[Basic Policies on the Internal Control System]
At the meeting of the Board of Directors on May 19th, 2006, the resolution was made to maintain systems stipulated in the ordinance of the Ministry of Justice, as systems required to ensure that performance of the duties of directors complies with laws and the Articles of Incorporation, and other systems required to ensure the appropriate performance of the corporation's work. After several revisions, the latest partial revision was made by resolution at the meeting of the Board of Directors on April 17th, 2015. The basic policy following this revision is as follows:
Our management philosophy is to contribute to development in agriculture, horticulture and related businesses while complying with the corporate ethics, based on the spirits of "Quality", "Reliability", and "Service", which are the motto of our group. The principal stakeholders of our group are people engaged in agriculture, horticulture and related businesses, our stockholders, and our employees.
Maintenance and Implementation of Compliance System
We have established compliance-related regulations, including the "Compliance Manual", and stipulate that all of the management members and employees of the group comply with laws and corporate ethics.
In addition, we have established a "Compliance Committee", headed by the president, to make decisions on the important policy regarding the practice of compliance programs such as training and education in our group. The "Compliance Committee" reports the necessary information to the Board of Directors. We have established the "Compliance Consultation Hotlines" both inside and outside our company as an organization for employees of our company and our domestic subsidiaries to consult and report on the matters relevant to laws and corporate ethics in our group, and we maintain an appropriate organization in our overseas subsidiaries according to their respective sizes. Our group keeps the consultation details confidential, and does not mistreat the consulters in violation of the Whistleblower Protection Act or other laws and internal regulations.
Elimination of Anti-social Forces
Our group takes a firm stance against forces or groups that threaten public order and healthy corporate activities, and has no relation with such forces or groups.
We act according to three principles, i.e. "pay no money", "do not use", and "have no fear" against anti-social forces.
We also make effort to collect information from the competent governmental authorities and so on, and to establish such systems that we can communicate with these governmental authorities and legal professionals immediately upon the occurrence of these problems so that we can resolve them promptly.
Maintenance of a System to Ensure the Reliability of Financial Reports.
We have compiled the "Internal Control Implementation Rules" to ensure the reliability of financial reports, and have developed a basic policy of internal control in relation to financial reports, and based on this we maintain related regulations such as the "Implementation Guidance of Internal Control over Financial Reporting" to promote the maintenance and operation of internal control. We also evaluate the effectiveness of internal control relevant to financial reports via the person in charge of internal control evaluation, and have developed an "Internal Control Report" as set forth in the Financial Instruments and Exchange Law under the responsibility of the president (the representative director). In the event where there is any point to be improved in internal control relevant to the financial reports, the person in charge of internal control evaluation offers an improvement plan to the president and takes steps.
In relation to information relevant to the performance of duties of our Board of Directors (including, but not limited to, information via electromagnetic media) accompanied with the related materials, we maintain and manage them in the responsible divisions and keep them available for review as applicable, as set forth in the "Company's Regulations on the Management of Documents".
In addition, we manage information based on the "Basic Policy for Information Security", the "Regulations on the Management of Personal Information", and the "Regulations on the Management of Trade Secrets".
We maintain internal manuals to minimize any loss or disadvantage our group may suffer, and establish control systems against each risk such as climate change, geopolitical and social changes in the areas we conduct business, research and development, infringement of intellectual property rights, safety, finance, crime or scandal by employees, disaster or accident.
In the event any risk arises, the responsible divisions and related divisions as a whole take prompt action in accordance with the internal manuals.
Board of Directors
We properly operate the Board of Directors in accordance with the internal regulations.
The meeting of the Board of Directors is basically held monthly to discuss and make resolutions on the important business matters in our group stipulated in laws, the Articles of Association, regulations and others. In addition, the meeting of the Board of Directors defines the works commissioned to the directors and officers and the allocation of duties to each organization.
Senior Management Meeting
We have established the Senior Management Meeting pursuant to the internal regulations to conduct prompt and smooth discussions and make resolutions at the meeting of the Board of Directors, and discuss matters relevant to the operation of our company. The meeting of the Senior Management Meeting is basically held monthly and whenever necessary.
Introduction of an Executive System
We have introduced an executive system to enable prompt decision-making and efficient performance of duties in the business in our group, and to clarify the responsibility for control and execution in our business.
System of Circulars for Approval
We have adopted a system of circulars for approval based on the internal regulations, for the directors and the executive officers to efficiently perform their routine business.
Concerning the performance of duties, we stipulate the details of authorities for the efficient operation, according to the tasks and responsible persons.
System Establishment in the Subsidiaries
We have established a standard relating to the distribution of duties, the chain of command, authority, decision-making and others regarding the organization, and make our subsidiaries establish a system in compliance with it.
Enforcement of Business Policy in Our Group
We hold meetings basically twice a year with directors, respective Senior General Managers of the functional headquarters, and presidents of major subsidiaries, to enforce the operational policy and business objectives of our entire group.
In addition, as the need arises we make up a cross-national organization, whose secretariat is our relevant responsible functional headquarters, to streamline and improve business efficiency with a global view of research and development, production and logistics, information system, quality control, and marketing.
Management and Administration of Subsidiaries
The Corporate Planning Department is responsible for management and oversight of appropriate business at Subsidiaries. Among the directors and executive officers, we appoint Supervisors for respective subsidiaries.
The Corporate Planning Department and the Supervisors aim for a regime of cooperation including information exchange and interchange of personnel in accordance with the internal regulations and through the Board of Directors of the subsidiaries, to instruct the subsidiaries on the appropriate business performance, by which we construct a solid system of internal control over the entire corporate group.
System Concerning Reporting to the Company on Matters Relevant to the Performance of Duties of the Directors of Subsidiaries
We oblige our subsidiaries to report monthly on their business results, financial status, personnel, and other important information.
We also require subsidiaries to submit annually their full-year sales forecasts and business plans for the following year so that we can investigate them at our meetings of the Board of Directors.
In response to requests from the auditors, we establish an "Audit & Supervisory Board Members Office" and, if necessary, appoint personnel to assist the duties of the auditors.
The directors consult with the Audit & Supervisory Board in advance on the number and the position of such personnel, and the chain of command, salary and personnel changes relevant to such personnel.
The directors and employees of our group report to our auditors in case they are aware of such matters that could cause significant harm or serious impact to our group, and dishonest activities or any other activities that are in violation of laws or the Articles of Association by the directors.
Persons making reports will not be treated adversely based on such reporting.
For the purpose of smooth and efficient performance of the auditors in their duties, the directors and employees of our group promptly and appropriately report to our auditors upon request on the important matters for business and performance status of operations.
We develop a budget each year to pay for the costs and expenses arising out of the performance of our auditors in their duties.
When our auditors claim us for the advance payment for the performance of their duties based on Article 388 of the Companies Law, we discuss in the responsible division and promptly approve it except for cases where such costs and expenses are determined to be unnecessary for the performance of duties of such auditors.
Our representative director and our auditors regularly hold meetings to mutually communicate. Our auditors receive a report on status of the audit implementation and performance of operations from the responsible person of the Internal Audit Office and audit of the subsidiaries or equivalent when they consider it is necessary for their work to improve the effectiveness of the audit by exchange of information. Our auditors at their own discretion may appoint lawyers, certified public accountants, and other external professionals for their audit duties.
Our auditors may also attend important meetings including those of the Senior Management Meeting, Executive Officers Meetings, compliance committee meetings and others, and review circulars for approval and documents on settled accounts.//