NEC 2010 Annual Report Download - page 29

In addition, NEC has long-term borrowings from Sumitomo
Life Insurance Company.
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 Implementation of
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 2010 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 Implementation of 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 company-
wide policy 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 manage-
ment perspective at the Executive Committee, 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 company-wide risk
management system and the implementation status of
risk management.
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, NEC sends the Directors and
Corporate Auditors to subsidiaries along with sharing
information routinely with subsidiaries to conduct
operations based on the “NEC Group Charter of
Corporate Behavior” and the “NEC Group Code of
Conduct.” 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. The NEC Group endeavors to evaluate,
maintain and improve internal control over financial
reporting in accordance with applicable laws and
regulations. From the perspective of proper and
efficient operations of the NEC Group, NEC also
endeavors to conduct improvement and standardization
of business processes, and further strengthen its internal
control utilizing information systems.
6 NEC assigns full-time employees to assist the Corporate
Auditors in performing their duties. Performance evalu-
ations, personnel changes, disciplinary action and other
similar measures pertaining to these employees are
subject to the approval of the Corporate Auditors.
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NEC Corporation
Annual Report 2010