Corporate Governance

Basic Philosophy on Corporate Governance

The following provides a summary of the main points of the Report on Corporate Governance.

At MORESCO, we believe that the basis of corporate governance is that horizontal and vertical communication within the organization are in a good state or are energized. More specifically, we consider that corporate governance cannot function effectively unless policies, strategies, plans, instructions, etc., are communicated certainly, accurately, and smoothly, and the results or the state of implementation of such are reported accurately. With these ideas forming the basis of our philosophy, the MORESCO Group recognizes the strengthening of corporate governance as an important management issue. Accordingly, the group's basic policy is one of implementing prompt and dynamic decision-making adapted to the environment whilst ensuring the health and transparency of management through the maintenance and enhancement of its corporate governance system.

 

State of administrative management organization related to managerial decision making, execution, and supervision, and state of other corporate governance systems

  • Matters regarding execution of business, audits, supervision, appointment of personnel, determination of remuneration, and other functions
  • Matters regarding internal control system and other issues
 

 

MORESCO is a "company with auditors" as defined under the Companies Act of Japan, and has appointed 8 directors (3 of whom is an external director) and 4 auditors (3 of whom are external auditors). The board of directors meets at least once a month and, in addition to supervising the execution of duties by the president, makes decisions regarding important matters related to the management of the company. The board analyzes differences between the monthly budget and actual financial performance, and based on that report, provides instructions and guidance toward achieving plans. External directors (independent executives) provide the company with advice and guidance from a neutral perspective regarding the transparency of management, that is, the validity and logicality of business judgments. Based on the decisions of the board of directors, the president makes decisions regarding day-to-day business and ensures that such business is carried out. As a general rule, the executive committee, which consists of operating officers ranked "senior" and above, meets once a month . The committee discusses matters decided directly by the president and ensures that duties are executed smoothly while avoiding the excessive concentration of authority. With the aim of streamlining management and achieving rapid decision-making, MORESCO has introduced an operating officer system. All operating officers, internal auditors, etc. hold a meeting of the Management Committee once a month, and promote mutual understanding regarding the current state of corporate management and related ideas by reporting on and discussing important matters related thereto. The details of such meetings are disclosed and transmitted to all employees. To maintain systems for compliance and risk management and check the progress related to such systems, the meeting of the Compliance & Risk Management Committee, which is formed by all directors, operating officers, and internal auditors, etc. is held at the same time as the meeting of the Management Committee.

 

MORESCO Group Corporate Governance System

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1. Basic philosophy and preparedness regarding internal control system

MORESCO stipulates basic policies regarding the provision of an internal control system as below and maintains the system in accordance with these policies.

1. System to ensure that duties executed by directors and employees are in compliance with laws and the company's articles of incorporation

1. MORESCO has set forth the MORESCO Corporate Behavior Charter as the foundation of its compliance system, and will continue to ensure that all employees are aware that legal compliance forms the basis of all corporate activities. 2. MORESCO shall provide a compliance system by establishing a Compliance & Risk Management Committee chaired by the president and consisting of all operating officers, internal auditors, and others as an organization to oversee compliance in general. 3. To promote compliance, MORESCO shall provide guidance via training and other measures so that directors and employees perceive compliance as their own problem in their respective positions when working. 4. Auditors and the Audit Department shall work together to investigate the compliance system by investigating laws to check for problems with respect to laws and regulations, articles of incorporation, and in-house regulations. The relevant committee shall work to identify and improve problems by periodically reviewing the compliance system. 5. MORESCO shall create a consultation and reporting system, and if an employee recognizes and reports questionable acts, etc., shall not treat the employee in question in a disadvantageous manner.

2. System related to the retention and management of information regarding the execution of duties by directors

1. MORESCO shall appropriately retain and manage the following documentation related to the execution of duties by directors (including electromagnetic records) based on laws and the company's Important Documentation Management Regulations: 1. Minutes of the meetings of the board general meeting of stockholders, and related materials
2. Minutes of the meetings of the board of directors, and related materials
3. Minutes of the meetings of the Management Committee, and related materials
4. (4) Other important documentation regarding the execution of duties by directors

2. Information shall be managed in accordance with the information security policy and the basic policy related to the protection of personal information, etc.

3. Regulations and systems regarding the management of the danger of loss

1. Led by the aforementioned Compliance & Risk Management Committee, MORESCO shall promote the provision of a system under the company's risk management policy and shall implement appropriate responses upon identifying risks facing the company. 2. In preparation for the manifestation of a risk that may seriously affect its business, MORESCO shall provide a crisis management manual and, under an emergency operations center headed by the president, shall implement necessary responses in order to minimize losses posed by the manifestation of a risk.

4. System to ensure that duties executed by directors are carried out efficiently

1. A regular meeting of the board of directors shall be held once a month where decisions shall be made regarding important matters and the execution of duties by the president, etc., shall be supervised. 2. In order to enhance the functions of the board of directors and improve management efficiency, MORESCO shall introduce an executive officer system, and shall hold a Management Committee meeting attended by all operating officers and internal auditors, etc. once a month, and shall discuss basic matters and important matters related to the execution of duties. 3. Regarding the operation of business, in consideration of the future business environment, MORESCO shall formulate a medium-term management plan and annual plans, and shall set companywide targets. All departments shall formulate and carry out specific measures towards achieving these goals.

5. System to ensure appropriate work practices within the corporate group formed by MORESCO and its subsidiaries

1. MORESCO shall, via its Affiliate Management Regulations, stipulate matters requiring management based on a framework of periodic reports and discussions regarding important jobs, which shall be managed and overseen by the departments with jurisdiction over subsidiary management. 2. MORESCO shall dispatch directors, auditors, or operating officers to act as directors or auditors at its subsidiaries. The dispatched directors shall monitor and supervise the directors of the subsidiary to which they have been dispatched in the execution of their duties and the dispatched auditors shall audit the execution of duties at the subsidiary, while the Audit Department shall conduct periodic audits of the subsidiary. 3. Each subsidiary shall, while maintaining coordination and information sharing with MORESCO, autonomously provide an internal control system based on the scale and nature of its operations, organizational design, and its other individual characteristics and properties as a company.

6. System regarding employees responsible for assisting auditors in their duties, and matters regarding the independence of such employees from directors

1.While MORESCO does not currently have employees who assist auditors in their duties, in the event that an auditor makes a request for such an assistant, MORESCO shall assign an assistant within reasonable bounds upon consultation with the auditor. 2. Independence from directors shall be ensured by requiring that decisions regarding the appointment, transfer, and evaluation of the employee in question, and other matters related to authority over human affairs are subject to the prior agreement of the internal auditor.

7. System by which directors and employees can report to auditors; other systems related to reporting to auditors; and other systems to ensure that audits by auditors are conducted effectively

1. Directors and employees shall report immediately to the board of auditors regarding important matters that may affect the business or performance. 2. So as to thoroughly understand important decision-making processes and the state of the execution of duties, in addition to attending meetings of the board of directors and important committees such as the Management Committee and the Compliance & Risk Management Committee, the internal auditor shall review major decision requests, contracts, and other important documentation related to the execution of duties, and shall be able to request directors and employees to explain such documentation if required. 3. While maintaining close coordination with the Audit Department and accounting auditors, auditors shall achieve the audit outcomes, in addition to ensuring the effectiveness of audits via independence and authority based on the Board of Auditors Regulations and Audit Standards for Auditors.

8. System to ensure the reliability of financial reporting

1. To ensure the reliability of financial reporting and the effective and appropriate submission of an internal control report as prescribed by the Financial Instruments and Exchange Act, MORESCO shall prepare relevant regulations and shall build and operate an internal control system under the direction of the president. 2. MORESCO shall ensure the adequacy of the internal control system with respect to the Financial Instruments and Exchange Act, related laws, etc., by evaluating whether the system is functioning properly on an ongoing basis and carrying out necessary corrections.

2. Basic philosophy and preparedness regarding elimination of anti-social forces

1. Basic philosophy regarding elimination of anti-social forces

1. As stipulated in our Corporate Behavior Charter, MORESCO's basic policy regarding the elimination of anti-social forces shall be to "have nothing to do with anti-social forces or groups that threaten the order and safety of civil society". This basic policy shall be communicated to all directors and all employees via in-house networks and other means. 2. In response to an unreasonable demand or approach from an anti-social force or group, MORESCO shall take a resolute stance based on our Regulations concerning Measures against Anti-social Forces.

2.Preparedness regarding elimination of anti-social forces

1. MORESCO stipulates the General Affairs Department as the coordinating department for responses related to anti-social forces or groups, and any unreasonable demand or approach shall be responded to systematically by immediately reporting such incident to the coordinating department so as to provide a unified response. 2. The response-coordinating department shall remain in close coordination with the police and other organizations, and in response to an unreasonable demand or approach, shall promptly contact the police and request appropriate guidance and support as needed.