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 decisionmaking. Furthermore, in November 2015 we formulated and disclosed the Corporate Governance Guidelines for the purpose of ensuring transparency and fairness in decision-making and realizing effective corporate governance through the proactive provision of information. We also revise the guidelines as appropriate in line with governance-related developments.
State of Corporate Governance
We have established as advisory bodies to the Board of Directors 1) the Nomination and Compensation Advisory Committee, for the purpose of enhancing the independence, objectivity, and accountability of Board of Directors functions related to the nomination and compensation of Directors and contributing to the further enhancement of the corporate governance system; and 2) the INPEX Advisory Committee, for the purpose of obtaining multifaceted and objective advice and recommendations from internal and external experts about issues in fields such as domestic and international politics and economics, the energy situation, and CSR as they relate to business management and aiming for sustained growth and enhancement of medium- and long-term corporate value.
We have many opportunities to negotiate with oil-producing countries and state-owned oil companies in those countries, as well as with international oil companies and other organizations. We believe that these negotiations require Directors as well as Executive Officers who have a thorough knowledge of our business operations and technologies and extensive international experience. For this reason, Directors appointed from within INPEX in principle hold concurrent positions as Executive Officers. This ensures a governance structure in which the Board of Directors executes business decisions efficiently while also effectively performing its management oversight function.
In order to improve management transparency and to enhance the effectiveness of the supervisory role of the Board of Directors, we have appointed five Outside Directors (out of thirteen Board members) who are expected to objectively monitor management processes, prevent conflicts of interests, provide expert advice, and incorporate the feedback of stakeholders. The appointed Outside Directors include business leaders, academics or other specialists who possess rich experience and knowledge in the fields of energy and resources, finance, law, diplomacy or other related disciplines.
As of the end of June 2019, four out of five Audit & Supervisory Board members are also appointed from Outside Auditors. In order to ensure the independence and effectiveness of the audit, we established the Audit & Supervisory Board as required by law. In addition, to support the supervisory function of the Audit & Supervisory Board members, we have assigned dedicated employees in the Audit & Supervisory Board Members' Office strengthening coordination between the internal audit department (Audit Unit), and the accounting auditors.
INPEX regularly holds meetings among Outside Directors, the Representative Director, Audit & Supervisory Board members, and accounting auditors such as the “Meeting of Outside Directors, Audit & Supervisory Board Members, and the Representative Director”; the “Meeting of Outside Directors and Audit & Supervisory Board Members (including the Accounting Auditors)”; and the “Meeting of Audit & Supervisory Board Members and the Representative Director,” to provide opportunities to exchange opinions on a wide range of themes relating to important business challenges, the establishment and implementation of internal control systems, and other items related to corporate governance.
Evaluation results of effectiveness of Board of Directors in FY 2018
With the aims of regularly verifying that the Board of Directors is functioning appropriately and identifying issues to resolve for continuing improvement, the Company undertakes an evaluation of the effectiveness of the Board of Directors each year, and discloses the summary of the evaluation results. Based on this policy, an evaluation was conducted in fiscal year 2018. The evaluation method and summary of the results are as follows.
As the fourth evaluation was approaching, multiple discussions regarding the evaluation method, including those at Board of Directors meetings, were conducted, and it was confirmed that the method shall continue to be autonomous evaluation by members of the Board of Directors in this fiscal year. At a “meeting between Outside Directors and Audit & Supervisory Board Members” held in November 2018, the progress in the first half of the fiscal year regarding issues identified in the previous evaluation was discussed and an interim evaluation was conducted. In addition to the above, at the Board of Directors meeting held in February 2019, overall results of the initiatives taken during the fiscal year were reviewed, and the implementation policy of the evaluation for the FY 2018 was deliberated.
The evaluation items included the self-evaluation of each Director and Audit & Supervisory Board Member, the composition, operations, roles and responsibilities of the Board of Directors, operations of the Nomination and Compensation Advisory Committee, as well as the status of improvement of issues identified in the previous evaluation. An anonymous survey of all Directors and Audit & Supervisory Board Members was conducted in March. In order to obtain more specific views and opinions from the directors, the directors were encouraged to make comments on many of the questions.
Subsequently, results of the survey were consolidated and analyzed by the Board of Directors office. The results of the consolidation and analysis, as well as issues and initiatives for the future were discussed at a meeting among the Outside Directors, Audit & Supervisory Board Members and the Representative Director. Based on such discussion, the final evaluation results and action plans were confirmed at the Board of Directors meeting held in April 2019.
Summary of Evaluation Results
- 1.The effectiveness of the Board of Directors has been steadily improving, even when compared to the previous three evaluation results.
- 2. In particular, the structure of providing information to outside directors, including the routinization of briefings prior to Board of Directors meetings and enhancement of information on the Company's business portfolio, has been further augmented, and the resulting improvement in operations was positively evaluated.
- 3.The issues for further improvement in the effectiveness of the Board of Directors are as follows:
- Enhance discussions regarding strategies further, on topics including the progress status of the Medium-term Business Plan, the impact of changes in the business environment, and optimization of the business portfolio
- Further enhance information regarding risks to contribute to appropriate and decisive investment decisions by the Board of Directors; conduct deeper discussions on the business strategy (including governance) in Australia, centering on the Ichthys LNG Project that began production and shipment last year; and further strengthen cooperation between the Board of Directors and the Nomination and Compensation Advisory Committee
- Discussions on the desired state of governance in the Group, and deeper discussions, including at meetings of the Nomination and Compensation Advisory Committee, on how to secure greater diversity and independence in the Board of Directors
Based on these evaluation results, the Company will continue striving to improve the effectiveness of the Board of Directors.
Corporate Governance Chart