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Hitachi High-Tech
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Corporate Governance

We have adopted the structure of a Company with Auditors and separate management supervision from business execution, and we have also adopted an executive officer system to clarify and streamline responsibilities of business execution. In addition to those matters stipulated by law, the Board of Directors is responsible for overseeing the execution of business, such as the development of internal control systems, and performs monitoring to ensure that the fundamental framework of corporate governance is designed in an appropriate, reasonable, and efficient manner, supporting the Company’s goal of being a company that is trusted by all stakeholders.

Corporate Governance Structure

Basic Approach

Based on our corporate vision of ”Simplify our customers‘ high-tech processes,“ we execute our mission of “To help our customers be fast-moving, successful, cutting-edge businesses” and increase supervision over the conduct of business in each segment and strive to improve the transparency of management and enhance corporate governance. By managing the Company with a strong awareness of our corporate social responsibility, we believe it is important to gain the trust, but also of the whole of society, and to contribute to the progress and development of society through our business activities.

Supervisory Functions of Management and Business Execution Functions

The Board of Directors makes decisions on matters stipulated by laws and regulations, such as the selection of representative directors, as well as important management matters, and supervises execution of business. While ensuring the appropriateness and speed of business execution by delegating authority to executive officers as necessary, important matters are discussed and approved by the Executive Committee, which is an advisory body to the President and CEO, before being decided by the President and CEO. This ensures that decisions are made appropriately through active discussions and mutual checks and balances among executive officers with diverse backgrounds. The corporate auditors are appointed as the supervisory body, and the corporate auditors’ council has been established as an optional coordinating body for each corporate auditor to communicate, exchange opinions, share information, and decide common matters. Corporate auditors oversee the execution of company operations in cooperation with the Internal Audit Department, such as the Internal Auditing Division, and the accounting auditors as necessary.

Corporate Governance Structure and Internal Control and Business Execution Structure

image: Corporate Governance Structure and Internal Control and Business Execution Structure

Business Execution Structure and Internal Control

Decision-making Process for Business Execution

The president and CEO delegate authority to each executive officer in each division of duties determined by the Board of Directors. The decision-making process includes several steps to ensure more efficient management. The major steps are listed below.

Category Description
Executive Committee The Executive Committee is a consultative body comprised of executive officers nominated by the President and CEO. Proposals are decided upon after deliberation by the committee. The Executive Committee is an accumulation of the wisdom of the Company, offering not only reciprocal checks and balances for the execution of business, but a place to promote individual proposals. As a rule, the committee convenes twice each month.
Budget/ Medium-Term Management Plan Deliberation Committee The Budget/ Medium-Term Management Plan Deliberation Committee deliberates on single-year budgets and three-year medium-term management plans and their progress. Budgets and management plans are presented to the Budget/ Medium-Term Management Plan Deliberation Committee after first being formulated by the relevant business group and then reviewed by the Budget/ Medium-Term Management Plan Deliberation Committee meetings. Because it deliberates over content at the core of our management, matters that are deliberated by the Committee must be authorized by a resolution of the Board of Directors after receiving final approval by the Executive Committee.
Management Meetings Meetings held twice a month in principle and consists of members of the Executive Committee to discuss, exchange opinions and form a consensus on company-wide management issues and important matters.
Business Groups Management Committee The Business Groups Management Committee is a decision-making committee that convenes periodically. It is made up of executive officers who are Business Group General Managers, and who make decisions within the scope of their authority. It also conducts advance consideration of matters to be put before the Executive Committee. Furthermore, Business Group General Managers formulate internal rules for their business groups and delegate authority to lower positions within the scope allowed for by the Decision-Making Standards to streamline work.

In addition, to complement the functions described above, the Investment Committee provides support to the proposers of business investments including M&A as well as capital investments starting in the investigation and planning stage, performs phase gate management in the investigation of subject investments, conducts appropriate risk management, and performs other roles for the purpose of providing advice on decision-making. Furthermore, Business Strategy Meetings are held to review strategies and measures for the entire company and each business division in order to achieve the mid-term management plan before deliberation of the budget and midterm plan, as well as to deliberate the scale of performance plans.

Operation of Group Companies

The Company has a governance framework of executive officers who supervise group companies. These executive officers attend the Shareholders Meetings of each company and exercise their voting rights as agents of the Company, which is the parent company, and provide guidance on management and business operations. Authorization by the Executive Committee of the Company, which is the parent company, and approval of the relevant Business Group General Manager are necessary to address important matters concerning group companies; however, the Decision-Making Standards and the internal rules of each business group stipulate the extent to which decision-making authority is delegated to each company to accelerate the decision-making process.
Furthermore, among overseas group companies, Hitachi High-Tech nominates a regional presiding company in each major region of the globe where it operates. The presidents of said companies represent the President of the company, while also providing supervision and support to group companies within their respective regions.

Internal Control System

With regard to the legal requirement to develop an internal control system, the Board of Directors decides the internal control system to be established and the executive officers establish and operate the schemes and procedures composing the internal control system. The Board of Directors seeks liveliness and effectiveness of the internal control system. It receives reports from the executive officers concerning the operational status and results of the internal control system and issues instructions to improve the system if necessary. Alternatively, the executive officers may propose modification of the system in response to changes in the business environment, which the Board of Directors deliberates to adopt.
The Company has established an Internal Control Management Committee to oversee activities to strengthen and enhance the Group-wide internal control system. The Internal Control Management Committee oversees its four committees (the J-SOX Committee, the Compliance Committee, the Information Security Committee and the Environmental Committee), which issue instructions to responsible divisions on measures to address and prevent the respective risks for which each committee is responsible.

Internal Auditing

The Company has placed the Internal Auditing Div., which conducts auditing of the operation of business execution under the direction of the President and CEO. Group companies are also subject to auditing. Through audits, the Internal Auditing Div. also gives direction about the need for rectification and improvements, and conducts periodic follow-ups. With the cooperation of the Audit & Supervisory Board Members and the Accounting Auditor, the Internal Auditing Div. promotes three-pillar audits, and plays an important role in the Group's internal control system, such as the secretariat of the J-SOX Committee.