Corporate Governance/Internal Control
Corporate GovernanceOur approach to corporate governanceIn order to maximize corporate value and enhance shareholder
satisfaction, the Tokyo Electron Group is endeavoring toestablish and operate optimal and highly effective structuresof governance based on its three basic principles: 1) Ensure
the transparency and soundness of business operations;
2) Facilitate quick decision-making and the efficient executionof business operations; and 3) Disclose information in a timelyand suitable manner.

The corporate governance framework
Tokyo Electron uses the audit & supervisory board system
based on the Companies Act of Japan, and furthermore
has established its own Nomination Committee *1 andCompensation Committee *2 to increase the transparency andobjectivity of management. The company has also adopted
the executive officer system to facilitate quick decisionmaking. Moreover, Tokyo Electron has been disclosing theindividual remuneration of representative directors since 1999
in recognition of the importance of managerial transparency
for shareholders.

The Board of Directors
The Board of Directors consists of 11 directors, two of whom
are outside directors. In order to ensure that Tokyo Electron canrespond quickly to changing business conditions, and to moreclearly define management accountability, the term of office fordirectors is set at one year.

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 not only attend meetingsof the Board of Directors, the Top Management Conference andother important business meetings, but also conduct operations
audits and accounting audits, and evaluate risk management,
and audit the performance of duties by directors.

Internal control/riskmanagement system
Our approach to internal control/risk management
To more effectively strengthen the internal control and risk
management systems of the TEL Group, we are implementing
practical measures in line with the Fundamental Policies
concerning Internal Controls within the Tokyo Electron Group.

Risk management system
Tokyo Electron has established a dedicated risk management
and internal control function within the General Affairs
Department, which evaluates and analyzes risks that could affect
the TEL Group, and works to reduce these risks by promoting theDiagram of the Corporate Governance Framework, Internal Control System and Risk Management System
Annual Shareholders’ Meeting
Board of Directors· Compensation Committee· Nomination Committee

Audit & Supervisory Board

Independent Auditors· Chief Business Ethics Director· Chief Internal Control Director

Confirm the progress of improvements and give instructions
Request for improvement/Report

Representative Directors
Audit and improvement
Request forreports
improvement/ReportCompliance & Internal Control Executive Officer

Executive Officers

Internal Audit Dept. (Global Audit Center)

Committees· Ethics Committee· Information Security Committee· Export Trade Control Committee

Request for improvement/Report

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

Monitoring

Administrative Depts.

Tokyo Electron Group Corporate Governance:
Glossary12

Check and balance

Business Depts.

http://www.tel.com/ir/policy/cg/index.htm*1 Nomination Committee: This committee nominates candidates for directors and a candidate for CEO, which it submits at the meeting of the Board of Directors for approval.
Committee: This committee develops proposals on the executive compensation program and the compensation to be paid to representative directors, which it*2 Compensation
submits at the meeting of the Board of Directors for approval.

necessary measures. The status of risk management activities isreported regularly to the Board of Directors.

Information security
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 leaks and ensures the safe andeffective utilization of information assets. In fiscal 2013, basedon the results of past assessments, we made an inventory ofelectronically stored information to enhance the management ofconfidential data. We will continue this initiative.

meet semiannually, report on ethics-related issues faced byeach company, and discuss measures to further improve ethicalbehavior and compliance.
The Code and its Q&A section are
published in Japanese, English, Korean
and Chinese, and the company distributes
it to all Group executives and employees,
including those overseas. Moreover, theCode is appropriately reviewed and revised
in response to changes in environmental
The Code ofEthics booklet
and social demands.
The Code of Ethics of the Tokyo Electron Group:

Following an overall review of our Business Continuity Plan(BCP), Tokyo Electron’s Head Office redeveloped its BCP infiscal 2013 to respond to large-scale earthquakes. In fiscal
2014, the BCP will be reviewed at the level of plant and office.
Meanwhile, the TEL Group carries out an annual BCP drill
involving an earthquake scenario.

http://www.tel.com/environment/corp_governance/compliance/ethical.htm

GOVERNANCE

Business continuity management

Compliance system
Tokyo Electron has appointed a Compliance & Internal Control
Executive Officer from among the executive officers to raiseawareness of compliance across the TEL Group and further
improve its implementation.

Internal audit department
The Global Audit Center, which is the internal audit departmentof the TEL Group, is responsible for auditing the businessactivities of the Group’s domestic and overseas bases, as well as
their compliance and systems, and evaluating the effectivenessof internal control systems. As necessary, the Global Audit
Center also provides guidance to operating divisions.

Compliance
Our approach to compliance
Stakeholder trust is the cornerstone of business activities. In
order to maintain trust, it is necessary to continuously act inrigorous conformity to business ethics and compliance. In linewith the Fundamental Policies concerning Internal Controlswithin the TEL Group, all Group executives and employees arerequired to maintain high standards of ethics and to act with aclear awareness of compliance.

Code of Ethics, Chief Business Ethics
Director and Ethics Committee
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 TELGroup. The Ethics Committee comprises the Chief BusinessEthics Director, the Ethics Committee Chairman, and presidents
of major Group companies in and outside Japan. The members

Initiatives on complianceTokyo Electron has drawn up the Compliance Regulations
setting out basic compliance-related requirements in linewith the Code. The Compliance Regulations are intended
to ensure that all individuals who take part in the businessactivities for the TEL Group clearly understand the pertinentlaws, international standards and internal company rules, andconsistently apply these rules in all of their activities.

Internal reporting system
In the event that an employee becomes aware of any activity
which may violate a law, regulation or principles of businessethics, the TEL Group operates an internal reporting system that
employees may use to report their concerns. The entire Grouphas established an ethics hotline and a compliance hotline, andthis reporting system is also in place at each overseas base.
In all cases, this system ensures that strict confidentiality is
maintained to protect the whistleblowers and ensure that they
are not subject to any disadvantage or repercussions.

Compliance education
Through the TEL Group’s e-learning system, we provide a common
training program covering the basics of compliance, internalcontrol, export-related compliance, information security andother topics, which all executives and employees are required tocomplete, as well as a training program on insider trading andother subjects aimed at different levels of personnel. We also
make information on compliance issues available to employees on
a dedicated site on our Intranet and take other steps to promotebroad awareness of compliance throughout the Group.
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