Corporate governance

Compliance

Corporate Governance

Basic policy regarding the Corporate Governance

We aspire to have a compliant management staff capable of establishing a corporate governance structure that will remain as a strong fundamental asset in EXEDY's personel.
Specifically, our system of board directors and corporate auditors supervise and confirm the executions of the director's task.
By making our organization flexible to adopt to variations in business , transparency in EXEDY management will be improved and enabled to strengthen the strong management and corporate governance within our company.

Basic policy regarding the Corporate Governance

Organizational structures and organizational operations

Organizational form	Company with a Board of Corporate Auditors

Details of Directors

Chairman of Board of directors	President
Number of directors	8
Outside directors	Yes
Number of outside directors	1

Details of Corporate Auditors

Board of Corporate Auditors	Yes
Number of Corporate Auditors	4
Outside Corporate Auditors	Yes
Number of Outside Corporate Auditors	3

Matters pertaining to functions relating to the execution of duties, audit and supervision, appointment and decisions regarding remuneration, etc.

Summary of current system

（１）Current governance system: The Board of Directors consists of eight directors, including one outside director.
They will discuss and determine matters related to the company's operation at the regular Board of Directors' meetings hold once a month and, the extraordinary meetings held whenever necessary.
The four corporate auditors, including three outside corporate auditors, will attend the Board of Directors' meetings. They will offer opinions on the determination of matters related to the company's operation from an auditing perspective, and conduct oversight of the directors' execution of their duties.

We reduced the number of directors to facilitate the performance of duties capable of a rapid response to changes in the operating climate. In addition, we adopted an executive officer system to recruit personnel with business expertise and to conduct business operations in a more efficacious manner.

Further, we conduct deliberations regarding our business strategy in the managing directors' council including president and senior executive managing officers. There is also a business council composed of all full time executive directors/officers that meets twice a month in principle. The members actively exchange opinions on and fully examine the detailed specifics related to the performance of their duties.

We have a contract with an auditing corporation for financial accounting audits. In addition to conducting periodic audits, they regularly identify auditing issues and make determinations as to the appropriateness of the auditing.
We have consultation agreements with our consulting attorneys, as well as agreements with external specialists in tax-related fields. We receive timely advice from them as necessary.
Our internal control system has the overall responsibility for risk management at the administrative division. The internal corporate auditors' office is a unit for auditing business activities under the direct control of the president. It conducts business audits and checks the compliance of all divisions.
（２）Items related to an outside director: An outside director is nominated for introduction of the outside view to the board of directors meeting, for promotion of transparency and quality in the management, and for the enhancement of supervisory function to the director’s performance by the Board of Directors.
（３）The efforts of corporate auditors for improvements: With regard to such matters is "Cooperation between corporate auditors and the independent accountants", "Cooperation between the internal audit division and the corporate auditors", "Outside Directors (Outside Corporate Auditors) support structure" and "to appoint outside corporate auditors shall Reasons" stated in each column.

Reason for adopting the current system

This company has introduced the operating officer system and total of 6 directors double as the operating officer, so the prompt decision making and effective business operation possible. On the contrary, 4 out of 8 directors and 4 corporate auditors to attend the Board of Directors are outside directors for securing the transparency in operation. By this reason, current auditing system as the board of corporate auditors is thought to be the best system.

Implementation of measures for shareholders and other stakeholders

Approach toward the vitalization of general shareholders’ meetings and the facilitation of exercise of voting rights

Early distribution of notice of convocation of general shareholders' meetings	We distribute the notice of convocation of general shareholders' meetings approximately 1 weeks prior to the date on which such general shareholders' meeting convenes.
Others	For further understanding to the company in General Shareholders Meeting, the sales report is visualized with slides and other tools.

IR activities

Convene periodic briefing for analysts and institutional investors	Briefings on the financial result is held semi annually in Tokyo.
Disclosure of IR documents on the website	Preliminary financial result, information for I.R briefings, convocation notice and appended documents to convocation notice are uploaded to the company website (http://www.exedy.com). Annual report and variation of financial result are disclosed in English as well.

Activities concerning respect for stakeholders

Setting forth provisions in the internal regulations concerning respect for the stakeholders’position	Our business philosophy, "Contribution to society", "Useful for our customers" and "the happiness of employees" must be step up further. By continuous growth and improvement, our management policy aims at accommodating the request and expectation from the shareholders and all others widely related to the company. For the achievement, the EXEDY Activity Guidelines is established and this is completely prevailed and understood by all employees and directors.
Promotion of environmental preservation activities and CSR activities	We as a global company recognize the responsibility to pay attention of the impact caused from business activity to the nature and environment in society. We promote the environmental activity and the result in each fiscal year is reported in our Home Page.

Setting forth provisions in the internal regulations concerning respect for the stakeholders’position

Our business philosophy, "Contribution to society", "Useful for our customers" and "the happiness of employees" must be step up further.
By continuous growth and improvement, our management policy aims at accommodating the request and expectation from the shareholders and all others widely related to the company.
For the achievement, the EXEDY Activity Guidelines is established and this is completely prevailed and understood by all employees and directors.

Promotion of environmental preservation activities and CSR activities

We as a global company recognize the responsibility to pay attention of the impact caused from business activity to the nature and environment in society.
We promote the environmental activity and the result in each fiscal year is reported in our Home Page.

Basic Approach to Internal Control System and its Development

Fulfillment of the social responsibility such as compliance, corporate ethics and environmental issues, and improving social reputation is one of management policy.
In line with this policy, the Board of Directors resolve following basic policy of the internal control system legally provided by law and regulations and, the status is reported to the board of directors meeting from time to time.

System to obtain and manage information relating to performance of duties by Directors

The company must keep and manage information related to the performance on duties, based on the regulation for archiving and retaining text, and the regulation for confidential documents.

Rules and systems related to the management of risk of loss

The company designate the General Affair H.Q is a responsible department and necessary action to protect from the loss or damage must be taken.

System to ensure that Directors exercise their duties efficiently

Regular Board of directors meeting is held monthly and the management meeting formed with full time director and executive officers is held twice a month, in which the management problems are discussed, and the establish the system if necessary.

A system ensuring that the director's and their employees perform their duties in accordance with laws, regulations and the articles of incorporation.

The company has formulated the EXEDY Activity Guidelines, strives to make the directors, the executive directors, and their employees aware of complying with laws, regulations, articles of incorporation, and internal regulations and informants.
In addition, the internal auditor's office is a unit for auditing business activities not under the direct control of the president. It audits the status of the operation of organizations and systems within the company, and the compliance with all regulations.

System to ensure the appropriateness of business operations of the corporation and the business group consisting of the parent company and subsidiaries

Based on the Affiliated Company Management Regulations, this company handles all of the work related to the management of affiliated companies in the management division. It uses the monthly reports submitted by each of the affiliated companies to monitor and verify the affiliated companies’ performance of their duties. Important matters related to the affiliated companies’ performance of their duties is reported to and deliberated by the Board of Directors and the management council.

System concerning employees who assist the Corporate Auditors when required

When the corporate auditors seek to have employees installed to supplement their work, this company will install those employees as required.

Independence of the employees described in the preceding item (6) from Directors

When there are employees for supplementing the corporate auditors' work, the company shall report to the statutory corporate auditors in advance the personnel movements, evaluations, and disciplinary action for those employees, and seek their opinions.

System for Directors and employees to report to Corporate Auditors, and other relative systems

The Board of Directors and executive directors of the company shall immediately submit reports when facts regarding significant damages to the company or its affiliated companies are discovered, or there are concerns of such damages.

Other systems to ensure that the Corporate Auditors conducted audits effectively

The company shall maintain a system in which it can always apprehend the circumstances regarding the performance of duties by having the statutory corporate auditors attend the business council and all other conferences.

Basic Policy for Elimination of Anti social Forces

In the EXEDY Activity Guidelines, the company provides for the firm confrontation with anti social groups and forces that would threaten the order and safety of civil society, and have these guidelines known to all employees.
Therefore, the company establishes units to deal with anti-social forces and creates a system to deal with illegal acts and unjust demands. Further, it provides for the means of response to these anti social forces in the EXEDY Activity Guidelines and makes these known by distributing them to all employees.