Corporate Governance

Status of corporate governance, etc.

Basic concept of corporate governance

Corporate governance is a high priority issue in our business management in terms of improving corporate value and increasing our management transparency to all interested parties including shareholders, business partners, employees and local communities, and we believe that fulfilling our social responsibility coincides with our goal of long-term profitability and sustainable growth.
We believe that we can fulfill our social responsibility by causing our corporate governance to function appropriately and conducting business activities that are highly fair and transparent.
We are fully aware of the necessity of supervising and monitoring our business management in order to ensure the legality and appropriateness of our business activities, and we will endeavor to cause our corporate governance to function effectively by pursuing the revitalization of the business management monitoring function of our board of directors, reinforcement of the monitoring function of external audit & supervisory board members, enhancement of our compliance system and information disclosure, and promoting the development and operation of our business management governing structure concentrating on directors and audit & supervisory board members.

Description of corporate structure and status of development of internal control system

The overview of our management organization and corporate governance system is as follows.

Schematic diagram of our management organization and corporate governance system

General explanation of corporate structure

(A) Board of directors

In order to make prompt business decisions in relation to the execution of our business, we are holding an ordinary board of directors' meeting, which consists of seven (7) directors, once a month. We also hold an extraordinary board of directors' meeting as needed.
During the board of directors' meeting, we discuss matters related to important business policies and important business executions in addition to the matters that are set out in laws and ordinances and our articles of incorporation.

(B) Audit & Supervisory Board and its members

In order to reinforce the audit of our business management, we have established an Audit & Supervisory Board consisting of three (3) audit & supervisory board members as an organization of the company. As a general rule, the Audit & Supervisory Board holds a meeting once a month to improve the audits conducted by audit & supervisory board members. Furthermore, auditors also participate in the board of directors' meetings and state their opinions, and full-time auditors also participate in important internal meetings and state their opinions as needed.
The Audit & Supervisory Board aims to maintain and enhance our audit function, and also actively exchanges information and closely cooperates with the audit firm and internal audit manager.
Persons who are familiar with our business and familiar with corporate governance are appointed as full-time audit & supervisory board member candidates, and the matter is placed before the general meeting of shareholders. Persons who are deemed appropriate from the perspective of corporate governance are appointed as external audit & supervisory board member candidates, and the matter is placed before the general meeting of shareholders.
The fees of audit & supervisory board members are approved in the general meeting of shareholders.

(C) Management meeting

As a general rule, we hold a management meeting once a month to discuss and decide on important matters related to business execution, and to report on important daily business affairs.
The management meeting consists of full-time directors and operating officers who were appointed by the board of directors.

(D) Internal audit

With regard to our internal audit, we have established an internal audit division as an independent organization, and a full-time manager of the internal audit division conducts an audit regarding the efficiency of our overall business, effectiveness of our internal control and compliance status so as to cover our entire group in accordance with the annual internal audit implementation plan. The audit results are reported to the board of directors and the head of the relevant business divisions, and the respective business divisions take measures for improving the items that need to be improved based on the respective audit results.
Furthermore, the internal audit division also meets with the audit firm and audit & supervisory board members as needed to improve the audit efficiency.

Status of development of internal control system

We have formulated our "Basic Policy on Internal Control System" in accordance with the provisions of the Companies Act, and are exerting efforts to develop and operate a system so that duties are efficiently executed by our board of directors and to ensure that the execution of such duties is compliant with laws and ordinances and our articles of incorporation. Audit & supervisory board members, Audit & Supervisory Board, Compliance Division and manager of the internal audit division are confirming the compliance with laws and ordinances and our internal rules, and also conducting internal audits concentrating on the verification of effectiveness of our internal checking function.
As the compliance system of directors and employees, we have formulated our "Compliance Rules", established the Compliance Committee and the Compliance Division, and are conducting our business activities for profit while discussing the compliance and risk management of our entire group from the perspective of applicable laws and ordinances and public nature, being deeply aware of our social responsibility as a company, and observing the interests of society and laws and ordinances.
Specifically, we have formulated our "Complaint Handling Rules", "Customer Management Rules", "Insider Trading Regulations", "Rules on Trading with Interested Parties", "Personal Information Protection Rules" and "Employee Service Rules", are exercising adequate care in handling information acquired during the course of business, and developed a system for preventing the interests of society and our company from becoming impaired.

Status of development of system of filing company for ensuring appropriateness of business performance of subsidiaries

In order to ensure the appropriateness of business of our subsidiaries, we have formulated our "Affiliate Management Rules", and are offering guidance and supervision such as by obligating the approval and report of important matters pertaining to business execution. Furthermore, monthly financial information from our subsidiaries is reported to our board of directors.
Moreover, our audit & supervisory board members and internal audit division conduct audits on whether the operation of important business by our subsidiaries is compliant with laws and ordinances and our articles of incorporation, and report the audit results to our board of directors.

Status of internal audit and audit & supervisory board member's audit

The respective audit function to check the robustness of our business management through coordination and complementarity, and audits are being conducted as described in "General explanation of corporate structure" (B) Audit & Supervisory Board and its members and (D) Internal audit based on the formulated audit plan.

Status of development of risk management system

Our Compliance Division has appointed a risk management administrator in the respective business divisions, and we are exerting efforts to promptly comprehend, and thereby prevent, risks by collecting and sharing information related to business execution and other matters.