- Basic Approach and Structure
- Standards and Policy for Appointment and Concurrent Appointment of Individual Officers
- Internal Control System
- Corptate Governance Report
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:
- Four (approx. 40%) out of a total of 10 management executives; Directors, and operating officers, are women.
- 72 (approx. 30%) out of a total of 237 employees in Japan (as of December 31, 2021) are women.
- Due to the enhanced child care leave system, the return-to-work rate after child care leave is 94% 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 also makes recommendations to the Board of Directors and makes recommendations. The Nomination and Compensation Advisory Committee (the majority of independent outside members), the ESG Committee (the majority of independent outside members), and the Internal Control Committee and its subordinate organizations has established the J-SOX Committee, Compliance Committee, Risk Management Committee, etc., and has established a governance system.
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 audit and supervisory committee|
|Chairman of the Board of Directors||President|
|Number of Directors||7 (The number specified under the articles of incorporation: 12), including 4 Outside Directors|
|Appointment of independent officers||4 Outside Directors are appointed|
(As of March 23, 2022)
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 up to four companies including the Company for Non-Executive Officers, and up to two companies including the Company for Executive Officers. Further, we have made it a rule that the attendance rate of each Outside Director at Board of Directors meetings and the attendance rate of each Outside Director who is an Audit and Supervisory Committee Member at Audit and Supervisory Committee meetings must be at least 85%.
Standards for determining non-independence
- Has work experience in an organization that is our major shareholder which holds 5% or more of the voting rights or is a major shareholder.
- Has work experience in the Company's main bank or major lender.
- Has work experience in our major trading partner or an organization that we position as our major trading partner.
- Has work experience in our audit corporation, law firm, or main securities firm.
- There have been cases where compensation such as consulting fees, attorneys' fees and tax accountant remuneration have been paid by the Company in addition to executive compensation.
- The corresponding period from a to e is within the past 5 years from the present time.
- Is next of kin to a person listed in any of the following (A) through (B)
(A) Persons listed from a to f.
(B) Person who executes business, non-executive person who does not execute business, or employee at the Company or its subsidiaries or affiliates.
2. As specialized committees that submit proposals and report to the Board of Directors, the Company has established the Nomination and Compensation Advisory Committee (the majority of whose members are independent outside persons) and the ESG Committee (the majority of whose members are independent outside persons).
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 for the internal control and compliance systems of the MEC Group, the Company stipulates MEC Group’s Charter of Corporate Behavior and Corporate Code of Conduct, as well as MEC Group’s Internal Control, Internal Audit and J- SOX Regulations, and Compliance Regulations. The Company shall establish the Internal Control Committee and as its subordinate organization, the Compliance Committee, which are chaired by the President, and while promoting the building, maintenance and improvement of the internal control system, the Company shall also develop the relevant regulations and guidelines, and implement employee education as necessary.
- If the Directors discover a material fact on serious legal violations or other compliance issues in the MEC Group, they shall report immediately to the Audit and Supervisory Committee Members and other Directors.
- The Company shall establish the Internal Audit Office, which is an internal audit department, with the aim of carrying out appropriate and efficient operations as well as auditing the development and operation of the internal control system so that it prevents fraud before it occurs.
- As the MEC Group’s whistle-blowing system for reporting facts relating to acts in violation of laws and regulations, acts in violation of internal rules such as work rules, and inhumane acts such as sexual harassment, the Company shall establish a whistle-blowing system. With it, one person from among the Outside Directors, the head of the Internal Audit Office and external lawyers shall be the direct recipients of information. The Company ensures that it prevents disadvantageous treatment of any whistleblower or other persons due to their reporting or cooperating with investigations.
- If the Audit and Supervisory Committee finds that there is a problem with the operation of the Company’s legal compliance system and internal reporting system, they shall give their opinion to the CEO & President and at the same time request the development of improvement measures.
- The Audit and Supervisory Committee shall hold meetings by requesting Outside Directors who are not Audit and Supervisory Committee Members and the Internal Audit Office to attend as observers at the Audit and Supervisory Committee meetings once a month, in principle, to report on audit results and other matters and exchange opinions.
- The Company shall never engage in transactions with anti-social forces and organizations that threaten the social order and safety, and shall coordinate with police-related administrative organs and our legal counsels, etc. where necessary, and take appropriate measures.
- 2. System to ensure that the duties of MEC Group’s Directors are performed efficiently
- 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 on an ad hoc basis as the occasion demands. With regard to important matters relating to the business strategy of the Company, discussions shall be held and results shall be thoroughly made known to all 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 and consisting of managers.
- 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. At the same time, the Company shall enhance the Executive Officer System with the aim of separating supervisory and enforcement functions.
- The Company shall establish the Nomination and Compensation Advisory Committee and the ESG Committee, the majority of whose members are Outside Directors. These Committees shall nominate candidates and provide various recommendations to the Board of Directors based on multifaceted discussions.
- In principle, the Outside Directors shall hold a meeting with the President and other Directors and the CFO once every three months to exchange opinions and information.
- In order to ensure the decisions made by the Board of Directors are carried out efficiently, the Company shall establish relevant internal regulations, and stipulate the details of the responsible persons, decision-making authorities and enforcement procedures of each business.
- 3. System for the storage and management of information related to the performance of duties by Directors of the MEC Group
- The MEC Group shall establish matters concerning creating, storing and managing minutes of important meetings such as the Board of Directors meetings and ringi documents in the relevant internal regulations, based on which business processes shall be carried out.
- In accordance with relevant internal regulations such as Information Security Management Regulations, the MEC Group shall protect information assets including personal information, and hold training on information security for all officers and employees on a regular basis.
- 4. Regulations and other systems for management of risk of loss in the MEC Group
- The Company shall recognize the following risks as the main risks that arise in the Company’s business activities: (i) risk of violation of laws, regulations or the Articles of Incorporation; (ii) quality risk; (iii) environment risk; (iv) personal information protection and risk of lack of protection of specific personal information; (v) information leakage and security risk; (vi) disaster risk; (vii) supply-chain risk; and other risks. Based on this recognition, it shall develop an internal system in order to capture and manage the risks.
- As the basic framework of risk management, the Company shall establish the Risk Management Committee chaired by the President, which is a subordinate organization of the Internal Control Committee, as well as MEC Group Risk Management Regulations and related regulations, and establish a system where management responsibilities are set out for each individual risk.
- The Company shall formulate a business continuity plan (BCP), and, if unforeseen circumstances arise, shall act quickly by setting up a task force headed by the President and obtaining support of external experts where necessary, to prevent or minimize any damage..
- 5. System to ensure the appropriateness of business in each Group company
- In order to ensure the proper operation of business in each Group company, relevant internal regulations shall be shared throughout the Group such as the group-wide management philosophy, the mission statement and the Group Charter of Corporate Behavior. In addition, each company in the MEC Group shall formulate relevant regulations, rules and guidelines, and implement employee training.
- In order to manage the business of each Group company, the Company shall establish the Regulations on Affiliate Management, based on which each Group company makes decisions and reporting. For important matters, group companies are managed by requiring resolution of the Company’s Board of Directors for such matters. In addition, domestic business divisions including the Business Headquarters shall oversee, and coordinate/cooperate with, business divisions of the Group companies in their respective business areas.
- If the Directors discover an important matter about legal violations or other compliance issues in a Group company, they shall report immediately to the Audit and Supervisory Committee and other Directors.
- If a Group company recognizes there is a violation of laws or other compliance issues in the business management and management guidance provided by the Company, it shall report to the Audit and Supervisory Committee and the Internal Audit Office, which shall give their opinion to the CEO & President or request the development of improvement measures.
- To enhance the MEC Group’s audit and internal control, the Company shall make it a policy whereby the Auditor and Supervisory Committee and the Internal Audit Office both audit all business offices, departments and offices in Japan and abroad. When auditing overseas Group companies, information shall be exchanged not only with the Group’s Accounting Auditor but also with local accounting auditors.
- 6. System for Directors (excluding Directors who are Audit and Supervisory Committee Members) and employees of the MEC Group to report to the Audit and Supervisory Committee, and other systems for reporting to the Audit and Supervisory Committee
- With regard to the matters that Directors (excluding Directors who are Audit and Supervisory Committee Members) and employees should report to the Audit and Supervisory Committee and the timing of such reporting, the Directors (excluding Directors who are Audit and Supervisory Committee Members) and employees shall report to the Audit and Supervisory Committee on important matters that affect the Company’s business or financial performance each time they arise in accordance with relevant internal regulations. In addition, the Company shall ensure that the person who has made such report will not be treated disadvantageously due to his or her reporting.
- Notwithstanding the preceding paragraph, the Audit and Supervisory Committee may, whenever necessary, request reports from Directors (excluding Directors who are Audit and Supervisory Committee Members) and employees.
- 7. Other systems to ensure that audits by the Audit and Supervisory Committee are conducted effectively
- The Audit and Supervisory Committee and the Internal Audit Office, in principle, shall hold four meetings per year with the Accounting Auditor to exchange opinions and information in order to achieve cooperation and mutual checks and balances.
- The Audit and Supervisory Committee may, when they deem it necessary in the practice of an audit, independently appoint a lawyer, certified public accountant or other external experts. Any prepayment or reimbursement of expenses arising from the execution of each Audit and Supervisory Committee Member’s duties shall be properly treated upon request from the Audit and Supervisory Committee Member.
- 8. Matters relating to the corresponding employee in cases where the Audit and Supervisory Committee requests the stationing of an employee (auxiliary employee) to assist them in their duties
The Company shall establish regulations on assistance to the Audit and Supervisory Committee that set forth procedures for appointing an auxiliary employee upon request by the Audit and Supervisory Committee.
The secretariat to which such auxiliary employee belongs will be established in the Audit and Supervisory Committee in accordance with the provisions on assistance of the Audit and Supervisory Committee Regulations.
- 9. Matters concerning independence of auxiliary employees from Directors (excluding Directors who are Audit and Supervisory Committee Members)
To ensure the independence of auxiliary employees from Directors (excluding Audit and Supervisory Committee Members), the Board of Directors shall make decisions on personnel affairs (e.g., transfer, compensation) of auxiliary employees after obtaining the consent of the Audit and Supervisory Committee. Auxiliary employees who have received necessary orders for their auditing work from Audit and Supervisory Committee Members shall not receive orders or instructions related to the Audit and Supervisory Committee Members’ orders from any Director (excluding Audit and Supervisory Committee Members) or employee.
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.
Corptate Governance Report
For detailed information on corporate governance, please refer to "Corporate Governance Report". The following items are summarized.
- Basic information on capital structure, corporate attributes and other matters
- Business Management Organization and Other Corporate Governance Systems regarding Decision-making,Execution of Business, and Oversight in Management
- Status of Implementation of Measures Related to Shareholders and Other Stakeholders
- Matters related to internal control systems, etc.