March 5, 2019

Internal control system of a company

Based on the regulations of Article 362, Section 5 of Companies Act, the Board of Directors of the Company will construct an internal control system, as provided for in Article 362, Section 4, Item 6 of the Companies Act and Article 100, Sections 1, each Item and Section 3 of the Ordinance for Enforcement of the Companies Act as follows.

System for ensuring that Directors and employees carry out their duties in accordance with laws, regulations, and the Articles of Incorporation

Under the following corporate governance system, the Company shall ensure management transparency and soundness.
- To clarify management responsibilities and respond rapidly to changes in the operating environment, the term of office of Directors of Fuji Electric companies shall be one year.
- To strengthen management supervision and management audit functions, and ensure the appropriateness of managerial decisions related to the execution of important business, the Company will invite outside directors and outside auditors with relevant qualities.
Managers at Fuji Electric companies are required to repeatedly explain and ensure full awareness of management principles applicable to the entire Fuji Electric, as well as the spirit behind the Criteria of Corporate Behavior, which serves as a code of behavior for all executives and employees.
The Company will establish and promote a compliance system as follows, based on internal regulations, to ensure the transparency and soundness of business execution.
- The Compliance Promotion Committee is chaired by the Representative Director of the Company. It will ensure full compliance with laws, regulations, and social norms pertaining to Fuji Electric companies.
- The Company will establish a compliance program that systematizes roles and responsibilities in terms of internal rules, daily monitoring, auditing, education, and other areas for each law and regulation, and carry out the program in accordance with the annual plan.
- Compliance training is conducted for all full-time executives of Fuji Electric companies.
- The Company will establish an internal reporting system that facilitates communication between Fuji Electric company employees and the President of the Company, using a route that is independent of normal lines of communication. This is intended to prevent actions that violate laws, regulations, Articles of Incorporation, or internal rules before they occur, and aid the early discovery of such actions.
- The establishment and promotion of the above systems will also enable each Fuji Electric company to provide an organized response aimed at rejecting antisocial forces and groups that threaten public order and the safety of private citizens.
Internal auditing divisions of the Company under the jurisdiction of the respective company presidents conduct audits of the Company and subsidiaries. In addition, to ensure effective internal auditing, information on various activities is shared within the committee, which consists of members of internal auditing divisions of the Company and subsidiaries.

System for retaining and managing information pertaining to the performance of Directors

Internal regulations will be formulated to ensure accurate retention and management of records of important business executed by Fuji Electric companies and to ensure that Directors and Auditors acquire knowledge of records. The regulations establish procedures for Directors, Auditors, and managers involved in saving and storing records regarding access to information.
The Company’s Auditors are also consulted in advance with regard to formulating, amending, or eliminating regulations.

Regulations for managing loss-related risk and other systems

The internal regulations will be formulated to systematically manage operational risks faced by Fuji Electric. Based on these regulations, Fuji Electric companies will establish appropriate risk management systems, and a system for managing specific group-wide risks will be established for Fuji Electric as a whole. The system involves the designation of departments within the Company to manage each category of risk.
The Company will establish an emergency response manual to minimize damage incurred at the time of a crisis, such as a major disaster. The manual will prescribe the directors in charge of crisis management and establishment of a conference system and response headquarters to be activated when an emergency occurs.
The internal auditing division audits the progress of risk management at companies and subsidiaries and reports the results to the president.

System for ensuring effective execution of business by Directors

The Company will adopt the executive officer structure to separate management and execution, and accelerate decision-making procedures. The division of duties of each executive officer will be clarified by a resolution of the Board of Directors.
In addition, the internal regulations that prescribe the duties and authority of executive officers and employees will be formulated to clarify decision-making authority and locus of responsibilities with regard to business execution.
A management meeting will be established as a permanent corporate body to advise the Company’s president. It will comprise the Company’s executive officers and other individuals, and will deliberate on important matters pertaining to the management of Fuji Electric as a whole and formulate reports. The Company’s Representative Director will communicate the deliberations and reports of the management meeting to the Company’s Board of Directors as necessary.
To formulate annual and medium-term management plans for Fuji Electric and to share information within Fuji Electric, the management meeting and the Company’s Board of Directors will confirm, evaluate, and review progress for each business division on a monthly basis.

System to ensure reliable financial reporting

The Company will formulate internal regulations to ensure the appropriateness of documents and other information related to financial settlements as stipulated by the Financial Instruments and Exchange Law of Japan. Based on these regulations, each Fuji Electric company will build internal controls for financial reporting, appropriately conduct evaluations and reporting, and report the results of evaluations to its Board of Directors.