Corporate Governance

1) Basic Policy of Corporate Governance

The Company, since its establishment, has operated its business under its business philosophy, “contributing to the progress and development of society and the well-being of people worldwide through its business activities.” Also, the Company believes it is important to increase corporate value by fulfilling accountability through dialogue with various stakeholders such as shareholders and customers, making effort to execute transparent business activities, and swiftly conducting business activities with fairness and honesty based on its basic philosophy of “a company is a public entity of society.”

The Company recognizes that corporate governance is the important basic structure for the aforementioned purpose, and endeavors to establish and strengthen the effective corporate governance structure based on the Audit & Supervisory Board System composed of the Board of Directors which is responsible for deciding important operational matters for the whole Group and monitoring the execution of business by Directors, and Audit & Supervisory Board Member (A&SB Member) / Audit & Supervisory Board (A&SB) which are independent from the Board of Directors and responsible for auditing the performance of duties by Directors.

The Company conducts the following activities to enhance effectiveness of its corporate governance.

  1. Secures the rights and equal treatment of shareholders.
  2. Endeavors to appropriately cooperate with stakeholders such as employees, customers, business partners and local societies with the recognition that its sustainable growth is brought about as a result of receiving resources and contributions from such stakeholders.
  3. Appropriately discloses corporate information and ensure transparency of the management.
  4. Given its fiduciary responsibility and accountability to shareholders, the Board of Directors set the broad direction of corporate strategy, establish an environment where appropriate risk-taking is supported and carry out effective oversight of Directors and management from an independent and objective standpoint.
  5. Engages in constructive dialogue with shareholders in order to contribute to the sustainable growth and the increase of corporate value over the mid- to long-term.

2) Overview and background of corporate governance structure

(a) Overview of corporate governance structure

In the Company, each of thirty-eight (38) business divisions of basic management units, autonomously manages R&D, production and sales as well as its cash and profit on a global and regional basis.
In order to support these business divisions, the Company introduced divisional company system. The five (5) business-based companies (Appliances, Life Solutions, Connected Solutions, Automotive, and Industrial Solutions) and the two (2) region-based companies (China & Northeast Asia and US) have been promoting the divisions’ evolution and change in the area in which they have responsibility and taking a leading role to realize growth strategy. The Company also established Corporate Strategy Division, which is responsible for the strategic management throughout the group, to promote enhancement of the corporate value by formulating mid- and long-term group-wide strategies. In addition, the Company incorporated Professional Business Support Sector which assumes the function of the group-wide management control in terms of developing and improving the Company wide rules and systems infrastructure, implementing internal audit, internal control and compliance activities required to the listed company and the legal entity, and responding to the stakeholders. Also the Company established Innovation Promotion Sector which assumes the function of creating new business projects and business models focused on AI/IoT technologies, contributing to the business with its innovation technologies and production technologies, and overseeing the Company-wide technology development, manufacturing and designing.

[The Board of Directors and Executive Officer System]

The Board of Directors, which is composed of eleven (11) Directors including four (4) Outside Directors, of which one (1) is a woman (at least one-third of its Directors are Outside Directors), seeks to ensure the diversity of the knowledge, experience and qualifications of the Board of Directors as a whole. Chairman of the Board who is not involved in execution of business takes on the position of a chairman.
In accordance with the Companies Act of Japan and related laws and ordinances (collectively, the “Companies Act”), the Board of Directors has ultimate responsibility for administration of the Company’s affairs and monitoring of the execution of business by Directors.

Under the seven (7) Divisional Company-based management structure, the Company has empowered each of seven (7) Divisional Companies and business divisions through delegation of authority. At the same time, the Company employs an Executive Officer system to provide the execution of business at its various domestic and overseas group companies. This system facilitates the development of optimum corporate strategies that integrate the Group’s comprehensive strengths. The Company has fifty (50) Executive Officers (including those who concurrently serve as Directors), which include President, Vice President, senior managements of each of seven (7) Divisional Companies, senior officers responsibly for certain foreign regions and officers responsible for corporate functions.

In addition, in order to ensure swift and strategic decision-making, along with sound and appropriate monitoring at the same time, the Board of Directors, as a decision-making body for Group-wide matters, concentrates on decisions about the corporate strategies and the supervision of the seven (7) Divisional Companies. Taking into consideration the diverse scope of its business operations, the Company has opted to maintain a system where Executive Officers, who are most familiar with the specifics of the operations, take an active part in the Board of Directors. Moreover, to clarify the responsibilities of Directors and build a structure of the Board of Directors flexibly, the Company limits the term of each Director to one (1) year.

[Audit & Supervisory Board Members (A&SB Members) and Audit & Supervisory Board (A&SB)]

Pursuant to the Companies Act, the Company elected five (5) A&SB Members (one (1) of them is a woman member) including three (3) Outside A&SB Members, with majority of them being Outside A&SB Members, and established A&SB made up of A&SB Members. The A&SB Members and A&SB monitor the status of corporate governance and audit the day-to-day activities of management, including the performance of duties by Directors. Additionally, the Company elected A&SB Members who have substantial finance and accounting knowledge.

[Nomination and Compensation Advisory Committee]

The Company established the Nomination and Compensation Advisory Committee in 2015. Upon receiving inquiries from the Board of Directors, the committee deliberates on the results of internal reviews regarding the nomination of candidates for Director, Executive Officer, and Audit & Supervisory Board Member, and also on the appropriateness of the remuneration system for Directors and Executive Officers.
As of the date of submission of this report, the Committee consists of five (5) members; Outside Director Hiroko Ota (Chairperson), Outside Director Kazuhiko Toyama, Outside Director Yoshinobu Tsutsui, Director and Chairman of the Board Shusaku Nagae, and Representative Director and President Kazuhiro Tsuga. The Company has been enhancing objectivity and transparency of the committee by ensuring that Outside Directors constitute a majority of its membership with one of them serving the chairperson.

[Conduct and utilization of evaluation of the Board of Directors effectiveness]

The Company, to enhance effectiveness of the Board of Directors, conducts a survey to all the Board members who attend the meeting annually, and reports the results and evaluations of the survey at the Board. The items of the survey in the fiscal 2019 are;

  •  Discussion session and compliance business reports
  •  Role of Board of Directors
  •  Composition of Board of Directors and audit of execution of duties performed by Audit & Supervisory Board Members
  •  Delegation of authority to the executive side
  •  Nomination and Compensation Advisory Committee

Upon analyzing the results of the survey, the Company’s findings with respect to the effectiveness of the Board of Directors are such that the current state of the Board is essentially appropriate in terms of its monitoring and decision-making function. Findings with respect to strengthening functions of the Board of Directors, however, included opinions regarding the need to further continue discussions on mid- to long term business strategy and compliance. As such, the Company is successively addressing such issues and implementing improvements.

[Group Strategy Meeting]

The Company holds, approximately twice a month in general, the Group Strategy Meeting to discuss and set the direction of the Company’s mid- to long-term strategies and important issues from 2012.Chaired by Representative Director, President, Kazuhiro Tsuga, Members of “Group management team,” which consist of approximately ten (10) people in managerial position, including the President and presidents of seven (7) Divisional Companies, and a non-Japanese Executive Officer, attend the Group Strategy Meeting, and the responsible persons of the related businesses and functions also participate in the meeting, depending on the matter to be discussed. Presidents’ names of seven (7) Divisional Companies etc. are listed in the (Notes) 9 of the Names List for “(2) Member of the Board of Directors and Audit & Supervisory Board Members.”

(b) Background of corporate governance structure

The Company determined that it is appropriate to build and enhance its corporate governance structure based on the Board of Directors and the Audit & Supervisory Board System composed of A&SB Members and A&SB, leveraging Nomination and Compensation Advisory Committee and the scheme of Evaluation of the Board of Directors Effectiveness.

Reference: Diagram of Corporate Governance Structure

3) The status of the Company’s internal system concerning disclosure of corporate information

Under its basic philosophy, “A company is a public entity of society,” the Company has committed to highly transparent business activities and endeavored to be accountable its accountability to its stakeholders. The Company’s basic policy concerning information disclosure is set forth in the “Panasonic Code of Conduct,” which prescribes specific items to be complied with in order to put the Group’s business policy into practice, and the standards in the course of business is published on the Company’s website as “the Disclosure Policy.” The Company’s basic policy is to provide the Company’s fair and accurate financial information and corporate information, including management policies, business activities and corporate ESG (Environment, Social, Governance)activities, in a timely, appropriate and easily understandable manner.

In accordance with this basic policy, important matters concerning the management of the Group are resolved or reported at the Board of Directors pursuant to the Regulations of the Board of Directors. These important matters and other matters, which are required to be disclosed under relevant laws and ordinances in Japan and overseas or any other regulations, are timely and accurately reported from each relevant department, that has the important internal information, to the department that handles relevant information under the monitoring of the Chief Financial Officer (CFO), so that important information is gathered. Further, matters required to be disclosed under the rules of financial instruments exchanges are also under the monitoring of the CFO.

Also, if any of the matters which is required to be disclosed under relevant laws and ordinances in Japan and overseas, and the rules of financial instruments exchanges or any other regulations, occurs at the Company’s business divisions including subsidiaries, such matter shall be immediately reported to the “Financial & Accounting Department” or the “Financial and, Finance & IR Department,” depending upon the nature thereof; Thus, the Company has established a structure whereby these matters can be collected.

With respect to the information gathered or identified, the Company determines the necessity of disclosure thereof in accordance with relevant laws and ordinances in Japan and overseas, and the rules of financial instruments exchanges or any other regulations, and makes effort to disclose it at the time that the organization, which effectively decides execution of the business of the Company, makes a resolution or determination, or becomes aware of its occurrence.

In addition, the Company endeavors to confirm the contents and expressions of the disclosure with the relevant departments within the Company and outside legal counsel to ensure the accuracy, fairness and adequacy of the disclosure.

Moreover, the Company has established disclosure control procedures in order to comply with relevant laws and ordinances in Japan and overseas, the rules of financial instruments exchanges and any other regulations, and to implement the fair, accurate and timely disclosure of information about its Group, etc. In the process of preparation and confirmation of documents such as annual securities reports and quarterly reports, the Disclosure Committee, which is comprised of managers from principal departments that handle relevant information, confirms the validity of the content of the descriptions and the appropriateness of the procedures concerning the disclosure under the supervision of the President and the CFO, who are responsible for establishing, maintaining and ensuring the effectiveness of the internal control and disclosure control of the Company. The chairman of the Disclosure Committee is appointed by the President and the CFO, and the members of the Disclosure Committee are appointed by the chairman of the Disclosure Committee. The Disclosure Committee also develops, maintains, improves and evaluates the internal control procedures concerning disclosure matters.

4) Internal Control Over Financial Reporting

The Company has documented the actual status of its internal control system, with integrated control provided by the Internal Control Promotion Office, in order to ensure reliability in the financial reporting of the Panasonic Group including its subsidiaries, ranging from the control infrastructure to actual internal control activities. Specifically, the Company has reinforced its internal controls by implementing self-checks and self-assessment programs at each of the Divisional Companies and business divisions, etc. Then, Internal Auditing Managers of the Divisional Companies appointed by the Company at each of the Divisional Companies, etc. conduct audits. Based on the audits, the Internal Control Promotion Office supervises the group-wide internal control audits in order to confirm the effectiveness of each company’s financial reporting. With the aim of further enhancing the Group’s internal control system, in fiscal 2019 Panasonic had approximately 400 personnel assigned to conduct internal audits in the Internal Auditing Group.

Please refer to the “Corporate Governance Report” for the latest compliance with the Corporate Governance Code, the basic policy of the internal control system, and more.