Epson 2012 Annual Report Download - page 36

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compliance. Auditors also take seats on the council to verify the details of legal compliance programs.
The president periodically reports to the board of directors on compliance management issues and formulates
appropriate measures to respond to these issues.
Epson’s Principles of Corporate Behavior categorically state that the Company will not be involved with
anti-social elements in any way.
Risk management
Epson’s risk management system is founded on regulations that define the organization, procedures, and other
key elements of this system.
Overall responsibility for risk management resides with the president, with the persons responsible at each
operations division in charge of risk management at their respective businesses and subsidiaries.
The Trust-Based Management Council was established to deliberate risk management issues under the leadership
of the president. The Council identifies important Group risks and manages programs to control them. When
major risks become apparent, the president leads the entire company in mounting a swift initial response in line
with Epson’s prescribed crisis management program.
The president periodically reports to the board of directors on risk management issues and formulates
appropriate measures to respond to these issues.
(2) Audit system
Internal audit
Epson’s compliance system guards against potential legal and internal regulatory violations in departmental
operations, and the Audit Office reports directly to the president the results of routine internal audits, including
those conducted at Epson subsidiaries. The Audit Office evaluates the effectiveness of the governance process
and requests improvements where needed.
Statutory audit
Epson has assigned three outside statutory auditors to its five-member board of statutory auditors to ensure
greater independence and transparency of audits.
Based on corporate regulations governing auditors and audit procedures, statutory auditors have the authority to
conduct hearings with directors and other personnel whenever they deem such hearings necessary. Statutory
auditors are also authorized to attend important business meetings, which enables the auditors to conduct audits
based on the same information as that available to directors. Statutory auditors also routinely review important
documents related to management decision making.
Epson has established an Audit Staff Office with specialized personnel to assist the statutory auditors in their
duties. The views of the board of statutory auditors are given a great deal of weight in the evaluation and transfer
of personnel assigned to this office.
To improve the effectiveness of their audits, statutory auditors consult on a regular basis with the Audit Office
and independent public accountants.
Statutory auditors hold regular meetings with representative directors to directly assess business operations.
(3) Outside directors and outside statutory auditors
View on independence
Epson, taking Tokyo Stock Exchange requirements for independent directors under advisement, selects outside
directors and outside statutory auditors who do not have potential conflicts of interest with general shareholders.
The outside director and the outside auditors that are currently engaged all meet these requirements.
Outside directors
Epson's board has one outside director. No special interests exist between the Company and the outside director.
The outside director, Toshiharu Aoki, was an executive at Nippon Telegraph and Telephone Corporation and at
NTT Data Corporation. Epson does not currently have a business relationship with Nippon Telegraph and
Telephone Corporation. Although Epson does have a business relationship with NTT Data Corporation, which
Epson has engaged primarily to build internal information systems, the transaction amount is insignificant when
compared to the net sales of both companies.