Corporate Governance

Based on its corporate philosophy of contributing to society through healthcare, the Company strives to consistently enhance corporate value by providing high quality products and services to the medical world. At the same time, we have formulated the Terumo Corporate Practices Guidelines, which aims for open management and good corporate citizenship and ensures that we operate in a sound and transparent manner. In order to earn and maintain the trust of society, Terumo has established the following corporate governance structure.

Overview of the corporate governance structure

As of June 30, 2010, Terumo's Board of Directors comprised 15 members, three of whom are independent directors, to reinforce the Board's supervisory function and raise the quality of decision-making. In addition, Terumo has removed executive responsibilities from the Board of Directors; the roles of directors have been classified into representative directors and directors, with the primary responsibilities of determining management policies of the Company as a whole and providing oversight. The Company has also enhanced its executive officer system, making executive officers accountable for the execution of business operations under their purview.

In order to clarify the duties of directors with management responsibilities and ensure that the management system is optimized to adapt flexibly to changing management conditions, the term of appointment is set at one year.

The Compensation and Nominating Committee was established with the aim of enhancing the transparency and objectivity of management. The committee, which includes at least one independent director, recommends candidates for directorships, evaluates director performance and deliberates on compensation proposals.

Terumo has a Board of Corporate Auditors, comprising four members, two of whom are external corporate auditors. The board confirms the status of governance and implementation, and strives to ensure the appropriateness of day-to-day management activities through oversight of the Board of Directors and in other ways.

The Auditors Office provides support for corporate auditors, with specialist staff assigned to further strengthen audit work.

The Company established the Advisory Board, comprised of eminent figures appointed from outside the Company, to provide advice on management of the Company as a whole. The Company's management meets with this Board every two months to exchange opinions. In addition to the three external advisors, the chairman, president, and other internal directors participate in these meetings.

Auditing by Corporate Auditors and Internal Audits

The Company has a Board of Corporate Auditors, comprising four members, two of whom are external corporate auditors as of June 29, 2010. The board confirms the status of governance and implementation, and strives to ensure the appropriateness of day-to-day management activities through oversight of the Board of Directors and in other ways. The Auditors Office has been established as a support organization for corporate auditors, with specialist staff assigned to further strengthen audit work.

As a part of these endeavors, the Board of Corporate Auditors holds a monthly meeting with the Internal Audit Department, an in-house body comprising eight members. The purpose of these meetings is to receive internal audit reports, reports on internal controls over financial reporting, and other related information and to generally promote increased collaboration on an ongoing basis. In addition, the corporate auditors and the manager of the Internal Audit Department attend meetings of the Internal Control Committee, and regularly receive reports on the maintenance, implementation and evaluation of internal controls.

The Board of Corporate Auditors also meets approximately six times each year with the independent auditor to actively exchange views and information, and issues reports as necessary on the status of audit implementation, and receives reports as required from the Internal Audit Department regarding evaluation of internal controls over financial reporting. In this way, the board ensures the ongoing existence of a structure that ensures fair and transparent audits.

Senior Corporate Auditor Yoshihiko Tosa, who has experience as a General Manager of Accounting at Terumo, and External Corporate Auditor Nobuyuki Takai, who formerly acted as CFO of Yamatake Corporation, both possess considerable expertise in the fields of finance and accounting. External Corporate Auditor Masasuke Omori is certified as a lawyer.

Preparation and States of the Internal Control System

The Company maintains a number of in-house bodies that together create a strong internal control structure. The Internal Control Committee works to strengthen internal control measures in the Company, reporting directly to the Board of Directors.

In compliance with the Companies Code of Japan, Terumo's Board of Directors has decided on a Basic Policy on Internal Control Systems.

This policy establishes compliance with the Code of Conduct of the Terumo Group as a core aspect of business activities. Based on this policy, and led by the Internal Control Committee, the Company is working to further improve the internal control system.

As of June 29, 2010

For detailed information about our corporate governance, please see our "Annual Report 2010".

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