System to Ensure Appropriateness of Business Conduct
(1) System to ensure that execution of business activities by directors is in compliance with laws and regulations and Articles of Incorporation
The Company has adopted the executive officer system to clearly distinguish the supervisory function of the directors from the executive function of the executive officers. Under this system, executive officers report on the execution of business at meetings of the Board of Directors, which are held regularly, thereby preparing and improving a supervision system for the execution of business activities.
The Company also elects independent outside directors in order to enhance the legitimacy, efficiency and propriety of the decision making of the Board of Directors.
Regarding the execution of important business, the Company has established criteria for submitting matters to the Board of Directors for proper decision making by the Board. The Management Committee, which consists of executive managing officers and higher officers, deliberates on important issues affecting the execution of business, among other matters. After deliberation at the Management Committee, some specific issues are put forward to the Board of Directors for further deliberation. The corporate auditors attend important meetings such as meetings of the Board of Directors and audit the performance of business activities by the directors, as well as business activities of each department as appropriate. The Board of Corporate Auditors, no less than half of which consists of outside corporate auditors, performs systematic audits, forms appropriate opinions, and improves the effectiveness of auditing.
The Company provides compliance training programs and other relevant activities for directors, executive officers and corporate auditors through the Compliance Promotion Committee and the like to deepen their understanding of compliance and to foster their respect for compliance.
In its regulations on the management of insider information and insider trading, the Company establishes basic matters for compliance regarding the management and public announcement of insider information obtained in connection with its business and also the sale or purchase of the shares, etc. of the Company or other listed companies, thus working to prevent insider trading.
In its system for internal control over financial reporting, the Company makes sure that its financial reports are appropriate by complying with relevant laws and regulations, as well as accounting standards, in its accounting treatment. In parallel with this, the Company makes sure that its financial reporting is reliable by carrying out evaluation and analysis of the impacts that management decision making and accounting facts have on financial reporting.
With the establishment of Whistle Blowing System, the Company provides contacts for whistle-blowing not only inside the Company, but also outside the Company, at a law firm. With this structure, the Company works to enhance compliance by seeking to detect organizational or individual violations of laws and regulations at an early stage and to correct such violations.
The Company resolutely rejects any relationship with unlawful groups. It tackles unjust claims and other interventions in a well-organized manner through cooperation and collaboration among the departments concerned and in close cooperation with external specialized institutions, including the police. The Company provides absolutely no payoffs to unlawful groups. When entering into contracts, the Company confirms that the other parties to the contracts are not connected with unlawful groups. In cases where contracts are concluded in writing, the Company specifies in written contracts and the like special provisions allowing it to cancel a contract if it is discovered that the other party to such contract is connected to an unlawful group.
(2) System for retention and management of information pertaining to execution of business activities by directors
Particulars about the preparation of minutes of meetings of the Board of Directors, committees and other bodies are specified in the relevant rules. The preparation of documents regarding other important decision making is covered by the rules for internal circulars for managerial decisions. Regarding the arrangement, retention and disposal of documents, the Company formulates document retention and management rules in order to manage information properly.
The corporate auditors examine whether documents, company rules, important records and other important information are adequately arranged, retained and managed. When deemed necessary, they must request explanations from, or deliver their opinions to, directors, executive officers or employees.
In its regulations on the management of insider information and insider trading, the Company establishes basic matters for compliance regarding the management and public announcement of insider information obtained in connection with its business and also the sale or purchase of the shares, etc. of the Company or other listed companies, thus working to prevent insider trading.
For confidential information of the Company and the subsidiaries and affiliates that constitute the Group, an appropriate management system is established to ensure that confidentiality obligations are thoroughly observed.
(3) Rules and other systems for management of risk of loss
With regard to risk in particularly important areas, the Company has set up individual committees and established relevant rules. Each business division conducts risk-management activities tailored to their respective needs. If a new risk factor occurs or is expected to occur, an executive officer is promptly assigned to be in charge of handling the matter. The Board of Directors receives reports, demands reporting, as needed, from committees and the executive officer in charge or strives to identify the risk, and implements necessary countermeasures.
(Note) At present, the Company has in place a structure that includes the Environment Safety Promotion Committee, the Anti-Monopoly Law Observance Committee, the Product Safety Committee, the Security Trade Control Committee, the Financial Reporting Risk Assessment Committee, the Compliance Promotion Committee, and the Safety and Health Committee, and has established rules accordingly.
(4) System to ensure that directors' duties are performed efficiently
The Company has adopted the executive officer system, which enables the clear separation of decision making on important management issues and supervisory function from executive function, thereby reducing the size of the Board of Directors. In line with this system, the Company apportions authority, defines business structures, divisions of duties and the organization of offices, and also clarifies the chain of command to develop a system that facilitates prompt and appropriate decision making.
(5) System to ensure that employees perform duties in compliance with laws and regulations and Articles of Incorporation
Alongside its corporate rules such as organizational rules and working regulations, the Company has developed an internal audit system to help ensure that its employees properly and diligently perform their duties in accordance with the Company's clearly defined chain of command. Regarding matters of specific importance, several committees have been set up to conduct studies and deliberations, and to offer guidance and awareness-promotion activities for the prevention of illegal acts.
The Company provides compliance training programs and other relevant activities for its employees to deepen their understanding of compliance and to foster their respect for compliance.
In its regulations on the management of insider information and insider trading, the Company establishes basic matters for compliance regarding the management and public announcement of insider information obtained in connection with its business and also the sale or purchase of the shares, etc. of the Company or other listed companies, thus working to prevent insider trading.
In its system for internal control over financial reporting, the Company makes sure that its financial reports are appropriate by complying with relevant laws and regulations, as well as accounting standards, in its accounting treatment. In parallel with this, the Company makes sure that its financial reporting is reliable by carrying out evaluation and analysis of the impacts that management decision making and accounting facts have on financial reporting.
With the establishment of Whistle Blowing System, the Company provides contacts for whistle-blowing not only inside the Company, but also outside the Company, at a law firm. With this structure, the Company works to enhance compliance by seeking to detect organizational or individual violations of laws and regulations at an early stage and to correct such violations.
The Company resolutely rejects any relationship with unlawful groups. It tackles unjust claims and other interventions in a well-organized manner through cooperation and collaboration among the departments concerned and in close cooperation with external specialized institutions, including the police. The Company provides absolutely no payoffs to unlawful groups. When entering into contracts, the Company confirms that the other parties to the contracts are not connected with unlawful groups. In cases where contracts are concluded in writing, the Company specifies in written contracts and the like special provisions allowing it to cancel a contract if it is discovered that the other party to such agreement is connected to an unlawful group.
(Note) At present, the Company has in place a structure that includes the Environment Safety Promotion Committee, the Anti-Monopoly Law Observance Committee, the Product Safety Committee, the Security Trade Control Committee, the Financial Reporting Risk Assessment Committee, the Compliance Promotion Committee, and the Safety and Health Committee, and has established rules accordingly.
(6) System to ensure appropriateness of business operations within the Group
In an effort to thoroughly promote compliance within the Group, regarding matters of specific importance, several committees have been set up to conduct studies and deliberations, and to offer guidance and awareness-promotion activities for the prevention of illegal acts.
The Company has set up a department in charge of managing its subsidiaries and the like. It has also established rules for the management of subsidiaries, and exercises necessary control over subsidiaries in accordance with their circumstances.
In addition, the Company provides compliance training programs and other relevant activities for the employees of the Group to deepen their understanding of compliance and to foster their respect for compliance.
In its regulations on the management of insider information and insider trading, the Company establishes basic matters for compliance regarding the management and public announcement of insider information obtained in connection with its business and also the sale or purchase of the shares, etc. of the Company or other listed companies, thus working to prevent insider trading.
In its system for internal control over financial reporting, the Company makes sure that its financial reports are appropriate by complying with relevant laws and regulations, as well as accounting standards, in its accounting treatment. In parallel with this, the Company makes sure that its financial reporting is reliable by carrying out evaluation and analysis of the impacts that management decision making and accounting facts have on financial reporting.
With the establishment of Whistle Blowing System, the Company provides contacts for whistle-blowing not only inside the Company, but also outside the Company, at a law firm. With this structure, the Company works to enhance compliance by seeking to detect organizational or individual violations of laws and regulations at an early stage and to correct such violations.
For confidential information of the Company and the subsidiaries and affiliates that constitute the Group, an appropriate management system is established to ensure that confidentiality obligations are thoroughly observed.
The Company resolutely rejects any relationship with unlawful groups. It tackles unjust claims and other interventions in a well-organized manner through cooperation and collaboration among the departments concerned and in close cooperation with external specialized institutions, including the police. The Company provides absolutely no payoffs to unlawful groups. When entering into contracts, the Company confirms that the other parties to the contracts are not connected with unlawful groups. In cases where contracts are concluded in writing, the Company specifies in written contracts and the like special provisions allowing it to cancel a contract if it is discovered that the other party to such agreement is connected to an unlawful group.
(Note) At present, the Company has in place a structure that includes the Environment Safety Promotion Committee, the Anti-Monopoly Law Observance Committee, the Product Safety Committee, the Security Trade Control Committee, the Financial Reporting Risk Assessment Committee, the Compliance Promotion Committee, and the Safety and Health Committee, and has established rules accordingly.
(7) Matters regarding employees who are requested for allocation by corporate auditors to assist them with their duties
An administrative office has been established in the Board of Corporate Auditors, consisting of corporate auditor staff, who are employees that assist the corporate auditors in their duties. To this end, the necessary personnel are allocated to the administrative office to serve as corporate auditor staff. The internal audit, finance & accounting, general administration and legal departments also assist the corporate auditors.
(8) Matters regarding independence of employees to assist corporate auditors from directors
While taking into consideration ensuring the independence of the corporate auditor staff from the directors and executive officers, the corporate auditors must hold consultations with directors and executive officers when necessary.
With regard to matters related to transfer or discipline of employees assisting the corporate auditors, the prior agreement of the corporate auditors must be secured.
(9) System for reporting by directors and employees to corporate auditors and other systems for reporting to corporate auditors
The corporate auditors attend meetings of the Board of Directors in which directors, executive officers and others give reports on the execution of their business activities, and listen to such reports. They also attend important meetings or meetings of committees in order to monitor the processes by which important decisions are made, as well as the execution of the relevant business activities. For those meetings they do not attend, the corporate auditors receive explanations on the matters discussed in such meetings and inspect the relevant materials. In cases where the corporate auditors request directors, executive officers or others to provide studies, reports or explanations, such requests must be carried out promptly.
(10) Other systems to ensure that audits by corporate auditors are performed effectively
The corporate auditors and the Board of Corporate Auditors exchange opinions with the representative directors and deepen mutual understanding at periodical meetings. They exchange opinions on matters such as enhancing the environment for their audits and important auditing problems in addition to issues faced by the Company and risks surrounding the Company. As part of their work to deepen mutual understanding, the corporate auditors and the Board of Corporate Auditors also make requests to the representative directors on matters they deem necessary. The corporate auditors conduct efficient auditing of the Company's business, asset conditions, as well as other auditing duties, in close coordination with the internal audit department and other sections. They are authorized to demand for the internal audit department and other sections to conduct investigations when necessary.
The corporate auditors and the Board of Corporate Auditors maintain close coordination with the accounting auditor through regular meetings. They also receive outlines of the accounting auditor's audit plans and explanations on the understanding of the accounting auditor regarding such matters as the condition of the internal control system, risk assessment, and high-priority auditing issues, and exchange opinions accordingly. In addition to this, where necessary, the corporate auditors attend audit visits made by the accounting auditor and observe feedback sessions on audits held by them, and request reports from the accounting auditor on the audit process as appropriate.
