Internal Control System

1. System to ensure directors and employees perform their duties in accordance with the laws and Articles of Incorporation

  • (1) The Board of Directors makes decisions on the managerial important matters of the Group and supervises the performance of duties by directors based on the Articles of Incorporation, the Rules for the Board of Directors, and other internal rules.
    Also, outside directors are elected to reinforce the supervisory functions of the Board of Directors.
  • (2) The Company formulated the Action Guidelines of DAIICHI KIGENSO KAGAKU KOGYO CO., LTD. as rules to ensure directors and employees perform their duties in accordance with the laws and Articles of Incorporation and fulfill their social responsibilities, and makes compliance with laws, respect for social norms and sensible corporate activities the basic principle.
    Further, the Company formulated the Rules for the Whistle-Blowing System and introduced the Whistle-Blowing System with an outside attorney and outside auditors as those who directly receive relevant information.
    All officers and employees of the Company shall carry a handbook which contains the Action Guidelines of DAIICHI KIGENSO KAGAKU KOGYO CO., LTD. and the Whistle-Blowing System.
  • (3) The Company promotes development, maintenance and improvement of the compliance framework by effectively enforcing various rules for legal compliance.
    In addition, the Company provides training as needed as a means to get directors and employees familiarized with these rules.
  • (4) The Company established the “Risk Management Committee” chaired by the President to strengthen the governance system.
    The Risk Management Committee, in cooperation with outside experts, determines preventive measures as well as countermeasures to deal with risks which may have grave consequences for the Company’s management such as violation of laws or an unexpected incident/accident.
  • (5) The Company has the Internal Audit Division, independent from operation divisions, and also the Compliance Office within the General Affairs & Human Resources Division which serves as a compliance supervisory division.
  • (6) Auditors attend meetings of the “Risk Management Committee” so that they can state an opinion and request the development of remedial measures when they believe there is a problem in the operation of the “system to promote compliance” or the “Whistle-Blowing System” of the Company.
  • (7) The Company formulated the Rules for Banning Relations with Anti-Social Forces which stipulate that we have no relations with anti-social forces and fight off unreasonable demands, and that we do no business with suppliers who have relations with anti-social forces.
    In accordance with these provisions, the Company conducts attribute investigations in advance to determine whether potential suppliers are anti-social forces, and requests from them a pledge to the effect that they do not belong to anti-social forces at the time of executing a contract, or adds a provision for eliminating anti-social forces in executing a master transaction agreement, etc.
    The General Affairs & Human Resources Division supervises measures to deal with these forces and works to keep up with the latest trends by collecting relevant information from the relevant police station and the stockholder registry administrator.

2. System concerning the storage and management of information on the performance of duties by directors

For information on the performance of duties by directors, the Company shall save and manage important information on the performance of operations such as minutes of board meetings, requests for managerial decisions and contracts properly and surely in a highly-searchable state depending on the storage medium, classify it according to its significance and maintain a browsable state with a proper viewing period.

3. Rules and other systems for the management of the risk of loss

  • (1) The Company has a system in place to swiftly respond to an unforeseen event with outside advisors including the corporate lawyer and to prevent damages from spreading and minimize them while formulating various rules for management of assumed risks and clarifying a person responsible for implementing measures when such event occurs.
  • (2) The Company promotes management of risks which may have grave consequences for the Company’s management foundation such as violation of laws or an unexpected incident/accident, and development, maintenance and improvement of the internal control system by using the Risk Management Committee.

4. System to ensure directors perform their duties effectively

  • (1) The Company regularly holds a board meeting on a monthly basis and also on a temporary basis as needed. The Management Council which consists of directors, full-time auditors and division heads discusses in advance important matters concerning the performance of operations of the Company, and all decisions are made after such discussion.
  • (2) For the performance of duties based on a decision of the Board of Directors, the Rules for Organization, the Rules for Segregation of Duties and the Rules for Administrative Authority stipulate a person in charge and the responsibilities thereof and the details of procedures for execution.

5. System to ensure appropriate operations of the corporate group consisting of the Company and subsidiaries

  • (1) The Company shall work to foster a healthy corporate culture of the corporate group consisting of the Company and its subsidiaries by establishment of a guideline equivalent to the Action Guidelines of the Company by subsidiaries and affiliates.
  • (2) The Rules for Segregation of Duties and the Rules for Administrative Authority stipulate that the Corporate Planning Division serves as a supervisory division of subsidiaries and affiliates.
    The Company also formulated the Rules for Management of Affiliated Companies to implement proper business management of subsidiaries and affiliates.
  • (3) Directors, in accordance with the Rules for Management of Affiliated Companies, keep close coordination between the Company and its subsidiaries and affiliates, give guidance and advice and monitor them as needed in cooperation with the accounting auditor.
  • (4) Directors shall report to auditors when they find a violation of laws or any other important matter concerning compliance at any of the subsidiaries and affiliates.
    Auditors may state an opinion to the Board of Directors and request that it formulate remedial measures to appropriately remedy the situation and prevent the reoccurrence thereof.
  • (5) Directors of subsidiaries and affiliates dispatched by the Company according to the Rules for Management of Affiliated Companies check the intent of the Company and follow its direction before making any important decisions.
    They report management information and matters which have grave consequences for management to a division in charge of the Company regularly and as appropriate.

6. System for employees who are assigned to assist duties of auditors and matters concerning securing of the independence of such employees from directors and the effectiveness of instructions to such employees

  • (1) The Company includes a provision for employees who are assigned to assist with the duties of auditors in the Rules for the Board of Auditors and appoints employees of the Company assistants to auditors as needed. Assistants to auditors perform their duties under the supervision of auditors.
    Auditors perform assessment of assistants to auditors, and the Board of Directors makes a decision on the appointment, dismissal, transfer and wage revision thereof by giving priority to the opinions of the Board of Auditors to ensure the independence thereof from the Board of Directors.
  • (2) Assistants to auditors shall not concurrently assume a post involved in the performance of operations.

7. System to report to auditors by directors and employees of the corporate group consisting of the Company and subsidiaries, other systems for reporting to auditors and system to ensure auditors conduct an effective audit

  • (1) As a system where directors and employees of the Company make a report to auditors, the Company holds a board meeting which auditors also attend on a monthly basis, a meeting of the Management Council regularly (twice a month) and on a temporary basis as needed to report important matters which affect the operations and financial results of the Company.
    Regardless of the aforementioned, directors and employees shall report the status of the performance of operations they are in charge of to auditors as appropriate, and auditors may request that directors and employees report to them as necessary.
  • (2) Directors and employees of the Company immediately report to auditors when they find a grave violation of laws and any other important fact about compliance, and also report to the Management Council or the Board of Directors without delay.
    In addition, auditors may request that directors and employees report to them as necessary.
  • (3) Directors and employees of subsidiaries and affiliates report to auditors of the Company directly or through a division in charge of the Company any grave violation of laws, any other important fact about compliance and important matters which affect the operations or financial results of the respective entities.
    Auditors may look into the status of operations and assets of subsidiaries and affiliates about a report made on such subsidiaries and affiliates.
  • (4) The Company maintains a proper reporting system to auditors concerning violation of laws and other compliance issues by maintaining appropriate operation of the Risk Management Committee and the Whistle-Blowing System.
    The Company protects everyone who asks for advice or makes a report under the Rules for the Whistle-Blowing System, such as by prohibiting unfavorable treatment against reporting by a director and an employee to an auditor, and against a whistleblower.
  • (5) The Company bears expenses required for auditors to perform their duties, and secures a budget after discussion with auditors.

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