Based on the “Compliance Regulations”, which specify the basic structure, roles of relevant parties, action guidelines and other matters concerning compliance, we set up the Compliance Committee chaired by the President. Thus, we are pushing ahead with the development of the structure to ensure compliance for the entire Group and use various opportunities to raise awareness of every executive and employee.
Internal Control System
An overview of the system to ensure Directors’ performance of their duties is in compliance with laws and regulations and the Articles of Incorporation and other systems to ensure the appropriateness of the company’s business is as follows.
Basic policy of the internal control system
1System 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.
2System 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 Operating 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 Operating Officers 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.
3System 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 executives and employees on a regular basis.
4Regulations 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.
5System 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 sites 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.
6System 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.
7Other 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.
8Matters 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.
9Matters 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.
Formulating and operating the standards for operational actions
The company has established the Employee Code of Conduct to ensure that all employees comply with rules, such as laws, prohibition of illegal profits, prohibition of anticompetitive agreement, checking of contracts by the legal department, prohibition of false advertising, respecting other companies’ intellectual property rights, etc.
It stipulates that if any violations of laws or any misconduct occur or are likely to occur, they are to be reported internally. We have established contact points both inside and outside the Company for whistle-blowing of non-compliance, etc., and are building a system that makes it easy to report.
The number of reports issued in FY2021 was 2.
Establishing the whistle-blowing system
We carry out a compliance test every year for all domestic employees (executives, full-time employees, contract employees, temporary staffs) regarding new legal regulations and ethical matters that must be observed in order to work.