The Company's Board of Directors has adopted the following resolutions regarding the basic policy for the establishment of an internal control system, and the Company operates based on this policy.

Basic Policy for the Establishment of an Internal Control System

Ⅰ． System for Ensuring Compliance with Laws, Regulations, and the Articles of Incorporation by Directors and Employees

  1. In order to live up to the social trust placed in us as a corporation and to clarify our basic stance on corporate ethics and compliance with laws and regulations, we have established a compliance program and, as specific codes of conduct, have formulated Conduct Guidelines and Standards of Behavior, and we shall strive to ensure that all officers and employees of both our company and our subsidiaries (hereinafter, the “Group”) are familiar with them.
  2.  In order to develop and maintain a compliance system, a Compliance Committee has been established under the direct control of the President. In addition, the Information Management Committee, Fair Trade Management Committee, and Trade Committee have been established as specialized committees to deal with specialized legal issues. As a means of further enhancing the compliance system, the Compliance Committee and specialized committees invite attorneys as outside members and seek their legal opinions as appropriate.
  3. Directors shall take the initiative in ensuring compliance with business ethics in the Group.
  4. The Company has an Internal Auditing Department, which is independent of the executive departments and directly reports to the President, and it conducts operational audits and makes reports in accordance with the Operational Audit Regulations.
  5. Regarding violations of laws, regulations, and other compliance violations, we have an internal reporting system in place, which uses the Compliance Committee’s consultation desk and outside attorneys as whistleblowing channels, based on internal reporting rules that guarantee anonymity at the whistleblower’s request and do not allow the whistleblower to be treated disadvantageously.
  6. The Group shall have no relationship with antisocial forces or groups that threaten the order and safety of civil society, and shall reject any unreasonable demands

 

 

Ⅱ． System for Storing and Managing Information Related to the Execution of Duties by Directors

  1. In accordance with the Regulations of the Board of Directors, Document Management Rules, etc., minutes of the Board of Directors meetings, approval documents, and other documents containing information related to the execution of duties by Directors shall be appropriately stored and managed.

 

Ⅲ．Regulations and Other Systems for Managing Risk of Loss

  1. The Company shall establish basic rules for crisis management, building a crisis management system based on rules for crisis response and RC Committee rules, taking into consideration environmental preservation, safety and disaster prevention, occupational safety, and chemical safety.
  2.  We recognize risks related to disasters, production and manufacturing, information management, information systems, and finances as major risks.
  3.  For disaster risks, a task force shall be established in accordance with the basic rules for crisis management and the rules for crisis response, and prompt action shall be taken. Production and manufacturing risks shall be handled by the RC Committee, Engineering and Technology Division, and Quality Assurance Committee. The Information Management Committee shall respond to information management risks, and will properly handle and monitor corporate and personal information in accordance with the basic rules for information management. The Information Systems Department shall respond to risks related to information systems in cooperation with the relevant departments. Regarding financial risks, mutual checks and internal checks and balances shall be carried out in accordance with accounting regulations, divisions of duties, and Regulations on Administrative Authority.

 

Ⅳ．Systems for Ensuring Efficient Execution of Duties by Directors

  1. The Company has introduced an executive officer system in order to accelerate business execution and clarify responsibilities. Based on management strategies and decisions made by the Board of Directors, Executive Officers shall execute business promptly in the areas of business delegated to them under the supervision of Directors and the Board of Directors.
  2.  Details regarding the authority of Directors and procedures for the execution of duties by Directors are stipulated by the Regulations of the Board of Directors, division of duties, Regulations on Administrative Authority, rules on decision-making, etc., and each Director shall carry out their duties in accordance with these rules.
  3.  In principle, the Board of Directors meets regularly once a month, and also meets as necessary on an ad-hoc basis to ensure flexible operations.
  4.  Important matters concerning the execution of duties by Directors shall be brought up for discussion at the Management Committee, which is composed mainly of Directors and acts as an advisory body to the Representative Director, to ensure that the decisions of the Representative Director are accurately understood and implemented.
  5. Mid-term Management Plans and budgets for each fiscal year shall be formulated to clarify the goals of the entire Group and each company, and progress shall be periodically checked to ensure the efficiency of the execution of duties by the Directors.

 

Ⅴ．System for Ensuring the Appropriateness of Business Operations Within the Corporate Group

  1.  In order to ensure the appropriateness of business operations within the Group, a Basic Policy for the Management of Affiliated Companies shall be established and subsidiaries shall be managed in accordance with the Subsidiary Management Regulations.
  2. The Company shall conduct audits of each Group company in accordance with the Operational Audit Regulations and establish a system to ensure the appropriateness of the Group’s business operations.
  3. The Company shall establish a Basic Policy on Internal Control regarding financial reporting in the Group and establish a system necessary to ensure the reliability of financial reporting.
  4. The Company shall hold liaison meetings with the executives of Group companies as necessary to promote communication, coordination, and cooperation within the Group.
  5. Directors shall report to the Board of Directors, Auditors, and the Compliance Committee with regard to any serious violations of laws and regulations or other important compliance-related violations that they discover within the Group, and shall ensure the appropriateness of business operations within the Group.
  6. The Company shall receive periodic business reports from each Group company, as well as reports whenever necessary, in accordance with the Subsidiary Management Regulations. In addition, the status of risk management of the Group shall be audited in accordance with the Operational Audit Regulations.

 

Ⅵ．Matters Concerning the System for Employees Who Assist Auditors in Their Duties and the Independence of Such Employees from Directors 

  1. At present, there are no employees to assist Auditors in their duties. However, if requested by an Auditor, employees with independence shall be assigned upon consultation with the Auditor. Such employees shall not concurrently serve as an employee of another department and shall exclusively follow the instructions and orders of the Auditor.

 

Ⅶ．System for Directors and Employees to Report to Auditors, System for Making Other Reports to Auditors, and System for Ensuring Audits by Auditors are Conducted Effectively

  1. Directors and employees of the Group shall report to Auditors any serious violations of laws, regulations, or other important compliance-related matters in the Group.
  2. Employees of the Group may use the internal reporting system and report to Auditors through the Compliance Committee, etc., and Auditors may request reports from employees as necessary.
  3. Auditors may request reports from Directors as necessary in accordance with the Regulations of the Board of Auditors.
  4. Auditors may attend meetings of the Board of Directors and other important meetings in order to understand and monitor the execution of duties by Directors, and may request periodic reports from Group companies.
  5. In order to ensure the effectiveness of audits, Auditors shall work closely with the Internal Auditing Department and accounting auditors to achieve audit results.
  6. Any individual who reports to an Auditor shall not be treated in a disadvantageous manner because of having made such a report, and this shall be made clear to all officers and employees of the Group.
  7. When an Auditor makes a request to the Company for expenses in accordance with Article 388 of the Companies Act in connection with the performance of their duties, the Company shall bear the expenses, except in cases where the expenses requested are deemed not necessary for the performance of said duties.

Status of Internal Control System Operation (FY2023)

  1. The Compliance Committee and specialized committees (Information Management Committee, Trade Committee, and Fair Trade Management Committee) shall meet twice a year to investigate and supervise compliance within the Group. In addition, the Company shall conduct compliance training for the Group’s officers and employees as appropriate. The Internal Auditing Department shall conduct internal audits of the Company and its Group companies, and reports the results of operational audits to the Representative Director and the Board of Auditors once a year, as well as the results of internal control audits related to financial reporting to the Management Committee and the Board of Directors once a year.
  2. The Responsible Care Committee and the Quality Assurance Committee shall each meet twice a year in order to collect, analyze, and evaluate information on environmental conservation, safety and disaster prevention, occupational safety, and production and manufacturing risks within the Group.
  3. In FY2023, the Board of Directors met 13 times to make decisions on important management matters and supervise business execution as stipulated by laws and regulations, the Articles of Incorporation, and the Regulations of the Board of Directors. In addition, management meetings are held as necessary to ensure that all employees are aware of and understand the decision-making process of the Representative Director regarding important matters related to the execution of duties.
  4. Each Group company is subject to internal audits by the Internal Auditing Department and shall report monthly on the status of its operations to the Board of Directors and Auditors.
  5. In FY2023, the Board of Auditors met 12 times to make decisions regarding auditing policies and other duties of Auditors, and to share information among themselves. Auditors shall attend meetings of the Board of Directors and other important meetings, receive reports from Directors and employees of the Group on important management matters, and conduct investigations, to ascertain and audit the status of the execution of duties by Directors. In addition, they shall work closely with the Internal Auditing Department and accounting auditors by exchanging information on a regular basis to ensure the effectiveness of audits.