Basic Views on Corporate Governance
The Group’s basic view on corporate governance is to pursue the continuous growth of the Company and earn the trust of society by maintaining efficient management and a strong competitive advantage through implementing rigorous compliance and improving the transparency and soundness of its management activities.
Based on the above basic view on corporate governance, and drawing on the provisions of the principles of the Corporate Governance Code, it is the Group’s policy to establish appropriate corporate governance via the implementation of a structure that enables the dissemination of timely, accurate information, strengthening of its information management system, rigorous legal compliance, the use of independent outside directors, and so forth.
Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions
The Company’s Board of Directors is composed of 11 directors, of whom four are outside directors. As a decision-making body for important matters relating to business execution, the Board of Directors resolves matters stipulated by the law and the Articles of Incorporation and matters relating to important business, as well as supervising the execution of the directors’ duties. In addition to its regular monthly meetings, the Board of Directors holds extraordinary meetings as needed in order to make timely decisions about important management-related matters.
The Board of Corporate Auditors is composed of one full-time corporate auditor and two part-time corporate auditors, for a total of three members. In order for them to supervise the directors’ execution of their duties from an objective, neutral perspective, all of the corporate auditors are outside directors, and the system allows them to understand important management-related matters, important matters relating to compliance and risk management, and other matters as needed through attending and consulting the minutes of key meetings, consulting all resolution documents (in the case of resolutions), holding regular meetings with all directors, asking questions about the status of execution of duties when necessary, and so forth. Moreover, the system provides an opportunity for corporate auditors to provide comments as part of the matters to be reported at regular Board of Directors’ meetings and enables reports, requests, suggestions, etc. to be received from corporate auditors. Through these mechanisms, the Board of Directors’ decision-making process and the status of directors’ execution of their duties is audited.
Internal Auditing Status
With regard to internal auditing, an internal audit department reporting directly to the president audits the work of various Company departments and Group companies in accordance with the internal auditing regulations, etc. and reports the results to the president and the various audited departments, as well as suggests matters for improvement if necessary. Moreover, the internal auditors, corporate auditors, and accounting auditors seek to enhance their cooperation via meetings for the purpose of information-sharing.
Accounting Auditing Status
The Company has signed an auditing contract for auditing based on the Companies Act and auditing based on the Financial Instruments and Exchange Act with Ernst & Young Shin-Nihon LLC. This accounting firm and the managing partners of the firm engaged in the auditing activities and the Company do not have any material interest in each other.
Basic Views on Internal Control System and the Progress of System Development
From the perspective of strengthening its compliance and risk management system, ensuring the reliability of financial reports, optimizing and increasing the efficiency of business execution, and so forth, the Company views the establishment and enhancement of an internal control system as extremely important. A Basic Policy on Establishing an Internal Control System has been adopted by a resolution of the Board of Directors, and the Company is working to enhance it.
Basic Policy on Establishing an Internal Control System
1. System for Ensuring That the Execution of Directors’ and Employees’ Duties Complies with the Law and Articles of Incorporation
1) Management Philosophy/Code of Conduct
Directors and employees shall comply with the law, the Articles of Incorporation, and company regulations as a matter of course, and the Company shall stipulate a Management Philosophy and Code of Conduct that establish shared standards for engaging in business conduct that is highly ethical, sincere, and appropriate.
2) Compliance Regulations/Compliance Manual
The Company shall create Compliance Regulations and a Compliance Manual to serve as the basic rules regarding compliance management of its group and promote rigorous legal compliance, the establishment of a compliance management system, and education/awareness activities.
3) Compliance Management System
To ensure the viability of compliance management, the Company shall appoint the director responsible for the administration department as the compliance officer, and the administration department shall serve as the compliance department. To ensure thorough awareness and practical implementation of the Management Philosophy, Code of Conduct, Compliance Regulations, and Compliance Manual, the compliance department shall formulate an action plan for executing compliance management, and based on this, it shall hold training workshops, verify legal compliance, and conduct daily monitoring activities. Moreover, to ensure comprehensive implementation of the internal control system as a whole, the administration department shall work to enhance the system across the company.
4) Whistleblowing System
The Company shall establish a whistleblowing system that enables Company and Group company employees to communicate directly with the compliance department or Board of Corporate Auditors regarding actions that violate the law and similar matters, and persons with knowledge of such actions shall be obligated to report them to the company. Moreover, if circumstances that require remedial measures should arise, the appropriate measures shall be taken promptly, and the compliance officer shall report the results of any investigations and remedial measures to the Board of Directors and the corporate auditors.
5) Ensuring the Reliability of Financial Reporting
To ensure the reliability of financial reporting, the Company shall formulate a Basic Policy on Financial Reporting that stipulates the basic policy and the role of internal control. Based on this basic policy, the accounting department shall establish and implement a system for ensuring the reliability of financial reporting along with internal control based on the Companies Act, as well as conducting continuous evaluation and making improvements if there are any deficiencies.
6) Prevention of Damage That May Be Inflicted by Anti-Social Forces and Banning of Relationships with Anti-Social Forces
In order to prevent damage that may be inflicted by anti-social forces and ban relationships with them, the administration department shall take comprehensive measures against them. The administration department shall develop a manual for this purpose as well as act in an organized manner in collaboration with attorneys, the police, etc. if necessary.
7) Internal Auditing
The internal audit department shall audit the status of compliance management across the company and report its findings to the Representative Director & President. If improvements are required as a result of auditing, the audited department shall promptly implement the measures.
2. System for Saving and Managing Information Relating to the Execution of Directors’ Duties
1) Saving and Managing Documents
Board minutes, approval request documents, and other information relating to the execution of directors’ duties shall be recorded in writing (including electronic records) and saved and managed in an appropriate manner based on the Written Document Management Regulations and other internal regulations.
2) Information Security Measures
The Company shall stipulate a Basic Information Security Policy and establish an information security management system (ISMS) based on the ISO27001 international standards relating to information security management systems.
3. Regulations and Other Systems Related to Managing the Risk of Loss
1) Risk Management Regulations/Emergency Response Regulations
The Company shall formulate Risk Management Regulations as basic regulations for risk management and stipulate a system for managing risk during normal times and when emergency situations arise. It shall establish Emergency Response Regulations as separate regulations that stipulate the measures to be taken when emergency situations arise, and it shall establish a system for promptly evaluating the circumstances in the event of such a situation and taking prompt, appropriate steps to minimize losses.
2) System for Risk Management During Normal Times
The Company shall appoint the director responsible for the administration department as the director responsible for risk management, and the administration department shall serve as the department in charge of general risk management. The administration department shall formulate an action plan for executing risk management and verify and evaluate the status of risk management based on this, implement countermeasures, and so forth.
3) Emergency Response Department
If an emergency situation arises, an emergency response department led by the Representative Director & President shall be established, and measures will be taken in an organized manner based on the Emergency Response Regulations and Detailed Regulations on Measures for Severe Natural Disasters, Etc.
4) Internal Auditing
The internal audit department shall audit the status of risk management across the company and report its findings to the Representative Director & President. If improvements are required as a result of auditing, the audited department shall promptly implement the measures.
4. System to Ensure the Directors Execute Their Duties Efficiently
1) Board of Directors’ Meetings/Business Execution Meetings
In order to rapidly make decisions on important matters stipulated in the Board of Directors Regulations, regular Board of Directors’ meetings shall be held once per month and extraordinary Board of Directors’ meetings shall be held as needed. The Board shall discuss matters relating to the Company’s overall management and business execution, and a Business Execution Committee shall be established as a managerial body for determining policies. The Business Execution Committee shall, as a general rule, be composed of all directors except outside directors and hold meetings once per week. The outside directors and full-time corporate auditor may, as necessary, attend meetings of the Business Execution Committee.
2) Business Execution Decisions
The Board of Directors shall determine the duties of the directors, and each director shall execute his or her duties in accordance with this decision. For the execution of day-to-day duties, authority may be transferred based on the Organization Regulations (administrative authority chart) and Division of Duties Regulations, and the persons in charge at each level shall execute their duties in accordance with the decision-making rules. Moreover, meetings attended by directors and business managers shall be held once per month with the aim of verifying the status of business execution and improving its efficiency.
3) Medium-Term Management Plan/Annual Budget
The Board of Directors shall formulate a Medium-Term Management Plan and, based on this, draft an annual budget in accordance with the general budgeting policy. For the purpose of rigorous budget management, meetings will be held once per month to analyze the reasons for surpluses or shortfalls and, in the case of shortfalls, report on improvement measures and revise targets if necessary.
4) Internal Auditing
The internal audit department shall monitor the status of business management and, for the purpose of making improvements, audit its efficiency and effectiveness and report its findings to the Representative Director & President.
5. System for Ensuring the Fairness of Business Practices in the Corporate Group
The corporate planning department will serve as the department in charge of ensuring the fairness of the Group’s business practices. The corporate planning department shall receive various reports and manage Group companies through affiliate company meetings, etc. held based on the Affiliate Company Management Regulations. Moreover, the Company shall promote an integrated compliance system for the Group based on the Compliance Regulations and Compliance Manual. Other Group companies shall be able to use the Company’s whistleblowing system, and if necessary, the Company shall provide other Group companies with advice on compliance- and risk management-related matters. Group companies shall manage their business based on the division of duties and powers stipulated by each company. The Company shall dispatch directors to supervise the business of key Group companies. The internal audit department shall audit the Company’s Group management system as well as key Group companies and report its findings to the Representative Director & President.
6. Matters Relating to Employees Who Support Corporate Auditors in Their Duties
There are no dedicated employees assigned to support the corporate auditors in their duties, but, if necessary, the internal audit department and corporate management department shall provide them with assistance. Employees who receive instructions from corporate auditors that are necessary for auditing tasks shall not receive commands relating to those instructions from directors or others. The employees in question shall prioritize the execution of these instructions ahead of other tasks.
7. System for Reporting to Corporate Auditors and System for Ensuring That Auditing Is Implemented in Practice by Corporate Auditors
1) System for Reporting to Corporate Auditors
The Group’s officers and employees shall report the matters below to the corporate auditors without delay. Moreover, persons who report these matters shall not be subject to detrimental treatment for any reason whatsoever.
1. Important matters related to management
2. Important matters relating to compliance and risk management
3. Important matters related to ensuring the reliability of financial reporting
4. All internal approval request documents
5. Minutes of important meetings or meetings requested by corporate auditors
6. Whistleblowing details
7. Matters liable to have a major impact on Group companies’ business or financial status
8. Other matters requested by corporate auditors
(2) System for Ensuring That Auditing Is Implemented in Practice by Corporate Auditors
Based on the annual auditing policy and auditing plan, the Board of Corporate Auditors shall implement auditing in practice using the following methods.
1. The corporate auditors shall attend Board of Directors’ meetings and other important meetings. Moreover, at Board of Directors’ meetings, opportunities will be provided for reports, requests, and other comments from corporate auditors.
2. The corporate auditors shall regularly hold meetings with the directors, including the representative directors, and exchange views on issues to be addressed by the company, the status of the environment established for auditing by corporate auditors, and important auditing-related issues.
3. The corporate auditors shall question directors and employees about the execution of their duties as needed. Moreover, they shall view important documents such as accounting records and approval requests and, if necessary, request explanations from directors or employees.
4. The corporate auditors shall conduct on-site investigations of properties and observe interim/completion inspections as needed.
5. The corporate auditors shall be present at audits conducted by the internal audit department in order to understand the actual status of each department’s business activities, as well as requesting improvements if there are any deficiencies in business execution.
6. The corporate auditors shall receive explanations relating to accounting auditing details from the accounting auditors, as well as pursuing collaboration by providing opportunities for sharing information and opinions in their day-to-day activities.
(3) Policy Relating to Handling Expenses or Reimbursements Arising in the Execution of the Corporate Auditors’ Duties
When corporate auditors claim expenses that are required in order to perform auditing, the claims cannot be rejected, except in cases where it is deemed that the applicable expenses were not necessary to the execution of the corporate auditors’ duties.
Basic Views on Eliminating Anti-Social Forces
In keeping with the Compliance Regulations and Compliance Manual, which stipulate that it shall resolutely oppose and have no involvement whatsoever with anti-social activities and forces, the Company strives to eliminate anti-social forces.
Status of Measures Aimed at Eliminating Anti-Social Forces
The administration department is tasked with coordinating measures for the purpose of preventing harm from anti-social forces and severing any ties with them.
In addition to preparing documents such as a countermeasures manual, the administration department shall collaborate with attorneys, the police, etc. to take steps in an organized manner if necessary.