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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").
The Board of Directors comprises thirteen Directors (consisting of twelve men and one woman), including six 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 six 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 fifteen men, including one foreign national) 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.
The policy on decisions regarding the content of remuneration, etc. for individual Directors and Executive Officers, determined by the Compensation Committee, 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.
(1) Remuneration paid to Directors
The remuneration paid to Directors comprises only basic remuneration.
<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.
(2) Remuneration paid to Executive Officers
The remuneration paid to Executive Officers comprises basic remuneration and productivity-linked remuneration.
<Basic remuneration>
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.
<Productivity-linked remuneration>
The amount of productivity-linked remuneration is determined according to results of the Company and personal performance.
(3) 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.
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
(1) 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.
(2) 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.
(3) 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.
(4) 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
(1) 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.
(2) 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
(1) 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.
(2) 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
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
(7) 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 Chief of Nuclear Safety Oversight 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
(1) 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.
(2) 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
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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
(1) 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.
(2) 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.
(3) 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.
(4) The Company shall establish an environment which facilitates the use of the "Consultation Desk for Corporate Ethics" by Group companies.
(5) 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.
| Corporate Governance Report |
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The TEPCO Group adopted a holding company system in April 2016. Chisa Enomoto, Corporate Officer, Head of Social Communication Office, sat down with Outside Directors Fumio Sudo and Hideko Kunii to hear their thoughts on where the Group is headed.
| Enomoto: |  As Outside Directors, what do you see as the reasons for the TEPCO Group's push to double productivity? |
| Sudo: |  Dramatically improving productivity is a pressing task facing the TEPCO Group. The Comprehensive Special Business Plan, established in April 2012, called for mobilizing all Group resources to promote the revitalization of Fukushima. Specifically, the Group would accept support from the national government in the form of ¥1 trillion in investment from the Nuclear Damage Liability Facilitation Fund (as it was then called); work with financial institutions and shareholders on issues related to financing and the dilution of voting rights; and cut costs by ¥3.4 trillion over 10 years. The plan has since been amended, in large part because of the increasingly urgent need to drastically improve productivity in order to advance revitalization in Fukushima. The total funding TEPCO will need to secure to continue addressing the effects of the Fukushima accident will be much greater than the initial estimates. In the TEPCO reforms proposed at the end of 2016, the necessary funds are estimated at not just double, but three to four times the earlier projections. |
| Enomoto: | Because it provides a public utility, TEPCO uses a special fee structure, the comprehensive cost method. As a result, I think its cost awareness has been somewhat different from that of an ordinary private-sector company. Changing that corporate culture is crucial. To double productivity, I think that TEPCO must set quantitative targets and take comprehensive measures to change the ways its employees work. Quantification can also help enable women to succeed in the workplace. For example, while it's a common problem that is by no means limited to TEPCO, there have been cases in which employees' performance reviews have been negatively affected by their legitimately utilizing the system for reduced working hours for child care. An important part of reforming work practices is eliminating this kind of unfair, opaque evaluation. |
| Sudo: | The quantification of work is essential to changing the corporate culture. On average, a TEPCO Group employee works more than 2,000 hours per year. Compare that with Germany, where average working hours amount to less than 1,500 a year, while productivity is said to be 1.5 times that of Japan. Clearly, we must seek to improve productivity. This will not happen simply by cutting out overtime; the goal is to raise productivity so that the work gets done without the need for overtime. To do so, I think TEPCO will need to develop better job descriptions. I often say that we cannot manage what we cannot measure. By this I mean that we can't create management metrics for things that we haven't quantified. If employees can quantify the results of their own work, they can create a culture that encourages improving on those results each year. This could provide the foundation upon which TEPCO could build world-class productivity. |
| Enomoto: | As Outside Directors, how do you feel that the TEPCO Group ought to go about fulfilling its responsibilities to Fukushima? |
| Sudo: | It's not an exaggeration to say that the TEPCO Group has been allowed to remain a going concern specifically so that it can fulfill its responsibilities to Fukushima. There are two main aspects of these responsibilities. The first is to restore the environmental conditions in Fukushima communities to as close to the pre-2011 state as possible. The second is to elucidate the causes of the accident and ensure that this information is shared with not only communities in Fukushima and Niigata, but the entire world. Doing so is a vital step in determining and communicating how TEPCO will handle nuclear power in the future. I must add that I feel the utmost gratitude for the efforts of TEPCO's employees over the past six years. We have to place greater emphasis on lifting employee morale going forward. |
| Kunii: |  I think that there is a common tendency to focus on the construction of public buildings. These buildings matter, of course, but revitalization means not just rehabilitation to how things were, but also fostering community in new ways, so it’s important that we take a more comprehensive view. As part of that, I think we may need to develop more active ties with local Fukushima women. To date, Group employees have participated in initiatives to support the local residents in Fukushima on more than 300,000 occasions. I’ve heard from many employees that these experiences helped them gain a truer understanding of where things stand there. Going forward, we must continue to reexamine how TEPCO can most efficiently be of help to the people of Fukushima. |
| Sudo: | The people involved and the mechanisms employed in revitalization are key. Revitalization is an area where quantification is challenging, but we must find ways to do so in order to raise productivity. I hope that TEPCO will carefully look into ways to achieve even greater multiplier effects to maximize the impact of the funds it invests. In many European and American companies, half of the personnel responsible for communication with local communities are women. We need to make efforts to reach that level. The people at the Fukushima Revitalization Headquarters, led by Representative Yoshiyuki Ishizaki, are working very hard. I hope to see those efforts taken a step further, though, with the quantification of revitalization in order to better serve and empower local communities in Fukushima. |
| Enomoto: | How do you think the TEPCO Group is doing in terms of its efforts to remove barriers to success for women in the workplace? |
| Kunii: |  Before the 2011 earthquake and tsunami, TEPCO, like many other Japanese companies, was working to make it easier for women to excel professionally. However, it seems to me that all the focus was on women's needs, and efforts to change attitudes among men were severely lacking. Raising the rate of male employees who take leave or reduced working hours for child care could help transform the corporate culture. Setting numerical targets to quantitatively develop a new culture is an important form of positive action TEPCO could take to achieve global-level parity on this front. |
| Sudo: | I think that the lack of effective job descriptions is a significant reason that the rates of male employees taking leave or reduced hours for child care have been slow to rise. Job descriptions represent a tool to help dramatically increase productivity, fulfill TEPCO's responsibility to Fukushima and promote diversity all at once. |
| Kunii: | It's important to actively recruit women for technical positions, too. Women with technical training are few to begin with, so the Company has to signal that it wants to hire women for such jobs. The International Monetary Fund's Managing Director, Christine Lagarde, said that "Women can save Japan." We need to make this into "Women can save TEPCO" by not just bolstering the Group's number of female employees, but also enabling women to take more active roles within the Group. We should let women know how they can contribute, and provide opportunities for them to advance their careers and network. |
| Sudo: |  To make networks, you have to make time. Employees who spend all their time at work may find it impossible to expand their networks. Developing effective job descriptions and quantifying work can multiply productivity, helping to free up time that can be spent with family or invested in one’s own future. This is absolutely crucial to enabling both the Group and individuals to make real social contribution. I look forward to seeing what TEPCO’s employees can do. |
( March, 2017 )
© Tokyo Electric Power Company Holdings, Inc.
