Company InformationCorporate Governance

Corporate Governance Report

Internal Control Systems

I. Our Basic Approach to Corporate Governance

Kyosan Electric Manufacturing believes excellent governance means operating for the benefit of all stakeholders, through fair and open businesses managed from a long-term perspective as a going concern that balances both environmental and social considerations, while aiming to maximize shareholder value. Based on this principle, we strive to establish healthy and functional corporate governance, and to build a corporate ethics system that ensures the transparency and soundness of corporate activities.

II. Overview of Our Corporate Governance System

The Company has chosen to operate with a Board of Auditors. In doing so, we can bolster our system of corporate governance by enhancing the functions of the Board, while benefiting from the supervisory function of individual auditors.
We have also introduced an executive officer system, enabling us to enhance the functions of the Board of Directors, which makes decisions at the highest level and supervises management, while facilitating the execution of operations by executives. Meanwhile, we have appointed outside directors and outside auditors to bolster supervision and monitoring functions over management.
Directors are appointed for terms of one year, to ensure that they are accountable in their role of improving management practices and building a management system that can respond quickly and flexibly to changes in the operating environment.

Corporate Governance System Chart

Corporate Governance System Chart

Board of Directors

The Board of Directors consists of eight directors (including three outside directors). The Board holds an ordinary meeting once a month and an extraordinary meeting as necessary to consider, approve, and decide on matters provided by laws and regulations, matters related to management plans, and other important matters related to the organization, systems, personnel affairs, financial affairs, facilities, and labor agreements. The Board of Directors also supervises the execution of operations.

Management Council

The Management Council consists of directors involved in execution of operations, officers, internal auditors, and other officials appointed by the President. The Management Council holds a meeting twice a month in principle and an extraordinary meeting as necessary to make decisions at an executive level to ensure that important management matters determined by the Board of Directors are executed without fail, to discuss how to execute them, and to confirm that they have been executed. The Management Council also deliberates on matters to be submitted to the Board of Directors, important matters related to sales, technologies, production, matters related to subsidiaries, and other important matters such as special assignments mandated by the representative director.

Audit & Supervisory Board Member

The Audit & Supervisory Board Member consists of four auditors (including two outside auditors). The Audit & Supervisory Board decides the audit policy, etc. The Board receives reports on the result of auditing by individual auditors and those on the result of accounting auditing by the accounting auditor as required. Furthermore, the Board also closely cooperates with the accounting auditor, the internal auditing office, auditors of subsidiaries, etc. to grasp the operation status of internal control.
Auditors attend meetings of the Board of Directors and other important meetings related to management to check the business operation for integrity and the decision making process for transparency.
Moreover, they mainly verify the compliance, adequacy and validity of operations carried out by directors through hearing from the directors and reviewing the critical corporate authorization documents. Internal auditors attend the Management Council and report the results to the Audit & Supervisory Board.

III. Enhancement of the Internal Control System and Risk Management

As a company that is closely linked to public needs, the public interest, and community safety, we believe that it is essential to have a strong sense of responsibility, integrity and ethics, while complying with laws, regulations and community standards. Based on this belief, we have created and implemented an internal control system for the Company, including its subsidiaries.

Compliance

The President is the chief administrator of compliance.
As a Company, including our subsidiaries, we make every effort to comply fully with laws, regulations, rules, social and corporate standards of ethics, and the Basic Corporate Behavior Regulations.

Risk Management

The President is the chief administrator of risk management.
Together with our subsidiaries, we are engaged in strengthening risk management, and have established a risk management committee system based on the Risk Management Regulations.

Internal audit

Through internal auditing, we assess the risks related to business operations of the Company and its subsidiaries, audit operational effectiveness, efficiency and compliance, and request or propose improvements, as well as assessing the status of development and operation of the internal control system.

IV. Resolutions Concerning the Internal Control System

  1. Systems to ensure that the execution of duties by directors and employees of the Company and directors, etc. (directors, personnel who execute operations, and other persons equivalent to the persons above) and employees of subsidiaries complies with laws and regulations and the Articles of Incorporation
    1. Auditors shall audit the legality, appropriateness and fairness of the execution of duties by directors and, if there is any act that violates or could possibly violate a law, regulation or the Articles of Incorporation at the Company or subsidiaries, take the necessary measures, such as providing directors with recommendations and advice.
    2. All officers and employees of the Company and subsidiaries shall practice the Basic Corporate Behavior Regulations of Kyosan Electric Manufacturing Co., Ltd., which specifically sets out regulations that must be followed when pursuing corporate objectives, and shall observe the Basic Compliance Regulations as guidelines for compliance with laws, regulations, the Articles of Incorporation, and corporate ethics.
    3. The official in charge of the Legal Department shall familiarize all officers and employees of the Company and subsidiaries with the Basic Corporate Behavior Regulations and the Basic Compliance Regulations as guidelines for compliance with laws, regulations, the Articles of Incorporation, and corporate ethics.
    4. The Legal Department shall provide compliance training to all officers and employees of the Company and subsidiaries in accordance with the Basic Compliance Regulations.
    5. The Compliance Committee shall deliberate on important matters related to compliance in the Company and its subsidiaries, and shall, upon the judgment of the Committee head, report to the Board of Directors and the Audit and Supervisory Board, as well as to the chief administrator of compliance (the Company President).
    6. The Legal Department shall target all officers and employees of the Company and subsidiaries, familiarize them with the compliance consultation and reporting contact (Help Line), and promote its use.
    7. All officers and employees of the Company and subsidiaries shall adopt a resolute attitude in dealing with antisocial forces.
  2. Systems for storage and management of information concerning the execution of duties by directors
    1. The Company shall construct and operate the proper information management systems by adopting a Basic Information Security Policy, Information Management Regulations, Document Management Regulations and other relevant regulations and rules.
    2. Documents and information about the execution of duties by directors must be properly managed by the Company in accordance with laws and regulations.
  3. Regulations and other systems for the management of the risk of losses of the Company and subsidiaries
    1. The Company has established a risk management system based on the Risk Management Regulations. The chief administrator of risk management (the Company President) shall engage in the overall management of management risks for the Company and its subsidiaries.
    2. The Company shall establish a Risk Management Committee to recognize, analyze and control management risks in the Company and its subsidiaries. The Management and Financial Risk Committee, the Disaster Risk Committee and the Information Risk Committee shall be established as individual committees under the Risk Management Committee. The head of each individual committee shall report promptly on its activities to the Risk Management Committee, and shall also submit a report to the chief administrator of risk management when deemed necessary by the head of the Risk Management Committee.
  4. Systems to ensure that directors and directors, etc. of subsidiaries execute their duties efficiently
    1. Directors and directors, etc. of subsidiaries shall develop specific actions to take to achieve management targets based on an annual management plan and shall ensure that they take those actions.
    2. The Board of Directors shall confirm the status of execution of duties by directors and directors, etc. of subsidiaries, and conduct required decision-making.
  5. Systems to ensure the appropriateness of operations of the Company and subsidiaries
    1. The Company shall communicate important matters such as its management policies at the Board of Directors, etc. and ensure appropriateness of operations by holding liaison meeting with subsidiaries.
    2. Based on the Affiliated Companies Administration Regulations, the Corporate Planning Department shall receive reports from subsidiaries regarding the status of execution and other important matters, periodically or whenever necessary, to confirm the appropriateness of operations.
    3. The Internal Auditing office shall audit the Company and its subsidiaries, conduct operational audit, and evaluate the status of development and operation of internal control system.
    4. The compliance consultation and the reporting contact (Help Line) of the Company shall be operated by placing a consultation contact both within and outside of the Company for the Company and subsidiaries.
    5. Based on the regulations, the Company shall not treat unfavorably persons who seek consultation or provide information as in (4) above due to the aforementioned reports.
  6. Matters related to employees appointed to assist auditors at the request of auditors
    1. At the request of auditors, the Company shall assign employees on a dedicated or concurrent basis to assist auditors in their duties. The agreement of the auditors is required for the appointment or dismissal of these employees.
    2. When assigning assistant employees on a dedicated or concurrent basis, the Company shall ensure their independence from those employees charged with executing operations related to the audit work. Furthermore, to ensure the effectiveness of instructions from auditors, the aforementioned assistant employees shall not receive directions or orders from the Company.
  7. Systems for reporting to auditors and other systems to ensure that persons who have made reports are not treated unfavorably due to the aforementioned reports
    1. When a risk that could have a material impact on the Company or subsidiaries exists, all officers and employees of the Company and subsidiaries shall report the details of the risk to auditors. Furthermore, based on the regulations, the head of the Compliance Committee shall report to auditors the content and research results, etc. of reporting made by employees through the Help Line.
    2. The Company shall not treat unfavorably persons who report as in (1) above due to the aforementioned reports.
    3. Auditors shall not only attend important meetings to express their opinions, but also exchange information with the Internal Auditing office, the Legal Department and other departments on a regular basis to facilitate close cooperation with these departments.
  8. Systems to ensure that the audit of auditors is carried out effectively
    1. Auditors shall meet with the representative director regularly to share information on important management policies, issues and risks for the Company, preparations for an audit by auditors, important audit issues, and other matters. Auditors shall also exchange information with other directors, officers, and the accounting auditor regularly and request a report at any time, as necessary.
    2. Auditors may, as required to execute duties, use outside experts as necessary.
    3. The Company, in the event that auditors claim prepayment, etc. for expenses incurred during the execution of duties, shall process the aforementioned expenses or liabilities except in cases where it has been recognized that they are not necessary for the execution of duties for the aforementioned auditors.

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