Rules on the Development of Systems Necessary to Ensure the Proper Execution of Duties by Corporate Officers etc.

Rules on the Development of Systems Necessary to Ensure the Proper Execution of Duties by Corporate Officers etc.

• These Rules set forth, in accordance with Article 416, paragraph (1), item (i), (b) of the Companies Act and Article 112, paragraph (1), items (iv) and (v) of the Regulations for Enforcement of the Companies Act, matters relating to the system for reports by Corporate Officers and others to the Audit Committee, and, in accordance with Article 416, paragraph (1), item (i), (e) of the Companies Act and Article 112, paragraph (2) of the Regulations for Enforcement of the Companies Act, matters relating to the development and operation of systems necessary to ensure that the execution of duties by Corporate Officers and others within ENW complies with laws and regulations and the Articles of Incorporation, and otherwise to ensure the proper execution of operations.

  • 2
    “ENW” means the corporate group consisting of the Company and its subsidiaries and affiliates, and “ENW companies” means the individual companies comprising ENW. “Corporate Officer responsible for an ENW company” means an Corporate Officer appointed by the Representative Corporate Officer and CEO as the person responsible for a particular ENW company other than the Company, whether on a supervising^*1, managing^*2, or oversight^*3 basis (collectively, “responsible for”). “Officers engaged in the execution of business of ENW companies” means the Corporate Officers and the Directors of ENW companies other than the Company.
    

    ^＊1 “supervising” shall mean directly monitoring the work of departments or ENW companies as a head of a department or an ENW company.
    ^＊2 “managing” shall mean high involvement in running the business and having broad responsibilities for the business.

    ^＊3 “oversight” shall mean high-level monitoring of departments or ENW companies based on the reports from them.

• The Board of Directors shall receive reports from the Corporate Officers or the Audit Committee on the development and operation of the systems set forth in these Rules, in order to supervise the execution of duties by the Corporate Officers in accordance with these Rules.

  • 2
    The Audit Committee shall request reports on, and conduct audits of, the development and operation of the systems set forth in these Rules by the Corporate Officers. The Audit Committee shall report the results of such audits to the Board of Directors and, as necessary, shall also report to the Board of Directors on reports received from the Corporate Officers.

  • 3
    The Representative Corporate Officer and CEO shall assign specific duties set forth in these Rules to the Corporate Officers.

  • 4
    The Corporate Officers shall perform the specific duties assigned pursuant to the preceding paragraph in compliance with these Rules and shall report on the status of execution to the Board of Directors and the Audit Committee.

• Each Corporate Officer shall report to the Audit Committee once per month, including whether any such matters exist, on the following matters relating to the department, organization, or ENW companies under their responsibility. Any matter that is particularly significant—such as facts that may cause substantial damage to ENW or acts that violate laws and regulations or the Articles of Incorporation (including potential violations)—shall be reported immediately to the Audit Committee.

  • (1)
    Business-related disasters or accidents

  • (2)
    Suspension of business operations lasting half a day or longer

  • (3)
    Filing of litigation and its status

  • (4)
    Cases in which the compliance function has determined that a compliance violation has occurred; however, where there is a possibility of a serious matter, such as a potential material violation of laws and regulations, a report shall be made as necessary even before formal determination is made

  • (5)
    Requests from government authorities for cooperation in investigations, inspections, summons, or on-site inspections (excluding regular investigations), and any warnings, guidance, orders, recommendations, or business suspension measures

  • (6)
    Infringement, or potential infringement, of assets or rights by a third party

  • (7)
    Bankruptcy or potential bankruptcy of, or termination of contracts with, a material business partner

  • (8)
    Any other fact or information, other than those listed in items 1 through 7 above, that may cause material loss to, or have a material impact on, any ENW company

  • (9)
    Any instance in which an officer or employee of an ENW company who made a report or communication under paragraphs 2 through 6 of this Article was subjected to disadvantageous treatment by reason of having made such report or communication

  • (10)
    Any other matter designated by the Audit Committee as requiring reporting

  • 2
    Where a matter relates to the responsibilities of multiple Corporate Officers, each Corporate Officer shall, in principle, report based on their respective areas of responsibility. However, for compliance violations, the Corporate Officer responsible for the function that determines violations and the function that administers disciplinary actions shall report. The Corporate Officer responsible for the organization to which the violator belongs shall report only if requested by the Audit Committee.

  • 3
    Corporate Officers shall establish and operate systems to ensure that they receive reports on the matters specified in paragraph 1 from the departments, organizations, and ENW companies under their responsibility.

  • 4
    Officers and employees of ENW companies shall, upon becoming aware of any matter specified in paragraph 1, promptly report such matter to the relevant Corporate Officer. If reporting to that Corporate Officer is deemed inappropriate (e.g., due to that Corporate Officer’s involvement), the report shall be made to another Corporate Officer or to the Compliance Counter.

  • 5
    Officers and employees of ENW companies may report directly to the Audit Committee on matters specified in paragraph 1, item 4, to the extent such matters relate to Directors or Corporate Officers of the Company.

  • 6
    Officers and employees of ENW companies shall, upon request from the Audit Committee, promptly provide appropriate reports on matters relating to business execution.

• The Representative Corporate Officer and CEO shall prepare and operate a system in order to ensure that the Officers and employees of the ENW companies who make a report to the Audit Committee or Corporate Officer of the Company or contact the Compliance Counter under the preceding Article do not receive disadvantageous treatment on the grounds of having made such report or contact.

• The Representative Corporate Officer and CEO shall appoint, from among the Corporate Officers, a person responsible for the retention and management of information relating to the execution of duties by Corporate Officers.

  • 2
    The Corporate Officer appointed pursuant to the preceding paragraph shall establish and operate rules on the retention and management of information within ENW.

• Each Corporate Officer shall be responsible for managing risks of loss within their assigned duties and shall establish and operate systems for such risk management. Corporate Officers responsible for ENW companies shall establish and operate systems to manage risks of loss of the relevant ENW companies, taking into account their business type, size, and other factors.

  • 2
    With respect to risks of loss that may have a material impact on ENW and that relate to multiple departments, six fields shall be designated: finance, legal, environment, disasters, product quality, and side effects. The Representative Corporate Officer and CEO shall appoint, from among the Corporate Officers, a person responsible for managing risks of loss in each field.

  • 3
    The Corporate Officers appointed pursuant to the preceding paragraph shall establish and operate systems for managing the relevant risks of loss.

• The Board of Directors shall delegate to the Representative Corporate Officer and CEO decision-making authority for the execution of business, except for matters to be resolved by the Board of Directors as provided for by laws and regulations, the Articles of Incorporation, and the Board of Directors Regulations.

  • 2
    The Board of Directors shall appropriately define the division of duties and the relationships among Corporate Officers.

  • 3
    The Representative Corporate Officer and CEO shall establish procedures for decision-making on important matters within ENW and shall establish and operate a system to ensure the proper and efficient execution of duties.

  • 4
    For matters other than those set forth in the preceding paragraph, each Corporate Officer shall establish decision-making procedures for their assigned duties and shall establish and operate a system to ensure the proper and efficient execution of such duties.

  • 5
    With respect to the decision-making procedures set forth in paragraphs 3 and 4, the Corporate Officer in Charge of Internal Control (as provided in Article 8) shall monitor their development and operation, and the Corporate Officer in Charge of Internal Audit shall audit them.

• The Representative Corporate Officer and CEO shall appoint, from among the Corporate Officers, a person responsible for promoting compliance, including systems to ensure that the execution of duties by officers and employees of ENW companies complies with laws and regulations and the Articles of Incorporation, and shall establish the necessary organization to perform such duties.

  • 2
    The Corporate Officer appointed as responsible for compliance (hereafter, “Corporate Officer in Charge of Compliance”) shall establish ENW’s Code of Conduct and Compliance Handbook, clearly define the standards of conduct and behavioral guidelines for officers and employees of ENW companies to ensure compliance with laws and regulations and the Articles of Incorporation, and promote compliance through training and other necessary measures.

  • 3
    The Corporate Officer in Charge of Compliance shall establish and operate internal and external reporting channels for consultation and reporting (whistle-blowing) to prevent compliance risks from arising and to ensure their prompt resolution if they do arise.
    For ENW companies other than the Company, such measures shall be implemented in coordination with the Corporate Officers responsible for the relevant ENW companies, and with the compliance officers and compliance functions of those companies.

  • 4
    The Corporate Officer in Charge of Compliance shall clearly state, in the Code of Conduct, a policy of opposing antisocial forces and shall take necessary measures to ensure that all officers and employees comply with this policy.

  • 5
    The Representative Corporate Officer and CEO shall appoint, from among the Corporate Officers, persons responsible for promoting the development and operation of the internal control system and for conducting internal audits, and shall establish the necessary organizations to perform such duties.

  • 6
    The Corporate Officer appointed as responsible for internal control (hereafter, “Corporate Officer in Charge of Internal Control”) shall establish policies on internal control, promote understanding through training and other measures to officers and employees of ENW companies, and promote the development and operation of the internal control system.
    For ENW companies other than the Company, such measures shall be implemented in coordination with the Corporate Officers responsible for the relevant ENW companies, and with the officers in charge of internal control and internal control functions of those companies.

  • 7
    The Corporate Officer in Charge of Internal Control shall establish and promote the operation of a system under which each Corporate Officer conducts a self-assessment of the management of risks of loss relating to that Corporate Officer’s assigned duties, as part of the risk management framework set forth in Article 6, for the purpose of supporting the development and operation of the internal control system.

  • 8
    The Corporate Officer appointed as responsible for conducting internal audits (hereafter “Corporate Officer in Charge of Internal Audit”) shall establish rules on internal audit for ENW, prepare an internal audit plan, and conduct internal audits in an appropriate and efficient manner.
    In addition, the internal audit functions of each ENW company other than the Company shall, under the direction of the Corporate Officer responsible for the relevant ENW company and the officer responsible for internal audit of that ENW company, coordinate with the Company’s internal audit function as necessary, conduct internal audits in accordance with ENW’s internal audit rules, and report the results to the Corporate Officer in Charge of Internal Audit and the Corporate Officer responsible for the relevant ENW company.

  • 9
    The Representative Corporate Officer and CEO may, as necessary, appoint from among the Corporate Officers a person responsible for confirming compliance with laws and regulations and the Articles of Incorporation in specialized areas, and shall establish the necessary organization to perform such duties.

• The Corporate Officer responsible for ENW companies shall, while respecting the autonomy of such companies, establish systems to receive reports from them on important management matters and matters set forth in Articles 6 through 8.

  • 2
    Such Corporate Officer shall report important matters received from ENW companies to the Board of Directors and the Audit Committee of the Company.

• The Representative Corporate Officer and CEO shall take necessary measures to ensure that the content of these Rules is fully communicated to the officers and employees of ENW companies.

• These Rules may be amended by resolution of the Board of Directors.

Supplementary Provisions

• Article 1
  These rules shall come into effect on April 27, 2006.

• Article 2
  These rules shall come into effect on June 20, 2014.

• Article 3
  These rules shall come into effect on May 1, 2015.

• Article 4
  These rules shall come into effect on June 21, 2017.

• Article 5
  These rules shall come into effect on June 19, 2020.

• Article 6
  These rules shall take effect on June 18, 2021.

• Article 7
  These rules shall take effect on June 17, 2026.