Corporate Governance

1. Basic concept

Our company has been providing the products which meet the needs of the times, through our pursuit of the products giving minimal loads to the patients and gentle to the people as well as the development and introduction of various kinds of new technologies under the corporate philosophy “to contribute to the progress of the healthcare and serve the people of the world for their health through the provision of ever improving medical systems”. Under such corporate philosophy, it is our recognition that promoting the speedy management as a company employing committee-based corporate governance structure as well as the transparency of the management will meet the expectation of the stakeholders including stockholders, while augmenting the corporate values.

2.The company’s system and policy

 

①Matters pertaining to directors and employees who are to assist in the duties of the Audit Committee
An administrative office for the Board of Directors has been established to assist in the duties of the various Committees including the Audit Committee and the Board of Directors; and one or more staff has been assigned to this office. In addition to the staff assigned to the administrative office for the Board of Directors, employees of the Audit Division and the General Affairs Division also assist in the administrative affairs of the Board of Directors and the various Committees. It should be noted that Directors have not been appointed explicitly to assist in the duties of the Audit Committee.

②Matters pertaining to the independence of the Directors and employees from the Executive Officer
The Audit Committee shall receive prior explanation regarding the personnel changes involving employees belonging to the administrative office for the Board of Directors and may request changes to the Executive Officer in charge of human resources, as necessary. When disciplinary actions are to be taken against an employee belonging to the administrative office for the Board of Directors, the Executive Officer in charge of human resources must obtain prior approval from the Audit Committee.

③System for Executive Officers and employees to report to the Audit Committee and the system for other reporting to the Audit Committee
Regarding the matters that have been brought before or reported to the Executive Committee, results of internal audits conducted by the Auditing office and the status of reports under the whistleblower system to monitor compliance and a fact that was discovered by an Executive Officer to possibly cause material damage to the Company, reports must be made without delay to the Audit Committee.

④Systems to ensure that audits are performed effectively by the Audit Committee
The Audit Committee shall establish a standing audit committee and draw up activity plans upon adjustments with the audit plans of Auditing office.

■ System to ensure that the execution of duties by the Executive Officers comply with the relevant laws and the Articles of Incorporation

Same as “System to ensure that execution of duties by the employee comply with relevant laws and the Articles of Incorporation,” stated below.

■ Enhancement of other systems stipulated as necessary by the Order of the Ministry of Justice to ensure the adequacy of operations

①System regarding retention and management of information relating to the execution of duties by the Executive Officers
Internal rules (Executive Officer Regulations and Document Retention Rules) stipulate that records of decisions by Executive Officers must be made and retained and that approval documents must be retained for certain number of years. Moreover in the event that a request is made for the above record or document by a member of the Audit Committee, it must be submitted by the Executive Officer without delay.

②Regulations and other systems relating to the management of risk of loss
In terms of risks relating to compliance, information security, the environment, disasters, quality and export control, systems have been established at each corresponding division to formulate rules and guidelines, conduct training, and create/distribute manuals.
Efforts are also being made to monitor the probability of occurrence of new risks through the reports given periodically by the Executive Officers on the execution of their duties; and in order to deal with the newly occurring risks, instructions are given to the Divisions concerned by the President and Chief Executive Officer as necessary, in addition to appointing an Executive Officer responsible for promptly dealing with such risks.
Furthermore, in the event that the risks materialize and the occurrence of material losses is predicted, the Executive Officer shall promptly report to members of the Audit Committee.

③ System to ensure that the execution of duties by the Executive Officers is conducted effectively
The effectiveness of the execution of duties by the Executive Officers is ensured by utilizing the management control system indicated below.

• The Executive Committee and executive committee for each segment have been established and decisions are being made after deliberations on various aspects take place.
• Each segment, to the end of systematically and efficiently executing operations, draws up its business strategies, action plans and numerical targets in the form of the medium-term management plan (mediumterm plan) and the yearly budget and manages its performance accordingly.
• Internal audits are being performed to monitor the status of operations and to implement improvements.
• In order for the Audit Committee to supervise the accounting auditors and to ensure the independence of the accounting auditors from the Executive Officers, the Audit Committee shall receive prior reports on the audit plans from the accounting auditors. Remunerations for the accounting auditors and commissioning nonauditing operations to the accounting auditors require prior approval by the Audit Committee.
• Documented processes relating to the items that are to be included in the financial statements are being steadily implemented and verified (verifications are commissioned to accounting auditors as necessary).

④System to ensure that the execution of duties by the employees comply with relevant laws and the Articles of Incorporation
A compliance system is being maintained continuously by utilizing the management control system indicated below.

• Internal audits by the Auditing office and other related divisions are being conducted in order to confirm the status of compliance and to deter violations of the laws.
• A whistleblower system to monitor compliance has been established so that personnel may report incidents to their divisions.
• As part of the Company’s compliance education, an educational program using texts including handbooks on the laws relating to the business activities of the Company is being conducted.
• In order to make the internal control systems known throughout the Company and to ensures their efficiency, the Executive Officers, as part of their duties, are establishing the rules for each Company. However the enactment and the revision/removal of rules determining the system of rules/enactment methods, and of the rules relating to the organizations of the companies and to compliance/information management, particularly significant ones will require the approval of the Board of Directors.

⑤System to ensure the adequacy of operations by the Corporate Group comprising the Company, the Company’s parent company and the Company’s subsidiaries
The adequacy of operations by the Corporate Group is ensured by the system indicated below.

[The system, which includes the parent company]

• We regard the corporate behavior standards of the Company and Hitachi, Ltd., the parent company, as the foundation for the Hitachi brand and our CSR activities. We will nurture a set of values to be shared by the entire Hitachi Group, while at the same time share in the understanding of the CSR that need to be fulfilled as a corporate entity.
• We are undergoing periodic audits on operations, accounting, export control and compliance by the parent company and receiving the results thereof in the form of appropriate feedback.
• The Company and the Hitachi Medical Group have made it their policy to conduct transactions within the Hitachi Group fairly and based on market prices.

[The system, which includes the subsidiaries]

• The Company has determined policies and management rules, which have at their core the compliance with the laws governing the business activities of the Hitachi Medical Group, including information security, the environment, quality control, export control, prevention of antisocial business, etc., and has laid down similar rules at its subsidiaries.
• In order to ensure efficiency and compliance, we have determined rules on internal audits and have developed a system that conducts periodic audits. We have also dispatched the Company’s personnel as Directors and Corporate Auditors to the Hitachi Medical Group Companies.
• We have established a whistleblower system to monitor compliance, which enables employees of the Company and the Hitachi Medical Group to make reports of incidents to the responsible divisions of the Company.
• In terms of internal controls over financial statements, documented processes relating to the items that are to be included in the financial statements are being steadily implemented and verified by the Corporate Auditors, etc. of each company.
• The Company and the Hitachi Medical Group have made it their policy to conduct transactions within the Group fairly and based on market prices.

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