1) Basic Policy of Corporate Governance
The Company, since its establishment, has operated its business under its business philosophy, "contributing to the progress and development of society and the well-being of people worldwide through its business activities." Also, 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 basic philosophy of "a company is a public entity of society."
The Company recognizes that corporate governance is the important basic structure for the aforementioned purpose, and endeavors to establish and strengthen the effective corporate governance structure based on the Audit & Supervisory Board System composed of the Board of Directors which is responsible for deciding important operational matters for the whole Group and monitoring the execution of business by Directors, and Audit & Supervisory Board Member (A&SB Member) / Audit & Supervisory Board (A&SB) which are independent from the Board of Directors and 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 thirteen (13) Directors including two (2) female Directors and one (1) non-Japanese Director, and six (6) 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 fourteen (14) times in fiscal 2021, 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.
<Nomination and Compensation Advisory Committee>
The Company established the Nomination and Compensation Advisory Committee in 2015. Upon receiving inquiries from the Board of Directors, the committee deliberates on the results of internal reviews regarding the nomination of candidates for Director, Executive Officer, and Audit & Supervisory Board Member, and also on the appropriateness of the remuneration system for Directors and Executive Officers.
The Committee consists of five (5) members; Outside Director Hiroko Ota (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, to enhance effectiveness of the Board of Directors, conducts a survey to all the Board members who attend the meeting annually, and reports the results and evaluations of the survey at the Board.
The items of the survey in the fiscal 2021 are;
- Verification of the Board of Directors operation policy for fiscal 2021
- The role of the Board of Directors in a holding company
- The role of the Directors in a holding company
- Others, including effectiveness evaluation methods
Upon analyzing the results of the survey, the Company's findings with respect to the effectiveness of the Board of Directors are such that the current state of the Board is essentially appropriate in terms of its monitoring and decision-making function. Findings with respect to the transition to a holding company system, however, included opinions that discussion on the role of the Board of Directors, and on other needed issues should be further studied. As such, the Company is methodically addressing such issues and implementing improvements.
<PHD Strategy Meeting/Group Management Meeting>
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.
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.
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.
(b) Background of corporate governance structure
The Company determined that it is appropriate to build and enhance its corporate governance structure based on the Board of Directors and the Audit & Supervisory Board System composed of A&SB Members and A&SB, leveraging Nomination and Compensation Advisory Committee and the scheme of Evaluation of the Board of Directors Effectiveness.
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 "Financial & Accounting Department" or the "Corporate Finance & IR Department", 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 2021 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.