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
1. 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 each business term.
2. 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.
3. 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.
Remuneration to Directors and Corporate Auditors
Details Regarding Remuneration
Remuneration paid to directors and corporate auditors in fiscal 2007 was as follows:
Directors (13) ¥703 million
Corporate auditors (5) ¥87 million
(including ¥25 million paid to external corporate auditors (3))
Details of Fees Paid to the Accounting Auditor
Fees paid for audits performed by accounting auditor Deloitte Touche Tomatsu were as follows:
Compensation for services rendered pursuant to Article 2-1 of Japan’s Certified Public Accountants Law ¥44 million
Other fees ¥13 million
Strengthening the Internal Control System
The enactment of Japan’s Corporate Law in May 2006 bolstered measures for enhancing internal control systems at Japanese corporations. Moreover, pursuant to Japan’s Securities and Exchange Law, corporations are also required to report on their internal control systems to ensure the reliability of their financial reporting in fiscal 2008. In accordance with these trends, DENSO is upgrading and enhancing its internal control system by reviewing and revalidating administrative systems with respect to operational processes and documentation.
The Code of Conduct for DENSO Group Associates clearly stipulates legal compliance and respect for customs and cultural norms in every country and region where the Group operates. Individual employees of the DENSO Group are also expected to conduct themselves in line with the highest ethical standards. This code is shared by all Group companies in Japan, with Group companies overseas also adhering to the spirit and principles of the code.
DENSO has established a Business Ethics and Compliance 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 Business Ethics Hotline, which provides access to outside legal counsel and the Company’s Legal Department, has also been established to handle questions from employees about compliance and provide related advice. In May 2006, the number of key suppliers adopting the hotline, which is managed in accordance with Japan’s Whistleblower Protection Law, had grown to 300 firms.
Compliance by Region
Compliance activities are centered on the North America Compliance Committee established in 1999, and conducted based on extensive guidance issued by compliance officers. The committee also manages a compliance helpline. Compliance audits were newly launched in 2006.
An EU version of the DENSO Group Employee Code of Conduct was formulated in fiscal 2006. Going forward, the code will be successively promoted throughout the EU region, with adjustments made to reflect the laws and cultural norms of respective EU countries. DENSO is also considering the adoption of a helpline based on guidelines unique to Europe.
DENSO has begun examining the possible introduction of a compliance program for operations in the country for fiscal 2008.
Additionally, each year DENSO sponsors a Global Legal Conference attended by head office personnel from Japan, North America, Europe and China to encourage greater sharing of compliance information and related issues.
Alongside the creation of these systems and tools, the Company conducts activities, such as the publication of compliance-related educational information and news, as part of its dedication to ensuring complianceoriented management.
Education and Awareness
DENSO has instituted compliance education specific to each employee work grade since fiscal 2002 to help disseminate and entrench compliance awareness throughout the Group. In May 2006, Compliance Leaders, who also serve concurrently as CSR Leaders, were assigned at DENSO and Group companies in Japan to carry out compliance education and awareness activities at the workplace level.
Inspection of Compliance Activities
October is Business Ethics and Compliance Month at DENSO, during which time all Group workplaces undergo a voluntary compliance inspection. This inspection is supplemented with a survey on business ethics to determine the degree of compliance policy awareness and to ascertain potential risks. The results of the survey are then reported to the Business Ethics and Compliance Committee. In fiscal 2006, the survey was distributed to roughly 4,000 employees, including temporary staff for the first time, with findings reflected in activities conducted during fiscal 2007.
Basic Approach and Promotion System
As another element of its internal control system, DENSO gives due attention to preventing risk before it materializes, and ensuring a timely and accurate initial response in order to minimize damage when unforeseen crises arise. This approach enables the Company to minimize the diverse risks associated with its global business operations. To this end, DENSO has established the Risk Management Meeting. This all-encompassing body is designed to unite the entire Group in a common effort to enhance its ability to respond to risk in Japan and overseas.
|Internal accidents and mistakes
Environmental pollution, man-made disasters, growing problems stemming from user complaints, human resource- and labor-related issues, human rights issues, leakage of trade secrets, recalls, bad debts, traffic accidents, production stoppages, information system interruptions, breach of contract, others
Anti-trust law violations, Foreign Exchange Control Law violations, tax evasion, infringement of other companies’ patents, crimes and scandals involving employees and officers, others
|Accidents and incidents due to external factors
Attempts to buy out DENSO stock, lawsuits brought by shareholders, product liability lawsuits, unforeseen accidents, transportation and capacity issues, cyberterrorism, others
|Natural disasters and random events
Dramatic fluctuations in foreign exchange and interest rates, natural disasters, random occurrences, damage incurred at suppliers, others
All DENSO officers, managers and personnel responsible for managing specific risk areas are issued a Crisis Communication Manual. All other employees are required to carry a copy of the Risk Management Handbook at all times. These steps are designed to promote accurate responses whenever crises arise. As a measure to bolster risk management, DENSO enacts a risk management seminar extended to all personnel responsible for risk management in the domestic DENSO Group. The seminar was attended by 75% of eligible personnel in fiscal 2006. Moreover, DENSO is formulating a Business Recovery Plan that seeks to ensure the safety of Group employees and their families in the event of a major disaster, and to enable the Company to meet its supply obligations to customers by swiftly responding to the crisis.
Basic Approach and Promotion System
DENSO views technology and information, as well as customer and employee data, as invaluable assets. This recognition prompted the Company to draft the DENSO Group’s Basic Principles of Information Security in 2003, and to take steps to better protect and strengthen control of its information assets. Since 2005, DENSO has applied the DENSO Group Information Security Standards to 56 domestic Group companies and 75 Group bases overseas. Formulated with reference to Information Security Management System criteria, these standards contain 142 specific points pertaining to the management of information assets. An Information Security Leader and Information Security Center have been established as specialized departments under the Information Strategy Committee. DENSO has also built an information management system based on ISO/IEC 27001 and other internationally recognized information management system standards. In addition to the control of trade secrets, audits and Company-wide voluntary inspections, DENSO conducts monitoring surveys to ascertain actual conditions at each Group company to continuously raise the level of information security through the Group.