Sustainability Report 2022

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Sustainability Report 2022

Additional Information for Corporate Governance

Basic Policy

We continue to enhance our corporate governance approach and activities to fulfill our responsibilities to our shareholders and other key stakeholders and support transparent, fair, timely and conclusive decision-making, with the goal of achieving sustainable growth and increasing corporate value over the medium- to long-term. Furthermore, we formulated and disclosed our 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.

Basic Policy on Corporate Governance

The mission of the Company is to contribute to the creation of a brighter future for society through our efforts to develop, produce and deliver energy in a sustainable way. Based on this mission, in order to achieve sustainable growth and increase corporate value over the medium- to long-term, the Company 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 Guidelines (Mar. 25, 2022)

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.

Corporate Governance Report (Nov. 27, 2023)

Overview of the Corporate Governance Structure

1. Management System

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 five of its 12-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.

Corporate Governance Framework

Corporate Governance System (graphic)
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)

12 (5)

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

 

9
(5 outside directors, 4 outside Audit & Supervisory Board Members)

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 12 members, five 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 Members and the Audit & Supervisory Board

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 from and interviews with related departments. Furthermore, the Audit & Supervisory Board members meet on a regular and as needed basis with the Independent Auditors to receive reports on audits from them and exchange views on key audit issues. The Audit & Supervisory Board members also exchange views with the internal audit department (Audit Unit) as it develops annual audit plans and receive quarterly reports on internal audits conducted by the Audit Unit. In addition, the full-time Audit & Supervisory Board members are informed by the Audit Unit about internal audits and the evaluation of internal controls, as necessary.

To strengthen the auditing function and ensure effective corporate governance, the Audit & Supervisory Board Members’ Office has been set up with full-time staff assigned to it. In this manner, efforts are being made to promote collaboration between the Audit & Supervisory Board members, the Audit Unit and the 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

Kazuhiko Yamazaki, Satoshi Takahashi, Mikio Shimizu,Kentaro Moronuki

Accounting audit members

33 CPAs, 5 persons who passed an accounting exam,etc., and 30 others

Compensation for auditing services

¥440 million
(INPEX: ¥352 million; Consolidated subsidiaries: ¥88 million)

Compensation for non-auditing services

¥11 million
(INPEX: ¥3 million; Consolidated subsidiaries: ¥7 million)

5. Internal Committees

Internal Committees (graphic)

To further enhance the efficacy of the corporate governance function, INPEX has set up (1) the Nomination and Compensation Advisory Committee, (2) the INPEX Advisory Committee, (3) the Compliance Committee and (4) the Sustainability 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.

1. Nomination and Compensation Advisory Committee

Number of meetings held in FY2022: 5

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

Number of meetings held in FY2022: 2

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

Number of meetings held in FY2022: 6

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. Sustainability Committee

Number of meetings held in FY2022: 2

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 discusses basic policies regarding sustainability and important matters pertaining to sustainability implementation including corporate governance and climate change response.

5. Corporate HSE Committee

Number of meetings held in FY2022: 9

In accordance with the HSE Management System, the Corporate HSE Committee was established in October 2007 to promote health, safety and environmental 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

Number of meetings held in FY2022: 2

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

Number of meetings held in FY2022: 10

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 major projects in which INPEX participates, and to improve and promote the value of the projects.

2. Monitoring of Management by Outside Directors and Audit & Supervisory Board Members

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 effectiveness, expertise and objectiveness in the oversight function in addition to the perspective of independence. As corporate managers, academics or other specialists, the Company’s five outside directors possess broad knowledge and many years of experience in such fields as resource/energy industry, finance and legal matters. One of the outside directors concurrently serves as advisor to Mitsubishi Corporation, which is a shareholder of the Company. As INPEX and Mitsubishi Corporation 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 the outside director who concurrently serves at Mitsubishi Corporation as mentioned above, 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. The Company has therefore obtained pledges confirming these points from all directors including the outside director referred to 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 qualifications 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 Members and the Audit & Supervisory Board

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 from and interviews with related departments. Furthermore, the Audit & Supervisory Board members meet on a regular and as needed basis with the Independent Auditors to receive reports on audits from them and exchange views on key audit issues. The Audit & Supervisory Board members also exchange views with the internal audit department (Audit Unit) as it develops annual audit plans and receive quarterly reports on internal audits conducted by the Audit Unit. In addition, the full-time Audit & Supervisory Board members are informed by the Audit Unit about internal audits and the evaluation of internal controls, as necessary. To strengthen the auditing function and ensure effective corporate governance, the Audit & Supervisory Board Members’ Office has been set up with full-time staff assigned to it. In this manner, efforts are being made to promote collaboration between the Audit & Supervisory Board members, the Audit Unit and the 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, 2022

Outside Directors

Jun Yanai

Advisor of Mitsubishi Corporation Outside Director, Kintetsu World Express, Inc.

Mr. Jun Yanai has been appointed as an Outside Director since it has been determined that he is able to appropriately execute his duties as Outside Director due to being expected to provide supervision of the execution of business from an international perspective and the necessary comments and suggestions, etc. in the meetings of the Board of Directors, etc. primarily by utilizing his experience as a corporate executive and abundant experience and insight in the resource and energy industry.

Board of Directors meetings 15/15

Norinao Iino

-

Mr. Iio has been appointed as an Outside Director since it has been determined that he is able to appropriately execute his duties as Outside Director due to being expected to provide supervision of the execution of business from an international perspective and the necessary comments and suggestions, etc. in the meetings of the Board of Directors, etc. primarily by utilizing his experience as a corporate executive and abundant experience and insight in the resource and energy industry.

Board of Directors meetings 15/15

Atsuko Nishimura

Outside Director, TAISEI CORPORATION

Ms. Nishimura has been appointed as an Outside Director since it has been determined that she is able to appropriately execute her duties as Outside Director due to being expected to provide supervision of the execution of business from a diverse and global perspective and the necessary comments and suggestions, etc. in the meetings of the Board of Directors, etc. by utilizing her abundant experience as a diplomat and extensive insight on international conditions, in addition to expert knowledge as a university professor.

Board of Directors meetings 15/15

Tomoo
Nishikawa

-

Mr. Nishikawa has been appointed as an Outside Director since it has been determined that he is able to appropriately execute his duties as Outside Director due to being expected to provide supervision of the execution of business from a diverse and global perspective and the necessary comments and suggestions, etc. in the meetings of the Board of Directors, etc. by utilizing his abundant experience and insight as an international attorney, in addition to knowledge in a variety of fields such as expert
knowledge as a university professor.

Board of Directors meetings 15/15

Hideka Morimoto

Outside Director, Takasago Thermal Engineering Co., Ltd.

Mr. Hideka Morimoto has been appointed as an Outside Director since it has been determined that he is able to appropriately execute his duties as Outside Director due to being expected to provide supervision of the execution of business from a sustainability (ESG) perspective and the necessary comments and suggestions, etc. in the meetings of the Board of Directors, etc. by utilizing his abundant experience and insight on the environment and energy policy developed through his career in the Ministry of the Environment, in addition to expert knowledge as a university professor.

Board of Directors meetings 15/15

Outside Audit & Supervisory Board Members

Hideyuki
Toyama

-

Mr. Toyama has been appointed as an Outside Audit & Supervisory Board Member since he possesses extensive experience and knowledge in finance as well as professional knowledge and experience as an attorney.

Board of Directors meetings 15/15 and Audit & Supervisory Board meetings 19/19

Shinya
Miyake

-

Mr. Miyake has been appointed as an Outside Audit & Supervisory Board Member since he possesses extensive experience and knowledge in international financing and finance, etc.

Board of Directors meetings 15/15 and Audit & Supervisory Board meetings 19/19

Mitsuru
Akiyoshi

Senior Adviser, Mizuho Marubeni Leasing Corporation

Outside Director, Concordia Financial Group, Ltd.

Mr. Akiyoshi has been appointed as an Outside Audit & Supervisory Board Member since he possesses extensive experience and knowledge in on finance and management, etc.

Board of Directors meetings 15/15 and Audit & Supervisory Board meetings 19/19

Hiroko
Kiba

-

Ms. Kiba has been appointed as an Outside Audit & Supervisory Board Member since she possesses extensive experience and knowledge as a freelance newscaster and university instructor.

Board of Directors meetings 15/15 and Audit & Supervisory Board meetings 19/19

3. Director Compensation

Compensation for directors (excluding outside directors) consists of basic compensation, which is paid according to the duties of each director; bonuses, which serve as a short-term incentive; and stock-based remuneration, which gives a medium- to long-term incentive. Compensation for outside directors is limited to basic compensation only from the perspective of independence of their duties.

Bonuses as a short-term incentive is linked to the Company’s net income attributable to owners of parent (hereinafter “net income”) and cash flows from operating activities before exploration, which are our major financial indices, as well as a safety index (zero major accidents) that serves as a non-financial index. The amount of compensation is calculated based on the evaluation weights in the table below according to the degree of achievement of these targets, and the final amount of compensation fluctuates within the range of 0% to 200%.

KPIs used to calculate bonuses for directors (excluding outside directors)

Bonus KPIs

Evaluation weight

Financial indicators

Net income

45%

Cash flows from operating activities before exploration

45%

Non-financial indicators

Safety indicators (zero major accidents)

10%

Stock-based remuneration as a medium- to long-term incentive is paid to directors (excluding outside directors and non-residents of Japan) and executive officers (excluding non-residents of Japan) (hereinafter collectively the “eligible directors and officers”). This remuneration system is called the Board Incentive Plan Trust, and it combines performance-based elements aimed at raising the awareness among the eligible directors and officers of their contribution to the Company’s medium- to long-term business performance and enhancement of corporate value, and fixed elements aimed at strengthening the awareness among the eligible directors and officers of sharing interests with shareholders through the ownership of the Company’s shares. The performance-based portion of the stock-based remuneration is linked to the Company’s key financial indices set forth in the Medium-term Business Plan, namely, net income, cash flows from operating activities before exploration, ROE and total payout ratio, as well as to the production cost per barrel and net carbon intensity, which are our major non-financial indices. The amount of compensation is calculated based on the evaluation weights in the table below according to the degree of achievement of these targets, and the final amount of compensation fluctuates within the range of 0% to 200%. In the event that any of the eligible directors and officers commit a significantly improper or violating act, the Company may cancel or forfeit their right to receive the Company’s shares or other forms of compensation under the system (malus) and demand the return of cash corresponding to the Company’s shares or other forms of compensation already delivered to them (clawback).

KPIs used to calculate performance-linked stock-based remuneration for directors (excluding outside directors) and executive officers

Stock-based compensation KPIs

Evaluation weight

Financial indicators

Net income

30%

Cash flows from operating activities before exploration

30%

ROE

10%

Total payout ratio

10%

Non-financial indicators

Production costs per BOE

10%

Net carbon intensity

10%

Regarding the compensation for directors, the Nomination and Compensation Advisory Committee deliberates on major matters in accordance with the policy for determining the amount and calculation method of compensation, etc. for directors and the details of compensation, etc. for individual directors, and submits a report to the Board of Directors. Based on the report from the Committee, the Board of Directors decides on the compensation for directors within the limits and terms approved at the general meeting of shareholders. The amount of compensation to be paid to each director by type is decided by the Representative Director, President & CEO, who shall be entrusted to do so by a resolution of the Board of Directors, in accordance with the deliberation by the Nomination and Compensation Advisory Committee, a majority of whose members are outside officers, including independent outside directors.

Considering the external environment, social and economic trends, and other factors surrounding the Company, the Nomination and Compensation Advisory Committee will carefully deliberate on the appropriateness of the target values and calculation method for compensation and issue a report, based on which necessary adjustments may be made to the amount of compensation for each director by a resolution of the Board of Directors.

The adequacy of compensation for directors is verified by the Nomination and Compensation Advisory Committee after an external compensation research organization examines and analyzes the level of compensation for each position in a peer group of companies of the same size and similar industries.

The ratios of the basic compensation, bonuses and stock-based remuneration for inside directors are generally balanced to follow the principle that the higher the position held by a director is, the higher the weight of his or her performance-based compensation (bonuses and stock-based remuneration) is.

Compensation for Directors and Audit & Supervisory Board Members in FY2022 (Million JPY)

Classification

Total amount of compensation paid

Total compensation by type

Number of eligible directors and Audit & Supervisory Board members

Total amount of compensation paid

Performance-based compensation

Non-monetary compensation

Bonus

Stock-based remuneration

Directors (excluding outside directors)

525

368

119

37

9

Audit & Supervisory Board members (excluding outside Audit & Supervisory Board members)

33

33

-

-

1

Outside directors and outside Audit & Supervisory Board members

165

165

-

-

11

Notes:

  1. The monthly basic compensation for directors was set to not more than 47 million yen (including monthly compensation for outside directors of not more than 6 million yen) at the 11th Ordinary General Meeting of Shareholders held on June 27, 2017. The number of directors as of the date of this resolution was 15 (including six outside directors). This amount was revised to an annual amount, including bonuses, of not more than 900 million yen (including an amount not more than 100 million yen for outside directors) at the 16th Ordinary General Meeting of Shareholders held on March 25, 2022. The number of directors as of the date of this resolution was 12 (including five outside directors).
  2. The monthly basic compensation for Audit & Supervisory Board members was resolved to be not more than 10 million yen at the 13th Ordinary General Meeting of Shareholders held on June 25, 2019. The number of Audit & Supervisory Board members as of the date of this resolution was five. This amount was revised to an annual amount of not more than 140 million yen at the 16th Ordinary General Meeting of Shareholders held on March 25, 2022. The number of Audit & Supervisory Board members as of the date of this resolution was five.
  3. The amount of bonus is the amount based on the resolution made at the 16th Ordinary General Meeting of Shareholders held on March 25, 2022 to pay a total amount of 140 million yen to eight directors in office at the end of the business year under review, excluding outside directors.
  4. At the 12th Ordinary General Meeting of Shareholders held on June 26, 2018, it was resolved that a stock-based remuneration system be introduced for directors (excluding outside directors and non-residents of Japan) and executive officers (the BIP Trust). The number of directors (excluding outside directors and non-residents of Japan) as of the date of this resolution was seven. The amount of the stock-based remuneration presented above represents the fees incurred regarding the stock-based points granted during the business year under review concerning the BIP Trust for directors. At the 16th Ordinary General Meeting of Shareholders held on March 25, 2022, the maximum amount of money to be contributed per business year by the Company was revised to 434 million yen, and the maximum points granted per business year to those eligible for the system was revised to 806,000 points (equivalent to 806,000 shares of the Company). The number of directors (excluding outside directors and nonresidents of Japan) as of the date of this resolution was seven.

4. Internal Control System

[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 Sustainability Principles and Business Principles and establish a system to ensure complete compliance. The Company shall establish a Compliance Committee consisting of the director in charge of compliance and the head or the director in each division, 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, Audit & Supervisory Board meetings and its Members.

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. 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. 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 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. 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. 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. 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. 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. 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. 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 director in charge of compliance shall report to the Company’s Audit & Supervisory Board Members (full-time) 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.

5. Class A Stock

According to the stipulations of the Articles of Incorporation, INPEX issues a Class A Stock to the Minister of Economy, Trade and Industry. Unless otherwise provided by laws or ordinances, 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 believe 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, 2022)

Authorized shares

 

3,600,000,000 shares

 

1 Class A Stock

Total Number of Shareholders and Issued Shares

Common shares

220,536/1,386,667,167 shares

Special-class share

1 shareholder (Minister of Economy, Trade and Industry) / 1 share

6. Compliance

INPEX is systematically developing a compliance structure—an indispensable requirement for its sustainable development—and strives to ensure compliance with laws and regulations and adherence to corporate ethics. Specifically, we have established the Compliance Committee, which formulates basic policies and plans pertaining to compliance, deliberates significant matters, monitors the effectiveness of compliance-related regulations, and supervises the implementation of compliance programs to promote unified compliance initiatives throughout the INPEX Group. The committee also develops and revises compliance-related rules.

In addition, under the Sustainability Principles, we have established the INPEX Group Code of Conduct, which defines the practices to be followed to ensure compliance and thereby supports observance of the Business Principles that guide how we conduct our business. We are also working to raise awareness of compliance among our executives and employees. The Business Principles and Code of Conduct were established by respective resolutions of the Compliance Committee and the Board of Directors, and are continuously reviewed in light of changes in the external environment and legislative requirements.

Compliance System

Compliance System (graphic)

7. Disclosure

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

The Convocation Notice for INPEX’s 17th Ordinary General Meeting of Shareholders held on March 28, 2023 was posted on the Company’s Web site more than three weeks prior to the meeting on February 27, 2023. The Convocation Notice itself was dispatched on March 6, 2023.

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.

Others

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

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, 2022, unless otherwise stated.)

8. Policy Concerning Corss-Shareholdings and Voting rights as to the cross-shareholdings

1. Policy Concerning Cross-Shareholdings

The Company assessed whether or not to hold each individual cross-shareholding by comprehensively examining the purpose of the cross-shareholding, dividend income, current transactions with the company, medium-to long-term opportunities for expanding transactions, business synergies and risks, etc., while considering the Company’s cost of capital. The Company confirmed that it will consider selling shares for which the Company assessed the necessity to hold has decreased.

2. Voting rights as to the cross-shareholdings

With respect to the voting rights as to the cross-shareholdings, the Company shall determine the matters to be confirmed for each proposal to shareholders, such as appropriation of surplus, election and compensation of officers, and company reorganization. Decisions whether or not to approve proposals shall be made after full consideration of the appropriateness of the proposals and whether they will contribute to the purpose of the cross-shareholdings and the sustainable growth and increased corporate value over the mid- to long-term of the companies invested in.

9. Evaluation results of effectiveness of Board of Directors

With the aims of regularly verifying that the Board of Directors is functioning appropriately and identifying issues to be resolved for continuous improvement, the Company undertakes an evaluation of the effectiveness of the Board of Directors each year, and discloses a summary of the evaluation results. Based on this policy, the eighth evaluation was conducted in fiscal 2022. The evaluation method and summary of the results are as follows. Based on these evaluation results, the Company will continue to strive to improve the effectiveness of the Board of Directors.