Internal Control Systems Details
Pursuant to Japan’s Company Law, Ichigo has set forth a “Basic Policy for the Establishment of Structure of Internal Controls,” and established the required internal policies, ensured the legality and efficiency of Ichigo’s operations, and established an appropriate risk management system. Ichigo will strive to improve and reinforce these systems through continuous review.
a. Internal Controls to Ensure that Statutory Executive Officers and Employees Execute Their Duties in Compliance with Laws and Regulations and Ichigo’s Articles of Incorporation
(i) Corporate Governance
– Ichigo’s Board determines material matters regarding management and monitors the execution of duties by Statutory Executive Officers pursuant to laws and regulations, the Articles of Incorporation, shareholder meeting resolutions, Ichigo’s corporate mission, Board rules, Ichigo’s Code of Corporate Ethics, and Ichigo’s Code of Conduct.
– The Statutory Executive Officers make decisions on the execution of business that are delegated by the Board, and perform their duties pursuant to these decisions, Board resolutions, and internal rules.
– In order for the Board to monitor the execution of duties by Statutory Executive Officers, the Statutory Executive Officers report on the status of the execution of business to the Board at least quarterly. Statutory Executive Officers monitor and supervise the execution of one another.
– The status of the execution of duties by Statutory Executive Officers will be audited by the Audit Committee.
– Ichigo has established a Code of Corporate Ethics and Code of Conduct which provide rules and standards for action to be taken by officers and employees including Directors and Statutory Executive Officers.
– Ichigo has established a Compliance Committee to deliberate major issues regarding compliance. The Compliance Committee is independent from the Statutory Executive Officers.
– Ichigo’s compliance structure comprises Responsible Officers (Chairmen and President), Overseeing Statutory Executive Officers (Business Management and Compliance), and a Compliance Division (the compliance group). These parties work together across businesses and Ichigo group companies to ensure proper compliance across Ichigo.
– Ichigo has in place a whistleblower system whereby Directors, Statutory Executive Officers, and employees can report any questionable acts to a designated internal person or external lawyer.
(iii) Structure to Ensure Appropriate Financial Reports
– Ichigo has established internal systems to ensure lawful and appropriate financial reports by establishing internal rules and by complying with the Financial Instruments and Exchange Act, accounting standards, and other related laws and regulations.
– The President, Statutory Executive Officers (Audit, Finance, Administration & HR, and Business Management), and Audit Department promote and establish an internal structure which complies with J-SOX.
(iv) Internal Audit
– Ichigo has established a Statutory Executive Officer (Compliance) and Internal Audit function which reports directly to the Audit Committee. The Statutory Executive Officer (Compliance) and Internal Audit conduct an internal audit of business with respect to compliance with laws and regulations, the Articles of Incorporation, internal rules, and the appropriateness of the execution of duties, and reports the results of such audit to the Audit Committee, the President, and the Board. The Statutory Executive Officer (Compliance) and Internal Audit report on corrective activities called for by the internal audit to the Audit Committee, the Chairmen, the President, and the Board.
(v) Elimination of Involvement with Anti-Social Forces
– In order to prevent anti-social forces from entering into the real estate and financial markets, Ichigo has established the Ichigo Group’s Code of Corporate Ethics which prohibits interaction with anti-social forces, working in cooperation with the Police Department and other institutions.
– Ichigo has designated Statutory Executive Officers (Business Management and Compliance) and the Compliance Department as responsible for working to eliminate interaction with anti-social forces by: coordinating with the Police Department, lawyers, and other external experts; becoming a member of police-related institutions; establishing manuals for the screening of anti-social forces; conducting due diligence checks on transaction counterparties; including language in contracts to prevent interaction with anti-social forces; and establishing manuals with respect to the handling of interaction with anti-social forces.
– The designated Statutory Executive Officer (Executive Vice President), working together with Ichigo and its subsidiaries, the police, and outside legal counsel, shall reject any and all requests from anti-social forces.
(vi) Structure to Prevent Insider Trading
– In order to prevent insider trading, the Chairmen and President have appointed a Statutory Executive Officer (Business Management) as the person responsible for information control with regards to information specified by the stock exchange and by Ichigo’s internal rules. The Statutory Executive Officer (Finance), responsible for providing the management structure of internal information and for the management of transactions of specific securities by employees, thoroughly prevents insider trading within each Ichigo company in cooperation with the designated Statutory Executive Officer (Business Management).
b. Systems for the Retention and Management of Information Pertaining to Execution of Duties by Statutory Executive Officers
Ichigo properly retains and manages documents and other information pertaining to the execution of duties by the Statutory Executive Officers with due care and in compliance with laws and regulations and internal rules.
c. Risk Management Policies and Systems
(i) Ichigo exercises risk management at the departmental level, establishes basic policies on risk management, and determines the execution of risk management and other material matters through the Business Management Department. The Business Management Department also supports each department in establishing a risk management system and an Ichigo-wide, cross-departmental risk management system.
(ii) As a means to facilitate strong risk management and appropriate handling of material risks, Ichigo has established a risk management structure comprised of Responsible Officers (Chairmen and President), the Overseeing Statutory Executive Officer (Business Management), and a Risk Management Department.
(iii) The Statutory Executive Officer (Business Management) together with the Risk Management Department are responsible for monitoring risks associated with business execution.
(iv) The Statutory Executive Officer (Business Management) is responsible for setting and coordinating a risk management framework to handle situations of crisis, including natural disasters. In the event of a crisis, a crisis management team will be established under the President, aimed at preventing any further damages and a speedy recovery of business.
d. Systems to Ensure Effective Execution of Duties by Statutory Executive Officers
(i) The Board authorizes Statutory Executive Officers to make certain decisions for the appropriate and agile execution of duties. In addition, in order to comprehensively discuss material management matters which require approvals from the Chairman & Representative Statutory Executive Officer, the President & Representative Statutory Executive Officer, the Executive Vice President & Statutory Executive Officer, and the President of each subsidiary, the Senior Statutory Executive Officer (Finance) convenes meetings including Statutory Executive Officers and ensures a smooth execution of duties.
(ii) Ichigo creates mid-term management plans, annual Ichigo-wide business targets, and annual subsidiary and division business targets. The Senior Statutory Executive Officer (Finance) ensures effective and efficient management by tracking Ichigo’s progress against these plans and targets.
e. Directors and Employees Assisting the Performance of the Duties of the Audit Committee
(i) Directors who assist in the performance of the duties of the Audit Committee will be determined by the Board in line with the opinions of the Audit Committee.
(ii) Employees assisting the performance of the duties of the Audit Committee are members of the Audit Department appointed by the head of the Audit Department and the Audit Committee. Following the direction of the Audit Committee or a member of the Audit Committee assigned by the Audit Committee, the head of the Audit Department manages the members of the department or directly leads the execution of assisting in the performance of the duties of the Audit Committee.
(iii) Statutory Executive Officers must confirm that the Audit Committee and employees assisting in the performance of the duties of the Audit Committee receive no undue constraints in carrying out duties. In case such employees receive undue constraints in carrying out duties, the employees can report to the Audit Committee or one or more Audit Committee Members appointed by the Audit Committee in advance, and request for such constraints to be resolved.
f. Independence of Directors and Employees from Statutory Executive Officers
Directors and employees who assist in the performance of the duties of the Audit Committee report to the Audit Committee. The appointment, transfer, appraisal, and compensation of the relevant employees require the consent of the Audit Committee. This ensures independence from the Statutory Executive Officers. Other matters regarding the independence of such Directors and employees from the Statutory Executive Officers are pursuant to internal rules as separately provided.
g. Reporting by Directors, Statutory Executive Officers and Employees to the Audit Committee and Other Systems for Reporting to the Audit Committee
(i) Audit Committee Members may attend the meetings of the Board, the Compliance Committee, and other important meetings and listen to the status of the execution of duties by Statutory Executive Officers, inspect related materials, and ask for explanations and reports at the meetings.
(ii) All Statutory Executive Officers, department heads, and other employees must explain and report to the Audit Committee and Audit Committee Members as required.
(iii) Statutory Executive Officers and employees must immediately report on the matters below to the Audit Committee or to its members. Where determined to be necessary, Statutory Executive Officers and employees can also report matters not listed below to the Audit Committee or its members. If the matter reported falls within Ichigo’s Whistleblower policy, then such report shall follow the procedures of the policy. Any person making a report shall not be relieved of employment and shall not receive any disadvantageous treatment directly as a result of making such report.
1. Any matter that may have a material impact on Ichigo’s business operation and financial standing (including matters of compliance and risk management)
2. Any matter that has material impact on Ichigo’s internal control systems
3. Any matter that impacts Ichigo’s handling of complaints or whistleblower reports
4. Any matter stipulated in the rules with respect to matters to be reported to the Audit Committee
5. Any matter that may materially impact the audits conducted by the Audit Committee or its members
h. Other Systems to Ensure Effective Audits by the Audit Committee
(i) Internal Audit works closely with the Audit Committee and the Audit Committee Members by discussing the internal audit plan, conducting internal audits, and reporting the results to the President, the Audit Committee and the Audit Committee Members. Audit Committee Members and Internal Audit also work closely with the External Auditor and exchange opinions about matters on internal audit.
(ii) The Audit Committee or the Audit Committee Member designated by the Audit Committee may retain any lawyers, certified public accountants, consultants, and other outside advisors at Ichigo’s cost without prior approval from the Board or the Statutory Executive Officers.
(iii) The Audit Committee Member designated by the Audit Committee reports the status of the execution of duties by the Audit Committee to the Board at least quarterly.
i. Systems to Ensure Fully Appropriate Business Activities by Ichigo and its Subsidiaries
(i) Ichigo’s subsidiaries share Ichigo’s Management Philosophy, Code of Corporate Ethics, and Code of Conduct.
(ii) Ichigo’s subsidiaries, pursuant to internal rules, are managed and controlled by the divisions that are in charge of managing subsidiaries, which are also responsible for providing advice on matters of each company’s corporate governance, compliance, and risk management.
(iii) Ichigo has established a Business Development Department to be in charge of Business Management and management regulations of its subsidiaries, obtain reports on business developments from them, and conduct sound management of and guide each subsidiary to achieve its business goals.
(iv) The Audit Committee works closely with Ichigo subsidiaries by holding liaison meetings with the Auditors of Ichigo companies to exchange opinions about material internal audit matters.
(v) The business activities of Ichigo’s subsidiaries are subject to an internal audit by Internal Audit to the extent that they do not conflict with laws and regulations.
(vi) In the event of any transactions with Ichigo Trust, Ichigo’s major shareholder, Ichigo takes special care to protect minority shareholders and has in place and follows appropriate procedures, including Board resolutions and reporting.
(vii) In order to prevent conflicts of interests, Ichigo has established a Policy for Managing Conflicts of Interest and manages any conflicts in accordance with such policy.
(viii) Ichigo subsidiaries hold meetings attended by officers and executives of the respective companies to ensure consistency of decision-making and operational efficiency and establish and maintain a system where execution of duties by subsidiary Directors are reported regularly to Ichigo.
(ix) In accordance with Ichigo’s approach, its subsidiaries establish a corporate governance framework, compliance structure (including an internal reporting system), a structure to secure the reliability of financial reporting, an internal audit system, a system against anti-social forces, a structure to prevent insider trading, and risk management systems. Ichigo’s subsidiaries also establish and operate a system to ensure that the officers and employees of the subsidiaries execute their duties in compliance with laws and regulations, and the Articles of Incorporation.