Basic Approach to Corporate Governance

At Daiseki, relevant parties and departments engage in governance of all Group business sites and companies based on our internal control system.

Internal control basic policies

Basic Approach to Corporate Governance

• ❶ Within the Daiseki Ethics Charter, Daiseki established three guidelines for corporate behavior that convey its stance on growing and developing alongside society: Social roles and responsibilities, compliance with laws and regulations, respect for human rights and the fostering of a free and open corporate culture. To achieve perpetual development as an industry leader, Daiseki has developed an internal control system and strives to embody its Ethics Charter.
• ❷ The Board of Directors formulates basic policies for internal control, provides instructions and supervision on the implementation status of internal controls, confirms maintenance and operational status and reviews basic policies and countermeasures when necessary.
• ❸ Daiseki established the Internal Control System Promotion Committee chaired by the President and Representative Director to ensure reliable financial reporting through the establishment and maintenance of internal control system program

System to ensure that the execution of duties by directors, executive officers, and employees of the company and its subsidiaries conforms to laws, regulations, and the Articles of Incorporation

• ❶ Under the powerful leadership of the president/CEO, we ensure that all executives and employees of the company and its subsidiaries engage in repeated study of our code of ethics (Management Principles, Ethics Charter, and Code of Conduct) are aware of our social roles and responsibilities as a company, and attain a basic stance of growing and developing together with society.
• ❷ We have a Compliance Committee headed by the president/CEO, through which we strive to develop a company-wide compliance structure and identify problems. We analyze compliance risks specific to departments and create countermeasures.
• ❸ We have a system by which directors and executive officers of the company and its subsidiaries, as well as departmental compliance officers, promptly report any discovered compliance issues to the Compliance Committee, and the system is being actively enforced.
  We ensure recognition and understanding of the significance of the Compliance Consultation Desk (Corporate Ethics Hotline) by which employees of the company and its subsidiaries can directly make reports and consult on issues.
  Upon receiving a report or request for consultation, the Compliance Committee will investigate the matter, determine necessary measures to prevent recurrence through discussions with the department in charge, and enforce the measures company-wide.
  We respond to persons making reports or requesting consultations in accordance with our separately established Internal Reporting and Consultation Regulations. Depending on the content, we may publicly disclose the information as appropriate.
• ❹ The Audit Offices of the company and its subsidiaries audit the status of compliance in cooperation with the Compliance Committee.
• ❺ In response to violations of laws, regulations, or our Articles of Incorporation by employees of the company or its subsidiaries, the Compliance Committee makes requests for disciplinary action to the Human Resources Department of the company. In response to violations of laws, regulations, or our Articles of Incorporation by officers, the Compliance Committee reports on specific disciplinary actions to the Board of Directors.
• ❻ We designate the General Affairs Department of the company as the department in charge of addressing unreasonable demands, etc., by antisocial forces. The company and its subsidiaries conduct training and develop manuals for dealing with such cases. We cooperate with police and other relevant organizations in taking a resolute stance against antisocial forces.

System for the storage and management of information related to the execution of duties by directors

• ❶ The president/CEO instructs the General Affairs Department and directors in charge to record and store information related to the performance of duties by directors (excluding directors who are members of the Audit and Supervisory Committee) in documents or electronic media, in accordance with our company-wide Document Management Regulations and Information Security Management Regulations.
• ❷ These documents, etc. are made accessible to directors as necessary.

Regulations and other systems related to management of the risk of loss at the company and its subsidiaries

• ❶ According to our Risk Management Regulations, we create a risk map and determine the responsible departments for each risk classification. We have a Risk Management Committee headed by the president/CEO to comprehensively and exhaustively manage risks to the company and its subsidiaries. We determine measures to address risks of high importance and strive for risk control. For newly emerging risks, we promptly designate a department to take charge.
• ❷ The Audit Office audits the status of risk management in specific departments, regularly reports its findings to the Risk Management Committee and the Board of Directors, and deliberates and decides on improvement measures.

System to ensure that the duties of directors of the company and its subsidiaries are efficiently executed

We work to enhance the effectiveness of the execution of duties by directors of the company and its subsidiaries (excluding directors who are members of the Audit and Supervisory Committee; the same applies below in this item) through detailed management as follows.

• ❶ Clarification of authority and decision-making rules through review of our Board of Directors Regulations, Organizational Regulations, Division of Duties Regulations, and Administrative Authority Regulations
• ❷ Enhancement of Management Meetings consisting of directors, executive officers, managers of Works, and directors of subsidiaries; setting of performance targets and budgets by business divisions; and enforcement of monthly and quarterly performance management using IT
• ❸ To ensure fairness, transparency, and objectivity in the decision-making process for nomination, compensation, etc. of directors, etc. in the Board of Directors, and to strengthen accountability, we have an Appointment and Compensation Committee, composed of multiple independent external directors, to serve as an advisory body to the Board of Directors. Each committee reports the results of its deliberations on the nomination and compensation of directors, etc. to the Board of Directors, in accordance with the Appointment and Compensation Committee Regulations.
• ❹ Implementation of monthly business performance reviews and improvement measures by the Management Meeting and Board of Directors

System to ensure the appropriateness of operations in the corporate grouping consisting of the company and its subsidiaries, and system for reporting to the company any matters involving the execution of duties by directors of subsidiaries

• ❶ For the purpose of having internal controls in the company and its subsidiaries, we have a structure by which the Headquarters of Business Generalization coordinates work operations and the Headquarters of Planning and Management coordinates compliance operations, and which includes a system by which instructions, requests, etc. are efficiently communicated through the monthly Management Meeting.
• ❷ Directors of the company (excluding directors who are Audit and Supervisory Committee members), executive officers, works managers, and the presidents of subsidiaries have the authority and the responsibility to establish and operate internal controls to ensure the appropriateness of the execution of work by departments.
• ❸ The Audit Office of the company conducts internal audits of the Company and its subsidiaries, reports findings to the departments in charge and the responsible parties in the departments, and provides guidance, support, and advice on improvement measures for internal controls through the Management Meeting, etc.
• ❹ We have affiliated company management regulations to clearly stipulate matters for discussion and reporting from subsidiaries to the company, and will establish systems for deliberation and reporting.

Matters concerning directors and employees who assist the duties of the Audit and Supervisory Committee, matters concerning the independence of said directors and employees from the Board of Directors, and matters concerning ensuring the efficacy of instruction given to said directors and employees by the Audit and Supervisory Committee

• ❶ At present, the company does not appoint such directors or employees for assistance. However, if deemed necessary and requested by the Audit and Supervisory Committee, the company will promptly make appointments. Said directors and employees will be independent from internal organizations.
• ❷ The Audit and Supervisory Committee has the ability to issue orders to Audit Office staff members regarding matters necessary for audit work. Audit Office staff members who have received orders necessary for audit work from the Audit and Supervisory Committee will not accept instructions or orders from directors (excluding directors who are members of the Audit and Supervisory Committee; the same applies below in this item) regarding said orders. Our directors and employees cooperate to ensure that the instructions of the Audit and Supervisory Committee toward said directors and employees are fully carried out.

Systems by which the directors, executive officers, and employees of the company and its subsidiaries, or persons who have received reports from said persons, report to the Audit and Supervisory Committee, and systems to ensure that said persons are not subjected to unfavorable treatment for the reason of having made said reports

• ❶ Regulations stipulating matters to be reported to the Audit and Supervisory Committee are deliberated with the Audit and Supervisory Committee, and directors (excluding directors who are Audit and Supervisory Committee members) and executive officers report the following matters to the Audit and Supervisory Committee.

  • (1) Matters that may cause significant damage to the company
  • (2) Matters that are important to monthly business status
  • (3) Important matters related to internal audit status and risk management
  • (4) Serious violations of laws, regulations, or the Articles of Incorporation
  • (5) Status and content of reports/consultations of the Compliance Consultation Desk (Corporate Ethics Hotline)
  • (6) Other important compliance matters
• ❷ An employee who discovers any material facts related to (1) and (5) above may directly make a report to the Audit and Supervisory Committee.
• ❸ We ensure that persons who have made reports are not treated unfavorably, in accordance with our separately established Internal Report and Consultation Regulations.

Matters related to procedures for prepayment or reimbursement of expenses arising from the execution of duties by directors who are Audit and Supervisory Committee members, and policies related to the handling of other expenses arising from the execution of duties or debts

Directors who are Audit and Supervisory Committee members may request reimbursement from the company for expenses, etc. incurred in the performance of their duties, in accordance with the separately established Audit and Supervisory Committee Audit, etc. Standards and taking into consideration efficiency and appropriateness.

Other systems to ensure that audits by the Audit and Supervisory Committee are carried out effectively

We implement division of duties in accordance with the Audit and Supervisory Committee regulations, regular exchanges of opinions with representative directors, and regular exchanges of information during audits by accounting auditors or through "management letters," etc. We will also construct systems that allows the receipt of counsel from corporate attorneys, etc., as necessary.