M anagement Report

Corporate Governance
We are strengthening the corporate governance framework to increase corporate value for all stakeholders.

■ Fundamental Policy Concerning Corporate Governanceeach, excluding the Chairman & CEO and the President & COO.

Reflecting the ongoing globalization of management practices, our fundamental policy is to strictly observe standards for corporate ethics andInternal Controls and Risk Management

comply with laws and regulations. We are also dedicated to establishing

All activities at the Tokyo Electron Group are based on adherence toand reinforcing internal control and risk management systems, and to main-

the highest standards of corporate ethics and compliance with laws,

taining the transparency and objectivity of our business activities. The pri-regulations and international rules. To oversee and ensure this, a director

mary objective of this policy is to conduct management that prioritizes thehas been appointed Chief Business Ethics Director. Ethical standards

creation of corporate value for the benefit of shareholders and all otherhave been established and measures are taken to see that these standards

stakeholders.

are strictly observed. Reflecting the fact that we now place evengreater importance on internal controls and risk management systems, we■ Measures Concerning Corporate Governance Framework

have upgraded the internal audit functions of the Global Audit Center. We

We regard the strengthening of corporate governance as vital tohave also added crisis management functions to the General Affairs

increasing its corporate value and shareholder satisfaction. For this purpose,Department, including measures involving business risk and operational

we concentrate on three aspects of corporate governance: 1) ensuring therisk. This department is responsible for establishing the necessarytransparency and soundness of business operations; 2) facilitatinginternal regulations for managing each category of risk, as well as for activ-

quick decision-making and the efficient execution of business opera-

ities for training and raising employees’ awareness of risk manage-tions; and 3) building an effective system for the timely and suitablement.

disclosure of information.

The Corporate Governance Framework■ Remuneration for Directors, Executive Officers andStatutory Auditors

We have 11 directors, including two external directors. We have adopted

Part of the remuneration for directors and executive officers of TEL and its

the statutory auditor system, as we believe that statutory auditors are ansubsidiaries is linked to operating results, with an upper limit of 3% of con-effective means of conducting management that reflects the interests ofsolidated net income. The remuneration is split between annual cash

shareholders. Accordingly, we have four statutory auditors, two ofbonuses and stock option based remuneration at a ratio of almost two towhom are from outside the company. In addition, we have separated theone. We believe that this system incentivizes officers to improve the cor-roles of the directors and the executive officers who oversee businessporate performance and share price because they share with share-operations. Additionally, we have established two committees on the board

holders the risk of a decrease as well as the benefits of higher earnings andof directors. A Compensation Committee determines the remunerationa higher share price.

paid to the Chairman & CEO and to the President & COO. The

Remuneration for directors and statutory auditors(Millions of yen)

Nomination Committee selects candidates for directorships for submission
Remuneration

Amountto the annual shareholders’ meeting, and a candidate to be elected as

Amount paid to internal directors

President by the board of directors. Through these measures we con-Amount paid to external directors

10

Amount paid to internal statutory auditors

51

stantly work to improve corporate governance. The Compensation

360

Amount paid to external statutory auditors
26* The above amounts do not include annual bonuses and retirement allowances
paid to directors.

Committee and the Nomination Committee both have three members

Corporate Governance Framework

Annual Shareholder’s Meeting
Board of Directors Nomination Committee
Compensation Committee
Chief Business Ethics Director

Statutory
Auditors

ChairmanPresident
Request for improvements

Audit

Executive Officers

Audit andimprovement
reports

Confirm the progressof improvements andgive instructions

Request for Improvements
ReportMonitoring
ReportRisk Management Function
Checks and Balances

Business Depts.
Audit

12 TOKYO ELECTRON Environmental and Social Report 2006

Audit

Monitoring
ReportAdministrative Depts.
Audit

Internal Audit Dept.
(Global Audit Center)

IndependentAuditors