Corporate Governance
- Basic Approach to Corporate Governance
- Corporate Governance Institutions
- Management Monitoring System
- Internal Control System
- Risk Management System
Basic Approach to Corporate Governance
On March 28, 2019, MABUCHI MOTOR CO., LTD. (the "Company") changed its corporate governance structure to that of a company with Audit & Supervisory Committee in order to strengthen the supervisory function of the Board of Directors and accelerate management decision-making by delegating part of the decision-making authority for business operations to the Directors. The Company has also established the Nominating Committee and the Remuneration Committee as voluntary advisory bodies to the Board of Directors.
The Management Principle of the Company is "Contributing to International Society and Continuously Increasing Our Contribution" through the Company's small motors business. The Company understands that realizing this principle is its raison d'être. Corporate governance of the Company comprises the organizational structure and managerial systems that support the realization of its Management Principle and various management measures that maintain these systems. Accordingly, the fundamental objective in establishing and implementing an appropriate corporate governance framework is to further the interests of shareholders and other stakeholders on an ongoing basis through the creation of fair profits and the enhancement of corporate value. Constructing and maintaining a corporate governance system along the lines given below is indispensable for the Company as a listed company:
- To clearly separate management decision-making and efficient business execution, and to clarify the scope of accountability;
- To build and operate a sound internal control system;
- To appoint a suitable number of independent officers whose interests do not conflict with those of shareholders to ensure the objectivity and neutrality of management supervision functions;
- To foster a corporate culture in which all employees recognize and share the understanding that the practices of corporate ethics and compliance support the organization's social impartiality and are fundamental to living up to the trust and expectations of all stakeholders; and
- To disclose corporate information to shareholders and other stakeholders in an appropriate, fair, timely and clear manner, and to ensure accountability through the Board of Directors, the Audit & Supervisory Committee and other bodies.
Corporate Governance Institutions
Directors, Board of Directors, Executive Officers Meeting and Executive Officer System
Important management decisions are made by the Board of Directors, which is composed of 11 directors: five internal directors and six outside directors. The Board of Directors plays a central role in making management decisions and supervising the directors’ execution of business, and as required by law, it makes decisions regarding the execution of important business matters and reports on the status of execution of these important matters. Matters decided by the Board of Directors are then executed via the representative directors and executive officers. In principle, the Board of Directors meets once a month and as needed. Independent outside directors understand that they are responsible for supervising and advising on the overall management at the Board of Directors and they contribute to ensure and improve the transparency of management.
In addition, we have introduced an executive officer system to concentrate strategic decision-making and supervisory functions in the hands of directors, while giving executive officers the authority and responsibility for the day-to-day execution of business, thereby strengthening both functions.
Furthermore, to complement the functions of the Board of Directors, we have established a Executive Officers Meeting, which is mainly composed of executive officers, to consult on important agenda items prior to their being submitted to the Board of Directors, make decisions regarding the execution of business that are considered to be outside the scope of the Board of Directors under laws and regulations, and report on the status of the execution of business, etc. This enables the Board of Directors to place greater emphasis on decision-making and the monitoring and supervision of the execution of business in their deliberations on reports and proposals at the Board of Directors meetings, and to enhance these functions.
Moreover, we have established the Appointment Criteria for Director Candidates and established the Nominating Committee and the Remuneration Committee as advisory bodies to the Board of Directors. The Nominating Committee deliberates matters related to the appointment of directors, executive officers and associate directors, while the Remuneration Committee deliberates matters such as remuneration for directors, executive officers and associate directors. We are strengthening our corporate governance system by reporting the results of these Committees’ deliberations to the Board of Directors, thereby increasing the transparency of the decision-making process regarding the nomination and remuneration of directors.
Management Monitoring System
Audit & Supervisory Committee Members and Audit & Supervisory Committee
Mabuchi has appointed four Audit & Supervisory Committee members, three of whom are outside members with a high degree of independence. Mabuchi has also established a department for Audit & Supervisory Committee members and has made it possible for Audit & Supervisory Committee members to request audit-related assistance from employees of the Internal Audit Department and other departments where appropriate.
Audit & Supervisory Committee members carry out audits on the execution of duties by directors and other bodies in accordance with legal stipulations and the auditing standards, policies, plans, and apportioned duties determined by the Audit & Supervisory Committee.
Specifically, Audit & Supervisory Committee members attend meetings of the Board of Directors and the Executive Committee, as well as other important meetings, and oversee major business execution decisions and documentation related to their execution, if necessary, requesting directors and employees to provide such documents or submit reports, in order to audit and supervise the execution of duties by directors. The Audit & Supervisory Committee convenes every second month and holds regular monthly meetings for the exchange of opinions between Audit & Supervisory Committee members along with essential deliberations regarding the execution of duties by directors.
Beyond emphasizing high-level independence of outside Audit & Supervisory Committee members, Mabuchi's policy is for outside Audit & Supervisory Committee members to represent more than half of the Audit & Supervisory Committee. Mabuchi also elects Audit & Supervisory Committee members with either specialist viewpoints or considerable knowledge of legal, financial and accounting matters.
As necessary, Audit & Supervisory Committee members receive relevant material information from the director responsible for internal control, the Internal Control Department, the independent auditor, and the Internal Audit Department upon inquiry. Audit & Supervisory Committee members and directors receive reports and advice from the Audit & Supervisory Committee.
Internal Audit Department
Mabuchi has established the Internal Audit Department under the direct control of the president. This body liaises with the Audit & Supervisory Committee (members), the director responsible for internal control, and the Internal Control Department on a timely basis and conducts ongoing supervision of the upgrading, running, and effectiveness of the internal control framework for Mabuchi and its Group companies. The Internal Audit Department reports its findings to the president, directors, and Audit & Supervisory Committee members.
Independent Auditor
With respect to accounting audits, the Company has formed an auditing agreement with Ernst & Young ShinNihon LLC to carry out audits under Japan's Companies Act and Financial Instruments and Exchange Law. Ernst & Young ShinNihon conducts audits and reviews of the Company's annual and quarterly financial results based on an independent, third-party standpoint. From Ernst & Young ShinNihon, the Company receives reports as appropriate on issues identified during the audit implementation process. The Company also receives reports from Ernst & Young ShinNihon on both the results of audits and the effectiveness of internal control regarding financial reporting at the Audit Report Meeting (attended by the director responsible for internal control and Audit & Supervisory Committee members) following the end of each financial period, and responds in a timely manner if there are any discrepancies.
Internal Control System
In accordance with the Basic Policy on Internal Controls approved at a meeting of the Board of Directors, Mabuchi established and is now operating an internal control system. In this way, inadequacies in internal controls and other issues discovered in risk management activities, compliance activities, Audit & Supervisory Committee members' audits, and internal audit activities are reported to the directors and Audit & Supervisory Committee members on a periodic or non-periodic basis, and appropriate corrective measures are taken in a timely manner. These efforts provide the Company with a framework for continuously enhancing the functioning and effectiveness of the internal control system.
By establishing and ensuring the appropriate application of internal regulations governing the approval system, job authority and division of responsibilities, and other matters, the Company seeks to further ensure the appropriate conduct of business. These various internal mechanisms serve to support the monitoring and supervision of the conduct of business by directors.
Risk Management System
In accordance with the Basic Policy on Internal Control, Mabuchi has designated a director with overall control over risk management and the departments responsible for risk management; has prepared and established internal rules and procedures necessary for appropriate management of risk; and has taken necessary measures, including informing and educating employees about risk management.
In addition, Mabuchi has established the Risk Management Committee, whose members are the persons responsible for risk management at each company department and subsidiary; has made possible cross-organizational activities concerning risk awareness and assessment in routine business activities, risk response, and information provision; and has put in place a Group Emergency Response System to prepare for contingencies, with the objective of protecting all Group business activities in the event of an emergency. Furthermore, the Internal Audit Department periodically audits the status of risk management and reports the audit results to the Board of Directors and Audit & Supervisory Committee. The Board of Directors reviews the report and takes any necessary measures, allowing Mabuchi to pursue continuous improvement of the risk management system.