Based on its fundamental corporate philosophy, the Company is working to enhance corporate governance as one of its most important management issues. Our aim is to have our customers and society, as well as our shareholders and investors, place even greater trust in us and to ensure that Honda is "a company that society wants to exist."

To ensure objective control of the Company's management, outside directors and outside corporate auditors are appointed to the Board of Directors and the Board of Corporate Auditors, which are responsible for the supervision and auditing of the Company. Honda has also introduced an operating officer system, aimed at strengthening both the execution of business operations at the regional and local levels and the supervision by the Board of Directors. The term of office of each director is limited to one year, and the amount of remuneration payable to them is determined according to a standard that reflects their performance in the Company. Our goal in doing this is to maximize the flexibility with which our directors respond to changes in the operating environment.

With respect to business execution, Honda has established a system for operating its organizational units that reflects its fundamental corporate philosophy. For example, separate headquarters have been set up for each region, business, and function, and a general manager from the Board of Directors or an operating officer has been assigned to each headquarters and main division. In addition, the Executive Council deliberates important matters concerning management, and regional operating boards deliberate important matters concerning management of their respective regions. The result is a system that functions effectively and efficiently, and addresses the needs of customers and societies around the world in a swift and appropriate manner.

With respect to internal control, each division within the Company is working autonomously to strengthen legal and ethical compliance and risk management. The task of the Audit Office is to carry out effective audits of the performance of each division's business.

To enhance even further the trust and understanding of shareholders and investors, Honda's basic policy emphasizes the appropriate disclosure of company information, such as by disclosing financial results on a quarterly basis and timely and accurately giving public notice of and disclosing its management strategies. Honda will continue raising its level of transparency in the future.

The Board of Directors consists of 21 directors, including two outside directors, and determines important items that are related to business execution or that are designated by law and supervises business execution.

In fiscal 2008, the Board of Directors met seven times.

The Articles of Incorporation of the Company currently in effect sets forth, among other matters, the matters for resolution by the Company's general meetings of shareholders and the requirements for such resolutions, some of which are described as below.

The number of Directors of the Company shall be not more than thirty.

Directors shall be elected by the resolution of a general meeting of shareholders. Resolutions for such elections shall be adopted by a majority of the votes of the shareholders present, who must hold one-third or more of the votes of all shareholders who are entitled to exercise their voting rights. Resolutions for the election of Directors shall not be made by cumulative voting.

The Company may determine the matters relating to distribution of surplus, which are described in each item in Paragraph 1, Article 459, of the Company Law by a resolution of the Board of Directors. (The purpose of such provisions of the Articles of Incorporation is to enable the Company to implement its capital policy and dividend policy in a flexible manner. On the other hand, it is the Company's policy that the year-end cash dividends should be determined by a resolution of a general meeting of shareholders.)

A special resolution at a general meeting of shareholders shall be adopted by two-thirds or more of the votes of the shareholders present, who must hold one-third or more of the votes of all shareholders who are entitled to exercise their voting rights. (The quorum for a special resolution at a general meeting of shareholders has been lowered by the Company's Articles of Incorporation to one-third of the voting rights, which is the minimum requirement provided by the Company Law, in order to ensure obtaining a required quorum for special resolutions.)

The Company has appointed outside director Satoru Kishi to receive advice on its corporate activities from an objective, broad-ranging, and advanced viewpoint based on extensive experience and a high level of insight in corporate management.

The Company has appointed outside director Kensaku Hogen to receive advice on its corporate activities from an objective, broad-ranging, and advanced viewpoint based on extensive experience and a high level of insight in diplomacy.

Outside director Satoru Kishi attended six of the seven Board of Directors' meetings held during the fiscal year and commented as necessary during the deliberation of proposals.

Outside director Kensaku Hogen attended all seven of the Board of Directors' meetings held during the fiscal year and commented as necessary during the deliberation of proposals.

There is no particular relationship between the Company and outside director Satoru Kishi.

There is no particular relationship between the Company and outside director Kensaku Hogen.

The Board of Directors also provides information on items of business and other topics as necessary to outside directors.

The Board of Corporate Auditors consists of five corporate auditors, including three outside corporate auditors. In accordance with the Company's auditing standards, auditing policies, apportionment of responsibilities, and other such matters as determined by the Board of Corporate Auditors, each corporate auditor audits the directors' execution of duties. Corporate auditors accomplish these audits through various means, including attending meetings of the Board of Directors and inspecting the state of the Company's assets and liabilities. In addition, a Corporate Auditors' Office was established to provide direct support to the Board of Corporate Auditors.

The Company maintains Standards for Reporting to Corporate Auditors to ensure that relevant matters are reported to corporate auditors in a timely and accurate manner. The standards require regular reports to be submitted to corporate auditors on the business conditions of the Company and its subsidiaries, the maintenance and operation of internal control systems, and any other matters that would have a substantial impact on the Company or its subsidiaries. In addition, corporate auditors are required to attend Executive Council and other important meetings.

In fiscal 2008, the Board of Corporate Auditors met 13 times.

The Board of Corporate Auditors has certified Shinichi Sakamoto, a corporate auditor of the Company, as an "audit committee financial expert," as set out in the rules of the Securities and Exchange Commission pursuant to Section 407 of the U.S. Sarbanes-Oxley Act of 2002. As stipulated in Item 8, Article 121, of the Company Law Enforcement Regulations, Shinichi Sakamoto has substantial knowledge related to finance and accounting.

In fiscal 2008, meetings between the Company's corporate auditors and its independent auditor were held on six occasions. At those meetings, the independent auditor provided the corporate auditors with explanations and reports on accounting audit plans and results, and opinions were exchanged.

The corporate auditors coordinate closely with the Audit Office, which is responsible for internal audits, with respect to audit policies and schedules. In fiscal 2008, corporate auditors and the Audit Office, either independently or in collaboration, conducted business audits of a total of 108 companies among Honda's domestic and overseas subsidiaries and affiliates.

The Company has appointed outside corporate auditor Koukei Higuchi to receive audits of its corporate activities from a broad-ranging and advanced viewpoint based on extensive experience and a high level of insight in corporate management.

The Company has appointed outside corporate auditor Fumihiko Saito to receive audits of its corporate activities from a broad-ranging and advanced viewpoint based on extensive experience and a high level of insight in legal affairs.

The Company has appointed outside corporate auditor Yuji Matsuda to receive audits of its corporate activities from a broad-ranging and advanced viewpoint based on extensive experience and a high level of insight in corporate management.

Outside corporate auditor Koukei Higuchi attended all seven of the Board of Directors' meetings and all 13 of the Board of Corporate Auditors' meetings held during the fiscal year and commented as necessary during the deliberation of proposals.

Outside corporate auditor Fumihiko Saito attended all seven of the Board of Directors' meetings and all 13 of the Board of Corporate Auditors' meetings held during the fiscal year and commented as necessary during the deliberation of proposals.

Outside corporate auditor Yuji Matsuda attended all five of the Board of Directors' meetings and all eight of the Board of Corporate Auditors' meetings held following his assumption of his position as outside corporate auditor in June 2007 and commented as necessary during the deliberation of proposals.

There is no particular relationship between the Company and outside corporate auditor Koukei Higuchi.

There is no particular relationship between the Company and outside corporate auditor Fumihiko Saito.

Fumihiko Saito serves as a partner of Saito Law Office. There is no particular relationship between Saito Law Office and the Company.

There is no particular relationship between the Company and outside corporate auditor Yuji Matsuda.

Yuji Matsuda serves as president and director of Mitsubishi UFJ Trust Investment Technology Institute Co., Ltd. There is no particular relationship between this organization and the Company.

The Board of Directors also provides information on items of business and other topics as necessary to outside corporate auditors.

The total amount of remuneration and bonuses of directors and corporate auditors is determined according to criteria that reflect their performance in the Company.

Remuneration for directors and corporate auditors is paid based on criteria approved by the Board of Directors, and it is paid within the extent of the maximum amount resolved by the Ordinary General Meeting of Shareholders.

Bonuses for directors and corporate auditors are paid based on a decision of the Ordinary General Meeting of Shareholders, taking into consideration the Company's profits during the fiscal year, past bonuses paid, and various other factors.

The total remuneration paid to directors and corporate auditors during fiscal 2008 was ¥923 million: ¥817 million to the 23 directors (including three directors who retired during the year) and ¥106 million to the seven corporate auditors (including one corporate auditor who retired during the year). The remuneration paid to directors includes remuneration paid by subsidiaries of the Company to directors who had business execution responsibilities for the subsidiaries.

Executive bonuses paid during fiscal 2008 totaled ¥578 million: ¥501 million to the 20 directors who were directors at the end of fiscal 2007 and ¥77 million to the six corporate auditors who were corporate auditors as at the end of fiscal 2007.

In fiscal 2008, retirement allowances paid to five directors (including two operating officers who previously served as directors) and one corporate auditor totaled ¥1,100 million, in accordance with a resolution of the General Meeting of Shareholders.

The total remuneration and other compensation paid to outside directors and outside corporate auditors during fiscal 2008 was ¥75 million to the two outside directors and four outside corporate auditors (including one outside corporate auditor who retired during the year).

Candidates for directors are decided by resolution of the Board of Directors. Candidates for corporate auditors are decided by resolution of the Board of Directors, subject to the agreement of the Board of Corporate Auditors.

KPMG AZSA & Co. provided auditing services for Honda under the Company Law, the Financial Instruments and Exchange Law, and the U.S. Securities Exchange Act.

A total of 52 people from KPMG AZSA & Co. provided auditing services for Honda: three Japanese certified public accountants (Masanori Sato, Kensuke Sodegawa, and Hideaki Koyama) and 49 assistants (10 certified public accountants, 17 assistant accountants, four U.S. certified public accountants, and 18 others).

In fiscal 2008, the Company and its consolidated subsidiaries paid a total of ¥3,042 million in fees to KPMG AZSA & Co. and its affiliated accounting firm, KPMG, for audit certification services under the Company Law, the Financial Instruments and Exchange Law, and the U.S. Securities Exchange Act. In fiscal 2008, the Company's overseas consolidated subsidiaries paid a total of ¥137 million in fees to KPMG AZSA & Co. and its affiliated accounting firm, KPMG, for non-auditing services.

To ensure that the independent auditor and its affiliate involved in audit certification services under the U.S. Securities Exchange Act behave in accordance with all applicable laws and regulations and maintain complete independence from the Company, they must obtain the prior consent of the Company's Board of Corporate Auditors before they carry out auditing services, auditing-related services, tax services, and other services for Honda.

The Company's initial policy required that each contractual agreement have a separate prior consent from the Board of Corporate Auditors. In order to make the decision-making process more efficient, however, we are enhancing procedural efficiency by establishing categories of matters requiring comprehensive prior consent. These categories are reviewed regularly by the Board of Corporate Auditors.

Any matter that does not fall under one of these categories still requires separate consent of the Board of Corporate Auditors.

As for execution of business, the Company has six regional operations around the world to develop business based on its fundamental corporate philosophy. These operations adopt long-term perspectives and maintain close ties with local communities.

The Company's three business operations—motorcycles, automobiles, and power products—formulate the medium- and long-term plans for their business development, and each operation aims to maximize its business performance on a global basis. Each functional operation—such as Customer Service Operations, Production Operations, Purchasing Operations, Business Management Operations, and Business Support Operations—supports the other functional operations, with the aim of increasing Honda's effectiveness and efficiencies.

Research and development activities are conducted principally at the independent subsidiaries of the Company.

Honda R&D Co., Ltd., is responsible for research and development on products, while Honda Engineering Co., Ltd., handles research and development in the area of production technology. The Company actively carries out research and development in advanced technologies with the aim of creating products that are distinctive and internationally competitive.

The Company has assigned a general manager from the Board of Directors or an operating officer to each regional, business, and functional division, as well as to each research and development subsidiary. By ensuring swift, optimal decision making in each region and workplace, the Company is building a highly effective and efficient business execution system.

The Company has established the Executive Council, consisting of the President, Vice President, and the Senior Managing Directors (for a total of nine members). Along with discussing in advance the items to be resolved at meetings of the Board of Directors, the Executive Council discusses important management issues within the scope of authority conferred upon it by the Board of Directors.

In fiscal 2008, the Executive Council met 29 times.

To enhance the independence of each regional operation and ensure swift decision making, regional operating boards have been established at each regional operation to discuss important management issues in the region within the scope of authority conferred upon it by the Executive Council.

To invigorate the annual Ordinary General Meeting of Shareholders, the Company holds the meeting as early as possible. The Company also presents easy-to-understand reports using video and slides, and displays its products in the conference room.

The Company sends convocation notices before the date required by law, and also allows shareholders to exercise their voting rights via the Internet, using personal computers or mobile phones. Convocation notices are sent in English to overseas investors. In these and other ways, the Company strives to make the exercise of rights as smooth as possible.

For analysts and institutional investors, the Company holds meetings to present its results four times a year and meetings with the president twice a year. Company representatives visit and hold information meetings as needed for major Japanese and overseas institutional investors to explain the Honda Group's future business strategies. Representatives based in North America and Europe also hold information meetings for institutional investors as appropriate. In addition, the Company holds information meetings for investors at motor shows and other major events, where presentations on such topics as Honda Group strategies are made by the president or relevant director. Moreover, the Company conducts regular tours of facilities in Japan and overseas for shareholders and other investors.

The latest information for investors is available on the Company's website (http://www.honda.co.jp/investors/ in Japanese; http://world.honda.com/investors/ in English). All new information is uploaded to the site simultaneously in Japanese and English.

The Company issues a regular publication for shareholders, containing information about its businesses, products, financial status, and other matters.

Seeking to earn the unwavering trust of customers and society, the Honda Group has formulated a set of behavioral guidelines, which is observed by all individual associates (employees).

In addition to supplying products incorporating the most advanced safety and environmental technologies, the Company pursues environmental protection activities, safe driving campaigns, and social contribution activities covering all aspects of its operations, including production, logistics, and sales. These initiatives reflect the Company's effort to earn the trust and understanding of society via its corporate activities.

The Company provides information about its corporate activities via financial reports and other disclosures according to law. We also publish yearly reports on environmental protection activities, safe driving campaigns, and social contribution activities, which are posted on our website. In addition, we publish a corporate social responsibility (CSR) report that comprehensively explains our activities related to the environment, safety, and society.

To earn the trust of customers and society, the Company's divisions, under the guidance of their respective corporate officers, have systems in place to ensure a systematic approach to compliance and risk management, in accordance with the Basic Policy concerning the Maintenance of Internal Control Systems adopted by the Board of Directors. These systems include the formulation of behavioral guidelines and procedures for self-assessment. The Company also has a system to support the initiatives of each division.

Moreover, effective audits are carried out to monitor the execution status of each division.

The "Honda Conduct Guideline," formulated to guide the behavior of all associates, is posted on the Company's website (http://www.honda.co.jp/conductguideline/ in Japanese; http://world.honda.com/conductguideline/ in English). In addition, each division produces more detailed behavioral guidelines according to its specific attributes.

Each division of the Company approaches compliance and risk management in a systematic way. For example, each division has a checklist that clarifies specific laws and risks to consider related to its particular business, and conducts regular self-assessments. The results of the self-assessments are reported to the corporate officer in charge of each division, and the overall status of compliance and risk management is evaluated regularly by the Executive Council and is reported to the Board of Directors and Board of Corporate Auditors.

The Company has appointed a Compliance Officer, who is a director in charge of compliance-related initiatives. Other key elements of our compliance system include the Business Ethics Committee and the Business Ethics Improvement Proposal Line.

Honda's Business Ethics Committee is chaired by the Compliance Officer and consists of directors and operating officers. The committee deliberates matters related to corporate ethics and compliance.

It met twice in fiscal 2008.

Honda places high priority on open communications in its divisions. It has also set up the Business Ethics Improvement Proposal Line to receive suggestions related to corporate ethics issues. By devising appropriate responses to suggestions received, Honda is constantly working to enhance corporate ethics. The system is designed to protect informants, who can either reveal their identity or remain anonymous.

The Business Ethics Committee supervises the operation of the Business Ethics Improvement Proposal Line and submits status reports to the Board of Corporate Auditors.

Each division works to prevent and address its particular set of risks. In addition, the Honda Crisis Response Rules are designed to address Companywide crises, such as major natural disasters.

The Company has appointed a Risk Management Officer, who is a director in charge of risk management related initiatives. It also established the Companywide Response Headquarters to address crisis situations.

Documents and other information related to the execution of business by directors are retained and managed appropriately, according to the document management policies of Honda and its major regional subsidiaries.

The Audit Office is an independent supervisory department under the direct control of the president. This office audits the performance of each department and works to improve the internal auditing of subsidiaries and affiliates in each region.

The Disclosure Committee, which consists of relevant directors, deliberates matters related to the accuracy and appropriateness of corporate information to be disclosed in business results announcements and financial reports.

The Company has also established a "Code of Ethics" as set forth in the rules of the U.S. Securities and Exchange Commission regulations pursuant to Section 406 of the Sarbanes-Oxley Act of 2002.

Honda's basic policy is to boldly and consistently oppose antisocial elements that present a threat to social order and safety. The organizational unit in charge of responding to these elements has been specified, and it works together with the police and other related outside institutions to mount an appropriate response.

Companies listed on the New York Stock Exchange (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 Honda, 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 Honda.

Corporate Governance Practices Followed by NYSE-Listed U.S. Companies	Corporate Governance Practices Followed by Honda
An NYSE-listed U.S. company must have a majority of directors meeting the independence requirements under Section 303A of the NYSE Listed Company Manual.	For Japanese companies that employ a corporate governance system based on a board of corporate auditors (the "corporate auditor system"), including Honda, Japan's Company Law has no independence requirement with respect to directors. The task of overseeing management and, together with the accounting audit firm, accounting is assigned to the corporate auditors, who are separate from the company's management and meet certain independence requirements under Japan's Company Law. In the case of Japanese companies that employ the board of corporate auditors system, including Honda, at least half of the corporate auditors must be "outside" corporate auditors who must meet additional independence requirements under Japan's Company Law. An outside corporate auditor is defined as a corporate auditor who has not served as a director, accounting councilor, executive officer, manager, or any other employee of the company or any of its subsidiaries. Currently, Honda has three outside corporate auditors which constitute 60% of Honda's corporate auditors.
An NYSE-listed U.S. company must have an audit committee composed entirely of independent directors, and the audit committee must have at least three members.	Like a majority of Japanese listed companies, Honda employs the board of corporate auditors system as described above. Under this system, the board of corporate auditors is a legally separate and independent body from the board of directors. The main function of the board of corporate auditors is similar to that of independent directors, including those who are members of the audit committee, of a U.S. company: to monitor the performance of the directors, and review and express an opinion on the method of auditing by the company's accounting audit firm and on such accounting audit firm's audit reports, for the protection of the company's shareholders. Japanese companies that employ the board of corporate auditors system, including Honda, are required to have at least three corporate auditors. Currently, Honda has five corporate auditors. Each corporate auditor has a four-year term. In contrast, the term of each director of Honda is one year. With respect to the requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934 relating to listed company audit committees, Honda relies on an exemption under that rule which is available to foreign private issuers with boards of corporate auditors meeting certain criteria.
An NYSE-listed U.S. company must have a nominating/corporate governance committee composed entirely of independent directors.	Honda's directors are elected at a meeting of shareholders. Its Board of Directors does not have the power to fill vacancies thereon. Honda's corporate auditors are also elected at a meeting of shareholders. A proposal by Honda's Board of Directors to elect a corporate auditor must be approved by a resolution of its Board of Corporate Auditors. The Board of Corporate Auditors is empowered to request that Honda's directors submit a proposal for election of a corporate auditor to a meeting of shareholders. The corporate auditors have the right to state their opinion concerning election of a corporate auditor at the meeting of shareholders.
An NYSE-listed U.S. company must have a compensation committee composed entirely of independent directors.	Maximum total amounts of compensation for Honda directors and corporate auditors are proposed to, and voted on, by a meeting of shareholders. Once the proposals for such maximum total amounts of compensation are approved at the meeting of shareholders, each of the Board of Directors and Board of Corporate Auditors determines the compensation amount for each member within the respective maximum total amounts.
An NYSE-listed U.S. company must generally obtain shareholder approval with respect to any equity compensation plan.	Currently, Honda does not adopt stock option compensation plans. When Honda adopts it, it must obtain shareholder approval for stock options only if the stock options are issued with specifically favorable conditions or price concerning the issuance and exercise of the stock options.