Governance > 1. Corporate Governance

GOVERNANCE
To build a better tomorrow, the Marubeni Group has identified Governance for Coexistence with Society as an essential categoryof Fundamental Materiality.
We will deepen our engagement with diverse stakeholders, enhance the effectiveness of the Board of Directors’ oversightfunction, and bring greater transparency to our management in order to build a governance framework that allows for improved
coexistence with society and works toward achieving sustainability.

Corporate Governance Structure
General Meeting of Shareholders
Election and dismissal

Board ofDirectors

Election and dismissal

Audit

Directors
10 (four External)

1. CORPORATE GOVERNANCE

Accounting
audit

Audit &
Supervisory Board

Audit & Supervisory
Board Members
Five (three External)

Audit &
Supervisory
Board
Member’s
OfficeNomination Committee

1-1. Corporate Governance

Governance andRemuneration Committee

Election and dismissal

Basic Policy on Corporate Governance
The Company believes in responding to the expectations of its
stakeholders—shareholders, customers, local community andemployees—by increasing its corporate value to become aproud corporate group committed to social and economic
development and safeguarding the global environment byconducting fair and upright corporate activities in accordancewith the spirit of the Company Creed of “Fairness, Innovation,and Harmony.” To realize this, we have been making efforts toenhance corporate governance as the platform for ensuringsoundness, transparency and efficiency of management. To
coexist with society based on social expectations anddemands, we will deepen our engagement with stakeholders,enhance the effectiveness of the Board of Directors’ oversightfunction, and bring greater transparency to management inorder to strengthen our governance system – in other words,
to practice Governance for Coexistence with Society.

Audit
Department

President

Framework(a) Ensuring rapid and efficient decision-making(b) Ensuring appropriate supervisory functions
The Company ensures appropriate supervisory functions byimplementing various measures, including appointing External Directors that account for a third or more of the membersof the Board of Directors; establishing the Audit & Supervisory
Board Member’s Office; fostering collaboration among the
Audit & Supervisory Board Members, the Audit Department
and the Accounting Auditor; and carrying out advance briefings, on the same occasion, on matters referred to the Boardof Directors for both External Directors and External Audit &Supervisory Board Members.

Compliance Committee

Internal Control Committee
Committee of
Executive Officers

Disclosure Committee

Board of Directors
The Board of Directors comprises 10 Directors (including four
External Directors; nine males and one female. The percentage
of female directors on the Board is 10.0%), and makes decisions
regarding management policy and other important mattersand supervises the execution of duties by Directors.
To clearly segregate management and execution, the Chairman of the Board without representative rights and the authority for business execution, in principle, chairs the Board of
Directors meetings.
The term of Board of Directors is one year to clarify management responsibility and flexibly build optimum management
structure in response to changing management environment.
For information on attendance at meetings of the Board of
Directors, please see pages 6-13 of the Reference Materials for
the General Meeting of Shareholders.

Audit & Supervisory Board
The Audit & Supervisory Board comprises five Audit & Supervisory Board Members (including three External Audit &Supervisory Board Members). The Company adopts a

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MARUBENI CORPOR ATION

Accounting audit

Investment and Credit Committee

Sustainability Management Committee

The Company ensures rapid and efficient decision-making byappointing Directors who serve concurrently as Executive
Officers and are well-versed in the Company’s diverse business activities.

(Cooperation)

Internal audit

Corporate Management
Committee

Committee ofHeads of Divisions

The Company conducts a diverse range of business globally.
Accordingly, the Company has established a corporate audit
governance model of a company with auditors in which theBoard of Directors consisting of Internal Directors and External
Directors has been established (to appoint External Directors
and liaise with the Audit & Supervisory Board) in order toensure rapid and efficient decision-making and appropriate
supervisory functions in management. The Company has
determined that this governance model is functioning effectively as set forth in items (a) and (b) below. Therefore, theCompany will retain the current governance structure.

Accounting Auditor

Appointing, removing, and supervising(Business Execution System)

Business Group
Business DivisionCorporate Staff Group
Domestic and Overseas Branches & Offices

corporate audit governance system and each Audit & Supervisory Board Member is responsible for overseeing Directors
in the execution of their duties by attending important meetings, such as the Board of Directors meetings, and by monitoring business activities and financial conditions inaccordance with the auditing policies and plans set by the
Audit & Supervisory Board.
The Audit & Supervisory Board Members and the Accounting Auditor are striving to grasp the audit status of each otherthrough measures such as exchanging information at monthly
meetings. The Company’s Accounting Auditor for FYE 3/2019
is Ernst & Young ShinNihon LLC. The Audit & Supervisory Board
Members and the Audit Department, the department that performs internal audits, exchange opinions at monthly meetingsand implement audit operations through close cooperation.
The President holds meetings with the Audit & Supervisory
Board Members on a regular basis, reports on execution ofduties and exchanges opinions. Other Directors, Group CEOs,
COOs and Corporate Staff Group General Managers reporttheir duty execution status to the Audit & Supervisory Board
Members every year.

SUSTAINABLE DEVELOPMENT REPORT 201970

Governance > 1. Corporate GovernanceCorporate Management Committee

Nomination Committee

The Corporate Management Committee is an advisory committee for the President and consists of five Representative
Directors including the President, two Senior Managing Executive Officers and three Managing Executive Officers. It deliberates important matters related to management.

The Nomination Committee is an advisory body to the Boardof Directors and the majority of its members are External
Directors/Audit & Supervisory Board Members. The Nomination Committee deliberates on nomination of candidates forthe positions of Director, Audit & Supervisory Board Member
and President, as well as succession plans formulated andimplemented by the President (including necessary qualifications and conditions, successor candidate pool and careerdevelopment plans), and reports to the Board of Directors.
• Committee’s Members: one Internal Director, two External
Directors, one External Audit & Supervisory Board Member• Chairperson: External Director

Committee of Heads of Divisions
The members of the Committee of Heads of Divisions are thePresident, the representative directors, the Division COOs andRegional CEOs and COOs appointed by the President. They
discuss matters pertaining to budgeting, account settlement
and financial planning as well as other issues related to the
execution of business.

Committees
The Company has established various committees forstrengthening corporate governance. Main committees andCommittee Roles
Committee

Role

Chairman

Meeting Frequency

Investment and Credit
Committee

Projects pending approval, such as investments, are discussed and approvedby the Investment and Credit Committee prior to appearing on the Corporate
Management Committee’s agenda.

Managing Executive
Officer, Member ofthe Board(Nobuhiro Yabe)

Held three times amonth in principle

Compliance Committee

The Compliance Committee provides support and guidance with regard topracticing compliance and as such develops, maintains, and manages the
Marubeni Group’s compliance structure.

Senior Executive Vice
President, Member ofthe Board(Yukihiko Matsumura)

Held four times ayear and wheneverelse necessary

Sustainability Management
Committee

The Sustainability Management Committee defines/redefines materiality
inclusive of ESG (environmental, social and governance) considerations acrossall business domains and deals with sustainability-related matters, including
ESG compliance.

Managing Executive
Officer, Member ofthe Board(Nobuhiro Yabe)

Held once a year inprinciple andwhenever else
necessary

Internal Control Committee

The Internal Control Committee is responsible for developing and monitoring
the enforcement of internal control policies based on the Companies Act aswell as drafting revisions when necessary. It also establishes, operates, andverifies the effectiveness of internal control systems for financial reports inaccordance with the Financial Instruments and Exchange Act, while also
drafting internal control reports.

Senior Executive Vice
President, Member ofthe Board(Yukihiko Matsumura)

Held whennecessary

Disclosure Committee

The Disclosure Committee creates disclosure policies, ensures that internal
systems concerning legally mandated and timely disclosure are in place, anddecides the importance and appropriateness of the information targeted forlegally mandated or timely disclosure.

Managing Executive
Officer, Member ofthe Board(Nobuhiro Yabe)

Held whennecessary

Governance and Remuneration Committee
Committee of Executive Officers
The Committee of Executive Officers consists of 34 Executive
Officers (five of whom also serve as Director) and its purpose
is to communicate management policies issued by the President and other information and discuss matters that affectbusiness execution such as financial performance and resultsof internal audits.

The Governance and Remuneration Committee is an advisory
body to the Board of Directors and the majority of its members are External Directors/Audit & Supervisory Board Members. The Governance and Remuneration Committee
deliberates on the policy for determining remuneration for
Directors and Executive Officers as well as appropriateness of
the level of remuneration, and reports to the Board of Directors. The committee also conducts evaluation and review
concerning the overall Board of Directors, including its composition and operation, and reports to the Board of Directors.
• Committee’s Members: two Internal Directors, two External
Directors, two External Audit & Supervisory Board Members• Chairperson: External Director

Roles and Functions of External Directors and External Audit & Supervisory Board Members

Overview of Corporate Governance Systems
Organization Form
Chairperson of the Board
Number of Directors
Number of Audit & Supervisory
Board Members

Company with auditors
Chairman
10 (including 4 External
Directors*)
5 (including 3 External Membersof Audit & Supervisory Board*)＊ All External Directors and Audit & Supervisory Board Members are
independent officers as defined by the Tokyo Stock Exchange.

Roles and Functions of External Directors
Number of Times Convened in FYE 3/2018
Board of Directors

18 times

Audit & Supervisory Board

10 times

Corporate Management Committee

30 times

Committee of Heads of Divisions

3 timesCommittee of Executive Officers

4 times

External Directors offer opinions on business management
drawn from their broad experience and high-level perspective,
and give advice to better implement corporate governance.
External Directors attend the meetings of the Board of
Directors and the Committee of Executive Officers, making
active contributions from the perspective of internal control.
Prior to meetings, External Directors are provided with agendas and fully briefed on management issues and project execution status. Two of the External Directors are members of
the Governance and Remuneration Committee (one is thechairman) and two are members of the Nomination Committee (one is the chairman).
For reasons of appointment, please refer to Marubeni’s
website:https://www.marubeni.com/en/company/governance/
data/20181221cg_en.pdf#page=6

Roles and Functions of External Audit &Supervisory Board Members
External Audit & Supervisory Board Members monitor the
Directors’ execution of duties and draw upon their wealth ofprofessional expertise to offer various recommendations andadvice to enhance the Audit & Supervisory Board.

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MARUBENI CORPOR ATION

their roles are as follows:

External Audit & Supervisory Board Members attend meetings of the Audit & Supervisory Board and also the Board of
Directors and Committee of Executive Officers. In addition,
the External Audit & Supervisory Board Members meet with
the President on a regular basis, as well as with members of
the Audit Department, Corporate Accounting Department,
and external auditors, for an exchange of opinions. They
receive audit-related information from Full-time Audit &Supervisory Board Members, which they use in the executionof their auditing duties. Two of the External Audit & Supervisory Board Members are also members of the Governanceand Remuneration Committee and one is a member of theNomination Committee.
For reasons of appointment, please refer to Marubeni’s website:

https://www.marubeni.com/en/company/governance/
data/20181221cg_en.pdf#page=10

Executive Compensation
Amounts of executive compensation, details of policies regarding calculation methods used to decide compensation, andmethods for making compensation decisions are as follows.
Compensation for Directors and Audit & Supervisory Board
Members is decided based on limits to the amount of totalcompensation for Directors and Audit & Supervisory Board

SUSTAINABLE DEVELOPMENT REPORT 201972

Governance > 1. Corporate GovernanceMembers determined by the General Meeting of Shareholders.
Compensation for Directors is decided through a process
involving discussion and formulation of proposals by the Governance and Remuneration Committee, a body whose membership consists of a majority of External Directors and Audit &Supervisory Board Members, with the proposals then being
approved by the Board of Directors. Compensation for individual Audit & Supervisory Board Members is decided throughdeliberation by the Audit & Supervisory Board Members.
Remuneration for Directors other than External Directors
consists of basic compensation, which is a fixed amount corresponding to each Director’s position, and variable compensation, which is linked to business performance in the previous
business year. Instead of cash, 20% of the aggregation of basic
compensation and variable compensation is granted as compensatory stock options, in order to share the benefits and risksof stock price fluctuations with shareholders and further boost
motivation to improve the Company’s stock price and corporate value. Compensation for Audit & Supervisory Board Members, all of whom are completely independent from businessexecution, consists entirely of basic compensation.
.

Total remuneration and other payments for
Directors and Audit & Supervisory Board Members
in FYE 3/2018•D irectors (other than External Directors): six;
Total remuneration, etc.: ¥512 million•A udit & Supervisory Board Members (other than External
Audit & Supervisory Board Members): three;Total remuneration, etc.: ¥76 million• External Directors/Audit & Supervisory Board Members: ten;
Total remuneration, etc.: ¥84 million

Notes:
1) The amounts less than 1 million yen are rounded off.
2) The maximum annual amount of remuneration for Directors was set at¥1,100 million (including ¥60 million for External Directors; by a resolution of the 92nd Ordinary General Meeting of Shareholders held on June24, 2016), the maximum monthly remuneration for Audit & Supervisory
Board Members was set at ¥12 million (by a resolution of the 88th Ordinary General Meeting of Shareholders held on June 22, 2012) and the
maximum annual amount of compensatory stock options for Directors(excluding External Directors) is ¥220 million (by a resolution of the
92nd Ordinary General Meeting of Shareholders held on June 24, 2016).
3) The Company abolished the retirement remuneration plan at the close of
the 83rd Ordinary General Meeting of Shareholders held on June 22,2007, which also resolved on making a final payment of retirement remuneration. In accordance with the resolution, the Company decided to pay
retirement remuneration to each Director who is eligible to receive thefinal payment either at the time of retirement as Director or at the timeof retirement as Executive Officer, whichever is later, and to each Audit &Supervisory Board Member who is eligible to receive the final payment
at the time of retirement as Audit & Supervisory Board Member. In FYE
3/2018, retirement remuneration was not paid to Directors/Audit &Supervisory Board Members who are eligible to receive a final payment
in relation to the abolition of the Retirement Remuneration plan.

Individuals to whom the total amount ofcompensation paid exceeded ¥100 million
in FYE 3/2018• Teruo Asada (Director): ¥104 million (cash compensation of¥83 million and compensatory stock options worth ¥21
million)• Fumiya Kokubu (Director): ¥128 million (cash compensationof ¥103 million and compensatory stock options worth ¥25
million)Evaluation of Effectiveness of the Board of Directors
The evaluation of effectiveness of the Board of Directors in
FYE 3/2018 was conducted as described below:

I. Framework and Method of Evaluation
1. Target•
All Directors (10 people) and Audit & Supervisory Board
Members (five people) (As of December 2017)(3) Organizational design and composition of the Board of
Directors and other bodies(4) Quality and expertise of Directors and of the Board of
Directors(5) Deliberation by the Board of Directors(6) Relationship and dialogue with shareholders(7) Engagement with stakeholders other than shareholders

4. Evaluation Process
2. Implementation Method•A questionnaire survey was conducted. (Anonymous responses.)
The Company utilized an external specialized institution for
its implementation.

3. Evaluation Items(1) Roles and responsibilities of the Board of Directors(2) Relationship between the Board of Directors and senior
executives

73

MARUBENI CORPOR ATIONThe Board of Directors deliberated in view of the results of theevaluation and review by the Governance and Remuneration
Committee concerning the overall Board of Directors, including its composition and operation, based on the responses tothe questionnaire.

II. Overview of the Evaluation Results
The Board of Directors deliberated in view of the results of theevaluation and review by the Governance and Remuneration

Committee and confirmed that, on the whole, the Board of
Directors is being operated effectively. The Company willcontinue to work to maintain and improve the effectiveness of
the Board of Directors, reflecting the results of the evaluation
and review.

Response to the Corporate Governance CodeMarubeni issued the Corporate Governance Report andMarubeni’s Corporate Governance Code Initiatives in responseto the revised Corporate Governance Code announced by the
Tokyo Stock Exchange on June 1, 2018.

Corporate Governance Reporthttps://www.marubeni.com/en/company/governance/
data/20181221cg_en.pdf
Marubeni’s Corporate Governance Code Initiatives

https://www.marubeni.com/en/company/governance/
data/20181221cgcord_en.pdf
For further information on the corporate governance structure,please refer to Marubeni’s website:

https://www.marubeni.com/en/company/governance/measure/structure/

Marubeni will continue to enhance corporate governance inpursuit of improved medium-to-long-term corporate value.

1-2. Internal Controls
Basic Internal Control Policy
Marubeni seeks to steadily increase and maximize corporate
value through business activities that are in accordance with
its Company Creed*1 and Management Philosophy,*2 and tobuild a stable and sustainable group business foundation. To
this end, the Company, in accordance with the Companies Act
and its implementation guidelines, establishes the policy
described below (hereinafter referred to as the “Basic Internal
Control Policy”) to ensure that all business activities ofMarubeni and the business group (hereinafter referred to as
the “Marubeni Group”) made up of Marubeni and all MarubeniGroup companies (Marubeni’s consolidated subsidiaries andcompanies deemed as equivalent to subsidiaries; the same

shall apply hereinafter) are conducted appropriately. Marubeni
regularly reviews the Basic Internal Control Policy in responseto changes in social conditions so as to realize a system that ismore appropriate and efficient.
＊1. Company Creed
Fairness—Act with fairness and integrity at all times.
Innovation—Pursue creativity with enterprise and initiative.
Harmony—Give and earn the respect of others through cooperation.
＊2. Marubeni Management Philosophy
In accordance with the spirit grounded in “Fairness, Innovation and Harmony,” the Marubeni Group is proudly committed to social and economic development and safeguarding the global environment byconducting fair and upright corporate activities.”

1-2-1. System for ensuring that the execution of duties by Directors and employees
complies with laws and regulations and the Articles of Incorporation(1) Corporate Governancei. Directors and Board of Directors
The Board of Directors, in accordance with laws and regulations and the Articles of Incorporation, sets the importantmatters related to management and supervises the executionof duties by Directors. To clearly segregate execution andsupervision, the Chairman of the Board without representative
rights or authority for business execution, as a rule, chairs theBoard of Directors meetings.
Directors execute business operations and report the situation of their duty execution to the Board of Directors once
every three months or more often based on operations incharge decided by the Board of Directors in accordance withthe laws, regulations and Articles of Incorporation. The term ofoffice of Directors is one year to clarify management responsibility and flexibly build optimum management structure in
response to changing business environment.

Marubeni appoints External Directors to ensure the effectiveness of corporate governance.
Marubeni adopts the executive officer system to improve
efficiency of business execution, and a system where its Group
CEOs participate in the Company’s overall management andsupervise overall operation of the respective business groups incharge by complying with the Company’s management policy.

ii. Audit & Supervisory Board Members and the Audit& Supervisory Board
Audit & Supervisory Board Members audit execution of duties
by the Directors in accordance with the Rules of the Audit &Supervisory Board and the Standards for Audit by the Audit &Supervisory Board Members by exercising their statutory
authority in collaboration with the Audit Department andAccounting Auditor.

SUSTAINABLE DEVELOPMENT REPORT 201974Governance > 1. Corporate Governance(2) Complianceiii. Blocking relationships with anti-social forces

i. Compliance system

Marubeni will stand firm against anti-social activities andforces that are threats to social order and public security, andwill never form or foster relationships with any organizationthat poses such threats.

Marubeni sets forth a code of conduct common for the
Marubeni Group such as the Marubeni Corporate Principles
and Compliance Manual for its Directors and Executive Officers (hereinafter referred to as the “officers”) and employees
to practice corporate activities in accordance with compliance.
To achieve the goal, it establishes various committees including the Compliance Committee and takes various measures.

ii. Internal whistleblowing system
To provide for a situation in which a person learns of a questionable
act from the perspective of compliance and the organizational
reporting line does not function for some reason, Marubeni hasestablished the following compliance reporting and consulting
points for the entire Marubeni Group.

(a) Marubeni Hotline (Compliance Committee line andexternal legal counsel line)
The Compliance Access Point for general compliance mattersfor the Marubeni Group(b) Marubeni Anti-Corruption Hotline
The Compliance Access Point for concerns relating to bribery
and other serious crimes involving the Marubeni Group and its
business partners(3) Internal audit
Marubeni has established the Audit Department directly
under the President to study the appropriateness of duty
execution by executing persons and compliance status andimplements internal audits by the Audit Department andself-inspection of Marubeni company-wide under instructions
from the Audit Department. The results of internal audits arereported to the Board of Directors on a regular basis.

(4) Disciplinary actions
When the execution of duties by an officer or employee resultsin violation of law or regulation, Marubeni shall seek judgement of the Governance and Remuneration Committee, anadvisory committee to the Board of Directors with the majority of members being External Directors/Audit & Supervisory
Board Members, in the case of an officer, and the Award andDisciplinary Committee in the case of an employee, and takestrict actions in accordance with relevant regulations.

1-2-2. Systems to preserve and manage information related to the execution of duties
by Directors(1) Preservation and management of informationand prevention of information leakage
Based on the Regulation for Management of Information
Assets, Marubeni sets forth the assets subject to storage, storage period and employees in charge of managing the information regarding information related to execution of duties byofficers and employees to develop a system to store andmanage information and prevent information leakage.

(2) Browsing information
The officers and Audit & Supervisory Board Members may
browse such information assets at any time.

Officers and employees with titles are given necessary authority for executing their duties based on resolutions of the Boardof Directors and the Regulations of Authority and Duties andmanage risks associated with execution of duties within thegiven scope and take responsibility for the results.

(2) Approval system
Individual projects such as important investment are deliberated by the Investment and Credit Committee, submitted to
the Corporate Management Committee and approved by the
President based on the Regulations of Job Authority Ringi
Approval Procedure. They become subject to approval by the

75

MARUBENI CORPOR ATION(4) Emergency management
In preparation for occurrence of serious issues such as a natural
disaster, Marubeni formulates Business Continuity Plans. Whena serious situation actually occurs, Marubeni establishes an
emergency task force with the President as the head based on
the said plan and makes decisions on and implements concretemeasures to limit the damage and loss to a minimum.

1-2-4. Systems necessary to ensure the efficient execution of duties by Directors(1) M anagement policy, management strategy andmanagement plan
To ensure efficient execution of duties by Directors, Marubeni
sets forth goals shared by all officers and employees at the
Marubeni Group, such as management policy, management
strategy and management plan and instill them, while establishing concrete targets that individual officers and employees
should implement for achieving the goals.

(2) Corporate Management Committee
To ensure efficient execution of duties, Marubeni establishes
the Corporate Management Committee and deliberates onhighest-order policy regarding management and importantcompany-wide matters.

(3) Business Groups and Corporate Staff Group
Marubeni has introduced the Business Group system and delegates authority to Group CEOs to enable a structure thatfacilitates swift decision-making regarding products they arein charge of in Japan and abroad. Further, the Corporate Staff
Group manages, checks and supports the Business Groups ineach specialized field to enable efficient execution of duties.

(4) Clarification of authority, duties and responsibilities
The Board of Directors decides Directors in charge and clearlystipulates each officer’s and employee’s roles, authority, responsibilities and rules for decision-making in various regulations.

1-2-5. Systems necessary to ensure the appropriateness of operations by the Group(1) Marubeni Group operation structure

Board of Directors depending on laws and regulations, Articles
of Incorporation and the importance of the project. The progress of important projects such as a new business is required tobe reported on a regular basis to the Corporate Management
Committee to strengthen individual risk management.

Marubeni shall stipulate necessary systems including a system
for appropriate reporting to Marubeni regarding managers incharge of grasping business status of Marubeni Group companies, giving instructions and supervising, guidelines regarding
the management system of Marubeni Group companies andexecution of duties by Directors etc. of each Marubeni Group
company, a system regarding appropriate management of riskof losses at Marubeni Group companies, a system for ensuring
efficient execution of duties by Directors, etc. of MarubeniGroup companies and a system for ensuring Marubeni Group
companies’ compliance with laws and regulations in order toenhance internal control of the entire Marubeni Group, improvebusiness performance and progress management.
Marubeni Group companies shall ask for advice fromMarubeni regarding important management-related mattersand report to Marubeni.

(3) Risk evaluation(2) Compliance

From the perspective of dispersing company-wide risks,
Marubeni implements integrated risk management to grasp
risks that can be quantified, such as credit and investment
risks regarding countries and regions, industries, markets
and customers.

The Compliance Committee and other committees shall support and give guidance regarding compliance activities by
Marubeni Group companies. Marubeni Hotline and Marubeni
Anti-Corruption Hotline shall be available for officers andemployees of all Marubeni Group companies.

1-2-3. Internal regulations for the risk management of losses and other related systems(1) Principle of authority and duties

Marubeni implements management of qualitative risks
including reputation risks and information security risks,
which are difficult to quantify, through enhancement of compliance structure.

(3) Establishment of system for ensuring
appropriateness of financial reporting andsafeguarding of assets
Marubeni Group shall develop, through activities, etc. of theInternal Control Committee, necessary systems for ensuring
reliability and continuous monitoring of financial reporting suchas consolidated financial statements as well as a system forensuring appropriate acquisition, storage and disposal of assets
held by Marubeni Group companies. It shall also establish theDisclosure Committee and develop the necessary system for
information disclosure in an appropriate and timely manner.

(4) Audits
The Audit Department carries out visiting audits at MarubeniGroup companies and reports the result to the Board of Directors. The Audit & Supervisory Board Members and Accounting
Auditor independently carry out audits or accounting audits
at Marubeni Group companies.

SUSTAINABLE DEVELOPMENT REPORT 201976

Governance > 1. Corporate Governance / 2. Compliance

1-2-6. Matters concerning employees assisting the duties of Audit & Supervisory Board Members,
and matters concerning the independence of these employees from Directors(1) The Audit & Supervisory Board Members
attending important meetings(2) Personnel affairs of the Audit & Supervisory
Board Members’ Office staff

Marubeni establishes the Audit & Supervisory Board Members’
Office and appoints dedicated staff members to assist in theduties of the Audit & Supervisory Board Members.

The Director in charge of human resources shall implement
personnel affairs of the Audit & Supervisory Board Members’
Office (personnel changes, evaluation, disciplinary actions,etc.) by hearing the opinions of the Audit & Supervisory Board
Members in advance and upon receiving their consent.

2. COMPLIANCE
PolicyAs it advances its global operations, Marubeni acts in accordance with the belief that compliance goes beyond merely
following the letter of the law. In its truest sense, compliancemeans corporations—as good members of society—practicing
high levels of ethics, living up to the expectations of stakeholders, and fulfilling their social responsibilities.

To achieve this type of compliance, Marubeni is reinforcing
and regularly improving its compliance systems under theguidance of the Compliance Committee, which is overseen by
the President and CEO. The Compliance Committee oversees
the Marubeni Group Compliance Manual and regularly reviews
its effectiveness and validity in light of changes in laws, regulations, and society.

1-2-7. Systems for Directors and employees to report to Audit & Supervisory Board
Members and other systems for reports to Audit & Supervisory Board Members(1) The Audit & Supervisory Board Members
attending important meetings
The Audit & Supervisory Board Members shall attend Board of
Directors meetings and receive reports from Directors on
execution of duties and other important matters. They shallalso attend the Corporate Management Committee and otherimportant meetings.

(2) Reporting by officers and employees to the
Audit & Supervisory Board Members
The President holds meetings with the Audit & Supervisory
Board Members on a regular basis, reports on execution ofduties and exchanges opinions. Other Directors, Group CEOs,
COOs and Corporate Staff Group General Managers reporttheir duty execution status to the Audit & Supervisory Board
Members every year.
Marubeni develops a system for Directors, Audit & Supervisory Board Members and employees of Marubeni Group
companies, or those who received a report from them, toreport directly or indirectly to the Audit & Supervisory Board
Members.
Notwithstanding the above, the Audit & Supervisory Board
Members may seek reports from officers and employees
whenever necessary.
Marubeni has in place a system to ensure that the person
who makes a report to the Audit & Supervisory Board Members would not be treated unfairly at Marubeni or MarubeniGroup companies because of the concerned report.

Framework
Each company within the Marubeni Group has been developing its own compliance system customized to its own businessactivities. Overseas offices and subsidiaries have also beencreating compliance systems customized to suit the laws,

regulations, and business practices of their respective countries. Overseas offices and subsidiaries formulate their compliance action plans and review their plans.

Organizational Diagram for the Marubeni Group Compliance System
Board of Directors

Audit & Supervisory Board Members

President

Chief Compliance Officer(Chairman of Compliance Committee)
ReportInstructGroup and Branch Office Compliance Committee

1-2-8. Other systems necessary to ensure effective audits by Audit & Supervisory Board Members(1) Collaboration with the Audit Department,
Accounting Auditor and Audit & Supervisory
Board Members of Marubeni Group companies
The Audit & Supervisory Board Members receive respective
audit plans in advance from the Audit Department andAccounting Auditor, and hold regular meetings to exchange
opinions regarding audit policy and audit result reports. The
Audit & Supervisory Board Members cooperate with Audit &Supervisory Board Members of Marubeni Group companies
through the Group Auditor Liaison Meeting and exchange
information regarding the development of internal controls at
each company and their operation.

77

MARUBENI CORPOR ATION(2) Appointment of external experts
The Audit & Supervisory Board independently has a contract
with a corporate lawyer, and if the Audit & Supervisory Board
Members deem it necessary, they can appoint external advisors such as lawyers and certified public accountants.

Reporting Lines(Through Supervisors)

Compliance Committee

direct control

Corporate
Management
Committee

Report or consult through regular reporting lines
Compliance reporting and consultation hotline
Feedback

Report/Consult

Secretariat (ComplianceControl Department)

Employees“Marubeni Hotline”(Compliance Committee)

Instruct/Advice

Marubeni Group Company
Compliance Officer
Compliance Access Point

Reporting Lines(Through Supervisors)“Marubeni Hotline”(External Legal Counsel)
Marubeni Group
Employees

Marubeni Anti-Corruption
Hotline (Serious Crimes,
such as Bribery)(3) Audit-related expenses
Marubeni shall allocate a budget and pay expenses arising fromthe execution of duties by the Audit & Supervisory Board Members, including the cost of appointing external experts describedabove in response to requests from the Audit & Supervisory
Board Members, through a prescribed procedure.

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Governance > 2. Compliance

Response When a Problem Occurs

Initiatives
Stringent Application of Compliance ManualPart of the Marubeni Group’s Company Creed is “Fairness.”
This symbolizes our pledge to always conduct ourselves in afair and upright manner. We have defined Marubeni’s stanceon compliance as: “When you are faced with a choice between
integrity and profit, choose integrity without hesitation.”
Based on this stance, Marubeni has compiled the MarubeniGroup Compliance Manual, which specifies the standards of
behavior that Group officers and employees are expected tofollow in all their daily work activities. Every year, the Company’s executives and employees, as well as the presidents of all
domestic Marubeni Group companies, make a written statement to adhere to the code expressed in this manual. As of
October 2018, the Compliance Manual, now in its 15th edition,
is available in English as well as Japanese, and can be viewed
on the Company’s website.
For further information on the Compliance Manual, please refer
to Marubeni’s website:

https://www.marubeni.com/en/company/governance/measure/compliance/

Anti-Corruption Measures
Overview of the Marubeni Group’s Measures
We believe that transactions that involve unlawful conduct are
not only unnecessary, but also harmful to the MarubeniGroup’s interests. In recent years, an increasing number ofcompanies in both developed countries and emerging countries are refusing to tolerate bribery. Marubeni Group, as a
global enterprise, also has a strong interest in actively working
towards the prevention of bribery.
As a part of this effort, we have the “Anti-Corruption Handbook”. This handbook requires all executives and employeesof the Marubeni Group worldwide to adopt and follow robust
anti-bribery practice.
In addition, Marubeni has established a strict anti-bribery
system. This includes setting rules for managing the appointment of agents, consultants, subcontractors, and joint venture
partners (hereinafter, “business partners”), and rules for managing entertainment of and gifts to public officials, and requiring Group companies to set similar rules.

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MARUBENI CORPOR ATION

Initiatives for Managing Appointment of
Business Partners

When compliance problems arise, the following procedure
shall be followed.

Marubeni has set the following rules to prevent bribery not only byofficers and employees, but also by business partners. These rules
mandate that we appoint only business partners who agree with the
Marubeni Group’s anti-bribery initiatives. Appointments are madeonly after having obtained the consent of the Group Compliance
Officer and the general manager of the Compliance Control
Department.
• When appointing a business partner, carry out prior due diligence
to ascertain that the business partner has a compliance system inplace, or plans to introduce such a system in the future, to ensurecompliance with anti-bribery laws, and that Marubeni will not be
exposed to bribery and corruption risks by the business partner.
• Exchange contracts that include the anti-bribery provisions necessary to reduce or eliminate the risk of improper payments being
made between Marubeni and business partners.

1. 1When a Group or Branch Office Compliance Officer identifies a problem, he/she shall report it immediately to theCompliance Committee.
2. Upon receipt of a report, the Compliance Committee shallinstruct the relevant department(s) to investigate the problem and determine an appropriate remedy.
3. If the Chairman of the Committee considers the problem tobe serious, he/she shall report the problem promptly to the
President and Audit & Supervisory Board Members.
4. When the problem affects the whole company, the Compliance Committee shall investigate the problem by forming
an Investigation Sub-committee and shall propose appropriate remedies including measures to prevent recurrence.

Internal Whistleblowing System

Compliance Education and Training

Marubeni operates the Marubeni Hotline (formerly the “Doorof Courage”) for general compliance matters. In addition to
officers and employees of Marubeni Corporation, the hotline isavailable to officers and employees of Marubeni Group companies, who may consult with or make reports either to
Marubeni’s Compliance Committee or to an external lawyer.
The name changed in FYE 3/2018 to Marubeni Hotline (thename written in Japanese is a play on words that also carries
the meaning of “feeling relieved” or “at ease”) to make it feel
more familiar to users and provide reassurance to those whoare hesitant to use it.
In addition to the Marubeni Hotline, Marubeni has also set
up a compliance hotline called the Marubeni Anti-Corruption
Hotline for reporting serious crimes such as bribery, money
laundering, illegal accounting practices, or violations of theAnti-Monopoly Act (competition law). This is available to the
Marubeni Group’s business partners as well as to the Group’s
officers and employees.
If consultations or reports are made to these hotlines, weundertake investigations and preventive measures as necessary, and provide feedback to the person who made thereport. In responding to reports, we maintain strict confidentiality, and guarantee that those making the report or consultation will not be treated unfavorably.
In FYE 3/2018, there were 25 matters reported at Marubeni.
None of these were compliance violations that would have aserious impact on the operations of Marubeni or its consolidated subsidiaries.

The Marubeni Group conducts education and training programs throughout its organization in accordance with the
Marubeni Group Compliance Manual.
Specifically, we conduct e-Learning programs and grouptraining sessions featuring roleplay and case studies to teachemployees about general compliance topics, anti-bribery
precautions, and cartel countermeasures. In addition, theChairman of the Compliance Committee and representatives
from the Compliance Control Department make periodic visits
to Group companies and overseas offices to provide training
and raise awareness of compliance. As a company that conducts business globally, Marubeni shares information on current trends in laws and regulations with the relevant officers
and employees in order to comply with the anti-corruption
and bribery laws and competition laws of each country, particularly in cross-border transactions.

Cartel Prevention
Marubeni treats the fact that Marubeni and its subsidiaries havebeen involved in a number of cartel-related cases as a very
serious problem, and is taking steps to prevent recurrence.
Specifically, we conducted internal investigations in cooperation with an external law firm, revised our internal regulations, and are educating employees with in-house training ande-Learning, and strengthening our competition law (including
the Japanese Antimonopoly Act) compliance system by preparing and distributing an in-house manual.

Management Regulations Related toCompetition Law
Marubeni has established Management Regulations Related
to Competition Law in order to prevent acts that violate competition law (including the Japanese Antimonopoly Act), suchas acts that constitute or give the appearance of cartels or
bid-rigging. These regulations include items such as thoselisted below.
• Prohibition of exchanging sensitive information with competitors, such as pricing, transaction terms, strategies, andsales volume related to specific products or services, except
in certain cases such as when acting as transaction partners
with competitors• Prohibition of involvement in competition law violations bycustomers or other transaction partners• System for notification and reporting in the event of contact
with competitors• Reporting obligations on member organizations• Reporting obligations and response if a violation is suspected• Measures to be taken in the event of a violation

Adequacy and Transparency of Tax Payments
PolicyIn addition to maintaining a system for proper filing of tax
returns, as an enterprise that does business globally, Marubeni
will maintain and strengthen its internal organization to enable
it to respond appropriately as countries update their legal
systems to reflect the content of the Base Erosion and Profit
Shifting (BEPS) Action Plan.

Status of Initiatives“Proper filing of tax returns” is included in the matters to beobserved in the Marubeni Group Compliance Manual. In practice, we also use external experts when conducting business
transactions and filing of tax returns, which helps to ensure
proper filing. Additionally, since the announcement of the
BEPS Action Plan, various countries are enacting related legislation. We are responding in ways such as systematizing
country-by-country reporting and cooperating with local
subsidiaries and operating companies in submission of country-by-country reports and master files, and in contemporaneous transfer pricing documentation.

SUSTAINABLE DEVELOPMENT REPORT 201980

Governance > 3. Risk Management

3. RISK MANAGEMENT
Structure
In the course of its diversified business activities, Marubeni
conducts risk management activities which address risk froma variety of perspectives: macro and micro, as well as qualitative and quantitative. Increased volatility in exchange rates,
natural resource prices, and other parameters has continued
unabated. Under these conditions, the Company is promoting
integrated risk management, measuring the maximum level ofrisk on a consolidated basis and limiting it to within the scopeof total equity. By conducting thorough screening and follow-up for individual projects and further enhancing internal
control systems, the Company has established a structure thatminimizes losses due to unforeseen events.
Individual projects such as important investment are deliberated by the Investment and Credit Committee, submitted to

the Corporate Management Committee and approved by the
President based on the Regulations of Job Authority Ringi
Approval Procedure. They become subject to approval by the
Board of Directors depending on the importance of the project. Following implementation, each business department
manages its own risk exposure and, for important cases,
periodic status reports are made to the Investment and Credit
Committee, Corporate Management Committee, and theBoard of Directors.
In addition, a corporate planning and strategy department
was placed under direct control of the Group CEO, the highest
authority with regard to all business groups, thereby establishing a risk management system that has been optimized tothe business models of each business group.

Marubeni’s Risk Management Approach
PATRAC
Investment standards and withdrawal
conditions for individual projects
Internal ratings

Risk assets

Quantitative
Ongoing improvement ofintegrated risk management

Micro

Stringent evaluation procedures for new
investments and financing
Enhanced systems for post-investment
monitoring

Group-wide risk exposure management
Country risk management
Market risk management

Macro

Enhanced management ofbusiness execution risks

Qualitative

Credit management

Internal control/compliance
Customs clearance supervision
Security trade control

Initiatives
Integrated Risk Management
Marubeni operates in a diverse range of industries and regions.
Therefore, the Company has established an integrated risk
management system that not only focuses on individual risk
factors at a micro level, but also takes a macro view of thevarious factors that affect the entire Marubeni Group. Integrated risk management takes a broad overview of the assets
for the entire Group, gauging risk based on the exposure ofthese assets to each specific risk factor—country risk, industry
risk, credit risk for each client, and so on. These risks form thebasis for calculating Value at Risk (VaR), which takes into

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MARUBENI CORPOR ATION

account dispersion effects and correlations to calculate maximum risk. VaR is used as a primary benchmark for our portfolio management.
Integrated risk management looks at various risk factors in
a comprehensive way to enable managers to understand risk
as a single monetary value. By using computer simulations
that reflect the latest information, Marubeni has made it possible to grasp the degree of risk. We calculate PATRAC*1 basedon risk assets—a value based on the maximum decline in thevalue of Group assets as quantified by the Company. PATRAC
indicates profit after tax following adjustment for risk.

Marubeni has adopted PATRAC as an important management
indicator, using it as a method of screening proposals requiring approval. Each Portfolio Unit*2 constantly takes steps toadjust its portfolio in a flexible manner, seeking to improve
PATRAC in order to achieve maximum returns for a given levelof risk, enabling the Marubeni Group to achieve steady andbalanced earnings growth.
＊1. PATRAC (Profit After Tax less Risk Asset Cost): Marubeni’s proprietary
management index for measuring the degree to which the return on arisk exceeds a minimum target＊2. Portfolio Unit: Unit of business management linking business departments and Group companies by business domain

Business Continuity Plans (for business continuity
in the event of a major disaster)
Marubeni has formulated Business Continuity Plans (BCPs) toprepare for natural disasters, including large-scale earthquakes and flooding, epidemics of new strains of infectious
diseases, and situations in which the Tokyo Head Office loses
its ability to function. In addition to BCPs for the Tokyo Head
Ofﬁce, Marubeni has also prepared individual BCPs for ofﬁces
both in and outside Japan that are essential to the continuation of corporate activities. These plans are updated regularly.
For earthquakes in particular, the whole company is working
to enhance resilience through regular evacuation drills andenhancement of BCPs, based on simulations of earthquake
scale and the extent of damage.
When a massive earthquake hit Japan in March 2011, an
emergency headquarters under the direction of the President
was established in accordance with the initial response guidelines stipulated in the BCPs. Information on the safety of
employees, the status of our infrastructure, and damage tofacilities was quickly collected and necessary measures weretaken in a timely manner.

Information and Data Security
To protect information assets and ensure the safe conduct ofbusiness activities, Marubeni has established IT security regulations and other internal rules for information security management that all officers and employees are expected tocomply with. These regulations are emphasized throughout
the company so that all employees are well informed.
In addition to rules, we also implement system measures toincrease the confidentiality, integrity and availability of information security based on our recognition of risks such as
unauthorized access to and loss, falsification and leakage of
information.
In April 2017, we reorganized our Document Management
Regulations into Information Asset Management Regulations,and created an environment in which information assets canbe stored and used safely according to their degree of confidentiality. The reason for these changes was to enhancebusiness efficiency by incorporating new rules for handlingand management of information, including production, storage, preservation and disposal of information assets.

For Group companies, we created the Marubeni Group IT
Governance Rules in April 2013 based on the above IT security
regulations and other internal rules. The unification of information security rules within the Group will contribute to stronger
security. We also call on Group companies to establish rules
equivalent to the Information Asset Management Regulations.
The Marubeni Group is creating a secure and convenient IT
environment in accordance with the Group IT Governance
Rules, and is promoting the introduction of that environment
at Group companies.

Measures to Address Climate Change
The Marubeni Group is incorporating climate change perspectives into its risk management process to respond to risks andopportunities related to climate change.
Specifically, we are including climate change as an evaluation item in the integrated risk management process mentioned above, and are analyzing and making judgments on its
potential impact on our businesses.
As a risk management measure for climate change, theMarubeni Group is analyzing the risks, opportunities andimpacts on its businesses from climate change based on a
Current Policies Scenario and a 2.0°C Scenario. We will use
the results in formulating business plans and strategies.
For further information on our climate change scenario
analysis, please refer to Marubeni’s website:

https://www.marubeni.com/en/sustainability/
environment/approach/?id=anc_04

Protection of Water Resources
In dealing with water problems in regions suffering from water
shortages, the Marubeni Group conducts risk analysis andimplements business risk assessments for new investments
and existing businesses. We make decisions on whether to go
ahead with projects after comprehensively analyzing andassessing not only local laws and regulations, but also theimpact on the local environment and communities.
For further information on water management, please refer to
Marubeni’s website:

https://www.marubeni.com/en/sustainability/
environment/water/

Risk Assessments of Human Rights Issues,
Labor Problems and Corrupt Practices
The Marubeni Group conducts risk assessments on social
issues such as human rights issues, labor problems (includingchild labor, forced labor and illegal employment) and corrupt
practices. We make business decisions after conducting risk
analysis and assessments for new loans and investments aswell as existing businesses.
For further information on ESG risk surveys and analyses,
please refer to Marubeni’s website:

https://www.marubeni.com/en/sustainability/group/esg/

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