Corporate Governance & Internal Controls
We are making efforts to enhance our corporate governance framework and develop and improve our internal controls on a global group basis, to make sure that Mitsui & Co. is a company that is trusted by society.
We recognize that ensuring thorough compliance with respect to internal controls is a particularly important issue.
Corporate governance and internal control:
Systems and implementation
Corporate governance framework
Mitsui & Co. has chosen to base its corporate governance framework on a corporate auditor system, headed by the audit & supervisory board. To achieve effective corporate governance for shareholders and other stakeholders, the Company has established the following governing bodies:
- The Board of Directors is Mitsui & Co.'s ultimate decision-making body for business execution and oversight. To ensure that those functions are fulfilled, Mitsui appoints no more than the number of directors necessary to enable effective deliberations, and conducts an annual assessment of the Board in order to validate its effectiveness and discloses a summary of the results. The company has also established the Governance Committee, Nomination Committee, and Remuneration Committee as advisory bodies to the Board of Directors, with external directors and external audit & supervisory board members serving as members of these committees.
- The audit & supervisory board members audit the execution of the duties of the Board of Directors as an independent body and report to shareholders. In pursuit of this objective, the audit & supervisory board members carry out multifaceted, effective auditing activities, such as attending important internal meetings and auditing various types of reports, and develop necessary measures in a timely manner.
To ensure transparency and accountability, which are key requirements of corporate governance, we are endeavoring to strengthen management oversight and supervision, taking into account the perspectives of external directors and external audit & supervisory board members. At the same time, the Company is developing its internal control framework with respect to information disclosure, and, based on the general rules of fair disclosure, executives and employees are responsible for ensuring accountability. Furthermore, to separate the functions of business execution and oversight, Mitsui has broadly transferred the authority for business execution to the Company's executive officers, and the Board of Directors is responsible for overseeing the execution of business by the executive officers. The chief operating officers of the Company's 15 Headquarters business units and 3 overseas regional business units also serve concurrently as executive officers, supporting a dynamic approach to business execution across Mitsui & Co. global group.
At the time of the General Meeting of Shareholders in June 2019, there were 14 directors, five of whom were external directors (including two female directors, two foreign directors).
We have five audit & supervisory board members, two full-time and three external (including 1 female audit & supervisory board members), and we have established the Audit & Supervisory Board Member Division as a framework to provide added support to the audit & supervisory board members in the execution of their duties. Audit & supervisory board members attend the meetings of the Board of Directors and other important in-house meetings, overseeing procedures and resolutions, and visit offices in and outside Japan and important affiliate companies.
Business execution and internal control system
In the fiscal year ended March, 2012, we adopted the so-called "J-SOX" standards defined in Japan's Financial Instruments and Exchange Act as the basis for the evaluation of our internal control systems. We are determined to maintain highly effective internal control systems that are compliant with the new global standards and in keeping with the values of Mitsui & Co., and to ensure that all employees, including those working for affiliated companies, are fully aware of and comply consistently with the basic principle that "without compliance there will be no work and no company".
At the core of our internal control system, the Corporate Management Committee establishes basic internal control policy and carries out company-wide internal control evaluations and improvements.
Furthermore, to respond to the increasingly diverse kinds of risks associated with our business, we have established the Compliance Committee, which formulates the compliance structure of Mitsui & Co. and maintains and strengthens its effectiveness; the Disclosure Committee, which establishes principles and basic policy for disclosures of the company and conducts individual discussions on important disclosures; J-SOX Committee, which formulates the structure to secure trustworthiness of the company’s financial reporting and maintains and strengthens its effectiveness; the Portfolio Management Committee, which monitors the company's entire portfolio, makes proposals on the company's overall portfolio strategy, and conducts individual discussions on important projects; the Crisis Response Headquarters, an ad-hoc body reporting directly to the president, which exercises swift, precise decision-making when there is a need for a swift response; the Sustainability Committee, which promotes management with greater emphasis on the sustainability of both society and Mitsui & Co.; the Information Strategy Committee, which formulates policies related to company-wide information and IT strategies and prepares major policies related to promoting the enhancement of the management platform and information strategy and monitors the implementation of those policies; and, the Diversity Promotion Committee, which analyzes and addresses current issues to realize the full mobilization of our diverse workforce.
Current status of the internal auditing structure
The Internal Auditing Division, which reports directly to the president and has a staff of about 60, conducts regular audits, including audits of subsidiaries inside and outside Japan. Internal auditors make independent and objective evaluations of such areas as management and operational effectiveness, compliance, and the reliability of financial reporting. The audit results are reported to the president, and follow-up reports from the audited department are requested on items where improvement is deemed necessary.
Furthermore, we have established an internal auditing section in each business unit. Such internal auditing sections carry out self-auditing of their business units on their own initiative, and combined with the Internal Auditing Division's audits, this contributes to further improving the effectiveness of our internal controls.
Evaluation of effectiveness of the Board of Directors
Each year, the Board of Directors analyzes and evaluates its effectiveness, taking into consideration relevant matters, including self-evaluations of each Director, and discloses a summary of the results. The methods and results of the evaluation of effectiveness of the Board of Directors for the year ending March 31, 2019, and prior years, are summarized as follows:
Please note that the summary of the methods and results of the evaluation of effectiveness of the Board of Directors is also described in the Corporate Governance Report.
- Evaluation of effectiveness (Excerpt from the Corporate Governance Report, the recent three years)
- Evaluation of effectiveness for the year ending March 31, 2019 (PDF 238KB)
- Evaluation of effectiveness for the year ending March 31, 2018 (PDF 219KB)
- Evaluation of effectiveness for the year ending March 31, 2017 (PDF 161KB)
- Evaluation of effectiveness for the year ending March 31, 2016 (PDF 119KB)
Overview of corporate governance and internal control
Overview of our corporate governance and internal control framework is as follows:
Corporate Governance and Internal Control Principles
Mitsui & Co. enacted the following "Corporate Governance and Internal Control Principles" in April 2006 (Revised on 10th April, 2019)
Risks arising from Mitsui's business activities are monitored and managed by chief operating officers of business units and regional business units under the oversight of the Board, within the authorization delegated to them from Mitsui's management. Measures taken by each business unit to manage quantitative risks include setting position limits and loss-cut limits and conducting monitoring through divisions with relevant expertise. For the management of qualitative risks, the business units are obligated to observe relevant internal regulations. When a business unit or regional business unit takes on risks that are greater than the scope of authority granted to them, it is necessary to obtain approval of the Corporate Management Committee or a relevant representative director or senior managing officer, depending on the importance of the situation, in accordance with the standards of the internal approval system.
Furthermore, organizations such as the Portfolio Management Committee, the Sustainability Committee, and the Crisis Management Headquarters establish and develop risk management structures on a companywide basis and handle significant risks. These committees and their chairpersons are separate from the Audit & Supervisory Board, and directors who serve as committee chairpersons report to the President and Chief Executive Officer as required. Members of the corporate staff units are responsible for surveillance of Mitsui's position regarding the risks they are in charge of overseeing, as well as the control of risks within the prescribed range of their authority and the provision of support to relevant directors and managing officers.
ESG-Related Risk Management
Business opportunities, as well as the risks associated with doing business, have increased and are becoming more diversified due to the impact of economic globalization, progress in information technology, and increasing awareness of the importance of corporate social responsibility. Based on this understanding, Mitsui Co. recognizes the necessity for comprehensively managing risk from both quantitative and qualitative perspectives, while responding appropriately to changes in social conditions and business models. With this awareness, we have defined the business which have high qualitative risks including risks related to the natural environment, society, and governance as "Specially Designated Business," and have been endeavoring to develop such businesses with due caution under our Specially Designated Business Management System.
In the promotion and management of each business, we bear in mind the various climate change scenarios that are put forward by internationally recognized organizations, such as the International Energy Agency, and analyze the potential impact of such scenarios on our businesses. We have been reflecting the results of these analysis in our screening processes for investments, loans, and other activities. A shift toward a low carbon society could have an impact on our energy business among others, and in response to that we have been promoting environment-friendly, next generation energy business. Moreover, since Mitsui has been engaging in business in various locations around the world, climate change-related measures implemented by the countries and regions where we operate could have a significant impact on the profitability and sustainability of our business. We monitor the measures adopted in each country and region in a timely manner, and trends relating to stakeholders influencing those measures, by utilizing the global network that we have established through our business activities over many years, and use the information which we obtained in our decision making process.
Specially Designated Business Management System and Environmental & Societal Advisory Committee
When beginning new projects, we conduct internal assessments and, wherever necessary, consult with the Environmental & Societal Advisory Committee, the Sustainability Committee, or other committees for advice as to whether or not to proceed with the proposed projects, and for suggestions on how improvements can be made. Ultimately, the final decision on whether or not to proceed with any given project is made by Corporate Management Committee and the Board of Directors (both of which supervise the ESG risks) and through the ringi (circular executive approval) process by representative directors, in accordance with the predetermined qualitative and quantitative standards. The members of the Environmental & Societal Advisory Committee consist mainly of external experts and attorneys who are familiar with a broad range of fields including climate change, environmental restoration, environmental policy with respect to water, energy, etc., technology trends, human rights, and labor issues. The advisory committee members assess the risks related to such matters and provide recommendations where appropriate for improving projects. In the fiscal year ended March 2019, we held the committee in regards to several energy business, our identification of new Materiality, and so on.
Under the Specially Designated Business Management System, we promote project formation based on the results of screening from the perspectives of environment, society, and governance (ESG), and, at the same time, engage in activities for raising awareness of the ESG aspects within the company and deepening the understanding of those personnel at the business frontlines. In the fiscal year ended March 2019, 23 projects were individually assessed under the Specially Designated Business Management System. 15 of these projects were categorized under the environment-related business domain, while 8 were categorized as the projects receiving subsidies, and others. We will continue to conduct comprehensive and well-balanced management of risks associated with Specially Designated Business from the early stages of the business development process up to the follow-up stage, with a focus on the ESG aspects.
Furthermore, we have established the Rules on ODA (Official Development Assistance) Business Management for promoting ODA business, which has a high public profile and, therefore, requires highly transparent operational processes. Under this system, Mitsui's ODA Projects Evaluation Committee reviews these projects as necessary and ensures appropriate risk management. In particular, we carry out comprehensive assessment of risks related to bribery and corruption considering the significance of those issues.
Business Domains Subject to Specially Designated Business Management System
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