Annual Report 2018

Tosoh Corporate Governance

Tosoh has established an organizational structure designed to enable it to respond in a flexible and agile manner to fluctuations in its business environment. The company is constantly working to ensure a high degree of fairness and transparency in its management and day-to-day operations for the purpose of producing sustainable growth on corporate value. In line with the importance and spirit of the Corporate Governance Code, Tosoh practices fairness and transparency in management, operations, and reporting. The company is also working to enhance its corporate governance structure and reporting mechanism to ensure proper information disclosure to shareholders and all others with a stake in the company.

Board of Directors

(as of June 28, 2017) Internal External (independent)
Directors 8 2
 

Tosoh’s Board of Directors is composed of 8 internal and 2 external directors, for a total of 10 directors. At its meetings, which are in principle conducted once a month, the Board is tasked with addressing important issues related to management and is responsible for overseeing the performance of Board members and executive officers. The Board also makes final determinations concerning executive officer selection and dismissal. In order to have corporate governance function efficiently, we believe that we must organize and properly manage an internal control system. We will work tirelessly with the aim of becoming an ever-stronger company.

Analysis and Evaluation of the Effectiveness of the Board of Directors

Tosoh undertakes the analysis and evaluation of the effectiveness of its Board of Directors annually and publishes an overview of its findings. 

In fiscal 2018, the company’s analysis and evaluation surveyed Board members for candid feedback. The findings were that Tosoh’s Board of Directors is fulfilling its role.

The fiscal 2017 findings, conversely, revealed that discussions of management and business strategies related to the company’s medium-term business plan needed to be enhanced. Progress was achieved in this regard in fiscal 2018, with discussions of the plan’s strategies held regularly throughout the year. The fiscal 2018 analysis and evaluation, however, did find that the quality of such discussions by the Board required improvement. As such, the Board will continue to work to further enrich its discussions.

Board of Auditors

(as of June 28, 2017) Internal External (independent)
Auditors 2 2

Tosoh’s Board of Auditors includes two internal and two external auditors, for a total of four auditors. At its meetings, which are in principle conducted once a month, the Board of Auditors assesses the Board of Directors’ activity and execution of business. Members of the Board of Auditors are present at Board of Directors meetings to receive reports and review documentation related to important decisions. They also have the opportunity to communicate with members of the Internal Control Committee and the Auditing division, and with the accounting auditor to enhance audit efficiency and effectiveness. The Board of Auditors incorporates a secretariat for the purpose of maximizing the performance of its members.

Management Committee

The Management Committee has preliminary deliberations on the Board of Directors’ agenda items and discusses important matters related to overall Group management, thereby establishing a structure that allows proper and efficient decision making for management.

External Directors and Auditors

In order to ensure an appropriate governance structure through a monitoring function from an objective perspective with regard to the company’s businesses, we select insightful external directors and auditors who are independent and have vast experience. Tosoh also adheres to directives issued by the Tokyo Stock Exchange (TSE) with regard to the appointment of external directors and auditors and reports these appointments accordingly. In addition, the company has established proprietary independence evaluation standards and utilizes them to assess the independence and capabilities of external directors and auditors. External directors and auditors attend Board of Director meetings, Board of Auditor meetings, and other related gatherings, and execute their supervisory and auditing responsibilities by receiving regular explanations and reports.

Executive Officer System

Tosoh’s introduction in June 2016 of an executive officer system has contributed to management effectiveness and speed. That system distinguishes decision-making from supervision and thereby enables Tosoh to respond flexibly and quickly to changes in its business environment. It also prioritizes the transparency of management responsibilities.

Tosoh Group Code of Conduct

The Tosoh Group Code of Conduct provides guidance concerning the handling of key matters related to compliance. All employees and officers of the Tosoh Group are obliged to observe the Tosoh Group Code of Conduct. In addition to the original Japanese version, we have prepared and disseminated versions in English, Chinese, and Korean to account for cultures and customs of the various areas in which we do business.

Dissemination of the Tosoh Group Code of Conduct

In fiscal 2018, all Tosoh employees underwent a reconfirmation of the Tosoh Group Code of Conduct as it relates to operations at the department level, and had discussions on items requiring particular attention.


Compliance Structure

Basic Policy

The Tosoh Group makes it a basic policy to practice compliance and to pursue profits through fair competition while working to ensure that its presence is beneficial to society as a whole. The basic compliance activities of the Tosoh Group have always been rooted in each employee’s observation of and compliance with the tenets of the Tosoh Group Code of Conduct, faithfulness, fairness and transparency, and maintenance of high moral standards.

Internal Control Committee

The responsibilities of Tosoh’s Internal Control Committee include the development of internal controls to ensure compliance with financial reporting standards in accordance with Japan’s Financial Instruments and Exchange Act. The committee is further responsible for adjusting controls as deemed necessary based on audits conducted by Tosoh’s Audit Office for producing and releasing internal control reports and for heightening awareness of the compliance structure and associated risks related to internal controls throughout the Tosoh Group.

Compliance Committee

Compliance entails adherence on the part of directors and employees to high ethical and moral standards and to a high degree of fairness and transparency in business activities. Ensuring compliance is the purview of the Compliance Committee. To reduce and avoid compliance-related indiscretions and promptly resolve issues, the committee operates internal and external compliance hotlines that ensure anonymity and facilitate reporting.

Export Supervision Committee

Tosoh’s Export Supervision Committee ensures the safe and secure management of exports. It works with personnel in each of Tosoh’s business units to administer cargo control, and it sees to it that Tosoh fulfills the duties and responsibilities of an international corporation in complying with Japan’s Foreign Exchange and Foreign Trade Act.

Antimonopoly Act Compliance Committee

The Antimonopoly Act Compliance Committee secures Tosoh’s compliance with Japan’s Antimonopoly Act and support of a fair, free business environment. It prepares and enforces internal rules and instructions and provides direction for emerging business activities and corporate development.

Compliance Promotional Structure

Compliance protects the employees from hazards and accidents as much as it strengthens Tosoh’s management structure. For this reason, we are establishing a promotional system that aids employees in understanding the significance of compliance, which enables them to execute it properly.

Compliance Committee

Chaired by an officer designated by the president, the Committee is otherwise composed of the heads of related departments. At its biannual meetings, the Committee formulates and executes the compliance education plan, assesses the progress of compliance promotion, and plans and proposes various measures toward promoting compliance.

Compliance Committee Promotion Team

This team submits opinions to the Compliance Committee, and promotes compliance activities under the direction of the Committee. Moreover, as the parent company that oversees all of the Group companies, it offers information and educational opportunities in support of compliance promotion at Tosoh Group companies.

Manufacturing Complex Compliance Committees

These committees plan, propose, and implement various measures toward promoting compliance.

Department Person in Charge

A person in charge will be assigned in each department to promote compliance within that department. They follow the instructions of the Compliance Committee and conduct compliance training and other activities within the department to ensure each employee is capable of executing compliance measures.

Compliance Hotlines

Tosoh has set up Compliance Hotlines to prevent compliance violations, to enable prompt corrective action, and to rapidly recognize and respond to violations or potential violations. There are three types of hotlines—internal, external, and audit. They are available to the employees of Tosoh and its domestic subsidiaries, to temporary employees, and to the employees of affiliated companies. Moreover, in investigating and responding to inquiries, the protection of the privacy and the prohibition of the mistreatment of hotline users are provided for in company regulations. Similar systems have been established at all overseas subsidiaries.

Compliance Survey

Once a year, a compliance survey is conducted, and the results are utilized to improve employee compliance awareness and enhance compliance structures. In fiscal 2018, we distributed surveys to all domestic employees, and achieved a response rate of 90.7%.

Compliance Education in Fiscal 2018

Rank-Based Training

Compliance lectures are incorporated into all levels of rank-based training, and education activities are being conducted for employees.

Educational DVD

Every year, each department viewed a DVD that covered everything from basic compliance topics to issues such as workplace harassment and work-related violations. Discussions were held by each department after viewing the DVD.

Legal Affairs Briefings

Once a year, we hold an employee briefing to provide an overview of important legislation and issues requiring particular attention at work. Topics include the Antimonopoly Act (including competition laws overseas), the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors, and the safe and secure management of exports (Foreign Exchange and Foreign Trade Act).

Revision of Privacy Policy Briefings

Tosoh has revised its privacy policy to correspond with the enactment of amendments to the Personal Information Protection Law, and conducted a briefing session for employees on related matters requiring particular attention during the performance of duties. Tosoh regularly conducts educational activities to enhance awareness of the careful handling of personal information on the part of employees.

Cybersecurity

In response to increasing threats to online and offline cybersecurity, we have continuously enhanced our security measures.

For example, in addition to enforcing minimum password lengths and complexities, we are working to prevent virus penetration and unauthorized internet access and mail use within the company using multilayered security systems. Moreover, in order to prevent information leaks through the use of USB flash drives and other portable storage devices, only authorized devices can be utilized inside the company. Furthermore, email attachments to external recipients are automatically encrypted to prevent the erroneous sending of sensitive information. And PC operation and internet access records are automatically acquired and stored, which facilitates rapid analysis and response in the event of a cybersecurity incident.

Educational activities for employees consist of regular briefings on compliance with security policies, on accidents involving other companies, and on other points requiring attention. We also conduct targeted e-mail attack drills to measure and analyze the effectiveness of such cybersecurity knowledge and education so as to enable employees to understand the significance of cyberattacks and minimize the risk of IT-related incidents.

We also regularly acquire the latest information about cyberattacks from industry organizations and government agencies and apply it to our security measures.

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