1) Basic Policy of Corporate Governance
The Company, since its establishment, has operated its business under the belief of the founder Konosuke Matsushita, that “the original mission of an enterprise is to contribute to the development of society by supplying products and services of superior quality that are useful in people's lives, at reasonable prices, in appropriate amounts”. He believed that the owner of an enterprise with such a mission is society itself, and this is expressed in the phrase "a company is a public entity of society." The Company concludes that the managerial resources that are necessary to that enterprise, including personnel, capital, land, and materials, have been entrusted to it by society and the enterprise must contribute to society by engaging in activities that make the best use of resources entrusted to it by society, and thereby create surplus value. The Company believes that an enterprise conducts its business while maintaining relationships with customers, business partners, shareholders, society, and numerous other stakeholders, and that the only way for an enterprise to develop over the long term is to do so along with all of its stakeholders. These ideas are outlined in the “Basic Business Philosophy” of the Panasonic Group.
In April 2022, the Group adopted an operating company system (a holding company system) in order to evolve the management of the Group from a medium- to long-term perspective and further secure management, even as changes in the business environment intensify year by year and uncertainty continues. As a holding company, the Company will continue to support the business growth of each operating company and define growth areas from the perspective of optimizing the group as a whole, thereby striving to enhance the corporate value of the entire group.
The Company recognizes that corporate governance is the important basic structure for implementing the Basic Business Philosophy, and endeavors to establish and strengthen the effective corporate governance structure based on the Board of Directors which is responsible for deciding important operational matters for the whole Group and monitoring the Operating Companies and on the Audit & Supervisory Board system, consisting of Audit & Supervisory Board Member (A&SB Member) and the Audit & Supervisory Board (A&SB), which are responsible for auditing the performance of duties by Directors.
The Company conducts the following activities to enhance effectiveness of its corporate governance.
- Secures the rights and equal treatment of shareholders.
- Endeavors to appropriately cooperate with stakeholders such as employees, customers, business partners and local societies with the recognition that its sustainable growth is brought about as a result of receiving resources and contributions from such stakeholders.
- Appropriately discloses corporate information and ensure transparency of the management.
- Given its fiduciary responsibility and accountability to shareholders, the Board of Directors set the broad direction of corporate strategy, establish an environment where appropriate risk-taking is supported and carry out effective oversight of Directors and management from an independent and objective standpoint.
- Engages in constructive dialogue with shareholders in order to contribute to the sustainable growth and the increase of corporate value over the mid- to long-term.
2) Overview and background of corporate governance structure
(a) Overview of corporate governance structure
The Company has transformed into an Operating Company Structure (Holding Company Structure) in April 2022. The Operating Companies are “(1)Panasonic Corporation” (it is composed of multiple business areas and unites the following five divisional companies: China & Northeast Asia Company, Living Appliances and Solutions Company, Heating & Ventilation A/C Company, Cold Chain Solutions Company, and Electric Works Company), “(2) Panasonic Automotive Systems Co., Ltd.”, “(3) Panasonic Connect Co., Ltd.”, “(4) Panasonic Industry Co., Ltd.”, “(5) Panasonic Energy Co., Ltd.”, “(6) Panasonic Housing Solutions Co., Ltd.”, and “(7) Panasonic Entertainment & Communication Co., Ltd.”. They facilitate the evolution and change of business in each area and carry out autonomous management on development, manufacturing, and sales as well as management of profits and fund for the realization of growth strategies.
The Company has responsibility for the management and engineering strategies across the Group. Specifically, the Company formulates the mid/long-term group strategies for the enhancement of corporate value, contributes to the businesses with innovative technology and production technology, and supports for engineering development and manufacturing. In addition, (8) Panasonic Operational Excellence Co., Ltd. has been established to play a role as a platform for improving the efficiency and sophistication of operations across the Group. Panasonic Operational Excellence Co., Ltd. assumes as a function of the group-wide management control in terms of developing the Company-wide rules, infrastructure and systems, implementing internal audit, internal control and compliance activities required to the listed company and the legal entity, and responding to the stakeholders closely working with the Company.
<The Board of Directors and Executive Officer System>
The Board of Directors shall concentrates on the roles of decision-making of management strategies from group-wide perspective and supervision of the Operating Companies, in order to ensure the balance of “swift and strategic decision-making” and “sound and appropriate monitoring”, for the decision-making of group-wide matters and autonomous management of the Operating Companies. For the purpose of fulfilling this roles, the Board of Directors is composed of twelve (12) Directors including two (2) female Directors, and five (5) Outside Directors (at least one-third of Directors must be Outside Directors), and seeks to ensure the diversity of knowledge, experience and qualifications as a whole Board of Directors. Chairperson is the Chairman of the Board who is not involved in execution of business.
The Board of Directors was held thirteen (13) times in fiscal 2022, and matters to be resolved at the Board of Directors which is required by the Companies Act and matters stipulated in the Standards for Discussions at the Board of Directors were deliberated and resolved. Outside Directors, with their extensive experience and deep insight, made active statements which is necessary for deliberation of matters. Moreover, to clarify the responsibilities of Directors and build a flexible structure of the Board of Directors, the Company limits the term of each Director to one (1) year.
In the Company, authorities are significantly delegated to the Operating Companies for the complete autonomous management. Also, in order to maximize the Group value, the Company has adopted the Executive Officer system, which allows group management from the standpoint of total optimization.
The number of Executive Officers (including those who concurrently serve as Directors) is 13, consisting of President, Executive Vice President, a position in which the executive officer acts as President in specific areas, and Executive Officer, a position responsible for the business execution of specific functions.
<Audit & Supervisory Board Members (A&SB Members) and Audit & Supervisory Board (A&SB)>
Pursuant to the Companies Act, the Company elected five (5) A&SB Members (one (1) of them is a woman member) including three (3) Outside A&SB Members, with majority of them being Outside A&SB Members, and established A&SB made up of A&SB Members. The A&SB Members and A&SB monitor the status of corporate governance and audit the day-to-day activities of management, including the performance of duties by Directors. Additionally, the Company elected A&SB Members who have substantial finance and accounting knowledge.
<Voluntary Nomination and Compensation Advisory Committee>
The Company has established the voluntary Nomination and Compensation Advisory Committee. Upon receiving inquiries from the Board of Directors, the committee deliberates on the results of internal reviews regarding the nomination of candidates for Director, Audit & Supervisory Board Member, Executive Officer, President of the Operating Companies, and Outside Director of the Operating Companies and, and also on the appropriateness of the remuneration system for Director, Executive Officer, President of the Operating Companies, and Outside Director of the Operating Companies, and of the amount and content of remuneration for each individual. In addition, the Committee monitors candidates for successor to the Group CEO, Executive Officers, and Presidents of the Operating Companies, and the Committee members can suggest when the Group CEO should be replaced.
The Committee consists of five (5) members; Outside Director Michitaka Sawada (Chairperson), Outside Director Kazuhiko Toyama, Outside Director Yoshinobu Tsutsui, Director and Chairman of the Board Kazuhiro Tsuga, and Representative Director and Group CEO Yuki Kusumi. The Company has been enhancing objectivity and transparency of the committee by ensuring that Outside Directors constitute a majority of its membership with one of them serving the chairperson.
<Conduct and utilization of evaluation of the Board of Directors effectiveness>
The Company conducts an annual survey to evaluate the effectiveness of the Board of Directors to all the Board members who attend the Board of Directors meetings. The results are reported at the Board of Directors meetings as one of the agenda items, and issues and improvement measures raised by the Members of the Board of Directors are discussed. Based on the results of these discussions, the Company continuously builds up a PDCA cycle by considering and implementing measures to improve the structure and operation of the Board of Directors, leading to improvement of the effectiveness of the Board of Directors and strengthening of governance.
In fiscal 2022, the Company focused on the following points based on the effectiveness evaluation for fiscal 2021 and the transition to an operating company structure started from April 2022.
- More time was allocated to deliberations on themes that the Board of Directors should focus on, such as the Group's medium- and long-term strategy and group governance
- In addition to the agenda items for the Board of Directors meeting, the minutes of the PHD Strategy Meeting and the minutes of the Board of Directors meetings of the Operating Companies were posted on the Management Information site, which was established to provide information to the official members of the Board of Directors meetings, in order to establish the system where Outside Directors and Outside A&SB Members can grasp the status of discussions and deliberations by the executive side
- On important matters, prior briefings aside from the Board of Directors meetings were held
After taking the above measures, the Company conducted a survey to evaluate the effectiveness of the Board of Directors for FY 2022 in February 2022 as follows:
Method: Questionnaire (choice and free description)
- Sufficiency of provision of information on agenda items
- Opinions and points to be improved on information sharing for the Board of Directors (Management Information site)
- Key discussion themes at the Board of Directors meetings
- Appropriateness of setting agendas such as the medium-term management plan and group governance, roles expected of Outside Directors, appropriateness of time allocation for each agenda item, etc.
- Strengthening of governance of the Board of Directors
- Skills necessary to fulfill the roles of Director, and sufficient communication between Outside Directors and management (particularly management of the Operating Companies), etc.
- Directors Training, Business Site Visits, etc.
The structure of the Board of Directors for fiscal 2022 and the measures the Company has taken to improve management were positively evaluated in general. On the other hand, the following issues were raised and proposed.
- In order to deepen discussions at the Board of Directors meetings, the Company shall clearly indicate the key points, issues, and directions for resolving issues that should be discussed at the Board of Directors meetings, regarding important matters.
- On the condition that agenda materials are shared in advance, depending on the content of the agenda items, the presentation at the Board of Directors meetings may be simplified and more time may be allocated to discussion.
- Establish a system so that the members of the Board of Directors can ask questions on agenda items in advance and to the responses to the questions can be shared using online tools, etc.
- Increase opportunities for interaction between Outside Directors and Operating Company Presidents.
In fiscal 2023, the Company will implement specific measures to enhance and deepen discussions at the Board of Directors meetings in order to resolve the above issues, and will continue to strive to improve the effectiveness of the Board of Directors and strengthen governance.
<Evaluation of the A&SB Effectiveness>
The Company's A&SB evaluates the effectiveness of the A&SB. In order to enhance the effectiveness of audit activities, the A&SB evaluates the effectiveness of audit activities at the end of the fiscal year, clarifies issues, determines countermeasures, and reflects them in the audit plan for the next fiscal year to continuously improve the effectiveness. In fiscal 2022, in addition to the existing business reports, the A&SB confirmed Group-wide agendas such as DX, Brand, Design, etc., and implemented initiatives to enhance activities that make use of the knowledge of Outside A&SB Members and strengthen cooperation with the Internal Audit Department. The A&SB recognizes that it has been able to achieve certain results in improving the effectiveness of its audits.
On the other hand, in order to strengthen the governance function under the new structure, it recognizes the need to enhance "Tripartite audits" and cooperate in further enhancing communication with Outside Directors so that the Board of Directors can have deeper discussions.
In fiscal 2023, in recognition of changes in the risk-related environment, the A&SB has set compliance, thorough and strengthened group governance, and enhanced tripartite audits as priority audit themes, and will continue to improve the effectiveness of audits.
<Group Management Meeting/PHD Strategy Meeting>
Group Management Meeting and PHD Strategy Meeting and Group Management Meeting are held to discuss, set the direction, and report on the Group’s mid-to long-term strategies, important Group-wide projects and committees, and important initiatives implemented by the Company and the Operating Companies.
Group Management Meeting is held basically once a month, chaired by the Group CEO Yuki Kusumi. It consists of approximately twenty (20) senior managements including the presidents of the Operating Companies and functional directors.
PHD Strategy Meeting is held basically at least two times a month chaired by the Group CEO Yuki Kusumi. It consists of approximately ten (10) senior managements including functional directors of Human Resources, Accounting, and Legal Affairs.
(b) Background of corporate governance structure
Prior to the transition to an operating company structure in April 2022, the Company carried out a number of discussions concerning the Company's corporate governance structure.
Under the Operating Company structure, a full-fledged autonomous management is implemented by the Operating Companies that have gained substantial delegation of authority for investments, etc. As a holding company, the Company's role is to determine management strategies from a group-wide perspective and to supervise the Operating Companies. As a result of the study, the Company has determined that it has been able to ensure the effectiveness of corporate governance by having an independent A&SB establish and operate the Group internal audit system in cooperation with the Internal Audit Division, and by having a voluntary Nomination and Compensation Advisory Committee chaired by an independent outside director, with a majority of independent outside directors, deliberate on executive personnel matter and remuneration. The Company has determined that the corporate governance that it aims to achieve under the Operating Company structure can be achieved without changing the conventional corporate governance structure and maintaining the system of a company with A&SB Members. For that reason, the Company has established the corporate governance structure, based on the A&SB System composed of the Board of Directors and A&SB Member / A&SB.
Corporate Governance Structure
3) The status of the Company's internal system concerning disclosure of corporate information
Under its basic philosophy, "A company is a public entity of society," the Company has committed to highly transparent business activities and endeavored to be accountable its accountability to its stakeholders. The Company clearly defines its basic policy on information disclosure in the "Panasonic Code of Conduct," the guideline for putting the Group's Basic Business Philosophy into practice. The Company also publishes relevant practical standards, methodologies, internal processes, etc., as the "Disclosure Policy,". The Company's basic policy is to provide the Company's fair and accurate financial information and corporate information, including management policies, business activities and Environment, Social, Governance (ESG) activities, in a timely, appropriate and easily understandable manner. In accordance with this basic policy, important matters concerning the management of the Group are resolved or reported at the Board of Directors pursuant to the Regulations of the Board of Directors. These important matters and other matters, which are required to be disclosed under relevant laws and ordinances in Japan and overseas or any other regulations, are timely and accurately reported from each relevant department, that has the important internal information, to the department that handles relevant information under the monitoring of the Group CFO, so that important information is gathered. Further, matters required to be disclosed under the rules of financial instruments exchanges are also under the monitoring of the Group CFO.
Also, if any of the matters which is required to be disclosed under relevant laws and ordinances in Japan and overseas, and the rules of financial instruments exchanges or any other regulations, occurs at the Company's business divisions including subsidiaries, such matter shall be immediately reported to the "IR Section, Corporate Finance & IR Department" or the " Financial & Accounting Center” of Panasonic Operational Excellence Co., Ltd.,", depending upon the nature thereof; Thus, the Company has established a structure whereby these matters can be collected.
With respect to the information gathered or identified, the Company determines the necessity of disclosure thereof in accordance with relevant laws and ordinances in Japan and overseas, and the rules of financial instruments exchanges or any other regulations, and makes effort to disclose it at the time that the organization, which effectively decides execution of the business of the Company, makes a resolution or determination, or becomes aware of its occurrence.
In addition, the Company endeavors to confirm the contents and expressions of the disclosure with the relevant departments within the Company and outside legal counsel to ensure the accuracy, fairness and adequacy of the disclosure.
Moreover, the Company has established disclosure control procedures in order to comply with relevant laws and ordinances in Japan and overseas, the rules of financial instruments exchanges and any other regulations, and to implement the fair, accurate and timely disclosure of information about its Group, etc. In the process of preparation and confirmation of documents such as annual securities reports and quarterly reports, the Disclosure Committee, which is comprised of managers from principal departments that handle relevant information, confirms the validity of the content of the descriptions and the appropriateness of the procedures concerning the disclosure under the supervision of the Group CEO and the Group CFO, who are responsible for establishing, maintaining and ensuring the effectiveness of the internal control and disclosure control of the Company. The chairman of the Disclosure Committee is appointed by the Group CEO and the Group CFO, and the members of the Disclosure Committee are appointed by the chairman of the Disclosure Committee.
4) Internal Control Over Financial Reporting
The Company has documented the actual status of its internal control system, with integrated control provided by the Internal Control Promotion Office of Panasonic Operational Excellence Co., Ltd., in order to ensure reliability in the financial reporting of the Panasonic Group including its subsidiaries, ranging from the control infrastructure to actual internal control activities. Specifically, the Company has reinforced its internal controls by implementing self-checks and self-assessment programs at each of the Operating Companies. Then, Internal Auditing Managers of the Operating Companies appointed by the Company at each of the Operating Companies conduct audits. Based on the audits, the Internal Control Promotion Office supervises the group-wide internal control audits in order to confirm the effectiveness of each company’s financial reporting. With the aim of further enhancing the Group’s internal control system, in fiscal 2022 Panasonic had approximately 400 personnel assigned to conduct internal audits in the Internal Auditing Group.
Please refer to the "Corporate Governance Report" for the latest compliance with the Corporate Governance Code, the basic policy of the internal control system, and more.