Corporate Governance

ITOCHU operates its business in accordance with the ITOCHU Group Corporate Philosophy and Code of Conduct. Our fundamental policy is to work toward the long-term preservation and enhancement of our corporate value by building positive and effective relationships with our stakeholders. To execute our business activities in a fair and efficient manner in accordance with our fundamental policy, we are increasing the transparency of our decision-making process and constructing a corporate governance system that incorporates appropriate monitoring and supervisory functions.

ITOCHU Group Corporate Philosophy and Code of Conduct

Corporate Governance Report (257KB)

Features of ITOCHU’s Corporate Governance System

ITOCHU is a company with the Board of Directors and corporate auditors (the Board of Corporate Auditors). The corporate auditors including outside corporate auditors monitor and audit business management independently and objectively. And ITOCHU elected outside directors at the General Meeting of Shareholders held in June, 2011, for the purpose of further increasing the effectiveness of the supervision of management by the Board of Directors and improving the transparency of decision making.

Comprising 14 directors (including 2 outside directors) as of June 24, 2011, the Board of Directors makes decisions on important management matters and supervises each director's business management.

ITOCHU has adopted an Executive Officer System in order to separate the decision-making and supervisory functions of the Board of Directors from its implementation of business management.

One feature of ITOCHU's corporate governance system is the HMC (Headquarters Management Committee), a supporting body of the CEO, where company-wide management policy and important issues are discussed and decided.

In addition, management issues in individual areas of responsibility are discussed and screened by various internal committees in order to support the decision making of the CEO and the Board of Directors. Moreover, ITOCHU is developing and implementing a system for incorporating third-party opinions in which outside experts become members of some internal committees.

The table below details steps ITOCHU has taken to strengthen corporate governance.

Steps Taken to Strengthen Corporate Governance

1997	Introduced the Division Company System	To accelerate decision making / increase efficiency of business management
1999	Introduced Executive Officer System	To strengthen decision-making and supervisory functions of the Board of Directors
2007	Shortened the terms of office of directors and executive officers to one year	To clarify management responsibility during terms of office
2011	Introduced an Outside Directors System	To increase the effectiveness of the supervision of management and improve the transparency of decision making

Increasing the Effectiveness of the Supervision of Management by the Board of Directors (Introduced an Outside Directors System)

ITOCHU has elected 2 outside directors at the General Meeting of Shareholders held in June, 2011. The outside directors are believed to further increase the effectiveness of the supervision of management by the Board of Directors and improve the transparency of the Board of Directors' decision making by providing their monitoring and supervising functions to the internal directors and management advice based on various perspectives from their neutral and objective position.

Relationship of Outside Directors with ITOCHU

Name	Reason for Appointment
Yuko Kawamoto^*1	ITOCHU has elected her, anticipating that she will use her wealth of knowledge on corporate management nurtured through her long expertise as a management consultant and a professor of a university's graduate school and supervise the corporate management of ITOCHU from an independent perspective. And she has no material interests in ITOCHU.
Kazuyuki Sugimoto^*1	ITOCHU has elected him, anticipating that he will use his insight on public finance and financing nurtured through his many years of experience at the Ministry of Finance and supervise the corporate management of ITOCHU from an independent perspective. And he has no material interests in ITOCHU.

*1 Yuko Kawamoto and Kazuyuki Sugimoto are independent directors as prescribed by domestic financial instrument exchanges, such as the Tokyo Stock Exchange.

Systems to Ensure Effectiveness of Supervisory Functions

ITOCHU appoints five corporate auditors, of whom three are outside corporate auditors. Standing corporate auditors strengthen audit functions by regularly attending meetings of the Board of Directors and other in-house meetings and working in cooperation with ITOCHU's independent external auditors and other audit bodies inside and outside ITOCHU. ITOCHU's Audit Division is responsible for internal audits. Aiming to facilitate exchanges of information and close collaboration, members of this division meet regularly with corporate auditors to discuss such matters as internal audit planning. In addition, the Corporate Auditors' Office, reporting directly to the Board of Corporate Auditors, supports corporate auditors.

Relationship of Outside Corporate Auditors with ITOCHU

Name	Reason for Appointment
Ryozo Hayashi^*1	ITOCHU has elected him, anticipating that he will provide auditing from an independent perspective by utilizing his wealth of experience at the Ministry of Economy, Trade and Industry and the former Ministry of International Trade and Industry, and his long-term perspective and broad vision as a professor of a university's graduate school. And he has no material interests in ITOCHU.
Keiji Torii^*1	ITOCHU has elected him, anticipating that he will provide auditing from an independent perspective by utilizing his many years of experience and insight as a former executive of a major financial institution. Before being appointed as a Corporate Auditor of ITOCHU, he had served as an executive of a major financial institution, with which ITOCHU has dealings, but he retired from his position at the financial institution before being appointed as a Corporate Auditor of ITOCHU and he has no material interests in ITOCHU at present.
Masahiro Shimojo^*1	ITOCHU has elected him, anticipating that he will provide auditing from an independent perspective by utilizing his wealth of experience and expertise as a lawyer in the field of corporate legal practice and international business law. And he has no material interests in ITOCHU.

*1 Ryozo Hayashi, Keiji Torii and Masahiro Shimojo are independent auditors of ITOCHU as prescribed by domestic financial instrument exchanges, such as the Tokyo Stock Exchange.

Comments from Corporate Auditor

Ryozo Hayashi
Corporate Auditor

My major activities at the Ministry of Economy, Trade and Industry as well as at the University of Tokyo were focused on corporate governance and corporate social responsibility. Based on my experiences, I intend to contribute to the enhancement of management performance by introducing an outside perspective and by focusing on enhancing the corporate governance system.
The current business environment surrounding major global companies, such as ITOCHU, is unprecedentedly difficult. The opportunities and risks that such companies face change swiftly and drastically. In such a business environment, management is required to show both strong leadership to pursue the business opportunities and an effective corporate governance system that limits risks. In particular, ITOCHU, as one of the largest trading companies engaged in diversified businesses around the world, has not only to perform a wide range of operations skillfully but also to maintain a balance between the realization of short-term business performance and the maintenance of sustainable long-term value creation. As a corporate auditor, I will monitor management performance and advise management with a view to developing a strong and well-balanced management system, which is an imperative to coping with these challenges. In developing such a system, I will keep reminding myself of the interests of ITOCHU shareholders as well as the interests of a wide range of other stakeholders.

ITOCHU's Current Corporate Governance System

*1 Each Division Company has a Division Company President.
*2 Internal control systems and mechanisms have been implemented at every level of ITOCHU. Only the main internal control organization and committees are described herein.
Further, the Internal Control Committee receives reports from internal departments related to internal control on the development and operation of respective internal controls for which they are responsible; evaluates and confirms the overall development status of internal control; and reports items for improvement to the HMC and Board of Directors.

Principal Internal Committees

Name	Objectives
Internal Control Committee	Deliberates on issues related to the development of internal control systems
Disclosure Committee	Deliberates on issues related to business activity disclosure and on issues related to the development and operation of internal control systems in the area of financial reporting
ALM Committee	Deliberates on issues related to risk management systems and balance sheet management
Corporate Officer Compensation Consultative Committee	Deliberates on issues related to the compensation of corporate officers, including their compensation after retirement
Compliance Committee	Deliberates on issues related to compliance
CSR Committee	Deliberates on issues related to corporate social responsibility, environmental problems, and social contribution initiatives