensure that information is accurate and disclosure is fair, theCompany’s major investor relations activities will be undertaken by
official IR spokespersons—either the CEO, the COO, the IR director,
or representatives of the IR department. In principle, information on
the Company shall not be provided to the press, or to persons connected with the securities market, by any executive or employee ofTokyo Electron acting alone other than official IR spokespersons.
When necessary, IR spokespersons may formally appoint other executives or employees to speak on their behalf.

Disclosure Policy
Tokyo Electron is committed to disclosing information about theCompany in a fair, prompt and accurate manner, to ensure that all
stakeholders, including shareholders and other investors, can obtainan accurate, in-depth understanding of the Company and its activities, and evaluate the Company’s corporate value appropriately. TheCompany also solicits feedback from its stakeholders as part of its
information disclosure activities, and uses the feedback as a point ofreference to guide corporate management.
Information Disclosure Standards
Tokyo Electron complies fully with the Financial Instruments andExchange Law, and the Tokyo Stock Exchange’s listing regulations
pertaining to marketable securities.
Furthermore, even when the information is not subject to thelisting regulations pertaining to marketable securities, the Company
discloses the information proactively, in a fair, prompt and accurate

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Tokyo Electron Limited  Annual Report 09

Disclosure Practices
If it is subject to the marketable securities listing regulations (materialinformation), Tokyo Electron will release information simultaneously
in a press release, and via the Tokyo Stock Exchange’s “TimelyDisclosure Network” (TDnet), and will post the information on its
website as soon as possible, following the official announcement.
Even when it does not fall into the category of “material information,”
the Company will voluntarily disclose information which may be ofinterest to stakeholders, in a fair, accurate, and easy-to-understandmanner, either on its website or in printed form, through various
means of communication.
Tokyo Electron conducts meetings to discuss its financial resultswith securities analysts and investors; these meeting are also open tomembers of the press. The company makes audio and video recordings of its fiscal year-end and mid-term financial results meetings,and posts these recordings on the Company’s website. All of thedocuments distributed at its quarterly financial results meetings arealso posted on the website.
To ensure that foreign investors have fair and equal access to theinformation, the Company strives to disclose all information simultaneously in Japanese and English. However, due to the time required
for translation, there may be cases where the posting of English
information to the website is delayed slightly.

Shareholder Measures
Tokyo Electron mails a Notice of Annual General Meeting of Shareholders to shareholders more than three weeks in advance of themeeting, as one of its measures to vitalize these meetings and topromote smooth and efficient voting. It also sets the date of theCompany’s meeting to avoid days on which many such meetings areconcentrated. In addition, shareholders are free to cast their votes
via the Internet. Moreover, Tokyo Electron participates in the webbased voting platform for institutional investors operated by Investor
Communications Japan Inc. (ICJ). To supplement the above shareholder meeting-related initiatives, Tokyo Electron’s website carries
notices, resolutions and presentation materials of shareholders’meetings. An English version of the Notice of Annual General
Meeting of Shareholders is also provided.