Maruichi Steel Tube Ltd.

Basic Approach

The Company has formulated Corporate Governance Guidelines, and is striving to strengthen corporate governance in accordance with the basic approach and policies described below.

Basic Approach Concerning Corporate Governance

1.

Led by the fundamental concept that “Our mission is to contribute to society by providing outstanding products and responding to the trust of customers,” laid out in the Maruichi Steel Tube Group’s management philosophy, we strive to enhance corporate value by developing in concert with our shareholders, customers, employees, business partners, and local communities.

2.

We strive to respect the rights of shareholders and ensure equitability and transparency of management while fulfilling our fiduciary responsibilities and providing accountability to our shareholders, led by our Board of Directors. At the same time, we position corporate governance as a critical management issue as we strive to achieve our management vision, and reinforce speedy and accurate decision-making supervisory functions.

3.

In order to improve medium- and long-term corporate value and maintain sound management, we pursue the optimal corporate governance and engage in ongoing efforts to enhance corporate governance.

Basic Policies Concerning Corporate Governance

1.

To respect the rights of shareholders, and ensure shareholder equality.

2.

To strive for appropriate cooperation with all stakeholders, such as business partners, employees and shareholders, based on respect for humanity.

3.

To strive for transparency and appropriate disclosure of company information.

4.

To strive for appropriate execution of roles and duties by the Board of Directors.

5.

To engage in constructive dialogue with shareholders, to achieve sustainable growth and enhance corporate value.

Diagram of the Governance Structure

Overview of the Corporate Governance Structure

Board of Directors

　The Board of Directors is composed of Directors with extensive knowledge of production, sales or administrative divisions, as well as Outside Directors with abundant experience and a high level of expertise in corporate management. While maintaining diversity of gender and nationality, the size of the Board of Directors is kept to ten members or less, in order to ensure that it carries out its function in the most effective and efficient manner. Presently, the Board of Directors is composed of eight Directors (including one female Director), of whom three are Outside Directors. In accordance with the Rules of the Board of Directors and the Summary of Matters for Deliberation by the Board of Directors, the Board of Directors resolves on matters prescribed under laws and regulations or the Company’s Articles of Incorporation, as well as important matters of management policy and labor policy, which are other important matters concerning the execution of business. A Table of Duties, Authority and Approval Standards has been formulated, and the scope of duties and authority delegated to management has been clearly established.
　In addition to confirming whether business execution conforms to management strategy and the Medium-Term Management Plan, the Board of Directors has also established the Risk Management Committee, and has built an appropriate structure for managing risk. A suitable monitoring structure has been established with the aim of further enhancing management soundness and transparency, including the selection of at least two candidates for Outside Director, each with abundant career experience and considerable insight, with reference to the independence standards established by the Tokyo Stock Exchange, as well as the requirements of the Companies Act. Every year, the Board of Directors carries out an analysis and evaluation of the effectiveness of the Board of Directors as a whole, based on individual self-assessment of the execution of duties by each Director.

Board of Directors
(Internal and Outside)

Diversity of Directors

Audit & Supervisory Board

The basic structure of the Audit & Supervisory Board comprises four Audit & Supervisory Board Members. Robust independence is maintained, with three of the four being Outside Audit & Supervisory Board Members. In addition to attending meetings of the Board of Directors and expressing opinions as an independent body, Audit & Supervisory Board Members perform roles and duties including auditing the execution of duties by Directors and Managing Officers, and executing authority with respect to the appointment, dismissal and audit fees for the external Accounting Auditor. They also cooperate with the Outside Directors to strengthen the ability of the Outside Directors to gather information without compromising their independence.

Nomination and Compensation Committee

The Nomination and Compensation Committee is composed of a total of five members, including two Representative Directors and three Outside Directors. It is chaired by an Outside Director. Regarding the Company’s policy concerning the nomination of candidates for Director, the Representative Directors refer to the opinion of the Nomination and Compensation Committee to select candidates who have the abundance of experience, deep insight, and the high level of specialized expertise appropriate for a Director entrusted with corporate management, after comprehensive consideration of factors including their past performance. These candidates are presented to the General Meeting of Shareholders, after deliberation and consideration by the Board of Directors. Decisions on Directors' compensation are also made after consideration by the Nomination and Compensation Committee.

Internal Audit

The Internal Audit Division, an independent body reporting directly to the Representative Directors, engages in audits designed to enhance the appropriateness and effectiveness of internal controls across the Maruichi Steel Tube Group, through objective assurance activities and consulting activities. In addition to efficiently implementing audits, the Internal Audit Division also engages in occasional liaison and coordination with Audit & Supervisory Board Members and the Accounting Auditor, for the purposes of exchanging audit information.

Accounting Auditor

The Company has appointed KPMG AZSA LLC, which implements audits by a designated limited liability employee (managing partner) and multiple assistant auditors. The Company is aware that the Accounting Auditor has a duty to shareholders and investors, and strives to ensure appropriate audits through cooperation with relevant internal departments such as the Accounting Department and the Internal Audit Division, as well as the Audit & Supervisory Board. The Audit & Supervisory Board has established evaluation criteria for the Accounting Auditor, and confirms the independence and expertise of the Accounting Auditor.

Internal Controls

Basic Approach Concerning Internal Control Systems and Their Implementation Status

The Group has established an Internal Audit Division to manage and inspect the Group’s internal controls, and has implemented the following initiatives, based on the basic policy for constructing internal control systems.

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Regarding compliance, we have established a Compliance Committee. With adherence to laws, regulations and the Articles of Incorporation as our highest priority, we are striving to monitor activities across the Group, prepare and follow our Compliance Manual and Corporate Ethics Handbook. We have also established compliance hotlines, facilitating direct reporting by employees across the Group, as well as other operators engaged in the Group’s businesses, of matters that may risk violating laws, regulations or the Articles of Incorporation.

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Regarding risk management, we are responding to the risks faced by the Group, establishing the Risk Management Committee as a body, and the Risk Management Regulations as rules.

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In addition, we also carry out inspections of the completeness and operational status of these internal control systems, including audits of the status of business execution within the Group. The Internal Audit Division is composed of three members.

Compliance

Establishment of a Compliance Committee

The Compliance Committee has been established reporting directly to the President, to support and guide the thorough practice of compliance by officers and employees of the Maruichi Steel Tube Group. A Compliance Committee member has been appointed for each plant, office and Group company, to act as the person responsible for compliance in that organization.

Establishment of Compliance Hotlines

An internal compliance hotline, an internal compliance hotline for women, and an external compliance hotline have been established as compliance consultation hotlines for the entire Group.

Compliance Manual

A compliance manual has been prepared and distributed as a handbook stipulating the standards of behavior that should be adhered to by each and every employee in the performance of everyday duties, to realize thorough compliance across the Group.

Compliance Training

Corporate Governance Report Corporate Governance Guidelines

Corporate Governance Guidelines