Panasonic Holdings Corporation
1) Basic Policy of Corporate Governance
The Company believes it is important to increase corporate value by fulfilling accountability through dialogue with various stakeholders such as shareholders and customers, making effort to execute transparent business activities, and swiftly conducting business activities with fairness and honesty based on its management philosophy of “a company is a public entity of society.” For this reason, we recognize that corporate governance is an important foundation of management. The fundamental structure is an audit and supervisory system consisting of the Board of Directors that decides the execution of strategies and important matters related to the overall Group and supervises the execution of Director duties, and the Audit & Supervisory Board Members and Audit & Supervisory Board which supervises the execution of Director duties. The entire Panasonic Group endeavors to establish and strengthen this structure as an effective system.
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 entrusts authority to the Operating Companies, and achieves a fast-moving decisionmaking process centered on the Operating Companies. It also decides the Group’s medium- and long-term strategies and important Group matters, and concentrates on Group direction through Group governance and risk management, in order to make important decisions for the Group and conduct sound and suitable monitoring. The term of each Director is limited to one (1) year and all Directors are reelected at an annual general meeting of shareholders. The structure of the Board of Directors makes it possible to appropriately apply decisions of shareholders to management. The Board of Directors is composed of thirteen (13) Directors (of which two (2) are women). With consideration for the skills required by the Panasonic Board of Directors, it seeks to ensure diversity of the knowledge, experience, and qualifications of the Board of Directors as a whole. Based on a policy of ensuring that one-third or more of Board of Directors Members are Outside Directors who can be expected to provide valuable opinions for decisions related to operations and supervision of Director duties based on their extensive careers outside the Company and high levels of knowledge, six (6) Outside Directors have been appointed. Chairman of the Board who is not involved in execution of business takes on the position of a chairman.
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 fourteen (14), 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 and Audit & Supervisory Board>
In order to contribute to the sound and sustainable growth and improvement in mid- to long-term corporate value of the Group, the Audit & Supervisory Board is responsible for a part of corporate governance as an independent agency contracted by the shareholders in order to establish a high-quality corporate governance system and ensure sound management and trust from society. The Audit & Supervisory Board is composed of five (5) members (of which one (1) is a woman). Two (2) of these members are Senior Audit & Supervisory Board Members (full-time) who were selected from executive directors or equivalent positions and who are highly familiar with company operations, and are capable of visiting actual worksites and exercising investigative authority to understand the actual conditions of operations. Of these, one (1) has considerable knowledge related to financial and accounting matters. Three (3) Outside Audit & Supervisory Board Members have been appointed, consisting of a business manager, lawyer, and certified public accountant who are capable of effectively supervising the execution of Director duties based on their advanced expertise, extensive careers, and high levels of knowledge.
<Voluntary Nomination and Compensation Advisory Committee>
The Company has established a 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 Directors, Audit & Supervisory Board Members, Executive Officers, Operating Company Presidents, and Operating Company Outside Directors, and also on the appropriateness of the remuneration system for Directors, Executive Officers, Operating Company Presidents, and Operating Company Outside Directors, as well as the amounts and details of compensation for each individual. The committee discusses the succession plan for the Group CEO, Executive Officers, and Operating Company Presidents, and conducts monitoring of successor candidates. The members can also propose the timing for replacement of the Group CEO. In fiscal 2023, the committee met four times (attendance rate 100% by all members). It discussed matters including the timing for replacement of the Group CEO, successor candidates for Group CEO, Executive Officers, and Operating Company Presidents, the results from internal consideration of Director and other candidates, and the remuneration system for Directors, Executive Officers, and Operating Company Presidents, and provided reports to the Board of Directors. The committee is composed of five (5) members, Outside Director Michitaka Sawada (chairperson), Outside Director Kazuhiko Toyama, Outside Director Yoshinobu Tsutsui, Chairman of the Board Kazuhiro Tsuga, and Representative Director, President and Chief Executive Officer Yuki Kusumi. The Company has enhanced the objectivity and transparency of the committee, by ensuring that it is chaired by an Outside Director and that Outside Directors constitute a majority of its membership.
<Group Management Meeting/PHD Strategy Meeting>
The Group Management Meeting and the PHD Strategy 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 Group-wide initiatives implemented by the Company and the Operating Companies.
The Group Management Meeting is held basically once a month, chaired by the Group CEO. It consists of approximately twenty (20) senior managements including the presidents of the Operating Companies and functional directors.
The PHD Strategy Meeting is held basically at least two times a month chaired by the Group CEO. It consists of approximately ten (10) senior managements including functional directors of Human Resources, Accounting, and Legal Affairs.
<Conduct and utilization of evaluation of the Board of Directors effectiveness>
Each fiscal year, Panasonic conducts an evaluation of the Board of Directors effectiveness for the members who attend Board of Directors meetings. The results of this effectiveness evaluation are shared at Board of Directors’ meetings as an agenda item, and issues and improvements raised by the attending Board of Directors members are discussed at Board of Directors’ meetings. Based on the results of this discussion, the future Board of Directors system, operating improvements, and other measures are discussed and implemented in order to continually operate a PDCA cycle for improving the effectiveness of the Board of Directors and strengthening corporate governance.
i) Important fiscal 2023 measures based on the effectiveness evaluation in the previous fiscal year
The following are the primary measures that were carried out in fiscal 2023.
- In order to deepen discussion at the Board of Directors’ meetings, 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, simplify the presentation at the Board of Directors’ meetings and allocate more time to discussion depending on the content of the agenda items.
- Utilize online tools and other means to construct a system for sharing advance questions regarding agenda items from Board of Directors members and the responses to them.
- Increase opportunities for communication between Outside Directors and Operating Company Presidents.
ii) Fiscal 2023 evaluation of the Board of Directors effectiveness
In fiscal 2023, an evaluation of the Board of Directors effectiveness was carried out on the following schedule. Questionnaire question design and results analysis involved advice from an outside agency in order to ensure objectivity.
- Survey period: Late November, 2022 - Mid December, 2022
- Survey format: Total 27 questions
(Of these, 25 were evaluations in four ranks, and two were multiplechoice questions. Free answer spaces were provided for each question.)
- Primary survey items:
- Structure and operations of the Board of Directors
- Group strategies and Operating Company strategies
- Corporate ethics and risk management
- Evaluation of the management team (nomination, remuneration)
- Dialogue with shareholders etc.
- Board of Directors evaluation results report and discussion: Board of Directors’ meetings in January and March 2023 (2 times)
Through discussion, the Board of Directors identifies issues for improving Board of Directors effectiveness, important supervision themes for Board of Directors in the next fiscal year, items for improving operations, and other matters.
iii) Board of Directors effectiveness evaluation results and issue improvement measures
It was confirmed from the survey results that, continuing from the fiscal 2022, the evaluation of Board of Directors effectiveness, have been generally ensured. We received the following comment from an outside agency. “At all stages including the design stage for questions and response methods, the response stage with many constructive comments from all officers, and the review stage of collected results, the entire company was directly involved with an awareness of issues aimed at improving the effectiveness of the Board of Directors.” The Panasonic question design and evaluation process, and the collected responses and comments were assessed as sufficient to confirm the effectiveness of the Board of Directors.
The identified issues were also discussed by the Board of Directors and the following improvement measures were proposed.
- Ensure sufficient time and expand discussion of Group medium- to long-term strategies and business portfolios.
- For agenda item of Operating Company medium- to long-term strategies and important matters, clearly identify the division of roles between the Board of Directors as the Panasonic holding company and the Panasonic execution side and Operating Company Board of Directors, and narrow down the list of resolutions which should be supervised and monitored by the Panasonic Board of Directors.
- From the perspective of utilizing intangible assets, functions reports on matters such as investment in human capital and DX should be connected directly to resolutions of Group management issues and Group medium- to long-term strategies, and expanded as strategic discussions that contribute to improving corporate value.
- Clearly identify the division of roles between the Board of Directors and the Nomination and Compensation Advisory Committee, and expand the activity contents and policy of the committee in order to strengthen supervision of nomination and remuneration jointly by the Board of Directors and the committee and ensure its transparency.
In fiscal 2024, based on the above improvement measures which were discussed and concluded by the Board of Directors, we will continue working to improve the Board of Directors effectiveness.
<Evaluation of the Audit & Supervisory Board Effectiveness>
An evaluation of effectiveness is also conducted for the Panasonic Audit & Supervisory Board at the end of each fiscal year. Issues and improvements proposed by Audit & Supervisory Board Members are discussed and the action to be taken is decided. The results are applied to the Audit Plan for the following fiscal year, and continual efforts are made to improve the effectiveness of audit & supervisory activities. Activities in fiscal 2023 included attendance at Board of Directors Meetings, monitoring the status of supervising execution of Director duties, and stating opinions when recognized as necessary. In addition, the decision-making process for important Group matters and the conditions of discussion at important meetings were checked, and the status of execution of duties by the President and Chief Executive Officer, Operating Company Presidents, and functional top management was monitored. Observers attended meetings—generally held once each quarter—of the Internal Audit Committee which is the controlling institution for internal audit functions. The results of audits and other information was reported to the Audit & Supervisory Board by the internal auditing group, and the Audit & Supervisory Board Members, internal auditing group, and Accounting Auditors all met together to exchange information such as risk assessments and plans for visits at the start of the year, as well as changes in the audit contents, identified items, and risk assessments in order to improve the effectiveness of audits intended to strengthen governance under the new system. In addition to a quantitative evaluation of effectiveness based on a total of 40 evaluation items from perspectives such as action based on corporate governance, the effectiveness evaluation identified specific issues proposed by each Audit & Supervisory Board Member, and worked to identify items for improvement. The Audit & Supervisory Board discussed the effectiveness evaluation results and concluded that “it is functioning effectively.” For issues and other matters which were identified at discussions during fiscal 2023, measures in response will be decided and continual efforts will be made to improve the effectiveness of the Audit & Supervisory Board.
(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 the Group’s mid-to long-term strategies and important Group matters, and monitor Group through group governance and risk management. 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 Audit & Supervisory Board 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 Audit &Supervisory Board Members. For that reason, the Company has established the corporate governance structure, based on the Audit & Supervisory Board System composed of the Board of Directors and Audit &Supervisory Board Member / Audit & Supervisory Board, holding the following elements.
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's specific approach to information disclosure is set forth in the “Panasonic Group Compliance Code of Conduct”, which embodies the Management Philosophy and sets forth specific items to be fulfilled in conducting business activities while practicing compliance. The basic policy on information disclosure, together with practical standards, methods and internal systems, are published in the “Disclosure Policy” on the Company’s website.
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 Rules of Meetings 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 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 subsidiaries including the Operating Companies, 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 and approves 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 chairperson 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 chairperson of the Disclosure Committee. The Disclosure Committee also develops, maintains, improves and evaluates the internal control procedures concerning disclosure matters.
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 2023 Panasonic had approximately 360 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.