Ordinary General Meeting of Shareholders. Management Supervision. Instruct. Report. Risk Management. Committee

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1 Corporate Social Responsibility (CSR) A company exists as a member of society that has relationships with all stakeholders shareholders, customers, suppliers, employees and communities. Based on our founding spirit Contribute to culture and industry through creativity we have been putting great emphasis on maintaining a harmonious and symbiotic relationship with society. In the electronics industry, we contribute to society by providing innovative new products exuding originality. And our corporate activities are based on the observance and enforcement of fair corporate ethics, which we recognize as a social responsibility. Corporate Governance The following is a summary of the resolutions regarding the system which ensures that the execution of duties by s complies with laws and ordinances and the Articles of Incorporation, and the system which ensures that the Company s business is duly executed: Ordinary General Meeting of Shareholders Information Disclosure (, Submit Proposals) Elect and Dismiss, Supervise Elect and Dismiss, Supervise Elect and Dismiss, Supervise Advise, Business Ethics & CSR Ensure Compliance With Corporate Ethics, Promote CSR Activity Disclosure Advisory Discuss and Examine Important Corporate Information Disclosure Compensation Advisory Chaired by Outside Review the Remuneration for s and s Nomination Advisory Chaired by Outside Deliberate Matters Concerning Nomination of s, Company Auditors and s Discuss and Important Projects Guide and Supervise Board of s 7 s (Including 3 Outside s) Management Decision Making Elect and Dismiss, Supervise Chairman, President Decide Policies and Measures Related to Business Execution Executive Review Policies and Measures Related to Business Execution s Business Execution Audit Audit Risk Management Introduce and Promote Enterprise Risk Management (ERM) Crisis Management Board of Company Auditors 5 Company Auditors (Including 3 Outside Company Auditors) Management Supervision Instruct Instruct Countermeasures Against Unexpected Contingencies Company Auditors Office Assist Company Auditors Cooperate Management Review & Support Department Audit Consistency of Business Execution and Management Policies, and Management Efficiency Regulations Establish Corporate Regulations Information Security Undertake Information Security Measures Accounting Auditors Accounting Audits Cooperate Divisions and Group Companies TDK Corporation Annual

2 TDK Group s Basic Stance on Corporate Governance TDK Corporation was established in 1935 as the world s first company to commercialize a magnetic material called ferrite. In the ensuing years, TDK has increased its corporate value through the development of a variety of products of value and originality to society, based on the founding spirit: Contribute to culture and industry through creativity as its Corporate Motto. In addition, in the TDK Code of Ethics, TDK has clearly stated its understanding that corporations exist in society with the support of various stakeholders, including shareholders, customers, suppliers, employees and communities, etc. The same Code states that TDK respects the rights of all stakeholders; and that it complies with social norms, including laws and regulations, as a good corporate citizen. All members of the TDK Group behave in strict compliance with the corporate standards of business conduct prescribed by the TDK Code of Ethics. TDK aims to achieve its management targets and further improve corporate value through the creation of products while adhering to its founding spirit. At the same time, TDK strives to foster a sound corporate culture and sincerely conduct business activities, always aware of its place as a member of society. Moreover, TDK will fulfill its accountability to all stakeholders through the comprehensive, timely and impartial disclosure of appropriate information. As mentioned above, TDK sincerely and devotedly seeks to achieve its management philosophy, and to maintain the following effective and orderly corporate governance systems to continue to ensure soundness, compliance and transparency in its business operations. 1) Adoption of Company Auditor System and Strengthening the Supervisory Function: TDK has adopted the Company Auditor System pursuant to the Companies Act of Japan and has appointed three independent outside Company Auditors who have no conflicts of interest in order to enhance the supervision of management. 2) Strengthening the Function of the Board of s and Holding s More Accountable: TDK has a small number of s (seven) to expedite management decision-making. At the same time, TDK has appointed three independent outside s who have no conflict of interest in order to enhance the supervision of management. In addition, the s term of office is set at one year to give shareholders an opportunity to cast votes of confidence regarding s performance every business year. 3) Adoption of System for Expeditious Business Execution: TDK has adopted a system that separates the management decision-making and supervisory functions of the Board of s from the execution of business. s are in charge of business execution and carrying out decisions by the Board of s, thereby expediting business execution in line with management decisions. 4) Establishment of Advisory Bodies to the Board of s (Business Ethics & CSR, Disclosure Advisory, Compensation Advisory, and Nomination Advisory ): The aim of the Business Ethics & CSR is to ensure implementation of the TDK Corporate Motto and improve awareness of corporate social responsibility (CSR). To achieve this aim, the s, Company Auditors, s and all other members of the TDK Group are made fully conversant with the TDK Corporate Motto and Corporate Principle ( Vision Courage Trust ) as TDK s management philosophy, and the TDK Code of Ethics, which stipulates concrete standards and guidelines for compliance with all laws, regulations and social norms. The Disclosure Advisory reviews and examines important corporate information and disclosure materials required for investment decisions by shareholders and investors, to ensure that TDK conducts comprehensive, appropriate, timely and impartial disclosure in accordance with various laws and regulations regarding securities transactions and the rules and regulations of the stock exchanges where TDK s shares are listed. The Compensation Advisory, which is made up of the outside s (1 of whom chairs the committee), outside specialists and the in charge of human resources, examines the composition of remuneration and the remuneration system pertaining to s and Corporate Officers, as well as presidents and qualifying executive officers of principal TDK subsidiaries. It also verifies the transparency of the remuneration decision-making process, as well as the reasonableness of individual remuneration levels in light of corporate business results, individual performance, and the general standards of other companies. The Nomination Advisory, which is chaired by an outside of TDK, discusses the conditions expected with regard to nominations for the post of, Company Auditor or and makes nominations. In this way it helps ensure the appropriateness of the selection of s, Company Auditors and s, and the transparency of the decision-making process. 12 TDK Corporation Annual 2010

3 Main Past Initiatives Year and Month Details 2002 April June Formed the Ethics (Now Business Ethics & CSR ). Amended the Articles of Incorporation to reduce the maximum number of s from 20 or less to 10 or less and increase the maximum number of Company Auditors from 4 or less to 5 or less. Reduced the number of s from 12 to 7. Introduced the system. Appointed 1 outside for the first time. Formed the Compensation Advisory (Chairperson: outside ). Stopped reserving retirement grants for s June Amended the Articles of Incorporation to shorten the s term of office from 2 years to 1 year. Increased the number of outside Company Auditors from 2 to June December 2007 March June 2008 June August Introduced stock-linked compensation stock options for s and s. Formed the Disclosure (Now Disclosure Advisory ). Applied* U.S. Sarbanes-Oxley Act (SOX). Stopped reserving retirement grants for Company Auditors. Limited outside and Company Auditor compensation to basic remuneration only. Increased the number of outside s from 1 to 2. Formed the Nomination Advisory (Chairperson: outside ) June Increased the number of outside s from 2 to March Filed all outside s (3) and outside Company Auditors (3) as Independent s and Independent Company Auditors, respectively, with the Tokyo Stock Exchange *Applied from the fiscal year ended March 31, J-SOX applies now following TDK s April 2009 delisting from the New York Stock Exchange. The TDK Code of Ethics can be found on TDK s website at The TDK Code of Ethics provides concrete standards and guidelines for compliance with all laws, regulations and social norms, to be followed by every, Company Auditor, and employee of TDK and its consolidated subsidiaries in conducting business. TDK s corporate governance framework can be found on the Company s website. ( TDK Corporation Annual

4 s, Company Auditors and s (As of June 29, 2010) s ( Outside ) Hajime Sawabe Representative Takehiro Kamigama Representative Yasuhiro Hagihara Kenichi Mori Shinichi Araya Yukio Yanase Junji Yoneyama s Hajime Sawabe Chairman Takehiro Kamigama President and CEO Raymond Leung Executive Vice President Shinichi Araya Kenichiro Fujihara Atsuo Kobayashi Hiroyuki Uemura Takeshi Nomura Takaya Ishigaki 14 TDK Corporation Annual 2010

5 Company Auditors (* Outside Company Auditor) Noboru Hara Full-time Company Auditor Masaaki Miyoshi Full-time Company Auditor Kaoru Matsumoto* Outside Company Auditor Ryoichi Ohno* Outside Company Auditor Osamu Nakamoto* Outside Company Auditor Shinya Yoshihara Junji Yoneyama Robin Zeng Seiji Osaka Masataka Kajiya Kaoru Matsuoka TDK Corporation Annual

6 Environmental Activities TDK positions environmental activities as a top management priority. In line with this positioning, TDK has formulated an environmental plan based on a long-term perspective called TDK Environmental Action We are conducting various activities in accordance with this plan. In the year ended March 31, 2007, all of TDK s facilities worldwide achieved zero emissions status. From fiscal 2008, we embarked on the company-wide policy of cutting CO2 emissions. Our target is to reduce these emissions by at least 7% in Japan in fiscal 2011, compared with fiscal Preventing global warming Managing wastes Promoting creation of environmentconscious products Environmental Action Conducting external environmental activities Managing environmental risks Specific Initiatives Preventing Global Warming In May 2008, TDK began holding Global Warming Countermeasures Summits for energy technicians with the aim of developing energy-conservation measures, revolving around production activities. Subcommittees were formed and activities commenced at main facilities (such as sintering, air conditioning and compressed air). In fiscal 2010, the subcommittees assessed and verified energy efficiency based on actual measurements and linked these activities with initiatives. Promoting the Creation of Environment-Conscious Products (ECO LOVE Products) TDK designates environment-conscious products that have a lower environmental impact and outperform other products on the market in terms of their environmental performance as ECO LOVE products. Meanwhile, products that are highly effective in reducing the environmental burden and that boast industryleading technology, function and form among ECO LOVE products are designated as SUPER ECO LOVE products. Details of these products can be found on TDK s website (Japanese only). TDK is working to double the number of ECO LOVE products by the end of March Overall evaluation score SUPER ECO LOVE Products ECO LOVE Products Environment-Conscious Products 16 TDK Corporation Annual 2010

7 Social Contribution Activities TDK recognizes the importance of being a corporate citizen with a harmonious and symbiotic relationship with greater society. Considering what TDK as a company could do to benefit society, we have devised various unique social activities. Philosophy Based on the corporate motto of Contribute to culture and industry through creativity, the TDK Group will help build a healthier, richer society by carrying out creative activities, with each and every employee maintaining a keen awareness of his or her role as a corporate citizen. Policy TDK will channel its corporate citizenship into four spheres of activity: academic, research and education; sports, art and culture; environmental conservation; and social welfare and local community activities. Drawing on the various resources of the TDK Group (employees, products, capital, information, etc.), the company will conduct activities on a global scale. These activities will include cooperation with nonprofit organizations and nongovernment organizations. TDK Group CSR For the TDK Group, CSR efforts take shape through the implementation of our Corporate Motto and the pursuit of corporate ethics. This involves promoting CSR activities through TDK s business activities based on the TDK Code of Ethics, while communicating with stakeholders such as customers, suppliers, employees, shareholders and other investors, and local communities. TDK intends to contribute to the creation of a sustainable society and continuous corporate development by raising its corporate value through implementation of its Corporate Motto. Major CSR-centric Activity Themes The TDK Group is working on the following four important themes, considering the degree of impact on and importance to society and TDK itself. 1. Technological innovation and the creation of impressive, highquality products that help address social problems 2. Development of people that can implement CSR-centric supply chain management 4. Coexistence with the natural environment Relationship Between TDK s CSR and Philosophy Continuous corporate development Creation of a sustainable society Corporate Motto implementation Contribute to culture and industry through creativity Raise corporate value Customers Environmental Economic CSR activities Social Employees Suppliers TDK s business activities TDK Code of Ethics Shareholders and other investors Local communities TDK Corporation Annual