Based on the Companies Act established by the Japanese government, EBARA’s organization comprises the Board of Directors, the Board of Corporate Auditors, and the Independent Auditor.
　The Board of Directors is composed of 12 members, and 4 of these are Outside Directors who have no special interest in EBARA. Under the rules for the activities of the Board of Directors established by the Company, it is ensured that the execution of the duties by the Directors complies with laws and regulations and the Company’s Articles of Incorporation. The Board of Directors holds regular monthly meetings and special sessions when necessary.
　The Board of Corporate Auditors comprises five members, three of whom are Outside Auditors who have no special interest in EBARA. Based on auditing plans and auditing principles drawn up by the Board of Corporate Auditors, it audits the conduct of management duties by the Directors. At the same time, it exchanges information and opinions with the Representative Director and with the Independent Auditor to ensure the effectiveness of auditing activities.
　The Company has appointed Ernst & Young ShinNihon LLC as its Independent Auditor, as required under the Companies Act and Japan’s Financial Instruments and Exchange Act.
　In addition to the organizational units required by law, EBARA has formed some organizational units on its own initiative. For example, the Management Meeting is convened monthly to provide management members with the chance to discuss various issues concerning management policy and strategy. Also, to ensure the transparency and objectivity in the selection of Directors and Executive Officers as well as in the determination of their compensation, the Company has established the Nominations Committee and the Compensation Committee, both of which have a majority of Outside Directors.
　Moreover, EBARA has established the Corporate Ethics Committee. The key organizational units of the Company’s corporate governance system, such as Outside Directors, Corporate Auditors, the Corporate Audit Depart ment, and departments in charge of internal auditing/internal control, play their own role in cooperation with each other under the Committee to realize the Company’s effective corporate governance systems.

Based on Japan’s Companies Act, in 2006 EBARA’s Board of Directors established the “Basic Internal Control Policy” for the development of its “system to ensure the properness of operations of the Company.” In 2008, the Company included its basic policy for structuring a “system for ensuring the reliability of financial reporting” within the “Basic Internal Control Policy.” In addition, in 2007, the Company formed its Internal Control Division, which reports directly to the President, and based on the “Basic Internal Control Policy,” it is responsible for the development of internal controls and for assessing their effectiveness.
　Regarding the structuring of its “system to ensure the properness of operations of the Company,” the Company is developing a compliance system, a risk management system, and systems for internal control within Group companies. Particularly in the case of risk management, the Company has organized its “Risk Management Panel,” which consists of all full-time Directors and is chaired by the President. This panel is in overall charge of material risks of the Company and other Group companies. In addition, to provide against the event of a crisis, the Company has already prepared a Business Continuity Plan (BCP) for a new strain of influenza A (H1N1). Moreover, since the fiscal year ended March 31, 2011, the Company has been giving consideration to a BCP in the event of a major disaster. However, following the occurrence of the Great East Japan Earthquake (March 11, 2011), the Company is taking account of its experience and is reviewing the assumptions of its plans.
　Regarding the development of a “system for ensuring the reliability of financial reporting,” during the fiscal year ended March 31, 2011, which marked the third year under the internal control reporting system that is based on Japan’s Financial Instruments and Exchange Act, the Company worked toward improving the efficiency of assessment processes and raising the quality of business processes for putting this system into completed form. To promote Group corporate governance from a perspective of “Company-Level Controls,” the Company expanded the items for evaluation and reporting that it requires of Group companies. For these items, assessments were conducted not on individual Group companies but on the departments in charge within the Head Office with the goal of making these assessments more efficient. For the assessments of “Process-Level Controls,” the assessment schedule was accelerated compared with that of the previous fiscal year. In this way, initiatives for identifying issues and making improvements in the departments actually operating the processes could be afforded, and the overall level of the Group could be increased.
　In its internal auditing systems, the Company has organized the Corporate Audit Department (CAD) as an independent unit reporting to the President. Based on the Company’s internal audit rules, the CAD selects important matters and themes and conducts audits related to the status of compliance, risk management, and other issues in the Company and other Group companies. The CAD is also in charge of internal control assessments (including financial reporting risk), from an independent perspective, under the Financial Instruments and Exchange Act. Their audits specifically include the examination and surveillance of the Company’s business activities covered by various laws and regulations in Japan, such as the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (for participation in tenders for government projects), the Act against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors (for purchasing from subcontractors), and the Construction Business Act (for the execution of construction projects). These auditing and monitoring activities make it possible to provide advice and recommendations for improvements to the business units through the auditing process, and its results are reported to the President of the Company. In addition, as deemed necessary, the CAD exchanges information and opinions with the Corporate Auditors and related departments.

The Company is fully aware that unethical behavior due to the lack of adherence to high standards of compliance may damage its management foundations. Accordingly, the Company positions full compliance with laws and regulations as one of its most-important internal control objectives. To attain this objective, the Board of Directors prepares a Board of Directors’ Compliance Action Plan each year and then makes available to employees the content of this plan, which spells out what they should do as directors. Also, the Company has formed the Corporate Ethics Committee, which is chaired by the President, and, with the advice of outside legal counsel, is responsible for discussing appropriate courses of action from an overall perspective related to legal provisions for internal controls, appropriateness of transactions, environmental preservation, human rights, the EBARA Group Code of Conduct, and other similar matters. At the same time, by performing periodic checks on the state of compliance promotion from a Company perspective, this committee monitors the execution of business activities and contributes to improvement in activities. In addition, Group company representatives are invited to meetings of this committee, and the status of initiatives related to compliance in each company is also confirmed. To keep personnel well-informed on these matters, the content of the committee’s discussions is made available to employees.
　The Company’s Compliance Department acts as the focal point for these various initiatives by providing advice and building the base for promoting compliance and ethical behavior in the Company’s overall activities. Also, to ensure that the various measures decided by the Corporate Ethics Committee are applied and implemented in Group companies, EBARA has formed the Group Compliance Network, which includes personnel in charge of corporate ethics at subsidiaries and consolidated companies. With the goals of ensuring that the awareness of the importance of compliance is communicated to each and every employee and identifying compliance risks at an early date, EBARA has also established its Compliance Liaison System, which assigns liaison personnel to the working units. In addition, the Compliance Department conducts a compliance survey once a year, and, by making it possible to assess how well the spirit of compliance has permeated the organization, the survey contributes to improvement in compliance systems and measures.
　To address potential violations of legal provisions and other ethical issues, the basic understanding is that personnel will receive advice from their supervisors and others in the normal course of business operations. However, the Company also provides for in-house consultation, which is in addition to a compliance consultation function outside the Company conducted by outside legal counsel. Under this “whistle-blower” system, measures have been adopted to preserve the confidentiality of personnel providing such compliance-related information and prevent them from being disadvantaged. This system is designed to actively solicit compliance-related information from internal sources and thereby prevent unethical behavior as well as discover improper activities as quickly as possible.