Nurturing a culture of trust
Corporate ethics and compliance with the law
As the foundation supporting the Haseko Group’s corporate activities, we work for intensive adherence to corporate governance and compliance.
Basic Approach to Corporate Governance
Haseko Corporation has made it a basic policy of its corporate management to contribute to society and win society's confidence through its business operations that put customers first. The Company has also positioned reinforcement of corporate governance as one of its utmost management priorities as it recognizes that it is indispensable to secure management transparency and objectivity for maximizing corporate value in a stable manner over the long term and ensuring shareholders’ interests.
Basic Explanation of Company Institutions
Haseko Corporation has adopted an auditor system as a corporate institution. The Board of Directors of Haseko Corporation serves as the institution where directors with expert knowledge and experience in various business sectors conduct decision-making on managerial issues and supervise execution of duties of other directors. As for monitoring of management operations, the Company’s system provides the Board of Auditors, the majority of which are outside auditors, with the monitoring function from an objective and neutral standpoint from outside through implementation of audits. On top of these functions, starting in June 2016, Haseko appointed outside directors with abundant experience and track record to occupy at least one third of the Board of Directors, so that they shall provide appropriate opinions and advice in order to further activate discussions at the Board of Directors and enhance the function to monitor business management. With this system in place, we are making efforts to build an optimum system for the Company, taking into consideration the balance between the operation of the Board of Directors and the monitoring functions. In addition, one of the appointed outside directors is a woman, and we are continuing to work towards ensuring the diversity of the Board of Directors.
Decisions on certain matters authorized by the Board of Directors are made by the Management Council, Business Operation Council, and Technology Operation Council, each of which limits the participation of directors to a certain extent. In doing so, we have developed a system to separate the functions of decision-making and supervising such decision-making, so that each director can supervise the execution of duties by other directors. In addition, the Management Council is also responsible for the function of discussing in advance the important issues to be decided by the Board of Directors.
Details of Company Institutions
- The Board of Directors holds regular meetings once a month and extraordinary meetings as necessary, and is responsible for important decision-making and regular reports on matters related to management. In addition, operating officers make reports on business operations on a regular basis to the Board.
- The Nomination and Remuneration Committee is an advisory body for the Board of Directors, in order to secure objectivity, transparency, and fairness of the procedures related to the nomination, remuneration, etc. of directors and enhance corporate governance. The committee comprises all independent Outside Directors and an equivalent or below number of Representative Directors, etc.
- The company has established the Management Council and two operation councils - the Business Operation Council and the Technology Operation Council - to facilitate prompt and flexible decision-making on matters related to daily business operations to the extent they are authorized by the Board of Directors. Participation of directors in the Management Council and the two operation councils are limited to a certain level, so that the functions of decision-making and supervising such decision-making are divided and clarification is made for the responsibilities and authority for these functions. Moreover, the Management Council is responsible for the function of discussing in advance the important issues to be decided by the Board of Directors.
- The Risk Management Committee is held once every quarter and on an ad hoc basis as necessary whenever any material risk has arisen. It examines and determines the establishment, amendment or abolishment of internal rules on risk management and risk prevention plans, etc., and discusses and decides on the implementation policies and specific measures for risk management, among other things.
Effectiveness Analysis and Evaluation of the Board of Directors
Based on the results of analyzing and evaluating the effectiveness of the Board of Directors in fiscal 2018 in accordance with our Basic Policy on Corporate Governance, we have confirmed that the Board of Directors has held constructive and active discussions and that its effectiveness has been sufficiently ensured. The outline and results of this analysis and evaluation are as follows.
We conducted a questionnaire regarding the effectiveness of the Board of Directors for all directors and auditors. Reflecting on the results of this questionnaire and reports from the secretariat on the operation of the Board of Directors in fiscal 2018, deliberations were held and the effectiveness of the Board of Directors as a whole was analyzed and evaluated at a meeting of the Board of Directors held in April 2019, based on opinions presented by the Board of Auditors and individual directors.
- Institutional Design/Composition: Number of members, percentage of independent Outside Directors, diversity, frequency of meetings, meeting length
- Operation: Number and content of agenda items, quality and quantity of agenda materials, timing of prior distribution, quality of prior explanations
- Deliberation: Constructive discussions and multifaceted considerations in meetings, ethos, one’s own roles and responsibilities
- PDCA: Addressing issues raised, reporting results after resolutions, efforts toward improvement
Evaluation Results and Future Response
As a result of analysis and evaluation, we confirmed that the effectiveness of the Board of Directors in fiscal 2018 was adequately ensured, and that we will work to improve a few issues recognized in the evaluation results.
Going forward, we will continue utilizing effectiveness analysis and evaluation of the Board of Directors to further improve the Board of Directors, and make efforts to enhance its effectiveness.
Executive Remuneration Determination Process
Remuneration of directors is determined by resolutions of the Board of Directors based on our Basic Policy on Corporate Governance, following discussions in the Nomination and Remuneration Committee, which comprises all independent Outside Directors and the same or lower number of Representative Directors, etc. Remuneration of auditors is determined by discussions among the auditors. The Nomination and Remuneration Committee held one meeting in the current fiscal year, where it discussed the basic remuneration for directors and reconfirmed the basic remuneration table for directors. The committee also discussed the application of performance factors based on the calculation formula for the performance-linked remuneration and the achievement status of performance indicators, and unanimously approved a proposal drafted for the Board of Directors.
Outline of Directors’ Remuneration System
Composition of Remuneration
- Remuneration of directors consists of basic remuneration (fixed remuneration) and performance-linked remuneration.
- Basic remuneration is paid monthly in a fixed amount, with a standard amount set for each position.
- Performance-linked remuneration consists of executive bonuses and stock remuneration. This system makes adjustments according to business performance, with the purpose of offering incentives for achieving management plans and increasing corporate value.
- Because the medium-term management plan sets consolidated ordinary income as a specific numerical target, the achievement status of the consolidated ordinary income relative to the initial forecast as of the beginning of each fiscal year is used as a performance-linked indicator.
- In principle, Outside Directors and Auditors are not eligible for performance-linked remuneration.
In the case where holding shares of our business partners will help facilitate the operation of business, Haseko’s policy is to hold shares as cross-shareholdings in accordance with the “Guidelines for Asset Acquisition in Facilitating Transactions” that is separately prescribed.
The guideline states that the total book value for assets acquired shall be about a prescribed amount of the consolidated net assets.
Haseko examines cross-shareholdings individually in terms of medium- to long-term economic rationale and future projections annually at a Board of Directors meeting, and if any shares are determined to be without merit in holding, then those shares will be reduced or otherwise reconsidered. The Board of Directors confirms the status in transactions for the businesses relevant to the cross-shareholdings once every year, including annual amounts of orders received and purchase amounts for those businesses to deliberate the feasibility of continuing shareholding.
Status of Audits
Status of Audit by Corporate Auditors
Haseko is a company with corporate auditors. The Board of Corporate Auditors consists of five members: two full-time corporate auditors and three outside corporate auditors. A meeting is held once a month and as necessary.
The two full-time corporate auditors cooperate and attend important meetings including those of the Management Council, Business Operation Committee, Technology Operation Council, and Risk Management Committee. They also stand in on internal audits, conduct interviews with directors, other officers, and employees as necessary to assess their business execution, inspect approval forms, meeting minutes, reference material for meetings, and reports in order to carry out audit activities that include the internal control system.
The group audit liaison meeting is also held so that auditors of Group companies can coordinate with each other.
With regard to financial auditing, all corporate auditors meet with accounting auditor Ernst & Young ShinNihon LLC to receive an explanation of the financial audit plan, quarterly review, and financial audit report. The full-time corporate auditor also interviews the accounting division and accounting auditor as necessary.
Status of Internal Audit
An internal audit related to information management, risk control, and other aspects is performed by the Internal Auditing Department consisting of nine members, and an assessment of the internal control system for financial reporting is also conducted.
In the event a problem regarding the internal control system is detected through financial auditing, that information will be promptly relayed to the relevant division for consideration to be made regarding improvements, and at the same time the Internal Audit Department will receive the said information as part of the internal control system assessment. Feedback will be provided for the various divisions and each division will be monitored as to their improvement, with the results being reported to the president, the Board of Directors, corporate auditors, and accounting auditor.
To decide on the coordination of roles and for conformity with the audit by corporate auditors, activities are carried out while providing status reports from time to time to the corporate auditors, who will stand in on internal audits, receive reports on the results of those audits, and take part in information exchange as necessary regarding conditions within the Company.
Status of Accounting Audit
Name of Accounting Auditor
Ernst & Young ShinNihon LLC
Policy Regarding Selection of Accounting Auditor and Rationale
Haseko stipulates its policy on dismissal of or non-reappointment of an accounting auditor in the following manner.
In the event the Board of Corporate Auditors finds that the accounting auditor falls under any of the items in Article 340, paragraph (1) of the Companies Act, the accounting auditor may be dismissed with consensus among all corporate auditors.
In addition to the above, when an event which damages the competency or independence of the accounting auditor occurs and proper execution of the audit is deemed difficult, the Board of Corporate Auditors may propose a resolution regarding the dismissal of or non-reappointment of the relevant accounting auditor at a general meeting of shareholders.
The Board of Corporate Auditors, based on the standards for evaluation of the accounting auditor that they have established, will make an assessment of the accounting auditor, collect the necessary documents from the directors, relevant divisions within the Company, and the accounting auditor as well as be provided a report, upon which they will examine the decision and suitability of reelection based on this policy every term.
Assessment of the Accounting Auditor by the Corporate Auditors and the Board of Corporate Auditors
Haseko’s Board of Corporate Auditors conducts an assessment of the accounting auditor.
The Board of Corporate Auditors has prepared standards for evaluation of the accounting auditor to assess items which include quality control of the auditing firm, independence of the auditing team, expertise, level of audit compensation, corporate auditors, management, communication with the internal audit division, etc.
The accounting auditor is evaluated based on these assessment standards; necessary documents are obtained from directors, relevant internal divisions, and the accounting auditor and a report is provided after which the decision and suitability of reelection based on the policy on dismissal of or non-reappointment of an accounting auditor is considered every term.
As a result of evaluation made based on these assessment standards along with consideration of other confirmed items, a decision was made that competency, audit structure, independence, and expertise, etc. of the accounting auditor were appropriate.
Compliance/risk management system
- With the recognition that intensive compliance is indispensable for the existence and continuity of a corporation, the Company established the Haseko Group Standards of Conduct in April 2003, under which Haseko has been working to establish a management system where all directors, operating officers and staff respect societal standards and take sensible courses of action in keeping with their duties as members of society, as well as complying with all laws and the Company's articles of incorporation, so that the Company can win the confidence of society. Moreover, for enhanced compliance Haseko established the Compliance Department which conducts promotion and education of compliance based on the internal rules and regulations on compliance. An internal whistle-blowing system for consultations on compliance and notification of illegal conduct, etc. and an external contact have also been established.
- In April 2005, the Company established the Internal Auditing Department that is under the direct control of the President. Pursuant to internal rules and regulations on internal audits, the Department investigates and evaluates whether activities of respective divisions conform to laws and regulations, the Articles of Incorporation, the Company's rules and regulations, corporate policies, etc. and whether they are reasonable, and works to make improvements based on the results.
- The Company has no relations with anti-social forces or groups that threaten the order and security of civic life, and will cope with such anti-social forces and groups systematically, and with an adamant and resolute attitude.
Risk Management System
- In anticipation of a variety of risks, Haseko endeavors to collect risk-related information and prepares preventive measures and appropriate countermeasures in advance against risks according to their magnitude and possibility of arising. Through these efforts, Haseko aims to minimize the potential losses and to systematically cope with risk management centering on the Risk Management Department established in April 2006.
- Specifically, Haseko has set up a system in which respective sections of the Management Division coordinate with each other and check the status of business operations in accordance with the roles they are assigned, while the Internal Auditing Department conducts further checking. For the corporate approval system that serves as a record of decision-making for work implementation, the Company has introduced an electronic system in which legal procedures have been digitized since April 2002. This system enables auditors and the Management Division to view and check the content at any time.
- Furthermore, of the issues forwarded to the Board of Directors and the two operation councils (the Business Operation Council and Technology Operation Council), those involving many departments or requiring specialized knowledge are subject to sufficient verification in advance by the adequately established advisory meetings and committees. Periodical results reports are also mandatory for issues that require monitoring.
- On top of these, the Company established the Risk Management Council under the chairmanship of the President in May 2006 with the aim of strengthening the risk management system of Haseko and its entire Group. This enhanced the Company's risk management system in which cross-sectional collection of information, analysis, valuation and handling of risks are conducted in accordance with the internal rules on risk management. In addition, the Company has appointed a Chief Risk Management Officer responsible for the overall risk management of its entire Group.
- The contents of deliberations at the Risk Management Council are required to be reported to the Board of Directors on a periodic basis.
Establishment of an Internal Whistleblowing System
Haseko has set up a service to receive public-interest whistleblowing reports by officers and employees and for consultation regarding harassment and compliance issues in general in the Compliance Department of the Risk Management Department, as well as in a law firm as an external contact. A protective framework has been established for whistleblowers and an environment that is friendly for employees to reach out for consultation has been created in an effort to realize early detection and correction of illegal activity and other misconduct.
Promotion of Compliance
To promote corporate activity that is sincere and contributes to society, we have established the “Haseko Group Standards of Conduct,” which stipulates basic standards of conduct for all officers and employees. To instill the fundamental aspects of these standards and compliance, all officers and employees have been provided with the “Haseko Group Compliance Manual.” Information is also provided periodically online through the intranet to promote compliance. We are also raising awareness regarding compliance by having all officers and employees consent to the checklist of items regarding promoting compliance.
Business Continuity Plan (BCP)
The Haseko Group has formulated a “Business Continuity Plan” which clarifies key operations of Group companies in the event of a major earthquake and other natural disasters, ensuring the safety of “housing” provided by us, preventing the suspension of operations or in the event that they are suspended, enabling the resumption of operations within the shortest possible time; and a mechanism of promptly preserving offices and tasks after ensuring the safety of employees and their families, as well as enabling employees engaged in restoration activities and restoration support to take action autonomously. The “Business Continuity Plan” stipulates that it shall be triggered by the authority of general managers of divisions in the event where large earthquakes with a seismic intensity of 6 Lower or more are observed at an earthquake observation point of the Japan Meteorological Agency located within a 50 km radius of the Haseko Group’s business bases (earthquakes below the reference seismic intensity are not excluded depending on the degree of the damage, etc.), and also in the event of natural disasters other than earthquakes (including storms, heavy rain, heavy snow, floods, high tides, tsunamis, eruptions, etc.) if the damage is significant.
Measures Against the Spread of COVID-19
The Haseko Group, in light of the spread of COVID-19, has been conducting business while implementing preventive measures against infections, such as recommending telecommuting, staggered commuting, and restraint on business trips and meetings that require gathering of people, since early March 2020. These measures apply correspondingly with the business continuity plan created in 2009 for the swine flu pandemic, and we continue to deal with COVID-19.
Specifically, the Group Headquarters for the Coronavirus Task Force headed by the president of the Company has been set up, working to prevent employees and their families as well as our customers from contracting the disease, while ensuring business continuity by identifying priority business tasks, securing the supply chain, strengthening cooperation with stakeholders, and establishing a work environment for employees working from home and other situations.
Standards of Conduct
Haseko Group Standards of Conduct
With the recognition that intensive compliance is indispensable for the existence and continuity of a corporation, the Company established the Haseko Group Standards of Conduct, under which Haseko has been working to establish a management system where all directors, operating officers, and staff respect societal standards and take sensible courses of action in keeping with their duties as members of society, as well as complying with all laws and regulations both in Japan and abroad, and the Company’s articles of incorporation, so that the Company can win the confidence of society.
- Behave with common sense and responsibility / obey laws and regulations / respect human life / honor human rights / prevent risks
- Obey industry laws / observe thorough quality control / ensure complete safety management / raise customer satisfaction / obey laws such as the Antimonopoly Act / prevent unfair competition / prevent infringement upon intellectual property rights / prevent bribery and corrupt practices / make proper donations and political contributions / conduct sound accounting procedures and tax processing / disclose management information / sever ties with anti-social forces
- Develop new technology, products, and services / develop and improve products and services to fulfill customer needs / conduct environmental protection activities / contribute to society
- Manage and appropriately utilize corporate assets / manage corporate information / manage personal information / protect intellectual property rights / operate information systems
- Foster a positive workplace / comply with labor-related laws and regulations / prevent labor-related disasters and preserve the work environment / prohibit harassment / prohibit political and religious activities
- Prohibit the provision of profits related to the exercising of shareholder rights / prohibit conflict of interest / prohibit insider trading / prohibit breach of duty / prohibit any other form of fraudulent activity
Our policy and commitment to prevent bribery and corruption
The Haseko Group has positioned ensuring the practice of compliance as one of its important management issues. In order to promote this, the Group has established the "Haseko Group Standards of Conduct" and ensures thorough compliance among all officers and employees.
Furthermore, in order to keep all officers and employees well informed of the basic stance described in the Standards, the Group has distributed to all officers and employees the "Haseko Group Standards of Conduct" and the "Haseko Group's Compliance Rules and Regulations" including the "Haseko Group Compliance Manual" that explains each provision of the Standards of Conduct.
The "Haseko Group Compliance Manual" compiles specific items to be complied with related to matters including "compliance with various laws and regulations in the course of business (prohibition of bid rigging, cartel, etc.)," "prohibition of misconduct (prohibition of acts of conflict of interest, etc.)," "compliance with social standards (responses to anti-social forces, provision of gifts and entertainment to public officials, etc.)," "compliance with internal rules and regulations (prohibition of ultra vires acts, use of corporate assets, etc.)," and the Group has been making efforts to ensure thorough compliance and prevention of bribery and corruption.
Information security and protection of personal information
In recent years, there has been a growing risk of information assets being exposed to threats in various aspects in line with the progress of information technology.
The Haseko Group is working on the protection of information assets handled in its businesses and the enhancement of management of such assets, including customer information. We are building awareness of information management, having established the "Haseko Group’s Information Management Regulations" and "Basic Policy for Information Security" on a Group-wide scale and formulated the "Information Handling Guidelines" shared across the Group. We have also set individual management standards according to the respective businesses and contents of information handled by Group companies.
Haseko Livenet, Inc., which is engaged in the operational management of rental housing, handles personal information of residents and prospective residents as well as information assets entrusted by clients. For this reason, we have built an Information Security Management System (ISMS) in all divisions in Tokyo and Osaka. We are utilizing international standard ISO/IEC27001 in the inspection and review of day-to-day information asset management activities, having obtained certification in August 2005.
Protection of personal information
In order to clarify the structure of responsibility for the protection of personal information inside all companies in the Group, we have appointed a personal information protection manager and developed internal regulations on personal information, and are educating employees and raising their awareness so that they would comply with such regulations.
We have also established the "Guidelines for Handling Personal Information in Information Systems," which set forth the system requirements and operation rules of information systems that handle personal information, laying down the rules of the administration framework and operation method of systems that fall under the scope.
Furthermore, we execute thoroughgoing management and take various security measures to prevent the loss and leakage of personal information. We conduct internal audits periodically to verify that the series of measures to protect personal information are being implemented without fail, and take corrective action as necessary. In addition, we have undergone PrivacyMark (P-Mark) assessment to have our personal information protection status evaluated objectively by a third party, as a result of which four Group companies have been granted P-Mark.
Rules and regulations on information management
- Nurturing a culture of trust