Corporate GovernanceAs the globalization of its business progresses, the TEL Group believes that enhancing corporate governance is
crucial to achieving management that emphasizes improving corporate value for all stakeholders. The TEL Group isbuilding an optimal corporate governance structure that is highly effective at improving and strengthening its internal
control system and risk management system.

Corporate GovernanceCompensation for corporate directors andAudit & Supervisory Board Members

Tokyo Electron endeavors to establish and operate optimal andhighly effective structures of governance based on its three basic
principles: (1) Ensure the transparency and soundness of business
operations; (2) Facilitate quick decision-making and the efficient
execution of business operations; and (3) Disclose information in atimely and suitable manner.

Tokyo Electron has adopted the following executive compensation
program with the intention of tying compensation more closely
to financial results and shareholder value, raising corporate
competitiveness, and enhancing management transparency.
1. The compensation for corporate directors consists of a monthly
fixed remuneration and a performance-linked compensation.
2. The performance-linked compensation system for corporate
directors is designed to align compensation more clearly withfinancial results and increases in shareholder value. It takes
into account consolidated net income and consolidated returnon equity (ROE), two performance indicators of consolidated
business results. Necessary adjustments are then made when
there are special factors that should be taken into account, suchas principal performance indicators for the term under review,
including profits and losses, and so on. In principle, performancelinked compensation comprises cash bonuses and stock-based
compensation. Performance-linked compensation is limited to fivetimes the fixed yearly remuneration. The ratio of cash bonuses tostock-based compensation has generally been one-to-one. Stockbased compensation consists of granting share subscription rights
with a set strike price of one yen per share and a three-year vesting
period before the granted stock options may be exercised.
3. The performance-linked compensation of outside directors does
not include stock-based compensation.
4. The compensation for Audit & Supervisory Board Members
consists only of a monthly fixed remuneration, to maintainindependence from management.
5. Retirement allowance systems for corporate directors and Audit &Supervisory Board Members have been abolished since the endof fiscal year 2005, as part of the revisions to Tokyo Electron’sexecutive compensation program.

The corporate governance framework
Adopting an audit and supervisory board system based on theCompanies Act of Japan, Tokyo Electron has established its
own Nomination Committee1 and Compensation Committee2 toincrease the transparency and objectivity of its management. TheCompany adopted the executive officer system to facilitate decisionmaking and, in 2015, established its Corporate Senior Staff (CSS),
mainly comprised of its executive officers, as a global body forthe deliberation of TEL Group strategies. Moreover, recognizing
the importance of managerial transparency for shareholders,Tokyo Electron has been disclosing the remuneration of individual
representative directors in its business reports since 1999.
[Report for the fiscal year ending March 31, 2015: http://www.tel.com/ir/stocks/asm/document/52_01.pdf]
1 Nomination Committee: This committee nominates candidates for directors anda candidate for CEO, which it submits at the meeting of the Board of Directors
for approval.
2 Compensation Committee: This committee develops proposals for the executive
compensation program and the compensation to be paid to representative
directors, which it submits at the meeting of the Board of Directors for approval.

Diagram of the Corporate Governance Framework, Internal Control System, and Risk Management System (as of April 2015)
Shareholders’ Meeting
Board of Directors

Audit & Supervisory Board• Compensation Committee • Chief Business Ethics Director • Chief CSR Promotion Director• Chief Internal Control Director• Nomination Committee

RepresentativeDirectors

Request for improvement/ReportCompliance & Internal Control Executive Officer
CSR Promotion Executive OfficerCommittees• Ethics Committee• Information Security Committee• Export Trade Control Committee

Confirm the progress of improvements and give instructions

Audit andimprovement reports
Request for improvement/
ReportExecutive Officers

Internal Audit Dept. (Global Audit Center)

Request for improvement/
ReportCSR Promotion Council

Audit

Risk Management & Internal Control
Function (General Affairs Dept.)
Request for improvement/Report

Administrative Depts.

Monitoring

Business Depts.

Check and balance

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Independent Auditors

Corporate Governance

The Board of Directors

Auditing by internal audit department

The Board of Directors consists of 13 directors, two of whom
are outside directors. Directors serve a one-year term in orderto ensure that Tokyo Electron can respond quickly to thechanging business environment, as well as to more clearly
define management accountability. To ensure and maintainthe soundness and appropriateness of business practices,notwithstanding the rapidly changing market environment andtechnological industry trends, management by people whohave specialized knowledge and experience in the industry isessential. Based on this premise, the Board of Directors is mainlycomposed of internal directors, but outside directors are also
invited to join in order to objectively ensure the effectiveness ofboard decisions.

The Global Audit Center is the internal audit department of
the TEL Group. This department is responsible for auditing
business activities undertaken at the Group’s domestic andoverseas locations, as well as their compliance and systems,
and evaluating the effectiveness of internal control systems. As
necessary, the Global Audit Center also provides guidance tooperating divisions.

Business continuity management
After 2012, the TEL Group redeveloped its Business Continuity
Plan (BCP) at the headquarters to respond to large-scale
earthquakes. The BCP is being developed at the plant and officelevels by reviewing measures for early recovery and alternate
production following a disaster.
Emergency supplies, such as food and drinking water, alongwith first-aid outfits for times of disaster, are made available at all
times and thorough measures involving a disaster scenario arecarried out across the entire Group.

The Audit & Supervisory Board
Tokyo Electron has five Audit & Supervisory Board Members,
three of whom are outside Audit & Supervisory Board Members.
The Audit & Supervisory Board Members attend meetings ofthe Board of Directors and other important business meetings,audit the directors’ performance of duties, determine audit policy
and the division of auditing duties among Members at Audit &Supervisory Board meetings, and examine the Group’s executionof operations. Through these and other measures, Audit &Supervisory Board Members work to provide effective auditing.

Information security management
Under the TEL Group Information Security Policy and theRegulation for Management of Technical and BusinessInformation, Tokyo Electron has put in place a frameworkfor preventing information leakage to ensure appropriate
management and safe and effective use of information assets.
In order to strengthen management of technical and businessinformation across the Group, we review operation rules, as
needed, and regularly provide web-based education for all
executives and employees of Group companies in Japan andoverseas. We also review rules related to information security. To
get across the contracts and ensure rule compliance, we obtainconsent for rule compliance from all executives and employees ofTEL Group companies, including those overseas, every year.
Additionally, we have established a system for reporting
incidents that lead to actual information leakage as well as thosewith that possibility. In light of these reports, we respond promptly
to each incident and integrate analysis results into Group-wide
efforts and measures.

Internal Control/Risk Management
In order to enhance the TEL Group’s corporate value andremain accountable for our actions to all stakeholders, weare making efforts to strengthen viable internal control. This
involves implementing practical measures that are in line with
the Fundamental Policies concerning Internal Controls within
the Tokyo Electron Group, set out by Tokyo Electron’s Board ofDirectors. We are also conducting activities for internal controlover financial reporting based on the Financial Instruments andExchange Act of Japan. In response to the May 2015 changes
to the Companies Act and the Ordinance for Enforcementof the Companies Act, Tokyo Electron has updated theFundamental Policies concerning Internal Controls within theTokyo Electron Group. The Company is working to strengtheninternal control systems as a corporate group and to improve
the audit system of the Audit & Supervisory Board in terms ofconcreteness and robustness.

Risk management system
To more effectively strengthen the internal control and risk
management systems of the entire TEL Group, Tokyo Electron
appoints a Compliance & Internal Control Executive Officer.
Furthermore, the Company has established a dedicated risk
management and internal control function within the General
Affairs Department to manage and reduce risks throughnecessary measures such as, for example, analyzing risks
that could affect the TEL Group and instructing responsible
departments to conduct self-assessments of major identifiedrisks. The function also regularly reports the status of risk
management activities to the Audit & Supervisory Board
Members and the Board of Directors.

13Corporate GovernanceBusiness Ethics and Compliance

Compliance education

Stakeholder trust is the cornerstone of business activities. Inorder to maintain trust, it is necessary to continuously act inrigorous conformity to business ethics and compliance. In linewith the Fundamental Policies concerning Internal Controls within
the Tokyo Electron Group, all Group executives and employees
are required to maintain high standards of ethics and to act with aclear awareness of compliance.

Through the TEL Group’s e-learning system, we provide acommon web-based training program covering the basics ofcompliance, export-related compliance, and other topics. All
executives and employees are required to complete this training,as well as a web-based training program on insider trading andother subjects tailored to specific positions and job roles.
In fiscal year 2015, we completely redesigned the existingbasic compliance education program to include details on
how to handle the confidential information of other companies
and specific cases of conflict of interest. We provided the new
education program to all executives and employees of Group
companies in Japan. As of March 2015, we are providing
web-based education on the Act against Delay in Payment of
Subcontract Proceeds, Etc. to Subcontractors of Japan to all
executives and employees of Group companies in Japan toensure fair transaction.
We also provided web-based, test-format education onbusiness ethics and compliance to all Group executives andemployees in fiscal year 2015, including those overseas, as we didin the previous year. These efforts will be continued every year.

Improving business ethics
In 1998, Tokyo Electron formulated the Code of Ethics ofthe Tokyo Electron Group to establish uniform standards togovern all of its global business activities. In the same year,
the Company appointed a Chief Business Ethics Director andestablished the Ethics Committee, which is responsible forpromoting business ethics awareness throughout the TEL Group.
The Ethics Committee comprises the Chief Business Ethics
Director, the Ethics Committee Chairman, and presidents ofmajor Group companies in and outside Japan. The members
meet semiannually, report on ethics-related issues faced byeach company, and discuss measures to further improve ethicalbehavior and compliance.
The Code of Ethics is reviewed, as appropriate, in responseto changes in the expectations of society. In January 2015, ananti-corruption statement was added to the introduction basedon Principle 10 of the UN Global Compact about working against
corruption including extortion and bribery.
The Code of Ethics and its Q&A section are published inJapanese, English, Korean and Chinese and disclosed on theintranet to enable all Group executives and employees, including thoseoverseas, to view them at any time.

Web-based, test-format education[Code of Ethics: http://www.tel.com/environment/corp_governance/compliance/
ethical.htm]

Internal reporting system

Compliance system

In the event that an employee becomes aware of any activity
that may violate a law, regulation, or principle of business ethics,
the TEL Group operates an internal reporting system that
employees may use to report their concerns. An ethics hotline
and a compliance hotline have been established for all Group
companies, and this reporting system is also in place at eachoverseas location. In all cases, this system ensures that strict
confidentiality is maintained to protect whistleblowers and ensurethat they are not subject to any disadvantage or repercussions.
There has been no violation of compliance that could have had amajor impact on the Company’s business or local community infiscal year 2015.

Tokyo Electron has appointed a Compliance & Internal Control
Executive Officer from among its executive officers to raiseawareness of compliance across the TEL Group and further
improve its implementation. The Company has also drawn up theCompliance Regulations, setting out basic compliance-related
requirements in line with the Code. The Compliance Regulations
are intended to ensure that all individuals who take part in thebusiness activities of the TEL Group clearly understand thepertinent laws, international standards, and internal companyrules, and consistently apply these rules in all of their activities.

14Corporate Governance

CSR Promotion Framework

Approach to CSR

President & CEO

The Tokyo Electron Group believes that achieving sustained growththrough sound business practices forms part of its corporate social
responsibility to stakeholders. To achieve this, we must not only
provide high-quality products and services, but we must also bea company that is esteemed in terms of good faith, fair corporate
activities, the pursuit of safety and environmental preservation,
respect for human rights and ethics, crisis management, corporate
governance, and compliance.
The Tokyo Electron Group carries out initiatives based on its CSR
Policy and in response to the opinions of its stakeholders.

Chief CSR Promotion Director
CSR Promotion Executive Officer
CSR

Ethics

Personnel

SafetyQuality

Environment Procurement

CSR Promotion Council
TEL Group companies(11 locations worldwide)

Key initiatives for fiscal year 2015
In fiscal year 2015, the CSR Promotion Council, comprising seven CSR promotion
departments and CSR promotion executives, set specific indicators for departmentspecific issues and measured achievements. Separate from the biannual council
meeting, a monthly working-level liaison meeting was established to actively discuss
CSR issues in a timelier manner. To promote EICC® on a company-wide basis, the TELGroup held internal seminars and invited guest lecturers to make presentations. The
events were attended by around 120 people in charge of CSR promotion.
Internal presentation on the EICC® Code of Conduct

Participation in CSR Initiatives
To work on CSR issues from a broad perspective and make improvement efforts, the TEL Group proactively participates in various
initiatives.
The TEL Group decided to join
EICC® in June 2015. EICC® sets
forth a code of conduct for labor,
safety, the environment, and ethics
to be used in the management ofsupply chains.

Since July 2013, the TEL Group has
been a member of the United Nations
Global Compact. In support of its Ten
Principles, the TEL Group will continue
to work to maintain the harmonious
pursuit of both its corporate activities
and a sustainable society.

TEL Group CSR Policy❹ Environment
The Tokyo Electron Group seeks to achieve harmony with the globalenvironment. We strive to reduce our own impact on the environmentand contribute to reducing the environmental impact of ourcustomers by developing and providing eco-friendly products.

❶ Corporate Activities
The Tokyo Electron Group will provide safe and high-quality products
and services to customers around the world and contribute to therealization of an enriched society.
❷ Business Ethics
The Tokyo Electron Group acts in compliance with the laws andregulations of each country and with international regulations, as well asin accordance with strict business ethics. We refrain from engaging inany conduct that impedes fair and open market competition.

❺ Communication with Stakeholders
The Tokyo Electron Group discloses information relating to theGroup in a fair, impartial and timely manner, strives to engage in
two-way communications, and works to meet the expectations ofstakeholders appropriately.

❸ Respect for Individuals
The Tokyo Electron Group respects the individuality and uniquecharacter of each person. We recognize and appreciate the diversityof our employees, share a sense of mission with them, and promote
the development of workplaces with vitality.

❻ Social Contribution
The Tokyo Electron Group engages in social contribution activities
worldwide as a good corporate citizen to contribute to the developmentof local communities and society.

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