Corporate Governance

As an “energy frontier corporate group” that focuses on

Management StructureManagement Structure Designed for Objectivity and Swiftness

natural gas, Tokyo Gas has a management philosophy thataims at the realization of comfortable lifestyles and environ-Tokyo Gas takes a proactive stance in employing outside officers.
The Company has created a system featuring multiple auditing

mentally friendly cities. We work to ensure continued devel-and supervisory layers in its aim to achieve highly objective andopment while consistently earning the trust of customers,

transparent governance. In 2002, we reduced the maximum number of directors to raise the speed and effectiveness of manage-

shareholders, and society. Based on this philosophy, ourment decision-making. At the same time, we reinforced andfundamental concept of enhancing corporate governance isclarified the function for supervising business execution byintended to achieve a continuous increase in our corporate

employing independent outside directors. (As of June 30, 2010,

value by maximizing the value provided to all of our stake-the Board of Directors comprises three outside directors and eightinternal directors.) The Advisory Committee, established in 2005,

holders. We are also endeavoring to develop systems andis made up of three internal directors and three representatives

measures to further augment corporate governance, and arefrom outside directors and outside auditors. This structure aims to

implementing them with a commitment to management

ensure that the selection of director candidates is fair and appropriate. The committee also deliberates officer compensation inlegality, soundness, and transparency. Tokyo Gas continues

accordance with the Company’s basic policy (described below).

to emphasize the importance of accurate and prompt deci-

The five corporate auditors, three of whom are outside auditors,

sion making, efficient business operations, strengthening ofstrictly audit the legality and appropriateness of the performanceof duties of the directors. Furthermore, they proactively makeauditing and monitoring functions, and clarification of man-recommendations at Board of Directors, and Corporate Executive

agement and executive responsibilities.

Committee meetings to enhance the effectiveness of monitoring.
The Corporate Executive Committee meets once a week, inprinciple, to deliberate and make decisions on matters of management importance, ensuring accurate and speedy decision-making
and the effective execution of operations. The Company employs
an executive officer system (with 25 executive officers as ofJune 30, 2010), to execute operations in accordance with Boardof Directors’ resolutions. The system is designed to devolve

Initiatives to Strengthen Corporate GovernanceContinuous growth in corporate value

2000

Management
Strategy

Ensuring sound, transparent management

October 2002
Medium-term
management planfor 2003–2007:“Frontier 2007”

January 2006
Medium-term management
plan for 2006–2010: “Creation
and Cultivation of New
Natural Gas Markets”

Internal
Governance

Information
Disclosure

CORPORATE GOVERNANCE

January 2009
Medium-term management
plan for 2009–2013:“Evolution andAdvancement of Integrated
Energy Business”

April 2004–
Strategic business unit system(building of group management system,
and maximization of group corporate value)

Organizational
Structure

Management
Structure

32

2009

June 2002–
Management structure reform• Reduction of regular number of
directors (from 30 to 15)• Appointment of outside directors• Introduction of executive officer system• One-year term of office
June 2002–
Reinforcementof internal audit
structure

June 2001–
Start of overseas
IR activities

February 2005–
Establishment ofAdvisory Committee(consideration of
director candidates
and officer remuneration)

November 2002–
Reinforcement ofcompliance system• Establishment of Management
Ethics Committee• Establishment of ComplianceDepartment
April 2003–• Earlier publicationof business results• Introduction ofquarterly disclosure

June 2005–
Reform of officer remuneration system• Formulation and disclosure ofbasic policy• Abolition of retirement benefit
system, and other measures

April 2003–
Reinforcement of risk
management structure• Introduction ofEnterprise Risk
Management system
April 2004–
Consolidated
accounting for
all companies

April 2006–
April 2008–
Establishment of • Establishment of Risk
Internal Control
Management Committee
Promotion
Committee

July 2005–
Publication of
CSR Report

April 2008–
Reevaluation of IR organization• Establishment of
IR Department• Consolidation of risk
management function in
IR Department

authority and responsibility and foster the rapid execution ofWith regard to auditing, in addition to corporate auditors theoperations. Executive officers report on the status of execution toCompany has established the Internal Audit Department as an

directors and the Board of Directors, and these bodies supervise

internal audit organization. The department monitors the businessexecutive officers’ activities on this basis. To clarify the job respon-

activities in each segment of Tokyo Gas and its consolidated

sibilities of directors and executive officers, their terms of officesubsidiaries, as well as the state of the development and opera-

have been fixed at 1 year.

tion of internal control and risk management. To implement

To promote transparent management and a flexible and open

specialized audits efficiently, the Internal Audit Department hasorganization, in fiscal 2002 the Company established a Manage-

developed a structure of four groups, specializing in financial,ment Ethics Committee. We also formed in-house committees tooperational, information system, and compliance audits. In April

address issues that are important from a management perspec-

2009, an internal control group was established to evaluate thetive, such as compliance, risk management, customer satisfaction,effectiveness of internal control regarding financial reporting.

and safety. This structure facilitates the sharing of information
within the Group, as well as deliberation of and adjustments to the

Objective and Transparent Officer Remuneration

Group’s overall direction.

In fiscal 2005, Tokyo Gas restructured its officer remuneration
system and published details of the new system with the aim of

Toward an Effective Internal Control Systemfurther enhancing management objectivity and transparency as

Under our internal control system, the Board of Directors, which

well as clarifying the management responsibility for businessincludes three independent outside directors, determines theperformance.

basic policies for the development of the important business

1. Role of executive and remuneration

operations plans and the internal control systems and monitors

	The role demanded of executive is to seek to enhance short-,

the performance of the directors. In accordance with resolutions

medium-, and long-term corporate value, and executiveby the Board of Directors, the executive officers act to carry out

remuneration shall serve as an effective incentive for themto perform that role.

business operations as well as to develop and operate the internal
control system. In addition, we have established the Corporate

2. Level of remuneration

Executive Committee as a deliberative body to assist the Board

	The level of executive compensation shall be suitable for therole, responsibility, and performance of the executive.

of Directors. The committee deliberates provisions stemmingfrom Board of Directors resolutions and important management-

3. Performance-linked remuneration scheme

related issues.

	The performance-linked remuneration scheme is meant to

Corporate Governance Structure
Customers

Shareholders / Investors

Local Community
General Shareholders’ Meeting

Appointment

Appointment

ReportReport submission

AnswerAdvisory Committee2

ReportAppointment

Board of Directors1
Inquiry

Audit

Board of Corporate
Auditors3
Collaboration

Report submission

Management Ethics Committee
ReportCollaboration

Collaboration

Internal Audit Dept.

Independent Auditors

MonitorPresident (Corporate
Executive Committee4)
Approval

Deliberation
and report

Customer Satisfaction Promotion Committee
Investment Evaluation Committee
Environmental Committee

Settlement and monitor

Report submission

CSR Promotion Committee
Risk Management Committee

Audit

Other In-House Committees

Audit

Add to agenda and report

Strategic Business Units / Support Units(each unit, subsidiaries & affiliates)

General Shareholders’ Meeting

1
2
3
4

Safety Committee

Decision and risk monitoring

Stakeholders

Tokyo Gas Co., Ltd.

Business Operations

Board of Directors: 11 directors (3 outside directors, and 8 internal directors)
Advisory Committee: 3 representatives from outside directors and outside auditors, Chairman, Vice Chairman, and President
Board of Corporate Auditors: 5 corporate auditors (3 outside auditors, and 2 internal auditors)C orporate Executive Committee: President, 3 Executive Vice Presidents, 9 senior executive officers(3 of the representative directors also serve as President and Executive Vice Presidents.)

TOKYO GAS ANNUAL REPORT 201033

Total Remuneration for Directors and Corporate Auditors (Fiscal 2009)
Thousands of
U.S. dollars
Type ofremuneration

Millions of yen
Type ofremuneration
Total
remuneration

Base

BonusesTotal
remuneration

Base

Bonuses

¥430
74

¥374
74

¥56
—

$4,623795$4,021
795

$602
—

64

58

6

688

623

64

Remuneration for ten directors (excluding outside directors)
Remuneration for three corporate auditors (excluding outside auditors)
Remuneration for seven outside officers (outside directors and outside
auditors)Compensation for Independent Auditors (Fiscal 2009)
Millions of yen

Thousands of U.S.
dollars

¥326
7
¥333

$3,50575$3,580

Remuneration for auditing services
Remuneration for non-auditing services
Total

firmly motivate the executives to execute management strate-

operations, all under the responsibility of unit managers. The aim

gies, and is also meant to reflect their performance clearly onof this cooperative approach is to maximize our Group potential

their remuneration.

and further strengthen our competitiveness.

4. Share-purchase guideline

shareholder in management and improve shareholder value

Risk Management
Enterprise Risk Management System Responds to andDiscloses Information on Growing Risks

over the long term.

In fiscal 2003, the Company established a groupwide Enterprise	The establishment of the share-purchase guideline is meant tofirmly motivate the executives to reflect the perspective of a

5. Assurance objectivity and transparency

Risk Management (ERM) system, which includes risk manage-	The Company shall assure objectivity and transparency ofment regulations and documented rules concerning major risks

remuneration by establishing the “Advisory Committee” com­that require management intervention.

prising outside directors, outside corporate auditors, and the

The IR Department’s Risk Management Group was estab-Company’s directors to govern the system of remuneration.

lished to promote overall risk management, and approximately
110 Risk Management Promotion Officers have been deployed

Concentrating Group Effort to Survive in the Faceof Competitionin Tokyo Gas and its consolidated subsidiaries, and in this way

With the deregulation of the energy industry, Tokyo Gas now

year, we review risks, evaluate fluctuations in the importance of

faces escalating competition from both inside and outside therisks, and assess the implementation and improvement status ofindustry. In April 2004, we introduced the “Strategic Businesscountermeasures. This system facilitates the steady implemen-

Unit” (SBU) system, which is designed to focus all of thetation of the ERM-PDCA (Plan-Do-Check-Act) cycle.

ERM is promoted. Under this risk management system, every

resources of the Tokyo Gas Group on the task of surviving and

Furthermore, to improve the level of ERM, in fiscal 2008, thesucceeding in an increasingly competitive environment. Under

Risk Management Committee was established to review risks,

this structure, Tokyo Gas corporate divisions are linked withbuild up the ERM system, and periodically assess and evaluateGroup companies to form business units in each business area.

its operational status. The committee reports to the Corporate

The divisions and companies work closely together on tasks

Executive Committee and the Board of Directors and secures

ranging from the formulation of business strategies to thethe necessary approvals.

allocation of management resources and the management ofMajor Risks Requiring Management Intervention
Accidents and disasters

Resource procurement supply interruption risk, Natural disaster risk, City gas and electricity production/supply disruption,
Ensuring the safety of city gas and quality problems affecting gas equipment, Damage due to reputation resulting from city
gas accidents caused by other gas companies

Market risksMarket price and interest rate fluctuation risks

Risks accompanying businessexecution
Risks related to information
management and system operation
Risks related to corporate social
responsibility

34

CORPORATE GOVERNANCE

Risks faced by existing business (Change in procurement costs, Decline in gas sales volume due to weather fluctuations,
Decline in demand due to intensified competition, Demand risk, Delay in the development of new technology, and Changes
in laws, regulatory systems, or energy policies of the national governments and local governments), Delayed cultivation of
new markets, Inability to recover investments
Outflows of personal information, Failure or malfunction of IT backbone systems, Interruption of communication withcall centers
Response to new environmental regulations, Compliance violations, Inadequate customer satisfaction or responses
to customer needs

As a result of the ERM system, we can identify and clarify

activities for each unit. These include development of compli-

the latest major risks that reflect changes in the management

ance promotion systems, encouraging awareness and educa-

environment, and we can provide appropriate disclosure of risktional campaigns about the code of conduct, compliance risk

information to the capital markets and other stakeholders. Also,

reduction measures, maintenance of advisory systems, and theas a result of periodic monitoring through the Corporate Execu-

broad-based distribution of information within and beyond thetive Committee and Board of Directors’ meetings, we canTokyo Gas Group companies.

respond appropriately to risks that are becoming more diverse,
complex, and sophisticated.

To cultivate an understanding of compliance, we promote a
thorough awareness of ongoing activities related to our code of
conduct that was revised in 2004. We also are moving forward

Crisis Management Responsibility as a Public Company

with a compliance casebook designed for applying the code ofBecause the Company provides public services that comprise a

conduct to various problems in the workplace, so as to achieve

lifeline, for many years we have also had a crisis management

the permeation of compliance.

system that serves as a response system in case that a risk-

Compliance risk countermeasures include internal and exter-

related event actually occurs. Specifically, we have formulated

nal advisory systems. By operating these systems effectively,

Emergency Response Organization Regulations. In case of any

we are endeavoring to ensure that compliance-related problems

type of crisis, the Emergency Response Organization responds

are discovered and resolved quickly so that our corporate self-

to the situation immediately in accordance with the Emergency

regulatory processes will continue to function effectively. The

Response Organization Regulations. Possible crises include

Compliance Audit Group also works steadily to mitigate risks bymajor natural disasters, such as earthquakes, or production or

implementing follow-up audits to verify progress in tackling con-supply disruptions arising from major accidents at pipelines orcerns identified at first auditing.

terminals, as well as influenza, terrorism, failures in mission-criti-

We monitor the effectiveness of Group compliance promo-

cal IT systems, and compliance problems. Periodic training istion activities by conducting regular compliance awareness sur-conducted in relation to major risk response measures. The

veys of all employees. The results of these surveys are

Company has also formulated a Business Continuity Plan (BCP)

reflected in initiatives for the following years.

outlining its responses in the event of a major earthquake ofan outbreak of influenza. This plan is in place to reinforce theDisclosure
Enhancement of IR Activities

Company’s risk management system.

Top management takes an active role in Tokyo Gas IR activities,

the magnitude assumed by Japan’s Cabinet Office, as well as

disclosing such broad-ranging information as management

Compliance
Promoting Compliancestrategies, progress, and performance and engaging in interac-

Our stance is reflected in three basic policies calling for the fos-management’s thoughts with investors in this way can help

tering of compliance awareness, the cooperation of each work-

close the gap between our real corporate value and the market

place with compliance efforts based on the Group policy, andassessment of the Company. In particular, during the period fol-the establishment of compliance PDCA cycles.

lowing the announcement of our financial results, we engage intive communication with investors. We believe that discussing

We have established the Management Ethics Committee,

IR activities including visits by top management to institutional

chaired by the President. This committee discusses at the man-investors in Japan and overseas. Briefings and individual meet-agement level basic compliance policies and all aspects of com-

ings are also used as opportunities for wide-ranging discussions.

pliance initiatives by the Group, monitors the implementation ofcompliance-related measures, and confirms activity programsfrom the following year and thereafter. We have also established the Compliance Department to lead compliance-related

Compliance Structure
Board of Directors
President

Corporate Auditors

ReportManagement Ethics Committee
Chairman: President
Members: Head of divisions / departments, Directors in charge

ReportInternal Audit Dept.

ReportCompliance Dept.
Instruction / report

Support / report

Each division / business unit

Compliance Committee

Each department of Tokyo Gas
Compliance audit(risk understanding)

Consultation / notification

Subsidiaries & affiliates

Report / consultation

Report / consultation

Employee

TOKYO GAS ANNUAL REPORT 201035

Board of Directors and Corporate Auditors

April 1967

Director, Chairman

Director, Vice Chairman

Mitsunori Torihara

Tadaaki Maeda

Joined the Company

April 1970

April 2004	Representative Director, Executive Vice President,
Chief Executive of Corporate Communication Div.
and in charge of Compliance Dept.

Resources Div. and in charge of Internal Audit Dept.
April 2006	Representative Director, Executive Vice President andChief Executive of Strategic Planning Div.

April 2006	President, Representative Director, and Executive President
April 2010

Director and Chairman of the Board

Joined the Company

June 2004	Director, Senior Executive Officer, Chief Executive of Energy

April 2007	Representative Director, Executive Vice President, Chief Executive ofEnergy Production Div., and in charge of Environmental Affairs Dept.
April 2010

April 1970

Representative Director, President

Representative Director

Tsuyoshi Okamoto

Shigeru Muraki

Joined the Company

July 1972

April 2007	Representative Director, Executive Vice President, and in charge ofCompliance Dept., and Internal Audit Dept.

and General Manager of Volume Sales Dept. of Energy Solutions Div.
June 2007	Director, Senior Executive Officer and Chief Executive of Energy
Solutions Div. and General Manager of Volume Sales Dept. of Energy

April 2009	Representative Director, Executive Vice President, and in charge of
Personnel Dept., Secretary Dept., General Administration Dept.,
and Compliance Dept.

Joined the Company

April 2007	Senior Executive Officer, Chief Executive of Energy Solutions Div.

Personnel Dept., Secretary Dept., General Administration Dept.,

April 2010

Director and Vice Chairman

Solution Div.
April 2010	Representative Director, Executive Vice President, Chief Executive ofEnergy Solutions Div. and General Manager of Volume Sales Dept. ofPresident, Representative Director, and Executive President

Energy Solution Div.

April 1972

Representative Director

Director

Toshiyuki Kanisawa

Tsutomu Oya
April 1975

Joined the Company

June 2007	Director, Senior Executive Officer, and Chief Executive of Residential

Joined the Company

April 2006	Senior Executive Officer and Chief Executive of Energy Resources Div.
June 2009	Director, Senior Executive Officer and Chief Executive of Energy

Sales Promotion Div.

Resources Div.

April 2009	Director, Senior Executive Officer, and Chief Executive of Housing

April 2010	Director and Chief Executive of Energy Production Div., and in charge

Development Div.

of Environmental Affairs Dept.

April 2010	Representative Director, Executive Vice President, in charge of
Personnel Dept., Secretary Dept., General Administration Dept.,
and Compliance Dept.

April 1974

Director

Director

Michiaki Hirose

Mikio Itazawa

Joined the Company

April 1974

April 2009	Senior Executive Officer and in charge of Corporate Planning Dept.
and Affiliated Companies Dept.
June 2009	Director, Senior Executive Officer and in charge of Corporate

Maintenance Div.
April 2004	Executive Officer and General Manager of Pipeline Dept. of Pipeline

Planning Dept., Corporate Communications Dept., and AffiliatedCompanies Dept.

Network Div.
April 2007

April 2010	Director, In charge of Corporate Planning Dept., Project Management
Dept., Corporate Communication Dept., and Affiliated Companies Dept.

Joined the Company

June 2003	General Manager of West Pipeline Business Dept. of Pipeline andSenior Executive Officer and Division Manager of Pipeline Network Div.

June 2010	Director, Senior Executive Officer and Division Manager of Pipeline
Network Div.

Auditors

Outside Auditors

Yasunori Takakuwa

Shoji Mori	(Vice Chairman, Institute for International Socio-Economics Studies)

Kunihiro Mori

Yukio Masuda	(Standing Consultant, Mitsubishi Corporation)
Masayuki Osawa	(Outside Auditor, PACIFIC CONVENTION PLAZA YOKOHAMA)36

CORPORATE GOVERNANCE

Message from Outside Directors

Outside Director

Outside Director

Outside Director

Katsuhiko Honda

Sanae Inada

Yukio Sato

Current position

Current position

Current position

Advisor, Japan Tobacco Inc.

Attorney

Vice Chairman, The Japan Institute of International Affairs

June 2007

June 2007

Director of the Company

Director of the Company

June 2010

Director of the Company

As an outside director, I look at management

The gas industry faces not only a global

In Japan, the concept of “corporate gover-

and operational initiatives from an impartial

economic slowdown but also fierce competi-

nance” was originally imported, and Japaneseperspective. I am deeply impressed by thetion among forms of energy, and Tokyo Gas

society faces the challenge of how best to sys-

straightforward and steady efforts of managers

itself has many challenges in responding totematize and implement corporate governanceand employees to enhance the Company’s

electricity-related campaigns. The Company

practices. I think that there are three key points

enterprise value, as well as by the high ethicalshould strongly emphasize the outstandingfor companies that conduct business opera-

and moral standards that are evident in theenvironmental friendliness of natural gas,

tions in society: following rules, self control,

execution of business activities.

as well as the fact that Tokyo Gas is a veryand self-awareness regarding the corporate

Tokyo Gas is a “public utility” that provides

environmentally friendly company. I also thinkpresence in society. For Tokyo Gas, which issocial infrastructure, but I believe that the pub-that the Company needs to further enhancea public enterprise that has responsibility forlic interest aspect of a company’s operations is

the corporate image.

stability and safety in the lives of the public,

not intrinsic to the company itself but rather is

In the midst of today’s intense competition,

granted to the company by the customers whothere may be some concerns and disorientation

In addition, to respond appropriately to the

support it. The Company has made customer

in worksites. It is important for executives torequests of customers and society as well as

satisfaction its number one priority, and moving

demonstrate strong leadership and clear vision

those of shareholders and investors, I think it

forward I would like to see the Company fur-in order to foster a strong feeling of trust

is important not to neglect the enhancement

ther enhance service, with all Group employees

among employees.

of transparency in business activities. Moreworking together under the leadership of thethese are especially important points.

Further, the Company should implement new

than anything else, it is important to pay careful

operational development, with consideration forattention to outside opinion. Of course, it goes

As the Company works to move beyond theglobal initiatives. I would like to see the Compa-

without saying that it is also important to havedramatic changes in the current operating envi-

ny concentrate the capabilities of All Tokyo Gas,a solid grasp on international developments

ronment while anticipating future changes, I will

including affiliated companies, without beingthat is reflected in decision-making and to

do my best to make a contribution to sustaining

limited by existing concepts, and aim to be amaintain a focus on preparedness.

and enhancing the Company’s enterprise value.

global, integrated energy enterprise.

new president.

Executive Officers
President

Tsuyoshi Okamoto

Executive Vice Presidents

Shigeru Muraki
Toshiyuki Kanisawa
Hirokazu Hayashi

Senior Executive Officers

Tsutomu Oya
Division Manager of Energy Production Div., In charge of Environment Dept.
Michiaki Hirose	In charge of Corporate Planning Dept., Project Management Dept., Corporate Communication Dept., andAffiliated Companies Dept.
Mikio Itazawa
Division Manager of Pipeline Network Div.
Norikazu Hoshino
Dispatched to the Japan Gas Association
Kazuo Yoshino
In charge of Investor Relations Dept., Finance & Managerial Accounting Dept., and Accounting Dept.
Hisao Watanabe
Division Manager of Technology Development Div. and Information Technology Div.
Manabu Fukumoto	In charge of Purchasing Dept., Real Estate Management Dept., Major Site Development Dept., andInternal Audit Dept.
Matsuhiko Hataba
Division Manager of Residential Sales Promotion Div.
Koichi Aonuma
Division Manager of Housing Development Div.
Yutaka Kunigo
Division Manager of Energy Resources Div.

Executive Officers

Akio Maekawa
Masahiro Mikami
Hiroaki Kubota
Hidefumi Takahashi
Hideaki Obana
Hiroaki Kobayashi
Yoshihiro Tanabe
Fumio Murazeki
Takashi Uchida
Hideaki Arai
Satoru Yasuoka

Division Manager of Energy Solution Div., and General Manager of Volume Sales Div.
In charge of Personnel Dept., Secretary Dept., General Administration Dept., and Compliance Dept.
Division Manager of Regional Development Marketing Div.

Coordinator, Energy Solution Div.
General Manager of General Administration Dept.
General Manager of Energy Production Dept., Energy Production Div.
General Manager of Kanagawa service branch, Residential Sales Promotion Div.
General Manager of Corporate Communications Dept.
General Manager of Customer Safety Dept., Residential Sales Promotion Div.
Deputy Chief Executive of Energy Solution Div. and General Manager of Energy Sales & Service Planning Dept.
General Manager of Residential Sales Planning Dept., Residential Sales Promotion Div.
General Manager of Corporate Planning Dept.
General Manager of Pipeline Dept. Pipeline Network Div.
General Manager of Gas Resources Dept. Energy Resources Div.

TOKYO GAS ANNUAL REPORT 201037