MC's Corporate Governance Framework
MC's corporate philosophy is enshrined in the Three Corporate Principles-corporate responsibility to society, integrity and fairness, and Global Understanding Through Business. Through corporate activities rooted in the principles of fairness and integrity, Mitsubishi Corporation strives to continuously raise corporate value. The Company believes that by helping to enrich society, both materially and spiritually, it will also meet the expectations of shareholders, customers and all other stakeholders.
A key management theme in achieving these goals is to strengthen corporate management on an ongoing basis, as the foundation for ensuring sound, transparent and efficient management. MC is thus working to build a corporate governance system, based on the Corporate Auditor System, that is even more effective. To this end, the Company has employed various measures, including the further separation of management and execution by introducing the executive officer system, as well as the enhancement of supervision by appointing a total of eight outside directors and outside corporate auditors (five outside directors and three outside corporate auditors) who meet the requirement to act as independent director or auditor.
With respect to outside directors, MC has established selection criteria for outside directors and outside corporate auditors to clarify the roles and selection policy for these directors and corporate auditors. Currently, five out of 12 directors are outside directors selected in accordance with these standards and involved in management from an external perspective.
MC also has a Governance & Compensation Committee and an International Advisory Committee as advisory bodies to the Board of Directors. These committees are made up mostly of outside directors and corporate auditors as well as other experts from outside the Company.
The Governance & Compensation Committee conducts continuous reviews of corporate governance-related issues at the Company and also discusses the remuneration system for directors and corporate auditors, including the policy for setting remuneration and appropriateness of remuneration levels for these corporate officers, and monitors operation of this system. The International Advisory Committee holds discussions on management issues and advises the Company management from a global perspective.
The five corporate auditors, including three outside corporate auditors, utilize staff members of the Corporate Auditors' Office, which is under their direct control, in conducting their audits. At the same time, the corporate auditors attend meetings of the Board of Directors and other important meetings and hold discussions with internal departments, including important offices in Japan and overseas, as well as visit main subsidiaries that are important from the perspective of Group management to conduct audits.
Regarding internal audits, the Internal Audit Dept. conducts audits of the Company, overseas regional subsidiaries and affiliated companies from a Company-wide perspective. These internal audits are conducted after selecting audit targets and are based on annual audit plans. The results of audits are reported to the president, corporate auditors as well as regularly to the Board of Directors and the Executive Committee.
In addition, each business group has established its own internalaudit organization and, based on objectives that have been setto suit, as necessary, the specific group characteristics, theseorganizations audit the operations that fall under their respectivegroup's organization.
Selection Criteria for Outside Directors and Outside Corporate Auditors
Selection Criteria for Outside Directors
- Outside directors are elected from among those individuals who have an eye for practicality founded on a wealth of experience as corporate managers, as well as an objective and specialist viewpoint based on extensive insight regarding global conditions and social and economic trends. Through their diverse perspectives, outside directors help ensure levels of decision-making and management oversight appropriate to the Board of Directors.
- To enable outside directors to fulfill their appointed task, attention is given to maintaining their independent stance; individuals incapable of preserving this stance will not be selected to serve as outside directors.
- MC operations span a broad range of business domains; hence there may be cases of conflict of interest stemming from business relationships with firms home to the corporate managers appointed as outsider directors. MC copes with this potential issue through the procedural exclusion of the director in question from matters related to the conflict of interest, and by preserving a variety of viewpoints through the selection of numerous outside directors.
Selection Criteria for Outside Corporate Auditors
- Outside corporate auditors are selected from among individuals possessing a wealth of knowledge and experience across various fields that is helpful in performing audits. Neutral and objective auditing, in turn, will ensure sound management.
- To enable outside corporate auditors to fulfill their appointed task, attention is given to maintaining their independent stance; individuals incapable of preserving this stance will not be selected to serve as outside corporate auditors.
Selection Criteria for Outside Directors (PDF:28KB)
MC's Internal Control System
MC is building and operating an internal control system, as discussed below, so as to ensure that business activities are conducted properly and in conformity with laws and its Articles of Incorporation.
Efforts are ongoing to reform and improve this system.
Efficient Business Execution
The president delineates basic management policies and sets specific management goals. At the same time, the president formulates management plans and oversees progress in achieving targets efficiently. The organization is realigned and resources deployed as necessary so as to achieve management targets in the most efficient manner possible. Furthermore, the organizational chain of command is clearly laid out and authority is delegated to managers and staff of organizational bodies to the extent necessary to accomplish targets. These people are required to submit reports regularly.
Compliance, which is defined as acting in compliance with laws and regulations and in conformity with social norms, is regarded as a matter of the highest priority in conducting business activities. MC has formulated a Code of Conduct for all officers and employees, which specifies basic matters in relation to compliance. Efforts are made to ensure that all officers and employees are familiar with the Code of Conduct and that the Company's corporate philosophy is understood and practiced.
To promote compliance, MC has established a cross- organizational framework headed by the Chief Compliance Officer. MC is also taking preventive and corrective measures such as offering training regarding various laws and regulations and has established a dedicated compliance organization.
Regarding the status of compliance, in addition to a framework for receiving reports from all organizations throughout the Company, MC has established an internal whistleblower system. Through these structures and systems, MC identifies problems and shares information. Regular reports are also made to the Board of Directors on the status of compliance.
Regarding risks associated with business activities, MC has designated categories of risk-such as credit, market, business investment, country, compliance, legal, information management, environmental, and natural disaster-related risks-and has established departments responsible for each category. MC also has in place policies, systems and procedures for managing risk. Furthermore, MC responds to new risks by immediately designating a responsible department to manage such risks.
With respect to individual projects, the person responsible for the applicable department makes decisions within the scope of their prescribed authority after analyzing and assessing the risk-return profile of each project in accordance with Company-wide policies and procedures. Projects are executed and managed on an individual basis in accordance with this approach.
In addition to managing risk on an individual project basis, MC assesses risk for the Company as a whole with respect to risks that are capable of being monitored quantitatively and manages these risks properly, making reassessments as necessary.
Management and Storage of Information
Regarding information related to business activities, personnel responsible for managing business activities classify information individually in accordance with its degree of importance. These individuals also instruct users on the handling of this information. The aim is to ensure information security while promoting efficient administrative processing and the sharing of information.
Responsible personnel store for a predetermined period documents that must be stored by law and information that the Company specifies as important in terms of internal management. For all other information, responsible personnel determine the necessity and period for storage of information and store such information accordingly.
Ensuring Proper Business in Group Management
MC specifies a responsible department for the oversight of each subsidiary and affiliate and quantitatively monitors business performance, management efficiency and other operational aspects of each company every year. Efforts are also made to monitor qualitative issues such as compliance and risk management.
MC strives to ensure proper business conduct by subsidiaries and affiliates by sending directors to sit on their boards, executing joint venture agreements, exercising its voting rights and in other ways. In this way, and through various initiatives designed to sustain growth at each company, MC aims to raise corporate value on a consolidated basis.
Auditing and Monitoring
Each organization takes responsibility for reviewing and improving its business activities on a regular basis. In addition, to more objectively review and evaluate the business activities of each organization, MC conducts regular audits through an internal audit organization.
Corporate auditors attend and express opinions at meetings of the Board of Directors and other important management meetings. In addition, corporate auditors gather information and conduct surveys, keeping channels of communication open with directors, employees and others who cooperate with these efforts.
If there is a risk of a certain level of financial loss or a major problem, the person responsible for the department concerned is required to immediately report to corporate auditors in accordance with predetermined standards and procedures.
To raise the effectiveness of audits conducted by corporate auditors, personnel are appointed to assist corporate auditors in carrying out their duties. Mindful of the need for independence, the opinions of corporate auditors are respected and other factors taken into consideration when evaluating and selecting people to assist them.
To ensure the proper and timely disclosure of financial statements, MC appoints personnel responsible for financial reporting and prepares financial statements in conformity with legal requirements and accounting standards. These financial statements are released after being discussed and confirmed by the Disclosure Committee.
Regarding the internal controls over financial reporting, MC conducts internal control activities and monitors internal controls in accordance with the internal control reporting system based on the Financial Instruments and Exchange Act of Japan. The Company develops activities on a Group-wide basis to ensure the effectiveness of internal controls.
Note: To read PDF files you need "Adobe® Reader®". Click here to download this free software from the Adobe® website.