M A N AG E M E N T R E P O RT

Corporate Governance
We are strengthening the corporate governance framework to ensure management thatprioritizes improvements in corporate value.

Fundamental Policy Concerning Corporate
Governance
MANAGEMENT REPORT

14

In order to maximize corporate value and increase shareholder
satisfaction, we think it important to enhance our corporate governance and are committed to complying with corporate ethics andcompliance program. We are also dedicated to imploving and reinforcing internal control and risk management systems, and tomaintaining transparency and objectivity in our business activities.

Strengthening the Framework of Corporate
GovernanceCorporate GovernanceTokyo Electron Group regards the strengthening of corporate
governance as vital to increasing its corporate value for all its
stakeholders including shareholders. To this end, we concentrate on three aspects of corporate governance: 1) ensuring thetransparency and soundness of business operations; 2) facilitating quick decision-making and the efficient execution of business
operations; and 3) building an effective structure for the timely
and suitable disclosure of information.
Specifically, the Board of Directors comprises 13 directors,
including two external directors. The Board has two committees: the Compensation Committee 1 and the Nomination
Committee2. The term of office for directors is set at one year toallow prompt and flexible responses to changes in the management environment. The Board of Directors held a total of 14
meetings in FY 2007. We have four statutory auditors, two ofwhom are from outside the company. We have adopted thisauditing system to improve corporate governance. In FY 2007,
the auditors held a total of five meetings. In the execution ofbusiness, we have introduced the executive officer system toclearly separate the roles of the Board of Directors and of thoseactually executing business operations. We plan and implementbusiness strategies promptly under this system.
1. Compensation Committee: Makes a draft remuneration plan for the Chairman &CEO and the President & COO and presents the draft to the Board of Directors
2. Nomination Committee: Selects candidates for directorships for submission to theannual shareholders’ meeting and a candidate to be elected as president by theBoard of Directors.

To implement measures to manage risks including businessand operational risks, we have established a department incharge of risk management, which creates and revises in-houserules on risk management and conducts risk-related educationand enlightenment activities.

Establishing Even More Effective Internal
Control Systems
Following the enforcement of the new Companies Act, Tokyo
Electron Group decided its basic policies to ensure appropriate
business operations at the meeting of its Board of Directors
held on May 12, 2006. In line with the policies, we have beenreexamining our business risks and establishing even more
effective internal control systems.
Internal control systems
1. Compliance system
2. Risk management system
3. System to ensure the appropriateness of financial reporting
4. System to store and manage information
5. System to ensure the efficiency of business execution
6. System to ensure appropriate business operations of thecorporate group
7. System to ensure the effectiveness of internal audits

Furthermore, in order to establish an internal control system
for financial reporting, which we will launch in the year ending
March 31, 2009 to comply with the Financial Instruments andExchange Law (so-called Japanese SOX), we are creating rules
and manuals, checking our business processes, and preparing
the required documentation.
Corporate Governance Framework
Annual Shareholders’ Meeting

Nomination Committee
Board ofDirectors Compensation Committee
Chief Business Ethics Director

Internal Controls and Risk ManagementChairman

To behave towards all our stakeholders in a responsible manner, we are committed to strengthening an even more effective
internal control system. We have our Global Audit Center forinternal control. This Center conducts internal audits on business operations, compliance, and systems targeting Tokyo
Electron Group’s bases both in Japan and overseas, and evaluates the effectiveness of the Group’s internal control systems.
In addition, the Center makes regular reports to management on the audit results, and exchanges information with theauditors and submits reports to them to strengthen the internal
audit function of the Group.

President

TOKYO ELECTRON Environmental and Social Report 2007

Request for
improvements

Statutory
Auditors

Confirm the progress ofimprovements and give
instructions

Audit andimprovement reports
Request for
Reportimprovements
ReportAudit
Executive Officers

Internal Audit Dept.
(Global Audit Center)

ReportReportRequest for
improvements

Risk Management
Function
Monitoring

Audit

Monitoring

Request forimprovements

Checks and Balances

Business Dept.

Independent
Auditors

Administrative Dept.

Audit
Audit