We understand corporate governance to be a framework with which to bring discipline to our corporate activities, thus enabling us to maximize the corporate value of our group without compromising its soundness. Sumitomo business spirit is "to placing prime importance on integrity." This does not mean it is enough to just comply with laws and regulations. Rather, we understand that we can earn the trust of our clients, shareholders, and society only after we have set rules to govern our activities and these rules have penetrated every corner of our organization.
We have a corporate governance system consisting of two parts, the executive officers system and the corporate auditor system, and each of these executive and monitoring/supervising entities are fully functioning within our corporate management. We understand that systems such as these are most suited to our company since we are engaged in mineral resource, smelting and refining, and materials businesses that vary greatly in their operational environments and characteristics, as well as their scale.
Our Articles of Incorporation provide up to ten directors, which is considered to be a proper number for active discussion in the Board meetings. Currently, the Board has eight members, with one of them being an external director. We have no special interest in or relationship with the external director. The term of office for directors is one year, and regular meetings of the Board of Directors are held once a month, with extraordinary meetings held as required so that we can make decisions expeditiously.
Also, any resolutions taken by, and any matters reported to, the Board are in turn reported to the meeting of executive officers to ensure that information is properly shared among the officers.
The Management Committee consists of the president, senior executive officer, and other executive officers concerned. However, any other external directors and corporate auditors may attend the Management Committee meetings. Here, matters requiring careful consideration among those to be resolved by the Board of Directors or sanctioned by the president are reviewed from a wider point of view, and decisions are made as to whether they should be referred to the Board of Directors, supporting the sanction of the president.
We introduced the executive officer system in June 2001, and provided for it in the Articles of Incorporation in June 2004, where the positions of executive officers clearly defined.
Substantial authority has been delegated to these officers, and their authority and responsibilities have been defined clearly so that their executive functions may be reinforced.
They are to perform their duties in important positions commissioned to them, such as the head of an operational division or the head of a department or office at HQ, within the specific authority assigned to each of their positions. In addition to this, the executive officers report the performance situation of their businesses once a month to the executive officers meeting.
A remuneration system linked to company performance has been introduced for executive officers, similar to that in place for directors.
Our Articles of Incorporation provide for up to five auditors. Currently, the Board has four members, and two of them are external auditors. Neither of these external auditors is native to our group, and we have no special interest in or relationship with them.
The auditors belonging to our company present their opinions based on the audits they have conducted as full-time auditors independently from the company, and the external auditors present their opinions supported by their expertise. Auditors are also expected to attend important meetings of the Board of Directors, Management Board, etc.
The meeting of the Board of Auditors is held once a month on an appropriate day prior to the regular meeting of the Board of Directors, as well as whenever required.
To perform the audit and supervision of business operations, we have established the Internal Audit Department and assigned it the responsibility of internal audit. This Department conducts internal audits of the entire group, and supplies this information to the auditors as required, including audit plan briefings. It also holds a conference to report the results of the internal audit to the executive officers, etc., which is also attended by the auditors.
Building an internal control system to secure proper and efficient supervision of business operations leads to an enhancement of the legality, efficiency, and transparency of corporate management. We consider this system to be one of the most important tools to ensure the sustained growth of our group.
We will ensure the establishment of an organizational compliance system and that our business is operated properly so that the soundness of our corporate management may be secured.
In May 2006, our Board of Directors adopted a resolution to develop an internal control system according to the provisions of the Companies Act and its enforcement regulations. Since then, we have made efforts to reinforce compliance with laws and regulations, reinforce the disclosure of company information to secure transparency and trust, reinforce control, and secure the properness of our business operations.
Moreover, an Internal Control Committee was established in July 2006 to further enhance our efforts. The president took office as the chair of the Committee in April 2008.
It is essential that corporate information be properly disclosed to investors. We are improving our system to actively ensure the properness of our financial statements as a part of our efforts to reinforce corporate governance.
We are also having the internal control of financial statements assessed by the management and audited by public accountants according the provisions of the Financial Instruments and Exchange Act enacted in June 2006.
We will disclose our Internal Control Report and Internal Control Audit Report along with the Securities Reports for the fiscal year 2008 and beyond.
The concept of "fulfilling our responsibility to stakeholders" is a pillar of our group's corporate philosophy. To achieve this goal, we are enacting IR activities which actively and properly disclose information to our shareholders and their candidates in order give them a better understanding of our company. In particular, we disclose information on our webpages, issue bulletins and annual reports to shareholders, and hold a briefing session for domestic and overseas institutional investors about twice a year where our president discusses our business strategies and account settlement.
Moreover, we hold meetings with domestic and overseas investors individually on a regular basis, conduct plant inspection tours for them as required, hold briefing sessions about our nickel business and products, and take part in investment conferences joined by many overseas institutional investors. All of those IR activities are intended to reinforce two-way communication with our investors, both domestic and overseas, and get feedback from them regarding our business management.
