Since 1999, we have implemented a series of groundbreaking management reforms, with the aim of enhancing transparency, ensuring fairness and objectivity, and accelerating decision making. These include establishing an Advisory Board, reducing the number of directors on the Board of Directors and introducing a corporate officer system and a compensation system for directors that is linked to consolidated return on assets (ROA), calculated using operating income. In 2003, we published the Corporate Governance Guide and resolved to strive for the further improvement and clarification of management mechanisms.

Since then, we have continued to modify systems and procedures in response to changes in the operating and legislative environments—including increasing the number of external auditors on our Board of Auditors to enhance the Board's capabilities and independence—and are in the process of establishing internal control systems in compliance with Japan's revised Corporate Law. In April 2007, the Board of Directors approved amendments to the Teijin Group's Corporate Governance Guide. In line with the Group's medium-to-long-term basic management policies—which focus on achieving sustainable growth in corporate value—we continue to take steps to build a superior management foundation, including adding consolidated return on equity (ROE) to the list of performance measures used to determine compensation for directors.

To expedite decision making and clarify accountability, we have set the number of directors on Teijin's Board of Directors at a maximum of 10 and have delegated considerable authority and responsibility to corporate officers. To further enhance autonomy, three directors are independent. To ensure the appropriate separation of responsibility for monitoring/auditing and internal, frontline management of operations, the Board of Directors is directly responsible to the chairman.

Teijin's Board of Auditors comprises five members, three of whom are external, thereby ensuring transparency and the effective monitoring/auditing of management. The independence of external auditors is guaranteed. We have also installed a Group Board of Auditors comprising auditors from Teijin Group companies, which is charged with monitoring/auditing the Group with respect to consolidated management, thereby ensuring the fairness of auditing.

The Teijin Group operates on the principle that effective corporate governance depends on strict compliance and the comprehensive management of risk—both of which are essential to effective internal controls. We endeavor to implement both as a single concept and encourage management and employees to work together to promote education and enhanced awareness.

We believe that effective compliance is crucial to the establishment of a sound corporate culture. To this end, we have established the Corporate Code of Conduct and the Corporate Standards of Conduct, as well as the Regulations for the Teijin Group's Corporate Ethics, and work tirelessly to promote greater awareness thereof among employees.

Our definition of risk management is the evaluation of and protection of the Teijin Group against various risks and uncertainties. We are developing a risk management system and specific countermeasures and conduct related drills. We have also established a Total Risk Management (TRM) Committee within the Board of Directors to accelerate Groupwide decision making to effectively counter risks.

We have established an Advisory Board, a consultative body that includes experts from Japan and overseas, to advise on management issues and evaluate the performance of top executives, thereby enhancing the effectiveness and transparency of management. The Advisory Board, which meets twice annually, comprises five or six external members—of whom three are Japanese, and two or three non-Japanese—as well as the chairman and president and CEO of Teijin.

The Advisory Board is also responsible for nomination and remuneration functions. These include deliberating the appointment and retirement of presidents and the selection of successors, as well as appraising Group remuneration systems, salary levels and performances of the president and CEO and representative directors.