NEC 2011 Annual Report Download - page 32

ACCOUNTING AUDITORS
In fiscal 2011, the independent audit of NEC was
performed by three certified public accountants of KPMG
AZSA LLC: Hideki Amano, Yasushi Hamada and Masafumi
Tanabu. The independent audit was assisted by 41
certified public accountants, 45 assistant accountants
and 31 other individuals.
RELATIONSHIPS WITH OUTSIDE DIRECTORS AND
OUTSIDE CORPORATE AUDITORS
NEC conducts business transactions with Sumitomo Mitsui
Banking Corporation (“SMBC"), for which the President and
Chief Executive Officer is Takeshi Kunibe, who is an outside
director of NEC. These transactions include sales of NEC’s
products and provision of services including, without
limitation, system construction, operation and maintenance.
In addition, NEC has borrowings from SMBC.
NEC entered into agreements with the outside directors
and outside corporate auditors to limit their liabilities as
stipulated in Paragraph 1, Article 423 of the Company Law
to the higher of ¥20 million or the amount provided in the
Company Law and the regulation for enforcement of the
Company Law on condition that they perform their duties
as directors or corporate auditors in good faith and
without gross negligence.
STIPULATIONS IN NEC’S ARTICLES OF
INCORPORATION
NEC stipulates in its Articles of Incorporation that the
number of directors shall be no more than 20, and that the
quorum required for the approval of a resolution on the
election of directors shall be one-third of all the voting
rights of the shareholders entitled to exercise their voting
rights. NEC also stipulates in its Articles of Incorporation
that it may determine matters provided for in each item
of Paragraph 1, Article 459 of the Company Law by a
resolution of the Board of Directors unless otherwise
provided by the relevant laws and regulations, in order to
conduct the distribution of surplus and acquisition of NEC’s
shares and other matters expeditiously. Furthermore, NEC
stipulates in its Articles of Incorporation that the quorum
required for the approval of a resolution by the general
meetings of shareholders, as stipulated in Paragraph 2,
Article 309 of the Company Law, shall be one-third of all
the voting rights of the shareholders entitled to exercise
their voting rights. This is to ensure the smooth operation
of the general meetings of shareholders.
INTERNAL CONTROL SYSTEMS
NEC has formulated a “Basic Policy on Internal Control
Systems” as a policy for development of systems
necessary to ensure that the execution of duties by
directors complies with laws and regulations and the
articles of incorporation and other systems necessary to
ensure the properness of operations.
NEC shall endeavor to establish and operate its internal
control systems more effectively, through continuous
evaluation of the implementation of the internal control
systems under this policy as well as taking measures
necessary for its improvement, and conducting consistent
reviews of this basic policy in response to changes in the
business environment.
NEC assessed the status of the implementation of its
internal control systems for fiscal 2011 and confirmed that
it has established and operated its internal control systems
properly based on the Policy.
Below is an outline of systems based on the “Basic
Policy on internal control systems”:
1 In order to ensure that the directors and employees
perform their duties in compliance with laws,
regulations, and NEC’s articles of incorporation, the
directors and corporate officers take the lead in
practicing and striving to make known the “NEC Group
Charter of Corporate Behavior” and the “NEC Group
Code of Conduct,” both of which were adopted to
establish business ethics standards for the NEC Group
and to ensure compliance with laws and regulations,
the articles of incorporation and internal rules. NEC
encourages the use of the NEC Helpline, a compliance
hotline, and strives to identify breaches or facts that
may constitute breaches as early as possible.
2 NEC properly conducts the storage and management
of information in accordance with applicable laws,
regulations and internal rules.
3 NEC implements risk management systems efficiently
and comprehensively under a consistent policy
throughout the NEC Group in accordance with internal
rules. Business divisions properly implement risk
management systems related to their operations and
corporate staff divisions support such business
divisions’ activities. NEC fully deliberates matters of
importance from a risk management perspective such
as its strategy to control important management risks.
Of these, matters of particular importance are reported
to the Board of Directors. The Corporate Auditing
Bureau conducts audits of the NEC Group’s risk
management system and the implementation status of
risk management in cooperation with internal auditing
section of subsidiaries.
4 In order to ensure that the directors perform their duties
efficiently, the Board of Directors delegates substantial
authority to corporate officers and promotes more
timely decision making concerning management of
business operations and effective performance of
duties. The corporate officers conduct business
efficiently in accordance with medium-term corporate
management goals and budgets determined by the
Board of Directors.
5 In order to ensure that the NEC Group conducts
operations appropriately, based on the “NEC Group
Management Policy”, NEC sends directors and
corporate auditors to subsidiaries as well as shares
information and conducts discussions on important
matters concerning the management of business
operations with subsidiaries. At the same time, NEC
gives instructions and assistance to subsidiaries with
respect to the establishment of systems for ensuring
compliance with laws and regulations, and ensuring
the properness of their business operations. The
Corporate Auditing Bureau conducts audits of
subsidiaries in cooperation with their internal auditing
sections to ensure proper operations.
6 From the perspective of ensuring proper and efficient
operations of the NEC Group, NEC also endeavors to
improve and standardize business processes, and further
strengthen internal control utilizing information systems.
7 Internal control over financial reporting of the NEC
Group will be evaluated, maintained and improved in
accordance with applicable laws and regulations.
8 NEC assigns full-time employees to assist the corporate
auditors in performing their duties. Performance
evaluations, personnel changes, disciplinary action and
31 NEC Corporation
Annual Report 2011