Corporate Governance

Tokyo Stock Exchange Group, Inc.

Update : Jun. 22, 2011

Basic Concepts

The mission of Tokyo Stock Exchange, Inc., subsidiary of Tokyo Stock Exchange Group, Inc. (TSE Group), is to act as the central securities market of Japan - a vital element of public infrastructure. The TSE Group, through the fulfillment of its subsidiary's mission, seeks to secure stable income while maintaining the balance between its public nature and profitability. Therefore, our basic corporate governance philosophy is based on the following principles: to increase the transparency of management by clarifying the authorities and responsibilities of each corporate body and exercise accountability; to reflect the opinions of investors and a wide variety of other stakeholders in management and operation of the market; and to ensure impartial decision-making free from the influence of particular stakeholders as a self-regulatory organization, thereby providing the securities market with a high level of confidence and liquidity.

Board of Directors

The TSE Group has adopted a company with committees system in order to clarify the authority and responsibilities involved in the execution of its operational and administrative functions. Specifically, three committees consisting mainly of external directors - a nomination committee, an audit committee, and a compensation committee - are established, executives responsible for executing business activities are assigned, and the management oversight function and the business execution function are separated.

The Board of Directors responsible for overseeing management consists of 16 or fewer members (15 members as of June 21, 2011) to enable substantive discussions. Also, 11 of these 15 directors are appointed from outside the company in order to increase the transparency and accountability of management, and enhance oversight of the adequacy of business execution.

Of the eleven external board members, six are from companies listed on the TSE, three are legal experts, one is certified public accountant, and one is a former officer of the central bank Each board member has deep insight in his or her specific field of expertise, making this an enhanced system that allows the TSE Group to actively incorporate a variety of different external perspectives into company management.

In addition to making decisions on the fundamental policy of and important issues affecting management, the Board of Directors also oversees executives' administration of business activities in accordance with these decisions.

Nomination Committee

The Nomination Committee is comprised of three directors, two of whom are external directors. This committee decides on proposals to be submitted at the General Shareholders Meeting regarding the selection and dismissal of directors.

Audit Committee

The Audit Committee is comprised of four directors, three of whom are external directors. Of the external directors, one is a former officer of the central bank, and two are lawyers. The Audit Committee holds regular meetings as well as extraordinary meetings when necessary.

Based on the auditing plan and the distribution of duties determined at the Audit Committee meeting, efficient audits are conducted by monitoring and verifying the establishment and operation circumstances of the internal control system while maintaining close collaboration with accounting auditors, the Internal Auditing Office, auditors of subsidiary companies and others.

Compensation Committee

The Compensation Committee is comprised of three directors, two of whom are external directors. This committee determines the compensation of each of individual directors and executives.

Internal Auditing Office

Internal control systems are established within each respective division to prevent violations of statutory laws and regulations, the TSE Group's articles of incorporation, internal rules and others. Additionally, to reinforce the systems, we established an Internal Auditing Office under the direct control of the President & CEO. The Internal Auditing Office performs internal audits of each division and reports the results of those audits directly to the President & CEO.

President's Advisory Committee

The TSE Group established the President's Advisory Committee, a private discussion group involving the president, as a forum to exchange a wide range of opinions about the TSE Group and the securities market in general. This committee is comprised of representatives from listed companies, persons from academic circles and others.