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 16 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 2017, there were 14 directors, five of whom were external directors.
We have five audit & supervisory board members, two full-time and three external, 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 Internal Control Committee, chaired by the president, establishes basic internal control policy and carries out company-wide internal control evaluations and improvements. The Compliance Committee, Disclosure Committee, and J-SOX Committee all operate under the Internal Control Committee.
Furthermore, to respond to the increasingly diverse kinds of risks associated with our business, we have established 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. In addition, we have formed 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, and the Sustainability Committee, which promotes management with greater emphasis on the sustainability of both society and Mitsui & Co., and the Business Innovation Committee, which promotes initiatives for next-generation innovation business. Moreover, we have formed 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, 2018, 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)
- 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)
Initiatives to enhance corporate governance over the last fiscal year
As we have terminated our registration with the US Securities and Exchange Commission (SEC), the current fiscal year is the sixth year that we have adopted the J-SOX standards as the basis for the evaluation of our internal control systems. As with last year, we took great care to maintain the same high level of transparency, information disclosure, and internal control discipline as under the US standards. In line with the Corporate Governance Code put into force in June, 2015, we are continuing to provide direct briefings to shareholders and others concerning our corporate governance systems.
Corporate Governance and Internal Control Principles
Mitsui & Co. enacted the following "Corporate Governance and Internal Control Principles" in April 2006 (Revised: May 2018)
The chief operating officers of business units and regional business units manage risks arising from Mitsui's business operations within the authority delegated to them by the management. When a business unit or a regional business unit takes risks greater than the scope of authority delegated to the chief operating officers, it is necessary to obtain approval of the Corporate Management Committee or a representative director in charge, or a senior managing officer in charge in accordance with the standards of the internal approval system. In business fields considered typically to have higher levels of risks, including environment-related business and business with a high public profile, a particularly careful investigation is carried out through the Specially Designated Business Management System.
Construction and maintenance of the risk management systems and response to significant risks on a companywide level are handled by such organizations as the Portfolio Management Committee, the Internal Control Committee, the Sustainability Committee, and the Crisis Management Headquarters. The corporate staff divisions are responsible in their respective fields for surveillance of the risk position of the Company as a whole, risk control within the prescribed range of their authority, and assistance of the relevant representative directors and managing officers.
Reinforcement of Sustainability Governance
Developing the Sustainability Framework
In 2004, Mitsui & Co. formed the CSR Promotion Committee (now the Sustainability Committee) as an organization under the Corporate Management Committee to develop Mitsui's internal framework with respect to sustainability, and to work to raise sustainability awareness among employees. Mitsui also promotes sustainability-related activities based on cross-organizational collaboration to meet the needs and expectations of society in relation to companies' social values and initiatives.
As a measure to facilitate planning and promotion of sustainability activities, such as supporting the practice of sustainability management and raising sustainability awareness at each organization, together with the staff in the workplaces of each unit, we continue to appoint CSR Promotion Officers (currently Sustainability Promotion Officers) in each of the corporate staff divisions, Headquarters business units, overseas regional business units, and domestic offices, and we are building our internal network.
In the fiscal year ended March, 2017, CSR Promotion Officers meetings (now Sustainability Promotion Officers meetings) continued to be held quarterly, where we shared new policies relating to our sustainability-initiatives and other important information discussed and formulated by the CSR Promotion Committee (currently the Sustainability Committee), and gave reports on surveys and measures related to supply chain management. In addition, working groups were held to consider society's needs and expectations, and our responsibilities to society, using case studies of Mitsui's business from the perspective of Mitsui's identified materiality.
Moreover, Mitsui CSR Promotion Officers in business units and corporate divisions have taken the initiative in organizing various sustainability awareness-raising programs, such as in-house sustainability seminars and lectures by people from partner companies and external experts, and sustainability-themed workshops through employees' day-to-day work. In this way, we are urging employees to consider sustainability issues in their everyday business.
In recent years, there has been growing interest in the United Nations' "Sustainable Development Goals" (SDGs) and in "Environmental, Social, and Governance" (ESG) investing. In order to send a clearer message about Mitsui & Co.'s unchanging commitment to the creation of new value for society through our business activities and our continual pursuit of the mutual sustainability of society and our company, we launched the Sustainability Committee on May 1, 2017.
The Sustainability Committee will assume a stronger and broader role than its predecessor, the CSR Promotion Committee. It will submit proposals to the Corporate Management Committee regarding sustainability-related management policies and business activities (identifying risks and opportunities in business), company-wide policies relating to the environment, conduct deliberations on effective information disclosures to stakeholders, inculcates the importance of sustainability management throughout the Company, make proposals in relation to Specially Designated Businesses, and engage in other sustainability related matters.
The committee's chairman is the executive officer in charge of corporate staff divisions (overseeing the Corporate Planning & Strategy Division), and its deputy chairman is the executive officer in charge of corporate staff divisions (overseeing the Human Resources & General Affairs Division and the Legal Division). The general managers of each corporate staff division - the Corporate Planning & Strategy Division (secretariat), the Investor Relations Division, the Corporate Communications Division, the Human Resources & General Affairs Division, the Legal Division, the Investment Administrative Division, and the Environmental·Social Contribution Division - serve as committee members. The committee has the following duties:
- Develop basic policies on the company's sustainability management and fundamental plans for activities to promote sustainability and CSR.
- Review and make proposals on the company's management policies, as well as policies and strategies of the business units and corporate divisions from the viewpoint of sustainability.
- Present proposals on company-wide environmental policies.
- Make proposals on sustainability-focused business activities (understanding risks and opportunities involved in business)
- Deliberate on the effective disclosure of information to stakeholders, and the content, methods, and means of transmission thereof.
- Consider and present proposals relating to progress reviews and monitoring required for management.
- Configure and establish the internal structure for promoting sustainability management of the company.
- Identify the material issues to focus on each year for promoting sustainability and CSR activities of the company and ensure progress on these.
- Respond to issues related to sustainability and CSR, both internal and external to the company.
- Decide and report whether to support individual proposals which qualify under the matters of Specially Designated Business, and indicate the necessary cautions for projects that will be supported.
- Approve important matters (basic policies, business plans, etc.) relating to the Mitsui & Co. Environment Fund.
- Select the proposals from internal applicants for the Environment Fund grants.
- Select the proposals from external applicants for the Environment Fund grants.
- Decide and report whether to support an exceptional acquisition of forests or the disposal of company owned forests, which is out of the scope of the Guidelines on the acquisition of a new forest and disposal of company owned forests, based on Rules on the Management of Company Owned Forests.
Furthermore, the Environmental & Societal Advisory Committee has been established under the Sustainability Committee. The members are selected from among outside individuals who are familiar with technology and social trends in a broad range of fields — including climate change, environmental restoration, and environmental policy related to water, energy, human rights and other matters — attorneys, and other knowledgeable individuals.
CSR Promotion Committee (now the Sustainability Committee) Meetings in the Fiscal Year Ended March 2017
Meeting 1 (May 13, 2016)
A report was given of the response to GRI G4 in the CSR Report 2016 (in Japanese), and deliberations were held.
Meeting 2 (August 26, 2016)
Deliberations were held on the response to Article 54 of the UK Modern Slavery Act (MSA) in the following fiscal year and onwards, and a report was given on our response to the ESG questionnaire surveys.
Meeting 3 (December 22, 2016)
Reports were given on the review of our CSR promotion framework and our response to the ESG questionnaire surveys.
Meeting 4 (March 3, 2017)
Deliberations were held on proposed revisions to the CSR Promotion Committee and the proposed new committee, and on the results in the fiscal year ended March 2017 and action plan for the fiscal year ending March 2018 in respect to our sustainability promotion activities and the Mitsui & Co. Environment Fund. Reports were given on the results in the fiscal year ended March 2017 and action plan for the fiscal year ending March 2018 in respect to environmental and social contribution activities.
ESG-Related Risk Management
Business opportunities and the risks associated with doing business have increased and are becoming more diverse due to economic globalization, progress in information technology, and the increasing awareness of the corporate social responsibility. Based on this understanding, Mitsui & Co. recognizes the necessity of comprehensively managing risk from both quantitative and qualitative perspectives, by responding appropriately to changes in social conditions and business models. With this awareness, we have designated the business domains listed in the table below, which have high qualitative risks, including risks related to the natural environment, society, and governance, as specially designated business, and we have been endeavoring to develop such businesses with due caution under our Specially Designated Business Management System. Specifically, when beginning new projects, we conduct internal assessments and, wherever necessary, approach the Sustainability Committee as well as the Environmental & Societal Advisory Committee for advice as to whether or not to proceed with the proposed projects and for recommendation on how improvements can be made. Ultimately, the final decisions on whether or not to proceed with any given project are made by representative directors after respective proposal documents have been circulated to the relevant departments. The members of the Environmental & Societal Advisory Committee are selected from among outside individuals who are familiar with technology and social trends in a broad range of fields — including climate change, environmental restoration, and environmental policy related to water, energy, human rights and other matters — attorneys, and other knowledgeable individuals.
In the fiscal year ended March, 2017, 26 projects were individually assessed under the Specially Designated Business Management System. By business domain, 7 of these projects were the environment-related business, 3 were the medical, healthcare and bioethics related business, 14 were the projects receiving subsidies, and 2 were the businesses harboring other unusual reputation risks.
In this fiscal year, we conduct a comprehensive and well balanced management of risks on specially designated business at the earlier stage of business development process and up to the follow-up stage in view of the ESG investment with support from those units.
Furthermore, we have established the Rules on ODA Business Management for promoting ODA business, which has a high public profile and, therefore, requires operation processes that are highly transparent.
Under this system, as necessary, Mitsui's ODA Projects Evaluation Committee considers these projects and engages in appropriate risk management practices.
Business Domains Subject to Specially Designated Business Management System
|Business Domain||Key Points for Screening|