Within the Nichiden Group, our basic approach to corporate governance is to facilitate swift managerial decision-making in response to changes in the business environment while also establishing corporate ethics, ensuring legal and regulatory compliance, and strengthening internal control systems for greater business efficiency. In terms of business transparency, we believe that timely disclosure of information to stakeholders is an important aspect of safe and sound management.
Corporate governance structure
At Nichiden, we have in place an Audit and Supervisory Committee to enhance corporate governance through stronger Board of Directors oversight, as well as to facilitate faster decision-making and execution of business by ensuring clear delegation of authority, thereby improving business integrity and efficiency and, in turn, greater corporate value.
As a rule, Nichiden's Board of Directors meets once a month to deliberate, vote, and report upon various matters as well as to provide oversight and make recommendations about the execution of business. Based on the policies adopted by the Board of Directors, regular and extraordinary meetings of managerial committees, block committees, and other administrative groups are convened to help ensure that Nichiden is able to flexibly respond to changes in the business environment.
Within the Nichiden Group we maintain a governance structure that is equipped with the means to identify and evaluate the various risks capable of significantly impacting business objective-related management. This enables us to prevent these risks from materializing or, if they do, to minimize the loss incurred.
In order to ensure the effectiveness of our risk management, we have established a Compliance and Risk Management Committee, which is chaired by the representative director to conduct comprehensive examination of the Nichiden Group's risk management-related structures, policies, and measures. Furthermore, in line with the Group's risk management rules, we have established risk-specific oversight departments, which regularly review the status and effectiveness of Nichiden's risk response measures.
With regard to accounting, Nichiden has an auditing agreement with Ernst & Young ShinNihon LLC, from whom we receive regular audits. We are continually working to ensure that we have proper accounting processes, internal control systems, and other robust mechanisms in place.
In terms of legal considerations, we maintain consulting agreements with a law office who helps us in addressing legal issues in a timely and lawful manner.
As for compliance structure, we maintain and operate systems that ensure compliance with laws, regulations, and internal standards, as well as establish corporate ethics.
Our compliance structure also covers our domestic and overseas subsidiaries to ensure they can receive advice consultations when necessary regarding legal, accounting, and tax-related matters.
We also have a whistle-blowing system (“Hotline”) in place, which employees can use to provide information or consult about suspected legal and regulatory violations as well as compliance-related concerns.
Auditing by the Audit and Supervisory Committee, and internal auditing
Nichiden's Audit and Supervisory Committee is comprised of four directors, three of whom are outside directors. As a rule, all Audit and Supervisory Committee members attend the monthly meeting of the Board of Directors to provide their input as required, while the Audit and Supervisory Committee use a variety of resources, including reports from accounting auditors and executive officers, to perform strict auditing of the legality and validity of executive officer job performance. In addition, as a rule and in line with the Audit and Supervisory Committee's auditing policies and auditing plan, the Audit and Supervisory Committee meets once a month to engage in opinion and information exchange with accounting auditors and members of the Audit Office with regard to their ongoing on-site audits of organizational management system and operational procedure suitability and internal control propriety, endeavoring to improve auditing effectiveness and efficiency. For the sake of mutual checks and balances to strengthen Nichiden's internal control systems, the Audit Office (staffed by two personnel) has been established under the direct oversight of the president. Internal audits are carried out in line with internal auditing rules and are used to check compliance with rules, manuals, and other requirements, as well as to check the accuracy of administrative processes, thereby helping to prevent corruption and promote more efficient and streamlined business operations.
Three of Nichiden's directors are outside directors (Audit and Supervisory Committee members). There is no conflict of interest between Nichiden and any of the outside directors or the other positions that they hold. Although we do not adhere to any preset independence-related criteria or policies with regard to the selection of outside directors, we ensure that everyone who is appointed brings with them specialized expertise, has a wealth of experience and insight to share, and is able to be sufficiently objective and neutral when supervising or auditing Nichiden business. The outside directors serve on the Audit and Supervisory Committee, where they receive internal audit and accounting audit reports and engage in opinion and information exchange as appropriate. The outside directors also coordinate with the internal control oversight department (Corporate Planning Department) in auditing the effectiveness of Nichiden's internal control systems.