We believes that the appropriate form of governance, as a design of its organs, is to ensure the legality, appropriateness and efficiency of business execution by securing the effective supervising framework of the Board of Directors by creating its structure consisting of inside directors who are also responsible for the execution of business and outside directors who specialize in supervisory functions, in addition to a mutual supervision and check mechanism between inside directors (concurrently serving as executive officers) who execute business, while securing the audit function of the Audit & Supervisory Board, which is independent from the Board of Directors. Based on this belief, we made ourselves into a "company with an Audit & Supervisory Board" as provided for by the Companies Act.
The Board of Directors, through its resolution, has established a basic policy for developing a system to ensure the appropriateness of operations (the internal control system). The MOL Group's officers and employees, under the president serving as the chief executive officer for management, carry out business operations in accordance with the management policy established by the Board of Directors and the abovementioned basic policy under the supervision of the Board of Directors and audits carried out by the Audit & Supervisory Board.
In FY2021, the MOL Group also newly established the Corporate Governance Council under the Board of Directors as a forum for holding free and open-minded discussions on general issues relating to the enhancement and strengthening of our corporate governance framework, taking on board expertise from outside of us. The Corporate Governance Council is also expected to be effective in helping increase the effectiveness of the Board of Directors through its reports and advice to the Board of Directors.
We also believe that the true worth of corporate governance will not be achieved by the existence of the framework and organization constructed as described above, but will be put to the test by whether such a framework actually works properly and effectively as described below.
As the central decision-making body of the Company, the Board of Directors deliberates and make decisions on the basic policies and the most important matters for the management of MOL Group.
The Board of Directors consists of six (6) inside directors and three (3) outside directors who hold no interest in MOL. Outside directors play a major role in vitalizing the Board of Directors by checking the reasonability of management decisions and of the status of business execution based on their respective experience and knowledge from an independent standpoint without an interest in the Company and expressing useful opinions on overall management. We have developed a supporting system for outside directors whereby agenda items at the Board of Directors' meetings are explained in advance and the execution of important businesses is reported to them each time. In addition, the Board of Directors also conducts the "Deliberation on Corporate Strategy and Vision", during which the directors exchange opinions freely with outside directors and outside Audit & Supervisory members on management strategies, the long-term vision and other subjects related to overall management.
MOL's "Deliberation on Corporate Strategy and Vision"
At MOL, three hours are set aside for every Board of Directors' meeting, with an hour and half allotted to "Deliberation on Corporate Strategy and Vision." At the "Deliberation on Corporate Strategy and Vision," a theme is selected related to our management strategy, long-term vision or management in general. A free exchange of opinions is carried out at these deliberations which include outside directors and outside audit & supervisory board members.
FY2020 "Deliberation on Corporate Strategy and Vision": Main Agenda Items
|July||Business plans and overall investment plans of Business Units|
|September||Initiatives for Offshore Business (constituting the next step beyond transport of fossil fuels)|
|October||Environment and sustainability promotion structures|
|December||Direction of next management plan|
|January||LNG carrier business policy (consistently exceptional company in the market)|
In addition to the aforementioned "Deliberation on Corporate Strategy and Vision," the "Board Member Discussion Sessions" is also held when necessary after the meetings of the Board of Directors to share and discuss a range of ongoing important issues other than the agenda items at the Board of Directors meeting at an early stage.
We have established the Nomination Advisory Committee and the Remuneration Advisory Committee as arbitrary organizations under the Board of Directors. For making the outside directors supervise the executive directors more effectively, both committees are chaired by outside directors and are composed of all three (3) outside directors, the Chairman and the President, so that the majority are outside directors.
The Nomination Advisory Committee deliberates on the election, appointment and dismissal of directors and executive officers, as well as the necessary criteria for their determination and proposals for the next President based on the succession plan (including reappointment and dismissal of the incumbent President), thereby increasing the objectivity and transparency of the processes and strengthening accountability.
The Remuneration Advisory Committee appropriately reviews the remuneration plan for directors and executive officers, and determines appropriate levels of remuneration for directors, including incentives for long-term enhancement of corporate value from an objective standpoint, while putting a high priority on the "stakeholders' perspective."
In addition to the committee members, the outside audit & supervisory board members may also attend meetings of the respective committees in order to gain an understanding of the deliberation process and provide their opinions. The Board of Directors respects the contents of reports from both Advisory Committees and uses them to pass necessary resolutions.
The Corporate Governance Council has been established under the Board of Directors to serve as a forum for facilitating unrestricted discussion while incorporating outside knowledge with respect to overall issues related to enhancing and strengthening the corporate governance structure. We expect that the council will contribute to improving the effectiveness of the Board of Directors by providing reports and advice to the Board of Directors.
The Board of Directors, in accordance with the Corporate Governance Code, performs effectiveness evaluations and analyses each year through deliberations based on the results of self-questionnaires and questionnaires, and uses the results to improve the operation of the Board of Directors.
In the effectiveness evaluations for FY2020, there were opinions on enhancing the quality of explanations and materials pertaining to the matters deliberated by the Board of Directors, ensuring enough time for deliberation according to the importance and level of difficulty of the matter to be deliberated, and making improvements to the "Deliberation on Corporate Strategy and Vision" sessions, particularly in terms of increasing the number of such sessions and setting topics, with the aim of stimulating discussion related to areas of focus and division strategies in light of overall management strategies. These points were then identified as issues to be addressed. Drawing on such awareness, we took steps to improve the effectiveness of the Board of Directors by reviewing agendas of meetings of the Board of Directors and sessions of the Deliberation on Corporate Strategy and Vision, figuring out ways of conducting meetings to ensure effective discussion, and furthermore organizing and identifying matters to be deliberated and discussed.
In order to make effectiveness evaluations more beneficial, the Company reviews the evaluation items every fiscal year to ensure an adequate evaluation, which may involve adding matters that are pertinent to the actual condition of the fiscal year.
MOL introduced the executive officer system in 2000. The executive officers, who are appointed by the Board of Directors and to whom the authority is delegated by representative directors work to increase the speed of management by operating business in accordance with the highest management policy determined by the Board of Directors. The Executive Committee (chaired by the President), functions as a deliberative organ to make decisions on basic management plans and important issues related to execution of business in accordance with the basic policy determined by the Board of Directors. MOL has established six (6) committees as subordinates under the Executive Committee. In addition to the members of each respective committee, officers and general managers related to each issue attend the committee meetings to examine and deliberate on various matters such as important matters submitted to the Executive Committee for discussion and matters pertinent to multiple divisions.
The Audit & Supervisory Board consists of two (2) internal audit & supervisory board members and two (2) outside audit & supervisory board members who hold no interest in MOL. The audit & supervisory board members periodically hold Audit & Supervisory Board's meetings to draw up audit plans and report and share audit results, etc, and prepare audit reports at the end of fiscal years. Each audit & supervisory board member attends meetings of the Board of Directors and other important meetings to audit the deliberation and decision-making processes. They also audit the development and operational status of internal control systems by conducting interviews with directors, executive officers, and employees, as well as by making on-site visits to Group companies. KPMG AZSA LLC, the accounting auditor, conducts accounting audits. In addition to the above, the Corporate Audit Division, which receives directions from the President and is independent from any other management body, conducts internal audits including internal audits on Group companies. Three entities?namely, the Audit & Supervisory Board, the accounting auditor, and the Corporate Audit Division?take initiatives to improve the effectiveness of audits through close coordination with each other.
The Company is aware of the crucial role that compliance plays in living up to its broad corporate social responsibilities, and that compliance with laws and regulations is at the core of this role.
We have established the Compliance Committee, which is headed by the Chief Compliance Officer, and formulated the Compliance Policy to assure strict adherence to rules and regulations. General managers of divisions are appointed as Compliance Officers. In this role, they are responsible for enforcing compliance regulations and are also required to report to the Compliance Committee in the event of a compliance breach. The Corporate Audit Division, a body that operates independently of the Company's divisions, provides an Internal Compliance Advisory Desk. The Corporate Audit Division undertakes investigations of breaches and reports the results to the Compliance Committee. In addition to the Internal Compliance Advisory Desk, we have established an External Compliance Advisory Desk, operation of which is entrusted to an outside attorney. The Desk provides anonymous consultation services.
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