The board of directors consists of 14 directors, three of whom are external directors.In order to ensure that the Company can respond quickly to changing business conditions, and to more clearly define management accountability, the term of office for directors is set at one year.
    The board of directors has two committees: the Compensation Committee and the Nomination Committee, whose activities are intended to improve corporate governance. The Compensation Committee proposes the remuneration to be paid to the Chairman & CEO and the President & COO to the board of directors for approval. The Nomination Committee selects candidates for directorships for submission to the annual shareholders' meeting, as well as candidates for CEO, which it submits to the board of directors for approval. Each of these committees is composed of members of the board of directors, excluding the Chairman & CEO and the President & COO.

The Company has four statutory auditors, two of whom are outside auditors. The statutory auditors not only attend meetings of the board of directors and other important business meetings, they also conduct operations audits, accounting audits and risk evaluation, in addition to auditing the performance of duties by directors.

In order to further clarify the roles of the board of directors and executives in charge of business operations, Tokyo Electron adopted the executive officer system in April 2003. This system promotes fast decision-making and the quick establishment and execution of business strategies.

The General Affairs Department is responsible for crisis management, including measures involving business risk and operational risk, as well as for establishing the necessary internal regulations for managing each risk category and activities for training and raising employees' awareness of risk management. These internal regulations include compliance standards, risk management regulations, crisis management regulations, rules governing the handling of personal information, standards for managing documents, rules to prevent insider trading, rules for the timely disclosure of important information.

The Global Audit Center, which is responsible for internal auditing activities, makes regular reports to Company management on the results of its audits, and holds periodic meetings (34 times a year) to report its findings and exchange information with the statutory auditors.

Tokyo Electron has engaged KPMG AZSA & Co. as its independent auditor. The Company provides the independent auditor with all required information and data to ensure that it can conduct its audits efficiently and effectively.
    The statutory auditors obtain reports from KPMG AZSA & Co. describing a summary of audit plans during the fiscal year. They also receive opinions for the half-year and annual audits of the financial statements.

Trust is the cornerstone of Tokyo Electron's business foundation. The fundamental requirements for maintaining trust are rigorous conformity to ethical standards and compliance with the law, by individual employees and by each of our organizations.
    The Group maintains high standards of ethics and a clear awareness of compliance, placing the utmost priority on compliance with laws, regulations and international business standards in all of its corporate activities.

Recognizing the need to establish uniform standards to govern all of its global business activities, in 1998, the Company formulated the "Tokyo Electron Code of Ethics," which concretely describes the Company's basic views on ethics. The same year, the Company established the Ethics Committee, which is responsible for promoting business ethics awareness, and appointed a Chief Business Ethics Director to supervise these efforts.
    In June 2007, the Tokyo Electron Code of Ethics was rewritten to make it easier to understand, and to reflect the changing ethical norms of the current era. To ensure full awareness of the Code, it was compiled into a booklet, which the Company distributed to all Group employees, including those overseas.

In 2004, the Company established compliance regulations based on its ethical standards. These regulations are intended to ensure that all individuals who take part in business activities for the Group clearly understand the pertinent laws, regulations, international standards and internal company rules, and continuously apply these rules in all of their activities.

Information on compliance issues is available to employees via the Company intranet. The Company also conducts web-based training programs for employees, and takes other steps to promote broad awareness of compliance.

In the event that an employee becomes aware of any activity which may violate laws, regulations or principles of business ethics, the Company operates an internal reporting system (hotline) that employees may use to report their concerns. Strict confidentiality is maintained to protect the whistleblower, and ensure that they are not subject to any disadvantage or repercussions.

Following the full introduction of Japan's personal information protection law, the Company formulated a basic directive and regulations to protect personal information. The Company conducts training programs to educate employees on how to handle such information, and to ensure that the rules and policies are widely understood. The Company uses software to monitor any personal information stored on PCs provided to employees in Japan, and has installed servers exclusively for storing personal information, among other actions.

The Company and its subsidiaries (excluding listed companies) have introduced incentive systems, such as business resultsbased remuneration, and stock options linked to share prices. Effective from fiscal 2006, the Company revised its executive remuneration system to link remuneration more closely to financial performance and shareholder value and also improve management transparency and its competitive strength.

1. The remuneration for Company directors and executive officers is composed of two elements:
    a fixed monthly salary, and an annual bonus which is linked to earnings performance.
2. The total amount of performance-linked remuneration (annual bonuses) for directors and
    executive officers of the Group is set at a maximum of 3% of consolidated net income.
    This remuneration is split between cash bonuses and stock-based remuneration
    (stock options), at a ratio of roughly two to one. The stock-based remuneration takes the form
    of new stock warrant contracts with an exercise price of one yen per share. This is because
    current securities and exchange regulations make it difficult to introduce and implement direct
    share issuance, or the sort of transfer-restricted shares that are used in countries such as the
    United States. The restricted period on exercising stock options is set at three years.
3. The earnings-linked remuneration (annual bonuses) of external directors does not include
    stock options.
4. In order to ensure that statutory auditors maintain full independence from management
    pressures, the compensation of statutory auditors consists of a fixed monthly salary only.
5. Retirement allowances for directors, statutory auditors and executive officers were abolished at
    the end of fiscal 2005, as part of the revisions to Tokyo Electron's remuneration system for
    executives.

    Performance-linked remuneration comprises a relatively large share of executives' total remuneration. Tokyo Electron thinks that this will give executives a strong incentive to improve the Company's earnings performance and elevate the share price, since they share in both the benefits and the risks experienced by shareholders.

In order to increase transparency and reflect shareholders' interests, Tokyo Electron discloses the remuneration paid to each representative director (Chairman & CEO and President & COO), as well as the aggregate remuneration paid to directors and statutory auditors, in its business report, which is sent to shareholders along with the Notice of Annual General Meeting of Shareholders.