Basic Policy on Internal Control (for FY2021)
The Internal Control System at Dentsu is designed to encourage compliance among directors, executive officers, and employees while it supports continuous corporate development as the Company strives to meet its social responsibilities.
The Company (Dentsu Group Inc.) has chosen the Dentsu Group Code of Conduct to define the parameters of acceptable behavior, which ensures that directors, executive officers and employees of the Company and its subsidiaries (hereafter the Group) comply with all laws, regulations, and the Articles of Incorporation during the course of their duties and that business is conducted appropriately. The Internal Control and Risk Committee is charged with creating, operating, and improving the System.
1. System to Ensure the Appropriateness of Operations throughout the Group
The Company will define matters that subsidiaries must establish and operate as members of the Group, starting with the following items, and will ensure the appropriateness of operations throughout the Group through proper support, oversight, and management by the Company as a holding company.
- The Dentsu Group Code of Conduct was drafted as the standard for acceptable corporate behavior and embraces the entire Group, including subsidiaries. Each subsidiary passes a resolution on the adoption of the Code.
- Subsidiaries will define standards pursuant to the Dentsu Group Code of Conduct, and by resolution of a meeting of the Board of Directors, etc., will ensure compliance and risk management as members of the Group.
- In addition to receiving periodic reports from subsidiaries concerning the business operations, business results, and other significant matters that may have significant effect on the business operation or business results of the Company, subsidiaries will request advance approval or report to the Company.
- In order to ensure efficient and appropriate decision-making and business execution of the businesses, Dentsu Japan Network is responsible for the management and oversight of the Japan business and Dentsu International for the international business.
- The Company will enforce the establishment and the operation of the system described in the followings on subsidiaries.
2. Compliance System for Directors, Executive Officers and Employees
- Directors and executive officers of the Group must perform their duties appropriately, in accordance with rules such as the Board of Directors’ Rules, Rules for the Operation of the Important Committees, Directors’ Rules, and Executive Officers’ Rules.
- If a director or an executive officer of the Group discovers a violation of the prevailing laws or comes across any other serious compliance-related issue, it is imperative that he/she reports it without delay to the Board of Directors or the important committees. The Audit and Supervisory Committee of the Company or the Audit Committees or Audit Officers of each subsidiary must also be immediately advised of the circumstances.
- The relevant departments create internal policies and manuals and conduct training to improve and enhance the compliance system for employees of the Group.
- The Company has set up an internal reporting and proposal system to respond appropriately in the event a law is broken or some other internal compliance issue arises.
- If the Audit and Supervisory Committee of the Company or the Audit Committees or Audit Officers of each subsidiary states opinions on the compliance system or require steps to improve the system, directors and executive officers of the Group must respond without delay and make the recommended improvements.
- The Company has established a department to facilitate the termination of business relationships with organized crime groups and elements thereof—termed "antisocial forces"— when a link is discovered and to resolutely refuse any and all future transactions. This department functions as the liaison between the affected in-house divisions and the relevant authorities to expedite an appropriate course of action.
3. Systems to Ensure Efficient Execution of Duties by Directors and Executive Officers
- In addition to meetings of the Board of Directors, the Company and each subsidiary hold meetings of the Board of Directors, Executive Management Meetings, and various committees in order to make decisions on important matters pertaining to management policy and strategy appropriately and expeditiously.
- Items resolved at such meetings are transmitted to all employees through the corporate structure for prompt reflection in the execution of duties. Urgent items are posted on the internal electronic bulletin board in the interest of rapid dissemination.
4. Storage and Management of Information Related to the Execution of Duties by Directors and Executive Officers
Information concerning the execution of duties by directors and executive officers of the Group is stored and managed appropriately, in accordance with the Company's Documentation Management Rules and Information Management Rules etc.
5. Risk Management System
- The Group establishes risk management regulations to maintain and improve a structure that precludes the spread of damage or loss and minimizes the impact of risk progression in the event risks become reality. The Company performs self-checks with regard to the situation of risk management under the Group Executive Management Meeting selects material risks to be handled, and implements risk management based on concrete response plans.
- The response policy for material risks in management and other material items concerning risk management are reported to the Board of Directors and the Audit and Supervisory Committee of the Company or the Audit Committees or Audit Officers of each subsidiary.
6. Internal Structure to Support the Audit and Supervisory Committee and their Independent Status
The Company maintains an Audit and Supervisory Committee Office, which consists of employees who assist the Audit and Supervisory Committee in their duties.
This office reports directly to the Audit and Supervisory Committee, thereby preserving its independence from directors (excluding Directors who are members of the Audit and Supervisory Committee) and executive officers and effectiveness of instructions from Audit and Supervisory Committee.
7. System for Reporting to the Audit and Supervisory Committee and Improving Audit Effectiveness
- Policies are in place to define issues that directors (excluding directors who are Audit and Supervisory Committee members), executive officers, and employees (hereinafter called “executives and employees”) of the Group are required to report to the Audit and Supervisory Committee, while at the same time, the system ensures that significant matters that have an impact on the Group’s business operations or business results are reported by executives and employees to the Audit and Supervisory Committee in a certain and prompt manner.
- In the event that the Audit and Supervisory Committee request information other than that indicated above, executives and employees of the Group are still required to respond without delay.
- It will be ensured that parties who report under the condition of the previous items do not receive harmful treatment as a result of reporting.
- Pursuant to laws and regulations, a policy will be defined to account for expenses, etc., incurred during the course of execution of duties by the Audit and Supervisory Committee, and this information will be disseminated to concerned parties.
- To enhance audit effectiveness, the internal audit functions and external auditors collaborate.
8. System to Ensure Appropriateness of Financial Reporting
- The President and Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the Company, under the supervision of the Board of Directors, shall maintain and continuously improve a system that ensures appropriateness in financial reporting by the Group.
- Subsidiaries and departments involved in business activities shall perform self-checks through the course of day-to-day operations to determine if internal controls are functioning properly.
- The Group Internal Audit Office shall monitor the Internal Control System from a perspective free of operational bias to assess the effectiveness of internal controls related to financial reporting.
(Formulated on November 1, 2008)
(Amended on April 1, 2021)