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Hitachi Kokusai Electric Inc.

Basic Views on Corporate Governance

Hitachi Kokusai Electric (the “Company”) has formulated its “Corporate Statement,” the “Hitachi Kokusai Electric Way,” and its “Guidelines and Commitments.” With “Hitachi Kokusai Electric Group strives to realize a society of security, safety and happiness, creates value by applying advanced technologies and pushes the boundaries of tomorrow.” as its Corporate Statement, the Company has also formulated the “Hitachi Kokusai Electric Group Codes of Conduct” as its specific code of conduct. Based on these philosophies, shared with its Group companies, the Company manages and operates its business.

Based on the aforementioned philosophies, in order to realize sustainable growth and increase the corporate value of Hitachi Kokusai Electric Group over the mid- to long-term, in accordance with the basic views stated below, Hitachi Kokusai Electric strives for an optimal form of corporate governance.

  1. Respect the rights and secure effective equal treatment of shareholders.
  2. Endeavor to appropriately cooperate with stakeholders.
  3. Ensure appropriate information disclosure and transparency.
  4. Develop a system and an environment to secure the effectiveness of the Board of Directors, and endeavor to enhance its functions.
  5. Engage in constructive dialogue with shareholders.

In addition, the Company has established the “Corporate Governance Guidelines of Hitachi Kokusai Electric Inc.” to specify its basic views on and the framework of its corporate governance.

Basic Structure

The Company has adopted a “Company with Three Committees” system under the Companies Act of Japan to ensure timely decision making as well as transparent management. The Board of Directors has as its internal organization the Nominating Committee, the Audit Committee and the Compensation Committee (hereinafter, “each Committee”). While the Board of Directors, whose predominant members are externally appointed Outside Directors, determines the Company’s basic management policies and delegates decision-making authority to Executive Officers to promote efficiency of the Company’s operations, it oversees and supervises the Company’s operations in unison with each Committee. Through this framework, the Company promotes management reform by placing every emphasis on securing the adequacy of its operations. Outside Directors remain independent from the Company, actively providing their objective opinions within the above framework. In this regard, Outside Directors fulfill an important role and function in further enhancing the transparency and soundness of the Company’s management.

  1. Execution of Business
    Within the scope of statutory and regulatory requirements, considerable authority is delegated to Executive Officers with respect to matters related to the decision of management in an effort to accelerate the decision-making process.
    While individual Executive Officers are provided with decision-making authority and execute operations for their particular areas of responsibility in accordance with the segregation of duties determined by the Board of Directors, Executive Officers’ Meeting comprising all Executive Officers is held to deliberate on matters of major importance from multifaceted perspectives, upon which Executive Officers make decision on the matter in order to secure the adequacy of the decision-making.
    All other operational matters for determination by Executive Officers are defined in the Company’s internal rules and regulations by their type and content. All necessary procedures are taken in accordance with these internal rules and regulations.
  2. Monitoring and Audit Functions
    The Board of Directors monitors overall management including execution of business in collaboration with each Committee, which is its internal organization.
    In addition, the activities of the Board of Directors and each Committee are supported by the responsible departments. A designated specialist department has been established particularly for the Audit Committee to ensure that audits are conducted in an appropriate and effective manner. Employees within this department are not subject to the directions and instructions of Executive Officers.
    (1) Board of Directors
    The Board of Directors monitors management by way of receiving reports from each Committee in connection with the status of each Committee’s activities as well as reports directly from each Executive Officer outlining details of the execution of their duties.
    (2) Nominating Committee
    The Nominating Committee determines candidates for the position of Director, who are then proposed at the Company’s shareholder meetings for approval. In order to make better managerial judgment, the Nominating Committee selects Director candidates from both inside and outside the Company, based on comprehensive criteria that encompass personality, experience, knowledge, ability and other factors, which are necessary for Directors of the Company to contribute to its management.
    (3) Audit Committee
    In addition to determining the Company’s audit policies and plans, the Audit Committee engages in follow up activities to ensure that a designated member of the Audit Committee has conducted each audit in accordance with such audit policies and plans. In order to complement the effectiveness of its audit, the Audit Committee promotes the sharing of information and other collaborative measures regarding the audits conducted by the Internal Audit Department, Accounting Auditor, and audit members of Group companies.
    (4) Compensation Committee
    The Compensation Committee formulates the basic policy for determining the compensation to be paid to the Company’s Directors and Executive Officers. At the same time, the Compensation Committee evaluates the performance of each Director and Executive Officer and determines the compensation amount.