Our Policy

INPEX’s approach to corporate governance is designed to ensure transparent, fair, timely, and conclusive decision-making and to fulfill our social responsibilities in cooperation with our shareholders and other stakeholders, to ultimately support sustainable growth and increase corporate value over the medium to long term.

We have developed and disclosed our Corporate Governance Guidelines, which aim to ensure transparency and fairness in decision-making and effective corporate governance through proactive information disclosure. These guidelines are reviewed and revised as appropriate in line with developments in corporate governance.

Governance Structure

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—for the purpose of strengthening the independence, objectivity, and accountability of the functions of the Board of Directors 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, with the aim of maintaining sustainable growth and enhancing medium- and long-term corporate value.

A 100% attendance rate was achieved for all meetings held in FY2022 for each committee.

We have also established the Compliance Committee for the purpose of promoting consistent compliance initiatives throughout the Group. Further information is included in the “Compliance: Management Structure” section.¹

We have many opportunities to engage in important negotiations with the governments of oil-producing countries, government-owned oil companies, and international oil companies. This requires Executive Directors and Executive Officers who have knowledge, expertise, and international experience related to our business, and in-depth knowledge of both the Company and their particular fields of expertise. For this reason, in principle, Executive Directors hold concurrent positions as Executive Officers. By adopting this organizational structure, our Board of Directors is better placed to make efficient business decisions and ensure the effective supervision of management.

At the same time, we have appointed five of the 12 members of the Board of Directors from outside the Company to improve management transparency and strengthen the effective supervisory function of the Board of Directors. We also take advantage of the objective perspectives of Outside Directors, which may differ from those of the Executive Directors. Given their independent standing, Outside Directors are expected to provide advice based on their own knowledge and experience, supervise management and conflict-of-interest transactions, and appropriately represent the views of stakeholders at Board of Directors meetings.

Our Outside Directors have either worked in corporate management or academia, or are specialists in fields such as the resources and energy industry, finance or legal affairs. They have been appointed for their extensive experience and wide-ranging insights, and to ensure diversity. Diversity herein refers not only to diversity of knowledge, experience or skills, but also areas such as gender or perspective.

In light of our management strategy, we have identified nine specific skill sets that our Board of Directors should have, and mapped relevant skill sets to each Director, as shown in the skill matrix below.

The number of directors in our Board of Directors is set at between 3 and 16, of which a third or more must be Independent Outside Directors.

We are making progress to increase the diversity of our Board of Directors and management-level personnel 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, in addition to both a female Outside Director and a female Audit & Supervisory Board Member. In addition, in March 2020 we also observed the first internal promotion of a female employee to an Executive Officer role.

As of March 31, 2023, four of the five Audit & Supervisory Board Members are Outside Auditors. Our Audit & Supervisory Board has been established pursuant to Japanese laws and regulations to strengthen the audit function and ensure the independence of Audit & Supervisory Board Members and the effectiveness of audits. Our further efforts include assigning audit assistants to the Audit & Supervisory Board Members’ Office—which assists Audit & Supervisory Board operations—and strengthening this 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.

¹ Compliance - Management Structure

Corporate Governance System

Attendance at the Board of Directors meetings during FY2022

In principle, the Board of Directors meets on a monthly basis, with 15 meetings being held in FY2022. The attendance of all Directors at Board of Directors meetings is shown in the table below.²

² Notice of Resolutions of the 17th Ordinary General Meeting of Shareholders: pp. 12, 78, 79

Effectiveness Evaluation Results of Board of Directors in FY2022

With the aim of regularly verifying that the Board of Directors is functioning appropriately and to identify issues for continuous improvement, we conduct an annual evaluation of the effectiveness of the Board of Directors and disclose a summary of the results. In line with this policy, we conducted our eighth evaluation in FY2022. The evaluation method and summary of the results are as follows.

Evaluation Method

An interim review of the issues identified in the effectiveness evaluation for the previous fiscal year was undertaken at a meeting with Outside Directors and Audit & Supervisory Board Members held in August 2022. The implementation method for the current fiscal year’s effectiveness evaluation was also discussed, including how to involve a third-party evaluation organization.

A decision was made to retain the Board of Directors self-evaluation method as the effectiveness evaluation in FY2022, an approach confirmed to be appropriate by a third-party evaluation organization in the FY2020 evaluation. The FY2022 evaluation was thereafter discussed at a Board of Directors meeting held in October 2022, including the implementation policy and the content and composition of the evaluation survey prepared by the Board of Directors secretariat.

In addition to a self-evaluation by each Director and Audit & Supervisory Board Member, the items evaluated included: the composition, operation, roles and responsibilities of the Board of Directors; the operations of the Nomination and Compensation Advisory Committee; and the status of improvement of issues identified in the previous evaluation.

Additionally, in December 2022, an anonymous online survey including open-ended questions was issued to all Directors and Audit & Supervisory Board Members to encourage more specific opinions.

The survey results were consolidated and analyzed by the secretariat for discussion at a February 2023 meeting of the Outside Directors, Audit & Supervisory Board Members, and the Representative Directors, where issues and future initiatives were also raised. Based on that discussion, the following evaluation results were confirmed at the Board of Directors meeting held the same month.

1. The overall effectiveness of the Board of Directors was confirmed to be sufficient, as in the previous fiscal year.
2. The following initiatives were commended, and their continuation requested: (i) pre-meeting briefings; (ii) lectures and opinion exchange meetings with external experts; and (iii) enhanced explanation of background circumstances to support discussions on new projects.

The following issues were identified as future initiatives to further ensure the effectiveness of the Board of Directors:

• Enhancement of discussions on management strategies and further invigoration of discussions at Board of Directors meetings
• Deeper discussions on the desired state of the Board of Directors
• Ongoing enhancement of portfolio management

We will continue include to improve the effectiveness of the Board of Directors based on the results of this evaluation.

A status of efforts to address issues based on the results of the FY2021 effectiveness evaluation is as follows:

Deeper discussions on management strategies, including the planning and progress of initiatives for each of the Net Zero businesses

• Progress and action plans for each business are reported at the monthly Board of Directors meetings, and items where notable progress has been made are reported and discussed as individual agenda items.
• Opportunities are provided to discuss key management issues and themes from a medium- to long-term perspective.
• Appropriately understand domestic and international policy trends that have a significant impact on business and reflect them in management strategy discussions.

Further invigoration of discussions at Board of Directors meetings

• Holding online pre-meeting briefings and disclosing the content of Executive Committee meetings to clarify the agenda of Board of Directors meetings and ensure optimal deliberation time for each proposal.
• Efforts to promote the understanding of relevant matters by the Board of Directors, including Outside Directors, by providing: information on the latest trends in oil prices, exchange rates, etc.; detailed annotations for industry terminology; and thorough explanation of the background circumstances for specific or new matters.
• Arranged a lecture and opinion exchange meeting on the Middle East situation for the Board of Directors with an external expert.

Deeper discussions on the desired state of the Board of Directors

• The Nomination and Compensation Advisory Committee furthered discussions on enhancing board diversity (such as in support of climate change response, participation by foreign nationals, more female members, etc.) and the appropriate board size and composition. The contents of this discussion were thereafter reported to the Board

Enhanced discussions on portfolio management

• Appropriately understand trends in the business environment and ensure timely opportunities to discuss Company-wide portfolio optimization.
• Held a Board of Directors meeting in Abu Dhabi, one of the Company’s core regions, to deepen the understanding of our business by the Board of Directors (including Outside Directors), and to build relationships between the Board of Directors and Abu Dhabi-based stakeholders such as partners and local communities.

Corporate Governance Topics

Board of Directors Meeting in Abu Dhabi

We are engaged in oil development projects in the Emirate of Abu Dhabi of the United Arab Emirates (UAE) through our subsidiary, Japan Oil Development Co., Ltd. (JODCO). JODCO celebrates its 50th anniversary in 2023, and to express our commitment to the UAE for the next 50 years, we held a Board of Directors meeting in Abu Dhabi on January 24, 2023.

The Board of Directors meeting included discussions on: our future strategies for the UAE over the next 50 years; the maintenance and expansion of oil production in Abu Dhabi; the development of low-carbon, clean energy businesses such as hydrogen, and ammonia projects; and strengthening social contribution activities to deepen relations between Japan and the UAE, in which the 2023 United Nations Climate Change Conference (COP28) for the United Nations Framework Convention on Climate Change (UNFCCC) will be held.

In addition, the Board exchanged opinions with COP28 President-Designate, Sultan Ahmed Al Jaber, who is also CEO of ADNOC and the Minister of Industry and Advanced Technology for the UAE. Minister Al Jaber thanked INPEX for our commitment to the UAE and discussed his expectations for the continued strengthening of the partnership with INPEX in the fields of decarbonization, hydrogen, and clean energy development to actively address climate change and achieve energy transition.

Skill Matrix

The knowledge, experience, and skills our Board of Directors should possess to execute our Long-term Strategy and Medium-term Business Plan (INPEX Vision @2022) with the aim of realizing a net zero carbon society in 2050 are those shown in the table below.

Compensation for Directors

Basic Management Policy for Compensation

Compensation for our Directors is based on the following basic management policy:

1. Contribute to the attraction and retention of superior management personnel to realize our Mission.
2. Raise awareness of director contributions to our sustainable growth and enhancement of corporate value over the medium to long term.
3. Ensure a transparent and objective compensation system that is accountable to shareholders and other stakeholders

Based on said policy, the Board of Directors of the Company has adopted the following decision-making policy which helps to determine the content of remuneration, etc. for each individual director of the Company.

In deciding the individual compensation for Directors, the Nomination and Compensation Advisory Committee—which serves as an advisory body to the Board of Directors and comprises a majority of Outside Directors—studies compensation proposals from various angles, including compliance with the decision-making policy, so the Board of Directors respects the Committee’s report and determines it to be compliant with the decision-making policy.

Compensation Levels

Our process for determining compensation levels for our Directors is inclusive of analysis of data prepared by external research organizations on the levels applied for each Director position in companies of a similar size or within similar industries. Our Nomination and Compensation Advisory Committee then verifies the appropriateness of the compensation levels to be recommended, and the levels are finally set by resolution of the Board of Directors.

These levels are also revised from time to time in response to changes in the external environment or other factors.

Compensation Structure

The compensation of Directors (excluding Outside Directors) consists of basic compensation in accordance with the duties of each position, bonuses as a short-term incentive, and stock-based compensation as a medium- to long-term incentive. The particulars of each category are shown in the table below. Note that compensation for Outside Directors consists only of basic compensation from the perspective of the independence of their duties.

Where the target achievement level is 100%, the President & CEO’s basic compensation is, in general, set at a ratio of 50%:30%:20% respectively for basic compensation, bonuses, and stock-based compensation.

Process for Determining Directors’ Compensation

Our Nomination and Compensation Advisory Committee—which is largely composed of our Outside Directors—was established as an advisory body to the Board of Directors to strengthen the independence, objectivity, and accountability of the Board of Directors’ function in determining compensation for each Director.

Based on reports by this Committee, the Board of Directors establishes a policy for determining the amount of compensation for Directors and the method of calculating such amount.

The Nomination and Compensation Advisory Committee is expected to meet, in principle, at least four times a year to discuss major matters concerning the policy for determining the amount and calculation method of compensation for Directors, details of individual compensation, and other relevant matters, and to provide advice and recommendations to the Board of Directors. The Board of Directors makes its decisions on compensation closely considering this advice and recommendations. The amount of compensation to be paid to each Director (including the total amount of bonuses based on the evaluation of the performance of the division in charge) shall be decided by the Representative Director, President & CEO—who has been entrusted by resolution of the Board of Directors and is most familiar with our management situation—in accordance with the advice and recommendations of the Committee.

We may adjust how we calculate the amount of compensation for each Director according to changes in the external environment and social and economic trends. Such adjustments are conducted by resolution of the Board of Directors and after careful deliberation by the Nomination and Compensation Advisory Committee about the appropriateness of the target value and calculation method for performance-linked compensation.

INPEX does 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 or other such directives. issued by the Financial Services Agency of Japan.

Audit & Supervisory Board

We have adopted an audit & supervisory board members system which comprises a five-member Audit & Supervisory 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 the Board of Directors meetings, or as necessary. The Audit & Supervisory Board makes resolutions 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 FY2022, a total of 19 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 properly fulfill their roles and responsibilities, we provide a thorough overview of important matters such as our business and management strategies as well as business risks to newly appointed Directors and Audit & Supervisory Board Members. We also provide each Director and Audit & Supervisory Board Member with necessary training opportunities (training by experts, site visits, etc.). In 2022, training sessions were provided for both Executive Directors (one session) and Outside Directors (five sessions). These include two sessions on business risks for Outside Directors.

In addition, we strive to enhance cooperation and business knowledge among our Board of Directors by arranging regular lectures and opinion exchange meetings for the Directors with external experts in the environment, energy, and other relevant fields.