A．Status of Internal Control System
Based upon the decision by the Board of Directors’ meeting, each director takes a lead in the execution of operations within relevant departments. The Board of Directors’ meeting is held monthly under “Regulations of the Board of Directors” to make resolutions on significant management issues and individual transactions and to manage the progress of business results and operational performance. Prior to the regular Board of Directors’ meeting, bills are presented to the Audit & Supervisory Board Members in advance. Then, the meeting of Audit & Supervisory Board held shortly before the Board of Directors’ meeting, including Outside Audit & Supervisory Board Members, deliberates the necessity and legality of proposed bills. This is followed by sequential questions and confirmations at the Board of Directors’ meeting to ensure the transparency of the Board of Directors’ meeting.
In addition, “Management Meeting” comprised of the executives of the Company and subsidiaries is held every month to discuss business results as well as the management status of each business sector’s progress and execution of operations and to implement appropriate countermeasures.
Moreover, the Company uses the electronic approval system, which allows access from outside the Company for browsing and approval purposes, to realize quicker decision-making and better operational efficiency.
B．Status of Risk Management System
The Group, regarding the ensuring of compliance as the premise of risk management in all respects, has the “Compliance & Risk Management Committee” to realize better internal compliance structure.
This Committee sets internal regulations for compliance-related matters to ensure high-level compliance awareness and, by collecting information on the risk realized though daily activities and analyzing results, considers/discusses proper responses to any significant risk information.
Also, the Group makes every effort to prevent/mitigate risk through Monthly Reporting, which allows employees to offer opinions/proposals to President, and Corporate Ethics Consultation, which receives consultations/reports on corporate ethics from executives and employees.
Furthermore, the Group promotes the development of internal structure to prevent leakage of personal information by stipulating “Personal Information Protection Policy” on how to handle/manage personal information, following the implementation of the “Act on the Protection of Personal Information.”
C．Status of system to ensure appropriateness of subsidiary operations
To ensure a system that enables the oversight of whether operations at subsidiaries are properly carried out, as a principle, directors and employees of the Company or any person who is considered capable of overseeing if operations are properly carried out equivalently to directors and employees of the Company may assume the offices of Directors or Audit & Supervisory Board Members of subsidiaries. In addition, the Company’s Internal Audit Team may conduct a direct audit on subsidiaries, and Audit & Supervisory Board Members and the Audit & Supervisory Board may conduct a direct examination on subsidiaries. The results are reported directly to the President & CEO of the Company.
In addition, the Company will hold "Management Meetings" composed of executives from the Company and its subsidiaries every month, deliberate on matters such as the status of execution of duties at the subsidiary and take appropriate action.
D．Overview of Limited Liability Contract
The Company, pursuant to the provisions set forth in Article 427, Paragraph 1 of the Companies Act, has entered into a contract limiting liability for damages with Outside Directors and Outside Audit & Supervisory Board Members (excluding Mr. Hideki Yamane as a Full-Time Audit & Supervisory Board Member) under Article 423, Paragraph 1 of the same act. The limit of liability is the minimum amount as stipulated by law.
E．Number of Directors
The Company’s Articles of Incorporation stipulates that the number of directors should not be more than 15.
F．Conditions for Appointment and Dismissal of Directors
The Articles of Incorporation stipulates that voting on resolutions for election of directors shall take place in the presence of shareholders who represent one-third or more of total voting rights, and the majority of the votes of such shareholders without dependency on cumulative votes shall be the requisite for adoption of the resolution.
G．Purchase of Treasury Shares
Pursuant to the provisions in Article 165, Paragraph 2 of the Companies Act, the Company includes in its Articles of Incorporation a clause allowing purchase of treasury shares upon a resolution of the Board of Directors’ meeting. This allows the Company purchase of its own shares through market transactions, etc. to realize the flexible capital policy in response to the change in the Company’s business conditions.
H．Requirements for special resolution at the General Shareholders' Meeting
The Company’s Articles of Incorporation stipulates that special resolution in the Article 309, Paragraph 2 of the Companies Act shall be adopted at the General Shareholders' Meeting in the presence of shareholders who represent one-third or more of total voting rights, and by two-thirds or more of affirmative votes of such shareholders. This stipulation is aimed at smooth operation of the General Shareholders' Meeting by lowering the quorum for special resolution.
I．Decision-making body to approve dividends of surplus and relevant matters
The Articles of Incorporation stipulates that matters set out in each item of Article 459, Paragraph 1 of the Companies Act, including dividends of surplus, shall be determined by a resolution of the Board of Directors’ Meeting, instead of a resolution of the General Shareholders' Meeting unless otherwise prescribed by law. This stipulation is aimed at flexible profit return to shareholders by authorizing the Board of Directors to determine dividends of surplus and relevant matters.
J．Exemption from liability of Directors and Audit & Supervisory Board Members
Pursuant to the provisions in Article 426, Paragraph 1 of the Companies Act, the Company may exempt Directors (including former Directors) and Audit & Supervisory Board Members (including former Audit & Supervisory Board Members) from the liabilities prescribed in Article 423, Paragraph 1 of the Act, to the extent permitted by law. This stipulation aims at establishing the environment in which Directors and Audit & Supervisory Board Members may fully demonstrate their execution abilities to play their roles as expected