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Corporate Governance Report
Corporate Governance Report
Basic Views on Corporate Governance
Tokyo Electric Power Company Holdings, Incorporated (hereinafter, the "Company") is working to develop organizational structures and policies for thorough legal and ethical compliance, appropriate and prompt decision-making, efficient business execution, and enhanced auditing and supervisory functions. To further improve the objectivity and transparency of its management, the Company has adopted a "Company with Nominating Committee, etc." management structure, thereby stepping up the effort to secure solid corporate governance.
Moreover, having adopted a holding company system in April 2016, the Company is striving to further enhance its corporate value through the optimal allocation of management resources and a robust corporate governance system encompassing its entire group (hereinafter, the "Group").
Matters on Functions of Business Execution, Auditing, Oversight, Nominating and Compensation Decisions (Overview of Current Corporate Governance System)
The Board of Directors comprises thirteen Directors (consisting of twelve men and one woman), including seven Outside Directors. To supervise business execution undertaken by Directors and Executive Officers, the Board of Directors meets once a month in principle and holds additional special meetings as necessary to discuss and make decisions on important business execution and to receive reports from Executive Officers on the status of their execution of duties on both a regular and an as-needed basis. In addition, the Company has established the Nominating Committee, Audit Committee, and Compensation Committee in accordance with the stipulations concerning a "Company with Nominating Committee, etc." as set forth in the Companies Act.
Outside Directors draw on extensive experience, insight, etc. in their respective fields of expertise to formulate important management strategies and supervise business execution via the Board of Directors and other channels. The Company considers that they possess the competency to further improve the objectivity and transparency of the Company's management. All of the seven Outside Directors are independent in accordance with the standards for independence prescribed by Tokyo Stock Exchange, Inc. and "Standards for Independence of Outside Directors" specified by the Company. As such, there is considered to be no risk of a conflict of interests arising with ordinary shareholders.
Also, Executive Officers (consisting of fourteen men and one woman) execute business operations in accordance with policies formulated by the Board of Directors. To ensure appropriate and prompt decision-making as well as efficient company operations, the Board of Executive Officers, which meets once a week in principle, and other forums, discuss important management matters, including agendas to be submitted to meetings of the Board of Directors. The Company has also set up cross-organizational committees aimed at assisting the decision-making of the Board of Executive Officers.
In addition, the Company has appointed Corporate Officers who bear responsibility for specific businesses and execute operations accordingly.
Basic Views on Corporate Governance
Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods
The Company has established determining policy regarding the remuneration for each of the Directors and Executive Officers via the Compensation Committee, which is composed of three Outside Directors, based on the stipulations of the Company Law regarding companies with nominating committees. The content is as follows.
The main duty of each Director and Executive Officer of the Company is to minimize the burden on the people by enhancing corporate value based on a strong commitment to achieving stable supply of electric power beyond the world's highest level for ensuring safety and under competitive conditions, while fulfilling the Company's responsibility for the Fukushima Daiichi Nuclear Power Station accident.
In order to achieve this, the basic policies for the determination of remuneration are securing outstanding human resources capable of leading business operations and management reform to achieve both "responsibility and competitiveness," clarifying responsibilities and outcomes and increasing incentives for improved performance and increase in the stock value.
The remuneration system for Directors and that of Executive Officers are different based on the different duties of the Directors, who are in charge of supervising corporate management, and the Executive Officers, who are in charge of executing business operations. Officers who concurrently serve as Director and Executive Officer receive only the remuneration paid to Executive Officers.
Remuneration paid to Directors
The remuneration paid to Directors comprises only basic remuneration.
The amount of basic remuneration paid to each Director is determined taking into consideration whether he/she is full time or part time, the committee to which he/she belongs and his/her job description.
Remuneration paid to Executive Officers
The remuneration paid to Executive Officers comprises basic remuneration and productivity-linked remuneration. The proportion of the productivity-linked remuneration is set according to the proportions at other companies and other factors.
The amount of basic remuneration paid to each Executive Officer is determined based on his/her specific rank, whether he/she holds the right to represent the Company and his/her job description.
The amount of productivity-linked remuneration paid to each Executive Officer is set based on his/her specific rank, whether he/she holds the right to represent the Company and his/her job description. It is also determined according to results of the Company and personal performance.
Level of remuneration to be paid
When determining the level of remuneration to be paid to Directors and Executive Officers, the Company takes into consideration its management environment, the remuneration levels of other companies and the current salaries of employees, etc., with the aim of setting remuneration at levels commensurate with their abilities and responsibilities to be required as Directors and Executive Officers.
Based on the above-mentioned policy, Executive Officers act with the intention and responsibility to achieve the goals in the Revised Comprehensive Special Business Plan (The Third Plan). In order to reflect the results appropriately, the indicator for productivity-linked remuneration is set to the Company’s performance per the management plan (consolidated ordinary income) and personal performance (cost reduction indicator and other KPI in each department). The amount of payment fluctuates within 0~112.5%, with the achievement of goals being paid 100％, and it is calculated by the Compensation Committee as follows.
・Company performance: Calculated according to the basic amount multiplied by the achievement rate.
・Personal performance: Calculated according to the basic amount multiplied by the achievement rate or the proportion of evaluation by the Compensation Committee.
Basic Views on Internal Control System and Progress of System Development
The Company endeavors to establish, apply, and, from time to time, evaluate and improve the following systems in order to ensure appropriate operations.
1. Systems for Ensuring Effective Audits by the Audit Committee
To support the duties of the Audit Committee, the Company shall appoint Audit Committee Aides. In addition, the Company shall establish a full-time body for assisting the duties of the Audit Committee and assign the necessary personnel.
Audit Committee Aides and members of the full-time body for assisting the duties of the Audit Committee shall comply with instructions and orders from the Audit Committee, and matters concerning their personnel shall be discussed with the Audit Committee in advance.
When discovering facts that could cause the Company significant damage, Directors and Executive Officers shall report immediately the same to a member of the Audit Committee, while also making necessary reports on matters requested by Audit Committee members selected by the Audit Committee. A system shall also be arranged to enable necessary and appropriate reporting to the Audit Committee by a Director, Executive Officer, Corporate Officer or employee of the Company, or by a Director, Auditor, Corporate Officer or employee of a Group company or by a person who received a report from one of them. At the same time, appropriate measures shall be taken to ensure that a person who makes such a report does not receive disadvantageous treatment because of making such a report.
The Company shall establish a system that enables members of the Audit Committee to attend meetings of the Board of Executive Officers, the Management & Planning Meeting and other important meetings and state their opinions whenever necessary. Moreover, in addition to creating the environment to achieve the cooperation of the Accounting Auditor and the internal audit body with the Audit Committee, the Company shall make arrangements to ensure the effectiveness of audits by the Audit Committee, including the payment of the expenses deemed necessary for the execution of the duties as a member of the Audit Committee.
2. Systems for Ensuring that Execution of Duties by Directors and Executive Officers is in Compliance with Laws and Regulations and the Articles of Incorporation
To rigorously enforce operations of business in line with social norms and observance of corporate ethics, the Company shall draw up the "TEPCO Group Charter of Corporate Conduct" and the "Corporate Ethics Code of Conduct" and Directors and Executive Officers shall take the lead in practicing these, while ensuring their observance by Corporate Officers and employees.
Meanwhile, the "TEPCO Group Corporate Ethics Committee," which includes external experts as its members, shall be set up to oversee corporate ethics as a whole and promote compliance-oriented management.
The Board of Directors shall meet once a month in principle and additionally as necessary to discuss and make decisions on important execution of duties in accordance with laws and regulations and the Articles of Incorporation and supervise execution of duties undertaken by Directors and Executive Officers by such means as receiving reports from Executive Officers on the status of their execution of duties on both a regular and an as-needed basis. The Board of Directors, whenever necessary, shall request Corporate Officers to report to the Board of Directors on their status of execution of duties.
The Board of Executive Officers shall be established to assist the functions of the Board of Directors and achieve efficient and appropriate decision-making. The Board of Executive Officers shall meet once a week in principle and additionally as necessary to discuss on important management matters including the agenda of meetings of the Board of Directors.
Directors and Executive Officers shall always gather sufficient information and make appropriate business judgments in compliance with laws and regulations and the Articles of Incorporation.
3. Systems for Preservation and Management of Information on Execution of Duties by Executive Officers
The summary of the minutes of meetings of the Board of Executive Officers and other information on execution of duties by Executive Officers shall be managed appropriately in accordance with laws and regulations and internal rules in all processes from its creation to use, utilization, preservation and disposal.
An IT environment shall be established that contributes not only to information security but also to the improvement of efficiency and the assurance of appropriateness in relation to the execution of duties.
4. Regulations on Risk Management and Other Systems
Directors and Executive Officers shall identify and evaluate risks associated with the business activities of the Company and its Group companies on both a regular and an as-needed basis and appropriately reflect such risks in the business management plan formulated for each fiscal year. Internal rules shall also be prepared to enable risk management of the entire group to be carried out appropriately.
Such risks are basically managed as part of execution of duties by individual body in charge of the relevant business in line with internal rules. Any risk that involves more than one body shall be managed appropriately based on discussions by cross-organizational committee and other forums.
Concerning risks that might seriously affect corporate management, the "Risk Management Committee" chaired by the Executive Officer and President shall prevent such risk from materializing. If the risk does materialize, the committee shall quickly and accurately deal with such risk in order to minimize its impact on corporate management.
Appropriate systems shall be arranged in readiness for the occurrence of a major earthquake or similar emergency disaster, including the setting up of a response body, creating a system for communication of information and carrying out periodic disaster prevention drills.
The internal audit body shall audit the effectiveness of the risk management system periodically and additionally as necessary, and report the results of audit to the Board of Executive Officers, etc. The Executive Officers shall make necessary improvements based on the audit results.
The Management & Planning Meeting shall be established to share information on the overall management of the Company and to promote corporate reform. The Management & Planning Meeting shall be held as necessary and discuss on the policy for responding to important management issues and the direction of that response.
Based on reflection on the accident at the Fukushima Daiichi Nuclear Power Station, a "Nuclear Safety Oversight Office" shall be established as a body that is directly controlled by the Executive Officer and President. Drawing on the expertise of external specialists, the Nuclear Safety Oversight Office shall monitor nuclear safety initiatives, provide advice whenever necessary and involve itself directly in the decision-making on those initiatives, and by arranging such system the Company shall achieve improvement of management of nuclear power safety. Moreover, the Nuclear Safety Oversight Office shall report directly to the Board of Directors as necessary regarding matters of nuclear safety.
A system for communicating appropriately with the general public about the Company's business activities in general, including nuclear power business, shall also be established.
5. Systems for Ensuring Efficient Execution of Duties by Executive Officers
Steps shall be taken for efficient decision-making on important management matters, including the appropriate discussions at the Management & Planning Meeting and other forums, in addition to by the Board of Executive Officers.
The responsibilities and authority of Executive Officers in their execution of duties shall be clarified in internal rules, and Executive Officers, Corporate Officers and employees shall execute their respective duties appropriately and promptly.
6. Systems for Ensuring that Execution of Duties by Employees is in Compliance with Laws and Regulations and the Articles of Incorporation
Steps shall be taken to establish and rigorously enforce the "TEPCO Group Charter of Corporate Conduct" and the "Corporate Ethics Code of Conduct," such as continuously providing training in corporate ethics and other measures, so that all employees observe them.
The Company shall establish a "Consultation Desk for Corporate Ethics" to allow for anonymous inquiries about issues around laws and regulations and corporate ethics and shall take appropriate action on cases reported based on discussions by the "TEPCO Group Corporate Ethics Committee." The privacy of those using the Consultation Desk shall be strictly protected in accordance with internal rules.
The Company shall clarify the laws and regulations that must be observed when executing duties in internal rules and rigorously enforce the execution of duties based on internal rules through education and training, etc.
To ensure that execution of duties by employees is in compliance with laws and regulations and the Articles of Incorporation, the internal audit body shall audit the status of execution of duties by employees periodically and at other times if necessary and report the results of audit to the Board of Executive Officers, etc. Executive Officers shall make necessary improvements based on the audit results.
Based on these initiatives, the Company shall enhance and rigorously enforce a "Climate of active compliance," under which each employee is aware of and acts in accordance with corporate ethics and creates a workplace with a positive atmosphere, a "Mechanism of ensuring compliance" under which internal rules are continuously improved and steps are taken to rigorously enforce them, and a "Framework for speaking out," under which employees can speak of their own accord on work-related issues and problems and their input is positively welcomed.
7. Systems for Ensuring Properness of Business Operations of the Corporate Group Comprising the Company and its Subsidiaries
Under the "TEPCO Group Charter of Corporate Conduct," the Group shall indicate the shared direction and targets, etc. as management policy to be aimed for by the Group as a whole, and make concerted efforts to achieve them. Meanwhile, the Company shall provide appropriate support to Group companies to help them autonomously develop and operate systems to ensure the properness of their business operations.
The Company shall clarify responsibilities and authority in internal rules to facilitate efficient decision-making and appropriate and prompt execution of duties at Group companies.
The Company shall arrange a system for prior consultation and reporting from Group companies in accordance with internal rules, etc. regarding important matters in the execution of duties. Meanwhile, the Company's Directors and Executive Officers shall exchange opinions, etc. with the Directors of Group companies at periodic meetings to ascertain the status of management at Group companies and share and resolve any management issues within the Group.
The Company shall establish an environment which facilitates the use of the "Consultation Desk for Corporate Ethics" by Group companies.
The Company's internal audit body shall conduct audits, etc. as necessary to enable the properness of business operations at Group companies to be ensured.