The Denka Philosophy & Code of Conduct

Denka has established priority management materiality issues(important management issues) that the Denka Group must fulfill in order to achieve SDGs. In order to enhance corporate governance, which is one of these material issues, we are working to enhance the Group’s internal control systems in order to comply with laws, regulations, and the Articles of Incorporation, and to increase corporate value through appropriate and efficient business operations.
In recognition that the fulfillment of our social responsibilities, and in particular, compliance, is fundamental to sustainable development, we have established the “Basic Policy on the development of Internal Control Systems” and are reviewing the function of existing internal control systems across the entire Group with the aim of promoting ongoing improvements. We have also established a “Corporate Conduct Policy”, which specifically sets forth standards of conduct for the entire Group.

Employee education and dissemination of information within the Group

Our President has used various opportunities and means to communicate these policies to all executive officers and employees within the Group in his own words, for example, “It is important to share a sense of crisis that any action that undermines social responsibility will be severely criticized by society as a whole and has the potential to jeopardize the company's survival.” Moreover, representatives of major Group companies, executive officers and corporate department heads meet twice a year to share our corporate philosophy, management policies and challenges, as well as to discuss and further share internal control risks and our responses to them.
Furthermore, in order to ensure that all employees act in accordance with laws, regulations, and corporate ethics, the Legal Department has formulated the “Denka Global Compliance Program”, a global training program, and systematically conducts education for all executive officers and employees of the Group, both in Japan and overseas, to ensure that they are familiar with the Corporate Conduct Policy and compliance.

Monitoring, internal auditing, and internal reporting systems

The Audit Committee attends important meetings and conducts audits of the company and major subsidiaries in order to confirm that business activities of the Denka Group are being conducted appropriately and also periodically conducts interviews with business and administrative divisions to confirm the status of business operations.
Within the Internal Control Department, nine staff members of the Internal Audit Office, an independent body set up to monitor operations, works closely with the Audit Committee to ensure effective and efficient audits, while also assessing the status of internal controls based on the Financial Instruments and Exchange Law (J-SOX) and conducting operational and management risk audits of corporate bodies and business processes that are not subject to J-SOX. Each audit plan is formulated with the approval of the President and the Board of Directors, and audit results are reported to the head of the body subject to audit, as well as periodically to the President, the Audit Committee, and the Board of Directors.
The operational and management risk audit covers not only Denka and its subsidiaries, but also affiliated companies to which Denka seconds representative directors and has significant responsibility for their management. However, due to the large number of bodies subject to audits, we aim to improve the efficiency and effectiveness of the audits by using self-evaluation results to narrow down targets and areas in advance. During on-site audits, we assess progress in the establishment and management of internal controls, including risk management, legal compliance, asset management, and business operations, identify inherent risks and issues, and monitor the effectiveness and adequacy of each process. We also provide advice on issues and improvement measures with respect to problems identified during audits while respecting the autonomous management of business executives of the audited companies, and share information with internal related departments as necessary to resolve issues.
In addition, since FY2021, the Internal Control Steering Office has been established within the Internal Control Department to support the development of internal controls at Group companies, mainly overseas. We are working to enhance the Group's controls based on a framework that packages standard internal control initiatives (Internal Control Framework), and are working with the Internal Audit Office to improve work processes in each Group organization, reduce risks, and eliminate misconduct, thereby improving the non-financial value of the Group as a whole. Further, in terms of audits of operating divisions, the Accounting Department conducts accounting audits of major subsidiaries, and related departments, such as the Legal Department, the Environmental and Safety Department, and the Quality Assurance Department either independently or jointly with the Internal Control Department to ensure strict compliance with laws and regulations in each specialized area.
In addition, with the aim of strengthening internal controls at overseas bases, we have established divisions in charge of internal controls at our regional control bases in Southeast Asia and China, where our bases are concentrated, and are working together with the Head Office Internal Control Department to promote the development of local internal controls and have commenced internal audits.
To complement these internal audits and to detect and correct violations of laws and regulations and internal regulations at an early stage, we have also established a group whistle-blowing system and are actively encouraging its use.