Resolutions on Basic Systems for Internal Control
Systems for Ensuring the Compliance with Laws and the Articles of Incorporation in the Performance of Duties by Directors, Officers and Employees of Teijin and its Subsidiaries
- (1)Teijin has declared the basic principles of compliance in its Teijin Group “Corporate Governance Guide” which include the following statement: All directors, officers and employees of the company are required not only to comply with any laws and regulations but also to act with good faith as a businessperson and as a member of society based on ethics and social norm. In this regard, Teijin strives not only to make fair and proper management decisions but also to harmonize with the civil society based on the full compliance with social norm, ethics, laws and regulations.
- (2)To practice these basic principles, Teijin shall establish systems and organizational structures that ensure practical operation and observation of Teijin Group’s Corporate Philosophy, Corporate Code of Conduct, Corporate Standards of Conduct and other related internal regulations. representative directors, other executive directors and corporate officers shall take the initiative and set good examples in observing laws, the Articles of Incorporation, social rules and ethics, and shall promote compliance awareness among directors, officers and employees of Teijin and its subsidiaries.
- (3)In order to supervise of the entire Teijin Group’s compliance and identify and address any potential issues, Teijin appoints a Chief Social Responsibility Officer (CSRO) as the officer in charge of compliance.
- (4)Directors, officers and employees of Teijin and its subsidiaries shall be required to report to Teijin entity or to the holding company, i.e. Teijin Limited, any significant violations of laws or other serious information concerning compliance, in accordance with Group Ethics Regulations and others. CSRO shall direct and supervise investigations to confirm such facts and, upon consultation with President (CEO), determine appropriate measures.
- (5)Teijin shall provide necessary means for directors, officers, employees and business partners to directly report any violation or doubtful activities of non-compliance in Teijin or its subsidiaries. As one of such means, Teijin shall establish and operate a compliance hotline with outside counsel and other experts, so that any director, officer or employee of Teijin and its subsidiaries can directly contact the outside counsel. The anonymity of the caller shall be protected, i.e. no name of the caller shall be disclosed without his/her consent, and any repercussions to the caller shall be prevented. Moreover, important reports as well as measures taken by the relevant Teijin entity and their results shall be announced as appropriate to, and shall be recognized by, all directors, officers and employees of Teijin and its subsidiaries.
- (6)The directors of Teijin and its subsidiaries shall receive audits on their performance of duties by statutory auditors and will respect any advice or recommendations received from the statutory auditors.
- (7)Teijin places Corporate Audit Department directly supervised by CEO, which performs internal auditing of Teijin Group’s business operations as instructed by CEO and conducts the evaluation of the internal control system and proposes its improvement.
- (8)Teijin Group shall maintain a resolute attitude toward pressure from antisocial forces, including demands for payoffs from specific shareholders or interference by crime syndicates, and shall not allow such interference. CSRO shall be appointed as the person in charge of actions against antisocial forces and , in collaboration with Human Resources Officer, establish action policies and other rules and shall ensure observance of such policies and rules by directors, officers and employees within Teijin and its subsidiaries.
- (9)More than one independent outside director shall be appointed as members of the board of directors in order to intensify the validity of the decisions to be made by the board of directors. These outside directors must satisfy the requirements for independence stipulated in the Rules for Independent Directors to be adopted by the board of directors.
Rules and Other Systems for Management of Risk of Loss in Teijin and its Subsidiaries
- (1)According to the basic principles for total risk management declared in the Teijin Group “Corporate Governance Guide,” the board of directors of Teijin shall operate a Total Risk Management (TRM) system as described below to deal with every risk (uncertainty) that may threaten the mission of enhancing corporate value and achieving sustainable business development of Teijin Group.
- (2)The TRM Committee, to be established under the board of directors of Teijin, shall mainly deal with both the Teijin Group’s business operational risks and the managing strategic risks, and shall propose basic policies and annual plans related to TRM to the board of directors.
- (3)CSRO in charge of the business operation risk shall undertake groupwide efforts for Teijin Group to enhance the risk management system, identify problems and deal with risks upon occurrence thereof, all in accordance with the Group Risk Management Regulations.
- (4)CEO shall assess strategic risks, which is necessary for formulating management strategies and plans and making strategic decisions for Teijin Group. CEO shall present his assessment to the board of directors of Teijin, so that the directors can use it in the course of making managerial decisions.
- (5)In addition, necessary measures shall be implemented to ensure the continuation of businesses of Teijin Group when faced with the following events:
- (a)Significant losses due to disasters, such as earthquakes, floods, accidents and fire;
- (b)Significant problems affecting the production, sales and other business activities due to the inappropriate performance of duties of directors, officers and employees;
- (c)Significant damage due to technical problems in of the critical IT systems;
- (d)Significant damage due to damage to intellectual property or technology leakage; and
- (e)Other events that may be deemed significant by the board of directors of Teijin.
Systems for Ensuring that Duties by Directors and Employees of Teijin and Its Subsidiaries Are Performed Efficiently
- (1)Teijin shall establish Group Regulations to provide the necessary rules and guidelines for the Group to ensure the efficient performance of duties throughout the Teijin Group. These regulations shall be revised as may be necessary to reflect any revision and/or abolition of laws and/or to increase efficiency.
- (2)The board of directors of Teijin shall ensure that the representative directors and other executive directors and corporate officers perform their respective duties within the scope of their responsibilities and in accordance with the managerial structure specified by the board of directors.
- (3)When the representative directors and other executive directors and corporate officers of Teijin have been delegated decision-making powers, their decisions shall be made through the organization, and in compliance with the procedures, stipulated in the Group Organization Regulations, the Group Rules of Responsibility and Authority, and other internal regulations of the Teijin Group. These regulations shall be revised as may be necessary to reflect any revision and/or abolition of laws and/or to increase efficiency.
- (4)The board of directors of Teijin shall organize the basic structure of Teijin Group, and shall promote efficient management and supervision of these organizational bodies.
- (5)Teijin shall formulate the Group medium-term management plan, and each fiscal year it shall formulate short-term plans, and Group’s entire key management targets and budgets, as well as carrying out progress checks, in order to realize the medium-term management plan.
Systems for Ensuring that Proper Business Operations Are Conducted within Teijin Group
- (1)Teijin shall establish Group Regulations to provide the necessary rules and guidelines for the Group to ensure appropriate business operations throughout the Teijin Group. Each Teijin Group company shall establish its own regulations based on the Group Regulations, and shall use appropriate processes, such as discussion by meeting bodies, for deciding on important issues.
- (2)In accordance with the Regulations for Teijin Group Responsibilities and Authorities and the Group Risk Management Regulations, Teijin shall discuss important matters concerning Teijin Group companies at its Group Strategy Committee meeting and other meetings, and shall require Teijin Group companies to make reports.
- (3)The representative directors and other executive directors and corporate officers shall provide necessary instructions within the scope of their responsibilities to ensure that Teijin Group entities have appropriate internal control systems.
- (4)Corporate Audit Department of Teijin shall operate and supervise internal audits of Teijin Group’s business operations to ensure the efficiency and validity of internal control functions over the entire business of Teijin Group. Annual plans for, and the status and results of, internal audits must be reported to specified bodies, including the board of directors, according to the audit’s level of importance.
- (5)Statutory Auditors of Teijin shall, by themselves or through The Committee of Teijin Group Statutory Auditors, establish appropriate systems, such as those for close cooperation with outside accounting auditors and Corporate Audit Department, to ensure effective and appropriate supervision and auditing of Group’s entire business operations that concern the consolidated management of Teijin Group.
- (6)To ensure the reliability of its financial reporting, Teijin shall enact Teijin Group Regulations for Internal Control over Financial Reporting and establish a general internal control system over Financial Reporting covering the general operation of Teijin Group and specific internal control systems covering individual operational processes, which shall be properly and efficiently operated and assessed.
Systems for the Preservation and Management of Information in Relation with the Directors’ Performance of Their Duties
- (1)Directors shall preserve and manage, in an appropriate manner as required by their respective duty and in accordance with the relevant company regulations, the following documents (including documents in electromagnetic media) and other important information concerning the performance of their duties:
- (a)Minutes and related materials of shareholders’ general meetings;
- (b)Minutes and related materials of board of directors’ meetings;
- (c)Minutes and related materials of, other important meetings convened by directors;
- (d)Documents (including decision making documents and any related documents thereof) concerning decisions made by any director; and
- (e)Other important documents concerning the performance of directors’ duties.
- (2)The Chairman of the Board of Teijin (in case of absence of the Chairman of the Board, CEO) shall act as the “Internal Control Supervisor,” who shall supervise the preservation and management of the information specified in paragraph 1 above.
- (3)The General Manager of the Legal Department shall assist the Internal Control Supervisor, and shall provide Teijin Group with the guidance concerning the preservation and management of the documents listed in paragraph 1 above and other information.
- (4)The documents listed in paragraph 1 above shall be preserved for at least ten (10) years and shall be accessible whenever necessary.
- (5)In order to maintain and manage the system above-mentioned, the Group Rules for Handling Information Concerning the Duties of Directors shall be enacted and revised as necessary.
Provisions Concerning Employees Assigned to Assist the Statutory Auditors in Performing Their Duties, the Independence from Directors of Such Employees, and the Validity of Instructions Given to Such Employees
- (1)Teijin places Teijin Group Auditors Office directly supervised by Statutory Auditors to assist them in performing their duties, which shall have, as a general rule, two or more Auditor Assistants. Auditor Assistants shall work full-time and have proficient accounting abilities required for that purpose. The Auditor Assistants may also act as Statutory Auditors of Teijin Group companies, but it shall not act as corporate officers or employees having executory duties at Teijin Group companies.
- (2)The Auditor Assistants shall perform their duties under the direction of the Statutory Auditors. Teijin Group Auditors Office shall also function as secretariat for The Committee of Teijin Group Statutory Auditors.
- (3)To secure the independence of Auditor Assistants above, all decisions concerning the appointment, transfer and other personnel issues affecting Auditor Assistants require the prior consent of the full-time Statutory Auditors.
- (4)The full-time Statutory Auditors shall assess the performance of Auditor Assistants.
Systems for Reporting to Statutory Auditors by Directors, Corporate Officers and Employees of Teijin and its Subsidiaries, and Other Systems for Reports to Statutory Auditors
- (1)The full-time Statutory Auditors of Teijin shall attend the meetings of the board of directors as well as the Group Strategy Committee and other important meeting bodies of Teijin, as well as those of the important meeting bodies of the main subsidiaries.
- (2)Representative directors, other executive directors and corporate officers shall report at the meetings of the Board of Directors and other important meetings on their performance of duties with regard to the business operations, functions, and subsidiaries under their charge.
- (3)Directors, officers and employees of Teijin and its subsidiaries shall immediately report any of the following (including any reports or notifications made to the hotline) to the Statutory Auditors of Teijin.
- (a)Incidents that have significantly eroded or might erode public trust of the Company;
- (b)Incidents that have caused or might cause significant adverse effects on the performance of the Company;
- (c)Incidents that have caused or might cause any significant damage to the environment, safety and health (ESH) or product liability (PL);
- (d)Significant violations of Group Ethics Regulations and other internal rules; and
- (e)Other events similar to items (a) through (d) above.
- (4)The Directors, officers and employees of Teijin and its subsidiaries shall report on the business operations, functions, and subsidiaries under their charge, when they deem it necessary to do so, or at the request of the Statutory Auditors of Teijin, and shall cooperate with the investigations of the Statutory Auditors of Teijin.
Systems for Ensuring that Persons Reporting to the Statutory Auditors Are Not Subject to Unfair Treatment Because of Such Reporting
- (1)Group Ethics Regulations stipulates that no person shall be treated unfairly because of reporting or notifying illegal or unethical conduct and so forth, and prohibit unfair treatment of Directors, officer and employees who have made reports to the Statutory Auditors because of such reports.
Policy Regarding Processing of Expenses and Payment Duties Arising with Respect to the Statutory Auditors’ Performance of Duties, Prepayment of Expenses, and Reimbursement Procedures
- (1)Teijin shall bear the expenses and payment duties required for the Statutory Auditors’ performance of duties, and shall promptly respond to requests for pre-payment of expenses in accordance with the Companies Act after the relevant department has checked the requests.
- (2)Each year a budget shall be established to secure funds for expenses arising from the Statutory Auditors’ performance of duties. The budget shall be established after discussion with the Statutory Auditors.
Other Systems for Ensuring that the Audits of Statutory Auditors Are Conducted Effectively
- (1)The majority of Statutory Auditors shall consist of independent and outside auditors to secure the transparency. The outside Statutory Auditors must satisfy the requirements for independence to be stated in the Rules for Independent Auditors determined by the board of directors, and obtained the consent of the board of Statutory Auditors.
- (2)Statutory Auditors shall enter into advisory agreements with outside law firms in order for themselves and subsidiaries’ statutory auditors to form independent opinions. When they consider it necessary in the course of conducting audits, the Auditors can, at their own discretion, retain outside advisers, including Certified Public Accountants and other consultants.