Seiko Epson Corporation
Epson Corporate
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Corporate governance at Epson is based upon a commitment to sustaining trust-based management by providing a highly transparent form of management that benefits stakeholders, including customers, shareholders and employees, with the aim of increasing corporate value, strengthening management oversight, and complying with ethical standards of corporate conduct.
Epson currently maintains a board of directors and a board of statutory auditors. As of the end of the fiscal year ended March 31, 2009, the board of directors was composed of nine members and convenes once every month or as needed. Epson has established the Nomination Committee for establishing selection criteria for directors and screening candidates and the Compensation Committee for defining appropriate remuneration systems and the amounts of director remuneration. Upon deliberation of these matters, the committees then present their conclusions to the board of directors.
While Epson has not yet adopted a system involving outside directors, it is continually investigating such systems as it searches for ways to further improve corporate governance. To ensure the greater independence and transparency of audits, Epson has assigned three outside statutory auditors to its five-member board of statutory auditors. Epson is implementing the following measures to increase the effectiveness of audits. Statutory auditors must:
In addition, Epson established the Audit Staff Office to assist statutory auditors in the execution of their duties, thereby making audits more effective, and leaving no doubt as to the independence of the audits.
Epson has further established an internal compliance system to guard against potential legal and internal regulatory violations in the operations of any of its departments, as well as an internal Audit Office (comprising 16 auditors) that reports directly to the president the results of routine internal audits, including those conducted at Epson subsidiaries. The Audit Office evaluates the effectiveness of the governance process and requests improvements where needed.
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Epson has established the following basic policies for improving its system (hereinafter, "internal control") for ensuring the appropriate conduct of operations. Under these basic policies, responsible departments promote improvements. These improvements, which are based on the Management Philosophy and Principles of Corporate Conduct that embody the philosophy, are reported to the Trust-Based Management Promotion Meeting, which is attended by all directors and standing statutory auditors. By doing this, Epson is taking action to steadily improve the level of internal control for the entire Group.
Epson is instituting a system that will ensure the efficient execution of business. To that end, Epson has established regulations governing each job function, the division of operational duties, and the management of affiliated companies while distributing power and authority across the entire Group. Affiliated companies in particular must report or receive prior approval from the parent company of changes in management regulations. Regulations at affiliates that meet certain criteria are put on the agenda for discussion at the parent company's board meetings, thereby creating a system of business oversight for the Group. Personnel responsible for business operations must report to the board of directors on the following items at least once every three months.
The safeguarding and management of information related to business operations is carried out under regulations governing document management, management approvals and contracts, and other related regulations, with directors and statutory auditors reviewing these and other relevant documents on an ongoing basis.
Epson has established regulations on management compliance that set forth the basis for its legal compliance and has set up a compliance system. As a cornerstone in the practice of trust-based management, Epson has established principles of corporate conduct and an employee code of conduct that is based upon these principles.
In addition, the president holds overall responsibility for management's legal compliance, with heads of each business and individual department responsible for compliance with laws related to their respective consolidated businesses.
Epson has installed a legal compliance hotline and other counseling services to facilitate internal compliance-related inquiries and reporting and is implementing in-house compliance training, including web-based training, for employees.
A forum has been instituted in which issues related to management's legal compliance are discussed under the president's leadership. Standing statutory auditors also attend this forum, which allows them to corroborate the actual content of legal compliance programs. The president periodically reports to the board of directors on compliance-related issues and formulates appropriate measures as needed.
Epson has established regulations that form the basis of its risk management system and has defined the organization, procedures, and other key elements of this system. Overall responsibility for risk management resides with the president, with heads of each business and department responsible for the management of risk in their respective consolidated businesses.
Under the president's leadership, a forum has been established wherein risk management-related issues are discussed. This forum routinely deliberates to identify and assess important Group risks and implements activities appropriate for their control. When major risks become apparent, the president leads the entire company in mounting a swift initial response in line with Epson's prescribed crisis management program.
The president periodically reports to the board of directors on risk management issues and formulates appropriate measures to respond to these risks.
Based on corporate regulations governing auditors and audit procedures, statutory auditors have the authority to conduct hearings with directors and other key personnel whenever they deem such hearings necessary.
Statutory auditors are also authorized to attend sessions of the Corporate Strategy Council, the corporate management meeting and other important business meetings. Attendance at these meetings enables the auditors to conduct audits based on the same information as directors. Statutory auditors also routinely review important documents related to management decision making.
Epson has established an Audit Staff Office with specialized personnel to assist the statutory auditors in their duties. The views of the board of statutory auditors are given a great deal of weight in the evaluation and transfer of personnel assigned to this office. To improve the effectiveness of their audits, statutory auditors consult on a regular basis with the internal Audit Office and independent public accountants.
In addition, the holding of regularly scheduled meetings with representative directors allows statutory auditors to directly assess business operations.
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