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Corporate Governance System

Shionogi has adopted a "company with board of corporate auditors" corporate governance system that is composed of a Board of Directors, a Board of Corporate Auditors, and independent accounting auditors.
To further enhance the effective functioning of corporate governance, two outside directors were elected to the Board of Directors in fiscal 2009 and another was added in fiscal 2012 to promote comprehensive management decision-making incorporating an outside, objective perspective. The outside directors recognize their role as independent directors in helping the Company to fulfill its corporate responsibilities, making decisions with maximizing shareholder interests in mind from the standpoint of representatives of general shareholders and contributing to highly transparent management. The Board of Directors is composed of five directors, including the three outside directors. It meets once a month, in principle, to make decisions on important matters affecting management. To facilitate rapid responses to changes in the operating environment and clarify management responsibilities, the directors' term in office has been set at one year.
In addition, to further increase management transparency and accountability to stakeholders, the Company has established a Nomination Advisory Committee and a Compensation Advisory Committee as advisory bodies to the Board of Directors. Both committees are chaired by outside directors, ensuring that management decisions in these areas are examined from a fair and honest perspective, as well as that selected directors are vetted and evaluated from multiple angles, including assessment of aptitude, impact on management, quality of work performance, and appropriateness of compensation.
Moreover, the Company has introduced a corporate officer system to allow management policy to be reflected in operations without delay, and has built a flexible operational execution structure able to rapidly respond to changes in the operating environment. Furthermore, the Corporate Executive Meeting is a unit created to conduct deliberations regarding operational execution issues. It is composed of the directors, standing corporate auditors, and corporate officers responsible for operation, and, in principle, it meets every week.
The Company has appointed two standing corporate auditors and three outside corporate auditors to create a Board of Corporate Auditors that puts emphasis on the expertise of each individual and independence. The corporate auditors attend meetings of the Board of Directors, Corporate Executive Meetings, and other important meetings, offering opinions when necessary. In addition, by conducting operational and accounting audits in accordance with corporate auditing standards, they check and evaluate the legality and propriety of operations executed by directors and each corporate officer.

Corporate Governance System (As of April 2012)

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