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Governance and CSR Management

Governance Report

Basic Stance on Compliance and Compliance Structure

The Hitachi Chemical Group positions compliance at the heart of its CSR activities. The Group defines compliance as much more than merely observing regulatory requirements instead it entails adhering to and improving our ability to comply with voluntary industry standards, corporate ethics, social norms, and each employees’ sense of appropriate behavior.

In advancing compliance, the Hitachi Chemical Group has set forth a regulatory system, an organizational structure, and actions to be taken to ensure complete compliance in the Hitachi Chemical Group’s Global Compliance Program.

At the heart of the Hitachi Chemical Group’s compliance regulations are the Hitachi Chemical Group Codes of Conduct, which were established in 2010 to lay down the bare minimum that all employees are expected to uphold rigorously. The Codes of Conduct were established by the Board of Directors as a company regulation, whose enforcement the Board also reviews. This Codes of Conduct has become a uniform set of standards of behavior at all Group companies both in Japan and overseas. Through e-learning programs, reading circles and periodic roundtable discussions, the Group works to ensure that all employees are fully aware of all the details. The Group has also created and distributed Japanese, English, Chinese (Simplified and Traditional) and Vietnamese versions of the Hitachi Chemical Group Codes of Conduct Handbook that explains the Codes of Conduct in an easy-to-understand manner. The handbook is provided to ensure all Group employees around the world further their understanding by reviewing the contents of the handbook regularly. While heightening the importance of compliance, these initiatives also help to clarify the possible consequences of punishments in case of any breach of the Codes.

The Group deploys efforts to raise the compliance awareness with the aim of fostering personnel, who will behave in every situation in ways they can be proud of as a member of society. Employees are given opportunities to participate in the in-house training seminars and take e-learning programs on a periodic basis. At the same time, to ensure that all Group employees have a genuine understanding of compliance on a par with international standards, presidents of business offices and Group companies deliver message to employees to take ownership of their own development of compliance awareness.

If, however, a breach of statutory requirements arise, employees are required to promptly report all details to the designated departments and sections, and to consult with legal advisors toward an early resolution and prevention of recurrence. Details of any breach of compliance are also required to be reported at the Executive Officers’ Meeting, and since January 2012 a summary has been sent directly from the Hitachi Chemical Headquarters via e-mail to all management-level Hitachi Chemical employees (employees with positions equal to section chief and above), the presidents of domestic and overseas Group companies, and compliance officers. Through such efforts, the entire Group is notified those breach incidents. Managers receiving the notice are required to discuss it with all subordinates, and are required to check and make sure potential occurrence of similar cases are not lurking in their own operation. In addition, managers must keep a record of known facts, which are confirmed by an internal audit performed by the Auditing Office.

Corporate Ethics Month

The Hitachi Chemical Group designates every October as the Hitachi Chemical Group Corporate Ethics Month. In fiscal 2016, a message from the President & CEO was translated into 8 languages and transmitted to Group companies in Japan and overseas. Moreover, a series of roundtable discussions conducted by a corporate lawyer were held at the workgroup level, in which Executive Officers and the heads of business sites join, to talk about the Hitachi Chemical Group Codes of Conduct. In the discussions specific case examples were introduced to stimulate debate and the exchange of opinions, thereby raising everyone’s awareness and understanding of the Codes of Conduct.

Compliance Training and Audits

Antimonopoly Act Training at Headquarters
Anti-Trust Training at Headquarters

The Hitachi Chemical Group emphasizes training designed to raise employees' awareness about compliance. New and mid-career recruits undergo training on CSR, compliance and human rights without exception, and the Hitachi Chemical Group Code of Conduct Handbook is distributed to all employees in domestic and overseas Group companies to ensure compliance with the requirements.

In fiscal 2016, the Risk Management Center conducted 100 training courses (88 in Japan and 12 overseas). The number of participants reached over 4,100, surpassing the target of 3,000.

Compliance audits were conducted at four offices of Hitachi Chemical, two Group companies in Japan, and eight overseas companies. In addition to confirming how well management systems and training are being implemented, audits uncover areas for improvement, which were reported to management. In fiscal 2017, plans call for systematically auditing five offices of Hitachi Chemical, two Group companies in Japan and eight overseas companies.

Trend of Participants to Compliance Training (Persons)
FY 2012 2013 2014 2015 2016
Participants 1,774 2,072 3,137 3,350 4,110
Compliance Training Results in Fiscal 2016 (Persons)
Subject
New hires Others Totals
Compliance (in general)* 188 2,732 2,920
Harassment issues 447 447
Antimonopoly Act 743 743
Total 188 3,923 4,110
*
Comprehensive training including the Antimonopoly Act, bribery, antisocial forces, prevention of insider trading,
and export controls.

Compliance Counseling and Whistle-Blowing System

The Hitachi Chemical Hotline was set up as a counseling and whistle-blowing program for employees to turn to when they encounter compliance issues. Requests for counseling and information are handled quickly and discretely, while strictly maintaining confidentiality with due care for whistle-blowers to protect them from any disadvantageous treatment.

Inquiries concerning compliance are accepted by postal mail, email, via the intranet, and by telephone by the unit responsible for handling compliance issues and via an external hotline where calls are handled by legal advisors. In line with the growing globalization of business activities, the Hitachi Chemical Group set up a Global Hotline in March 2012. Inquiries can be made to this hotline in three languages— Japanese, English, and Chinese. Effort is being made to develop the counseling and whistle-blowing programs at overseas Group companies as well.

A wide variety of requests for counseling and information are accepted including matters relevant to noncompliance with various laws and regulations such as the competition and anti-corruption law, violations of the Group's work rules, and infringements on human rights such as harassment, as well as inappropriate conduct and acts against social justice.

In fiscal 2016, the hotline received 10 calls from employees in Japan and overseas. The Group addressed each report appropriately and as needed, working with the related business units. No instances of major statutory breaches were discovered.

Trend of Consultation and Whistle-blowing Calls
FY 2012 2013 2014 2015 2016
Total 16 16 34 20 10

Anti-Trust Act Rigorously Observed

Compliance Information Record Notebook
Compliance Information Record Notebook

At Hitachi Chemical, if there is even a hint of a breach of the Anti-Trust Act, employees mainly in sales and marketing, business, and technology divisions are obliged to record the details in the Compliance Information Record Notebook and report to their supervisors and other competent departments. Employees related to sales and marketing divisions are also obliged to obtain the approvals in advance from their supervisors and record the details in the same notebook in case of the necessity to attend a meeting of a particular industry organization. All records are subject to biannual audits. In fiscal 2016, audits were conducted in April and October by the unit in charge of compliance. All concerned employees are interviewed to ascertain the facts recorded in the Notebook. This initiative has also been implemented at each Group company, with the same type of audits being conducted. Furthermore, with the Anti-Trust Act positioned as a core of compliance management, a message from the president issued in the Corporate Ethics and Compliance Month in October every year calls for thorough adherence to the act and constant reference to the Anti-Trust Act Handbook.

In July 2016, a legal advisor was invited to conduct Anti-Trust Act workshops for all employees. A total of 531 employees participated in the workshops.

Agreement on Capacitor Business with the U.S. Department of Justice

Since 2014 Hitachi Chemical has been cooperating with the U.S. Department of Justice in its investigation on the violation of the U.S. antitrust Laws by the capacitor business managed by its Group company. In relation to this case, Hitachi Chemical accepted a plea bargain with the Department of Justice in April 2016, which included the payment of a fine amounting to US$3.8 million (approx. ¥398 million). We deeply apologize for the concerns and inconvenience caused to our customers, shareholders and all other interested parties. As a measure to prevent recurrence, we will endeavor to rebuild the compliance system of the entire Group and conduct education in a thoroughgoing manner, with our division in charge of legal affairs and compliance playing a leading role under the direction of the top management of Hitachi Chemical.

Prevention of Antisocial Transactions

The Hitachi Chemical Group has traditionally avoided any contact with “antisocial forces” (criminal organizations). In addition to its policy of steadfastly refusing any demand for interaction, the Group has established a Compliance Committee at each of its business sites and endeavored to put in place a framework, including self-audits, designed to block any connections with antisocial forces. As a member of Tokuboren (the Federation on Special Organized Crimes within the Jurisdiction of the Tokyo Metropolitan Police Department), the Group makes ongoing efforts to ensure the elimination of contact with antisocial forces in cooperation with its parent company, Hitachi, Ltd. In accordance with Ordinance for Eliminating Organized Criminal Groups, the Hitachi Chemical Group incorporated a clause in its contracts with customers, suppliers, and all other third parties specifically precluding any transactions with antisocial forces as part of its work.

Anticorruption Measures

The Hitachi Chemical Group’s Global Compliance Program was established as a set of guidelines to be observed throughout the Group. Furthermore, we are promoting the establishment of rules based Rules Pertaining to Prevention of Bribery and others to implement thorough compliance of these rules by employees throughout the entire Group.

The Group has prohibited so-called facilitating payments in principle, and added the items regarding the employment of public servants to target further risk mitigation.

Protecting National Security Interests and Complying with Export Controls

In fulfilling its responsibilities as an organization that actively develops business overseas, the Hitachi Chemical Group strictly observes the Foreign Exchange, Foreign Trade Act and foreign regulations governing exports in the countries where it operates. In addition, the Group takes steps to put in place rules and regulations relating to national security and export controls that match the business conditions at each Group company.

Based on these rules and regulations, decisions are made whether export approvals are required for specific products and technologies at design and development departments. Sales and marketing departments investigate concerns regarding transaction counterparties and conduct stringent due-diligence screening. The Group additionally conducts periodic audits as well as director and employee education programs.

By corresponding to the accelerating global business expansion, we will continue to make improvements in fiscal 2017 by focusing on cooperation with overseas companies and the control of technology as priority items.

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