Internal Control System

Internal Control System

The Company’s Board of Directors has resolved the basic policy on the establishment of the internal control system, as follows.

  1. System to ensure that the execution of duties by the Directors and employees of the Company and its subsidiaries is in conformity with laws and regulations and the Articles of Incorporation
    1. The Company shall establish the “Compliance and Risk Management Committee” as an organization to oversee the Company Group’s compliance, as a whole.
    2. To thoroughly enforce compliance with laws and regulations and the Articles of Incorporation among the Directors and employees of the Company and its subsidiaries, the Compliance and Risk Management Committee shall conduct periodic in-house education on compliance, and also manage and supervise the implementation status of compliance, and establish a system to report such activities to the Board of Directors and the Audit & Supervisory Board, as necessary.
    3. To promote compliance, instructions shall be given through training and other methods, based on the compliance regulations, to ensure that the Directors and employees of the Company and its subsidiaries take individual ownership of the problem of compliance, and engage in business operations accordingly.
  2. System for the storage and management of information related to the Directors’ execution of duties, and system for reporting matters related to the execution of duties by the Directors of subsidiaries to the Company
    Information related to the Directors’ execution of duties shall be appropriately stored and managed in a readily accessible form, in accordance with the provisions of the document management regulations. In addition, at the subsidiaries, matters to be approved by and reported to the Company’s Board of Directors or the Business Executive Committee shall be set forth in the affiliate management regulations and the authority regulations.
  3. Regulations and other systems concerning management of the risk of loss for the Company and its subsidiaries
    1. The Company shall establish the “Compliance and Risk Management Committee” as an organization to oversee risk management in general, as well as an “Emergency Response Headquarters” headed by the President, to oversee risk management in times of emergency for the Company and its subsidiaries.
    2. In normal times, the Company shall make efforts to mitigate risks associated with information security, the environment, occupational health, product safety, quality, etc. through risk analysis based on the risk management regulations.
    3. The Company shall establish the “Security Committee,” “Environment Committee,” and “Quality and Safety Committee” under the “Compliance and Risk Management Committee,” to analyze operational risks from their respective specialized standpoints and report to the “Compliance and Risk Management Committee.” The Company shall also conduct in-house training and other methods to firmly establish risk management.
  4. System for ensuring that the Directors of the Company and its subsidiaries perform their duties efficiently
    1. In accordance with the provisions of laws and regulations and the Articles of Incorporation, the Company shall convene a meeting of the Board of Directors once per month, in principle, or whenever necessary, regarding important matters related to the management of the Company and its subsidiaries, in order to resolve such matters upon conducting the necessary and appropriate discussions and deliberations, and to supervise the execution of the duties of the Directors.
    2. To further strengthen the functions of the Board of Directors and improve management efficiency, the Company shall convene meetings of the Business Executive Committee each month, as appropriate, with the attendance of all Directors and Executive Officers, in order to flexibly make decisions on basic matters and important matters related to business execution.
    3. Directors (excluding Directors and Audit & Supervisory Board Members) shall establish organizational structures with clearly defined responsibilities and authorities under their chain of command, in accordance with the division of duties regulations and the authority regulations, and respond to important issues promptly and flexibly.
  5. System to ensure the appropriateness of business conducted by the corporate group comprising the Company and its subsidiaries
    1. The Company shall assign a person in charge of compliance to each subsidiary, while the “Compliance and Risk Management Committee” shall carry out management and supervision of compliance of the Company Group, in general.
    2. The Company shall manage, instruct, and audit the subsidiaries, in accordance with the affiliate management regulations, and conduct periodic reports and discussions in order to understand their business status.
    3. The Company’s Directors (excluding Directors and Audit & Supervisory Board Members) shall serve concurrently as Directors of the subsidiaries, in order to improve the business efficiency of the entire Group and enhance the risk management system, by means such as securing opportunities to report on important issues and responses to newly-recognized risks, as necessary, at the management meetings of each of its subsidiaries.
  6. Items concerning Directors and employees who assist in the duties of the Audit & Supervisory Board of the Company, items concerning the independence of such Directors and employees from other Directors (excluding Directors and Audit & Supervisory Board Members), and items concerning ensuring the effectiveness of instructions given to such Directors and employees by the Audit & Supervisory Board
    1. When deemed necessary by the Audit & Supervisory Board, employees shall be assigned to assist in its duties, and such assignments shall be made with reference to the opinions of the Audit & Supervisory Board.
    2. Personnel matters (transfers, evaluations, disciplinary actions, etc.) of employees assigned to assist in the duties of the Audit & Supervisory Board shall be deliberated in advance by the Audit & Supervisory Board and the Human Resources Division.
    3. When assisting in the duties of the Audit & Supervisory Board, employees who have been assigned to such duties shall be under the command and control of the Audit & Supervisory Board.
  7. System for reporting to the Audit & Supervisory Board and system to ensure that individuals who have reported to the Audit & Supervisory Board are not disadvantageously treated as a result of such reports
    When requested by the Audit & Supervisory Board, Directors and employees of the Company and its subsidiaries shall attend the meetings of the Audit & Supervisory Board and provide explanations regarding relevant matters. Furthermore, Directors and employees of the Company and its subsidiaries shall report without delay to the Audit & Supervisory Board Members, not only regarding matters provided for by laws and regulations, but also when facts that could cause significant damage to the Company or its subsidiaries are discovered or reported.
    The Company and its subsidiaries shall establish rules to the effect that individuals who have made reports to the Audit & Supervisory Board Members shall not be treated unfairly due to such reports, and ensure that such rules are enforced.
  8. Items concerning procedures for advance payment or reimbursement of costs incurred in relation to execution of the duties of Audit & Supervisory Board Members (limited to those related to execution of the duties of the Audit & Supervisory Board) and other policies on the treatment of costs and debts arising from execution of such duties
    Audit & Supervisory Board Members may request the Company for advance payment or reimbursement of costs incurred, and the payment of debt to creditors borne in relation to the execution of duties. The Directors (excluding Directors and Audit & Supervisory Board Members) shall settle said costs or debts without delay, except in cases where any doubt arises regarding whether or not said costs or debts were necessary for the execution of duties by Audit & Supervisory Board Members, and shall ensure that sufficient audits are not hindered.
  9. Other systems to ensure that the Audit & Supervisory Board’s audits are executed effectively
    The Audit & Supervisory Board may attend relevant meetings and freely access various materials in order to acquire the information necessary for audits. The Audit & Supervisory Board shall make efforts to exchange information with the Accounting Auditor, the corporate attorneys, and the Corporate Auditors of each subsidiary, and collaborate to ensure the effectiveness of the audits of the Company and its subsidiaries.
  10. System for ensuring the reliability of financial reporting
    In order to ensure the reliability of the Company’s financial reporting, the Company shall establish a system in which internal control with respect to financial reporting as stipulated in the Financial Instruments and Exchange Act functions effectively, directed by the President and Representative Director.
  11. Status of development of the risk management system
    The Company has established the “Compliance and Risk Management Committee” as an organization to oversee risk management in general. The Compliance and Risk Management Committee analyzes and works to reduce risk. The “Emergency Response Headquarters,” headed by the President, oversees risk management in times of emergency in order to respond quickly and appropriately in the event of disasters or other emergencies. The “Security Committee,” which has been established under the “Compliance and Risk Management Committee,” oversees risk management regarding important information such as customer information and overall information leakage measures.
  12. Liability limitation agreements with Directors (excluding Executive Directors, etc.)
    The Company has stipulated in its Articles of Incorporation that it may enter into liability limitation agreements with Directors (excluding Executive Directors, etc.), in accordance with Article 427, Paragraph 1 of the Companies Act, to limit their liability for damages to the amount stipulated by laws and regulations as provided in Article 423, Paragraph 1 of the same Act, so that they may fully perform their expected roles. Currently, the Company has entered into such liability limitation agreements with all of the Company’s nonexecutive directors.
  13. Overview of directors and officers liability insurance contracts providing coverage to officers, etc.
    The Company has entered into a directors and officers liability insurance contract as provided in Article 430- 3, Paragraph 1 of the Companies Act with an insurance company. In the event that a claim for damages is brought by a shareholder, third party, or other party, the insurance contract covers liability such as compensation for damages and litigation expenses that shall be borne by the insured. The insured under the insurance contract is Directors of the Company, and the premiums are fully borne by the Company.
  14. System to ensure the appropriateness of business of the Company’s subsidiaries
    The Company has assigned a person in charge of compliance to each subsidiary, and has adopted a system in which the “Compliance and Risk Management Committee” oversees and promotes the compliance of the Company Group in general. At least one of the Directors of every subsidiary is concurrently a Director of the Company and ascertains the status of management mainly by attending Board of Directors meetings. Once a month, the management status of each subsidiary is reported at the Company’s Business Executive Committee meetings. The Company has created a system in which the Directors serving as Audit & Supervisory Board Members work closely with the Accounting Auditor to effectively and appropriately supervise and audit each subsidiary.
  15. Policy for constructive dialogue with shareholders
    In order to build a foundation for constructive dialog with shareholders, the Company upholds the “appropriate disclosure of information” as part of its Corporate Code of Conduct. The Company maintains and ensures the continuity of transparent management and appropriately discloses corporate information, not only as a means of complying with laws and regulations, but also as a way to gain the trust of its customers, shareholders, and investors.
  16. Transactions between related parties
    In order to protect the interests of shareholders, the Company has defined, in the Board of Directors Regulations, transactions between Directors and the Company as matters to be discussed and resolved by the Board of Directors, and the Board of Directors provides appropriate supervision.

Exclusion of Anti-social Forces

The Company has established the “Basic Policy on the Exclusion of Anti-social Forces” as follows, and has set up a system to maintain a resolute stance against anti-social forces.

Basic Policy on the Exclusion of Anti-social Forces

  1. The Company is fully aware of the importance of severing all ties with anti-social forces that threaten the social order and the sound business operations of corporations, from the perspectives of social responsibility, compliance, and corporate defense, and rejects all ties with such forces and provides no benefit to them.
  2. The Company shall steadfastly refuse all unjust demands by anti-social forces. Furthermore, the Company shall address such unjust demands as an organization, and take a resolute stand.
  3. The Company shall always strive to strengthen its collaboration with outside specialist organizations such as the police, so that it will be able to receive appropriate advice and cooperation in the event that it receives an unjust demand from anti-social forces.

Development of a System for the Exclusion of Anti-social Forces

The Company has established the following systems to sever any and all ties with anti-social forces.

  • Appointment of a manager in charge of preventing unjust demands, and collaboration with corporate attorneys, local police stations, and Public Interest Incorporated Association Special Anti-violence Countermeasures Federation of the Metropolitan Police Department (Tokubouren)
  • Membership in Tokubouren and gathering of information through the Tokubouren newsletters and Tokubouren news, and through participation in workshops sponsored by Tokubouren