Man a g e m e n t R e port

Corporate GovernanceManagement at TEL emphasizes enhancement of corporate value
while earning the trust of all of our stakeholders (people who have a stake in our success).

Our Approaches to Corporate GovernanceInternal Control Systemand Risk Management System

Reflecting the ongoing globalization of management practices, TEL’s fundamental policy is to strictly observe
standards for corporate ethics and to comply with laws
and regulations. We are also dedicated to establishing andreinforcing internal control and risk management systems,
and to maintaining the transparency and objectivity of ourbusiness activities. The primary objective of this policy is
to conduct our business in a way that prioritizes the creation of corporate value while earning the trust of shareholders and all other stakeholders.

All activities at TEL are based on adherence to the highest
standards of corporate ethics and compliance with laws,
regulations and international rules. To accomplish this, wehave named a director to oversee ethics and establishedethical standards and we are taking measures to see thatthese standards are strictly observed. Reflecting the evengreater importance we now place on internal control andrisk management systems, we have upgraded the internal
audit functions of the Global Audit Center. We have also
added to the General Affairs Department’s crisis management functions, such as taking measures targeting business risk and operational risk.

On Our Corporate Governance System
TEL is implementing its corporate governance systemwith the following three goals:
1) Ensuring the transparency and soundness of business operations; 2) facilitating quick decision-making andthe efficient execution of business operations; and 3)
building an effective system for the timely and suitabledisclosure of information.
We have adopted the corporate auditor system. TEL has aboard of directors with twelve members, including two external
directors, and we have four corporate auditors, two of whom
are from outside the company. In addition, we have separated
the functions of the directors from those of the executives whooversee business operations. The compensation of representative directors is determined by the Compensation Committeethat is part of the board of directors. In addition, the Nomination Committee selects director candidates for submission tothe general meeting of shareholders and a CEO candidate to beelected by the board of directors. Both committees consist of
three members of the board of directors, excluding the Chairman and President. In April 2003, we adopted the executive
officer system to further clarify the roles of the board of directors and executives in charge of business operations.

Changes to Dividend Policy
and Executive Compensation System
TEL has adopted a new dividend policy with the goal of a
20% pay-out of consolidated net income from the fiscal
year ended March 2006. Beginning with the fiscal yearthat ended March 2005, we also eliminated retirement
allowances (which were fixed compensation) from thecompensation of directors, statutory auditors and executive officers. This action was aimed at achieving further
gains in corporate value and management transparency.
Along with this revision, a part of the compensation fordirectors, auditors and executive officers has been linked
to operating results, with an upper limit of 3% of consolidated net income. As a result, the portion of compensation that is based on results more clearly corresponds toconsolidated net income and compensation is moreclosely connected to consolidated performance and shareprice.

Corporate Governance System
General Meeting of Shareholders
Board of Directors

Nomination Committee
Compensation Committee
Chief Business Ethics Director

Statutory Auditors

ChairmanPresident
Request for improvements

Audit

Audit andimprovement
reports

Confirm the progressof improvements
and give instructions

Executive Officers
Request for improvements
ReportMonitoring
ReportRisk Management Function

Business Dept.
Audit

6Checks and balances

TOKYO ELECTRON Environmental and Social Report 2005

Audit

Monitoring
ReportAdministrative Depts.
Audit

Independent Auditor

Internal Audit Dept.
(Global Audit Center)