Corporate Social Responsibility (CSR) / Corporate Governance and Compliance

Corporate Governance

Taiyo Nippon Sanso's Corporate Governance Structure

Management Structure

The Board of Directors is composed of 15 directors-including two part-time directors, one of whom satisfies the requirements for an outside director-and four standing auditors. To facilitate effective, efficient decision making by the Board of Directors, we established the Management Committee to serve as an independent forum for deliberation, thereby clarifying Board rulings and accelerating the decision-making process.

Auditing Structure

Currently, our Board of Auditors consists of four auditors, two of whom are outside. Auditors sit in on meetings of the Board of Directors and the Management Committee, and they oversee compliance and management efficiency by communicating with auditors and representatives from subsidiaries.

There is also a Corporate Audit Office operating directly under the auspices of the president, whose job is to oversee legitimate operations and efficiency. Through close communications with auditors and audit corporations, this office supports efficient auditing.

Outline of Internal Control System

As prescribed by Japan's Corporate Law, we established a Basic Policy for Constructing an Internal Control System, i.e., basic guidelines for the creation of an internal control system. In line with this policy, we are working to reinforce internal controls by clarifying decision-making authority and business practices, among others. We have also established an Internal Control Committee, which is chaired by the president and meets at the end of each fiscal year to examine business practices and business activities. Under the Internal Control Committee, we have created the Compliance, Risk Assessment and Technology Risk Management taskforces, with the aim of reinforcing compliance and facilitating the comprehensive management of monitoring and responses to corporate risks.

Compliance

Compliance System

We recognize that a company must act faithfully according to the values and ethics demanded of it as a corporate citizen, operate fairly and appropriately, and act in harmony with greater society as it pursues its corporate mission. Based on this recognition, we have taken steps to create a robust compliance system-including formulating a code of conduct and establishing internal monitoring and auditing frameworks and a helpline-and ensure we are acknowledged as a trusted corporate citizen.

The Taiyo Nippon Sanso Code of Conduct

The Taiyo Nippon Sanso Code of Conduct consists of action guidelines for all Company executives and employees. These guidelines are designed to guarantee healthy, trusting relationships with all stakeholders, including customers, partners, shareholders, investors and employees. A pamphlet explaining the Code of Conduct has been printed and distributed to the entire Group.

Compliance Taskforce

We have established a Compliance Taskforce, which is chaired by a managing director. The purpose of this taskforce is to manage and oversee compliance for all divisions and Group companies. The taskforce has published an antimonopoly manual and distributed it to all Taiyo Nippon Sanso Group employees with the aim of preventing violations of the Antimonopoly Act and encouraging awareness of related issues.

Taiyo Nippon Sanso Helpline

The Taiyo Nippon Sanso Helpline was created to help identify areas that need improvement in terms of compliance.

On May 26, 2011, Japan's Fair Trade Commission took the decision to issue a cease-and-desist order against Taiyo Nippon Sanso regarding an alleged pricing cartel for air separator gases (liquid oxygen, liquid nitrogen and liquid argon) for nonmedical applications, along with a surcharge payment order, i.e., a fine, of ¥5,144 million.

This event occurred despite the fact that we have published an antimonopoly manual and distributed it to all Taiyo Nippon Sanso Group employees and despite the fact that we have always been very strict about ensuring compliance with Japan's Antimonopoly Act. Recognizing the gravity of this occurrence, we have taken specific steps to prevent a recurrence, two of which are described below.

  1. Establishment of rules governing contact with competitors
    The Internal Control Committee has established rules whereby contact with competitors is prohibited except in instances where such contact is deemed essential. Additionally, individuals wishing to attend meetings or events organized by industry associations must obtain the advance approval of their immediate supervisor and are required to follow up with a report on the proceedings.
  2. Staging of lectures on the Antimonopoly Act
    To prevent future violations of the Antimonopoly Act, we organized a lecture on the Antimonopoly Act aimed particularly at managerial-level employees in sales positions. The lecture was held three times between July and September 2011 and was attended by a total of 285 employees.