Basic Internal Control System Policies | Company Profile

HOME > Company Profile > Basic Internal Control System Policies

Basic Internal Control System Policies (Revised January 1, 2009)

1.	A Structure to Ensure that the Executive Duties of Directors and Employees Comply with Legal Requirements and the Company's Articles of Incorporation
	(1)	Basic Stance
		a.	The Lion-Group Charter for Corporate Behavior and Behavioral Guidelines, shall provide the platform for the Company's compliance structure.

		b.	The President shall reinforce the basic spirit and essence of the Lion-Group Charter for Corporate Behavior among directors, executive officers, corporate auditors and employees with the aim of increasing awareness and understanding. Each and every member of the Lion Group shall adopt and pursue the credo that compliance underpins every facet of the Group's business activities.

	(2)	Compliance Structure
		a.	Chaired by the director responsible for corporate ethics, an appointee from the Board of Directors, a Corporate Ethics Committee covering the entire Group formulates and implements specific initiatives to ensure greater awareness of and compliance with corporate ethics. In the event an incident or item fails to comply with the Lion-Group Charter for Corporate Behavior and Behavioral Guidelines, an Ethics Evaluation Committee shall be established, as and when deemed necessary by the Corporate Ethics Committee. The Ethics Evaluation Committee shall comprise specialists from outside the Group, including lawyers and certified public accountants.

		b.	A director — corporate ethics, who reports to the director of the Board responsible for corporate ethics, enhances and maintains the Group's compliance structure and identifies and implements essential education and training for each Group department. Complementing these measures, the Personnel Department conducts essential education and training in a systematic manner. Each department also formulates its own standards, prepares a manual to ensure that activities are conducted in compliance with relevant laws and regulations, and carries out the related administrative duties.

		c.	In an effort to reinforce the supervisory function of the Board of Directors, external directors, who do not engage in any executive function within the Group, are appointed to the Board.

		d.	A Management Evaluation Committee, comprising intellectuals from outside the Company, provides third-party opinions and advice in matters relating to legal compliance and management policy.

		e.	An Auditing Office provides an internal audit function throughout the Group.

		f.	Members of the Auditing Office, the director corporate ethics, members of the Corporate Planning Department and the Legal Department, and corporate auditors maintain close communications with each other. In this manner, Lion promptly identifies issues and problems relating to compliance and the structure thereof.

		g.	In the event corporate auditors uncover an issue relating to the Group's compliance structure or the management of its internal communications system (identified in item (3) c. below), a report shall be presented to the director responsible for corporate ethics and the necessary corrective measures formulated.

		h.	Lion's work regulations shall determine the course of action in the event an employee contravenes any law or the Company's Articles of Incorporation. The Corporate Ethics Committee shall prepare and submit its final decision to the Board of Directors in the event a director of the Board contravenes any law or the Company's Articles of Incorporation.

	(3)	Response in the Event of Emergency
		a.	The Emergency Response System shall apply to any emergency relating to legal requirements and corporate social responsibility (CSR). The director of the General Affairs Department shall report any incident to the president, the director responsible for corporate ethics and corporate auditors. The Emergency Response Committee, chaired by the president or the director of the relevant department, shall implement an appropriate resolution and submit future preventive measures and reports to the Executive Committee and the Board of Directors.

		b.	The procedures outlined above in item (3) a. shall be adopted in the event a director or employee of a Group company uncovers a serious breach of any legal requirement or any significant matter relating to compliance by a Group company.

		c.	Besides items (3) a. and b. above, a “Heart Hotline” has been established to provide access to the director — corporate ethics and external lawyers. This hotline forms a part of the Group's internal communications system designed to address any legal breach or fact concerning compliance. In addition, the “Quality Information Hotline” has been established. In cases of doubt about product quality, personnel responsible for product development will utilize this internal communications system to report directly to the director of the CSR Promotion Department. Those Hotlines are managed based on separately prepared guidelines.

2.	Management Structure for Maintenance and Storage of Information Concerning the Execution of Directors Duties
	(1)	Representative directors and executive directors report on the status of their own executive duties to the Board of Directors in accordance with legal requirements.

	(2)	The president formulates information preparation, maintenance and storage rules relating to the execution of directors' duties as a part of information management rules.

	(3)	Directors maintain and store information pertaining to the performance of their duties in accordance with information management rules.

	(4)	Directors and corporate auditors may view and copy this information at any time.

3.	Rules and Other Structures Relating to the Management of Risk
	(1)	Response under General Conditions
		a.	The director responsible for the Corporate Planning Department has overall responsibility for risk management for the Group. The Corporate Planning Department accordingly maintains exhaustive and comprehensive responsibility for the Group's risk management.

		b.	The Auditing Office audits the status of risk management for each department within the Group and reports to the Executive Committee and the Board of Directors.

		c.	Under normal circumstances, each department strives to identify its own risks and to implement appropriate risk reduction measures. In the event of a management risk with the potential to significantly impact business activities, the director of the Board responsible for the relevant department shall consider appropriate countermeasures, which are deliberated by the Senior Executive and Executive Committees for implementation.

		d.	In connection with risks associated with the environment, quality assurance, accident and disaster, appropriate countermeasures are formulated in advance by the Environmental Conservation, Customer Satisfaction/Product Liability, Safety and Disaster Prevention Committees, and when necessary deliberated by the Executive Committee to control said risks.

		e.	Each plant has acquired ISO 14001 accreditation and actively pursues measures that promote quality assurance and environmental protection.

	(2)	Response in the Event of Emergency
		a.	In the event of natural disasters or accidents, in accordance with the Emergency Response System or the Earthquake Hazards Countermeasure Manual, details of any incident are reported to the president and corporate auditors. At the same time, the director of the relevant department collects all relevant information, formulates response measures, clarifies causes and determines countermeasures, which are submitted to the Executive Committee and the Board of Directors.

4.	A Structure to Ensure that Directors' Duties are Executed Efficiently
	The following business management system is applied to ensure the efficient execution of directors' duties.
	(1)	Decision-Making Rules
		a.	Board of Directors' meetings are held regularly once a month, with extraordinary meetings convened as and when necessary, as the foundation for ensuring the efficient execution of directors' duties. With the exception of the regular Board of Directors meetings, the written approval of each director shall be deemed to constitute a resolution of the Board of Directors pursuant to regulatory requirements.

		b.	Executive Committee meetings, attended by all executive officers, shall be held once a month. At each meeting the Executive Committee shall determine fundamental matters as well as important matters in an agile manner. Through these means, Lion strives to promote speedy operation and strengthen the Board of Directors' functions.

		c.	Matters of importance relating to the management policies and strategies of the overall Group are deliberated in advance by the Senior Executive Committee, comprising senior executive directors and others of equivalent status and above. Thereafter, recommendations are ratified by the Board of Directors.

	(2)	The Board of Directors
		a.	The Board of Directors determines companywide objectives and targets common for all directors and employees, promotes understanding and awareness and formulates management plans based on those objectives and targets.

		b.	In order to realize management plans, the Board of Directors establishes business plans and sets operating budgets on the basis of management plans. Investments for marketing, research and development, capital expenditure and new businesses are also allocated on the basis of management plans.

		c.	The Board of Directors determines the level of delegated authority of committees, executive general managers and directors of each division or department relating to important matters.

		d.	The Board of Directors reviews monthly results. In the event of a discrepancy between established targets and actual performance, the director responsible for each division provides an analysis of the discrepancy and recommends measures to reduce or eliminate negative factors to the Board of Directors. When necessary, targets may be revised.

	(3)	Business Operation Structure
		a.	Directors responsible for each department establish an efficient business operation structure including concrete measures that each department must implement.

		b.	Monthly results are collated for management accounting purposes in a timely fashion utilizing the Group's IT systems and submitted to the director responsible for the relevant department and the Board of Directors.

		c.	Subject to item (2) d. above, each director responsible for a department implements essential improvements to increase the efficiency of the department's business operation structure.

5.	A Structure to Ensure Appropriate Operation of Lion and Group Companies
	(1)	While respecting the autonomy of each company within the Group, each Group company regularly reports business activities to Lion, and Lion undertakes prior discussion of Group companys important matters. In addition, matters of significance that may substantially impact the assets and financial condition and earnings of Group companies are subject to approval by Lion's Board of Directors or Executive Committee.

	(2)	Lion's Auditing Office conducts internal audits of Group companies.

	(3)	Members of the Auditing Office, the director corporate ethics, members of the Corporate Planning Department and the Legal Department, as well as corporate auditors maintain close communications with each other. In this manner, Lion strives to promptly identify issues and problems relating to Group company compliance and the structure thereof.

	(4)	Lion dispatches corporate auditors to Group companies. Corporate auditors conduct audits in accordance with regulatory requirements.

	(5)	In the event a director responsible for Group companies or employee of a Group company uncovers a serious breach of any legal requirement or any significant matter relating to compliance by a Group company, the matter is reported to the director of the Company's General Affairs Department, pursuant to the Emergency Response System. The matter is then reported to the president, the director responsible for corporate ethics and corporate auditors of Lion. The Emergency Response Committee, chaired by the president, or the director of the relevant department, shall implement an appropriate resolution and submit future preventive measures and reports to the Executive Committee and the Board of Directors.

	(6)	In the event that Group companies recognize that management guidelines and instructions provided by Lion to Group companies contravene the law or raise issues relating to compliance, the matter is immediately reported to the Company's president, director responsible for corporate ethics and corporate auditors. The director responsible for corporate ethics, in collaboration with corporate auditors, resolves the situation and submits a proposal outlining preventive measures.

	(7)	Besides items 5. (5) and (6) above, the “Heart Hotline” has been established to provide direct access to the director — corporate ethics and external lawyers. This hotline forms a part of the Group's internal communications system designed to address any legal breach or fact concerning non-compliance. In addition, the “Quality Information Hotline” has been established. In cases of doubt about product quality, personnel responsible for product development will utilize this internal communications system to report directly to the director of the CSR Promotion Department. Those Hotlines are managed based on separately prepared guidelines.

6.	Matters Relating to Employees in Support of Corporate Auditors and the Independence of Such Employees from Directors in the Case that Auditors Request Such Employees
	(1)	More than one employee is allocated to the Auditing Office to support the duties and functions of the Board of Corporate Auditors.

	(2)	Employees allocated for this purpose to the Auditing Office are subject to the instructions of the Board of Corporate Auditors and not to the instructions of directors of the Board and the director of the Auditing Office.

	(3)	The aforementioned employees are independent of directors of the Board. Personnel evaluation, transfer and reprimand of those employees are determined after agreement by the Board of Corporate Auditors.

7.	A Structure for Reporting to Corporate Auditors by Directors and Employees and Other Matters Relating to Reporting Procedures to Corporate Auditors
	(1)	Pursuant to regulatory requirements, directors report to the Board of Corporate Auditors any matters of importance that may significantly impact the Company. Other matters to be reported to the Board of Corporate Auditors are as follows.
		a.	Significant breaches of the law and other important compliance matters.

		b.	Emergencies relating to natural disasters and accidents, as well as emergencies concerning legal requirements and corporate social responsibility.

		c.	The implementation status of Group internal audits.

		d.	The status and details of communications reported through the Group's internal communications system hotline.

		e.	Matters determined by the Executive Committee and the Product Planning Executive Committee.

		f.	Matters determined by directors and executive officers based on designated delegated authorities.

		g.	The status of Group company activities and the status of Group company corporate auditor activities.

		h.	The details and impact of any change in important accounting policies and standards adopted by the Company and its Group companies.

	(2)	Reporting methods (the provider/recipient timing and other matters) are determined through deliberation between directors and the Board of Corporate Auditors.

	(3)	Notwithstanding item 7. (1) above, corporate auditors may seek information from directors and employees as and when necessary.

8.	A Structure to Ensure Effective Auditing by Corporate Auditors
	(1)	At the request of the Board of Corporate Auditors, the Board of Directors appoints legal, accounting and taxation specialists and ensures that opportunities are provided to receive advice relating to audit activities.

	(2)	Corporate auditors attend management meetings and discussions of the Company and Group companies as may be necessary.

	(3)	Corporate auditors review and copy important information concerning Group companies when necessary.

	(4)	Corporate auditors may conduct individual interviews with the directors responsible for business execution and important employees in accordance with audit plans formulated by the Board of Corporate Auditors.

	(5)	The Board of Corporate Auditors periodically convenes meetings with the representative directors and accounting auditors to promote the exchange of information, opinions and views.

9.	A Structure to Ensure Reliability and Appropriateness of Financial Results Report
	(1)	For the purpose of ensuring the reliability of the financial results report of Lion, its subsidiaries and affiliated companies, that form consolidated financial statements, the president shall develop, operate and evaluate internal control regarding the financial results report based on the “Internal Control Policies Regarding Financial Results Report” set forth by the Board of Directors. The president shall also make a report regarding the status of internal control and submit an internal control report to the Board of Directors in a regular manner.

	(2)	The Auditing Office shall understand and evaluate the status of development and operations (including the progress of correcting implementation methods of the internal control system and improvements made) of the Company’s internal control regarding the financial results report through internal audit activities and submit a report to the president and corporate auditors.

	(3)	As a part of their job, corporate auditors shall audit directors’ execution of job for the development and operations of internal control regarding the financial results report. In addition, corporate auditors shall audit the status of development and operations of internal control regarding the financial results report through seeing whether the methods and results of accounting audits conducted by accounting auditors are appropriate.

10.	A Structure to Eliminate Antisocial Forces
	(1)	In accordance with the “Lion-Group Charter for Corporate Behavior,” the Company shall maintain its stance of confronting any antisocial forces that pose a threat to public order and safety. In addition, Lion shall position its General Affairs Department as an “Office for Handling Issues Relating to Antisocial Forces” and appoint a person responsible for the prevention of undue claims against the Company. Together with this, Lion shall strive to reinforce the relationship between each operational site of the Group as well as external institutions.

	(2)	The person responsible for the prevention of undue claims shall implement the necessary training at each operating site of the Group. The person responsible for the prevention of undue claims and the person in charge of the prevention of undue claims at each operating site shall engage in his or her business responsibilities in accordance with the specific Undue Claim Prevention Manual which provides the steps to handle antisocial forces.

Enacted: May 30, 2006 Revised: June 29, 2006 Revised: January 1, 2008 Revised: February 7, 2008 Revised: March 28, 2008 Revised: January 1, 2009

<< Back | Top >>

Corporate Philosophy

Corporate Message

Corporate Compliance

Basic Internal Control System Policies

Company Overview

Business Segment

Research & Development

Company History

Purchasing Activity Principles

Lion Corporation Web Site:Terms of Conditions of Use