Since its founding in 2005, Mitsubishi Chemical Holdings Corporation (MCHC) has worked to strengthen its corporate governance, compliance and risk management in pursuit of optimal Group management.
Corporate Governance System (as of April 1, 2011)
As the pure holding company of the Mitsubishi Chemical Holdings Group (MCHC Group), MCHC fulfils the portfolio management function of the Group and promotes policies that include the deepening of Group management and the allocation of management resources, allowing the Group to grow and leap ahead. Further, in its role overseeing the management of the MCHC Group, MCHC strives to ensure decision-making and the efficient and timely execution of operations in management, and also works to clarify management responsibility as well as enhance compliance and risk management.
Based on the Board of Directors Regulations and other related regulations, the Board of Directors makes decisions on important managerial matters and fundamental the MCHC Group management matters, and also supervises the directors’ execution of their duties. As a general rule, the Board of Directors meets once a month. The Articles of Incorporation specify that MCHC have no more than ten directors, and as of the end of June 2011, the board comprised seven directors, two of whom assume dual roles as executive officers. To build a management system capable of swiftly responding to changes in the management environment and to provide greater clarification of the management responsibilities and roles of each director, directors are appointed for a term of one year. In addition, to determine candidates for director, the Board of Directors decides on people who possess the qualities and abilities best suited to achieving the management principles of the MCHC Group and fulfilling its social responsibility. Candidates are then presented at the Shareholders’ Meeting and appointed by election.
The Management Committee operates as a body for assisting the President and Representative Director in decision-making. The Committee conducts deliberations on investments, loans and other important issues involving business execution by MCHC and MCHC Group companies, and also deals with important matters concerning the promotion of corporate social responsibility (CSR), such as compliance, risk management, safety and environmental measures, human rights promotion and social contribution. Also note that important management matters discussed by the Management Committee are subject to approval by the Board of Directors before being carried out.
The Management Committee meets around once a month and comprises the President, directors, standing executive officers, the executive representatives of core Group companies and corporate auditors.
Corporate Auditors and the Board of Auditors are in place as a body for the auditing and supervision of MCHC. The corporate auditors take part in the Board of Directors Meeting as well as other important meetings and committees to verify the details of reports from the Board of Directors and other bodies, look into company business activities and the state of its assets and audit directors’ execution of their duties. As a general rule the Board of Auditors meets once a month, where it deliberates and decides on audit policy and other important matters concerning auditing. The Board of Auditors at MCHC comprised five members as of the end of June 2011, three of whom are outside auditors designated as disinterested, independent auditors. Accounting auditors and the Audit Office also conduct audits in close coordination with one another, providing information on the status of audits and exchanging views on audit results.
Senior Managing Executive Officer,
Chief Compliance Officer,
General Manager, Internal Control Office,
Mitsubishi Chemical Holdings Corporation
In April 2008, Mitsubishi Chemical Holdings Corporation (MCHC) formed the Internal Control Office. Although systems for compliance and risk management had been maintained and operated within the CSR Office until then, we thought it was necessary to have a department which specialized in and exercised across-the-board jurisdiction over internal control, including coordination with internal audit departments.
Traditionally, internal control is understood as “having an organization function effectively as such to realize its goals.” At MCHC, we regard the term “effectively” to mean properly undertaking risk management, including compliance, and operating an organization in an efficient and effective manner. The mission of the Internal Control Office is to promote these improvements.
At the MCHC Group, we regard the generation of KAITEKI value leading to the sustainability of society to be a pillar of our management, and to this end we ourselves must earn the trust of society and be a sustainable organization. In that sense, we believe that ensuring firm internal control is a precondition to pursuing KAITEKI value.
Meanwhile, the MCHC Group has undergone substantial changes in recent years. Because of its growth in size and the rapid advancement of globalization, the MCHC Group has gained greater social influence and heavier responsibility regarding internal control. With these developments as a backdrop, we will continue to engage in activities with a focus on the points described below.
The first of these points is to strengthen the development of group-wide, cross-sectional guidelines and standards on internal control. To date, the MCHC Group has developed basic rules and systems which are common to its four operating companies. That said, since each company differs by industry sector and business conditions, operates under a different corporate culture, and has its own set of employment conditions, we have enabled each company to conform to basic rules while conducting internal control in an autonomous fashion.
However, society has changed at a growing pace and we have become increasingly unable to keep up using this method alone. Overseas in particular, conventional laws, established practices and customs are often tightened without being noticed, and there are sometimes delays in taking action in the field. What’s more, since the risks differ depending on the country, in many cases it is effective to approach a country with a stance that is shared across the four operating companies. In light of these circumstances, MCHC deems it necessary to go ahead with measures such as group-wide internal control guidelines.
The second point is to leverage the different companies within the MCHC Group to develop better systems.
The four operating companies each have areas and methods of internal control in which they uniquely excel due to the experience they have acquired to date. Given this, MCHC plans to evaluate the systems and operational status of internal control at each company, and with the best companies serving as models, utilize the advantages of being able to convey experience, knowledge and expertise on a mutual basis to promote systemic reforms at other companies. We believe it is also the role of MCHC to take account of the characteristics of the four operating companies and overseas Group companies and constantly make adjustments so that the four operating companies engage in friendly competition with the aim of being the best.
The third point is to enable the operation of internal control in an autonomous and self-aware manner from the field level.
To date, we have undergone a process of innovation and improvement concerning the systems and schemes for internal control at MCHC. Awareness on the part of every employee is essential to instilling these systems and schemes and making them actually work. There is also a tendency for internal control to be taken as “managing from senior management,” but without autonomous awareness in the field, this has no practical effectiveness. We recognize this as an enormous challenge.
In particular, the roles of department and section managers are crucial. No matter how well developed a system is, it will end up a pie in the sky unless each and every organization functions as such. The same goes for me. When a problem occurs, I gather the section managers and try to get down to the questions of “where did the problem lie and what should we do about it?” Looking ahead, we will continue to put effort into training and other measures to raise the awareness of employees, and are considering personnel rotations and other ways to stimulate awareness with regard to leaders in departments of above a certain size.
The common thread to these initiatives, in other words, is that the fundamental attitude of internal control is the comprehensive implementation of “accountability” and “transparency.”
Since MCHC is an organization with an extensive reach and we live in an era of rapid social change, no matter how far we go in establishing schemes and adding layers of protection, troubles and difficulties can happen. At those times, we must explain ourselves internally and externally in an accurate and sincere manner, and uncover the facts without concealment. Following that, it is extremely important to consider what to reflect on and what improvements to make, and to then take action. Moving forward, we will strive to ensure that this is instilled throughout the entire the MCHC Group as a natural practice.