Basic Policy on Corporate Governance
DENSO is working to strengthen its corporate governance. The Company sees this as vital not only to raising Group competitiveness but also to maintaining and improving long-term business performance in today's rapidly changing global markets.
Corporate Governance System
DENSO has adopted the corporate auditor system. In addition to statutory bodies such as the General Meeting of Shareholders, the Board of Directors and the Board of Corporate Auditors, as well as the Accounting Auditor, DENSO has put in place a number of internal control mechanisms. Through the ongoing provision of management information to shareholders and other investors, the Company practices sound, highly efficient and transparent management.
Board of Directors and Board of Corporate Auditors
- Managing officer system
DENSO has adopted the managing officer system. Using this system, DENSO is speeding up decision-making and operational execution by reducing the number of directors and appointing managing officers. The system comprises directors (13) who supervise activities in all business divisions and play a bridging role between management and day-to-day operations. The managing officers (27) focus exclusively on business execution in each business division. In addition, the term of office for directors has been reduced to one year to create a management structure capable of adapting flexibly to changes in the business environment and to further clarify management responsibility for business terms.
- Decision-making bodies related to business execution
The Board of Directors, which meets monthly, is the Company's decision-making body with responsibility for statutory and other important management matters. DENSO also has a Top Management Meeting and other organizations that discuss issues from a Company-wide perspective prior to them being submitted to the Board of Directors.
Although DENSO has no external directors, the Compan's standing corporate auditors and external corporate auditors (a total of five individuals), mentioned in the following paragraph, are responsible for monitoring the execution of duties by directors and auditing the operations and financial condition of DENSO Corporation and its domestic and overseas subsidiaries.
- Management oversight functions
The Company's two standing corporate auditors and three external corporate auditors are responsible for monitoring the execution of duties by directors and auditing the operations and financial condition of DENSO Corporation and its domestic and overseas subsidiaries. An academic, an attorney and an executive from another company make up the three external corporate auditors, who attend meetings of the Board of Directors and the Board of Corporate Auditors. These individuals provide advice to directors from a broad perspective and exchange opinions with the other corporate auditors.
In addition to the statutory appointment of corporate auditors, the Company's audit system also comprises dedicated internal audit departments at key domestic and overseas subsidiaries. There are 40 staff in total assigned to this role.
In terms of audit methods, DENSO's business divisions and domestic and overseas subsidiaries voluntarily carry out internal inspections using their own internal control systems, while continuous audits are also conducted to ensure compliance with laws and the appropriateness of the Company's own management and business procedures. DENSO's corporate auditors meet monthly with internal audit departments to discuss audit results and
reports and exchange opinions, working to raise the efficiency and quality of audits.
Internal Control System and Basic Policy
- System to ensure the execution of duties by directors is in compliance with relevant laws and the Articles of Incorporation
- Directors shall, through their statements, actions and correspondence, demonstrate total commitment to the universal values, ethics and convictions enshrined in DENSO’s Basic Philosophy and Code of Conduct.
- In addition to the Board of Directors, the Top Management Meeting and other senior management meetings, directors shall conduct decision-making through cross-divisional meetings and committees and work to mutually supervise other directors.
- Systems to store and manage information related to the execution of duties by directors
- Important information shall be stored and managed in accordance with internal regulations.
- Regulations and other systems to manage risk of loss
- Risk related to businesses and investments shall be managed on a Company-wide basis in the Board of Directors, the Top Management Meeting and other senior management meetings in accordance with internal regulations; each department head shall be responsible for managing risk in their respective areas of operational responsibility.
- In terms of other risk management, the Risk Management Meeting shall establish and operate a Company-wide system to manage risks on an individual basis in each key department.
- System to ensure directors execute their duties efficiently
- The Company shall pursue efficient management by reducing the number of directors through the introduction of the managing officer system.
- In accordance with long-term management policy, the Company shall formulate policies and plans and ensure a shared sense of commitment to achieving them Company-wide.
- System to ensure the duties and actions of employees comply with relevant laws and the Articles of Incorporation
- The Corporate Ethics Committee shall formulate and revise the Code of Conduct, ensure awareness of the code among employees and provide related guidance.
- The Company shall promote awareness of the Code of Conduct through compliance training for each employee level.
- The Company shall operate an internal whistleblower system that enables employees to communicate directly with key internal departments or outside legal counsel.
- To ensure the legality, appropriateness and efficiency of business operations, the Internal Audit Department shall conduct internal audits in accordance with internal regulations; each department shall establish and upgrade management and operational systems based on points raised by these audits.
- System to ensure appropriate business activities by the DENSO Group
- Decision-making by Group companies shall be conducted in accordance with internal regulations.
- In accordance with long-term management policy, the Company shall formulate Group policy and plans on a consolidated basis and ensure
a shared sense of commitment to achieving them Group-wide.
- The Company shall provide direction on risk management and compliance to Group companies in the form of policy and guidelines,
and construct and operate a Group-wide risk management and compliance system.
- The Company shall operate an internal whistleblower system for domestic Group companies.
- Matters related to employees requested by corporate auditors to support audit activities and the independence of such employees
- The Company shall establish a Corporate Auditors Office as a dedicated organization to support the audit activities of corporate auditors.
- Any changes to the organization or personnel of the Corporate Auditors Office shall require the prior agreement of the Board of Corporate Auditors.
- System for reporting information to the corporate auditors
- Corporate auditors shall gain an understanding of and monitor business execution by attending meetings of the Board of Directors, committees and other important management meetings, accessing important documents and using other means.
- Directors, managing officers and employees shall regularly, or as necessary, submit business reports to the corporate auditors.
- Other systems to ensure corporate auditor activities are conducted effectively
- Corporate auditors shall regularly, and as necessary, exchange opinions with the Internal Audit Department and the Accounting Auditor.
- Corporate auditors shall conduct preliminary checks of documents for the Board of Directors and other important meetings.
DENSO has established a Corporate Ethics Committee, with the Legal Department as its secretariat, as one element of its internal control system. This committee is responsible for monitoring the legality and ethical standards of all the Company's corporate activities.
A Corporate Ethics Hotline, which provides access to outside legal counsel and the Company's Legal Department, handles questions from employees about compliance and provides related advice. In April 2005, DENSO formulated the DENSO Group Employee Code of Conduct as guidelines for behavior desirable of DENSO associates. Incorporating the spirit of its forerunner, the DENSO Code of Business Conduct, the content of this code of conduct has been significantly updated to more accurately reflect today's business environment. In addition to creating these systems and tools, DENSO also works to ensure an emphasis on compliance in management through training, newsletters and other approaches.
As another element of its internal control system, DENSO has established the Risk Management Meeting to minimize the diverse risks associated with its global business operations. This body is working to enhance the DENSO Group's ability to respond to risk in Japan and overseas by implementing preventative measures and initially responding to risk when it occurs.