EBARA Corporate Governance Basic Policy
This basic policy is set to formulate the basic views on the corporate governance of EBARA CORPORATION, with the aim of contributing to the sustainable growth and medium- to long-term enhancement of the corporate value of EBARA CORPORATION and the EBARA Group.
Outline of EBARA’s Corporate Governance Framework
|1.||Board of Directors
The main responsibilities of the Board of Directors are to determine basic policies on management and supervise business execution by Directors and Executive Officers. The Board of Directors comprises Directors elected by the General Meeting of Shareholders.
Taking into account the balance among Independent Directors, Inside Directors (non-executive) and Directors (serving concurrently as Executive Officers), the number of Independent Directors is determined to be at least one-third (1/3) of all the Directors, and the number of non-executive Directors accounts for a majority of all Directors.
As of March 29, 2019, the Board of Directors comprises eleven (11) Directors, and seven (7) of whom are Independent Directors (including one (1) female), three (3) of whom are non-executive inside Directors and one (1) of whom is an executive Director. Sakon Uda, an Independent Director, serves as Chairman of the Board of Directors.
The Company is considering the appointment of Directors of foreign nationality in the future from the standpoint of diversity.
The Nomination Committee makes resolutions on the contents of proposals for the General Meeting of Shareholders concerning the election and dismissal of Directors, basic policies regarding the election and dismissal of Directors, and the establishment, amendment and abolition of regulations and procedures. The Nomination Committee also presents recommendations regarding the election and dismissal of Executive Officers. In addition to formulation of succession plans for the President, Representative Executive Officer. The Nomination Committee comprises all non-executive Directors to ensure its independence and objectivity, and the majority of the committee is made up of Independent Directors.
As of March 29, 2019, the Nomination Committee comprises three (3) non-executive Directors, two of whom are Independent Directors and one (1) of whom is a non-executive inside Director. Hiroshi Oeda, an Independent Director, acts as chairperson of the Nomination Committee.
The Compensation Committee determines policies regarding individual compensation for Directors and Executive Officers and the amount of their compensation and other contents, as well as the establishment, amendment and abolition of the relevant basic policies, regulations and procedures that are necessary for adopting resolutions concerning the aforementioned matters. The Compensation Committee also presents recommendations regarding the officers’ compensation system of the entire Group including subsidiaries and affiliated companies. The Compensation Committee comprises all non-executive Directors to ensure its independence and objectivity, and the majority of the committee is made up of Independent Directors.
As of March 29, 2019, the Compensation Committee comprises three (3) non-executive Directors, all of whom are Independent Directors. Shiro Kuniya, an Independent Director, acts as chairperson of the Compensation Committee.
The Audit Committee endeavors to oversee and verify whether the Executive Officers determine and execute their duties in a sound, fair, appropriate and efficient manner in accordance with the basic policies on management and the medium- to long-term management plans, which are formulated by the Board of Directors.
In addition, Audit Committee Members, in accordance with audit standards and audit plans, audit the execution of business of Executive Officers and Directors in order to prevent the occurrence of violations of laws and regulations and the Articles of Incorporation.
The Audit Committee comprises all non-executive Directors to ensure its independence and objectivity, and the majority of the committee of the Audit Committee is made up of Independent Directors.
As of March 29, 2019, the Audit Committee comprises five (5) non-executive Directors, and three (3) of whom are Independent Directors. Tetsuji Fujimoto, a non-executive inside Director, acts as chairperson of the Audit Committee.
|5.||Independent Directors’ Meeting
The Independent Directors’ Meeting, comprising only Independent Directors, has been established as a venue for Independent Directors to freely discuss matters required for obtaining sufficient information to fulfill their responsibilities and sharing awareness of issues. The Lead Independent Director, who is elected by mutual voting, serves as chairman of the meeting.
As of March 29, 2019, Shiro Kuniya, an Independent Director, acts as the Lead Independent Director.
|6.||External Independent Auditor
The Company has entered into an audit agreement with Ernst & Young ShinNihon LLC, which conducts the Company’s accounting audits with respect to audits required by the Companies Act and the Financial Instruments and Exchange Act.
Executive Officers are elected by a resolution of the Board of Directors. Executive Officers determine the execution of duties as delegated by the Board of Directors and perform such duties in compliance with the overall direction of management (Basic Policy) as determined by the Board of Directors. Although all thirteen (13) of the Executive Officers are currently Japanese males, the Company is considering the appointment of female Executive Officers and Executive Officers of foreign nationality in the future from the standpoint of diversity.
|2.||Internal Audit System
The Corporate Audit Department conducts internal audits, the results of which are reported to the President, Representative Executive Officer. The Corporate Audit Department, in accordance with the Internal Audit Rules, performs internal audits to evaluate the development and operation status of corporate governance, compliance, risk management and internal controls of each business execution division of the Company and its subsidiaries, in order to check and evaluate the legality and appropriateness of their business execution in line with management policy and rules and regulations, and to give advice and recommendations toward improvement.
|3.||Meeting bodies for business execution|
The Management Meeting has been established as a deliberative organ to support the President, Representative Executive Officer in conducting his/her decision making. Important matters concerning managerial business execution are deliberated at the Management Meetings, which are held regularly once a month, in accordance with the Management Meeting Rules. The Management Meeting comprises all Executive Officers.
|2)||Management Planning Committee
With respect to the status of business administration, the Management Planning Committee reviews the yearly budget plan on a quarterly basis, in addition to deliberating at the Board of Directors.
|3)||Risk Management Panel
The Risk Management Panel (“RMP”) has been established as an organization to supervise, deliberate, instruct on improvements to and support the risk management activities. The RMP is chaired by the President, Representative Executive Officer and comprises all Executive Officers as panel members. In addition, the non-executive Directors attend to the RMP as observers to exert the supervision function, if necessary, in light of the aim of RMP, and give the RMP appropriate instructions concerning risk management on its topics. The deliberation situation in RMP is reported to the Board of Directors. The Board of Directors obtains the risk management situation of RMP precisely through such reports and maintains the system to exercise a supervision function. The RMP is held regularly four times a year and as necessary.
The CSR Committee deliberates on maintenance, development and issues of activities related to EBARA Group CSR Policy, and determines the policy of CSR activities, while determining the key issues (materiality), policy and KPIs of CSR and confirming the progress and the state of achievement. It also monitors the status of compliance at the Company and its subsidiaries in accordance with the EBARA Group CSR Policy and the EBARA Group Code of Conduct, while giving instructions for improvement as appropriate. The CSR Committee is presided over by the President, Representative Executive Officer, and the Executive Officers are the committee members. The attorneys of external law office in charge of the External Compliance Consultation Counter participate in the committee meetings as advisors. In addition, the non-executive Directors actively attend to the CSR committee as observers to exert the supervision function, if necessary, in light of the aim of CSR committee, and give the CSR committee appropriate instruction concerning management on its topics. The deliberation situation in CSR committee is reported to the Board of Directors. The Board of Directors obtains the management situation of CSR committee precisely through such reports and maintains the system to exercise the supervision function. The CSR Committee is held regularly on a quarterly basis.
The Company has established the Disclosure Committee to handle disclosures of corporate information including events that involve the entire Group and matters that have been decided and financial closing information in a fair, timely and appropriate manner.
Evaluation of the Effectiveness of the Board of Directors
To ensure corporate governance functions effectively, the Company’s Board of Directors itself performs analysis and evaluation of the effectiveness of the Board of Directors, identifying issues and making improvements. Overviews of the results are disclosed.
Initiatives for Further Reinforcement of EBARA's Corporate Governance Structure
The Company has continued to enhance its corporate governance system by introducing the Executive Officer system in 2002, establishing the Nominations Committee and the Compensation Committee as voluntary committees while adding two (2) Outside Directors in 2008, and further increasing the number of Outside Directors to four (4) in 2011, which accounts for one-third of the maximum number of Directors set forth in the Company’s Articles of Incorporation. In June 2015, the Company adopted the new organizational form of a “Company with Three Committees,” with the Nominations Committee, the Compensation Committee and the Audit Committee as statutory committees under the Board of Directors, to enhance its corporate governance from the following aspects.
|1)||Reinforce the function of the Board of Directors in supervising corporate management and enhance the transparency of management.|
|2)||Expand the authority of the executive organizations over business execution and enhance competitive strengths.|
|3)||Establish a corporate governance framework that can be easily understood by the global community.|
Based on the Basic Internal Control Policy approved by EBARA’s Board of Directors, EBARA has developed and implemented internal control systems comprising the following: a compliance system for the conduct of duties by the Executive Officers and employees, a risk management system, systems for ensuring that operations are conducted properly, and systems to ensure the reliability of financial reporting in EBARA Group companies.
As a part of the compliance system, EBARA established and disseminated the EBARA Group CSR Policy and the EBARA Group Code of Conduct. In addition, to raise awareness and knowledge of compliance EBARA has implemented training programs for employees. Furthermore, the CSR Committee discusses the direction of the Group’s CSR activities, monitors the status of compliance with the EBARA Group CSR Policy and the EBARA Group Code of Conduct, and also monitors the development and implementation of internal controls. The CSR Committee also acts as the organizational unit to issue directives for making improvements. Moreover, both internal and external whistle-blowing hotline services have been established so employees can report legal and ethical violations.
As for the risk management system, the Risk Management Panel leads oversight of group risk management activities, engages in comprehensive consultations, and provides guidance and support for improvements.
The EBARA Group classifies its risk management activities into two categories. The first category is risk that may affect continuous business development and the other category is risk related to business continuity strategy in the event of disasters. The major risks within these two categories have been identified, and countermeasures have been established. Initiatives for dealing with business continuity risks have included the creation of management systems that can respond to risk during times of major disasters.
The Corporate Audit Section takes responsibility for identifying major issues and themes related to the status of compliance and risk management of the EBARA Group, and then implements internal audits.
EBARA ensures the reliability of financial reporting based on Japan’s Financial Instruments and Exchange Act and through the implementation of assessments of internal controls by assessment teams organized under the Internal Control Coordination Department.
EBARA is fully aware that unethical behavior due to a lack of compliance may damage its reputation and management foundation. Accordingly, EBARA’s approach to instituting strict compliance consists of the following: the formation of a CSR Committee, the establishment of a Group Compliance Network, and the provision of multiple whistle-blowing hotline services.
The CSR Committee consists of all of the Executive Officers and is presided by the President, Representative Executive Officer of EBARA Corporation acts as chairman. The attorneys in charge of the external whistle-blowing hotline services participate in the committee meetings as advisors, and some representatives of Group companies are invited to the CSR Committee on a rotation basis, being interviewed about how they develop their compliance systems.
The CSR Committee also determines policies regarding CSR activities of the Group, as well as deliberates agendas for maintaining good relationships with stakeholders in association with corporate ethics, compliance, corporate governance, internal control, environmental conservation and the protection of human rights, and instructs to modify and develop systems.
The Compliance Network is in place in order to enable Compliance representatives from Japanese group companies to freely exchange information and to more effectively enforce compliance throughout the Group.
In addition, EBARA offers various whistle-blowing hotline services to facilitate the reporting of any illegal or unethical conduct. These services provide confidentiality for the whistle-blower and allow the group to promptly confirm facts, rapidly make improvements and resolve issues regarding legal violations and questionable conduct by organizations and individuals. The Group has broadly two types of services; a Compliance Hotline and Audit Committee helpline.
- The Compliance Hotline consists of the External Compliance Hotline, the Internal Compliance Hotline and Compliance Liaisons. The External Compliance Hotline is staffed by outside legal counsel and addresses all types of improper conduct and compliance violations. All stakeholders including management, employees, their family members, suppliers and so on may make inquiries. Corrective measures are then taken to resolve any issues. The Internal Compliance Hotline is operated by the Compliance Promotion Section and deals with general compliance violations in addition to harassment issues. Compliance Liaisons are personnel who act as on-site consultants for compliance-related issues. There are currently around 80 active personnel all around Japan.
- The Audit Committee Helpline handles information regarding improper conduct as well as violations against laws and the Articles of Incorporation by directors and executive officers. It is staffed by full-time audit committee members to implement countermeasures.
Overall, these hotline services handle around 50 inquiries each year. Furthermore, the Compliance Promotion Section conducts a questionnaire each year to analyze the sense of compliance among officers and employees. The results of which are categorized by company and division basis to highlight compliance risks, assess the compliance functions and implement improvements.