Fundamental Philosophy of Corporate Governance
In order to actualize our corporate vision “Client satisfaction is the true value of our company, and the growth of each of our employees creates the value that shapes our future,” we recognize corporate governance as one of the most essential tasks in management, and we strive for building favorable relationships with our shareholders, clients, and also stakeholders such as our vendors, the community, and employees, in order to offer services to satisfy our clients, clarify management responsibility and accountability, and improve/expand monitoring and supervising functions to aim at maximizing our corporate values.
System of Corporate Governance
1. Summary of Corporate Governance System and Reasons for Adopting the system
At the 31st Annual Meeting of Shareholders held on June 22, 2016, our company transitioned to become a company retaining an Audit and Supervisory Committee in place of the former auditors and Board of Auditors, whereby this Audit and Supervisory Committee will be composed of three or more directors, a majority of whom will be Outside Directors.
As a company retaining an Audit and Supervisory Committee, we have established a management system to perform accurate decision-making and prompt execution of operations while enabling appropriate auditing and oversight, as well as a system to improve effectiveness in these areas for enhancing corporate governance in accordance with the current business situation.
In addition, we are striving to simultaneously pursue prompt and rational decision-making and mutual restraints by introducing a chain of responsibility consisting of a group chief executive officer (group CEO founder), a chief executive officer (CEO), and a chief operating officer (COO) who manages general operations, who perform the role of making important management decisions while also overseeing the performance of operations.
2. Details of the Company Organization
Director/Board of Directors
Our company’s board of directors consists of a total of 19 members including six external directors, and it performs decision-making with regard to important managerial issues while also overseeing the performance of operations by all of the corporate officers. Furthermore, in order to enhance restraints on management functions and to ensure the transparency of decision-making processes within the board of directors, six of the external board members who have a wealth of knowledge and experience are designated as independent directors.
Along with the transition to become a company retaining an Audit and Supervisory Committee, the company will promote the acceleration of decision-making and strengthening of oversight functions by having the Board of Directors delegate decisions regarding the execution of important operations to Management Meetings.
Audit and Supervisory Committee
Our company’s Audit and Supervisory Committee is composed of three Outside Directors in order to ensure the objectivity and neutrality of management oversight functions. In addition, all of the Outside Directors have been appointed as independent directors who have no particular personal or economic relationship with our company, and all of them are Outside Directors having considerable knowledge of finance and accounting. Audit and Supervisory Committee Members will exercise the authority stipulated by laws and regulations to audit the execution of duties by the Board of Directors according to the audit policies and audit plans determined by the Audit and Supervisory Committee, including attendance in important meeting groups.
This is a body comprised of representative directors which discusses important matters relating to the management and administration of all operations based on basic management policies determined by the board of directors, as well as issues including the corresponding execution policies.
The corporate officers of our company are appointed by resolutions of the board of directors, and under the direction of the representative directors, they implement operations to perform “executive functions” within the scope authorized by the board of directors and executive directors in accordance with laws, the articles of incorporation, in-house rules and corporate resolutions.
Operation Implementation Meeting
This is a body comprised of representative directors, executive directors and corporate officers, which promotes appropriate practices through deliberations concerning the smooth operation of business hubs, including implementation of our company’s group business activities, administration, controls and general horizontal coordination of various departments.
Corporate Governance Flow Chart
Internal Control System
Through a resolution of the Board of Directors regarding development of a system to ensure the suitability of business practices (a so-called Internal Control System), our company properly maintains and operates an Internal Control System based on this resolution in accordance with laws and regulations. Basic policies concerning a system to ensure the suitability of business practices as resolved by the Board of Directors (Basic Policies of Internal Control System Construction) are as follows.
1. Systems to ensure that the execution of duties by directors complies with laws, regulations and the Articles of Incorporation
In order for the execution of duties by directors to comply with laws, regulations and the Articles of Incorporation, and to fulfill social responsibilities, duties are performed based on a compliance code of conduct, compliance action guidelines and compliance regulations. Measures such as compliance related training further raise the awareness of all directors regarding compliance, and duties are carefully executed on that basis.
Meetings of the Board of Directors operate on the basis of the Regulations of the Board of Directors, and they are held once a month as a general rule. Directors who are Audit and Supervisory Committee Members promote communication among the directors and also mutually oversee the execution of operations, in order to audit the performance of duties by the directors.
In response to the enforcement of laws and regulations related to internal controls, basic plans related to the construction of an internal control system will be reformulated with the cooperation of outside advisors, such as attorneys and certified public accountants, in order to further enhance the Internal Control System.
2. Systems for storage and management of information pertaining to the execution of duties by directors
Important decision-making and reporting are carried out based on the Regulations of the Board of Directors.
With regard to documents and other information related to the execution of duties, rules are implemented for approval requests, document management, contract handling, information management and information security management, and verification of operational status as well as reviews of all rules are performed as necessary.
Regarding these issues, the Administration Division Manager has jurisdiction over rules for approval requests, document management and contract handling, the Compliance Promotion Director has jurisdiction over rules for information management and information security management, and they report as appropriate to the Board of Directors regarding matters such as the progress of verification and review of operational status.
Moreover, in order to efficiently promote operations, developments such as the rationalization and computerization of business systems will be further developed.
3. Rules and other systems to manage the of risk of loss
Under the direction of the President and the Audit and Supervisory Committee, the Internal Audit Office reviews audit action items and methods to formulate audit plans based on internal audit rules, performs audits based on those plans, and reports on the audit results.
If violations of laws, regulations or the Articles of Incorporation are found by an audit of the Internal Audit Office, or if executive actions that create a risk of loss for other reasons are found, they are to be promptly reported to the President and the Audit and Supervisory Committee.
The Compliance Promotion Department is responsible for Risk management based on the Basic Risk Management Rules.
Each department performs risk management related to its own area, and if a risk of loss is found, a control system should be promptly constructed and reported to the Compliance Promotion Department. In order to facilitate the gathering of risk information, employees are fully informed about the reasons for the existence of the Compliance Promotion Department, and they are instructed to promptly report through the organization in case any risks of loss are found.
An environment is maintained in which it is easy for an internal whistleblower to provide information through the establishment of internal reporting system rules and the installation of features such as a help line. The internal reporting system includes a structure that allows directors and employees to report directly to the Audit and Supervisory Committee in order to carry out the appropriate handling of reports or consultations related to issues such as organizational or personal fraud and misconduct. This facilitates the early detection and correction of any misconduct, as well as maintaining the trust of interested parties including customers and stakeholders, by promoting good workplace order and the prevention of misconduct such as fraud and illegal activities related to the company’s business.
The information management system is enhanced based on features such as privacy marks and other personal information protection rules.
4. Systems to ensure that the execution of duties by directors is carried out efficiently
The efficiency of operations is ensured, while also implementing evaluation and compensation linked to performance, by establishing annual plans and medium-term management plans to clarify the goals to be achieved as a company, as well as clarifying the organizations for which each director is responsible along with their performance goals. The Board of Directors then reviews the attainment of goals in order to provide feedback on the results.
The decision-making authority and responsibilities of the directors are clarified based on the Regulations of the Board of Directors, administrative authority operational guidelines, and approval request rules
The Board of Directors is to manage and oversee the status of business execution by Corporate Officers.
Decisions regarding important matters delegated from the Board of Directors are made carefully and quickly in Management Meetings composed of Representative Directors, on the basis of Management Meeting rules.
5. Systems to ensure that the execution of duties by employees complies with laws, regulations and the Articles of Incorporation
In order for the execution of duties by employees to comply with laws, regulations and the Articles of Incorporation, and to fulfill social responsibilities, a system is established for all employees to follow a compliance code of conduct, compliance action guidelines and compliance regulations.
In addition, based on the compliance action guidelines, an internal system is established for the entire organization to take a firm position against having business relationships or any other relationships with anti-social forces that threaten the order and safety of civil society.
With the officer in charge as the responsible person, the Compliance Promotion Department will periodically develop and implement compliance programs for employees in order to enhance their knowledge of compliance and to foster a consciousness for achieving compliance, through the implementation of compliance related training and the creation and distribution of manuals.
6. Systems for reporting to the company on matters related to the execution of duties by the Board of Directors and employees of subsidiaries
Internal systems are established to regularly report to the company regarding the business performance, financial situation and other important information concerning subsidiaries, based on affiliated companies management rules stipulated by the company.
7. Rules and other systems to manage the of risk of loss at subsidiaries
In order to confirm the existence of risk information for the corporate group consisting of our company and its subsidiaries (hereafter referred to as our Group), each department within our company that is in charge of subsidiaries will perform the necessary risk management depending on the situation of the subsidiaries, based on the affiliated companies management rules.
In cases where an occurrence of a risk of loss is discovered in a subsidiary, all departments within our company that are in charge of subsidiaries will promptly report to the Representative Directors of the company on matters including the contents of the discovered risk of loss, the extent of the loss that occurs, and its effects on the company.
8. Systems to ensure that the execution of duties by the Board of Directors and employees of subsidiaries is carried out efficiently
Our company requires that subsidiaries create an annual plan and it stipulates items such as budget allocations. An internal system is established to clarify the performance goals of subsidiaries and to ensure the efficiency of operations.
9. Systems to ensure that the execution of duties by directors and employees of subsidiaries complies with laws, regulations and the Articles of Incorporation
The company may dispatch directors or auditors to a subsidiary, whereby the dispatched officers will attend the Board of Directors Meetings of the subsidiary as well as overseeing the management of the subsidiary. The Affiliated Companies Corporate Management Department of our company conducts audits of subsidiaries in cooperation with the Internal Audit Office to provide guidance for subsidiaries based on the affiliated companies management rules.
Compliance training equivalent to that provided within our company is implemented every year for the directors and employees of subsidiaries that our company considers to be critical.
10. Matters related to directors and employees who assist with the duties of the Audit and Supervisory Committee, and matters related to ensuring the independence of those directors and employees from the Board of Directors, as well as the effectiveness of instructions for those directors and employees
The Internal Audit Office assists with the duties of the Audit and Supervisory Committee. The Internal Audit Office supports the audit work of the Audit and Supervisory Committee under the direction and oversight of the Audit and Supervisory Committee. Prior consent is to be obtained from the Audit and Supervisory Committee regarding personnel changes, personnel evaluations and disciplinary actions concerning key employees attached to the Internal Audit Office.
The company does not assign directors to assist with the duties of the Audit and Supervisory Committee.
11. Systems for reporting by directors and employees to the Audit and Supervisory Committee, and systems for other reporting to the Audit and Supervisory Committee
The directors and employees are to regularly report items such as the following to the Audit and Supervisory Committee, while directors who are Audit and Supervisory Committee Members will attend meetings of the Board of Directors and other important meetings to receive the reports.
- Board of Directors resolution and report matters
- Monthly, quarterly and full-year operating results, earnings forecasts and business conditions
- Contents of important disclosure documents
- Important organizational and personnel changes
- Matters producing a significant risk of loss to the company
- Our company’s important accounting policies and standards, and related changes
- Activity status of the Internal Audit Office and the Compliance Promotion Department
- Other important approval request and decision matters
In addition, a system is established to promptly report in case matters arise which should be reported by the Audit and Supervisory Committee.
12. Systems for officers and employees of the Group to report to the Audit and Supervisory Committee of the company
When officers and employees of our Group are asked by our Audit and Supervisory Committee to report on matters related to the execution of operations, appropriate reporting is to be promptly carried out. However, an internal system is established to immediately report to our Audit and Supervisory Committee upon the discovery of any facts which present a risk of causing significant harm to the Group, such as serious violations of laws and regulations.
The department in charge of internal reporting systems for our company’s subsidiaries regularly reports to the company’s Audit and Supervisory Committee regarding the status of internal reporting from the officers and employees of the company’s subsidiaries.
13. Systems to ensure that persons who have made reports to the Audit and Supervisory Committee do not receive unfavorable treatment because of making a report
Our company prohibits the unfavorable treatment of any person because of making a report to the Audit and Supervisory Committee as indicated in the preceding two paragraphs.
14. Matters related to policies concerning the processing of expenses or debts arising from the execution of duties by Audit and Supervisory Committee Members
When an Audit and Supervisory Committee Member has made a claim to the company, such as prepayment for the performance of duties based on Article 399, Section 2, Item 4 of the Companies Act, the company will promptly process the expenses or debts, except in cases where it is found that the claim for expenses or debts was not necessary for the performance of duties by the Audit and Supervisory Committee Member.
15. Systems to ensure that other audits of the Audit and Supervisory Committee are performed effectively
Directors and employees will strive to deepen their understanding of the audits of the Audit and Supervisory Committee, and to establish a suitable environment for the audits of the Audit and Supervisory Committee.
While conducting a regular exchange of opinions with the Audit and Supervisory Committee, the Representative Directors will create a system for the Audit and Supervisory Committee to have appropriate communications with the Internal Audit Office and to implement effective audit work.
16. Systems for presenting timely and appropriate disclosures
Based on timely disclosure rules, a reporting line will be constructed for the Group’s disclosure information, while also promoting the dissemination of information to officers and employees. The suitability of content will be ensured by Management Meetings in order to implement timely and appropriate disclosures.