ISO 26000: Organizational Governance

Governingwith integrity
The JT Group
promotestransparency andaccountability,
creating a solid
framework fordoing business ona global scale.

44 | JT Group - CSR Report 2013 | Organizational GovernanceSupporting businesses with transparent
and sound governance
The JT Group structures its corporate
governance to enable prompt, high quality
decision-making and proper businessconduct. Enshrined within this structure areclearly defined roles and responsibilities thatallow the Group to respond to changing
business environments and manage activities
effectively and efficiently. Additionally,this structure is complemented throughcompliance, internal audits and risk
management strategies.
All employees are expected to represent
their organization in a socially responsible
and ethical manner. They must adhere to

the principles and processes set out by
the JT Group, in relation to organizational
governance. These clearly detail stringent
personal and professional standards, based
upon the Group’s values and operating
philosophies.
Open channels of communication aremaintained among the JT Group’s boards,
management teams, employees and otherinterested parties. Transparent and regular
reporting, governed by regulatory and internal
control mechanisms, achieves stability; whichhelps drive the business forward on all fronts.

Solid governance supports the JT Group’sbusiness operations, internally and with theexternal world.

Organizational Governance | JT Group - CSR Report 2013 | 45

Ensuring effective decision-making and accountability
The JT Group comprises different commercialentities, operational in over 120 countries.
Every company within the Group applies
rigorous and transparent policies to enableeffective corporate and organizational
governance.

Delivering efficientbusiness execution
In Japan, JT employs a corporate governancesystem that facilitates proper and efficient decisionmaking, while adhering to relevant laws andregulations, including the Companies Act of Japanand the Japan Tobacco Inc. Act.
The corporate governance system is a top-down
structure, beginning with the General Meeting ofShareholders where decisions are taken relating
to legal requirements and items embodied in
the Articles of Incorporation. Decisions thencascade down to the Board of Directors, whichis responsible for Group-wide management
strategies, as well as overseeing the execution of all
business activities.

46 | JT Group - CSR Report 2013 | Organizational GovernanceIn addition, the Audit & Supervisory Board ensures
accountability and transparency in the conductof proper business and accounting audits.
The Compliance Committee further enhances
corporate governance by deliberating and acting
on important Group-wide compliance matters. The
Advisory Committee includes external experts andoutside directors, who bring an invaluable external
perspective, advising on the Group’s mid- to longterm direction. The Compensation Advisory Panelconsists of outside directors, outside auditors andthe Chairman; and reviews the policy and the rules
relating to compensation for board members andexecutive officers.
The Executive Committee consults on importantmanagement issues on behalf of the Company’sPresident. This includes reviewing management
policies and plans in relation to overall business
operations.

JT’s Executive Officer system manages Group-widebusiness activities. Executive Officers, who areappointed by the Board of Directors, are assigned
duties in their respective areas of responsibility
which cover business execution, relationshipmanagement and signing business contracts.

Abiding by the JT Group’s
Codes of Conduct
Appropriate behavior, and an awareness of whatis expected of each employee are essential. To thisend, companies within the JT Group each havea Code of Conduct in place. These publications
clearly set ethical standards by which all employees
must abide. Reporting mechanisms are in placeso employees can report suspected misconduct
or violations of the Code of Conduct, or otheroperational guidelines.

The Group’s Compliance Officers are tasked withinvestigating reported violations and are provided
as dedicated contacts for employees at eachentity. Concerns can be reported quickly and infull confidence, ensuring the privacy of employees
who raise concerns. Detailed cases are reported
to Compliance Committees and/or the Board ofDirectors. Raising awareness and communicatingby these mechanisms has resulted in an increasein early-stage reporting, enabling Compliancestaff to take prompt and appropriate actions.
Following an investigation into a reported breach ofconduct, appropriate measures are implemented
if necessary to prevent the recurrence of verified
misconduct, following consultation with therelevant departments and divisions.

Enhancing organizational governance with internalcontrol systems
The JT Group has established a wide range of internal control
systems that underpin its ethical and legal approach to business
operations. Systems relate to compliance, internal audits andrisk management, and are continually reviewed and revised toensure the highest standards of self-regulating organizational
governance.
issues and make suggestions to improve
procedures that might strengthen compliant
behavior.
JT’s Compliance Office has also created a set of
educational tools for employees, to encouragehigh standards of behavior in business operations.
Materials are available on and offline.

Compliance news bulletin ‘Kawara-ban’Raising awareness ofcompliance in Japan
In every JT workplace, compliance meetings are
regularly held for employees to conduct a ‘selfcheck’ in relation to their roles and activities. During
the meetings, employees discuss complianceOver the past three years, JT’s Compliance Officehas issued a quarterly compliance news bulletin.
This includes summaries of cases relating to theCode of Conduct, such as misuse of company
property, or inappropriate disclosure of company
information via social media platforms.
Available on the intranet, it is often printed anddisplayed on bulletin boards in offices and factories
in Japan.

Defining the proper
direction and control of allinternational entities
JTI is made up of hundreds of legal entities inoperation globally. Through the publication of a setof guidelines and policies, the Company brings a
unified approach to all entities, enabling them toabide by the laws and regulations of their placeof incorporation, while operating within JTI’s own
organizational norms.
The Corporate Governance Management System(CGMS) is the JTI policy, which defines theinformation that must be reported by the CGMS
Coordinators, who are also tasked with uploadinginformation into a database, so that up-to-date
information pertaining to any JTI entity is constantlyavailable.
The ‘On Board’ publication acts as a guideline,
setting out the JTI standard model for thecomposition of a Board of Directors of a JTI
entity, as well as the roles and responsibilitiesof the Directors. It explains what is required inappointing a Board Secretary, along with theirduties, and details ‘how, when and where’ Board
meetings should be conducted. Finally templates
are provided, illustrating business reports, Board
meeting agendas and how to record the minutes ofa Board meeting.

François Dugast, JTI Corporate Secretary

François Dugast, JTI Corporate Secretary,
underlines why the policy and the guidelines areessential to the smooth running of the business,including safeguarding the actions of those inpositions of responsibility: “Directors of JTI entities
are given the privilege of making decisions onbehalf of the Company. However, the position
comes with considerable legal obligations andresponsibility. JTI Directors who act in accordancewith domestic legislation are offered theappropriate level of protection with respect to theirpotential liability by JTI, insofar as such cover islegally permitted locally. Having our own policy andguidelines, driven from headquarters, assures usthat our entities are aligned within a framework thatgives employees adequate levels of security, while
delivering effective global corporate governance.”

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