LIXIL Group Corporation has established the following main points of the system of its internal control and risk management. The following has been formulated as the basic policy on the internal control system pursuant to the Companies Act, in accordance with a resolution by the Board of Directors.
System to Ensure the Adequacy of Business and Summary of the Operation Status of Such System (As of June 23. 2017)
The main contents of the system regarding internal controls and risk management are as follows:
- 1. System to ensure that the performance of duties by Executive Officers and employees and Directors and employees of the Company's subsidiaries complies with the laws and regulations and the Articles of Incorporation
- The Company and the Company's subsidiaries (the "Group") will establish guidelines for actions as a code of ethics for the entire group, and will conduct a read-through and an oath to comply for all employees including officers once per year. In addition, the Company will institute a common whistle-blowing system for the Group's employees can directly make reports to the Company's Legal Affairs department or outside lawyers. Furthermore, the Company does not acknowledge nor has any relationship with anti-societal forces. In order to prevent damages by anti-societal forces, the Company will deal with the pressures as an organization and approach them with a firm attitude.
- 2. System regarding the storage and management of information involving the performance of duties by Executive Officers
- The Company will retain and manage written documents, etc. based on the laws and regulations and internal company rules. Based on the rules, Directors and Audit Committee Members may access those written documents, etc. at any time. In addition, information security management rules and personal information protection policies are established with regard to handling the management of information.
- 3. System for rules and others regarding the management of the Group's risk of loss
- The Group has established and is managing risk management rules, etc., and along with constantly observing the risks it carries, the Risk Management Department confirms and gives guidance on the status of its risk handling through risk management meetings, etc. In addition, the Company has it periodically report the status of the Group's risks as well as requests the attendance of the Group and receives reports at the Board of Directors meetings and other meetings with respect to material risks. Furthermore, with respect to the business continuity plan, the Group executes the BCP (Business Continuity Plan) Manual and instruction and training based on such manual.
- 4. System to ensure that the performance of duties of Executive Officers of the Company and the Directors, etc. of the Company's subsidiaries are carried out efficiently
- The Board of Directors of the Company establishes the division of duties of the Executive Officers and clarifies the areas that each Executive Officer will be responsible for. In addition, a board of Executive Officers attended by all Executive Officers will be convened regularly and will conduct flexible decision-making involved in basic and important matters regarding the execution of duties. Furthermore, various committees will be set up as subordinate bodies of the board of Executive Officers and will evaluate the entire group's business strategies and investment items and attempt to expedite the decision-making. In addition, a medium-term business plan and a short-term plan covering the entire Group will be established. The work for such establishment will value the autonomous business judgment and independence of the Company's subsidiaries and support their decisions.
- 5. Other systems to ensure the adequacy of the Group's business operations
- The Company values the autonomy of the operations of the group companies and will periodically receive reports of the business conditions and conduct authorizations of important matters. In addition, in order to ensure the accuracy and adequacy of the consolidated financial statements, an internal control system will be maintained and operated appropriately.
- 6. Directors and employees who should assist with the duties of the Audit Committee
- The Company will place an Audit Committee's Office as an organization exclusively in-charge of supporting the duties of the Audit Committee. In addition, Directors who should support the Audit Committee will not be placed.
- 7. Independence from the Executive Officers of the Directors and employees in (6.) above and matters regarding securing the effectiveness of instructions of Audit Committee Members to such employees
- The appointments, transfers, evaluations, etc. of such employees will be discussed in advance by the Audit Committee Members and the Personnel Department Head. In addition, instructions that are necessary for auditing services from the Audit Committee and Audit Committee Members to such employees will be properly handled by each department to ensure the effectiveness of such instructions.
- 8. System for Executive Officers and employees of the Company to report to the Audit Committee, and other systems regarding reporting to the Audit Committee
- If an Executive Officer discovers a fact that is likely to cause significant damages to the company, he/she will immediately report it to an Audit Committee Member. When an Audit Committee Member receives an important report, opinion or document from an Executive Officer or an Accounting Auditor or someone else, he/she will report it to the Audit Committee. Representative Executive Officers and Audit Committee Members will periodically exchange opinions regarding findings from an audit. In addition, the Legal Affairs Department will periodically report to the Audit Committee regarding the status of whistle-blowing. Audit Committee Members will attend regular Board of Directors' Meetings and receive reports on the status of the Executive Officers' periodic execution of duties at the Board of Directors' Meeting. Executive Officers and employees will report to the Audit Committee Member the status of the execution of duties through hearings, etc. of the Audit Committee.
- 9. System for the Company's subsidiaries' Directors, Auditors, etc., members executing business, persons to perform the duties of Article 598, Paragraph 1 of the Companies Act and employees and those who receive reports from such persons to report to the Audit Committee of the Company
- The Company will regularly hold Monthly Business Meetings, etc., attended by the Directors including the subsidiaries and endeavor to share important information for business, as well as require the subsidiaries to attend and report to extraordinary Audit Committee meetings of the Company if important events occur at the Company's subsidiaries.
- 10. System to ensure that a person reporting to the Company's Audit Committee does not receive unfair treatment on the grounds of having made such report
- To set forth in the Group's whistle-blowing system operation rules that directors, officers and employees of the Group can directly report to the Compliance Committee of which an Audit Committee Member of the Company is a constituent member and make that method of direct reporting, etc., widely known within the Group. In addition, to expressly state the prohibition of dismissals and other disadvantageous treatments due to having made such report or other report to the Audit Committee.
- 11. Matters concerning the policy regarding the procedures for pre-payment or repayment of expenses arising with respect to the execution of the duties of the Audit Committee of the Company and other disposition of expenses or liabilities arising with respect to the execution of such duties
- When the Audit Committee makes a claim for the repayment of expenses under Article 404 of the Companies Act is made against the Company with respect to its execution of duties, the Company will bear such expenses upon deliberation in the department in charge. In addition, a budget of a certain amount will be established every year to disburse the expenses for execution of such duties.
- 12. Other systems to ensure that the audit by the Audit Committee is carried out effectively
- The Audit Committee will periodically receive reports regarding the contents of the audit from the Company's Accounting Auditors and the Company's internal audit department, and periodically convene the Group's Board of Auditors meetings with the Auditors, etc. of each group company and seek to work together.
Operation Status of System to Ensure Adequacy of Business
The Company endeavors for the maintenance of an internal control system and its appropriate operation under the above policy. The principal initiatives thought to be important for internal controls implemented in this fiscal year are as follows:
- 1. Initiatives concerning compliance
- Make additions or changes to the languages into which the LIXIL Group Code of Conduct is translated and ensure that it is widely known by implementing its distribution, instruction and training. In addition, along with aiming for the establishment of a global compliance policy and training and education relating thereto, the effects of the various compliance measures and activities are regularly confirmed in the Compliance Committee.
- 2. Initiatives concerning the management of the risk of loss
- The status of the system of the new fiscal year and review of expected risks are reported through risk management meetings, etc., and with respect to crises and disasters, the understanding of and status of handling the occurred risk are timely reported and confirmed. In addition, a global crisis management system has been established and the crisis management guidelines have been reviewed to clarify the group's fundamental crisis management policy.
Risk Management >
- 3. Initiatives concerning appropriateness and efficiency of executing duties
- Board of Directors' Meetings are held at least once every month and important matters are deliberated and reports on principal execution status are received. In addition, decisions on execution, etc. have been carrying out the efficient execution of business based on the rules concerning duties and authority.
- 4. Initiatives concerning the Audit Committee audits
- The Audit Committee members will attend important meetings such as Board of Directors' Meetings and Board of Executive Officers' Meetings and are receiving reports regarding information that is necessary for audits as necessary. In addition, reports are received and cooperation is made through periodic meetings of the group Audit Committee, Accounting Auditors Information Exchange Meetings, Representative Executive Officer Opinion Exchange Meetings, etc.
Basic Stance Regarding Elimination of Antisocial Forces and Its Development
The LIXIL Group Corporation forbids its members to have any contact with antisocial forces. In LIXIL Group Conduct, we have clearly formulated our basic stance: "We will not be voluntarily involved with criminal organizations or individuals, such as corporate extortionists and members of organized crime, including as customers, business partners, or otherwise. We will not give in to threats by such parties and will promptly report any such threats to the company."