Corporate Governance

Information contained in this article is a reference from Annual Report 2008.

• 1. Basic Concept of Corporate Governance
• 2. Corporate Governance Structure
• 3. Internal Control Systems
• 4. Policy on Control of Matsushita Electric Industrial Co., Ltd.
• 5. Significant Differences in Corporate Governance Practices between Matsushita and U.S. Companies Listed on the NYSE

Matsushita's corporate governance system is based on the Board of Directors, which is responsible for deciding important operational matters for the whole Group and monitoring the execution of business by Directors, and the Board of Corporate Auditors, which is independent from the Board of Directors. The Corporate Auditors and the Board of Corporate Auditors are responsible for auditing the performance of duties by Directors. Matsushita has established the following management system based on the implementation of autonomous management in each business domain and the Company's corporate governance system.

The Board of Directors and Executive Officer System

Matsushita's Board of Directors is composed of 19 directors, two of whom are Outside Directors, as of June 26, 2008. In accordance with the Company Law and relevant laws and ordinances (collectively, the "Company Law"), the Board of Directors has ultimate responsibility for administration of the Company's affairs and monitoring of the execution of business by Directors. Under its basic philosophy "A company is a public entity of society," Matsushita has long been committed to enhancing corporate governance, and was one of the first Japanese companies to invite Outside Directors to serve on its Board of Directors.

Matsushita has an optimum management and governance structure tailored to the Group's business domainbased organizational structure. Under this structure, Matsushita has empowered each of its business domain companies through delegation of authority. At the same time, the Company employs an Executive Officer System to provide for the execution of business at various domestic and overseas Matsushita Group companies. This system facilitates the development of optimum corporate strategies that integrate the Group's comprehensive strengths.

In addition, Matsushita realigned the role and structure of the Board of Directors to ensure swift and strategic decision-making, as well as the optimum monitoring of Groupwide matters. Specifically, the Board of Directors concentrates on corporate strategies and the supervision of business domain companies, while Executive Officers handle responsibilities relating to day-to-day operations. Taking into consideration the diversified scope of its business operations, Matsushita has opted to maintain a system where Executive Officers, who are most familiar with the specifics of their respective operations, take an active part in the Board of Directors. Furthermore, to clarify the responsibilities of Directors and create a more dynamic organization, the Company has limited the term of each Director to one year.

Corporate Auditors and the Board of Corporate Auditors

Pursuant to the Company Law, Matsushita has appointed Corporate Auditors and established a Board of Corporate Auditors, made up of Corporate Auditors. The Corporate Auditors and Board of Corporate Auditors monitor the status of corporate governance and keep abreast of the day-to-day activities of management, including the Board of Directors. As of June 26, 2008, the Company had five Corporate Auditors, including three Outside Corporate Auditors.

Corporate Auditors participate in shareholder meetings and Board of Directors' meetings, and have legal authority to receive reports from Directors, employees and accounting auditors. Full-time Senior Auditors also attend important meetings and conduct checks in order to ensure effective monitoring. To augment internal auditing functions in the Group, Matsushita has assigned eight non-statutory fulltime senior auditors at internal divisional companies to assist in audits by Corporate Auditors. Matsushita also inaugurated regular Group Auditor Meetings (comprising 18 full-time senior auditors and non-statutory full-time senior auditors from main Company subsidiaries) chaired by the Chairman of the Board of Corporate Auditors of the Company to enhance collaboration between the Company's Corporate Auditors, non-statutory full-time senior auditors of internal divisional companies and Corporate Auditors of the Company's subsidiaries. In addition, as part of their audit duties, Corporate Auditors maintain close contact with the Internal Audit Group to ensure effective audits. Moreover, in order to enhance the effectiveness of audits conducted by Corporate Auditors and ensure the smooth implementation of audits, Matsushita has established a Corporate Auditor's Office with a full-time staff of five under the direct control of the Board of Corporate Auditors.

Corporate Governance Structure
<Functions of Board of Directors, Executive Officers and Board of Corporate Auditors>

Remuneration Policy

The maximum total amounts of remuneration for Directors and Corporate Auditors of Matsushita are determined by a resolution at a general meeting of shareholders. The remuneration amount for each Director is determined by Matsushita's Representative Directors who are delegated to make such determination by the Board of Directors, and the amount of remuneration for each Corporate Auditor is determined upon discussions amongst the Corporate Auditors.

Under a Board of Directors' resolution, the amounts of the remuneration and bonuses of Directors are linked to individual performance based on Capital Cost Management (CCM)* and sales (an indicator of growth potential). By implementing this performance evaluation criteria based on shareholder interests, Matsushita intends to promote continuous growth and enhance profitability on a long-term basis for the Matsushita Group as a whole.

In order to realize a remuneration system with a high level of transparency and acceptability, Matsushita terminated its retirement benefits for Directors and Corporate Auditors in June 2006.

• * CCM is an indicator created by Matsushita to evaluate return on capital.

Compliance

The Company has formulated the Matsushita Group Code of Conduct to clearly explain in easy-to-understand terms how its management philosophy should be implemented. As a unified global standard, the code applies to all the Matsushita Group's Directors, Executive Officers, and employees. Matsushita has also formulated a Code of Ethics for Directors and Executive Officers stating the fundamental ethics required of the Company's top managers.

In addition, the Company has created a Corporate Compliance Committee, which is chaired by the President and made up of relevant Directors, Executive Officers and Corporate Auditors. Meeting twice yearly, this committee has a Companywide remit and is responsible for discussing and sharing information concerning compliance issues and communicating compliance action policy.

Matsushita also works to ensure compliance in its global business activities. Specifically, the Company has appointed legal affairs managers at business domain companies, overseas regional headquarters and other entities, and has also appointed Directors and Executive Officers in charge of ensuring compliance with the code, as well as personnel responsible for fair trade and export controls. Based on cooperation with all relevant parties, Matsushita works to enforce Companywide compliance policy, as well as to provide training and promote awareness, in all the countries and regions where it operates. In particular, "Enhancing Compliance Month," launched in 2006 as an initiative in Japan, was positioned as a global undertaking in fiscal 2008. During this period, messages are sent from the president, tests are conducted to assess understanding of compliance, and unique activities are conducted in each country and region in a bid to raise compliance awareness on a global level throughout the Company.

Matsushita has a Global Corporate Business Ethics Hotline, enabling all employees in Japan and overseas to receive advice about possible violations of laws related to their duties or corporate ethics. The Company also established a system whereby the Board of Corporate Auditors can directly receive concerns from employees and other individuals with regard to accounting or auditing irregularities, thereby helping to improve financial soundness.

Risk Management

In addition to centralized collection and analysis of information, Matsushita maintains a management cycle that links risk management activities with other business management initiatives. In April 2005, Matsushita established the Global and Group (G&G) Risk Management Committee, consisting of Directors and Executive Officers from various departments of the Corporate Headquarters. Matsushita also established similar functional committees at business domain companies and subsidiaries to formulate appropriate countermeasures on a global and Group basis. Specifically, all business domain companies and subsidiaries of the Matsushita Group assess risks once a year, coinciding with the creation of annual business plans. Using the results of these surveys, the G&G Risk Management Committee then evaluates risks according to priority, and directs each business domain company on appropriate countermeasures. Progress in implementing these countermeasures is also monitored. Furthermore, in May 2006, the G&G Risk Management Committee formulated the Basic Risk Management Regulations, which outline the basic objectives of risk management and action guidelines for promoting risk management. In February 2008, in order to ensure the implementation of and strengthen internal controls further, chairpersonship of the G&G Risk Management Committee was handed from the Managing Director in Charge of Corporate Risk Management to the President. Matsushita has been operating Companywide Emergency Measure Regulations, mainly for disaster risks, since they were drafted in September 1995. However, in order to respond to the diversification of risks and their increasing impact as well as public demands, the Company has revised these regulations, widening their scope to include other risks. The revisions also clarify the systems and functions that will deal with Companywide emergencies in order to ensure a seamless and timely response.

Matsushita will make comprehensive efforts in risk management to recognize business risks through the abovementioned process and take countermeasures that protect the interests of all stakeholders, while helping the Company achieve its business goals.

Information Security

With the advent of the information society, the value of information in business has grown enormously. This prompted Matsushita to take a pioneering step with the establishment of a Corporate Information Security Division in January 2004. This division was created to achieve the three aims listed below. Specifically, the Company will implement initiatives to attain a world-class level of information security by setting and working toward common global targets and training information security personnel.

1. Ensure a high degree of trust in the Company by achieving the same level of information security for each business site and employee worldwide, and by managing customer and business partner information in an appropriate manner.
2. Boost management efficiency and enhance corporate value by ensuring trade secrets, personal information, technical data and other information held by the Company are used and shared safely.
3. Formulate common global rules, build a global implementation framework and conduct regular training programs for all Matsushita employees to raise awareness of information security among all employees and create a culture of information management.

Internal Controls over Financial Reporting

Matsushita has documented its internal control system, designed to ensure reliability in financial reporting of the Matsushita Group including its subsidiaries, ranging from the control infrastructure to actual internal control activities. The Company has reinforced its internal controls by implementing self-checks and self-assessment programs, in addition to regular internal auditing at each business domain company. Matsushita has also appointed an Internal Auditing Manager at each business domain company who audits the compliance status and effectiveness of internal controls.

The Corporate Internal Auditing Group supervises these activities in order to ensure the reliability of each company's financial reporting. With the aim of further enhancing the Group's internal control system, Matsushita has appointed approximately 300 personnel to conduct internal audits, including 21 people in the Corporate Internal Auditing Group.

Information Disclosure Structure and Execution of Accountability

To enhance transparency and ensure accountability, the Company established the Disclosure Committee, consisting of general or executive managers from departments that handle relevant information. The Committee checks the propriety of statements and descriptions in the Company's annual securities reports and quarterly earnings reports submitted to the Japanese regulatory authorities and its filings with the U.S. Securities and Exchange Commission, including its annual reports on Form 20-F, while confirming the appropriateness and effectiveness of its disclosure controls and procedures.

Basic Policy

Since its establishment, Matsushita has operated its businesses under its basic management philosophy, which sets forth that the mission of a business enterprise is to contribute to the progress and development of society and the wellbeing of people through its business activities, thereby enhancing the quality of life throughout the world. Aiming for further growth to become a global excellent company, Matsushita will work to deliver sustained growth in corporate value to satisfy its shareholders, investors, customers, business partners, employees and all other stakeholders.

Matsushita has a basic policy that shareholders should make final decisions in the event of a Large-scale Purchase of the Company's shares, regarding whether or not the Large-scale Purchase should be accepted. However, there is the possibility that such Large-scale Purchaser may not provide shareholders with sufficient information for making appropriate decisions. There is also concern that any Largescale Purchase may damage corporate value and shareholder interest. In this event, the Company may take countermeasures in order to protect the interests of all shareholders.

Measures to Realize Basic Policy

1) Specific measures to realize basic policy

Matsushita's mid-term management plan GP3, which runs from fiscal 2008 to fiscal 2010, is based on the fundamental concept of delivering steady growth with profitability. Under this plan, the Company will implement a range of measures to achieve the targets of ¥10 trillion in sales, representing growth, and ROE of 10%, measuring capital efficiency. In terms of concrete measures, Matsushita will concentrate management resources on its strategic businesses, while actively pursuing manufacturing of more competitive products based on its unique technologies. Moreover, in order to reinforce management structures, the Company will reduce costs and curb total assets by reducing inventories. In addition, the Company sees reducing the environmental load of all business activities as being just as important as steady growth with profitability. Accordingly, Matsushita will accelerate environmental sustainability management with a goal of reducing CO2 emissions by 300,000 tons (compared with fiscal 2007 levels) at all manufacturing sites around the world by fiscal 2010.

Matsushita also strives to maximize its corporate value by utilizing cash flows generated by business activities for actively distributing profits to shareholders through its own share repurchases and the payment of cash dividends, as well as for acquiring intellectual property rights or conducting M&As.

2) Measures based on the basic policy to prevent control by inappropriate parties

On April 28, 2005, the Board of Directors resolved to adopt a policy related to a Large-scale Purchase of the Company's shares called the Enhancement of Shareholder Value (ESV) Plan. With respect to On April 28, 2005, the Board of Directors resolved to adopt a policy related to a Large-scale Purchase of the Company's shares called the Enhancement of Shareholder Value (ESV) Plan. The ESV Plan has continued to be adopted, with Board of Directors' meetings in April of each subsequent year reaffirming the basic thinking behind the plan. At the April 28, 2008 Board of Directors' meeting, the ESV Plan was approved again.

With respect to a Large-scale Purchaser who intends to acquire 20% or more of all voting rights of the Company, this policy requires that (i) a Large-scale Purchaser provide sufficient information, such as its outline, purposes or conditions, the basis for determination of the purchase price and funds for purchase, and management policies and business plans which the Large-scale Purchaser intends to adopt after the completion of the Large-scale Purchase, to the Board of Directors before a Large-scale Purchase is to be conducted and (ii) after all required information is provided, the Board of Directors should be allowed a sufficient period of time (a sixty-day period or a ninety-day period) for consideration. The Board of Directors intends to assess and examine any proposed Large-scale Purchase after the information on such purchase is provided, and subsequently to disclose the opinion of the Board of Directors in order to assist shareholders in making their decisions. The Board of Directors may negotiate with the Large-scale Purchaser regarding purchase conditions or suggest alternative plans to shareholders, if it is deemed necessary.

If a Large-scale Purchaser does not comply with the rules laid out in the ESV Plan, Matsushita's Board of Directors may take countermeasures against the Large-scale Purchaser to protect the interests of all shareholders. Countermeasures include the implementation of stock splits, issuance of stock acquisition rights or any other measures that the Board of Directors is permitted to take under the Company Law in Japan, other laws and the Company's Articles of Incorporation. If a Large-scale Purchaser complies with the Largescale Purchase rules, the Board of Directors does not intend to prevent the Large-scale Purchase at its own discretion, unless it is clear that such Large-scale Purchase will cause irreparable damage or loss to Matsushita. The Board of Directors will make decisions relating to countermeasures by referring to advice from outside professionals, such as lawyers and financial advisers, and fully respect the opinions of Outside Directors and statutory corporate auditors.

When invoking the aforementioned countermeasures, if the Company's Board of Directors decides that it is appropriate to confirm the will of shareholders from the perspective of the interest of all shareholders, a general meeting of shareholders will be held. If the Company's Board of Directors decides to hold a general meeting of shareholders, it will give notice to that effect as well as the reasons for such a meeting at that time.

The Board of Directors will adopt specific countermeasures which it deems appropriate at that time. If the Board of Directors elects to make a stock split for shareholders as of a certain record date, the maximum ratio of the stock split shall be five-for-one. If the Board of Directors elects to issue stock acquisition rights in a rights offering, the Company will issue one stock acquisition right for every share held by shareholders on a specified record date. One share shall be issued on the exercise of each stock acquisition right. If the Board of Directors elects to issue stock acquisition rights as a countermeasure, it may determine the exercise period and exercise conditions of the stock acquisition rights, as well as the conditions that allow the Company to acquire stock acquisition rights by swapping Company stock with a party other than the Large-scale Purchaser, in consideration of the effectiveness thereof as a countermeasure, such as the condition that shareholders do not belong to a specific group of shareholders including a Large-scale Purchaser.

The Company recognizes that the aforementioned countermeasures may cause damage or loss, economic or otherwise, to a prospective Large-scale Purchaser who does not comply with the Large-scale Purchase Rules. Matsushita does not anticipate that taking such countermeasures will cause shareholders, other than the Large-scale Purchaser, economic damage or loss of any rights. However, in the event that the Board of Directors determines to take a specific countermeasure, the Board of Directors will disclose such countermeasure in a timely and appropriate manner, pursuant to relevant laws and stock exchange regulations.

The term of office of directors is one year, and they are elected at the annual general meeting of shareholders in June. Matsushita's Board of Directors intends to review the Large-scale Purchase Rules, as necessary, for reasons including amendments to applicable legislation. Any such review would be conducted strictly in the interests of all shareholders.

For further details, please see the press release issued on April 28, 2008 at the Company's Web site: http://panasonic.co.jp/corp/news/official.data/data.dir/en080428-3/en080428-3.html

Evaluation of measures by the Board of Directors and rationale for evaluation

Matsushita's current mid-term management plan was formulated as a specific measure to increase the Company's corporate value in a sustained manner. The ESV Plan was formulated from the perspective of protecting shareholder value, and is aimed at ensuring shareholders receive sufficient information to make decisions on share purchase proposals by allowing those responsible for the management of the Company, the Board of Directors, to provide their evaluation of any proposal, and providing the opportunity for alternative proposals to be submitted.

Consequently, these measures, in accordance with Basic Policy, are intended to protect the interests of all the Company's shareholders.

Companies listed on the NYSE must comply with certain standards regarding corporate governance under Section 303A of the NYSE Listed Company Manual. However, listed companies that are foreign private issuers, such as Matsushita, are permitted to follow home country practice in lieu of certain provisions of Section 303A.

The following table shows the significant differences between the corporate governance practices followed by U.S. listed companies under Section 303A of the NYSE Listed Company Manual and those followed by Matsushita.