27th Dec 2006 07:00
Toyota Motor Corporation25 December 2006 (Translation) December 25, 2006 TOYOTA MOTOR CORPORATION Katsuaki Watanabe Telephone Number: 0565-28-2121 Code Number: 7203 http://www.toyota.co.jp Corporate governance at Toyota Motor Corporation ("Toyota") is as follows: I. Toyota's Basic Policy on Corporate Governance and Capital Structure,Business Attributes and Other Basic Information 1. Basic Policy Toyota has positioned the stable long-term growth of corporate value asa top-priority management issue. We believe that in carrying this out, it isessential that we achieve long-term and stable growth by building positiverelationships with all stakeholders, including shareholders and customers aswell as business partners, local communities and employees, and by supplyingproducts that will satisfy our customers. This position is reflected in the"Guiding Principles at Toyota", which is a statement of Toyota's fundamentalbusiness policies. To explain the Guiding Principles in greater detail, inJanuary 2005, Toyota adopted and presented its statement, "Contribution towardsSustainable Development" as the guideline to the "Guiding Principles at Toyota". We are working to enhance corporate governance through a variety of measuresdesigned to further increase our competitiveness as a global company. 2. Capital Structure Percentage of Shares Held by Foreign Investors: Not less than 20% but less than 30% (Description of Major Shareholders) Name of Shareholders Number of Shares Held Ownership Interest (Shares) (%)Japan Trustee Services Bank, Ltd. 275,673,488 7.64The Master Trust Bank of Japan, Ltd. 209,613,068 5.81Toyota Industries Corporation 200,195,022 5.55Hero and Company 133,454,319 3.70Nippon Life Insurance Co. 131,604,815 3.65State Street Bank and Trust Company 119,382,108 3.31Trust & Custody Services Bank, Ltd. 103,307,043 2.86Tokio Marine and Nichido Fire Insurance Co., Ltd. 83,821,267 2.32Mitsui Sumitomo Insurance Co., Ltd. 65,166,920 1.81Denso Corporation 58,678,704 1.63 3. Business Attributes Stock exchange and section Tokyo: 1st Section, Osaka: 1st Section, Nagoya: 1st Section, Fukuoka: Existing Market, Sapporo: Existing MarketFiscal year end MarchLine of business Transportation equipmentNumber of employees (consolidated) Not less than 1000 personsSales (consolidated) Not less than JPY 1 trillionParent company N/ANumber of consolidated subsidiaries Not less than 300 companies 4. Other particular conditions that may materially affect corporategovernance - II. Corporate Governance System of Management Business Organization, Etc.for Management Decision Making, Execution of Duties and Management Audit 1. Organization structures and organizational operations Organizational form Company with a Board of Corporate Auditors (Directors)Chairman of the Board of Directors: Chairman (excluding concurrently serving as President)Number of Directors: 25 personsElection of Outside Directors: Not elected Reason for adopting the current system With respect to our system regarding directors, we believe that it isimportant to elect individuals that comprehend and engage in Toyota's strengths,including commitment to manufacturing, with an emphasis on frontline operationsand problem solving based on the actual situation on the site (Genchi Genbutsu).Toyota will consider the appointment of outside directors should there besuitable individuals. (Auditors)Establishment or non-establishment of a Board of EstablishedCorporate Auditors:Number of Corporate Auditors: 7 persons Cooperative relationships between Corporate Auditors and Independent Accountants Corporate Auditors receive reports from Independent Accountants on auditplans, methods and results of auditing periodically at the Board of CorporateAuditors. They also hold meetings and exchange their opinions as they considernecessary concerning auditing in general. Cooperative relationships between Corporate Auditors and Internal Audit Division As for internal auditing, a specialized independent department evaluatesthe effectiveness of internal controls over financial reporting. CorporateAuditors receive reports from the department on audit plans, methods and resultsof auditing periodically or whenever necessary. Election or non-election of Outside Corporate ElectedAuditors:Number of Outside Corporate Auditors: 4 persons Relationship with the Company (1) Name Attribution Relationship with the Company (*1) a b c d e f g h iYasutaka Okamura Attorney-at-law X XYoichi Kaya Academic X XYoichi Morishita Comes from other company X XAkishige Okada Comes from other company X X *1 Select the relevant "Relationship with the Company" a Comes from parent company b Comes from other affiliate company c Major shareholder of the company d Concurrently holds office as outside director or outside corporateauditor of another company e Holds office as management director or executive officer, etc. of anothercompany f Spouse, relatives within third degree of consanguinity or an equivalentperson of management level such as management director or executive officer,etc. of the company or specific affiliates of the company g Receives remuneration, etc. or other profits on assets from the parentcompany of the company or a subsidiary of such parent company as an officer h Limitation of Liability Agreement is executed between the said person andthe company i Other Relationship with the Company (2) Name Supplementary Information Reason for election as Outside Corporate AuditorsYasutaka Okamura - In order to receive advice based on his broad experiences and insight in his field of expertiseYoichi Kaya - In order to receive advice based on his broad experiences and insight in his field of expertiseYoichi Morishita - In order to receive advice based on his broad experiences and insight in his field of expertiseAkishige Okada - In order to receive advice based on his broad experiences and insight in his field of expertise Matters relating to other major activities of Outside Corporate Auditors Outside Corporate Auditors attend meetings of the Board of Directors, theBoard of Corporate Auditors and other office meetings and give Directors adviceand exchange their opinions with other Corporate Auditors from their broad pointof view within the scope of their respective specialized field. (Incentives)Implementation of measures on incentive allotment to Adoption of stock option plansDirectors: Supplementary Information We believe that this will heighten their willingness and motivation toimprove business performance in the medium- and long-term, enhance internationalcompetitiveness and profitability, and contribute to increased corporate value. Grantees of stock options: Inside Directors and others Supplementary Information Managing officers and senior managers are also included in the Grantees. (Directors' Remuneration)Means of Disclosure: Annual securities report, business reportDisclosure Status: The sum of all Directors' remuneration is disclosed. Supplementary Information Annual securities reports and business reports are made available forpublic inspection on Toyota's Internet website also. (Support System for Outside Directors (Outside Corporate Auditors)) Full-time Corporate Auditors and Directors disclose adequate informationto Outside Corporate Auditors, such as by giving prior explanations on agenda tobe proposed to the Board of Directors. An audit office is established withfull-time staff that assist Outside Corporate Auditors with audit activities. 2. Matters pertaining to functions relating to the execution of duties,audit and supervision, appointment and decisions regarding remuneration, etc. Toyota introduced the current management system in 2003. Maindifferences from the previous system are the establishment of the new positionof non-board "Managing Officers" and the decrease in the number of Directors.In the current system, "Senior Managing Directors" serve as the highestauthorities and "Managing Officers" perform practical business in Toyota'svarious operational functions. A distinctive feature of the system is that"Senior Managing Directors" do not focus exclusively on management, but theyalso serve as a link between the management and on-site operations, under theview to maintain an emphasis on developments on the site, which is one ofToyota's perennial strengths. As a result, business decision directly connectedwith actual operations can be made through incorporating feedback from frontlineoperations to overall management strategy and reflecting management decisionsswiftly in operations. Toyota has an "International Advisory Board" consisting of advisors fromoverseas, and receives advice on a wide range of management issues from a globalperspective. In addition, Toyota has a wide variety of conferences andcommittees for deliberations and the monitoring of management and corporateactivities that reflect the views of various stakeholders, including the"Labor-Management Council, the Joint Labor-Management Round Table Conference",the "Corporate Philanthropy Committee", the "Toyota Environment Committee" andthe "Stock Option Committee". Toyota has adopted an auditor system. Seven Corporate Auditors includingOutside Corporate Auditors play a role in Toyota's corporate governance effortsby undertaking audits in accordance with the audit policies and plans determinedby the Board of Corporate Auditors. For internal audit, a specializedindependent organization is working on establishing a solid system to evaluatethe effectiveness of internal controls over financial reporting. In order toenhance the reliability of the financial reporting of Toyota, the three auditingfunctions, audit by Corporate Auditors, internal audit, and accounting audit byIndependent Accountants, aid in conducting an effective and efficient auditthrough meetings held periodically and as necessary to share information throughdiscussion on audit plans and results. III. Implementation of measures for shareholders and other stakeholders 1. Approach toward the vitalization of general meetings of shareholders andthe facilitation of exercise of voting rights Supplementary InformationScheduling of general meetings of Convenes the general meetings of shareholders avoiding the date on whichshareholders avoiding the date on general meetings of shareholders of companies are most and second mostwhich general meetings of concentrated on.shareholders of companies areconcentrated 2. IR activities Explanation by Supplementary Information representative members of the boardConvene periodic No Convene briefings by officers and staff in charge of IR once or twice abriefing for individual year (not regularly scheduled).investorsConvene periodic Yes Explaining financial results and business strategies of the relevantbriefing for analysts business year every quarter. Also convenes business briefingsand institutional concerning the medium- and long-term direction of the business.investorsConvene periodic Yes Explaining financial results and business strategies of the relevantbriefing for foreign business year by visiting foreign investors and conference calls everyinvestors quarter. In addition, business briefings concerning the medium- and long-term direction of the business are convened in the United States and Europe.Disclosure of IR Yes In addition to legal disclosure documents such as annual securitiesdocuments on the reports, annual reports and references at result briefings, etc. arewebsite disclosed (such references of major briefings can be listened to on the website for a certain period). On the exclusive site for individual investors, the operating summary and business activities are clearly disclosed.IR related divisions - Toyota maintains IR personnel in the Accounting Division and Public(personnel) Affairs Division, and offices resident IR personnel in New York and London.Other - Implementing one-on-one meeting with investors, plant tours, etc. 3. Activities concerning respect for stakeholders Supplementary InformationSetting forth provisions For sustainable development, Toyota has engaged in management emphasizing all of itsin the internal stakeholders, and worked to maintain and develop favorable relationships with itsregulations concerning stakeholders through open and fair communication. This philosophy is outlined andrespect for the disclosed in the "Contribution towards Sustainable Development", an explanatorystakeholders' position paper on the "Guiding Principles at Toyota", prepared in January 2005.Promotion of Toyota has long engaged in business with the idea of corporate social responsibilityenvironmental ("CSR") in mind. This idea is clarified in "Contribution towards Sustainablepreservation activities Development " distributed in January, 2005, and it clearly conveyed Toyota's basicand CSR activities policies concerning CSR to both internal and external stakeholders. Regarding the environment, Toyota has positioned it as a top management priority and adopted the "Toyota Earth Charter" in 1992. Toyota created "Toyota Environmental Action Plan" that sets forth mid-term targets and action plans on a global basis, and promotes continuous environmental preservation activities. As for philanthropic activities, Toyota newly adopted "Basic Philosophy and Policy on Philanthropic Activities" in 2005 in light of the global expansion of its business and the increasing societal expectations towards Toyota. Toyota vigorously promotes philanthropic activities according to local conditions in each country and region in order to contribute to the development of a prosperous society and to promote its continuous development. These CSR activities are disclosed in the report titled "Sustainability Report".Establishment of policy Toyota has engaged in timely and fair disclosure of corporate and financialconcerning disclosure of information as stated in "Contribution towards Sustainable Development". In orderinformation to to ensure the accurate, fair, and timely disclosure of information, Toyota hasstakeholders established the Disclosure Committee chaired by an officer of the Accounting Division. The Committee holds regular meetings for the purpose of preparation, reporting and assessment of its annual securities report, semi-annual securities report under the Securities and Exchange Law of Japan and Form 20-F under the U.S. Securities Exchange Act, and also holds extraordinary committee meetings from time to time whenever necessary. IV. Basic Approach to Internal Control System and its Development Based on the "Guiding Principles at Toyota" and the "Toyota Code ofConduct", we, together with our subsidiaries, have created and maintained asound corporate culture. In our actual operations, based on the "Toyota Way"principles, we integrate into our business operation processes the principles ofproblem identification ("Mondai Hakken") and continuous improvements ("Kaizen")and make continuous efforts to train our employees who put these principles intopractice. With the above understanding, internal control has been developed underthe following basic policies. (1) Legal compliance by Directors • Ensure that Directors will act in compliance with, relevant laws andregulations, and with the Articles of Incorporation, through measures such asthe Code of Ethics and an orientation program • Make decisions after comprehensive discussions at cross-sectionaldecision-making bodies • Discuss significant matters and measures relating to issues such ascompliance and risk management at the Corporate Ethics Committee, etc. (2) Retention and management of information relating to the execution ofresponsibilities by Directors • Retain and manage information appropriately in accordance with relevantlaws and regulations (3) Regulations and other systems related to the management of risks oflosses • Properly manage capital funds through the budgeting system and other formsof control, and conduct our business operations and manage our budget based onthe authorities and responsibilities in accordance with the "Ringi" system(effective consensus-building and approval system), etc. • Prepare an accurate financial report, and make proper and timely disclosureof information through the Disclosure Committee • Manage compliance regarding various risks related to safety, qualitycontrol and other issues at the relevant division • Conduct emergency drills, and take other measures to diversify risks andsecure appropriate insurance, as a precaution for events such as naturaldisasters (4) Efficiency of execution of responsibilities by Directors • Policies are managed for consistency based on medium to long termmanagement policies and on the Company's policies ("Hoshin") • Chief Officer will act as a liaison officer between the management andoperational functions, and delegate executive authority to Managing Officersrealize effective and timely decision making • Reflect advice from stakeholders, including external experts, in ourmanagement (5) Legal compliance by employees • Distinguish the division of responsibilities of each organization unit andmaintain a foundation to ensure continuous improvements • Periodically review legal compliance and risk management, and report to theCorporate Ethics Committee • Quickly obtain information and achieve immediate solutions utilizingvarious hotlines in the Company (6) Appropriateness of the business operations of the group • Develop and maintain an environment of internal controls for the group bysharing the guiding principles and the code of conduct • Manage our subsidiaries in a comprehensive manner through divisions of theCompany that manage the financing and management aspects and the businessactivities of our subsidiaries, and ensure adequacy through informationexchanges between the relevant divisions and subsidiaries (7) Employees assisting the Corporate Auditors • Establish the Corporate Auditors Department and assign a number offull-time staff to support this function (8) Independence of employees described in the preceding item (7) • Any changes in personnel in the Corporate Auditors Department require theprior consent of the Board of Auditors, or of full-time Auditor (9) Report to Corporate Auditors • Report periodically and from time to time on matters concerning theexecution of significant operations, and immediately in the case where factsthat may cause significant damage to the Company are discovered (10) Ensure the efficient execution of audits by the Auditors • Ensure attendance of Corporate Auditors at major board meetings, inspectionof important Company documents, information exchange with independent auditorsand appointment of external experts with specialized knowledge See the Diagram described in the attachment at the end. V. Others 1. Matters regarding defense against a takeover bid No measures to defend against a takeover bid are scheduled to be adopted. 2. Matters regarding other corporate governance systems, etc. - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Toyota Motor