Anti-corruption and Compliance

Yokogawa promotes compliance management strongly throughout its entire group, with the slogan, "compliance above everything else". It aims to be a healthy and open business with two pillar foundations: "corporate culture that prevents misconduct" and "systems that prevent unethical conduct."

Provision of Compliance Promotion Structure

To build a "corporate culture that prevents misconduct" and "systems that prevent unethical conduct," a compliance promotion structure has been set in place globally. In Japan, compliance facilitators, who are advisors in the workplace, drive activities designed to communicate and entrench compliance awareness. Also, representatives from the compliance offices and key compliance facilitators in each organization are required to participate in the regular "Compliance Committee" meetings in order to share information and monitor the progress of activities.

Anti-bribery Guideline

Yokogawa has established and managed a specific guideline, as an internal bylaw, on bribery prevention, not only with respect to public servants but also to private citizens inside and outside Japan. It is intended to ensure compliance with the anti-bribery law in each country where the Yokogawa Group conducts business and prevent bribery while engaging in corporate activities in a fair, appropriate manner.

Enlightenment Activities

Yokogawa conducts compliance education and training to foster employees' awareness of compliance and a corporate culture that emphasizes fair, clear and open business conducts.

Compliance Training/Education

Yokogawa conducted a number of training/education programs again in 2016 in order to imbue all group companies with the concept of compliance awareness. All employees of our group companies inside and outside Japan received compliance training, while Japanese associates were given opportunities to learn about compliance in different circumstances, such as when being promoted to a manager position, before starting a new post as expatriate or upon joining the company.

Use of the Compliance Guidelines

Our Compliance Guidelines--which spell out the specific requirements for the Standards of Business Conduct and items the employees must observe in carrying out their duties--are currently published in English, Chinese and Portuguese. In 2016, compliance facilitators at our subsidiaries outside Japan again relied on these guidelines to step up their training programs.

Compliance News Issued

The "Compliance News" is issued bimonthly to all Group employees. It raises awareness of compliance among all employees through timely discussions of topics such as work climate and recent corporate scandals.

Revision of the Misconduct Case Studies

We have a handbook called "Misconduct Case Studies" for the purpose of preventing compliance violations. The handbook is updated each year with the addition of new examples that serve as real-life lessons collected from inside/outside the group. The revised editions are issued and made available to all employees.

Compliance Week

Aimed at all employees of Group companies in Japan, "Compliance Week" was held for the purpose of further instilling awareness of compliance. Activities carried out during the week included e-learning programs and solicitation of compliance slogans.

Some companies used the Compliance Week to take extra steps toward greater compliance in addition to taking part in the group-wide programs. For example, Yokogawa Solution Service uploaded write-ups for better communications and a simple diagnostic check sheet on workplace openness to their intranet with the goal of "building an open workplace environment."

Performing of Global Awareness Survey

An awareness survey regarding compliance is conducted for all Yokogawa Group employees every year. After analyzing the results by workplace and function in order to visually track how the compliance awareness of employees changes over time, the results are then used to facilitate the planning of the following year's activities.

Use of Consultation and Reporting System

To quickly identify and address compliance issues, a channel for reporting and inquiries has been established. In Japan, two hotlines are available: the internal hotline and the external hotline, which is staffed with lawyers.

An employee can contact the internal hotline anonymously or with his/her real name in order to report or consult on a compliance issue. The personal information of the employee who has contacted the external hotline will not be made available to the company. Both the internal and external hotline can be contacted by e-mail, over the phone or in writing. Each case will be investigated by keeping the identity of the reporting employee in strict confidence and in an expedient manner, in compliance with the manual on investigation.

Strict Prohibition of Insider Trading

To prevent insider trading, we have established the "Regulations on Prevention of Insider Trading" as an internal regulation and have included a section on prohibition of insider trading in our "Compliance Guidelines." Additionally, we have established a group-wide compliance structure and provided education, etc., to strictly prohibit insider trading.

The directors or employees in each YOKOGAWA Group company who buy and sell the stocks of Yokogawa Electric follow the prior confirmation procedure through the "insider trading prevention staff" in each company.

Moreover, the following people are uniformly prohibited from the buying and selling during the period from the end of a quarterly accounting term (the end of June, September, December, or March) to each date of the release of business results.

1. Directors and management in each company of Yokogawa Electric, Yokogawa Solution Service, Yokogawa Manufacturing, and Yokogawa Test & Measurement
2. Those who are directly engaged in the preparation and announcement of quarterly account settlement in Yokogawa Electric and its domestic subsidiaries

Actions to be taken to counter anti-social forces

Yokogawa's policy is to conduct business in compliance with laws, ordinances, commercial and social practices and other social norms while maintaining high moral values in the spirit of the "Standards of Business Conduct for the Yokogawa Group." We are doing the following to achieve this objective:

• We state the specific "Dealing with anti-social forces that pose a threat to safety and order" in the "Yokogawa Group Compliance Guidelines."
• Through the use of compliance training and the company newsletter, we bring home to all employees our basic stance on unreasonable demands and how to deal with such demands.
• We incorporate the provision on exclusion of anti-social forces in the text of our "Master Transaction Agreement" in compliance with the Organized Crime Exclusion Ordnance of Tokyo, and also execute a "Memorandum on Exclusion of Anti-social Forces" with our existing suppliers, contractors and customers.

Tax Compliance

Yokogawa, due to globalization of our business, shall abide by the following promises in taking tax-related actions in order to satisfy the tax liabilities of the countries and regions where Yokogawa operates, and execute appropriate tax risk management.

1. Making tax payment properly in accordance with tax laws and its related regulations of each country.
2. Taking appropriate actions in executing tax-related accounting treatment and measures.
3. Establishing tax governance structure and raising tax compliance awareness.
4. Taking actions in compliance with the international tax standards such as OECD (Organization for Economic Cooperation and Development) Transfer Pricing Guideline, BEPS (Base Erosion and Profit Shifting) Action Plan.
5. Building, maintaining and developing sincere and good cooperative relationships with the tax authority in each country.