Basic Policy on Internal Control System

日本語

Based on the Japanese Companies Act and its enforcement regulation, enacted as of May 2006, we have resolved the "Basic Policy on Internal Control System" at the Board of Directors, and prepared a framework to ensure fair business activity as outlined below.

Basic Policy

(Revised on April 1, 2024)

We believe that the reinforcement of our company's corporate governance plays a pivotal role in achieving "a fair and transparent management deserving of stakeholders' confidence," and we intend to increase its effectiveness by improving the quality of our internal controls. We acknowledge that the achievement of effective and efficient business processes, the credibility of financial reports, the compliance with relevant laws and regulations, and the preservation of company's assets at our company and its subsidiaries (hereinafter the "Group") are the management's responsibility. Accordingly, we will prepare and refine a framework, including our internal regulations as well as our organization, to ensure fair business activity in compliance with the Japanese Companies Act and implementing regulations of the said Act.

1. 1.A framework to ensure that performance of duties of directors, etc. and employees of the Group is in compliance with relevant laws and regulations as well as the articles of incorporation
   1. (1)In order to permeate and establish awareness of corporate ethics, we have established the Nikon Code of Conduct, which shows the Group's basic stance on corporate social responsibility and the standards of behavior to ensure sensible conduct by directors, officers and employees of the Group, based on a high level of morality, pursuant to relevant laws and regulations as well as internal regulations.
   2. (2)The Compliance Committee regularly performs its function in order to ensure legitimate, fair, and sound corporate behavior. In addition, the Sustainability Committee conducts activities for improving, fostering and educating on issues surrounding sustainability, including social responsibility.
   3. (3)Regarding elimination of anti-social forces and groups, we have defined our basic approach in the Nikon Code of Conduct. Additionally, we are establishing a system to liaison with attorneys and police forces, to take steadfast action as an organization.
   4. (4)The Basic Policy on internal control over financial reporting has been established to ensure credibility of financial reporting by the Group. Frameworks to enable the foregoing are being prepared and improved.
   5. (5)Internal Audit Department has been established as an independent organization. This Department examines whether operations within the Group are conducted in compliance with relevant laws and regulations as well as internal regulations, and when necessary, makes recommendations as to how such operations can be improved.
   6. (6)Structures are established and administered in order to fully implement compliance by the Group and prevent or correct behaviors that violate social regulations or corporate ethics. The Code of Conduct Hotline is being created as the report/consultation system in this respect.
2. 2.A framework to ensure an efficient performance of duties, etc. by directors of the Group
   1. (1)At our company and domestic subsidiaries, the executive officer system provides a clear definition of the authority and responsibility in performance of an officer's duty, resulting in quick decision-making as well as an efficient performance of the officer's duty.
   2. (2)Rules of authority clearly define the scope of authority and responsibility for each post as well as each organization within the Group and are administered, to ensure organized and efficient performance of duties.
   3. (3)Meeting structures such as the Executive Committee, as well as other committees and meeting bodies are established and are administered at our company to enable efficient decision-making and performance of duties for the Group by directors of our company. Among such organizations, the Executive Committee primarily consists of executive directors, deliberates about and resolves major issues regarding management, general internal controls, and guidelines about general operations of the company's business, in accordance with the basic direction of management as determined by the Board of Directors. Major issues are reported to the Executive Committee by each department.
   4. (4)In accordance with our corporate philosophy of "Trustworthiness & Creativity," management targets of the Group are defined within annual plans as well as within the Medium Term Management Plans, and implemented as specific measures. In order to achieve annual targets, management of operations is carried out through divisional organization. A meeting is regularly held to examine business issues and responses to them. The achievement level of annual targets is evaluated and validated based on the Achievement Evaluation System.
3. 3.A framework aimed at preservation and control of information relating to the performance of duties by directors of our company
   1. (1)Information regarding resolutions, decisions, and reports pertaining to performance duties by directors of our company are preserved in documentary format and until such time as provided in the Regulations of the Board of Directors, the Regulations of the Executive Committee, and the Nikon Group Information Management Rules. The information control system is designed to allow access, when needed, from directors, as well as accounting auditors.
   2. (2)As for security of information, Information Security Department controls centralized management for information management within the Group and manages coordination and reinforcement of an information management framework within the Group. Further, the common rules in the Group are being established and these rules intend to make definitions of the access level per category and relevance, password control, measures for preventing leaks, manipulations and destructions of proprietary information and other matters generally and thoroughly known by directors, officers and employees within the Group.
4. 4.A framework including rules concerning risk of the Group loss management
   1. (1)In accordance with our recognition of identification, assessment, and control of risk factors potentially affecting operations and business continuity as critical issues, the Risk Management Committee ascertains risks from a group-wide perspective and determines a policy for responding to such risks. Furthermore, we strive to develop a framework to appropriately control risks surrounding the Group by ascertaining risks based on expert knowledge in the Quality Committee, the Export Control Committee, and the Compliance Committee under the Risk Management Committee, as well as the Sustainability Committee, and its subcommittees, the Environmental Subcommittee and Supply Chain Subcommittee; and by establishing rules to address each risk and ensuring compliance with these rules.
   2. (2)Internal Audit Department audits the status of risk control by the above committees and others and evaluates its effectiveness on a regular basis, and reports to the Audit and Supervisory Committee and the Board of Directors. The Board of Directors develops a framework whereby it can implement corrective measures when necessary.
5. 5.A framework regarding reporting to our company of matters related to performance of duties by directors of subsidiaries
   1. A framework is being placed for important matters at subsidiaries to be reported and decided upon by our company in compliance with the Decision and Reporting Rules for Subsidiaries.
6. 6.Matters concerning employees assisting the Audit and Supervisory Committee of our company
   1. (1)Several employees are appointed as dedicated assistants to the Audit and Supervisory Committee who act in obedience to orders of the Audit and Supervisory Committee of our company in order to ensure an efficient procedure of the Audit and Supervisory Committee as well as to ensure the increased effectiveness of the audit.
   2. (2)Orders given by the Audit and Supervisory Committee to the assistants, transfer of the assistants, and evaluation of the assistants' performance are ensured to be independent of officers who assume executive responsibilities.
7. 7.A reporting framework to the Audit and Supervisory Committee of our company
   1. (1)An Audit and Supervisory Committee member of our company has the authority to attend major meetings. This ensures that the Audit and Supervisory Committee members have opportunities to constantly understand the status of operations and the decision-making process of the Group.
   2. (2)A framework is being developed to ensure appropriate and effective reporting to the Audit and Supervisory Committee of our company regarding facts that can potentially cause damage to our company, information obtained through the reporting/consultation system concerning corporate compliance, or items to be reported at the Audit and Supervisory Committee as previously agreed with directors.
   3. (3)Internal Audit Department regularly reports the status of internal audit as well as the results of the audit to the Audit and Supervisory Committee of our company. The Audit and Supervisory Committee of our company maintains close coordination with Internal Audit Department by measures including requesting, if necessary, further investigations by Internal Audit Department.
   4. (4)We ensure that parties who make reports to the Audit and Supervisory Committee of our company do not receive negative treatment, including provisions in place within the Confidentiality Rules of the Code of Conduct Hotline to forbid retaliation against parties that make reports to the Code of Conduct Hotline, the report/consultation system.
8. 8.Matters regarding policies related to processing expenses or liabilities arising from performance of duties by Audit and Supervisory Committee members of our company
   1. Expenses related to the duties of Audit and Supervisory Committee members of our company are budgeted annually to a certain amount by request of Audit and Supervisory Committee, and for necessary expenses, our company makes payments that are in excess of the budget, pursuant to laws and regulations. Additionally, our company also makes payments, as required, for expenses required to appoint outside specialists.
9. 9.A framework to ensure effective audit by the Audit and Supervisory Committee of our company
   1. (1)While ensuring independence of the Audit and Supervisory Committee of our company from management functions, this framework enables the Audit and Supervisory Committee of our company to hold regular meetings with the representative director in order to exchange opinions regarding issues to be dealt with by the company, or important tasks pertaining to audits, and to make necessary requests, consequently deepening the mutual understanding between them.
   2. (2)The Audit and Supervisory Committee of our company hold regular meetings with accounting auditors, to actively exchange opinions and information.