In order to speed up its response to management conditions and achieve enhanced transparency in its management, Kubota has been committed to enhancing its corporate governance structure. Moreover, by building an internal control system and implementing steady improvements continuously during its business activities, Kubota not only enforces the observance of laws and regulations, but also reduces risk.
The internal control system of the Kubota Group is a mechanism for clearly providing the rules that should be followed during the performance of business, and for checking whether or not business has been managed according to those rules. This system consists of the segments of business management, which entails the performance of business operations based on rules, and risk management, which entails the management of major risks in management.
In business management, basic matters necessary for operating businesses are determined in business rules, and each business division checks its daily business operations in accordance with the business rules. Business rules comprise of common business rules (basic rules) and functional business rules.
In risk management, operations that each department in charge of risk management should implement are determined in the risk management rules. Based on these rules, necessary actions to be promoted for risk management are identified and the departments are audited, thereby verifying the effectiveness of the risk management.
In the internal control system, major risks in Kubota’s management are classified into the following three categories:
To avoid these risks, each department in charge implements necessary actions to be promoted and conducts audits of the relevant operational division, and reports the results and the measures for the next fiscal year to the President and the Board of Directors. Thus the PDCA cycle for risk management is implemented properly.
Kubota positions risk management activities as part of its business activities. Based on the awareness that risk management is the foundation of business activities, Kubota identifies risks common to the entire Kubota Group, such as those relating to the reliability of financial reporting, and exerts efforts to manage risks appropriately through continuous steady improvement to “immediately correct any inadequacies.” At the same time, while accelerating the global development of its businesses, Kubota strongly recognizes that risk management activities are the foundation for the continuity of its businesses, and strives to improve such activities both in Japan and overseas.
In FY2016, as part of Kubota’s initiative continuing from FY2015 to enforce risk management, each business division determined the risks that seemed most critical under the current circumstances.
|Risk management items||Risk to be avoided||Number of audited items for FY2016*1|
|Internal control over reliability of
|Internal control over the basic functions of the company||Fair trade||
|Health and Safety||
|Internal control over compliance||Compliance with rules and regulations related to equipment||
|Earthquake and other disaster response management||
|Compliance with the Construction Business Law||
|Human rights advancement*2||
|Safe driving management||
|Prevention of illegal payments||
|Confidential information management||
|Protection of personal information||
|Import and export control||
|Compliance with laws and regulations related to logistics||
*1 Number of audited items is a sum of the number of items audited in each of the divisions subject to audit.
*2 Activities for human rights advancement focused mainly on training, the release of information, and the follow-up of survey results.
As a framework to support risk management, Kubota operates a whistleblowing system. This system aims to prevent, or quickly detect and correct, any illegal or unethical acts, as well as to develop an open corporate culture.
* A Human Rights Advancement Consultation Office has been established at each company and business site so that people can more easily seek consultation.
Full-time, part-time and temporary employees of Kubota and its group companies in Japan
* Each overseas location handles reporting individually and notifies the Kubota head office of any significant issues.
The Whistle Blowing System Operation Rules clearly states:
Various creative ways have been employed to alleviate unease about the system, which is often the result of a lack of understanding.
The company newsletter and website provide information on:
Jan.–Dec., 2015 37 cases
Jan.–Dec., 2016 30 cases
* Including enquiries and matters that were found not to be problematic as a result of investigation
Moreover, the Kubota Group Employee CSR Awareness Survey, which is answered in anonymity, has a space to accept free comments, as an opportunity for employees to frankly give reports and opinions to the Company. Thus, Kubota strives to develop an open corporate culture.
Our Corporate Auditing Department and the auditing divisions of our subsidiaries conduct regular internal audits in order to confirm the reliability of financial reporting for the entire Kubota Group, including its overseas subsidiaries.
The Corporate Auditing Department has also created a system for evaluating the effectiveness of internal controls on a Group consolidated basis. This assessment is based on the results of the abovementioned auditing results, and conforms to the internal control reporting system related to financial reporting stipulated by the Finance Instruments and Exchange Act (J-SOX) and other ordinances.
Despite the various Group-wide activities conducted to ensure compliance with the Anti-Monopoly Act, Kubota Corporation and Kubota Agri Service Corporation were subject to an on-the-spot inspection by the Fair Trade Commission in November 2013, and consequently received a cease-and-desist order and a fine. In response to this, the President delivered the following message: “Ensuring compliance is a requisite for the continuity of the Company, and any violation of compliance, whatever the motive, is an act of betrayal of the company and society. ‘No sales or profits achieved by undermining corporate dignity exist in the Kubota Group.’ Always keep this principle in mind when you act.” With this message, the President reaffirmed the importance of the thorough implementation of compliance in business activities.
Kubota continuously offers training programs on the Anti-Monopoly Act/Competition Law for not only its business divisions but also Group companies both in Japan and overseas, thereby instilling and raising awareness of compliance with laws and regulations. Legal training programs, which cover a broad range of legal matters including competition laws, are also provided for employees who are to be dispatched to overseas Group companies as managers.
In addition to continuously conducting audits under the Anti-Monopoly Act targeting the business divisions of Kubota Corporation, the Company is also carrying out risk management surveys for its Group companies both in Japan and overseas. These initiatives are effective for finding out the real situations of business activities and preventing violations. In China, where legal regulations have been increasingly tightened, Kubota, jointly with lawyers and other legal specialists, conducts surveys on risks related to business activities, with a view to enhancing its risk management system.
Kubota shares information with the relevant business departments and Group companies on matters related to business activities that require examination under the Anti-Monopoly Act, and facilitates advance consultation with external experts, including lawyers.
Kubota conducts written surveys targeting each of its business divisions and Group companies in Japan on a periodic basis. At the same time, Kubota also offers training programs to promote understanding of the Act against Delay in Payment to Subcontractors at each business site and holds consultancy sessions, with the aim of improving the level of voluntary risk management activities.
Kubota is aware that the appropriate protection and management of personal information of its customers and other stakeholders is an important social responsibility. In order to secure its competitiveness, Kubota is also devoted to preventing the leakage of confidential information such as technological information.
Depending on the type of information, Kubota appoints its main divisions to conduct ongoing activities such as revising rules, auditing and awareness-raising at their respective locations. These activities are also conducted at overseas bases. When necessary, these divisions cooperate with each other in risk management.
In FY2017, Kubota provided an education program and check tests on information security for all employees who use IT devices in their daily operations at Kubota, so as to enable them to deal with the recent rise of IT-related threats. We will have each group company to implement these measures in sequence.
*Initiatives to ensure information security
To enhance security for personal information and other information assets of the customers, Kubota promotes on a company-wide basis the implementation of the initiatives below:
Information security structure
Among illegal payments, Kubota has placed particular focus on preventing bribery, and has formulated the Kubota Group Anti-Bribery Policy, which delivers to all officers and employees a clear message from its top management that bribery will not be tolerated under any circumstances.
In response to this message, Kubota has employed the risk-based approach, in which risk assessment is conducted in advance to determine the departments, markets and business forms that are exposed to high risk, and prioritized risk management activities are conducted to tackle them. With this approach, Kubota aims to develop and operate effective programs. In FY2016, Kubota conducted written surveys at 92 of its departments/companies in Japan and 64 of its overseas bases as part of its risk assessment.
Also, Kubota has established the Prevention of Illegal Payments Committee to investigate whether preventative frameworks are in place and sufficiently functioning in accordance with the Rules for Preventing Illegal Payments, as well as whether or not there have been any illegal payments.
As an effort to educate directors and employees on the prevention of bribery, the Company repeatedly and continuously holds training sessions using the Kubota Group Handbook for Anti-Bribery. At these training sessions, the latest information is provided on laws and regulations related to preventing bribery as well as appropriate responses to bribery risks.
The Kubota Group Handbook for Anti-Bribery contains the globally common contents, and has been prepared in Japanese, English, Chinese, Indonesian, Tagalog, Korean and Vietnamese.
Kubota is also preparing a handbook for each country, containing more detailed information on the points to be noted and actions to be taken in the respective country or region. At present, the handbook for the People’s Republic of China has been formulated, with which training sessions by Chinese lawyers have been provided for 1,100 members of 10 Kubota Group companies located in China. The handbooks for South Korea and Indonesia are now being prepared in cooperation with local law firms.
The policies for these risk management activities and the results of the activities are periodically reported to the President and the Board of Directors through the Company-wide Risk Management Committee, composed mainly of Directors, and based on their feedbacks, the contents of the activities are occasionally revised, thereby improving the level of the activities.
As specified in the Kubota Group Charter for Action, we commit ourselves to “conducting corporate activities based on compliance with legal regulations and ethical principles”. As such, the Kubota Group never allows any business based on unfair practices such as bribery. The Group also strictly prohibits all of its companies, officers and employees from being involved in bribery.
President, Kubota Corporation
All the employees working for the Kubota Group, including those overseas, are required at the time of joining the Group to submit a written pledge that they will comply with the Kubota Group Charter for Action & Code of Conduct, and the corporate philosophy, the Kubota Global Identity.
Various other awareness-raising tools are prepared for business bases in Japan with the aim of fostering a compliance-based mindset.
A guidebook describing the Kubota Group Charter for Action and Code of Conduct in a straightforward way using illustrations and explanations. It is provided as a booklet to new employees and is also featured on the company Intranet.
A document that uses illustrations and Q&As to encourage employees to think about common compliance issues. Distributed monthly by e-mail.
A cartoon that introduces common compliance and CSR issues. Featured in the company newsletter every other month.