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Corporate Governance

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Cosmo Energy Holdings Co., Ltd.
The Corporate Governance Basic Policy

Chapter 1 General

(Purpose)

Article 1
The Corporate Governance Basic Policy (the "CG Basic Policy") is established for the purpose of establishing and enhancing corporate governance in order that Cosmo Energy Holdings Co., Ltd. ("Cosmo Energy Holdings" or the "Company") thoroughly follows compliance and corporate ethics and promotes sustainable growth and mid- and long-term improvement in corporate value of consisted of consolidated companies of the Company ("Cosmo Energy Group" or the "Group").

(Basic Approach toward Corporate Governance)

Article 2
The Group promotes "improvement in transparency and efficiency in the management," "prompt execution of business" and "thorough risk management and compliance" based on "Cosmo Energy Holding Group Management Vision" and a specific guideline for promoting such management vision and achieving targets thereof, "Cosmo Energy Group Code of Conduct" (the "Code of Conduct").
2.
Cosmo Energy Holdings strives to enhance corporate governance according to the following basic approach specified in the following articles, in order to respect shareholders rights, ensure fairness and transparency of the management and vitalize the management.

Chapter 2 Securing the Rights and Equal Treatment of Shareholders

(Securing rights and equal treatment of shareholders)

Article 3
Cosmo Energy Holdings secures shareholders' rights and equal treatment of shareholders by developing an environment in which shareholders can exercise their rights appropriately.

(Shareholders' Meeting)

Article 4
The Company's supreme decision-making body is a shareholders' meeting, which is consisted of shareholders holding voting rights. Thus Cosmo Energy Holdings set up an appropriate date, time and place to hold a meeting in order that all the possible shareholders can participate in the meeting and the will of shareholders can be reflected more.
2.
Cosmo Energy Holdings takes necessary measures to ensure sufficient time for all shareholders to consider agendas of a shareholders' meeting, with an aim to respect shareholders' rights.
3.
Directors answer to questions from shareholders sincerely, based on the understanding that a shareholders' meeting is an opportunity for constructive dialogue with shareholders and in order to build a trust relationship with shareholders.

(Cross-shareholdings)

Article 5
Cosmo Energy Holdings holds the required minimum cross-shareholdings, and assess whether or not to hold each individual cross-shareholding examining the cost of capital, benefits, mid- long term increase of economic rationale etc in a comprehensive and specific manner in order to grow sustainably and improve the mid- and long-term corporate value. Individual cross-shareholding will be sold when such cross-shareholding is considered unnecessary.
2.
Whether voting rights of listed shares are exercised, in regardless of whether a proposal is made by the issuer or the shareholder, would be decided by judging whether a proposal to vote contributes to midand long-term improvement in corporate value of the relevant issuer and the Company and whether or not such exercise harm the effectiveness of cross-holdings in a comprehensive manner.
3.
When cross-shareholders indicate their intention to sell their shares, the Company shall not hinder the sale if the cross-held shares by, for instance, implying a possible reduction of business transactions.

Chapter 3 Appropriate Cooperation with Stakeholders Other Than Shareholders

(Appropriate cooperation with stakeholders other than shareholders)

Article 6
Cosmo Energy Holdings is dedicated to achieve sustainable growth and improve corporate value in medium- and long-term, and tackle and resolve social and environmental problems with a sincere attitude through proper collaborations with stakeholders and in compliance to the Management Vision and the Code of Conduct.

Chapter 4 Ensuring Appropriate Information Disclosure and Transparency

(Ensuring appropriate information disclosure and transparency)

Article 7
Cosmo Energy Holdings will appropriately disclose material information concerning the management on a timely basis, according to the policy on information disclosure.
2.
In addition to financial information, Cosmo Energy Holdings will proactively disclose information on safety measures taken in our corporate activities and environmental conservation activities and the other non-financial information (including ESG(environmental, social and governance) matters).

Chapter 5 Responsibilities of the Board

(Responsibilities of the board of directors, etc.)

Article 8
The board of directors makes the best decision based on fair judgment with an aim to realize our management vision, thoroughly follow compliance and corporate ethics and achieve sustainable growth and mid- and long-term improvement in corporate value.
2.
The board of directors vitalizes the management by presenting the basic management policy through mid-term business plans and management strategies and encouraging directors and officers who are in charge of business execution to make decisive decisions promptly.
3.
The Company also appoints independent outside directors and utilize their knowledge, experience and capabilities to enhance supervisory functions through active discussions and objective viewpoints.
4.
The board of directors sets up a nomination and remuneration advisory board in order to supervise officers, evaluate the performance of the Company and reflect such evaluation into personnel affairs and remuneration of officers appropriately, from an objective viewpoint. Independent outside directors shall account for a majority of members of the nomination and remuneration advisory board.
5.
The board of directors introduces an executive officer system in order to divide supervision from execution of duties, for the purpose of strengthening its supervising functions and speeding up execution of duties.

(Structure of Board of Directors and Committees)

Article 9
The board of directors is consisted of a wide variety of members with different expertise, experience and backgrounds in order to make it perform its functions in the most effective and the most efficient way.
2.
The board of directors determines the number of directors within the scope specified in the articles of incorporation with an aim to make it perform its functions in the most effective and the most efficient way, based on the results of discussions at the nomination and remuneration advisory committee.
3.
The board of directors appoints 2 or more directors with independence for the purpose of enhancing transparency and objectivity, both of which are required in corporate governance.

(Structure and Responsibilities of Audit and Supervisory Committee)

Article 10
Cosmo Energy Holdings sets up an audit and supervisory committee to enhance our supervisory functions further.
2.
A majority of members of the audit and supervisory committee shall be consisted of independent outside directors and the committee member.
3.
The head of the audit and supervisory committee shall be chosen from independent outside directors for the purpose of securing independence and neutrality.
4.
A person with experience in finance/accounting, legal or managerial matters shall be appointed as independent outside directors, who serves as a member of the audit and supervisory committee. A person with high experience who is able to demonstrate his/her ability of advanced information gathering required for the audit and supervisory committee shall be appointed as internal directors, who serve as member of the audit and supervisory committee.

(Independence Standards)

Article 11
Cosmo Energy Holdings considers an outside director of the Company as an independent outside director with adequate independence, if such director fulfills requirements for independence specified by the Companies Act and Tokyo Stock Exchange, and does not fall under any of the items of the following standards:
(1)
An executing person of the Group (Note 1)
(2)
A large shareholder of the Company (holding 10% or more voting rights directly or indirectly) (Note 2)or an executing person thereof
(3)
An executing person of companies which fall under any of the following:
A) A major business partner of the Group (Note 3)
B) A major lender to the Group (Note 4)
(4)
A certified public accountant who belongs to an audit company, which serves as an accounting auditor of the Group
(5)
A consultant, accountant, tax accountant, attorney-at-law, judicial scrivener or patent attorney who receives cash or other assets of more than 10 million yen annually from the Group
(6)
A person who accepts donation of more than 10 million yen annually from the Group
(7)
A person from a company with which the Company sends an outside director reciprocally
(8)
A person whose close relatives fall under any of the above items from (1) to (7) [limited only to important persons except (4) and (5)]
(9)
A person who fell under any of the above items from (2) to (8) for the past five years
(10)
Notwithstanding the provisions of each of the above items, a person who has special grounds which may cause a conflict of interest with the Company.
(Note 1)
An executing person of the Group mean a person who is or used to be an executive director, executive officer, employer or employee of such consolidated companies.
(Note 2)
A large shareholder means a shareholder holding more than 10% of shares on a basis of voting rights under his/her/its own name or in somebody else's name as of the end of the fiscal year of the Company.
(Note 3)
A major business partner means a purchaser or a supplier of the Group's products, the annual transaction volume with which exceeds 2% of consolidated revenue of the Company or the counterparty.
(Note 4)
A major lender means a financial institution from which the Group lends money, the balance of borrowings as of the end of the fiscal year of the Company from which exceeds 2% of the consolidated total assets of the Company or the relevant financial institution.

(Responsibilities of the Nomination and Remuneration Advisory Committee)

Article 12
The Nomination and Remuneration Advisory Committee discusses and examines the Company's plan for nomination and remuneration of officers based on the request for advice from the board of directors, etc. and then submits the results of discussion to the board of directors.

(Officers' Remuneration System)

Article 13
Cosmo Energy Holdings adopts a performance-based remuneration system for officers and the basic policy of such system is as follows:
(1)
To clearly assess the corporate performance and link it to remuneration closely
(2)
To motivate officers to improve the performance and enhance corporate value in the mid- and long-term
(3)
To share awareness for profits with shareholders of the Company
(4)
To contribute to reinforce officers' spirit of challenge
(5)
To secure those with high business performance
(6)
To fulfill accountability to each of stakeholders by ensuring transparency and objectivity

(Executive Officer)

Article 14
An executive officer is appointed by the board of directors annually from candidates recommended by the nomination and remuneration advisory committee.
2.
Executive officers assume important responsibilities of business execution to realize the management vision, improve corporate value and increase shareholder returns on a long-term basis. Executive officers receive an authority to determine specific business execution in areas and operations in charge transferred from a director, and execute business to accomplish purposes responsibly.

(Internal Control)

Article 15
Cosmo Energy Holdings has established a basic policy regarding the internal control system to develop the system of execution of duties by directors and employees, etc. of the Company and the Group, the system of risk management and internal audit supporting such execution and the system ensuring effective audit implemented by audit and supervisory committee members, with an aim to realize the management vision and follow the Code of Conduct of Cosmo Energy Group.

(The Appointment/Dismissal of President and Development of Successor for President)

Article 16
The board of directors, understanding that the appointment and the dismissal of president is the most critical decision of strategy, establishes the objective, timely and transparent procedures ,and appoints and dismisses the president when necessary based on the procedures.
2.
The board of directors understands the development of successors for president as its critical duty to support the Company's sustainable growth, and engages in the development of the potential successors by having such candidates with sufficient time and resource experience various business fields as officers of the Company and its affiliated companies, etc.

(Self-evaluation at Board of Directors)

Article 17
The board of directors annually analyses and evaluates the effectiveness of itself by way of self-evaluations by directors (including audit and supervisory committee members), and disclose the summary of evaluation results.

Chapter 6 Dialogue with Shareholders

(Dialogue with shareholders)

Article 18
An officer in charge of IR supervises dialogue with shareholders and handle shareholders properly, in order to promote constructive dialogue with them and contribute to the Company's sustainable growth and improvement in medium- and long-term corporate value.
2.
Department in charge of IR supports dialogue between the officer in charge of and shareholders in handling of their opinions and requests, in collaboration with the related internal departments.
3.
Department in charge of IR engages in IR activities through shareholder visits and briefing sessions at home and abroad.
4.
Cosmo Energy Holdings holds a quarterly earnings briefing for investors and regular refinery tours as methods of dialogue, in addition to one-on-one meetings. The Company also sends information to Japanese and overseas shareholders through tools for constructive dialogue, such as enhanced publication of corporate information at the company's website and issuance of Cosmo Report.

Chapter 7 Revision and Abolition

Article 19 (Revision and Abolition)

Any revision and abolition of the CG Basic Policy shall be resolved at the board of directors;however, any slight revision shall be approved by an officer in charge of Legal and General Affairs Dept.
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