Annual Report>2005>Corporate Governance and Com pliance

Corporate Governance and Compliance

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The JFE Group's corporate vision is to contribute to society with the world's most innovative technology. We are creating an innovative corporate culture to address challenges as they arise, and operate at a level that exceeds society's expectations. Specifically, we endeavor to be an excellent, fully sustainable enterprise by:

  1. Responding to global customer needs better and faster;
  2. Enhancing credibility among shareholders and capital markets worldwide;
  3. Providing employees with more challenges and opportunities; and
  4. Contributing to local communities and global environmental preservation.

Toward the realization of these goals, we at the JFE Group have made great efforts to strengthen our systems of corporate governance and compliance, so that all officers and employees adhere to the highest ethical standards in the execution of their duties.

JFE Group

Management Organization
To enable us to construct the most effective operational and executive systems, we have adopted a holding-company structure for consolidated management of the JFE Group through centralized governance. The group holding company, JFE Holdings, is responsible for group-wide strategy, risk management and external accountability.

We employ "corporate officer" systems to separate decision-making and execution, clarify lines of authority and responsibility and accelerate the execution process itself. The rules and bylaws of the companies comprising the JFE Group contain clear decision-making procedures covering substantive issues. Decisions on major issues affecting the management of the entire group are made by JFE Holdings' Management Committee and Board of Directors. (JFE Holdings, Inc., JFE Steel Corp., and JFE Engineering Corp. hold Management Committee meetings approximately twice a month, and their boards of directors meet once or twice a month.)

Internal Governance and Risk Management Mechanisms
To optimize management by unifying strategy-making and revenue management in each product category and business, JFE has adopted the product-based sector system at JFE Steel and the "divisional company" system at JFE Engineering. Regarding matters of joint concern to the group, such as the environment, technological development and IT issues, we hold group meetings that cut across divisional boundaries to generate synergy through greater efficiency and total group strength.

In risk management, corporate officers are tasked with identifying potential risk management issues for each division they oversee. Important issues are brought before the Management Committee and other bodies for deliberation.

Each group company has standards for determining the degree of confidentiality for specific information, and for applying corresponding levels of security management. These standards determine how information is handled within the company in question and the conditions under which it can be shared with other companies. The JFE Group is also taking steps to strengthen the management and security of its information systems, including more robust measures to prevent unauthorized access from outside. The group has clearly articulated rules and policies for the protection of personal information, which were formulated under the spirit of the Personal Information Protection Law, which came into effect on April 1, 2005, and is currently enforcing tighter controls over the handling of such information.

Management Organization and Compliance Mechanism
Management Organization and Compliance Mechanism

Compliance Mechanism
Given that compliance is at the heart of corporate social responsibility, JFE's corporate vision and code of conduct make compliance one of the highest priorities of management. The company endeavors to fulfill all its responsibilities as a fully engaged corporate citizen that adheres not only to laws and regulations but also to the generally accepted ethical standards of the communities it serves.

The JFE Group Standards of Business Conduct have been formulated as guidelines for ethical, responsible corporate activities. The group also has extensive programs to educate executives and employees about the ethical standards expected of them.

The JFE Group Compliance Committee, a key mechanism for supervising and furthering appropriate business, is chaired by the president of JFE Holdings and meets quarterly to discuss the group's basic policies and other important issues, as well as to monitor compliance. JFE Steel Corp., JFE Engineering Corp. and other operating companies have similar compliance committees to oversee their specific activities.

In addition, a Corporate Ethics Hotline enables employees to communicate important compliance-related matters directly to senior executives.

In April 2005, JFE Steel Corp. established a CSR Section to better address the entire range of ethical and social issues related to the company, including compliance, the environment, safety, human rights and working conditions.

The JFE Group Standards of Business Conduct
+ All JFE Group executives and employees will faithfully adhere to the following Standards of Business Conduct in all facets of corporate activities. These standards were created to embody the Corporate Vision of the JFE Group and go hand-in-hand with the Corporate Values.
+ Senior executives are to take the lead in communicating these standards to employees throughout the group and in creating effective systems and mechanisms to ensure adherence to corporate ethical standards.
+ Senior executives shall be directly involved both in the resolution and implementation of measures to prevent the recurrence of any violations of these standards. They shall disclose information about violations in a timely and accurate manner both inside and outside the group, shall clarify the authority and accountability involved and shall deal rigorously with offenses.

1. Provide quality products and services
Earn the trust and regard of customers by endeavoring to provide quality products and services based on superior technology and by fully respecting and protecting the privacy of personal and customer information.

2. Be open to society at large
Endeavor to communicate with shareholders and the broader community, and actively disclose corporate information.

3. Coordinate and cooperate with the community
Actively contribute to the community as a good corporate citizen in a spirit of coordination and cooperation.

4. Globalize
Endeavor to achieve mutual understanding with people around the world, working from global perspectives and respecting local cultures and customs.

5. Exist in harmony with the global environment
Contribute to the achievement of better living standards and the creation of societies that exist in harmony with the global environment.

6. Maintain proper relations with government and political authorities
Endeavor to build and maintain sound and proper relationships with government and political authorities.

7. Respond appropriately to anti-social elements
Firmly resist all elements and organizations that threaten social order and stability, and refuse all illegal and improper demands.

8. Respect human rights
Respect all employees and members of the general public as individuals and refrain from any and all discrimination in corporate activities.

9. Provide challenging work environments
Provide employees with attractive, safe and challenging work environments.

10. Comply with laws and ordinances
Comply with all applicable laws and ordinances, endeavor to compete fairly and freely, refrain from illegal business activities, promote sound business practices, and be faithful and sincere in all activities and dealings.