Basic Idea of Corporate Governance

Sumida recognizes corporate governance is one of the most important topics of management that its basis is to secure the transparency and efficiency of management, to respond to the expectations of stakeholders, and to continuously enhance corporate value of the company.

In order to strengthen the corporate governance of the company, Sumida shifted to the Company with Committees System in April 2003. In the System, Committees in which outside directors occupy the majority are established in order to improve the management transparency. The Executive Officers concentrate on the business execution while the Board specializes in the supervision of their executions – thus the System clearly separates "Management" and "Governance" in order to make both organizations function effectively. At Sumida, in addition to the Nomination Committee, Audit Committee and Compensation Committee, we have established an original Strategy Committee. Furthermore, greater authority had been given from the Board to Executive Officers. This makes the group management more flexible and able to promptly respond to rapidly changing social and economic situations.

Considering that timely and high-quality disclosure of information can accomplish accountability to the stakeholders, as well as contribute to enhancing the transparency of management and the corporate governance of the company, Sumida works actively to disclose information to stakeholders including briefing session of quarterly financial results.

The concept of Corporate Governance of Sumida is stated in "Sumida Business Principles". "Sumida Business Principles" is published on intranet in English, Japanese and Chinese versions for Sumida staff to access any time.

Sumida takes a decisive and confrontational manner towards any anti-society force which menaces social order and safety of citizens.

Corporate Governance System and its Implementation

(1) Contents of Organizations

1. Board of Directors

The Board concentrates on the supervision of directors and Executive Officers, and the decision making on statutory approval items such as formulation of basic policy of management etc., that execution of other matters are delegated to Executive Officers. There are 11 directors in the Board in which 7 of them are outside directors, and following committees have been set up (as of 31st March, 2008):

Nomination Committee (Statutory)

The Nomination Committee is composed of 3 outside directors.
The Committee makes decisions on the resolution’s content for appointment and dismissal of directors. At Sumida, the Committee also appoints the nominees of Executive Officers for recommendation to the Board. The Chairman of the Committee is an outside director.

Audit Committee (Statutory)

The Audit Committee is composed of 2 outside directors and 1 internal director.
The Committee monitors and inspects the duty execution of directors and Executive Officers, and to make decisions on the resolution’s content concerning appointment and dismissal of accounting auditors etc. that to be submitted to the shareholder's meeting.

Compensation Committee (Statutory)

The Compensation Committee is composed of 3 outside directors.
The Committee determines the compensation policy as well as compensations of each director and Executive Officer. The Committee judges performance of Executive Officers according to their commitment. The Chairman of the Committee is an outside director.

Strategy Committee (Optional)

The Committee is composed of 4 outside directors and 1 internal director.
The Committee formulates mid-term business plans as well as considers the measures for the enhancement of corporate governance.

2. Executive Officers

Executive Officers execute business activities which are delegated from the Board. Sumida has 5 Executive Officers, where 3 of them are Representative Executive Officers and their respective responsibilities which are provided by the resolution of the Board. The responsibilities of each Executive Officer are described as follows:

Representative Executive Officer and CEO

Being responsible for formulating business strategies and policies of the Group, and to take the ultimate responsibility for the execution.

Representative Executive Officer and Group President

Being responsible for executing the business based on the policies and strategies planned by the CEO and to take the responsibility for the execution.

Representative Executive Officer and CFO

Taking the responsibility for accounting and financial-related affairs.

Executive Officer and COO

COOs are responsible for executing the business under the direction of the Group President.

3. Accounting Auditors

Sumida has contracted Ernst & Young for auditing of the company.

(2) Systems of Supervision and Internal Control

1. Supervision System

The Board and Audit Committee are the supervising bodies that they are responsible for supervision and inspection of directors and Executive Officers’ execution of duties accordingly. Besides, internal control division reports to the supervising bodies at any time when there is possibility of damage or influence on the interests of the company.

2. Internal Control System

To ensure their business activities comply with applicable laws, regulations and the Articles of Incorporation, Executive Officers have set up an internal control system based on the "Sumida Business Principles" which aims to ensure an appropriate decision-making process as well as the surveillance of individual activities, and thereby enhance operating efficiency.

1. Risk Management Committee was set up in July 2003. The Committee’s duties are to predict potential risks from global viewpoints and to formulate preventive measures against the risks by analyzing regular report from the risk monitors appointed in the group’s main business bases including overseas areas. The Committee is also responsible for examining correspondence methods to minimize losses in case of crisis.
2. Compliance function: Sumida positions compliance activities not limited to the problems concerning the compliance of laws and regulations, but also to actively accomplish the Corporate Social Responsibility (CSR) based on integrity, discipline, and common sense. The compliance body serves as the main body for framework maintenance and the core part of corporate governance, and monitoring functions of compliance activities.
3. Controlling of internal audit function: Deciding the yearly audit direction by having prior consultation with Audit Committee, and reporting the implementation and results of internal audit while closely cooperate with Audit Committee.
   The function also provides various supports to internal auditors appointed in the main business bases in the group including overseas sites. The supports include planning of internal audit schedule and its implementation in order to enhance internal audit operation among Sumida group as well as to improve the internal control system.

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