Corporate Governance

Our Policy

INPEX’s Mission is to contribute to the creation of a brighter future for society through its efforts to develop, produce, and deliver energy in a sustainable way. Based on this Mission, to achieve sustainable growth and enhance our corporate value over the medium- to long-term, we fulfill our social responsibilities in cooperation with shareholders and stakeholders. Furthermore, we continually strive to strengthen our corporate governance to ensure transparent, fair, and timely decision-making.

Please refer to this link for information on the Basic Policy on Corporate Governance and Corporate Governance Report. (Corporate Governance | INPEX CORPORATION)

Management Structure

To ensure efficient corporate management and highly effective supervision based on our Mission, we have adopted the structure of a Company with Audit & Supervisory Board Members, whereby Audit & Supervisory Board Members audit the business execution of Directors, who are well versed in their fields. In addition, to further increase the agility and efficiency of our management, we have introduced an Executive Officer System. This system strengthens our business execution structure to respond accurately and quickly to a rapidly changing management environment and business growth.

We have many opportunities to engage in important negotiations with governments and international energy companies. This requires Executive Directors and Executive Officers who possess knowledge, expertise, and international experience related to our business. They must also have in-depth knowledge of both the Company and their particular fields of expertise. Typically, Directors who were initially the Company’s employees also serve as Executive Officers. This ensures that the Board of Directors is well-versed in the current management and business environments, enabling them to make informed decisions regarding optimal business execution while maintaining effective management supervision functions. At the same time, at least one third of the Board comprises of Independent Outside Directors. The measure aims to improve management transparency and strengthen the effective supervisory function of the Board. We leverage the objective perspectives of Independent Outside Directors, which may differ from those of the Executive Directors. Given their independent standing, Independent Outside Directors are expected to provide advice based on their personal knowledge and experience. They oversee management and conflicts of interest transactions, and appropriately represent the views of stakeholders at Board of Directors meetings. Our Independent Outside Directors bring backgrounds in corporate management or academia, or specialized fields such as the resources and energy industry, finance, or legal affairs. They were appointed based on their extensive experience and comprehensive insights.

We are making progress to increase the diversity of our Board of Directors in terms of skills and gender. In recent years, we have appointed an Outside Director with extensive experience and knowledge in environmental and sustainability management, alongside the addition of both a female Outside Director and a female Audit & Supervisory Board Member. Currently, two of the members of the Board, which includes Audit & Supervisory Board Members, are women, accounting for 13% of the total Board membership. We have also appointed the internal promotion of a female employee to an Executive Officer role, ensuring diversity in our management structure.

The Nomination and Compensation Advisory Committee deepens discussions on ensuring further diversity and the appropriate size and composition of the Board. The Committee then shares the content of these discussions with the Board. Diversity here includes age, gender, work history, field of expertise, cross-cultural backgrounds, wide-ranging knowledge, and more.

Four of the five members of our Audit & Supervisory Board are Independent Outside Audit & Supervisory Board Members. The Board has been established pursuant to Japanese laws and regulations to strengthen the audit function, ensuring the independence of Audit & Supervisory Board Members and effectiveness of audits. Further efforts include assigning audit assistants to the Audit & Supervisory Board Members’ Office—which assists Audit & Supervisory Board operations—and strengthening the Board’s coordination with the internal audit department (Audit Unit) and accounting auditor.

We hold regular meetings for Outside Directors, Representative Directors, Audit & Supervisory Board Members, and the accounting auditor. These include: meetings attended by Outside Directors, Audit & Supervisory Board Members, and Representative Directors; meetings attended by Outside Directors and Audit & Supervisory Board Members (which can include the accounting auditor); and meetings attended by Audit & Supervisory Board Members and Representative Directors. Meeting participants exchange opinions on a wide range of key management issues, the development and operation of internal control systems, and other corporate governance-related matters.

Directors and the Board of Directors

The responsibilities of the Board of Directors include exercising its supervisory function to the full extent, ensuring fairness and transparency in management, fostering sustainable growth and increasing corporate value over the medium- to long-term. This is achieved through effective corporate governance, acknowledging the fiduciary responsibility to shareholders.

Our Board of Directors consists of 10 members, five of who are Independent Outside Directors. The Representative Director, President & CEO, who is the most well versed in our operations, serves as the Chair of the Board to ensure efficient discussions.

In addition to regular monthly meeting, the Board meets as needed to discuss and decide on matters concerning management strategy and important business operations. It also supervises the execution of duties by Directors.

The Articles of Incorporation state that the term of office of Directors shall be once year. This is to enhance their ability to promptly respond to changes in the global management environment and to further clarify management responsibilities.

Directors, Board of Directors Meeting Attendance, and Activities

The table below shows the composition of the Board of Directors as of the time of the writing of this report and attendance at Board of Directors meetings in FY2023.

Notice and Material of the 18th Ordinary General Meeting of Shareholders: pp15, 69, 70

Advisory Bodies

We have established the following advisory bodies to the Board of Directors: 1. The Nomination and Compensation Advisory Committee—the majority of which consists of outside officers including Independent Outside Directors and Chair of which is an Outside Director—for the purpose of strengthening the independence, objectivity, and accountability of the functions of the Board regarding the nomination and compensation of Directors, and contributing to the further enhancement of the corporate governance structure; and 2. The INPEX Advisory Committee, for the purpose of obtaining multifaceted and objective advice and recommendations from outside experts in Japan and overseas on a wide range of areas such as domestic/international political and economic outlooks, prospects for the energy sector, and sustainability, achieving sustainable growth, and enhancing medium- and long-term corporate value.

The table below shows the composition of the Nomination and Compensation Advisory Committee at the time of this report's disclosure and the attendance status of the Nomination and Compensation Advisory Committee meetings in FY 2023.

<Specific content of deliberations>

Nomination:

• Progress on the Medium-term Business Plan, current state of main management issues, and reorganization of executive organization
• New Executive Officer structure for the fiscal year ending December 31, 2024
• Requirements for Executive and Outside Directors (redefining of requirements)
• Candidates for Directors and Representative Directors
• Director and Audit & Supervisory Board Member skill matrix
• Terms of office of Directors and Audit & Supervisory Board Members, treatment of Outside Directors following the end of their term of office, etc.

Compensation:

• Review of the appropriateness of compensation levels (comparison with peer group)
• Company financial results, management indicator results, and individual division results for the fiscal year ended December 31, 2023
• Performance-linked compensation (bonuses and stock-based compensation) KPI results
• Proposal of Director bonuses and stock-based compensation for the fiscal year ended December 31, 2023

Nomination and compensation:

• Annual deliberation schedule
• Revisions to Nomination and Compensation Advisory Committee regulations, reelection of Committee members and Committee Chair
• Action plan in light of the results of the effectiveness evaluation of the Board of Directors

The table below shows the composition of the INPEX Advisory Committee at the time of this report's disclosure and the attendance status of the INPEX Advisory Committee meetings in FY 2023.

<Specific content of deliberations>

• How to help achieve a net zero carbon society by 2050
• Evaluation of the basic policy for achieving GX and identification of the challenges involved—focusing on carbon pricing
• Prospects and challenges of the international energy situation—focusing on the discussion points of IEEJ Outlook 2024
• Background and overview of the GX implementation conference and global GX trends

Other Committees Involved in Business Execution

Other committees involved in business execution are the Compliance Committee, Sustainability Committee, Corporate HSE Committee, Information Security Committee, and INPEX Value Assurance System (IVAS) Committee. Below are overviews of each committee and the activities they conducted in FY2023.

1. Compliance Committee
   The Compliance Committee was established in April 2006 with the objective to promote compliance initiatives across the Group. Chaired by the Director in charge of compliance, the Committee comprises of the Senior Vice Presidents and officers of the internal business units. The Committee discusses basic policies and important Group matters concerning compliance, while also managing the implementation status of compliance activities. The Committee met four times in FY2023. For details, please see Compliance—Management Structure.
   
   
2. Sustainability Committee
   The Sustainability Committee (originally named as the CSR Committee and changed its name to the Sustainability Committee in November 2021) was established in April 2012 to fulfill our corporate social responsibilities and promote activities that contribute to the sustainable development of society. Chaired by the Representative Director, President & CEO, the Committee comprises of the Representative Director, Chairman; Senior Vice President, General Administration Division; Senior Vice President, Corporate Strategy & Planning Division; Chair of the Compliance Committee; and Chair of the Corporate HSE Committee. The Committee discusses basic policies regarding sustainability, important matters pertaining to sustainability implementation, encompassing corporate governance and climate change response. The Committee met three times in FY2023.
   
   
3. Corporate HSE Committee
   In accordance with the HSE Management System regulations, the Corporate HSE Committee was established on September 17, 2008 to promote occupational health and safety and environmental initiatives. The Committee, chaired by the Director in charge of HSE, is comprised of the Senior Vice Presidents and officers of the standing organizational units and deliberates on basic policies and important Group HSE matters. The Committee met 10 times in FY2023.
   
   
4. Information Security Committee
   The Information Security Committee was established in November 2007 to consider and make decisions regarding measures necessary for maintaining, managing, and strengthening information security.The Committee, chaired by the Director in charge of information systems, deliberates on basic policies and important matters of the Group relating to information security, and manages our response to information security incidents and reoccurrence prevention measures. The Committee met twice in FY2023.
   
   
5. INPEX Value Assurance System (IVAS) Committee
   The IVAS Committee was established in May 2014 to confirm the status of preparations in connection with important milestones of major projects in which we participate. The Committee contributes to our decision-making process, striving to improve and promote the value of the projects. Chaired by the Senior Vice President of the Technical Division, the Committee engages in organization-wide activities such as acquiring new projects, performing technical evaluations and other matters in every phase of existing projects, including exploration, assessment, and development. The Committee met 28 times in FY2023.

Corporate Governance Structure

Effectiveness Evaluation Results of Board of Directors in FY2023

With the aim of regularly verifying that the Board of Directors is functioning appropriately, identifying issues, and continuing improvement initiatives, we conduct an annual effectiveness evaluation of the Board and disclose a summary of the results. In line with this policy, we conducted our ninth evaluation in FY2023. The evaluation method and summary of the results are as follows.

Evaluation Method

In September 2023, the Outside Directors and Audit & Supervisory Board members conducted an interim review of the action plan produced through the effectiveness evaluation for the previous fiscal year. The implementation method for the FY2023 evaluation was also discussed, including how to involve a third-party evaluation organization.

As a result, an external major law firm was appointed to review the content and composition of the questionnaire, the methods of consolidation and analysis by the Board of Directors secretariat, as well as the appropriateness of the proposed improvement plans. The FY2023 evaluation items were thereafter discussed at the Board of Directors meeting held in November, including the implementation policy and the content and structure of the questionnaire prepared by the Board of Directors secretariat then reviewed by a third-party evaluation organization.

Based on the results of this review, the following were selected as evaluation items and a completely anonymous (web-based) questionnaire was administered to all Directors and Audit & Supervisory Board Members. The secretariat consolidated and analyzed the questionnaire responses, and a third-party evaluation organization verified the methods used to consolidate and analyze the responses as well as appropriateness of the action plan. Subsequently, any issues identified were highlighted. During a meeting with Outside Directors, Audit & Supervisory Board Members, and Representative Directors held in January 2024, the consolidation and analysis results, future issues and initiatives were discussed. Based on that discussion, the following evaluation results were confirmed at the Board of Directors meeting held in February.

Evaluation Items

The items on the FY2023 questionnaire were as indicated below. A four-point scale was generally used for each question, and many open-ended questions were included to collect more specific opinions.

Part 1: Self-evaluation

Part 2: Composition of the Board of Directors

Part 3: Operation of the Board of Directors

Part 4: Support System for the Board of Directors

Part 5: Roles and Responsibilities of the Board of Directors

Part 6: The Nomination and Compensation Advisory Committee

Part 7: Actions on the Previously Prepared Action Plan

Part 8 Comments

Activities in FY2023 in Light of the Previous Year’s Effectiveness Evaluation

A status of activities conducted in FY2023, based on the FY2022 results, outlined below.

1. Expansion of discussions on management strategy
   • Progress toward INPEX Vision @2022 was regularly reported at Board of Directors meetings.
   • Deliberation points were specifically outlined for projects with a notable impact on achievement of plans, leading to thorough discussions across several meetings.
2. Further invigoration of discussions at Board of Directors meetings
   • Key points of discussions in Executive Committee meetings and previous meetings within the Company were presented.
   • In the process of determining a new project, the background circumstances of the project were clarified and discussed multiple times, as necessary.
   • Independent experts and others conducted lectures and shared their opinions with the Board of Directors regarding timely themes related to the situation in the Middle East and other matters. Opportunities for interaction and exchange, such as social gatherings for officers, were provided and site tours for outside officers were conducted for key operational sites in Japan and overseas.
   • Board of Directors meetings continued to be conducted in a lively and well-structured format, within time allocation. New initiatives, such as identifying issues for focused deliberation, were introduced and preliminary briefings and other materials were provided in advance.
3. Deeper discussions on the desired state of the Board of Directors
   • The Nomination and Compensation Advisory Committee furthered discussions on enhancing diversity and the appropriate size and composition of the Board of Directors. The Committee relayed the content of these discussions to the Board.
4. Enhanced discussion on portfolio management
   • Approaches to issues such as fund allocation were discussed in light of the status of each business segment in the five net zero businesses.
   • Information on net present value (NPV), risks, and other matters were organized for each core area. This information was reported to the Board of Directors on an ongoing basis.

Summary of FY2023 Evaluation Results

As a result of a meeting of the Outside Directors, Audit & Supervisory Board Members, and Representative Directors, Executive Committee deliberations, and Board of Directors deliberations, the effectiveness of the Board in FY2023 was evaluated as indicated below.

• Regarding the composition of the Board of Directors, the knowledge and experience of its members are sufficiently diverse. Although generally there is no problem with the size of the Board and the ratio of Outside Directors under the current circumstances, going forward, discussions regarding the desired state of the Board, including ensuring further diversity, should deepen.
• Initiatives to stimulate discussions at Board of Directors meetings, such as holding preliminary briefings, sharing discussions at Executive Committee and other meetings, and explaining and annotating technical terms, are all effective and should be continued.
• The holding of lectures by outside experts, tours of operational sites in Japan and overseas, and other measures adequately ensured that non-executive officers were provided with opportunities to improve their knowledge and understanding, and these efforts should be continued.
• The Nomination and Compensation Advisory Committee has played a necessary role in deliberations and other relevant matters in the fields of both nomination and compensation. Going forward, the independence of the Committee should be further enhanced, and the efforts to strengthen cooperation with the Board of Directors should also be continued.

As a result of the summary of the individual evaluation results—including the above—the Board of Directors was evaluated as being sufficiently effective overall in FY2023, as it had been in the previous year.

Initiatives for Further Evaluation of Effectiveness

The following action plans have been devised to enhance the effectiveness of the Board of Directors going forward.

1. Improvement of discussions regarding management strategies
   • Define agenda items multiple times in preparation for the next Medium-term Business Plan, and allocate sufficient opportunities and time for discussions.
2. Initiate discussions at Board of Directors meetings
   • With respect to materials and preliminary briefings, present discussion points and points of note at Executive Committee meetings and the discussions held before them. Provide extensive explanations and annotations regarding technical terms and clarify the process for presenting issues to the Board of Directors.
   • Create opportunities for appropriate discussions and the sharing of opinions with persons other than members of the Board of Directors. Conduct on-site tours in Japan and overseas as necessary.
   • Consider and implement methods, such as lectures by outside experts and others, for providing members of the Board of Directors with greater knowledge regarding corporate management, sustainability, environmental policy and regulation trends in major countries in which we operate, technology trends, and the like.
   • Continue dynamic and clearly defined management practices by identifying issues for focused deliberation, and improve the quality of its deliberations on critical matters.
3. Strengthen function of the Nomination and Compensation Advisory Committee
   • Deepen discussions by the Nomination and Compensation Advisory Committee regarding succession plans for the Representative Director, President & CEO, and provide feedback on those discussions to the Board of Directors.
   • Appoint an Outside Director as the Chair of the Nomination and Compensation Advisory Committee to enhance its independence.
   • Enhance the reporting by the Chair of the Nomination and Compensation Advisory Committee to the Board of Directors regarding the substance of the Committee’s discussions.
4. Deeper discussions regarding the desired state of the Board of Directors
   • Deepen discussions by the Nomination and Compensation Advisory Committee on broadening the diversity of the Board of Directors (increasing the number of women, people with management experience in different business fields, non-Japanese Directors, etc.) and assess the appropriate size and composition of the Board.

The third-party evaluation organization has concluded that the Board of Directors secretariat has appropriately consolidated and analyzed the results of the evaluation, and that the action plans presented above, drawn from these results and analysis, have been suitably established. Based on these evaluation results, the Company will continue striving to improve the effectiveness of the Board of Directors.

Skill Matrix

The Company recommends candidates for Director who have diverse and abundant experience and insight for executing its “Long-term Strategy and Medium-term Business Plan (INPEX Vision @2022)” aimed at the realization of a net-zero carbon society in 2050.

Compensation for Directors

Basic Policy for Compensation

The Company’s basic policy on compensation for Directors is as follows.

1. Attractive to recruit and retain qualified management personnel to realize the Company’s management philosophy
2. Raise awareness of the need to contribute to the sustainable growth and medium- to long-term enhancement of corporate value of the Company
3.  The compensation system shall be highly transparent and objective to ensure accountability to shareholders and other stakeholders

Based on the basic policy, the Company has passed a resolution at a Board of Directors’ meeting as below, on the policy for determining the content of compensation, etc. for individual Directors. In determining the content of compensation, etc. for each individual Director, as an advisory body to the Board of Directors, the Nomination and Compensation Advisory Committee, the majority of whose members are Outside Directors, conducts a multifaceted review including consistency between the draft and the decision policy, and the Board of Directors also respects the report of the Committee and judges that it is in line with the decision policy.

Compensation Levels

The level of compensation for Directors of the Company shall be set by a resolution of the Board of Directors after the Nomination and Compensation Advisory Committee verifies the appropriateness of the level after conducting an analysis of the level of compensation for each position in a peer group of companies of the same size and similar industries, utilizing data from external research organizations. The compensation shall be reviewed as necessary to meet changes in the external environment, etc.

Compensation composition

The compensation composition of the Company’s Directors (excluding Outside Directors) consists of basic compensation in accordance with the duties of each position, bonuses as short-term incentive compensation, and stock-based compensation as medium- to long-term incentive. Compensation for Outside Directors and Audit & Supervisory Board Members consists only of basic compensation from the perspective of the independence of their duties.

The ratio of the President’s basic compensation, bonuses, and stock-based compensation when the target achievement level for each index is 100% is set generally at 50%:30%:20%, respectively.

Process for Determining Compensation for Directors

In order to strengthen the independence, objectivity and accountability of the Board of Directors’ functions in determining Directors’ compensation, the Company has established the Nomination and Compensation Advisory Committee, the majority of whose members are Independent Outside Directors, as an advisory body to the Board of Directors. Based on the report of the Committee, the Board of Directors establishes a policy for determining the amount of compensation for Directors and the method of calculating such amount. The compensation for the Audit & Supervisory Board Members is determined through consultation among the Audit & Supervisory Board Members within the limits approved at the General Meeting of Shareholders.

The Nomination and Compensation Advisory Committee shall, in principle, meet at least four (4) times a year to deliberate major matters concerning the policy for determining the amount and calculation method of compensation, etc. for Directors and the details of compensation, etc. for each individual, and to provide advice and proposals to the Board of Directors, and the Board of Directors makes decisions with the utmost respect for the content of such advice and proposals. The amount of compensation to be paid to each Director (including the final amount of bonuses based on the evaluation of the performance of the division in charge) shall be decided by the Representative Director, President & CEO Takayuki Ueda, who is most familiar with the Company’s management situation, based on the content of the advice and proposals of the Committee.

Considering the external environment and social and economic trends, etc. surrounding the Company, the Nomination and Compen­sation Advisory Committee shall carefully deliberate on the appropriateness of the target value and calculation method for performance-based compensation, and may make adjustments to the calculation of the amount of compensation for each Director by resolution of the Board of Directors.

We do not disclose the total amount of consolidated compensation paid to each Director or Audit & Supervisory Board Member. This is because there is no one Director or Audit & Supervisory Board Member whose consolidated compensation is 100 million yen or more, which is the disclosure standard stipulated in the Cabinet Office Ordinance on Disclosure of Corporate Affairs issued by the Financial Services Agency of Japan.

Audit & Supervisory Board

We have adopted an Audit & Supervisory Board Member system which comprises a five-member Board, four of whom are Outside Auditors. These Outside Auditors have abundant experience and knowledge of our business, finance, accounting, legal, and other fields, which they apply to their auditing duties. We have also established an Audit & Super­visory Board Members’ Office, which is an organization independent from executive divisions that assists the Audit & Supervisory Board Members in the execution of their duties. Four full-time employees with relevant skills and knowledge have been assigned to the Office. In principle, the Audit & Super­visory Board meets monthly on the same day as Board of Directors meetings, or as necessary. The Audit & Supervisory Board makes determinations on statutory matters including audit plans, and receives reports from the internal audit department and accounting auditor on the performance of their duties, requesting explanations when necessary. In addition, the Audit & Supervisory Board Members share information on issues and other matters identified through audit activities and hold discussions on these as necessary.

In FY2023, a total of 17 Audit & Supervisory Board meetings were held and all Audit & Supervisory Board Members attended each of these meetings, as shown in the table below.

Training for Directors and Audit & Supervisory Board Members

To ensure that Directors and Audit & Supervisory Board Members can effectively fulfill their roles and responsibilities, we provide comprehensive explanations on important matters such as our business and management strategies, along with business risks, to newly appointed members. We also provide each Director and Audit & Supervisory Board Member with necessary training oppor­tunities (training by experts, site visits, etc.). In FY2023, training sessions were provided for Executive Directors (one session) and Outside Directors (five sessions). These include two sessions on business risks.

In addition, we strive to enhance cooperation and business knowledge among our Board of Directors by arranging regular lectures and opinion exchange meetings with external experts on affairs in the Middle East.