Our basic management policy is to continuously enhance our corporate value and meet shareholder expectations. To carry out this policy, we have established an efficient organizational structure and various systems designed to respond to changes in the business environment. In addition, to improve transparency in management and strengthen oversight functions, our basic approach to corporate governance is to accurately disclose information to shareholders and investors, and we consider this to be one of our highest management priorities.

The Board of Directors consists of nine directors, five of whom are Outside Directors with extensive corporate and organizational management experience and outstanding insight.

In addition to the Board of Directors, we have established the Managing Directors’ Meeting to function as another deliberation and decision-making body for business execution. In principle, both organizations meet once per month. The Board of Directors deliberates and makes decisions on important matters related to management, including the Company’s basic policies and matters required to be resolved by laws, regulations, and the Articles of Incorporation of the Company. The Managing Directors’ Meeting deliberates and makes decisions on all aspects of the Company’s operations (excluding matters submitted to the Board of Directors). Furthermore, the Company has formed the Officers’ Remuneration Committee, which is chaired by an outside director and serves as an advisory body to the Board of Directors, in an effort to ensure transparency and appropriateness in reviewing and evaluating remuneration for officers and the nomination of candidates for directors and Audit & Supervisory Board members.

Shin-Etsu Chemical has adopted the Company with Audit & Supervisory Board Members system as its organizational structure. The Audit & Supervisory Board consists of five Audit & Supervisory Board Members, including three Outside Audit & Supervisory Board Members. In addition to attending important internal meetings such as meetings of the Board of Directors and the Managing Directors’ Meeting, Audit & Supervisory Board Members receive reports from Directors, Corporate Officers, employees, and others on the status of execution of their duties and audit the execution of duties by Directors through on-site inspections of business sites and subsidiaries and other investigations. Audit & Supervisory Board Members also receive quarterly reports and explanations regarding accounting audits from an accounting auditor, and ensure proper collaboration by exchanging information and opinions as necessary. They also regularly receive reports and explanations regarding the status of internal auditing from the Internal Auditing Department and work cooperatively with it, exchanging views and ideas.

To ensure transparency and appropriateness in the processes involved in reviewing and evaluating remuneration for officers, as well as nominating candidates for senior management, directors, and Audit & Supervisory Board members, we have established the Officers' Remuneration Committee. This committee is chaired by Independent Outside Director Hiroshi Komiyama and includes two other independent outside directors, Kuniharu Nakamura and Michael McGarry, as well as Representative Director-President Yasuhiko Saitoh, making a total of four directors. They comprehensively review and evaluate each director's contributions to the Company’s performance and overall management every fiscal year, and report their findings to the Board of Directors.

The remuneration system of Directors shall be designed to contribute to the mid- to long-term enhancement of the corporate value of the Company, and the remuneration of Directors shall be determined by the Board of Directors based on the results of the review and evaluation by the Officers’ Remuneration Committee as well as its opinion thereon. The remuneration shall consist of “fixed remuneration” determined as appropriate for each individual’s position, job responsibilities, etc., and “performance-based remuneration” that takes into consideration the annual financial performance of the Company as an incentive for the enhancement of corporate value, as well as “stock options” as an incentive for higher motivation and morale to execute one’s duties and to improve performance, and ultimately for the enhancement of shareholder value (stock price-linked remuneration).

On the other hand, the remuneration of Audit & Supervisory Board Members shall be determined through their mutual consultation. The remuneration shall consist of “fixed remuneration” determined as appropriate for each individual’s job responsibilities as an Audit & Supervisory Board Member. Outside Directors and Audit & Supervisory Board Members are not entitled to any “performance-based remuneration” or “stock options” as they are expected to perform supervisory and checking functions over management.

At every meeting of our Board of Directors, Outside Directors ask questions and make suggestions regarding agenda items, and there is a lively exchange of opinions and discussion. In addition, the Board of Directors receives individual opinions each year from Outside Directors regarding the effectiveness of the Board of Directors as a whole. In FY2024, the Board of Directors of the Company was evaluated as being effective. During the evaluation, the Outside Directors also gave the Board of Directors valuable feedback on issues such as “Earlier Explanations (and More Data) to Facilitate Discussions at Board of Directors Meetings” and “Implementation of Site Visits for Outside Directors and Outside Audit & Supervisory Board Members.”

When we determine that maintaining and strengthening a stable business relationship with another company will contribute to the enhancement of our corporate value through sustainable growth, we may hold shares in that company where appropriate depending on the importance of that company to our business strategy. At least once per year, the Board of Directors reconsiders the medium- to long-term economic rationality of individual cross-shareholdings, taking into account whether the benefits and risks of maintaining and strengthening these business relationships and holding the relevant shares are commensurate with the cost of capital.

In cases where the Board of Directors judges that the economic rationality of holding the relevant shares has diminished, we gradually sell the shares, thereby reducing our cross-shareholdings. As of March 31, 2018, our cross-shareholdings consisted of 86 individual stocks, and by March 31, 2025, the number had decreased to 41.

With regard to our remaining cross-shareholdings, when exercising the shareholder voting rights they confer, we vote on each proposal in the shareholder meetings individually based on a comprehensive judgment that considers factors such as whether the proposal might damage shareholder value, based on the perspective of our purpose in holding the shares (which is to enhance our corporate value through sustainable growth) as well as what will contribute to enhancement of the corporate value of the investee.

The Company has formulated a "Basic Policy on Internal Controls" to help put in place "structures to ensure that the execution of duties by Directors is fully compliant with relevant legislations and the articles of incorporation, and structures to ensure the appropriateness of business operations within the corporate group, which consists of its subsidiaries, this corporation, and other corporate business," as stipulated by the Companies Act and an Ordinance of the Ministry of Justice. Our internal control system is structured and implemented in accordance with the above policy. We review it constantly and endeavor to make it more appropriate and efficient.

The Auditing Department, which is a dedicated department, conducts operational audits of each department from the perspective of legality and rationality of business activities, and evaluates the status of development and operation of internal controls related to financial reporting from an independent standpoint. The results are reported directly to Directors, including the Representative Director, and Outside Audit & Supervisory Board Members. The Auditing Department also conducts audits of the status of operations, including Group companies that are not subject to the internal control reporting system for financial reporting based on Japan's Financial Instruments and Exchange Law (J-SOX), and verifies that each company's operations are conducted under appropriate internal controls.

The Group believes that the appropriate and timely disclosure of company information boosts the understanding of stakeholders and leads to the creation of a fair market evaluation.

The Group has disclosed financial information in accordance with the Financial Instruments and Exchange Act and the regulations regarding information disclosure set by the stock exchange. Regarding the collection, management, and timely disclosure of corporate information, the Company formulated internal regulations based on the disclosure rules of the stock exchange, such as the "Regulations on Timely Disclosure of Corporate Information" and the "Rules on Regulations of Insider Trading." We have announced these regulations to all of the departments in the Company and Group companies to promote seamless and timely disclosure.

For non-financial information, we disclose information voluntarily, such as posting information on the Company's website, publicizing it through the news media, and providing an annual report, financial statements and other reports.

Recognizing that constructive dialogue with shareholders leads to sustainable growth and enhanced corporate value, we are working to enhance communication through dialogue with shareholders and investors. Opinions received from shareholders and investors through dialogue are reported to management and relevant departments as appropriate and are incorporated into management.

We endeavor to perform fair and transparent information disclosure and set a “silent period (from the day following the date of quarterly financial settlement to the date of publication of financial settlement)” during which we decline any communication regarding the information of the financial results and, during such period, we decline any inquiries about the financial results and interaction with news media so as to securely prevent any insider information leakage.

In its business principle, the Group states that it strictly complies with all laws and regulations and conducts fair business practices. Each and every Group employee performs their daily work duties sincerely based on this. We believe that it is our social responsibility and one of our contributions as a company to properly pay taxes for the profits in accordance with the laws and regulations of the countries and regions in which we operate.

As part of our efforts to this end, we strive to instill and raise awareness of tax compliance and provide education, especially for employees involved in tax affairs, to improve their tax knowledge and practical skills. For important tax issues, we consider the appropriateness of tax treatment while receiving appropriate advice from experts, and strive to file appropriate tax returns based on the laws and regulations of each country. We also place importance on maintaining good relationships with the tax authorities in each country by dealing with them in good manner. We do not engage in any business activities for the purpose of tax avoidance. The total corporate income tax paid in FY2024 was 187.0 billion yen for consolidated companies. The breakdown by region is as follows: Japan 127.0 billion yen, the U.S. 47.9 billion yen, Europe 4.5 billion yen, and Asia-Oceania 7.4 billion yen.

The Company aims to develop the whole Group by supporting and respecting the autonomy of the Group companies.

Group companies are managed based on the “Shin-Etsu Chemical Group Company Operational Regulations.” The 99 consolidated subsidiaries conduct prior consultation and report on the following projects.