Mitsubishi Corporation

Approaches to Corporate Governance
- Mitsubishi Corporation's Corporate Governance System Supporting Sustainable Growth

[Basic Policy]

Mitsubishi Corporation's corporate philosophy is enshrined in the Three Corporate Principles. Through corporate activities rooted in the principles of fairness and integrity, Mitsubishi Corporation strives to continuously raise corporate value. Mitsubishi Corporation believes that by helping to enrich society, both materially and spiritually, it will also meet the expectations of shareholders, customers and all other stakeholders.
In order to achieve these goals, Mitsubishi Corporation recognizes strengthening corporate governance on an ongoing basis as its important subject concerning management as it is foundation for ensuring sound, transparent and efficient management. Mitsubishi Corporation, based on the Corporate Auditor System, is thus working to put in place a corporate governance system that is even more effective. This includes strengthening management supervision by appointing Outside Directors and Outside Corporate Auditors who satisfy the conditions for Independent Directors or Independent Corporate Auditors, and establishing advisory bodies to the Board of Directors where the majority of members are Outside Directors and Outside Corporate Auditors and other experts from outside Mitsubishi Corporation. At the same time, Mitsubishi Corporation uses the executive officer system etc. for prompt and efficient decision-making and business execution.

Corporate Governance Framework (As of April 1,2015)

[Board of Directors]

The Board of Directors is responsible for making decision concerning important management issues and overseeing business execution. In-house Directors utilize their rich experience of working within Mitsubishi Corporation and Outside Directors utilize their practical, objective and professional perspectives to ensure appropriate decision-making and management oversight. Currently, the Board comprises 14 members, including 5 Outside Directors. The Board meetings are attended by 5 Corporate Auditors, of whom 3 are Outside Corporate Auditors.
The composition of the Board of Directors and the policy and process for appointing nominated Directors are deliberated at the Governance & Compensation Committee, and then decided by the Board of Directors as follows:

Composition of the Board of Directors and the Policy for Appointing Nominated Directors

To ensure Mitsubishi Corporation's decision-making and management oversight are appropriate for a sogo shosha involved in diverse businesses and industries in a wide range of fields, several Directors are appointed from both within and outside Mitsubishi Corporation with the depth of experience and high levels of knowledge and expertise needed for fulfilling their duties.

More specifically, in addition to Chairman of the Board and the President & CEO, Mitsubishi Corporation's in-house Directors are appointed from executive officers responsible for companywide management, Corporate Staff operations, and other areas. Outside Directors are appointed from those who possess a practical perspective of highly experienced officers and those who possess an objective and professional perspective with a deep insight on global developments and socio-economic trends.

In principle, the total number of Directors is around 15, with one third or more being made up of Outside Directors.

Process for Appointing Nominated Directors

Based on the above policy, the President & CEO proposes a list of nominated Directors, which is then deliberated at the Governance & Compensation Committee and resolved by the Board of Directors before being presented at the Ordinary General Meeting of Shareholders.

Matters Deliberated by the Board of Directors

Matters requiring a resolution by the Board of Directors in accordance with laws and regulations and the Articles of Incorporation and important matters concerning management are resolved by the Board of Directors. In particular, for acquisitions and disposals of shares, equity stakes, and fixed assets, and investments and loans involving loans and guarantees, the Board of Directors sets out monetary threshold standards for each of various type of risks, such as credit risk, market risk and business investment risk (amounts do not exceed 1% of total assets and are set individually depending on the nature of the risk). Investments and loans that exceed this monetary threshold are deliberated and resolved by the Board of Directors.

Furthermore, business execution other than these matters for resolution by the Board of Directors is entrusted to Executive Officers in accordance with the allocation of duties decided by the Board of Directors for prompt and efficient business execution. Business is executed through President, as the Chief Executive Officer, and the Executive Committee (held twice monthly), as a management decision-making body to take responsibility for business execution.

[Board of Corporate Auditors]

The Board of Corporate Auditors audits Directors' decision-making process and their performance of duties according to the Companies Act and other laws and regulations, Mitsubishi Corporation's Articles of Incorporation and internal rules and regulations. In-house Corporate Auditors conduct audits from a perspective of their rich experience of working within Mitsubishi Corporation, and Outside Corporate Auditors from a neutral and objective perspective, to ensure that management is sound. Currently the Board of Corporate Auditors comprises 5 Corporate Auditors, of whom 3 are Outside Corporate Auditors.
The composition of the Board of Corporate Auditors and the policy and procedure for appointment of nominated Corporate Auditors are deliberated by the Governance & Compensation Committee, and then, decided by the Board of Directors as follows:

Composition of the Board of Corporate Auditors and the Policy for Appointing Nominated Corporate Auditors

To ensure Mitsubishi Corporation's sound business development and improve its social credibility through audits, several Corporate Auditors are appointed from within and outside Mitsubishi Corporation with the depth of experience and high level of expertise needed for conducting audits.

More specifically, in-house Corporate Auditors are appointed from those with knowledge and experience in corporate management, finance, accounting, risk management, or other areas. Outside Corporate Auditors are appointed from those with rich knowledge and experience across various fields.

In principle, the total number of Corporate Auditors is around 5, with more than half their number being made up of Outside Corporate Auditors.

Process for Appointment of Nominated Corporate Auditors

Based on the above policy, the President & CEO consults with Senior Corporate Auditor and creates a proposal for appointment of nominated Corporate Auditors, which is then deliberated by the Governance & Compensation Committee and approved by the Board of Corporate Auditors before being resolved by the Board of Directors and presented at the Ordinary General Meeting of Shareholders.

Board of Directors' Office and Board of Corporate Auditors' Office

To ensure that the Directors and Corporate Auditors are able to perform their management supervision and audit functions adequately, the Board of Directors' Office and the Board of Corporate Auditors' Office have been established, and have been providing necessary information appropriately and in a timely manner for them to perform their duties.

For Outside Directors and Outside Corporate Auditors, the Board of Directors' Office and the Board of Corporate Auditors' Office provide Board of Directors' meeting materials and explanations as well as related information before the Board of Directors' meetings to ensure that they can participate in the discussion fully. The offices also provide an orientation to newly appointed Outside Directors and Outside Corporate Auditors, as well as ongoing opportunities to understand the business of Mitsubishi Corporation, including annual observation tours of subsidiaries and affiliates and opportunities for dialogue with the management. Furthermore, to enhance the management supervision function, Mitsubishi Corporation holds meetings of the Governance & Compensation Committee, the President's Performance Evaluation Committee, and other bodies comprising a majority of Outside Directors and Outside Corporate Auditors in their memberships, enhancing close cooperation between them.

[Board of Directors' Advisory Bodies]

Governance & Compensation Committee

Since its establishment in 2001, the Governance & Compensation Committee has met around twice a year. While a majority of the members of the Committee comprises Independent Directors and Independent Corporate Auditors, the Committee conducts continuous reviews of corporate governance-related issues at Mitsubishi Corporation and also discusses the remuneration system for Directors and Corporate Auditors, including the policy for setting remuneration and appropriateness of remuneration levels, and monitors operation of this system.

<Main Discussion Themes>

  • Composition of the Board of Directors and Board of Corporate Auditors, policy on appointment of Directors and Corporate Auditors
  • Requirements of corporate executive officers and basic policy on their appointment
  • Review of the remuneration system including the policy for setting remuneration and appropriateness of remuneration levels
  • Assessment of operations of the Board of Directors

Furthermore, the President's Performance Evaluation Committee has been established as a subcommittee to the Governance & Compensation Committee, to deliberate the assessment on the President's performance.

<Composition of Committee (*Committee Chairman)> (as of April 1, 2015)

Outside members (5):
  • Kunio Ito (Outside Director)
  • Ryozo Kato (Outside Director)
  • Hidehiro Konno (Outside Director)
  • Sakie T. Fukushima (Outside Director)
  • Tadashi Kunihiro (Outside Corporate Auditor)

In-house members (3):

  • Yorihiko Kojima* (Chairman of the Board)
  • Ken Kobayashi (President & CEO)
  • Hideyuki Nabeshima (Senior Corporate Auditor)

International Advisory Committee

The International Advisory Committee has met every year since its establishment in 2001. While a majority of the members of the Committee comprises prominent experts from business, political and academic fields all over the world and Independent Directors, the Committee offers proposals and advice from an international standpoint based on their specialties on Mitsubishi Corporation's management and corporate strategies as it develops its business globally.

<Main discussion themes>

  • Gathering and analyzing information relating to the global situation (political and economic conditions and geopolitical aspects)
  • Progress on New Strategic Direction
  • Regional strategy of Mitsubishi Corporation
  • International human resource development and organizational management

<Composition of Committee (*Committee Chairman)> (as of April 1, 2015)

Outside members (9):
  • Dr. Herminio Blanco Mendoza (Former Secretary of Trade & Industry (Mexico))
  • Professor Joseph S Nye (Harvard University Distinguished Service Professor and Sultan of Oman Professor (U.S.A.))
  • Mr. Ratan N Tata (Chairman, Tata Trusts (India))
  • Mr. George Yeo (Chairman of Kerry Logistics Network (Singapore))
  • Mr. Jaime Augusto Zobel de Ayala II (Chairman and CEO, Ayala Corporation (the Philippines))
  • Sir John Bond (Chairman, KKR Asia Ltd. (U.K.))
  • Mr. Niall FitzGerald (Former CEO & Chairman, Unilever (Ireland))
  • Ryozo Kato (Outside Director)
  • Hidehiro Konno (Outside Director)
In-house members (4):
  • Yorihiko Kojima* (Chairman of the Board)
  • Ken Kobayashi (President & CEO)
  • Minoru Makihara (Senior Corporate Advisor)
  • Mikio Sasaki (Senior Corporate Advisor)

[Selection Criteria for Outside Directors]

To make the function of Outside Directors stronger and more transparent, Mitsubishi Corporation has set forth Selection Criteria for Outside Directors as follows, after deliberation by the Governance & Compensation Committee, which is composed with a majority of independent Directors and Corporate Auditors.

  1. Outside Directors are elected from among those individuals who have an eye for practicality founded on a wealth of experience as corporate executive officers, as well as an objective and specialist viewpoint based on extensive insight regarding global conditions and social and economic trends. Through their diverse perspectives, Outside Directors help ensure levels of decision-making and management oversight appropriate to the Board of Directors.
  2. To enable Outside Directors to fulfill their appointed task, attention is given to maintain their independency*; individuals incapable of preserving this independency in effect will not be selected to serve as Outside Directors.
  3. Mitsubishi Corporation's operations span a broad range of business domains; hence there may be cases of conflict of interest stemming from business relationships with firms home to a corporate executive officer appointed as Outside Directors. Mitsubishi Corporation appropriately copes with this potential issue through the procedural exclusion of the director in question from matters related to the conflict of interest, and by preserving a variety of viewpoints through the selection of numerous Outside Directors.

(Note) Independency for the purpose of Selection Criteria for Outside Directors and Outside Corporate Auditors

To make a judgement of independence, Mitsubishi Corporation checks if the person concerned meets the conditions for independent directors and independent corporate auditors as specified by stock exchanges in Japan such as the Tokyo Stock Exchange, Inc., and whether the person concerned is currently any of the following items (1) to (7) and whether they have been at any time in the past 3 fiscal years.

  1. (1) A major shareholder of Mitsubishi Corporation (a person or entity directly or indirectly holding 10% or more of the voting rights), or a member of business personnel of such shareholder (*1).
  2. (2) A member of business personnel of a creditor of Mitsubishi Corporation exceeding the threshold set by Mitsubishi Corporation (*2).
  3. (3) A member of business personnel of a supplier or a customer of Mitsubishi Corporation exceeding the threshold set by Mitsubishi Corporation (*3).
  4. (4) A provider of professional services, such as a consultant, lawyer, or certified public accountant, receiving cash or other financial benefits from Mitsubishi Corporation, other than directors' or corporate auditors' remuneration, where the amount exceeds ¥10 million per fiscal year.
  5. (5) A representative or partner of Mitsubishi Corporation's independent auditor.
  6. (6) A person belonging to an organization that has received donations exceeding a certain amount (*4) from Mitsubishi Corporation.
  7. (7) A person who has been appointed as an Outside Director or Outside Corporate Auditor of Mitsubishi Corporation for more than 8 years.
  1. *1 A member of business personnel refers to a managing director, corporate officer, executive officer, or other employee of a company.
  2. *2 Creditors exceeding the threshold set by Mitsubishi Corporation refer to creditors to whom Mitsubishi Corporation owes an amount exceeding 2% of Mitsubishi Corporation's consolidated total assets.
  3. *3 Suppliers or customers exceeding the threshold set by Mitsubishi Corporation refer to suppliers or customers whose transactions with Mitsubishi Corporation exceed 2% of Mitsubishi Corporation's consolidated revenues.
  4. *4 Donations exceeding a certain amount refer to donations of more than ¥20 million per fiscal year.

If a person is still judged to be effectively independent despite one or more of the above items (1) to (7) applying, Mitsubishi Corporation will explain and disclose the reason at the time of their appointment as an Outside Director or Outside Corporate Auditor.

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