Corporate Governance

Basic Policy on Corporate Governance

In order to achieve sustainable growth and increase corporate value over the medium- to long-term, INPEX fulfills its social responsibilities in cooperation with its shareholders and other stakeholders, and works to enhance its corporate governance for the purpose of conducting transparent, fair, timely and decisive decision-making.

Corporate Governance Report

INPEX has presented and disclosed the Corporate Governance Report describing basic views on our corporate governance and others in accordance with the regulations for the stock exchange.

Overview of the Corporate Governance Structure

INPEX has adopted an Audit & Supervisory Board Member organizational structure, under which Audit & Supervisory Board members audit the execution of operations, which are in turn carried out by directors well versed in their field. In addition, the Company has introduced an Executive Officer System to pursue management with agility and efficiency. INPEX frequently engages in negotiations with the governments of oil-producing countries and overseas oil companies. This necessarily requires internal directors and executive officers who have knowledge, expertise and international experience relating to the Company's business and both a sound knowledge of the Company and their particular field of expertise. Internal directors in principle hold the concurrent position of executive officers. By adopting this concurrent organizational structure, the Company's Board of Directors is better placed to execute operations in an efficient manner. At the same time, this structure helps to ensure effective operating oversight.
In addition to enhancing the transparency of management and bolstering the ability of the Board of Directors to carry out its supervisory function, INPEX has appointed six of its 14-member Board of Directors from outside the Company. Through this initiative, steps have been taken to ensure that management issues are considered and deliberated with a greater degree of objectivity from an independent standpoint. Moreover, four of the Company's five Audit & Supervisory Board members are also appointed from external sources. In addition to putting in place an Audit & Supervisory Board, INPEX has set up the Audit & Supervisory Board Members' Office and deployed dedicated staff and is reinforcing collaboration between Audit & Supervisory Board members and the Audit Unit, as well as independent auditors.

Overview of the Corporate Governance Structure
Organizational structure Company with Audit & Supervisory Board Member
Directors Number of directors as stipulated by
the Articles of Incorporation
up to 16
Number of directors (number of outside directors) 14 (6)
Term of office 1 year
Audit & Supervisory Board Members Number of Audit & Supervisory Board members
as stipulated by the Articles of Incorporation
up to 5
Number of Audit & Supervisory Board members (number of outside Audit & Supervisory Board members) 5(4)
Term of office 4 years
Number of independent directors and auditors 10
(6 outside directors, 4 outside Audit & Supervisory Board Members)
Rights plan and other measures to protect against a takeover None
Other Issuance of a Class A Stock to the Minister of Economy, Trade and Industry

[1] Directors and the Board of Directors

The responsibilities of the Board of Directors shall be to fully exercise its supervisory function, secure fairness and transparency in management, and ensure sustainable growth and increase corporate value over the medium to long term through implementation of effective corporate governance, with recognition of its fiduciary responsibility to shareholders.
The Company’s Board of Directors comprises 14 members, six of whom are outside directors. In addition to a monthly meeting, the Board of Directors meets as necessary to discuss and determine matters concerning management strategy and important business execution, and to supervise the execution of duties by directors. The term of office for directors is set at one year. In addition to enhancing the ability of directors to respond to changes in the Company’s global operating environment in a timely manner, this initiative helps to further clarify management responsibilities.

[2] Executive Committee and Executive Officer System

From the perspective of increasing the speed of decision making related to the execution of business, we have established an Executive Committee. Meetings are held weekly and as necessary. At the Executive Committee, flexible decision making is conducted for resolutions not affiliated with the Board of Directors, and deliberation is held to contribute to decision making by the Board of Directors.
We implemented an Executive Officer System to respond accurately and quickly to a rapidly changing management environment and the expansion of our business activities. The term of office for executive officers is set to one year, the same as for directors.

[3] Audit & Supervisory Board and Audit & Supervisory Board Members

The Audit & Supervisory Board is composed of five Audit & Supervisory Board members, four of which come from outside.
In addition to attending meetings of the Board of Directors and the Executive Committee, the Audit & Supervisory Board members review the execution of business duties by directors and executive officers through reports given by and hearings for related departments. Furthermore, the Audit & Supervisory Board members meet on regular and as needed bases with the Independent Auditors, and receive reports from the Independent Auditors regarding audits. They also conduct regular meetings with the internal audit department (Audit Unit) to receive reports regarding internal audits and the evaluation of internal controls.
To strengthen the auditing function and ensure viable corporate governance, steps have been taken to set up the Audit & Supervisory Board Members' Office and to deploy dedicated staff. In this manner, efforts are being made to promote collaboration along the aforementioned terms between Audit & Supervisory Board members, the Audit Unit and Independent Auditors. Moreover, we have constructed a system to strengthen the monitoring function through periodic meetings with representative directors and directors.

[4] Accounting Audit and Auditor Compensation

In accordance with the Companies Act and the Financial Instruments and Exchange Act, we accept accounting audits from Ernst & Young ShinNihon LLC. The amount of auditor compensation is determined in total based on the audit plan and the number of auditing dates, after obtaining approval from the Audit & Supervisory Board.

Compensation Paid to the CPAs and Related Parties
Name of the CPA firm Ernst & Young ShinNihon LLC
Names of the CPAs Hiroaki Kosugi, Satoshi Takagi, Takeshi Yoshida
Accounting audit members 26 CPAs, 8 persons who passed an accountant exam, etc., and 22 others
Compensation for auditing services ¥302 million
(INPEX: ¥228 million; Consolidated subsidiaries: ¥73 million)
Compensation for non-auditing services ¥27 million
(INPEX: ¥14 million; Consolidated subsidiaries: ¥12 million)

[5] Internal Committees

To further enhance the efficacy of the corporate governance function, INPEX has set up 1. the Nomination and Compensation Advisory Committee, 2. the Advisory Committee, 3. the Compliance Committee and 4. the CSR Committee. In addition, the Company maintains 5. the Corporate HSE Committee, 6. the Information Security Committee and 7. the INPEX Value Assurance System Committee to appropriately manage risks associated with business operations.

Internal Committees
1 Nomination and Compensation Advisory Committee

The Nomination and Compensation Advisory Committee was established in January 2017 with the aim of strengthening the functional independence and objectivity as well as accountability of the Board of Directors in connection with the nomination of and compensation paid to directors.

2 INPEX Advisory Committee

The INPEX Advisory Committee was established in October 2012 with the aim of enhancing corporate value and the corporate governance function. Comprising external experts in a broad spectrum of fields, the committee provides the Board of Directors with multifaceted and objective advice and recommendations across a wide range of areas. Areas of discussion and advice include international political and economic conditions, an outlook of energy conditions and ways in which to bolster corporate governance.

3 Compliance Committee

The Compliance Committee was established in April 2006 with the aim of promoting compliance initiatives across the entire Group. The committee formulates fundamental compliance policies applicable to the Group, deliberates on important matters and manages the manner in which compliance is practiced.

4 CSR Committee

In April 2012, the INPEX Group established the CSR Committee with the aims of better fulfilling its corporate social responsibility and promoting activities that contribute to the sustainable development of society. The committee puts in place fundamental policies and formulates important measures designed to promote CSR.

5 Corporate HSE Committee

In accordance with the HSE Management System, the Corporate HSE Committee was established in October 2007 to promote health, safety and environment initiatives. In addition to formulating corporate HSE policies and priority targets for each period, the committee advances HSE activities across the organization.

6 Information Security Committee

The Information Security Committee was established in November 2007 to consider and determine all appropriate measures necessary to maintain, manage and strengthen information security. The committee also takes steps to address any incident relating to information security and to put in place preventive measures.

7 INPEX Value Assurance System Committee

The INPEX Value Assurance System Committee was established in May 2014 to contribute to the Company's decision-making process with respect to confirmation of the status of preparations in connection with important milestones of those oil and natural gas upstream business projects in which INPEX participates, and the improvement and promotion of project.

[1] Outside Directors

Regarding the appointment of outside directors, we believe that it is important to comprehensively consider a variety of factors. These factors include the validity of business decisions and consideration of their efficacy, professionalism and objectiveness in the oversight function in addition to the perspective of independence. As corporate managers, academics or other specialists, our company’s six outside directors posses broad knowledge and many years of experience as managers in such fields as resource/ energy industry, finance and legal matters. Three of the outside directors also concurrently serve as advisors to Japan Petroleum Exploration Co., Ltd., ENEOS Holdings, Inc. and Mitsubishi Corporation, respectively, all of which are shareholders (hereinafter referred to as “company shareholders”) of the company. As INPEX and all the company shareholders are engaged in business activities in the same fields, there is a possibility of conflicts of interest arising. Accordingly, the company recognizes the necessity to pay particular attention to corporate governance. INPEX considers it important for all its directors including outside directors to carry out their management duties while maintaining a high level of awareness at all times on matters including the obligation to prohibit competition under the Companies Act, the appropriate handling of transactions with conflicts of interest and the prevention of information leakage, etc. The company has therefore obtained pledges confirming these points from all directors including the three outside directors referred above.

[2] Outside Audit & Supervisory Board Members

When appointing outside Audit & Supervisory Board members, we believe that it is important to comprehensively consider factors such as independence, efficacy in the oversight function and professionalism.
Four of the Company’s five Audit & Supervisory Board members are appointed from external sources. Audit & Supervisory Board members possess a rich knowledge and experience in the Company’s business as well as in such fields as finance, legal affairs and management, which they use when performing auditing activities for the Company.

[3] Independence of Outside Directors and Outside Audit & Supervisory Board Members

The Company has reported all outside directors and outside Audit & Supervisory Board members as independent directors as defined by Tokyo Stock Exchange, Inc.
As a part of efforts to comply with the Corporate Governance Code, INPEX has formulated independence standards for outside directors and outside Audit & Supervisory Board members taking into consideration the independence standards and qualification for independent directors issued by the Tokyo Stock Exchange. The Company determines the independence of outside directors, including major shareholders and business partners that do not fall within the scope of these standards.

[4] Audit & Supervisory Board and Audit & Supervisory Board Members

The Audit & Supervisory Board is composed of five Audit & Supervisory Board members, four of which come from outside.
In addition to attending meetings of the Board of Directors and the Executive Committee, the Audit & Supervisory Board members review the execution of business duties by directors and executive officers through reports given by and hearings for related departments. Furthermore, the Audit & Supervisory Board members meet on regular and as needed bases with the Independent Auditors, and receive reports from the Independent Auditors regarding audits. They also conduct regular meetings with the internal audit department (Audit Unit) to receive reports regarding internal audits and the evaluation of internal controls.
To strengthen the auditing function and ensure viable corporate governance, steps have been taken to set up the Audit & Supervisory Board Members' Office and to deploy dedicated staff. In this manner, efforts are being made to promote collaboration along the aforementioned terms between Audit & Supervisory Board members, the Audit Unit and Independent Auditors. Moreover, we have constructed a system to strengthen the monitoring function through periodic meetings with representative directors and directors.

Outside Directors/Outside Audit & Supervisory Board Members: Concurrently Held Positions and Reason for Appointment
  Name Independent
director/
auditors
Significant concurrently held positions Reason for appointment Attendance at board meetings for
the year ended December 31, 2020
Outside Directors Jun
Yanai
Advisor of Mitsubishi Corporation Outside Director, Kintetsu World Express, Inc. To utilize his rich experience and broad knowledge in the resources/energy industry in our company’s management Board of Directors meetings 14/14
Norinao
Iio
- To utilize his rich experience and broad knowledge in the resources/energy industry in our company’s management Board of Directors meetings 14/14
Atsuko
Nishimura
Outside Director, TAISEI CORPORATION In addition to a broad base of knowledge related to international conditions built up through her years working as a diplomat, she is also well-versed in the fields of resources and energy. Also nominated because we are confident she can provide suggestions on a diverse array of topics Board of Directors meetings 14/14
Yasushi
Kimura
Senior Corporate Advisor, ENEOS Holdings, Inc. Outside Director, Nissan Motor Co., Ltd. To utilize his rich experience and broad knowledge as a manager in the resources/energy industry in our company’s management Board of Directors meetings 14/14
Kiyoshi
Ogino
Advisor of Japan Petroleum Exploration Co., Ltd. (JAPEX) To utilize his rich experience and broad knowledge in the oil and gas development industry in our company’s management Board of Directors meetings 14/14
Tomoo
Nishikawa
- To utilize his abundance of knowledge in corporate management based on his expertise in corporate legal affairs cultivated through his extensive experience as a lawyer, as well as wide-ranging insight drawn from his legal knowledge particularly in the field of international transactions. Board of Directors meetings 11/11*
Outside Audit & Supervisory Board Members Hideyuki
Toyama
- Possesses extensive experience and knowledge in finance, as well as professional knowledge and experience as an attorney Board of Directors meetings 14/14 Audit & Supervisory Board meetings 14/14
Shinya
Miyake
- Possesses abundant experience and wide-ranging knowledge in fields such as international finance and financial affairs Board of Directors meetings 14/14 Audit & Supervisory Board meetings 14/14
Mitsuru
Akiyoshi
President and CEO, Mizuho Marubeni Leasing Corporation Outside Director, Concordia Financial Group, Ltd. Possesses abundant experience and wide-ranging knowledge in fields such as financial affairs and management Board of Directors meetings 14/14 Audit & Supervisory Board meetings 14/14
Hiroko
Kiba
- Possesses abundant experience as a freelance newscaster, university lecturer, and holder of public offices such as seats on the Advisory Committee for Natural Resources and Energy and Industrial Structure Council, as well as her wide-ranging knowledge on a diverse variety of diverse topics Board of Directors meetings 14/14 Audit & Supervisory Board meetings 14/14
  • *Attendance of director Tomoo Nishikawa represents attendance after his taking office on March 25, 2020.

With the aim of strengthening the functional independence and objectivity as well as accountability of the Board of Directors in connection with compensation paid to directors, the Board of Directors specifies a policy for determining the amount and computation method of compensation paid to directors and Audit & Supervisory Board members, following a report from the Nomination and Compensation Advisory Committee. The compensation for directors, with the exception of outside directors, consists of three types: basic compensation, bonuses (performance-based compensation) and stock-based remuneration. Compensation for outside directors is limited to basic compensation only. Basic compensation is paid based on the duties of each Director and the bonus shall be paid based on the Company’s performance from a medium- to long-term perspective and other factors. As to the stock-based compensation, the Company’s shares, etc. will be delivered based on the position, etc. of each Director, with the aim of raising the awareness of Directors towards increasing the enterprise value of the Company and further increase their willingness to contribute to maximizing shareholder value, by making clear the linkage between the remuneration of Directors and the Company’s medium- to long-term stock price. Based on a resolution passed in June 2018 at the 12th Ordinary General Meeting of Shareholders, a stock-based remuneration system has been introduced for directors and executive officers. The Board of Directors decide on compensation for directors within the limits and terms approved at the general meeting of shareholders following a report from the Nomination and Compensation Advisory Committee. For details on the decision policy regarding the content of individual compensation for directors, please refer to the Corporate Governance Report. Compensation for Audit & Supervisory Board members consists solely of a basic compensation, which is determined through consultation between the Audit & Supervisory Board members, within the limits and terms approved at the general meeting of shareholders.

Compensation for Directors and Audit & Supervisory Board Members in FY2020
Director classification Total
amount of
compensation paid
(millions of yen)
Total compensation by type
(millions of yen)
Number of eligible directors and Audit & Supervisory Board members (persons)
Basic
compensation
Bonus Stock-based remuneration
Directors
(excluding outside directors)
447 381 54 11 9
Audit & Supervisory Board members
(excluding outside Audit & Supervisory Board members)
31 31 - - 1
Outside directors and outside Audit & Supervisory Board members 156 156 - - 10

Notes:

  1. 1The number of directors and Audit & Supervisory Board members presented in the table above includes one director who retired at the conclusion of the Company’s 14th Ordinary General Meeting of Shareholders held on March 25, 2020.
  2. 2The Company does not uphold an accrued retirement benefits plan.
  3. 3The maximum monthly basic compensation for directors was resolved to be within ¥47 million (including monthly compensation for outside directors of within ¥6 million) at the 11th Ordinary General Meeting of Shareholders held on June 27, 2017. The number of directors immediately after the conclusion of the 15th Ordinary General Meeting of Shareholders held on March 25, 2021 is fourteen (including six outside directors).
  4. 4The maximum monthly basic compensation for Audit & Supervisory Board members was resolved to be within ¥10 million at the 13th Ordinary General Meeting of Shareholders held on June 25, 2019. The number of Audit & Supervisory Board members immediately after the conclusion of the 15th Ordinary General Meeting of Shareholders held on March 25, 2021 is five.
  5. 5The amount of bonus is the amount based on the resolution made at the 15th Ordinary General Meeting of Shareholders held on March 25, 2021 to pay a total amount of ¥54 million to eight directors in office at the end of the business year under review, excluding outside directors.
  6. 6At the 12th Ordinary General Meeting of Shareholders held on June 26, 2018, the Company resolved to introduce a stock-based remuneration system for directors (excluding outside directors and non-residents of Japan) and executive officers (the BIP Trust). The number of directors (excluding outside directors and nonresidents of Japan) immediately after the conclusion of the 15th Ordinary General Meeting of Shareholders held on March 25, 2021 is eight. The amount of the stock-based remuneration presented in the table above represents the fees incurred regarding the stock-based points granted during the business year under review concerning the BIP Trust for directors.

[Resolutions of the Company regarding the Development of the Systems for Ensuring Proper Operations (Internal Control Systems)]

The following is a summary of the resolutions of the Company, regarding the “Development of the Systems for Ensuring the Proper Operations as a Stock Company (Internal Control Systems).” This summary reflects a partial revision made by a resolution of the Board of Directors meeting held on March 26, 2018.

Systems to Ensure that Directors and Employees of the Company Execute their Duties in Compliance with Laws and Regulations and the Articles of Incorporation

To ensure that Directors and employees of the Company execute their duties in compliance with applicable laws and regulations and the Articles of Incorporation, the Company shall develop a Corporate Social Responsibility Principles and Business Principles and establish a system to ensure complete compliance. The Company shall establish a Compliance Committee consisting of full-time Directors and Executive Officers, etc., to deliberate basic policies or other important matters related to compliance. By monitoring the implementation of such policies and ensuring thorough dissemination through in-house training, etc., the Company ensures that its Directors and employees comply with laws and regulations and the Articles of Incorporation in the execution of their duties. Furthermore, the Company shall establish an internal whistle-blowing system with a department in charge and external experts (lawyers) as providers of consultation services.
In order to ensure effective compliance systems and relevant internal rules, the Company shall also verify and evaluate such systems and make the necessary improvements through audits, etc., carried out by the internal audit department which reports directly to the President & CEO and other related in-house departments or external experts. Based on the internal audit regulations, the internal audit department, which reports directly to the President & CEO, shall report the results of audit of the previous fiscal year and the audit plan for the current fiscal year to the Board of Directors.
Furthermore, the Company shall develop a system to ensure the accuracy and reliability of financial reporting, and employ such system properly while evaluating its effectiveness.

Systems for the Storage and Management of Information Related to the Execution of Duties by Directors of the Company

In accordance with applicable laws and regulations, the Articles of Incorporation and internal rules, among others, the Directors shall develop a system for information security administration, and appropriately store and manage documents and other information related to the execution of their duties.

Rules and Other Systems for Risk Management of the Company

To manage diverse risks related to the INPEX Group's business activities, Directors shall cooperate closely with the related departments to identify, analyze and evaluate such risks, and manage them in accordance with internal rules and guidelines, etc.
Furthermore, the functioning and other aspects of the risk management related to daily operations shall be verified and evaluated through audits, etc., carried out by the internal audit department under the direct control of the President & CEO of the Company and other related in-house departments or an external expert, and continually reviewed in response to changes in the business environment.

Systems to Ensure the Efficient Execution of Duties by Directors of the Company

In order to ensure that the systems to execute Directors' duties efficiently are in place, the Directors shall manage business operations with particular attention to the following:

  1. 1.With regard to certain major corporate decisions, an Executive Committee meeting attended by full-time Directors, Managing Executive Officers, etc. shall be held weekly and as necessary to ensure that the duties are executed promptly and properly.
  2. 2.With regard to the execution of daily duties, the authority of the President & CEO shall be delegated in accordance with the Board of Directors’ Regulations and other internal regulations, and the persons in charge at each level shall execute their duties promptly.
    Furthermore, the Board of Directors shall formulate the long-term management strategies and medium-term management plans, and receive progress reports on the plans and targets. The Company has adopted a divisional system and assigns Directors as the head of each division in order to achieve the efficient management of business operations and establish a structure of accountability. Each division shall implement initiatives positioned as important business milestones reflecting the business environment, while taking into account important risks and their countermeasures, so as to realize goals in the medium-term business plan and other targets. The Executive Committee shall receive progress reports on the plans and targets.

Systems to Ensure the Proper Operations of the INPEX Group

  1. 1.Systems for Reporting the Company Matters Related to the Execution of Duties by Directors or Other Equivalent Managerial Staff (hereinafter “Directors, etc.,”) of the Company's Subsidiaries

    In accordance with the internal rules on group management, the Company shall enter into agreements regarding group management with its subsidiaries, under which the Company requires that important matters of each subsidiary shall be reported to and approved by the Company.

  2. 2.Rules and Other Systems for Risk Management of the Company's Subsidiaries

    For risk management of the subsidiaries of the Company, in accordance with the internal rules on group management, the Company shall conduct group-wide risk management via mutual cooperation with each subsidiary. Furthermore, the Company shall require its subsidiaries to cooperate in audits, etc., carried out by the internal audit department under the direct control of the President & CEO of the Company and other related in-house departments or an external expert to verify and evaluate the management of risks related to the daily operations of the subsidiaries. Based on the results of such verification and evaluation, the Company shall have its subsidiaries conduct continuous review of their risk management in response to changes in the business environment.

  3. 3.Systems to Ensure the Efficient Execution of Duties by Directors, etc., of the Company's Subsidiaries

    To ensure the efficient execution of duties by Directors, etc., of the Company’s subsidiaries, management strategies and plans shall be shared among all the INPEX Group companies. Under the vision, the Company shall have its subsidiaries manage human resources and financial resources efficiently and manage business operations in accordance with the Company’s internal rules, etc., with particular attention to the following:

    1. 1.Important matters of a subsidiary of the Company shall be determined by resolution of the Board of Directors meetings of the subsidiary or by consultation among the Directors of the subsidiary.
    2. 2.Authority for the execution of daily duties by the Company’s subsidiaries shall be delegated based on regulations stipulating the administrative authority of subsidiaries, and the persons in charge at each level shall execute their duties promptly.
  4. 4.Systems to Ensure that Directors, etc., and Employees of the Company's Subsidiaries Execute their Duties in Compliance with Laws and Regulations and the Articles of Incorporation

    The Company shall establish a compliance system (including an internal whistle-blowing system) that is applied to the entire Group, and this system shall be widely deployed and disseminated to all directors, auditors and other equivalent managerial staff, as well as to employees of the Company's subsidiaries.
    In cooperation with its subsidiaries, the Company shall conduct audits, etc., of the subsidiaries, carried out by the internal audit department under the direct control of the President & CEO of the Company and other related in-house departments or an external expert.
    The Company shall strive to establish a system to ensure that Directors, etc., and employees of the subsidiaries execute their duties in compliance with laws and regulations and the Articles of Incorporation, and enter into agreements regarding group management with its subsidiaries in accordance with the internal rules on group management.

Matters Regarding Employees Who Assist the Audit & Supervisory Board Members of the Company with Auditing Duties in Cases Where the Audit & Supervisory Board Member of the Company Requests the Assignment of Such Employees, Matters Regarding the Independence of Such Employees from Directors of the Company and Matters Related to Ensure the Effectiveness of Instructions Given to Such Employees

The Company has set up the Audit & Supervisory Board Members' Office as an independent organization from the business execution departments and shall deploy dedicated employees to assist the Audit & Supervisory Board Members with auditing duties in order to enhance the effectiveness of audits by Audit & Supervisory Board Members.
The employees who assist the Audit & Supervisory Board Members' duties shall follow instructions from the Audit & Supervisory Board Members. Performance appraisals, personnel changes and disciplinary action against such employees assisting the Audit & Supervisory Board Members shall require approval of the Audit & Supervisory Board Members beforehand.

Systems for Reporting to the Audit & Supervisory Board Members of the Company

The Directors and employees of the Company, directors, auditors or other equivalent managerial staff, as well as employees of the Company's subsidiaries, or persons who receive a report from them, shall report and provide information to the Audit & Supervisory Board Members of the Company as to the matters provided by laws and regulations, matters that might have a significant impact on the Company and its Group companies, and other matters that an Audit & Supervisory Board Member of the Company has determined to be reported to execute his/her duties.
Also, the Audit & Supervisory Board Members of the Company shall always be able to obtain business information whenever needed by attending the Board of Directors' meetings and other important internal meetings, as well as receiving internal approval documents, etc.
Regarding the internal whistle-blowing system of the INPEX Group, the responsible section of each Group company shall report to the Company's Audit & Supervisory Board Members swiftly as to the content internally reported by directors, auditors, other equivalent managerial staff and employees of the Group companies.

Systems to Ensure that Reporters in the Preceding Section Will Not Receive Detrimental Treatment Grounds of the Whistle-Blowing

The Company shall prohibit detrimental treatment against directors, auditors, or other equivalent managerial staff, and employees of the Group companies who reported to the Company's Audit & Supervisory Board Members. And this position shall be disseminated throughout the INPEX Group.
Regarding the internal whistle-blowing system of the INPEX Group, in case detrimental treatment against a whistle-blower is recognized, a disciplinary action will be taken against the person who treated the reporter in such a way and the head of the department to which the person belongs, pursuant to Rules of Employment, etc.

Matters Related to Policies Concerning the Treatment of Expenses or Liabilities Incurred by the Execution of Duties by the Company's Audit & Supervisory Board Members such as Procedures for Prepayments or the Redemption of Such Expenses

In case the Company's Audit & Supervisory Board Members request prepayment or redemption of expenses for their execution of duties, etc., based on Article 388 of the Companies Act, the Company shall swiftly process such expenses or liabilities except in the case such expenses or liabilities are proven to be unnecessary for the execution of duties by such Auditors.

Other Systems to Ensure Effective Audits by the Audit & Supervisory Board Members of the Company

The Representative Directors of the Company shall meet regularly with the Audit & Supervisory Board Members of the Company, provide information as necessary and strive to communicate with them. At the same time, the Company shall secure opportunities for Audit & Supervisory Board Members and Outside Directors to meet regularly, and strive to enhance their mutual cooperation and information sharing.
The Company shall also improve the effectiveness of audits by establishing a system, etc., whereby the Audit & Supervisory Board Members can cooperate with the internal audit department and receive reports regularly.
Furthermore, to conduct audits by the Audit & Supervisory Board Members, the Company shall ensure close cooperation between the Audit & Supervisory Board Members and external experts such as lawyers, certified public accountants and certified tax accountants, among others.

[Outline of the Status of Operations of the Systems for Ensuring the Proper Operations of the Company (Internal Control System)]

While the Company is operating its internal control system effectively based on the contents decided on the “Development of the Systems for Ensuring the Proper Operations as a Stock Company (Internal Control Systems),” the following are the outline of its major operations of such systems during this fiscal year:

<Compliance system>

The Company has established the Code of Conduct with which all officers and employees shall comply. This obliges them to respect social norms and act with high ethical standards, not to mention comply with laws and regulations. Also, the Company has held its Compliance Committee periodically and when necessary to confirm the status of implementation of the compliance and hence report to the Board of Directors.
Based on the activity plans resolved by the Compliance Committee, the Company has enhanced various information dissemination tools regarding compliance used in the Company. Also, after clearly defining the roles of compliance administrators and compliance managers in each Unit based on internal regulations, through holding meetings between the person-in-charge of the department supervising compliance and the compliance managers of each Unit semiannually, the Company has worked on enhancing and strengthening compliance activities among all personnel. As major activities of this fiscal year, besides the internal compliance training conducted regularly, education sessions about power harassment for those in managerial positions, compliance awareness surveys to determine the level of penetration and implementation conditions of all officers and employees in the Group, and training based on the results of those surveys, were also implemented. Furthermore, as part of strengthening the global implementation of the systems of anti-bribery and corruption within the INPEX Group, the Company conducted training sessions by department, and implemented the risk assessment of overseas offices as per the previous fiscal year.
To specify its stance towards the issue of respecting human rights, the INPEX Group formulated the “Human Rights Policy” based on the United Nation’s “the UN Guiding Principles on Business and Human Rights” and announced it. E-learning sessions were also conducted for officers and employees to raise the overall awareness of the Group in terms of respecting human rights. Furthermore, the INPEX Group published its “Modern Slavery Act Statement” as per the previous fiscal year, as disclosed on its website pursuant to the UK Modern Slavery Act 2015 enforced in October 2015, in order to clarify its initiatives against human rights violations such as slavery and human trafficking in the business and supply chain of the INPEX Group as well as the risks thereof.
As the Group develops its business globally, in order to appropriately respond to taxation risks concerning crossborder transactions, efforts were made to strengthen the taxation governance structure. As a part of such initiatives, the “Policy on Tax Affairs,” which specifies the Group’s basic policy on taxation compliance, was formulated and announced in March 2019.
The Company has established its whistle-blowing system, and an internal department in charge of compliance and outside experts (lawyers) were designated as contact points. There were however no whistle blowing cases related to material breach of laws and regulations, etc. during this fiscal year.

<Risk management system>

To respond to various risks related to business projects, first, the New Ventures Division carries out a centralized analysis/examination on whether to adopt or reject a new project. In addition, the Company operates the “INPEX Value Assurance System Committee” as a structure for conducting cross-sectional technical evaluation, etc. at each phase of exploration, evaluation, development, etc.
The Company has set guidelines for country risk management in countries and territories where projects are planned, which include the establishment of a maximum target amount for accumulated investment balance in high-risk countries.
Furthermore, the Company has been conducting financial risk control by identifying risks of fluctuation of currency exchange rates, interest rates, crude oil/natural gas prices and securities prices, and establishing corresponding managing/hedging methods.
With regard to HSE risks, in order to promote continuous improvement activities of industrial health and safety and environments associated with the development of crude oil and natural gas based on the HSE Risk Management Procedures established under the HSE Management System, each business location identifies, analyzes and evaluates HSE risks, as well as establishes and implements risk countermeasures. In addition, the status of risk management is to be reported to the head office for supervising HSE risks, and the head office confirms the report. With regard to security risks, the Company is promoting company-wide management based on procedures and guidelines. In this fiscal year, based on the Corporate HSE 3rd Phase Medium Term Plan, the Company is promoting HSE management that is effective and integrated, and in order to link it to an improvement in HSE performance for the Company’s business on the whole, the HSE Management System provisions have been revised, and the scope of HSE management has been extended to cover non-operator projects as well.
On the other hand, the Company has established an emergency/crisis response plan in order to enhance capabilities to cope with emergencies such as major accidents and disasters, etc. and is positively promoting risk management which includes conducting emergency response training regularly even in times of safety. Furthermore, the Company has drawn up a business continuity plan (BCP) in order to keep important operations from being stopped, and reviews it as necessary.
With regard to climate change response, which is receiving a high degree of interest internationally, the Company announced and published a position paper in December 2015 which summarized the INPEX Group’s basic views and actual efforts, and continues examination of the issues to be discussed in the future. This position paper is, in principle, to be reviewed once every year and was partially revised in July 2018.
Furthermore, in terms of legal risks, regarding important contracts, lawsuits, etc., the Company has developed a structure that can appropriately provide legal advice to business divisions and the management team.
Also, the Company convenes an information security committee regularly and as necessary in order to implement organizational and systematical information security measures in addition to the education and training regarding information leakage prevention.

<Systems to ensure the efficient performance of duties>

“Vision 2040,” which represents the Company’s long-term outlook until fiscal year 2040, and the “Medium-Term Business Plan 2018-2022,” which states the Company’s initiatives and goals across five years from fiscal year 2018 to 2022, were formulated and announced in May 2018. Based on the companywide policy of initiatives, which is the business execution departments’ business operation policy for realizing goals in the medium-term business plan, companywide plans and targets for fiscal year 2018 were formulated, the status of progress was reflected upon at the second half and end of the fiscal year, and the corresponding evaluation results were reported to the Board of Directors.
Furthermore, we will formulate the new companywide policy of initiatives as well as annual plans and targets based on “Vision 2040” and the “Medium-Term Business Plan 2018-2022,” and report the progress and results of such initiatives to Board of Directors each year.

<Systems for corporate management of the Group companies>

Based on the Group’s corporate management rule and the Group’s agreements with regard to corporate management, the Company in principle urges reporting to or approval by the Company about important matters. Also, the Audit Unit, the Company’s internal audit division, conducts audits of subsidiaries based on the annual auditing plan, and reports the results of the audits to the Company’s Board of Directors.
With regard to the operation of the Group companies, we are utilizing a concurrent management system with subsidiaries involved in overseas projects. At the same time, for financing, we are conducting efficient business operations such as by enhancing financial efficiency through a unified management system of the Group’s assets by 37 means of the Cash Management System, and by centralized management of the INPEX Group’s intercompany finance operations through the Company’s financial subsidiary established in the Republic of Singapore.
The Company’s whistle-blowing system is designed to be applied to all Group companies. The Company provides thorough instructions, through the Company’s and each subsidiary’s trainings and communication activities, to prohibit unfavorable treatment of whistle-blowers.

<Auditing system for Ensuring Effectiveness of Auditing by Audit & Supervisory Board Members>

Audit & Supervisory Board Members have been obtaining required information as well as exchanging opinions, for the purpose of improving effectiveness of their auditing, through their attendance at important meetings such as Board of Directors meetings and other management meetings, conducting hearings from each division, and through meetings with Directors including Representative Directors. Also, Audit & Supervisory Board Members participate in the exchange of opinions during the formulation of the annual auditing plan by the Audit Unit, receive individual reports on the results of audits whenever they are made, and receive necessary reports including reviews of quarterly financial results from the Accounting Auditor, thus keeping close contact with the internal auditing division and the Accounting Auditor.
Furthermore, reports from the Unit in charge of the whistle-blowing system about the contents and handling of whistle-blowing are swiftly accepted by Audit & Supervisory Board Members.
The Company established “Audit & Supervisory Board Members’ Office” as an organization having an employee, independent of the Company’s executive team, dedicated to assisting operations by Audit & Supervisory Board Members.
In accordance with the internal control reporting system enacted in September 2007 based on the Financial Instruments and Exchange Act, the Company has conducted assessment on the development and operation of its internal control systems in all areas (company-wide internal controls, process-level internal controls and overall ITrelated internal controls), and enforced improvement on any deficiencies detected in the process. As a result of the assessment, the Company concluded that its internal control systems over financial reporting were effectively functioning as of March 31, 2019, and submitted to the Kanto Local Finance Bureau an internal control report prepared based on these findings. Furthermore, the Company received an unqualified clean opinion from the accounting firm with respect to the internal control report. We will remain committed to making every effort to ensure reliability of our financial reporting through the process to adequately assess the development and operation of our internal control systems.

According to the stipulations of the Articles of Incorporation, INPEX issues a Class A Stock to the Minister of Economy, Trade and Industry. The Class A Stock does not possess voting rights at shareholders’ meetings. However, it is possible for the holder of the Class A Stock to exercise veto rights for certain major corporate decisions. We think the holding of Class A Stock by the Minister of Economy, Trade and Industry will help prevent any incidence of unusual management, allow INPEX to stably supply energy as a core company for Japan’s oil & gas E&P and ensure that the Company does not incur any negative impact from a speculative acquisition or an attempt at management control through foreign capital. On this basis, INPEX’s role is assured. Furthermore, we expect positive results in terms of external negotiation and credits as a national flagship company efficiently contributing to the stable supply of energy in Japan.

Stock Data

(As of December 31, 2020)

Authorized Shares:
  3,600,000,000 shares
  1 Class A Stock
Total Number of Shareholders and Issued Shares
Common shares: 108,717 shareholders / 1,462,323,600 shares
Special-class share: 1 shareholder (Minister of Economy, Trade and Industry) / 1 share

INPEX is systematically developing a compliance system, an indispensable requirement for the sustained development of a company, and strives to ensure compliance with laws and regulations and adherence to corporate ethics. Specifically, we have instituted the Compliance Committee, which deliberates basic policies, plans, and significant matters pertaining to compliance, and manages the status of compliance practice to promote unified compliance initiatives throughout the Group.
In addition, in accordance with the Corporate Social Responsibility Principles, we have instituted the Code of Conduct, which prescribes matters to be observed to realize compliance, in order to increase compliance awareness among executives and employees in an effort to put the Business Principles into practice.
The Code of Conduct stipulates the building of sound and appropriate relationships with government and administrative authorities (prohibition of political donations except in cases permitted under relevant laws and regulations) and compliance with the anti-bribery and anti-corruption laws and regulations in the countries in which we operate. We make no donations relating to political activities.
We have been participating in the United Nations Global Compact since December 2011 and have declared our commitment to preventing corruption. Based on our Code of Conduct, we have prepared a corporate Anti-Bribery and Anti-Corruption Policy (ABC Policy) and ABC procedures and we are engaged in the prevention of bribery and corruption.
We support international standards relating to human rights, such as the International Bill of Human Rights, the International Labor Standards of the International Labor Organization (ILO), and the United Nations Guiding Principles on Business and Human Rights, and favor the United Nations Global Compact, which promotes voluntary activities by companies as good corporate citizens.

Compliance Framework (Internal notification system)

To improve the transparency of management and the accountability of managers, we conduct timely, appropriate and fair disclosure of information through our Web site, public relations activities and IR activities toward shareholders and investors.

1. To invigorate the general meeting of shareholders and promote effective voting
  Supplementary explanation
Early delivery of convocation notices for
the general meeting of shareholders
We undertake the early delivery of convocation notices for our general meeting of shareholders in an effort to ensure that shareholders have sufficient time to consider agenda items tabled for resolution at each Ordinary General Meeting of Shareholders. The convening notice for the 15th Ordinary General Meeting of Shareholders held on March 25, 2021 was dispatched three weeks prior to the meeting on June 3, 2019. In addition, the notice was posted on the Company's website on February 24, 2021 prior to the dispatch.
Use of voting rights through the Internet We implemented the use of voting rights via the Internet. We also adopted a platform for the electronic use of voting rights.
Other The convocation notice and other related documentation are available in both Japanese and English on our company's Web site and TDnet. On the day of the shareholders' meeting, we used videos and a slide show to explain our business before opening the meeting.
2. Enhancing IR Activities
  Supplementary explanation Explanation by representative
: Yes / No
Regular IR presentations for
individual investors
We participate in events such as IR fairs for individual investors and meetings in a variety of venues including the branch offices of securities firms. About 10 information meetings for individual investors are generally held each year. Yes
Regular IR presentations for analysts
and institutional investors
We hold biannual meetings on financial results for analysts and institutional investors. The President & CEO and the director in charge of finance and accounting explain our financial details and business forecast to approximately 200 analysts and institutional investors. Video archives of these financial results presentations are provided on our Web site (IR section) together with a simultaneous interpretation in English. Yes
Regular IR presentations for foreign
institutional investors
In general, we undertake overseas IR road shows covering such regions as Europe, North America and Asia, while participating in conferences and engaging in one-on-one meetings as necessary. Yes
IR materials available on Web site Our Web site (IR section) features a host of IR tools including financial reports, financial results presentations and annual reports. Together with recent news releases, every effort is made to disclose pertinent information on our performance and financial position, as well as trends in crude oil prices, foreign currency exchange rates, our share price and stock information. Yes
Internal System for Timely Disclosure

Disclosure Policies

To achieve the appropriate disclosure of information, we have established internal regulations for corporate information disclosure and defined the process for collecting, managing, transmitting and disclosing information throughout our company. A summary of disclosure and other policies based on the aforementioned regulations is listed. Please refer to Disclosure Policy for further details.

(The information above is current as of March 25th, 2021, unless otherwise stated.)