At the Board of Directors' Meeting held today, Sony Corporation determined its direction to change its management structure in order to enhance the Group's corporate governance functions. Sony will adopt the "Company with Committees" system in June of this year in line with the revised Japanese Commercial Code that will become effective as of April 1, 2003, as well as new board rules that are appropriate for Sony's unique management approach.

From now, details related to the new governance structure including new board rules and personnel (candidates for director, corporate executive officer) will be finalized and submitted for approval to the General Meeting of Shareholders to be held in June of this year and a subsequent Board of Directors' Meeting.

Adoption of "Company with Committees" System

The proposed revisions to the current Japanese Commercial Code are designed to establish a clear distinction of roles and responsibilities between oversight and operational functions within a corporation. The Revised Commercial Code will become effective as of April 1, 2003. The newly adopted Commercial Code features the "Company with Committees" system.

Adoption of this system under the new code is optional. Japanese corporations may choose between the corporate governance structure provided for under the current or the revised Commercial Codes. If a corporation opts to adopt this system, the company is legally obliged to establish three committees (nomination, audit and compensation) under the board and to introduce the corporate executive officer ("Shikko-yaku") system as a package. The result is that the company's oversight function will be vested in a combination of the Board of Directors and the Board Committees. Once a corporation chooses to select the "Company with Committees" system, it is automatically required to abolish the Statutory Auditor/Board of Statutory Auditors structure which is mandatory under the current Commercial Code.

The rationale behind the revision of the Commercial Code is to clearly distinguish the corporate board's oversight functions from business operation functions. Under the current Code, this distinction may not be clear because the Board of Directors can perform both oversight and business operation roles.

By adopting the "Company with Committees" system, Sony will therefore abolish its current Statutory Auditor/Board of Statutory Auditors and establish Nomination, Audit and Compensation Committees (these Committees will be composed of a majority of outside directors). Sony will also introduce a new Corporate Executive Officer ("Shikko-yaku") system.
The present Corporate Executive Officer ("Shikko-yakuin") system will continue as a unique Sony system.

Adopting New Articles for Sony's Unique Governance

In order to further strengthen the distinction between oversight and business operation roles to a level beyond the requirements of the revised Commercial Code, Sony will also introduce internal standards for a separation between the Chairman of the Board of Directors and Representative Corporate Executive Officers. The Board of Directors will also decide the basic principles of Sony's corporate governance structure and issue "Regulations of the Board". The major regulations will concern upper and lower limits on the number of directors; eliminating conflicts of interest; and qualifications for director-candidates which will ensure the independence of the newly-created Committees.

The proposals for Sony's governance structure are outlined below:

• Composition of Board of Directors
  The Board of Directors will have between 10 to 20 directors. Regulations governing the qualifications for director-candidates will be established in order to eliminate conflicts of interest and ensure independence. The intention is to increase the number of outside directors from the present level of three.
• Chairman of the Board
  Separation between Chairman of the Board and Representative Corporate Executive Officer will be regulated.
• Composition of Committees
  Nomination Committee: The Nomination Committee will be composed of five or more directors and the majority will be outside directors. However there will be at least two internal directors.
  Compensation Committee: The Compensation Committee will be composed of three or more directors and the majority will be outside directors. However there will be at least one internal director. The CEO and COO will not be chosen for this Committee.
  Audit Committee: The Audit Committee will be composed of three or more directors and the majority will be outside directors. There will be at least one full-time member. All members of the Audit Committee will not have business operation responsibilities and will satisfy the independence requirements of U.S. corporate reform legislation. In principle, Audit Committee members will not become Nomination Committee or Compensation Committee members.
• Committee Chairpersons
  Chairpersons of the three Committees will be outside directors.
• Corporate Executive Officers/ Representative Corporate Executive Officers
  Corporate Executive Officers are in charge of management and governance for the Sony Group based on the directions of the Board of Directors. It is envisaged that present Representative Directors will be appointed as Representative Corporate Executive Officers.

For Reference: Sony's Efforts to Strengthen Corporate Governance

Sony has continually modified its management and organization structures to better adapt to changing business environments. Examples include the adoption of the CEO system (1976); Business Unit system (1983); the Company system (1994); the Network Company system (1999) and the separation of Group HQ and Shared Services function achieved by the establishment of the Global Hub and Management Platform (2001).

Sony has displayed considerable energy in reforming its Board of Directors over the years. In conjunction with Sony's listing on the NYSE in 1970, two outside directors were appointed, and in 1991 Sony appointed a non-Japanese as an outside director. In 1997, Sony clearly separated the oversight and business operation functions within the company by reorganizing the Board and establishing Japan's first Corporate Executive Officer ("Shikko-yakuin") system. This was followed by the setting up of Compensation and Nomination Committees in 1998. In 2000, the distinction in role between Director and Corporate Executive Officer was further clarified by abolishing rank-titles for Directors. In 2000, the position of Chairman of the Board was created and in 2002, an Advisory Board was established to enhance Board of Directors' discussions with expert outside advice.