Toray Group’s corporate philosophy centers on “contributing to society through the creation of new value with innovative ideas, technologies, and products.” In order to realize this philosophy, we are constantly enhancing corporate governance. Toray Group places top priority on gaining the trust of shareholders, as well as obtaining the trust and meeting expectations of society by acting fairly while maintaining high ethical standards, ensuring a strong sense of responsibility, and reinforcing management transparency.
Since Toray Group supplys various basic materials to a wide range of industries and operates on a global scale, we believe that swift and flexible decision-making and the execution of duties by directors well-versed in the Group’s business situations is essential from the perspective of fulfilling our responsibilities to shareholders. For this reason, we have not implemented an operating officer system. At present, we do not appoint external directors. However, all of Toray’s top executives fully recognize the importance of incorporating valuable external perspectives, and in this respect we are continually examining the introduction of external directors who could fulfill a valuable and effective role in Toray Group.

As of June 27, 2007, the Board of Directors consisted of 30 members. Decisions concerning important matters related to Corporation Law are made at monthly Board of Directors meetings. At those meetings, directors present reports and exchange opinions as part of the mutual monitoring of the execution of each of their respective duties. To ensure timely and rigorous decision-making at Board of Directors meetings, we set and adhere strictly to limits on the authority of top management for each organization, and we operate both the Executive Committee to discuss policy matters and the Board of Senior Vice Presidents to discuss implementation as deliberative organs for decisions made at Board of Directors meetings and by the President. We have also established a CSR Committee and other company-wide committees for each important management theme, which play a supplementary role in decision-making and implementation.

As of June 27, 2007, there were four corporate auditors, of whom two were external auditors. The role of the auditors is to enhance the management monitoring function. All auditors attend Board of Directors meetings and, based on policies and plans adopted by Board of Corporate Auditors meetings held quarterly, perform regular audits of Toray offices and plants worldwide, including subsidiaries and affiliates. They also meet with the President, all directors and the heads of Toray’s various departments. In addition, support personnel aid the auditors in their duties, and the Auditing Department assists the auditors when requested.

Toray Group has established an internal control system to enable all executives and employees to realize our corporate philosophy. It encompasses the creation of an appropriate framework, including the above-mentioned system of corporate governance, as well as formulation of rules and regulations, dissemination of information, and monitoring. We will ensure the legal and efficient execution of operations by constantly examining and improving this framework.

(1) Corporate Ethics and Legal Compliance

Corporate ethics and legal compliance are priority management issues on a par with maintaining safety, accident prevention and environmental preservation. Based on the clearly defined stance and active leadership of the CEO, Toray Group works together towards these goals.
Specifically, the Group’s compliance activities are spearheaded by three committees: (1) the Corporate Ethics Committee (chaired by the President & CEO and including all member of the board and the chair of the labor union), which determines policies related to corporate ethics and legal compliance; (2) the Company-Wide Legal Compliance Committee, which emphasizes direct communication between top management and employees; and (3) the CSR and Legal Compliance Committee, which implements programs at division, department, office, and plant levels.
To ensure that all executives and employees observe corporate ethics and comply with laws and regulations, Toray has adopted a Corporate Ethics and Legal Compliance Code of Conduct and Corporate Ethics and Legal Compliance Guidelines. The code of conduct and guidelines have been combined in the Corporate Ethics and Legal Compliance Handbook to ensure thorough dissemination to all executives and employees. We are also establishing an Internal Reporting System for executives and employees to report violation of laws, regulations, or the company’s Articles of Incorporation.

(2) Risk Management

Toray’s risk management system works to mitigate risks and prevent crises under normal conditions and to respond immediately in the event of a major emergency. We have identified the risks that are potentially present in our business activities and established Risk Management Regulations.
As a subordinate organ to the CSR Committee, the Risk Management Committee is charged with overseeing risk management under normal conditions. In the event of a company-wide crisis, the Committee will take action in coordination with the Company-Wide Emergency Headquarters and the On-Site Emergency Headquarters.

(3) Financial Reports

For fiscal periods beginning on or after April 2008, Japan’s Financial Product Exchange Law will require companies to submit internal control system reports and audits on these systems to be performed by auditing firms. To meet these new requirements, Toray’s Internal Control Department is establishing a new system for financial reporting, which will be completed during FY Mar/08. The system will be implemented after April 2008.

(4) Information Disclosure and Management

As a basic principle, Toray Group will continue functioning in an open manner by fulfilling its duty to provide information to all stakeholders. We are committed to independent and fair disclosure of information based on our Information Disclosure Principles. Business results are announced in quarterly financial reports, and important information related to the Group is disclosed in a timely manner through a variety of channels. These include filing reports with the Tokyo Stock Exchange, issuing press releases to media organizations, and posting information on the Toray website.
We have a robust system for storing and managing important documents and information, including minutes and financial reports related to management decision-making. Such information is made available to others when necessary. Confidential information is controlled by Confidential Information Management Regulations, which specify those in charge and methods of controlling such information, and we adopt measures to prevent improper access to such information by those outside the Group. Toray has also put in place a system for protecting personal information through our Personal Information Management Regulations.