1. Corporate Governance System
- Overview of corporate governance system and reasons for adoption of the system
- The Company and its group companies believe that continuously enhancing corporate value by ensuring transparency and soundness of management and accelerating decision-making and execution is the foundation of corporate governance and one of the important management issues.
- The Company is a Company with an Audit and Supervisory Committee and six Directors (including three Directors who are Audit and Supervisory Committee members, all of whom are Outside Directors). The Articles of Incorporation of the Company provide as follows: (1) The number of Directors (excluding Directors who are Audit and Supervisory Committee members) shall not exceed six and the number of Directors who are Audit and Supervisory Committee members shall not exceed four, (2) A resolution for the election of Directors shall be adopted by a majority vote of shareholders present at a general meeting of shareholders, at which shareholders holding one-third or more of the voting rights of the shareholders who are entitled to exercise their voting rights at such meeting are present, and (3) No cumulative voting shall be used for the election of Directors.
The Board of Directors, which supervises the Company’s decision-making on business execution and the execution of duties by the Directors, meets regularly every month and as needed to discuss, among other things, important management issues, the progress of business, measures to resolve issues and others. In addition, the Company has established the Executive Committee, which provides advice regarding the President’s decision-making on important issues related to business execution. The Executive Committee generally meets every month and as needed.
The Audit and Supervisory Committee generally meets every three months and as needed to engage in activities based on the audit policy, plans, and other items stipulated by the Audit and Supervisory Committee and, when needed, provide advice and others to Directors. The Audit and Supervisory Committee and the internal audit department meet regularly to discuss and exchange opinions about the results of internal audit as well as findings and recommendations. In addition, Audit and Supervisory Committee members attend internal audits as needed to facilitate close information exchange and communication. The Audit and Supervisory Committee and the internal audit department facilitate close relationships with accounting auditors through periodic exchange of information and opinions, such as by attending meetings where accounting auditors report audit plans and results. Directors who are full-time Audit and Supervisory Committee members attend important meetings, including those of the Executive Committee, and express their fair opinions from an independent position.
As a Company with an Audit and Supervisory Committee, all of the three Directors who are Audit and Supervisory Committee members are Outside Directors, enhancing management oversight functions and ensuring neutrality and fairness. In addition, three Outside Directors attend the Board of Directors meetings from an independent position to actively express their opinions and make decisions by leveraging their respective expertise. One of the Outside Directors, who is an Audit and Supervisory Committee member, strives to enhance corporate governance as a full-time Audit and Supervisory Committee member. The Company believes that these frameworks are sufficient to fully fulfill management oversight functions.
- Matters related to functions of business execution, audit/oversight, nomination, and others
- Decision-making authorities for business execution are divided according to importance based on laws and regulations, the Articles of Incorporation, rules of the Board of Directors, authorization rules, and others.
As mentioned above, the Executive Committee has been established as an advisory body for the execution of business by the President and CEO. The Executive Committee, consisting of those who are appointed by Directors with special titles and the President (appointing full-time Audit and Supervisory Committee members), discusses management policies and important management issues.
Nomination of Directors (including Directors who are Audit and Supervisory Committee members) of the Company, as well as Directors and Corporate Auditors of group companies, is carried out by the voluntary Nominating Committee, independent of the Companies Act, upon recommendation by the Representative Director and determined by resolution of the Board of Directors. We believe this contributes to increasing the transparency and objectivity of procedures for deciding the nomination of executives, enhancing corporate governance functions, and achieving sound development of the entire Group.
- Status of development of the internal control system
The Company and its group companies shall develop a framework to ensure that Directors and employees perform their duties efficiently and in compliance with laws and the Articles of Incorporation, and to manage risks that will inevitably occur in carrying out business activities. The basic concept of the internal control system is to establish a strict audit and monitoring system to ensure the appropriate implementation of the above.
While the Company believes that the system is largely in place, the Company strives to take all possible measures by establishing new rules and organizations according to the needs of the times and others.
Based on the recognition that having relations with anti-social forces is a compliance violation, the Company shall always place particular focus on taking measures to firmly reject their transactions.
Specifically, the Company shall implement the following measures:
- (1) State and disclose the discontinuation of relations with anti-social forces in the Group Charter of Corporate Behavior and Basic Policy for the Establishment of Internal Control Systems, and call attention to its intention both within and outside the Group.
- (2) Designate the General Affairs & Legal Department as the department in charge of control and appoint persons in charge of preventing undue claims. The persons in charge of preventing undue claims shall participate in external training and other programs and provide feedback within the Group.
- (3) Join external specialist organizations to collect information and establish a system to make inquiries and receive instructions in the event of an emergency situation.
- (4) Insert clauses to eliminate organized crime groups in various agreement templates.
Status of establishment of risk management system
- The Company has adopted a resolution on the basic policy for the risk management system that has a material impact on its business performance and financial conditions as follows:
- (1) The Company establishes a Risk and Compliance Committee chaired by the Chief Risk Officer and risk management rules. Based on the rules, the Company designates a department responsible for each risk category, manages Group-wide risks completely and comprehensively, and clarifies the risk management system.
- (2) The Audit Department audits the status of risk management.
- (3) Based on the results of audits by the Audit Department, the Chair of the Risk and Compliance Committee reviews the progress of Group-wide risk management at the Risk and Compliance Committee and reports the results to the Board of Directors.
Specifically, the Company has established the following systems:
With regard to a safety system for petroleum/LP gas facilities, the Company’s Safety Management Department has played a central role in conducting regular safety audits based on related laws and internal rules in addition to providing safety guidance as required.
In response to issues related to environmental pollution, the Company, in cooperation with Sompo Japan Nipponkoa Insurance Inc., has established a comprehensive risk management structure for the prevention of soil pollution caused by petroleum spills, which is managed and operated by the Company’s General Affairs & Legal Department.
In response to issues related to product quality and safety, the Company strives to enhance quality management, such as by acquiring ISO 9001 certification at Sinanen Zeomic Co., Ltd., a consolidated subsidiary of the Company. In order to ensure the safe use of products, the Company takes measures to prevent accidents, such as by providing usage instructions on its website. In addition, in order to respond to serious accidents and natural disasters, the Company established the Emergency Response Guidelines for the establishment of emergency response headquarters, procedures for emergency response, and more.
In order to protect personal information, the Company has established the Risk and Compliance Committee, provided employee education programs, introduced information security systems such as biometrics and encryption, and established various rules. In addition, based on the compliance rules, the Company has set up an internal consultation desk for the purpose of resolving potential risks related to compliance, such as legal violations and misconduct, as well as the Customer Service Office in order to understand external complaints in advance to prevent the worsening of problems.
- Overview of contents of limited liability agreement
- Pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, the Company has entered into agreements with Directors (excluding those who are an Executive Director, etc.) that limit their liability for damages under Article 423, Paragraph 1 of the said Act. The maximum amount of liability specified in these agreements shall be the amount stipulated by laws and regulations. However, such limitation of liabilities is applied only when such Directors (excluding those who are an Executive Director, etc.) performed their duties in good faith and without gross negligence.
2. Status of audit
The Internal audit is conducted by nine members of Audit Division (as of August 1, 2018) under president.
The Audit and Supervisory Committee's Audit is conducted by three Outside Directors.
The three Audit and Supervisory Committee members consist of one Director who has extensive experience and high insight in the energy industry, one Director with extensive business experience, and one Director with extensive experience and broad expertise as an attorney.
The audit by the Audit and Supervisory Committee is conducted by internal control system such as the Audit Division and the Risk and Compliance Committee, besides surveys by full-time Audit and Supervisory Committee member.
In addition, the Audit and Supervisory Committee receives the explanation of the audit plan from the accounting auditor in advance, and has the authority to receive explanations and reports on the audit results on the subsequent audit status, the financial statements and the supplementary schedules.
3. Outside Directors
All three Outside Directors of the Company are Audit and Supervisory Committee members. The three Outside Directors consist of one Director who has extensive experience and high insight in the energy industry, one Director with extensive business experience, and one Director with extensive experience and broad expertise as an attorney. There are no special interests between the Company and Outside Directors who are Audit and Supervisory Committee members.
With regard to the criteria for independence in appointing Outside Directors, in addition to the independence criteria established by the financial instruments exchange, the Company deems any Outside Director falling under any of the following items as not having sufficient independence from the Company.
- (1) A person who was an executing person of the Company or its consolidated subsidiaries (hereinafter collectively referred to as the “Group”)
- (2) A major shareholder of the Company(Note 1)</116
- (3) An executing person of a company, etc. that falls under any of the following items:
- ・A major business partner of the Group(Note 2)
- ・A major lender of the Group(Note 3)
- ・A company in which the Group holds 10% or more of the voting rights
- (4) A certified public accountant who belongs to an audit firm that serves as the Group’s accounting auditor
- (5) A professional such as a consultant, accountant, tax accountant, attorney, judicial scrivener, or patent attorney who has received a large amount(Note 4)of money or other assets from the Group
- (6) An executing person of another company where any executive of the Company serves as an outside executive(Note 5)
- (7) Notwithstanding the provision of the preceding paragraph, anyone who is deemed to have special reasons that could cause conflict of interest with the Company
Dedicated persons are assigned to the Office of Audit and Supervisory Committee in order to support Outside Directors who are Audit and Supervisory Committee members.
A system is in place to ensure that Outside Directors who are Audit and Supervisory Committee members are convened to the Board of Directors’ meetings without exception and receive explanations and others from departments submitting proposals similar to other Directors. A notice of convocation of the Board of Directors and materials are sent to outside Directors who are Audit and Supervisory Committee members similar to other Directors.
Three Outside Directors who are Audit and Supervisory Committee members participate in the Board of Directors from an independent perspective and actively state their opinions by leveraging their respective professional knowledge.