- Basic Approach and Structure
- Standards and Policy for Appointment and Concurrent Appointment of Individual Officers
- Internal Control System
Basic Approach and Structure
The MEC Group believes that to maximize shareholder return, continuous initiatives toward reinforcing corporate governance, thereby enhancing corporate value, are crucial. Specifically, we will promote initiatives for fair and transparent management, speedy and accurate information disclosure, and thorough accountability, and are acting in accordance with the concept of the Corporate Governance Code.
Under the policy of promoting diversity in management, we actively invite and appoint outside officers and women. We are also working on establishing rules to provide strict decision-making criteria in case management lacks independence.
Moreover, aiming to gain value from diversity, the Group has a policy to encourage the activities of diverse competent personnel. We will continue to support promotion of diverse personnel to executive or management positions and enhance various systems to enable all those who take childcare leave to return to work. The results of our efforts to support promotion and enhance various systems to encourage active female participation are as follows:
- Three (approx. 27%) out of a total of 11 management executives; Directors, and operating officers, are women.
- 61 (approx. 31%) out of a total of 198 employees in Japan (as of March 31, 2017) are women.
- Due to the enhanced child care leave system, the return-to-work rate after child care leave is 100% over the past five years.
Overview of the corporate governance structure and the reason for adopting the corporate governance structure
By holding the Board of Directors every month, the Company oversees decisions of important matters related to management and the execution of duties by Directors. The Company has also established an operating officer system and a system in which Operating Officers can focus on business execution. In these ways, we are working to accelerate the decision-making of the Board of Directors.
In addition, the Company is working to enhance the audit and supervisory functions, further strengthen corporate governance and improve transparency. To this end, as of the Ordinary General Meeting of Shareholders held on June 21, 2016, it has switched from the traditional structure of a company with a Board of Corporate Auditors to a company with an Audit Committee, in which three independent Outside Directors are committee members.
Further, the Company has established the Nomination and Remuneration Advisory Committee (independent outside members accounting for a majority), the ESG Committee (independent outside members accounting for a majority), the Internal Control Committee, the Risk Management Committee and the committee to ensure reliability of financial reports (J-SOX) directly under the Board of Directors to submit proposals and reports to the Board of Directors, thereby improving the corporate governance structure.
The Company has so far continued working on various measures in order to improve the quality of corporate governance. But to have the Company's develop in the future, we must be able to execute business in an efficient and agile way by making quick decisions. At the same time, we must further strengthen our ability to oversee our executives’ performance. Therefore, by taking advantage of the wealth of experience and wide range of views of Outside Directors, we will strengthen the supervisory function of the Board of Directors. And simultaneously, we have adopted a structure of a company with a committee system that enables us to proceed with separating supervisory and executive functions, such as by transferring authority to executive directors including representative directors.
Overview of organization composition and operation
|Form of organization||Company with an Audit & Committee|
|Chairman of the Board of Directors||President|
|Number of Directors||7 (The number specified under the articles of incorporation: 10), including 4 Outside Directors|
|Appointment of independent officers||4 Outside Directors are appointed|
(As of June 23, 2017)
Standards and Policy for Appointment and Concurrent Appointment of Individual Officers
1.The Company has established the following criteria and policy on independence for use when appointing Outside Directors. The current Outside Directors do not correspond to these criteria, and thus they have independence.
In addition, as general rules for the interlocking directorates of all officers, the Company has set the figure of four companies including the Company for Non-Executive Officers, and two companies including the Company for Executive Officers. Further, we have an attendance rate of 85% or more at Board of Directors meetings as an Outside Director, and the same rate for Outside Directors at the Audit Committee when they are also members of the Audit Committee.
Standards for determining non-independence
- The officer is a major shareholder of the Company holding 5% or more of the voting rights or has experience of working at an organization that is a major shareholder of the Company holding 5% or more of the voting rights.
- The officer has experience of working at the main bank or a major lender of the Company.
- The officer has experience of working at a major business partner of the Company or an organization for which the Company is a major business partner.
- The officer has experience of working at the auditing firm, law firm, or the lead securities firm of the Company.
- The officer has received compensation other than the officer’s remuneration, such as consulting fee, attorney’s fee and accountant’s fee.
- The applicable period for a. through e. above shall be five years prior to the present day.
- The officer is a close relative of one of those described below:
(i) Persons listed in a. through f. above
(ii) Executive officers, non-executive officers, and employees of the Company or one of its subsidiaries or affiliates
2. The Company has set the Nomination and Remuneration Advisory Committee (independent outside members accounting for a majority) and the ESG Committee (independent outside members accounting for a majority) as the specialized committees to submit proposals and reports to the Board of Directors.
Internal Control System
Status of the internal control system
The outline of matters decided with regard to the structure to ensure that the execution of duties by Directors conforms to laws and regulations, as well as the articles of incorporation, and other structures to ensure proper operations of the Company, is as follows.
Basic policy of the internal control system
- 1.System to ensure the performance of duties of Directors and employees of the MEC Group complies with laws and regulations and the Articles of Incorporation
- As the basis of the MEC Group’s internal control and compliance structure, the Company shall establish the MEC Group’s Charter of Corporate Behavior/Code of Conduct; internal control, internal audit and J-SOX provisions; and Compliance Regulations. The Company shall also set up the Internal Control Committee and Compliance Committee chaired by the President to promote establishment, maintenance and improvement of the internal control system, while as necessary, formulating related rules and guidelines and providing relevant education for employees.
- Each Director in the MEC Group shall immediately report to the Audit Committee and other Directors if he/she discovers any material violation of laws and regulations or any other important fact related to compliance.
- Aiming to ensure proper and efficient performance of operations and ensure and maintain independence of the internal control systems, as well as to prevent any wrongdoing, the Company has set up the Internal Audit Office, an internal audit body, directly under the control of the Audit Committee.
Changes (transfers, compensation, etc.) to be made to employees that belong to the Internal Audit Office are determined with the consent of the members of the Audit Committee The Internal Audit Department reports the audit results to the Audit Committee and the Internal Control Committee according to the annual schedule.
- As the MEC Group’s internal whistleblowing system for internal reporting of any fact of violation of laws and regulations, employment rules or other internal regulations, or inhumane act such as sexual harassment, the Company has established a whistle-blowing system in which one of the Outside Officers, an external lawyer, and the head of the Internal Audit Office are appointed as the direct receivers of internal reporting.
In addition, we thoroughly ensure that whistleblowers do not receive any disadvantageous treatment as a result of reporting or cooperating in investigations.
- The members of the Audit Committee, when recognizing a problem in the compliance structure or the whistle-blowing system of the Company, may express their opinions to the President and ask for formulation of corrective measures.
- The members of the Audit Committee, Outside Directors who are not members of the Audit Committee, and the Internal Audit Office request to attend as observers at the Audit Committee once a month in principle to meet, report on the audit results and other matters and exchange opinions.
- 2.Structure to ensure efficient execution of duties by the MEC Group’s Directors
- In order to ensure that the duties of MEC Group’s Directors are performed efficiently in accordance with basic management policies, the Board of Directors’ meeting shall meet monthly and meet on an ad hoc basis as the occasion demands. In addition, there will be discussions with regards to important matters relating to the business strategy of the Company at a business strategy meeting held once a month and composed of Directors and Executive Officers, etc., and at a company-wide policy meeting held twice a year that consists of managers, and the results shall be thoroughly made known to all.
- In order to enhance the supervisory function over the performance of duties by the Directors, Outside Directors shall be appointed so that they will account for a majority or half of the Board of Directors. On the other hand, we will also enhance the executive officer system, and work to separate supervisory and enforcement functions.
- We have established a Nomination and Compensation Advisory Committee and an ESG Committee, and the majority of their members are Outside Directors that report directly to the Board of Directors. These committees recommend candidates to the Board of Directors who have made a lot of suggestions and multi-faceted examinations.
- Outside Directors meet with members of the Board of Directors, including the President and Chief Financial Officer, in principle once every three months, and exchange opinions and information. The Leading Outside Director has responsibility for administering this process.
- For efficient performance of operations decided by the Board of Directors, organization regulations, division of duties regulations, official authority regulations, and ringi regulations shall be formulated to specify the details of responsible personnel, approval authority, and execution procedures for each operation.
- 3.Structure for storage and management of information concerning the execution of duties by Directors of the MEC Group
Matters regarding the preparation, storage, and management of the minutes of the Board of Directors’ meetings and other important meetings and approval documents such as the ringi statements shall be handled in accordance with the Board of Directors regulations, Ringi regulations, and document control regulations.
- 4.Regulations and other structures concerning management of the risk of loss at the MEC Group
- The Company shall recognize there are risks such as (i) Risk of violation of laws or the articles of incorporation, (ii) Quality risk, (iii) Environment risk, (iv) Risks pertaining to the protection of personal information and protection of information that can be used to identify a specific individual, (v) Risks pertaining to information leakage and information security (vi) Disaster risk, and (vii) Supply chain risk as the major risks in the performance of the Company. And it shall establish an internal structure for their identification and management.
- As the basic framework of risk management, we have established the Risk Management Committee chaired by the President, as well as MEC Group Risk Management Regulations and related regulations, and established a system where management responsibilities are set out for each individual risk.
- The Company shall formulate a Business Continuity Plan (BCP) to ensure the continuity of its businesses, and in the event of a contingency, set up a task force headed by the President and take prompt action, obtaining support from external experts, etc. as necessary, to prevent or minimize damage.
- 5.Structure to ensure proper operations in each company of the MEC Group
- To ensure proper operations in each company of the Group, the Company shall establish regulations as those of the MEC Group, and they shall be shared across the Group, such as the Group’s Management Philosophy; Charter of Corporate Behavior; Group’s Charter of Corporate Behavior/Code of Conduct; affiliates management regulations; internal control, internal audit and J-SOX provisions; internal whistleblowing regulations; risk management regulations; Group internal control/internal audit regulations; and Group risk management regulations. Each Group company shall formulate related regulations and other relevant rules and guidelines and provide education for employees.
- The Company shall establish the Affiliates Management Regulations for management control of each Group company. Based on these regulations, each Group company shall make decisions and report, and for important issues, management control shall be performed by resolution of the Board of Directors of the Company.
The Business Division and other business departments in Japan shall supervise and cooperate with the business departments of each Group company for their respective business fields.
- Each Director shall immediately report to the Audit Committee and other Directors if he/she discovers any material violation of laws and regulations or any other important matter related to compliance in a Group company.
- Each Group company shall report to the Audit Committee and the Internal Audit Office on any violation of laws and regulations or other compliance-related problem it has recognized in the Company’s management control or management instructions, while the members of the Audit Committee and the Internal Audit Office may express opinions to the President or ask for formulation of corrective measures.
- To enhance the MEC Group’s auditing and internal control, our policy is to have both the Audit Committee and the Internal Audit Office examine all the business locations, departments and offices inside and outside Japan. For examination of overseas subsidiaries, information shall be exchanged not only with the Group’s Accounting Auditor but also with the local Accounting Auditors of each company of the Group.
- 6.Structure for reporting by Directors (excluding those who are members of the Audit Committee) and employees of the MEC Group to the Audit Committee, and other structures regarding reporting to the Audit Committee
- Regarding the matters to be reported by Directors (excluding those who are members of the Audit Committee) and employees to the Audit Committee and the timing of reporting, Directors (excluding those who are members of the Audit Committee) and employees shall, in accordance with relevant rules, report to the Audit Committee on every important matter that may affect the operations or business performance of the Company whenever it arises. In addition, we shall thoroughly ensure that whistleblowers who made the above-mentioned report do not receive any disadvantageous treatment as a result of reporting.
- Notwithstanding the above, the members of the Audit Committee may ask Directors and employees for reporting whenever necessary
- 7.Other structures to ensure effective implementation of audits by the Audit Committee
- The Audit Committee and Internal Audit Office shall hold meetings with the Accounting Auditor five times per year in principle to exchange opinions and information, and enhance cooperation and mutual supervision.
- The members of the Audit Committee may employ a lawyer, certified public accountant, or other external specialist at their own discretion when they deem it necessary for auditing. Prepayment of the costs resulting from the performance of duties of the members of the Audit Committee or repayment thereof shall be properly processed based on the request of the Audit Committee.
- 8.Matters relating to employees who assist the members of the Audit Committee in the performance of their duties (assistant employees), in case the Auditor requests appointment of such an employee
The Company shall establish regulations concerning the employees to assist the members of the Audit Committee in the performance of their duties and specify the procedure for appointing the assistant employees when requested by the members of the Audit Committee.
The secretariat to which such auxiliary employee belongs will be established in the Internal Control Office in accordance with the provisions of the Audit and Supervisory Committee Regulations.
- 9.Matters relating to the independence of assistant employees from Directors (excluding those who are members of the Audit Committee)
- In order to ensure that employees assigned with the task of assisting the members of the Board of Directors are independent from the Directors, any changes (transfers, compensation, etc.) to be made to them shall be determined with the consent of the members of the Audit Committee. In the cases where assistant employees have received an instruction necessary for audit work from the members of the Audit Committee, they shall not receive orders and instructions related to that instruction from Directors (excluding those who are members of the Audit Committee).
- Assistant employees shall not concurrently take any position related to the performance of operations.
Basic approach toward elimination of antisocial forces
The Company has set a basic policy to uncompromisingly stand up against any antisocial forces or groups that threaten the order and safety of civil society. Specifically, the Company has established an organizational response system, and will cooperate with the police or other relevant government organs, company attorney, and industry organizations as necessary to take appropriate action.