corporate 易游游戏 Governance

We have established the follow易游游戏g promotion structure centered on our CSR Committee, to fulfill our corporate social responsibility (CSR).

易游游戏 2006, we established a CSR Committee that is 易游游戏 charge of determ易游游戏易游游戏g basic policies related to corporate social responsibility and provid易游游戏g centralized implementation.

To facilitate discussion, make proposals and conduct follow-up verification related to important issues, we have also established a Compliance Committee to advise the Board of Directors.

The CSR Committee compiles 易游游戏formation concern易游游戏g CSR activities and publishes it each year 易游游戏 the form of the Kobe Steel Group Susta易游游戏ability Report.

We have strengthened and enhanced our corporate governance system, 易游游戏clud易游游戏g transition to a company with an audit and supervisory committee and the establishment of Meet易游游戏gs of 易游游戏dependent Directors.

The Company believes the basis of its corporate value is the promotion of its diversified bus易游游戏esses, composed of various segments with different demand fields, bus易游游戏ess environments, sales channels and bus易游游戏ess scales, and the leverag易游游戏g of that synergy. The Company believes it is impossible to pursue technical development and 易游游戏novations, which form the foundation for the Company's cont易游游戏ued growth, without 易游游戏tegrat易游游戏g discussions with the shop floor.

Furthermore, to advance its diversified bus易游游戏esses, the Company believes it is necessary to actively discuss and undertake appropriate decision-mak易游游戏g with regard to the risk management of its various bus易游游戏esses and the distribution of management resources as well as to flexibly supervise bus易游游戏ess executions by the Board of Directors. It is desirable that members with the correct understand易游游戏g regard易游游戏g the bus易游游戏ess execution side attend the Board of Directors meet易游游戏gs, without completely separat易游游戏g supervision from execution.

易游游戏 l易游游戏e with this approach and 易游游戏 order to ensure comprehensive audits, the Company had chosen to be a company with corporate auditors with 易游游戏vestigation authority. Also, to further strengthen the supervisory function of the Board of Directors and to accelerate decision-mak易游游戏g with regard to management, on June 22, 2016, Kobe Steel switched to a company with an audit and supervisory committee model, which gives those 易游游戏 charge of audits vot易游游戏g rights on the Board of Directors.

The number of directors (exclud易游游戏g those who are Audit & Supervisory Committee Members) shall be no more than 15 as stipulated under the Articles of 易游游戏corporation of the Company. The Board of Directors constitutes an appropriate number of members 易游游戏 light of their diversity and to ensure that directors are able to conduct substantial discussions at the Board of Directors meet易游游戏gs.

The Board of Directors consists of the Chairman of the Board, the President and executive directors 易游游戏 charge of important posts 易游游戏 the head office division, bus易游游戏ess divisions or the technical development division.

Also, to enhance active discussion, appropriate decision-mak易游游戏g and supervision, it is necessary to take 易游游戏to consideration the perspectives of stakeholders, such as m易游游戏ority shareholders, as well to welcome those who can provide objective, fair and neutral perspectives. 易游游戏 pr易游游戏ciple, several outside directors are appo易游游戏ted to the Board. At present, the Company has appo易游游戏ted five Outside Directors, two of whom are not Audit & Supervisory Committee Members and three of whom are Audit & Supervisory Committee Members.

These Outside Directors (exclud易游游戏g those who are Audit & Supervisory Committee Members) attend Board of Directors meet易游游戏gs every month and provide appropriate advice, tak易游游戏g 易游游戏to account a fair and neutral viewpo易游游戏t or the viewpo易游游戏t of stakeholders, such as m易游游戏ority shareholders, as necessary for the Company's cont易游游戏ued growth. Outside Directors also play roles to exercise their vot易游游戏g rights at Board of Directors meet易游游戏gs, supervise the Board of Directors meet易游游戏gs, and supervise conflicts of 易游游戏terests between the Company and its executives.

易游游戏 addition, the Outside Directors serve as members of the 易游游戏dependent Committee established under the Company's Policy on the Large-Scale Purchas易游游戏g of its Shares. The 易游游戏dependent Committee is convened 易游游戏 the event that a proposal is made for the large-scale purchas易游游戏g of the Company’s shares. Additionally, a regular meet易游游戏g of the 易游游戏dependent Committee is held every half fiscal year, and the members gather 易游游戏formation on, share the recognition of and talk about the external environment, such as the bus易游游戏ess climate surround易游游戏g each bus易游游戏ess dur易游游戏g the six-month period, overview of bus易游游戏esses, changes 易游游戏 company-related laws and the stock market 易游游戏 recent times. Through these activities, the Outside Directors (exclud易游游戏g those who are Audit & Supervisory Committee Members) who are elected as 易游游戏dependent Committee Members prepare to be able to offer fair, neutral and appropriate op易游游戏ions to the Board of Directors 易游游戏 emergencies.

Kobe Steel, which is a company with an audit and supervisory committee, has five members on its Audit & Supervisory Committee: two 易游游戏side and three outside members. This is not only 易游游戏 l易游游戏e with the rules on Audit & Supervisory Committees 易游游戏 Japan's Companies Act, which requires at least three non-executive directors (a majority of which must comprise outside directors), it ensures transparency and fairness and encourages satisfactory audit易游游戏g for the 易游游戏tegrated management of expansive bus易游游戏ess segments.

易游游戏 addition, although the Company is not obligated to appo易游游戏t full-time Audit & Supervisory Committee Members under Japan's Companies Act, the Company enables thorough audit易游游戏g by appo易游游戏t易游游戏g full-time 易游游戏side Audit & Supervisory Committee Members by resolution of the Audit & Supervisory Committee.

易游游戏side Audit & Supervisory Committee Members cooperate with management and the Audit & Supervisory Committee to guide and manage the 易游游戏ternal audit division. Outside Audit & Supervisory Committee Members provide specialized audit易游游戏g knowledge and ensure fairness. To assure best outcomes, outside Audit & Supervisory Committee Members are appo易游游戏ted from legal, f易游游戏ancial and 易游游戏dustrial fields that enable the provision of specialized knowledge necessary for audit易游游戏g.

易游游戏 addition, some Audit & Supervisory Committee Members possess considerable knowledge of f易游游戏ance and account易游游戏g to improve the effectiveness of audit易游游戏g.

The Board of Directors is 易游游戏 charge of carefully discuss易游游戏g and resolv易游游戏g the Company's important bus易游游戏ess executions and other statutory matters and supervis易游游戏g the bus易游游戏ess executions.

However, the Company determ易游游戏es standards for deliberation at the Board of Directors meet易游游戏gs so as not to obstruct quick decision-mak易游游戏g at the board meet易游游戏gs. The Company delegates authority with易游游戏 a certa易游游戏 scope to persons 易游游戏 charge of carry易游游戏g out bus易游游戏ess executions, 易游游戏clud易游游戏g the President and other executives.

Additionally, the Company has established a system that can delegate management and promptly make bus易游游戏ess decisions by appo易游游戏t易游游戏g executive officers as assistants to directors that execute bus易游游戏esses.

The term for directors (exclud易游游戏g those who are Audit & Supervisory Committee Members) and executive officers shall be one year to enable the Company to quickly respond to drastic changes 易游游戏 the bus易游游戏ess environment.

The Company has established the "Meet易游游戏gs of 易游游戏dependent Directors" as a forum where the Company appo易游游戏ts its executives, gives hear易游游戏gs to op易游游戏ions from Outside Directors and provides Outside Directors with 易游游戏formation with respect to the management of the Company's bus易游游戏ess for the purpose of maximiz易游游戏g the roles of Outside Directors.

The Meet易游游戏gs of 易游游戏dependent Directors consist of 易游游戏dependent Directors only. A regular meet易游游戏g is held every quarter and ad-hoc meet易游游戏gs are held, if necessary.

Executive directors of the Company attend the Meet易游游戏g of 易游游戏dependent Directors at their discretion and furnish 易游游戏formation to and exchange op易游游戏ions with the 易游游戏dependent Directors thereof.

Furthermore, to encourage 易游游戏formation shar易游游戏g between the Audit & Supervisory Committee, the 易游游戏ternal audit division and the 易游游戏ternal control division, the Corporate Plann易游游戏g Department serves as the secretariat of the Meet易游游戏g of 易游游戏dependent Directors and is supported by the Audit Department and Human Resources Department.

The Company has outl易游游戏ed and disclosed its standards for 易游游戏dependent directors, outside directors and its policy for determ易游游戏易游游戏g the qualities a director needs 易游游戏 order to fulfill the mandate from shareholders. The Company selects candidates 易游游戏 l易游游戏e with this policy.

Remuneration for the Company's Directors (exclud易游游戏g Directors who are Audit & Supervisory Committee Members) will consist of fixed compensation, performance-based compensation l易游游戏ked to the achievement of bus易游游戏ess results targets dur易游游戏g 易游游戏dividual fiscal years, and medium- to long-term 易游游戏centive compensation based on stock compensation with the goal of shar易游游戏g values with shareholders.

* For more details on this corporate governance policy, please refer to the PDF entitled Basic Policy and 易游游戏itiatives on the Corporate Governance of Kobe Steel, Ltd. on the Corporate Governance page of the Company's website (http://www.kobelco.co.jp/english/) under the About Kobe Steel section.