Chugai is committed to continuously increasing corporate value and responding appropriately and fairly to the requests of all stakeholders, including shareholders. To fulfill this commitment, the Company has positioned the enhancement of corporate governance as an important management task and is building a system that emphasizes prompt decision-making, clear executive responsibility, and management transparency. Toward this end, Chugai has been improving its governance system through measures that include appointing outside directors and by introducing an executive officer system. Although the Company is affiliated with Roche Pharmholding B.V. on a consolidated basis, it is an independently listed company, and its decision-making is conducted under the principles of autonomy and independence.

Corporate Governance Report [212KB]

Chugai's Board of Directors is composed of 13 members including six outside directors. It makes decisions on the most important management issues and oversees business execution based on the status reports it receives.

All major decisions concerning business execution are delegated by the Board of Directors to the Executive Committee, which is composed of the president and the 11 main executive officers. Full-time corporate auditors also attend Executive Committee meetings to express their views from the standpoint of sound corporate governance.

The Board of Auditors is made up of four corporate auditors, two of whom are outside auditors. They carefully audit management decision-making and the status of business execution by attending meetings of the Board of Directors and Executive Committee and by examining business reports from members of the Board of Directors.

Chugai has also established an International Advisory Council (IAC) composed of specialists from Japan and other countries. In an effort to further enhance decision-making, Chugai receives valuable counsel from the IAC to ensure that the Company continues to respond effectively to the rapidly changing global business environment.

(Figures are as of December 31, 2009)

Corporate Governance System (As of December 31, 2009)

In order to maintain its independence and objectivity as the department in charge of internal auditing, the Audit Department was set up with corporate staff in an independent organizational structure. The Audit Department audits the activities of each department of the Chugai Group and reports the results to the Executive Committee.

Relevant departments are advised of items needing improvement, and follow-up audits are conducted six months later to verify the status of improvements. The results of these audits are reported to the vice presidents in charge. In addition, the Audit Department reports results of internal audits to the full-time corporate auditors.

The Audit Department also works with all departments to conduct an annual internal control self-assessment. This enhances awareness of internal controls among department heads, and the feedback they receive on their assessment results helps them to improve their internal controls.

The Internal Control System by the Board of Directors [56KB]

In the Chugai Group, full application of the internal control system for financial reporting under Japan's new Financial Instruments and Exchange Act (commonly called "J-SOX") began in 2009. Group-wide preparations for this system began in 2006, including identification of internal control risks, documentation of internal control activities and Control Design Effectiveness Assessment. Based on extensive discussion with external auditors, we have improved and established appropriate internal controls for the best possible system. Consequently, the assessment of internal controls and their operation proceeded without any major problems, and an external auditor also identified no material deficiencies. As a result, internal control over financial reporting was judged effective as of December 31, 2009.

Going forward, the Chugai Group will continue steady operation of the system to ensure that internal control is properly maintained while striving to establish a more effective and efficient work flow.

The Chugai Group has established Risk Management Regulations and has a Risk Management Committee and a Risk Management & Compliance Department that implement Group-wide risk management. Risks that could have a material impact on the Group's business activities are treated as Group-wide risks. Management policies are established for each type of risk, and concrete measures are taken proactively in an effort to prevent them from materializing. In addition, divisional risk management committees identify risks in each division and implement countermeasures.

The progress of, and response to, these major risk issues are reviewed every quarter, confirmed by the Risk Management Committee and reported to the Executive Committee.

To deal with emergencies, Chugai has a disaster response mechanism in place. In the event of a crisis, an emergency headquarters will be established, headed by a representative director.

Chugai has established Compliance Regulations and has set up a Compliance Committee under the Risk Management Committee to regularly ascertain the status of compliance throughout the Group. The compliance managers and others responsible for compliance in each organization within the Chugai Group strive to ensure that all laws are properly observed.

Department managers are surveyed each quarter to assess compliance and reconfirm compliance items. The results and response policies are discussed by the Compliance Committee and then reported to the Executive Committee.

If a suspected compliance issue arises, it is reported to the Risk Management & Compliance Department and the department in charge of the issue involved. Suitable response measures are then taken.

In response to the influenza A/H1N1 pandemic, Chugai set up an emergency headquarters headed by a representative director to plan and implement measures to prevent any material impact on business operations. To ensure employee safety and business continuity, after taking internal and external conditions into account, necessary countermeasures were promptly implemented, including measures to prevent infection among employees and their families and to limit the spread of infection within the Company.

Chugai also implemented various contingency measures based on its business continuity plan.