Initiatives of Internal Control
Principle 5, "Ensuring effective governance and compliance," in Principles of Corporate Behavior, states that we will not tolerate any form of bribery, corruption, dishonest marketing, cartels, insider trading, or conflict of interest and that we will conduct all transactions in accordance with these principles, promoting fair and open competition in the marketplace.
To put this principle into practice, Epson created the Epson Global Code of Conduct, which explains how employees are expected to implement the Principles of Corporate Behavior. The code impresses upon employees the need to seek profits by proper means and to immediately report conduct that is or could lead to a violation.
Principle 7, "Working with business partners for mutual benefit," in Principles of Corporate Behavior strictly forbids acts of bribery and collusion with business partners and strongly urges business partners to refrain from engaging in illegal or unethical business practices themselves. They are also strongly urged to avoid acts of bribery for business purposes in Anti-Bribery, Anti-Curruption and Competition Law (Antimonopoly Act) Guidelines for Business Partners. Epson Group Supplier Guidelines stipulates that Epson conducts business in a way that does not depend on entertainment or the like from suppliers. We ask our business partners to promptly report violations or potential violations by Epson personnel to Epson Group companies.
Epson Group Anti-Bribery Regulation
Established in 2014 and based on the Principles of Corporate Behavior and the Epson Group Compliance Basic Regulation, this regulation, reflecting the resolve of the Board of Directors to preempt bribery, prescribes an anti-bribery framework and rules.
In addition to prohibiting employees from bribing public servants and those in similar positions, this regulation stipulates that departments must take steps to prevent bribery under an anti-bribery organization headed by the president. In addition, it also stipulates that if agencies are used, they shall not order, consent to, or abet acts of bribery.
Anti-corruption activities at Epson are overseen by a compliance control department per the Epson Group Anti-Bribery Regulation, and various supervisory departments work together to monitor and control entertainment and gift-giving, invitations, donations, sponsorships, agency management, hiring, and much more.
|Response to risks||Anti-corruption law violations are cited as an important company risk. Risks are evaluated based on the likelihood of corruption (per the Corruption Perceptions Index) in countries and territories around the world and at Epson's overseas subsidiaries, as well as on the impact that an incident of corruption would have. For high-risk organizations, we formulate and execute control plans every year, regularly check plan progress, evaluate action effectiveness, and report the findings to the board of directors.|
|Business partners||Bribery and collusion with business partners are prohibited. Departments with primary responsibility for oversight of business partners are in charge of anti-bribery and anti-corruption activities. The procurement department evaluates new suppliers prior to the start of business transactions and evaluates existing suppliers by means of a detailed annual CSR self-assessment questionnaire.|
|Entertainment and gift-giving||Illegal and unethical gifts and entertainment are prohibited, and prior approval is required for gifts and entertainment. Advance requests are submitted, examined, and checked to determine whether gifts and entertainment are acceptable.|
|Education||We formulate annual education plans, share information about cases of bribery and corruption, and require all personnel to complete an online course during October of each year, which we have designated as Compliance Month. We also provide anti-bribery and anti-corruption education to our people in procurement, sales, development, and design, as these organizations are at higher risk of bribery and corruption.|
|Response to incidents||If a violation that has a material impact on Group management should occur, the Crisis Management Committee will be called upon to invoke the crisis management program.|
Compliance Promotion Activities
To instill internal compliance awareness, Epson provides online courses, training, and more on a regular basis to both executive officers and employees, in keeping with the Epson Global Code of Conduct. We invite outside experts to give instruction in compliance training courses for executive management. We also provide online compliance courses and compliance training by internal instructors for all personnel. At our affiliates outside Japan, our efforts include providing compliance training that reflects local conditions.
October is Compliance Month at Epson, a period during which we raise employee compliance awareness throughout the global Epson Group based on our Management Philosophy and Principles of Corporate Behavior. This helps employees recall the importance of compliance to the realization of the Management Philosophy. A variety of actions are taken during the month. For example, Epson's Chief Compliance Officer and the heads of Epson divisions and subsidiary companies issue compliance messages. A special article on compliance is published in the company newsletter. Action is taken to communicate and promote understanding of the Epson Global Code of Conduct, and personnel receive compliance training.
After Compliance Month ends, we conduct a survey to ascertain the extent to which employees recognize the importance of compliance and to pinpoint ways to improve activities for the next year. The survey enables us to find out about the kind of actions taken by the various Group companies and organizations and allows us to gather opinions and suggestions about activities. Survey responses are totaled, analyzed, and used for future activities.
Global Compliance Activities
Epson has built and is operating an R-CCO (Regional CCO) organizational system centered on the CCO in order to expand compliance activities globally. Since different regions of the world have their own languages and cultural norms, the sales company that supervises a region leads the compliance activities in that region, and Group companies cooperate to carry out the activities. We have established a vision of compliance management to which Epson aspires and are implementing a Global Compliance Program to realize this vision. Under this program, Epson sets targets for each year and follows a cycle of evaluation, assessment, and improvement of systems and operations at Group organizations and subsidiaries. By so doing, we aim to achieve our targets by sharing compliance policies, issues, and measures throughout the Group.
International Trade Initiatives
Epson is a multinational corporation with production centers, sales centers, customers, and business partners around the world. Smooth international trade operations are essential for delivering Epson products and services to customers in a timely manner.
Meanwhile, we must observe numerous conventions and frameworks governing international trade that have been put in place to maintain international peace and security.
To maintain compliance with these and to ensure smooth trade, Epson has established comprehensive systems and processes that have enabled Group companies to earn certification from the relevant authorities for compliance with international trade programs. (See the table below.)
|Seiko Epson Corporation||Special general bulk export license
(Ministry of Economy, Trade and Industry)
|The program grants a blanket license to export certain items (or provide certain information) to certain destinations without an individual application if an export control system is found to be in place.|
|Seiko Epson Corporation||Authorized exporter
(Ministry of Finance, Tokyo Customs)
|The program enables certified parties to get export permission even if goods are not brought into a bonded facility, etc., if an export security control and compliance system is found to be in place.|
|Seiko Epson Corporation||Authorized importer
(Ministry of Finance, Tokyo Customs)
|The program enables certified parties to separate import declarations from tax declarations and accept goods before filing a tax declaration if an import security control and compliance system is found to be in place.|
|Epson America Inc.||Customs-Trade Partnership Against Terrorism (C-TPAT)
|The program is designed to strengthen security of goods imported to the US and security of import channels to the US.|
|Epson Portland Inc.|
Business Continuity Management
Epson has a solid business continuity management program in place. For many years we have taken action to prevent and manage disasters, but the program really got started in 2006, when we formulated a business continuity plan (BCP) for what was then our liquid crystal displays business.
If a disaster or some other event impacts business at an Epson Group production site, our first priority is to ensure the safety of our employees. Next, we take steps to ensure continuity of the product supply so as not to inconvenience our customers. In order to provide a steady supply of products, particularly consumables and core components such as quartz and semiconductor devices, print heads, and small liquid crystal panels, we have preparations in place that allow us to limit damage, secure repair parts, switch to alternative producers, and restore operations in line with established procedures. We conduct exercises to check our procedures and ensure their effectiveness. Mission-critical IT systems and critical data that are essential for business continuity are consolidated in a robust data center, and backups are at the ready in the event of a disaster. We have secured multiple distribution routes to enable us to immediately switch to alternative routes in response to any disruption in international shipping and transport. In addition, our finance, accounting, public relations, and other key corporate functions have established BCPs so that business can continue in emergencies.
Meanwhile, we ask the companies that make up our supply chain to strengthen their BCPs, and we check to see how established those BCPs are. We analyze the items we purchase, and we develop multiple sources for those that are most important. When we cannot secure multiple sources, we keep an inventory of goods on hand or try other means to ensure continuous production in the event that something should happen to a supplier.
Every business and site in the Epson Group will continue to refine its BCP to ensure that it has the resilience to withstand threats to business continuity going forward.
Tax Compliance Policy
Epson seeks to fulfill its corporate social responsibility by paying appropriate taxes in compliance with the spirit as well as the letter of the tax laws and regulations in the countries and regions where it operates. In accordance with this basic policy on taxes, we are taking the actions below to maintain and improve tax compliance.
- Tax governance
- The Board of Directors is responsible for overseeing tax risk, and Epson's Chief Financial Officer is the responsible official of Group tax affairs. The group that is in charge of tax affairs reports and manages taxes is under the supervision of the Chief Financial Officer.
- Epson considers tax risk to be an important risk, and regularly reports such risks to the board of directors and the Corporate Strategy Council, which is composed of directors of the company.
- Employees are trained in the tax-related regulations and business process standards that Epson has established to ensure that it properly fulfills its tax obligations. We conduct periodic internal tax audits and report the findings to top management and to the Audit & Supervisory Committee.
- Monitoring tax affairs
- We appropriately respond in a timely manner to changes in local tax systems and taxation trends through regular reporting among the group that is in charge of tax affairs and Epson's local subsidiaries.
- We enlist the support of tax accounting firms and other external experts for advice on taxes and for tax support in each country and region.
- Tax planning and Tax avoidance
- Around the globe, we strive to effectively use preferential taxation systems where possible in our normal business activities to ensure a suitable tax burden.
- We do not transfer value created to low tax jurisdictions, and do not use tax structures intended for tax avoidance without the spirit of the law.
- Dealing with uncertainty
- Tax risk uncertainty is expected to increase as countries and regions around the globe strengthen their tax reporting obligations, tax audits, and tax enforcement. Epson controls tax risks by identifying situations that could potentially pose serious tax risks.
- Transfer pricing taxation
- Epson complies with local tax laws and OECD guidelines to control transfer pricing tax risks. We have established transfer pricing guidelines for the Epson Group to help ensure appropriate transfer pricing transactions. In line with these transfer pricing guidelines, we control the profitability range of our global subsidiaries to ensure that transactions are made at arm's length.
- We use an advance pricing arrangement (APA) for transactions with subsidiaries in high-risk countries.
- Anti-tax haven rules (also known as Japanese Controlled Foreign Company rules, or "CFC")
- Epson sets up foreign subsidiaries to carry out its ordinary business activities, but does not do so in "tax haven" jurisdictions to avoid taxes. When anti-tax haven rules apply, Epson properly files and pays taxes.
- Relationships with tax authorities
- Epson strives to work in good faith with tax authorities and to maintain and improve good tax corporate governance.