Corporate Governance

Building Stakeholder Confidence Aimed at Maximizing Corporate Value

Corporate Governance Framework

The Kobayashi Pharmaceutical Group constantly strives to maximize corporate value. In this pursuit, it is of major importance to earn the trust of our stakeholders, including shareholders and investors. Therefore, we are committed to enhancing our corporate governance through developing a system that ensures transparent management practices and undertaking the appropriate disclosure information.

Corporate Governance Organization

Corporate Governance Organization

Enhancing Management Transparency

Monitoring Management From Multiple Viewpoints

The Kobayashi Pharmaceutical Group has adopted an executive officer system to separate management from business operations, and implements a wide range of measures in order to ensure transparency in management. We established the Nomination Committee in August 2012 in order to secure greater transparency and fairness in the selection process for executive officers and members of our board of directors.

Board of Directors

We have selected outside directors since 2008 with the purpose of strengthening the board of directors’ supervisory function.
The board of directors consists of seven directors, including two outside directors, and constantly monitors the status of business operations by meeting monthly or when necessary to determine important matters concerning the management of the company and to check deliberations made at the Group Officers Meeting (GOM). Board of directors meetings are also attended by all four corporate auditors, including two outside auditors, who actively participate and engage in dialogue during these meetings.
This ensures from an outside perspective that the Kobayashi Pharmaceutical Group’s internal system of checks and balances is operating sufficiently.

Group Officers Meeting

The GOM consists of executive officers and statutory auditors that meet twice monthly to review significant matters relating to business operations.

Advisory Board

As a supporting arm to the board of directors and GOM, the Advisory Board, consisting of external experts, outside directors, the Chairman, the Vice Chairman, the President and relevant directors, meets half-yearly. The Advisory Board provides guidance on significant business issues and management policy, which is in turn reflected in the daily management of the Group.

Compensation Advisory Committee

The Compensation Advisory Committee ensures transparency in the determination process for director compensation and consists of outside experts, outside directors, the Vice Chairman and relevant directors.

Nomination Committee

The Nomination Committee ensures transparency in the selection process of directors and executive officers, and consists of outside experts, outside directors, the President and relevant directors.

Internal Control Committee

The Internal Control Committee consists of principal directors, which deliberate primarily on basic issues relating to compliance and the development of internal control systems. The committee also formulates the basic plan for internal control and oversees the internal control management framework.

Board of Corporate Auditors

Kobayashi Pharmaceutical has a board of corporate auditors, and has appointed two outside auditors that do not maintain a capital or business relationship with the Group as part of its four-member board of corporate auditors to ensure management transparency. Statutory auditors attend principal meetings, have access to required records, and conduct interviews of operating divisions in order to monitor management to identify business risk as early as possible.

“LA & LA” – Utilizing Employee Feedback

We actively provide opportunities referred to internally as “LA & LA” (Looking Around & Listening Around) for employees to convey their views and opinions directly to management to fulfill our commitment to developing an organizational climate in which all employees can openly share their opinion. Kobayashi Pharmaceutical believes this culture is a significant part of corporate governance.

Information Disclosure

Pursuing Timely and Easy-to-Understand Disclosure

Kobayashi Pharmaceutical strives to provide timely disclosure of corporate data and information in order for shareholders and investors to form an accurate assessment of the company. Our corporate website is also extensively used to disseminate the latest information, provide commentary on business strategy and product lineups, and the timely disclosure of important information related to financial filings.

Furthermore, the Aoitori Report, which is distributed to retail investors twice a year, summarizes our business operations and various business activities, indicating our commitment to disclose effective and useful information.

Internal Control System

Strengthening internal control for expansion of overseas business

The Internal Control Committee has met quarterly since it was established in May 2007. Chaired by the President, this committee oversees the Kobayashi Pharmaceutical Group’s internal control system and compliance framework, while also seeking the advice of outside attorney advisors. Based on its work, the committee issues recommendations and advice on measures concerning internal controls.

The committee focused primarily on building a corporate governance and compliance framework overseas to ensure our overseas business is operated in a speedy and reliable manner. This included establishing a program to raise awareness about the importance of compliance among employees of overseas group companies and also changes to approval and reporting routes.

*Basic Policy on Internal Control Systems
https://www.kobayashi.co.jp/corporate/governance/policy/index.html

Compliance

Compliance training that focuses on continuity

We provide educational training on compliance issues to employees and executive officers, with a focus on continuity in learning, in order to enhance compliance awareness and understanding among our people.

Educational training through the In-house Newsletter and Intranet

Since the fiscal year ended March 2007, we have published an ongoing series on compliance issues in the Kobayashi Pharmaceutical In-house Newsletter and have streamed the latest compliance news and videos on case studies over our intranet monthly. In July 2011, we began providing monthly Compliance e-Learning Sessions over our intranet for all employees and executive officers, and all employees including executive officers took test.

Group Training Sessions

During the fiscal year under review, group training sessions were held for executive officers on the topic of changes to Japan’s Companies Act (led by an attorney) and for managers on the topics of harassments, labor laws and regulations, and insider trading. In addition, new employees were also provided with general compliance training as in past years.

Global Compliance Policy

Given the growth of our overseas business, during the fiscal year under review we changed the name of the Compliance Guidelines, which were first drawn up in 2008, to the Global Compliance Policy and have declared our intentions to ensure full compliance with this new policy. English, Chinese, Indonesian, and Spanish versions of our Global Compliance Policy have also been prepared to ensure compliance best practices are followed at our overseas subsidiaries. In addition, all of our employees both in Japan and overseas have signed written pledges about complying with the Executive Officer and Employee Code of Conduct.

Risk Management Framework

We incorporate opinions of external experts not only into our management meetings, but other committees such as the Internal Control Committee, in defining the business risks each year and conducting and auditing the action plans.

Management of Business Risks

Reducing business risks under eight categories

For the fiscal year under review, we focus our efforts to reduce business risks under eight categories defined based on global management, quality improvement, and compliance with laws and regulations. To ensure the solid execution of risk management, our progress on the action plan was reported to the Internal Control Committee in receiving feedback. As a result, measures such as adding checks to daily business activities and implementing trainings were taken.

Business Continuity Plan

Bolstering our ability to respond to emergencies

In 2008, we began bolstering our measures to deal with disasters, accidents and pandemics to better manage risks to our businesses. This culminated in spring 2010 with the creation of a business continuity plan addressing aggressive influenza strains. In 2011 we drew up a business continuity plan on disasters, given our experiences from the Great East Japan Earthquake. In this regard, we are carefully preparing ourselves for emergencies by constantly revising our business continuity plan every year.