Compliance

Compliance Promotion Structure

The Corporate CSR Committee, which comprises all executives as members and is chaired by the Kawasaki president, meets at least twice a year (three meetings in fiscal 2018). Its goals are to discuss and determine approaches that enable the Kawasaki Group to fulfill its corporate social responsibilities and to monitor the status of compliance efforts. To ensure that the objectives of the Corporate CSR Committee extend to all corporate structures, the Head Office and internal companies hold respective CSR committee meetings at least twice a year, in their effort to promote compliance throughout the Group.

Compliance Promotion Structure

Compliance Promotion Structure

Compliance Reporting and Consultation System (whistle-blower system)

In certain situations, employees of the Company and domestic consolidated subsidiaries who suspect a violation of compliance practices relating to their operations may find it difficult to report the situation or seek advice from superiors or a department that would normally address alleged misconduct. To address this problem, we have established the Compliance Reporting and Consultation System (whistle-blower system).
Under this system, outside lawyers directly receive reports from and offer advices to the reporters/consulters (whistle-blowers). If recognizing a problem in compliance after investigations, the lawyer reports it and makes a proposal for correction to the Company. The whistle-blower will be advised of the result directly by the outside lawyer. The name, etc. of the whistle-blower will not be disclosed to the Company in the course of the investigation without the approval of the whistle-blower.
This system is posted on the intranet, the Compliance Guidebook, group newsletters, etc. for internal publication.
In fiscal 2018, the system was used 27 times.

Number of Reports or Consultations (in fiscal 2018)

Nature of report or consultation Number of cases
Power harassment  7
Personnel matters  8
Financial fraud  1
Sexual harassment  3
Others  8
Total 27

* Number of cases listed above refers to reports and consultations received, not those identifi ed as violation of compliance practices.

Compliance Reporting and Consultation System Flow Chart

Compliance Reporting and Consultation System Flow Chart

Efforts to Promote Compliance

President’s Declaration of Compliance

Each of our president, at newly taking office, announces the President's Declaration of Compliance to the Group employees soon after the assumption of office.

President Kanehana declares in his Declaration, "I will ensure compliance even under the most challenging situations," which is on the first page of the Compliance Guidebook and posted on the intranet, etc. for internal publicity.

Declaration to Observe Laws and Regulations

Each manager and executive of the Company, at his or her appointment, is required to prepare and submit to the Company a completely handwritten Declaration to Observe Laws and Regulations to reconfirm the awareness that he or she will never commit a violation and will cause other employees to ensure compliance. This Declaration includes the representation that they understand that they may be subject to a penalty or punishment if they commit a violation.

Compliance Guidebook

Distribution of the Compliance Guidebook

The Compliance Guidebook, which describes necessary and useful knowledge in an easy-to-understand way for ensuring thorough compliance within the Company, is distributed to all executives, employees, and temporary staff at all Group companies in Japan.
The Compliance Guidebook outlines the Group’s compliance system and operations as well as the Compliance Reporting and Consultation System (whistle-blower system). The Guidebook uses illustrations to present easy-to-understand examples that should be noted regarding compliance-related matters. It is divided into 20 sub-sections in total with six classified sections, Matters concerning Securing the Trust of Customers and Business Partners, Matters to Be Observed as a Corporate Citizen, Matters concerning Data Protection, Matters concerning Handling Financial Transactions, Matters concerning the Workplace, and Responsibilities of Managers.
This Guidebook is used in internal education and learning activities related to compliance. Its contents have been revised frequently since the issuance of the first version in 2003 (currently 2nd revised version of the 5th edition), in consideration of global trends of compliance requirements.

Employee Awareness Survey

The Group implements the employees awareness surveys regularly to monitor the risk of compliance violation within the Company. In recent years, it conducted a survey to measure the degree of penetration of employees' compliance awareness in 2012, 2015 and 2018, and analyzed the result focusing on its temporal changes and reflected it in subsequent actions.
In 2016, the Group implemented the compliance awareness survey for a part of the executives and managers of the overseas companies, too, and announced the result to employees including those in Japan. We will reflect it in subsequent actions in a similar way.

Implementation scheme for compliance activities

As a result of diversification of the Group business, the compliance activities required in the respective business divisions contain those specific to them according to their forms of business. On the other hand, there are not a few actions to be implemented across the entire company in a unified manner.
For this reason, the Group is carrying out compliance activities; (i) as the compliance activity common to all internal companies with an annual compliance related theme set for all the internal companies in common; and (ii) as the business division specific compliance activity with another theme set for each business segment and the Head Office, respectively.

Compliance with Competition Laws

The Kawasaki Group is focusing its efforts on compliance with competition (antimonopoly) laws. Since 2006, the Board of Directors has adopted a resolution to comply with antimonopoly laws and strive to maintain and improve our enterprise value in society at the first Board of Directors’ Meeting, held immediately following each year’s general meeting of shareholders.

Competition laws Guidebook
Competition laws Guidebook

For the prohibition of cartels and bid riggings, the Company issued and distributed to all the administrative and technical personnel in 2005 the Anti-Monopoly Act Guidebook Vol.1 - Cartel and Bid Rigging Q&A, which provides clear explanations on why they are prohibited, what sanctions will be imposed in case of violation, and how to think in individual cases. Its revised edition was issued in 2010 and 2015, reflecting legal revisions with the composition and expressions reviewed to make them easier to understand.
Similarly for the prohibition of private monopolization and unfair practice (vertical restrains) as well, the Anti-Monopoly Act Guidebook Vol.2 - Private Monopolization and Unfair Practice Q&A, which provides clear explanations of the contents of the regulations and how to think in individual cases was issued and distributed to all the administrative and technical personnel in 2007. It was revised as well in 2010 and 2017.
Furthermore, in 2013, the Anti-Monopoly Act Guidebook Vol.3 – FAQs: What do you think of it?, which provides 33 specific cases of consultations actually made to the Legal Department and explanations on how to think in these cases, was issued and distributed to the employees of the sales, procurement, and administrative divisions.
As shown above, the Company is working to ensure broadly the awareness of employees regarding the cases that may pose a question to us and encouraging them to learn about competition laws by issuing these guidebooks on the Anti-Monopoly Act.

Efforts to Prevent Corruption

Taking an even tougher stand against corruption, we established the Bribery Prevention Regulations in August 2013. Our basic policy states that the Kawasaki Group will uphold laws in the execution of business activities and that bribes to public officials in Japan or overseas is not at all condoned.
Additionally, the Company presents in its guidelines titled Idea regarding Sales Promotion Activities toward Overseas Public Officials and Appointment of Third Party, the basic idea regarding the offering of travel expenses and eating and drinking expenses, gifts, facilitation payments in the sales promotion activities as well as the appointment of the third party used for negotiations with overseas public officials.
In addition, we implement the establishment of regulations with similar content at domestic and overseas affiliated companies.
As for training activities, compliance education focusing on corruption prevention is provided in the training implemented in Japan every year for the personnel engaging in overseas business.

Prevention of insider trading

The Company has established and operated the corporate regulations Insider Trading Control Rules for the purpose of prevention and control of insider trading. In addition, the system was newly established in fiscal 2013 to oblige the Company officers and employees intending to trade the Company shares to notify the Company thereof by the prescribed date (Treasury Stock Trading Prior Notification System) to further ensure the prevention of insider trading.

Measures to Prevent Irregularities at Small-Scale Operating Sites

Certain situations are unique to small-scale operating sites, such as regional offices and satellite branches, which may not have meticulous check system or may have people remained in a particular position for relatively long term because personnel rotation is more of a challenge to implement.
Based on such circumstances, the working group composed of relevant divisions of the Head Office reviewed and improved the check manuals and strengthened audits in order to reduce risks in handling money, in particular.

Elimination of Antisocial Forces

The Company resolutely rejects inappropriate requests from antisocial forces and undertakes various measures to break off completely from any relationship that may unwittingly be formed.
Specifically, we publish our Compliance Guidebook and our Manual of Responses to Antisocial Forces, and strive to promote awareness and full compliance of established practices and systems, such as internal structures to prevent dealings with antisocial forces and specific actions that must be taken should transactions inadvertently occur. In addition, we have established a unit at the Head Office to supervise responses associated with the elimination of antisocial forces. This unit works closely with the police and other external specialist organizations and has the task of building a structure to systematically deal with inappropriate requests from antisocial forces.

Example of Compliance Education in the United States

KRC Code of Conduct training

Kawasaki Rail Car Inc. (KRC), a production point for rolling stock in the United States, issued a code of conduct, outlining corporate ethics and compliance. Every year, the company holds a code of conduct training for all employees (about 400 people). The training is presented by representatives from the personnel department who take participants through the entire document. Participants are given a short quiz comprising 20 questions and then check the answers together. At the end of the training, participants make a written pledge to respect the code of conduct. This training ensures that employees have a solid understanding of the code of conduct to which KRC subscribes.


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