Corporate Governance

Our basic approach to corporate governance

In recent times, socioeconomic importance of corporate governance is becoming increasingly important for business and industrial enterprises. For Kappa Create Co., Ltd., what is positioned as one of the most important management themes is to ensure that our business operations are both fair and transparent to our shareholders and other stakeholders. In line with this policy, our company promotes a management setup and its supporting system that together make highly efficient management possible.

(1) Our company’s organizational systems and the state of internal control system improvement

(i) Basic explanation of our company’s organizational systems

In recent times, socioeconomic importance of corporate governance is becoming increasingly important for business and industrial enterprises. For Kappa Create Co., Ltd., what is positioned as one of the most important management themes is to ensure that our business operations are both fair and transparent to our shareholders and other stakeholders. In line with this policy, our company promotes a management setup and its supporting system that together make highly efficient management possible.

(ii)Our company’s organizational systems and the state of internal control system improvement

Our company’s internal control systems are as follows:

  1. Setup to ensure that Directors execute their respective duties, complying with laws and regulations as well as our company’s articles of incorporation:
    1. Our company established and maintains a compliance policy and makes it well known to each Director to ensure that their execution of respective duties complies with laws and regulations as well as our company’s articles of incorporation and that our company fulfills its social responsibilities accordingly.
    2. Our company maintains the Compliance Committee, which conducts periodical inspections of items related to compliance, examines pertinent countermeasures to be adopted, and reports to both the President and the Board of Auditors as required.
  2. Setup for proper storage and management of information concerning Directors’ execution of their respective duties:
    This setup is intended to properly store and manage information, in document or other format, concerning Directors’ execution of their respective duties in accordance with our company’s document management rules and privacy protection rules, and to review and inspect the state of such operations as necessary.
  3. Rules and setup for proper management of loss risks:
    1. Our company maintains the Internal Audit Room (five members) ? a unit under direct supervision by the President ? that periodically examines operational audit items and auditing procedures to ensure that the audit items are sufficient and complete. If the auditing procedures are found incomplete, the Internal Audit Room makes amendments as necessary.
    2. Our company maintains a setup where in the event the Internal Audit Room has found any business activities involving a risk due to infringement of laws, regulations or the company’s articles of incorporation, a reporting system will be immediately mobilized, allowing the Risk Management Committee and the division in direct charge to receive a report on the risk as to its details and degree of incurred loss.
    3. In order to facilitate information collection by the Internal Audit Room, our company makes the importance of the Internal Audit Room thoroughly known to each and every employee, and guide them to immediately report it to the Internal Audit Room should a loss risk be found.
    4. Our company maintains the Risk Management Committee with the President as its chairman, which periodically receives reports on the state of operational risks from each business division, examines such risks and works out countermeasures as necessary.
    5. The Risk Management Committee takes charge of the improvement of risk management rules and confirms the state of their operation.
  4. Setup to ensure that Directors execute their respective duties efficiently:
    1. In accordance with responsibilities and powers as separately provided by our internal rules and decision-making rules, our company seeks to expedite decision-making through simplification of the decision-making process and so on to ensure that Directors execute their respective duties efficiently. When it comes to important matters, our company summons a management meeting to make more prudent decisions through mutual agreement among its members.
    2. Our company maps out a medium-term management plan to identify management objectives to be achieved by the company over a medium term while each Director works out an annual budget and a medium-term plan for the division of his/her responsibility, progress of which is to be reported at the Board of Directors meeting every month.
  5. Setup to ensure that business operations are properly carried out in our business group comprised of Kappa Create and its subsidiaries:
    1. Our company maintains a setup where in the event a loss risk has occurred to our subsidiary or affiliate and has been identified by the Internal Audit Room, the Internal Audit Room reports to the Board of Directors and the division in direct charge about details of the risk, the degree of loss that may be incurred, and its impact to our company.
    2. In order to prevent inappropriate transactions or accounting between the parent company and its subsidiaries or affiliates, the parent company’s Internal Audit Room exchanges information with that (or equivalent division) of the subsidiaries or affiliates to the extent possible.
  6. Items relevant to assignment of an employee to assist Auditors:
    1. Our company maintains the Auditors’ Room and assigns one employee to assist the Auditors.
    2. Specifics of the foregoing provision shall be examined based on proper communication with the Auditors and by taking opinions of the Personnel Management Director and other relevant divisions fully into account.
  7. Items concerning independence of the employee assigned to assist Auditors from members of the Board of Directors:
    1. Decisions on personnel matters related to the employee assisting the auditors shall be subject to the consent of the Board of Auditors.
    2. The employee assigned to the Auditors' Room shall not hold a concurrent post related to business execution.
  8. Setup whereby members of the Board of Directors and employees report to the auditors, and setup concerning other reports to the Auditors:
    1. Pursuant to decisions made by the Board of Auditors, members of the Board of Directors and employees shall make reports to individual Auditors in response to their requests.
    2. Main report items relative to the foregoing are as follows:
      • The state of activities of divisions responsible for the structuring of our company’s internal control systems
      • The state of activities of Auditors of our company’s subsidiaries and affiliates as well as those of their internal auditing divisions
      • Our company's important accounting policies and standards, and alterations thereto
      • Contents of announcements on business performance and performance prospects, and contents of important disclosure documents
      • The state of the Internal Reporting System operations and details of specific reports
  9. Other setups to ensure that auditing by Auditors is carried out effectively .
    1. Our company strives to promote the understanding of Board members as to auditing by Auditors and to improve the environment for auditing by Auditors.
    2. Our company periodically holds an opinion exchange meeting between the President and Auditors while also promoting collaboration between the President and the internal auditing division to facilitate proper communication and effective execution of auditing.