Systems to Ensure Appropriateness of Operations

Other matters relating to corporate governanceOther matters relating to corporate governance

The Company’s system and policy to implement appropriate and efficient operations

1. System to ensure proper operation as a corporate group constituted by the Company and its subsidiaries (here in after, “the Group”)

  • ① While taking the basic approach that each Group company autonomously has in place a system to implement appropriate and efficient operations, the Group‘s implementation of appropriate and efficient operations shall be ensured under the adequate management and support provided by the Company.
  • ② The Company shall establish “Document Management Rules for Affiliates” and require each Group company to obtain prior approval of the Company or report to the Company in regard to certain important matters.
  • ③ To ensure a system that enables the oversight of whether operations at subsidiaries are properly carried out, 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 President & CEO of the Company.
  • ④ General Accounting Department is in charge of management of accounting figures of subsidiaries and supervises the preparation of the consolidated financial statements of the Company.
  • ⑤ Management Meeting is held, attended by executives of each Group company, to track the performance and progress of each department, to examine the execution of duties and to implement appropriate measures.
  • ⑥ In principle, “The Company with Board of Directors” shall be established at each corporation within the Group.

[Overview of Implementation Status]

  • ① ③ In 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, assume the offices of directors or Audit & Supervisory Board Members of subsidiaries to oversee if operations at subsidiaries are properly carried out. In addition, the Company’s Internal Control and Audit Office conduct a direct audit on subsidiaries, and Audit & Supervisory Board Members and the Audit & Supervisory Board conduct a direct examination on subsidiaries. The results are reported directly to President & CEO of the Company.
  • ① ⑤ The Company holds a monthly Management Meeting attended by executives of each Group company to discuss the operation and performance of the subsidiaries.
  • ② The Company has established “Document Management Rules for Affiliates” and disseminated these rules by posting “Document Management Rules for Affiliates” on the internal groupware and other means, and requires each Group company to obtain prior approval of the Company or report to the Company in regard to certain important matters.
  • ④ General Accounting Department is in charge of management of accounting figures of the subsidiaries and supervises the preparation of the consolidated financial statements of the Company.
  • ⑥ In principle, “The Company with Board of Directors” is established at each corporation within the Group.

2. System to ensure that execution of duties by directors and employees of each Group company conforms to laws, regulations, and the Articles of Incorporation

  • ① The Company shall stipulate “Code of Ethics”, “Corporate Philosophy”, and “Behavioral Principles” as the basis of management. The Group, in accordance with its size and business characteristics, shall reinforce efficiency in business operation, accuracy of information, and compliance system in pursuit of sound corporate assets. To put these policies into practice, the Company shall strictly adhere to a code of conduct and ethics based on separately prescribed “Compliance Rules”, and others as well as complying with laws, regulations, and the Articles of Incorporation. Moreover, directors and employees of each Group company shall take the initiative in compliance with and spread these social norms, ethics, laws, and regulations, etc. in order to carry out fair and appropriate corporate activities and attain harmony with society.
  • ② The Company shall further reinforce the compliance system through “Compliance and Risk Management Committee” established to oversee, review, and improve the internal compliance system stated above.
  • ③ The Company shall establish an internal control system regarding financial reporting to ensure reliability of financial reporting. The Company shall maintain and improve the said system through regular assessment of the development and implementation status.
  • ④ The Company shall establish Consultation Desk for Corporate Ethics in the Group and an external reporting and consultation contact to implement appropriate measures with regard to violations of the laws and regulations and other compliance issues.
  • ⑤ The name and information, etc. of an informant applicable to (4) above shall be kept secret, and any disadvantageous treatment of the informant for filing report on a violation of the laws and regulations or others shall be prohibited.

[Overview of Implementation Status]

  • ① The Company has developed “Code of Ethics”, “Corporate Philosophy”, and “Behavioral Principles” as well as “Group Compliance Rules”, and posted them on the internal groupware to keep all employees thoroughly informed about them.
  • ② The Company held Compliance and Risk Management Committee meetings four times during the business year under review to report on the status of legal compliance and relevant issues within the Group and discuss the causes. Then, the countermeasures are taken to improve the situation.
  • ③ Internal Control and Audit Office of the Company makes the assessment of internal control over financial reporting covering each business location within the Group and works toward improvements, if necessary.
  • ④ ⑤ The Company has established internal report desks in and outside of the Company, ensuring that appropriate measures are taken with regard to violations of the laws and regulations and other compliance issues. “Group Compliance Rule” provides that any employee who reports to or consults with an internal report desk shall not receive any disadvantageous treatment including personnel matters as a result of such report or consultation. The Company has disseminated this requirement thoroughly.

3. System concerning storage and management of information pertaining to execution of duties by directors of the Company and system concerning reporting to the Company pertaining to execution of duties by directors and other relevant personnel of its subsidiaries

  • ① Based on “Document Management Rules”, the relevant department of the Company properly stores and manages legal minutes, minutes of Management Meetings and other documents pertaining to execution of important duties, together with their appendices as prescribed by internal rules. Directors and Audit & Supervisory Board Members of the Company can access these documents at any time.
  • ② Based on “Document Management Rules for Affiliates”, directors and other relevant personnel of the Company’s subsidiaries shall report matters concerning the execution of duties by directors and other relevant personnel of subsidiaries by submitting copies of legal minutes and other documents to the Company. Directors and Audit & Supervisory Board Members of the Company can access these documents at any time.

[Overview of Implementation Status]

  • ① The relevant department of the Company has properly stored and managed legal minutes such as minutes of the Board of Directors meetings, minutes of the Management Meetings and other documents for the storage periods prescribed in “Document Management Rules”. When so requested, the relevant department has appropriately made them available to Directors or Audit & Supervisory Board Members of the Company.
  • ② General Affairs Department of the Company receives copies of legal minutes of subsidiaries from time to time and stores and manages them. When so requested, the relevant department has appropriately made them available to Directors or Audit & Supervisory Board Members of the Company.

4. Rules and system pertaining to management of potential loss at the Group Risk management shall be addressed as below

  • ① The Company shall establish “Risk Management Rules” and prescribe the basic policy and structure concerning operational risk management to build and operate an appropriate risk management system and take proper measures.
  • ② Based on the rules stated above, the Company shall establish “Risk Management Manual”, which covers detailed procedures, and extract and assess information pertaining to potential risks, so that it can address such risks promptly and practically.
  • ③ The main tasks of Risk Management Team are to accurately forecast and organize, and to take measures in advance against expected future risks in and outside of the Company. Risk Management Team leads in further strengthening risk management structure at each department.
  • ④ Should any contingencies arise despite the above initiatives, the Company shall establish a task force with Chief Risk Supervisor as a general manager for prompt investigations and countermeasures.

[Overview of Implementation Status]

  • ① The Company sets basic policies and systems relating to operational risk management in the “Risk Management Rules”, and strives to disseminate these rules by posting “Risk Management Rules” on the internal groupware and other means and to build and operate an appropriate risk management system and take proper measures.
  • ② ③ The Company has established the process to extract and assess risk information in the “Risk Management Manual” and implemented it properly. The manual specifies the risk collection approach and risk management process to promptly and practicably address future or potential risks that may arise in and outside of the Company.
  • ④ The “Risk Management Rules” of the Company stipulates procedures to establish a relevant task force, conduct prompt investigations, and decide and implement countermeasures in the event of contingencies. For the business year under review, there are no applicable items.

5. System to ensure effective execution of duties by directors of each Group company

  • ① The Board of Directors of the Company passes resolutions on important management issues and individual projects at regular monthly meetings of the Board of Directors and extraordinary meetings of the Board of Directors that are held as needed. The Board of Directors of subsidiaries also passes resolutions on important management issues and individual projects at regular meetings of the Board of Directors and extraordinary meetings of the Board of Directors that are held as needed.
  • ② The Company uses an electronic approval system, which allows access from outside the Company for browsing and approval purposes, to realize faster decision-making and better operational efficiency.
  • ③ With regard to the execution of duties based on decisions, directors in charge shall give instructions to relevant supervisors according to “Organization Rules”, “Policies of Division of Duties”, and “Policies of Administrative Authority”, etc. If such execution of duties involves multiple departments, necessary coordination is made between directors in charge of the departments to ensure efficient implementation system.

[Overview of Implementation Status]

  • ① The Company held 12 regular meetings of the Board of Directors and nine extraordinary meetings of the Board of Directors during the business year under review and adopted relevant resolutions on significant issues concerning corporate management and other issues arising on an ad hoc basis. The subsidiaries hold regular meetings of their Boards of Directors every three months at minimum as well as extraordinary meetings when necessary, to adopt relevant resolutions on significant issues concerning corporate management and other issues arising on an ad hoc basis.
  • ② To achieve prompt decision-making on issues requiring approval, the Company has put an electronic approval system in place, which can be accessed for review or approval of requests from outside the Company.
  • ③ The Company has clarified the segregation of duties for respective divisions and departments and the roles of each position and established the system to ensure the organizational and efficient operations of business by setting “Organization Rules”, “Policies of Division of Duties”, and “Policies of Administrative Authority”.

6. System to ensure the employees’ independence from directors and effectiveness of instructions to such employees in case Audit & Supervisory Board Members request the assignment of employees who assist Audit & Supervisory Board Members’ duties

  • ① If Audit & Supervisory Board Members find it necessary, employees shall be appointed as their assistants. In such case, personnel matters such as appointment, transfer, and evaluation of the assistants shall be decided in consideration of opinions by Audit & Supervisory Board to ensure the independence and effectiveness of instructions by Audit & Supervisory Board Members.
  • ② Employees who assist Audit & Supervisory Board Members’ duties follow none but their instructions.

[Overview of Implementation Status]

  • ① ② Personnel matters such as the appointment and evaluation of employees who assist the duties of the Audit & Supervisory Board Members are stipulated in “Audit Standards for Audit & Supervisory Board Members”. On the request of the Audit & Supervisory Board, the Company appointed two employees who also assist the duties of the Audit & Supervisory Board Members.

7. System to report to Audit & Supervisory Board Members and system to ensure that employees shall not receive any disadvantageous treatment due to their submission of reports

  • ① Directors and employees of the Company and its subsidiaries (including people who received reports from those: hereinafter collectively referred to as “Directors and Employees of the Company and Subsidiaries”) report the status regarding the execution of duties upon request by the Audit & Supervisory Board Members of the Company.
  • ② Directors and Employees of the Company and Subsidiaries shall immediately report to the Audit & Supervisory Board Members of the Company any matters that may cause material harm to the Group and when they find serious violations by Directors and Employees of each Group company.
  • ③ Audit & Supervisory Board Members of the Company may request clarification directly from Directors and Employees of the Company and Subsidiaries at any time as needed.
  • ④ Audit & Supervisory Board Members of the Company may attend Committee Meetings, etc. at any time for their understanding of the decision-making process and status of execution, in addition to the Board of Directors’ meeting and Management Meeting of each Group company. Audit & Supervisory Board Members of the Company shall endeavor to facilitate mutual understanding on matters such as confirmation of management policy through regular exchange of views with the President & CEO.
  • ⑤ The Company shall ensure prompt reporting to Audit & Supervisory Board Members of the Company in cases where an internal report is submitted to the Consultation Desk for Corporate Ethics in the Group or an external consultation contact with regard to violations of the laws and regulations and other compliance issues.
  • ⑥ A person who submits reports applicable to (1) and (2) above shall not receive any disadvantageous treatment for filing such reports.

[Overview of Implementation Status]

  • ① ③ The Company’s “Audit Standards for Audit & Supervisory Board Members” provides that the Audit & Supervisory Board Members may request clarification directly from Directors and Employees of the Company and Subsidiaries regarding the status of the execution of duties. Directors and Employees of the Company and Subsidiaries have appropriately responded on the request of the Audit & Supervisory Board Members.
  • ② The Company’s “Audit Standards for Audit & Supervisory Members” provides that Directors and Employees of the Company and Subsidiaries shall report to Audit & Supervisory Board Members of the Company for any matters that may cause material harm to the Group and when they find serious violations by Directors and Employees of each Group company. The Company has appropriately implemented the standards.
  • ④ The Company’s “Audit Standards for Audit & Supervisory Board Members” provides that Audit & Supervisory Board Members may attend the Board of Directors’ meeting and Management Meeting of each Group company to express their opinions and views. The Company has implemented the standards. President & CEO and Audit & Supervisory Board Members exchange opinions once every quarter and share information on management policies and issues that the Company is required to address. Moreover, the Company has been holding a monthly liaison meeting with the Audit & Supervisory Board Members of domestic subsidiaries to exchange and share the views and opinions among the Audit & Supervisory Board Members of the Group. In addition to these meetings, the Company had liaison meetings with the Audit & Supervisory Board Members with overseas subsidiaries again in the fiscal year under review, which were started in the previous fiscal year.
  • ⑤ ⑥ The Company’s “Group Compliance Rule” provides that the Company shall have in place a system that a person who makes a report to any Audit & Supervisory Board Member shall not receive any disadvantageous treatment for filing such report. The system has been properly implemented. The Company has also established internal report desks in and outside of the Company, ensuring that any information to the desk is promptly escalated to the Audit & Supervisory Board Members.

8. System concerning settlement of expenses, etc. pertaining to execution of duties by Audit & Supervisory Board Members

  • The Company shall set procedures for the settlement of expenses pertaining to execution of duties by Audit & Supervisory Board Members. If Audit & Supervisory Board Members request for prepayment or repayment, except when deemed unnecessary for execution of their duties, the Company shall accept such requests in accordance with the prescribed procedures.

[Overview of Implementation Status]

  • “Audit Standards for Audit & Supervisory Members” provides for the settlement of expenses pertaining to execution of duties by Audit & Supervisory Board Members. Any settlement of expenses requested by Audit & Supervisor Members and the payments thereto has been carried out in accordance with the defined procedures.

9. Basic policy on exclusion of anti-social forces and its development

  • ① The Group shall steer away from all anti-social forces and stand resolutely against any unreasonable demand by them.
  • ② The Company has established “Rules on Exclusion of Anti-Social Forces”, and if it receives unreasonable demand from anti-social forces, General Affairs Department shall address the issue, and closely work with department heads and external specialist organizations such as the police to handle the issue systematically.

[Overview of Implementation Status]

  • ① ② The Group has established basic policies and measures for eliminating anti-social forces in its “Rules on Exclusion of Anti-Social Forces” and its “Manual to Deal with Unreasonable Demand and Violence”. The Company requires all employees to abide by the policies and measures thoroughly. The Company designated the General Affairs Department of the Company as the department to handle unreasonable demand, etc. by appointing an officer in charge of preventing unreasonable demand and has established a system to closely work with the police or Center for Elimination of Organized Crime Groups as appropriate.