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MOL’s Approach to Governance, Safety and CSR (2014)

Shizuo Takahashi
 Managing Executive Officer(title at that time)

We will continue to build a highly transparent management foundation that brings both order and growth dynamics.

Corporate Governance that Supports Growth Dynamics

MOL believes there are two sides to effective corporate governance. The first is defensive, focused on eliminating risks and ensuring business is conducted in line with social norms and corporate ethics. The other side is offensive, striving to maximize corporate value by accurately evaluating latent risks in the process of pursing business opportunities, then actively taking those risks deemed reasonable. In short, a company needs both wheels of governance. One brings order, the other provides growth dynamics. Only after both wheels are firmly in place, can a company gain the trust of its customers, stockholders, business partners, employees, local communities and wide-ranging stakeholders to sustainably conduct business operations.
MOL greatly shored up its management structure in the five years leading up to 2002. Taking a lead position among Japanese companies, MOL established an advanced, highly transparent corporate governance structure by, for example, inviting external directors and introducing an executive officer system. While you could say we are now reaping the benefits of those efforts, MOL has only arrived at its current position through a process of continuous improvement and evolution. We have worked hard to enhance corporate value.
The fruit of these efforts can be found in the growth we achieved through the successful implementation of a series of mid-term management plans. We were also able to overcome the oppressive business environment from around 2011 to 2012 and return to a growth trajectory through the Business Structural Reforms of 2012. This can be attributed to the proper functioning of corporate governance.
However, we must deeply reflect on the fact that during the boom period, before the onset of the financial crisis, we compounded significant market exposure risks, as well as the fact that car carriers became involved in cartel-related violations. Under the new midterm management plan, “STEER FOR 2020,” the strengthening of total risk control and compliance is regarded as a priority issue around which the entire MOL Group is coming together to carry out.

Safe Operation as the Wellspring of Competitiveness

A major premise for our business activities lies in the following MOL Group Corporate Principle: “We will promote and protect our environment by maintaining strict, safe operation and navigation standards.” Everyone at the Group knows that there is no completion date on maintaining strict, safe operation and navigation standards. We need to endlessly focus our efforts on making continuous improvements. This is why we established the Operational Safety Committee chaired by the president of MOL. This is also the reason top management is proactively taking the lead in evaluating and determining important matters related to safe operation.
Maintaining strict, safe operation is also directly connected to the quality of service we provide our customers. For this reason, MOL has set achieving the Four Zeroes (an unblemished record in terms of serious marine incidents, oil pollution, fatal accidents and cargo damage) as a permanent target. We are striving for transparency by monitoring standard quantitative key performance indicators (KPIs), such as the number of work-related accidents, operational stoppage time and operational stoppage accident rate. And by proactively disclosing MOL’s shipping quality to stakeholders, MOL is doing its utmost to be the carrier of choice.
As we place more focus on LNG carrier shipping and offshore businesses going forward under “STEER FOR 2020,” customers and society at large will demand an even higher level of safe operation. MOL’s ability to deliver this will, through marketing, likely become a powerful point of differentiation, setting us apart from other companies. MOL will not become complacent with the track record it has cultivated thus far. We will always place safe operation as our ultimate core competence. And in securing human resources as we expand the LNG carrier business, we will continue to actively promote the employing and training of superior marine and inland personnel. We aim to be the company of choice.

Tightening Global Environmental Regulations as a Business Chance

In the world of international seaborne trade, the 21st century is said to be the era of environmental regulation. New regulations are steadily being introduced to prevent global warming, conserve biodiversity, and protect the sea and the air. In responding concretely, MOL views these evolving regulations as a business opportunity. MOL will leverage its practical environmental technologies and know-how to attain a competitive advantage and advance toward further growth. To this effect, we have launched the Senpaku ISHIN project, have set targets for introducing environmental technologies and we are making fi rm strides toward achieving our goals. For example, the hybrid car carrier Emerald Ace, delivered in 2012, earned plaudits from automakers striving to lower environmental load over the entire product lifecycle.

Social Contribution Activities Centered on MOL’s Main Businesses and Sharing Global Values

In terms of social contribution, MOL especially promotes activities that synergize with our areas of business. For example, over half of the seafarers aboard our vessels are Filipinos. Their homeland lies in the frequent path of typhoons so, unfortunately, the Philippines is often visited by calamity. When this happens, we swiftly conduct on-site disaster relief operations and support reconstruction by providing relief supplies and funds to help people return to their normal lives. On a different continent altogether, MOL participates in a support project by the U.N. Development Programme to combat the pirate problem in the waters around Somalia. We are working hard to enable the young people of Somalia to fi nd employment in proper lines of work by solving underlying problems through the establishment of inland social infrastructure. The nations of Africa are expected to grow and we will continue to leverage the unique strengths of maritime shipping to promote stability, for example, by transporting desks and chairs to be used in schools for free and cooperating in shipments of mobile libraries. Taking the long view, these initiatives will serve as the cornerstone of our sustainable growth and through them, our Group employees from all around the world can really feel that our business activities are contributing to the betterment of people’s lives through marine shipping. Furthermore, as a company expanding globally, we share universal values. It is important to show that MOL acts in accordance with those values. MOL was quick to participate in the United Nations Global Compact in 2005 and has endeavored to support and carry out the Global Compact’s 10 principles, which span the four fields of human rights, labour, environment and anti-corruption

MOL’s Fighting Spirit is in Its DNA

MOL’s views as explained above regarding governance, safe operation, CSR and the environment are based on a corporate culture fostered throughout a 130-year history. Above all, I believe that MOL’s unique DNA is essentially its indomitable fighting spirit. Unyieldingly taking on new challenges is what I believe enables MOL’s sustainable corporate activities. To remain sustainable, it is necessary to set high targets and tirelessly pursue them. Reasonable risks must also be taken to be sustainable. Under “STEER FOR 2020,” we will greatly reduce our market exposure risks as we set course to pursue long-term stable profits, especially in LNG carriers and offshore businesses. The decision to shift its investment focus to LNG carriers and offshore businesses with a significant \700 billion investment is a remarkably bold decision. This kind of decision, however, is made based on the results of business intelligence, which the Company considers vital to governance. I want to stress that “STEER FOR 2020” is the result of a thorough decision-making process. Management, including outside directors, comprehensively examined the arguments analyzing relevant data from many angles, starting with front-line data collected by MOL’s employees. They only arrived at their decision after thoroughgoing debate and completing a careful governance process that included quantitative and qualitative risk assessment.
This year, MOL celebrates its 130th anniversary. From its forebears, open communication has been steadfastly handed down over all these years. Open communication remains a value the Company prides itself on, and a virtue essential to new endeavors. Valuing such endeavors, I would like to create a highly transparent management foundation that brings both order and growth dynamics. Rather than governance that merely constrains everyone to a predetermined mold, this two-sided form of corporate governance will enable us to anticipate long-term trends and customer needs to achieve the continued creation of corporate value.

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