Corporate Governance and Risk Management

Strengthening Governance

Hitachi, Ltd., a company that operates on the committee system,^*1 endeavors to boost the efficiency of management oversight by bringing in outside directors and speeding up decision making by giving executive officers broader powers.
We have also set up a group-wide system of internal controls, strengthened governance and management efficiency, and have worked hard to earn the trust of all stakeholders.
To reinforce the Group headquarters' role, we have established guidelines on the environment, compliance, risk management, and internal audits. As well, we have implemented internal audits of Group companies. We are striving to boost corporate value through close communications with all stakeholders.

*1

Committee system
A corporate governance system where a board of directors makes basic policy decisions and oversees the execution of business by executive officers, while the executive officers, appointed by the board of directors, execute the company's business affairs

Internal Control

As a public company listed on the NYSE, Hitachi, Ltd. is registered with the U.S. Securities and Exchange Commission (SEC) and is subject to the Sarbanes-Oxley Act (SOX).^*2 In fiscal 2008, Japan will enforce J-SOX,^*3 a similar law for the internal control assessment and reporting.
Hitachi is committed to full compliance with all laws. But beyond that, to fulfill important social responsibilities, we are working to re-engineer internal control systems by clarifying, examining, and visualizing management and operational frameworks and taking steps to bolster transparency and business credibility, as well as reinforcing the management structure.
Hitachi, a conglomerate of many companies, has adopted a framework that assigns accountability at the group level, including responsibilities for the design and operation of internal controls. Accordingly, Hitachi Group companies are required to revise, document, and evaluate the effectiveness of their operations in line with common guidelines for specific levels of corporate scale and business content. Management assessment of each company is collected at the group level, and is reported to Hitachi, Ltd. along with the certification.

Hitachi Group Internal Control Assessment Framework

*2

Sarbanes-Oxley Act (SOX)
Section 404 of this act, enacted in July 2002, mandates company management with the responsibility of establishing, maintaining, and evaluating internal control over financial reporting, and requires that control be assessed by independent auditors.

*3

J-SOX
A framework for evaluating and reporting internal control over financial reporting under the Japanese Financial Products Transaction Law, which came into effect in April 2008

Policy on Information Disclosure

Hitachi, Ltd. communicates with shareholders and investors in accord with a disclosure policy that sets the following basic policy: Hitachi seeks to maintain and develop trust relationships with its stakeholders, including shareholders and other investors, customers, business partners, employees and regional communities. It will fulfill its responsibility to stakeholders by disclosing information in a fair and highly transparent manner, and by conducting various communication activities.
Hitachi discloses not only information required by law and/or regulation, but also management and financial information it regards as useful in deepening stakeholder understanding of Hitachi management policy and business activities.

• Disclosure Policy

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The link to PDF has been linked with a pertinent part of CSR report 2008. (PDF format, 14,189KBytes)

Business Continuity Plans (BCPs)^*4

In August 2005, Hitachi set up an Expert BCP Promotion Panel, which in December 2006 completed the Guidelines for Developing Business Continuity Plans. Using the example of an electronic components plant hit by an earthquake, the guidelines clearly prioritizes the operations that should be restored, depending on estimated risk and impact of interruptions.
Using the BCP guidelines, all production plants and offices can operate more efficiently and employ level-headed risk management procedures following an emergency.
In February 2007, representatives from 110 Group companies got a detailed briefing on BCP policy. By March 2008, major Group companies had formulated BCPs. In April 2008, for a global outbreak of avian (bird) flu and other strains of influenza, we set up a special organization called the Risk Management Headquarters. With the president serving as CEO, this organization plays a central role in ensuring the safety of Group employees and their loved ones. We are adding resources to the development of BCPs for a range of socially indispensable Group operations, including those for healthcare, security, and social emergencies.

*4

Business Continuity Plan (BCP)
A plan for ensuring the continuation of core operations and prompt restoring of operations to normal in the event of a disaster or accident.

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