Basic approach to corporate governance

Japan Logistic Systems considers the establishment of a highly transparent management system that can respond rapidly to changes in social environment to be an essential measure for corporate governance to function effectively. Accordingly, it introduced a corporate executive officer system in June 2003 in order to separate the decision-making functions of management and business execution, and to clarify responsibility.

The reason for employing this system lies in the company’s judgment that fairness and transparency of management is effectively assured through the function of checks and balances on management by a board of auditors consisting of four external corporate auditors, while company executives perform rapid business execution and the board of directors, which includes one external director, carries out suitable decision-making. The articles of incorporation stipulate the number of company directors to be eleven or fewer.

Implementation of measures relating to corporate governance

[Details of company bodies]

Japan Logistic Systems employs an auditor system to supervise and audit business execution by means of a board of directors and a board of auditors. The board of directors convenes once a month in principle and is comprised by nine company directors including one external director. While determining management policy, matters established by laws and ordinances and other important matters relating to management, it is also positioned as a body that supervises business execution conditions and carries out business operations.

The board of auditors is an independent body comprised by four corporate auditors, all of which are external corporate auditors. In addition to always attending the meetings of the board of directors, the full-time corporate auditor also attends other important meetings such as management meetings, national meetings, international meetings, department manager meetings, and office manager meetings, forming a system by which to closely monitor the execution of duties by the directors.

[Preparedness of the internal control system, risk management system and compliance system]

The internal audit office, which is under the direct control of the president, systematically executes internal audits on each department and Group Company and provides an internal checking system. The audit results are reported to senior management.

Working in close corporation with a legal office contracted for advisory services in relation to business management and routine business, Japan Logistic Systems has put in place a system to quickly receive advice and guidance in reference to managerial decisions and works to strengthen the management of legal risk.

Furthermore, in addition to the safety and health committee established by law, a safety research group formed around workplace leader-class employees has been established to prevent traffic and work-related accidents, with exchanges of ideas and case study presentations held regularly.

With regards to risk management, risk management regulations and crisis control regulations have been established in order to define a crisis management system for the whole group. In addition, a risk management committee convened as necessary analyses, evaluates, and takes appropriate measures for the risks brought to light that may obstruct the suitable management of the group business. In the case of a state of emergency, reports are made to the Representative Director and President based on the report route determined by the crisis control regulations to facilitate a rapid response.

With regards to compliance, a compliance committee has been established and a compliance manual prepared, the content of which is made known in periodically held office meetings, national meetings, international meetings and ISO leader study groups.

[Internal audits, audits by corporate auditors and accounting audits]

Internal audits

Two persons from the internal audit office execute the internal audit under the direct control of the president. The internal audit office executes internal audits based on the internal audit plan determined at the beginning of the term, and the audit results are reported to senior management. In addition, Japan Logistic Systems works towards the smooth execution of internal audits by making adjustments in relation to the drafting of an audit plan and the execution of the audit as necessary with the corporate auditor and accounting auditor.

Audits by corporate auditors

The audits by corporate auditors is executed by the full-time corporate auditor and three part-time corporate auditors. In addition to corporate auditors always attending the board of directors meeting, a system is put in place by which to understand and inspect management conditions in a timely manner through the full-time corporate auditor proactively participating in important internal meetings.

Coordination of audits

The internal auditor and the corporate auditor attend the reporting of the audit results by the accounting auditor, holding a mutual exchange of opinions and working toward the construction of an effective structure that brings together the accounting auditor, the internal audit office and the audits by corporate auditors. Furthermore, the corporate auditor proactively accompanies the internal auditor on audits of all departments and group companies in order to implement an effective audit by sharing problematic issues and the like.

Accounting audits

Japan Logistic Systems has concluded an audit contract with Ernst & Young ShinNihon LLC, from which it continues to receive Companies Act audits and Financial Instruments and Exchange Act audits.

[External directors and external corporate auditors]

Japan Logistic Systems has one external director and four external corporate auditors.

The external director provides opinions from the perspective of the propriety and morality of management decisions from a neutral position, based on extensive management experience. The external corporate auditors make statements to ensure the propriety and appropriateness of decision-making at the board of directors and the board of auditors based on extensive business experience and a specialist perspective. The external director and external corporate auditors coordinate with the accounting auditor and the internal audit office, which executes internal audits and internal controls, and work to improve the efficiency of direction and audits.

Japan Logistic Systems does not have a clearly established standard or policy relating to independence when appointing an external director or external corporate auditor. However, appointees are as a prerequisite judged to be able to ensure sufficient independence to execute their duties as an external officer in a position independent from the management of the company, in compliance with the qualifications required by the Companies Act and based on their career and relationship with the company.