Raising employee awareness and understanding to strengthen compliance
We identify financial and nonfinancial risks assessing how the company and its business divisions may be affected. We make basic information-including environmental, social, governance, legal trends and know-how-available to every business and all employees. This information is shared to prevent and treat the problems from occurring or reoccurring. In addition, we audit areas of the business where problems have occurred in the past or where problems could occur, and divisions in charge use the information from the audits to improve their compliance and develop an emergency response, where appropriate.
| Risk | Division Responsible |
|---|---|
| Content of sales contracts and transactions with customers | Legal Affairs, Compliance |
| Worksite safety and health, labor management | Human Resources, Employee Relations |
| Management of the procurement process | Procurement |
| Information security | IT |
| Appropriate accounting and assets | Finance |
| Export management rules | Export Management |
| Transactions with antisocial individuals and organizations | General Affairs (inquiry) |
| Environmental protection | Environment |
| Ensuring employee safety and business continuity during natural disasters, political conflicts, crimes, etc. | Risk Management |
![[image]](/csr/csr_images/management/comp_01.jpg)
Lecture on global compliance
Controls on bribery by Japanese corporations abroad have been tightened, and more cases are being exposed through the U.S. Foreign Corrupt Practices Act. In August 2008, we created internal regulations for preventing corruption of public officials and others within and outside Japan. We also implemented detailed guidelines on entertaining and exchanging gifts. Every Group company set up similar regulations. In October 2008, an independent lawyer from the U.S. was invited to present on anticorruption policies, and 212 employees in charge of promoting compliance in Group companies attended. We will further bolster our policies through audits and training.
[voices] Preventing Corruption through a High Standard of Corporate Regulations
![[image]Richard Dean Attorney, Baker & McKenzie LLP](/csr/csr_images/management/comp_02.jpg)
Richard Dean
Attorney, Baker & McKenzie LLP
In recent years, corruption has been increasing, especially in developing countries, and it has been defined as a crime in international conventions established by the United Nations, the OECD, and others.
Corruption wastes enormous resources, undermines the proper functioning of markets, and destroys confidence in legal systems. There is also evidence that corruption impacts national security interests.
The Hitachi Group is doing its part by providing training and monitoring systems to ensure compliance awareness, and by setting high standards for its employees in the areas of integrity, business conduct, and ethics.
The Hitachi Group has taken decisive steps to meet the challenge of global corruption, which is receiving increased attention from political and business leaders, as well as from law enforcement agencies. The anticorruption regulations that Hitachi enacted in 2008 are being extended to Hitachi Group companies on a global basis, and Hitachi is playing a leading role among major Japanese corporations in the fight against corruption.
Since 2002, when we received administrative sanctions for bidding on government contracts, we have been working hard to improve compliance awareness.
From April 1999 to July 2003 we were involved in bid rigging on a Tokyo Bureau of Sewerage contract for a pump facility. In August 2008, we were ordered to pay an administrative fine, and in November 2008 we received a business suspension order. In addition, from April 2003 to December 2005 we were found to have violated the Antimonopoly Law when bidding on an electrical equipment construction project for a City of Sapporo sewage plant. Accordingly, in October 2008, we received an administrative fine order and a cease-and-desist order, and in March 2009 we received a business suspension order. We take these violations very seriously, and are engaging the entire company in complying with the Antimonopoly Law. When an issue arises, the Hitachi President and CEO will communicate with all employees, and the executive in charge will interview all the employees involved, asking them to submit a written oath to obey the law. In addition, we intend to strengthen compliance awareness- throughout the company-by enforcement through our audits and training.
| Action (in Japan) | Bidding on contract for electrical instruments and construction of mechanical facilities for the Kohoku Water Supply Bureau's new Tamari waterworks |
|---|---|
| Period | March 1999 |
| Punishment | Interference with competitive bidding. Court ruling: Sept. 2002 Business suspension order: Oct. 2002 |
| Steps for prevention | Established Compliance Division / carry out audits and guidance on business activities / thorough sales education / improved work process / established advisory committee of outside members for oversight |
| Action (in Japan) | Bidding on special pump facility construction for Tokyo Bureau of Sewerage |
|---|---|
| Period | April 1999-July 2003 |
| Punishment | Violation of Antimonopoly Law. Order for payment of fine: Aug. 2008 Business suspension order: Nov. 2008 |
| Steps for prevention | Established a compliance division within the Social Solutions Business Division to strengthen training and guidance |
| Action (in Japan) | Bidding on construction of tunnel ventilation equipment on the Shinjuku route of the Metropolitan Expressway, Tokyo |
|---|---|
| Period | 2004 |
| Punishment | Violation of Antimonopoly Law. Order for payment of fine: Sept. 2006 Business suspension order: Feb. 2007 |
| Steps for prevention | Expanded use of notebooks for recording compliance data,*1 strengthened training and audits |
| Action (in Japan) | Bidding on a City of Sapporo contract for electrical equipment construction related to a sewage disposal facility |
|---|---|
| Period | April 2003-Dec. 2005 |
| Punishment | Violation of Antimonopoly Law Order for payment of fine Cease and desist order: Oct. 2008 Business suspension order: March 2009 |
| Steps for prevention | Interviews conducted by executives of all sales employees involved / request for signed pledges / additional expansion of training and audits |
A Constant Effort to Observe the Laws
![[image]Hideaki Kobayashi, Attorney, Kobayashi & Associates Law Office](/csr/csr_images/management/comp_03.jpg)
Hideaki Kobayashi
Attorney
Kobayashi & Associates Law Office
I believe that Hitachi, Ltd. and the Hitachi Group are in the vanguard of compliance. For example, their understanding of the risks and their responses, their Corporate Ethics and Compliance Handbook, setting up a Compliance Division, and creating an internal whistle-blower system show a very solid approach to the issue. Many of these measures were in response to past incidents or problems, but whenever those issues arose, they dealt with them head on. I feel that these measures reflect the lessons they have learned.
However, it is a shame that incidents and issues have continued, even recently, suggesting that compliance is never ending and that observing laws and regulations requires a constant effort. I think that even stronger, steadier action is needed to improve compliance awareness through daily monitoring, regular training, and other means.
I look forward to seeing how Hitachi further improves compliance.
Enhancing the Environment for Compliance
![[image]Toshiaki Kuzuoka, Vice President and Executive Officer in Charge of Legal & Corporate Communications, Corporate Brand Management, and Management Audit, Hitachi, Ltd.](/csr/csr_images/management/comp_04.jpg)
Toshiaki Kuzuoka
Vice President and Executive Officer in Charge of Legal & Corporate Communications, Corporate Brand Management, and Management Audit, Hitachi, Ltd.
It is extremely regrettable that, even recently, incidents and issues have arisen that have caused concern. As Mr. Kobayashi points out, we hope to use what we have learned from the past as we think about future measures. In particular, in order to respond to his indication that we must make a constant effort, we would like to systematically set the time and points at which we should reconfirm and reinforce our corporate ethics and compliance, and I hope to follow up on that.
In addition, we are trying to further improve our response to each type of risk and are systematically working to discover new risks and understand the risks throughout the entire Group. At the same time, we are devising ways to enhance the environment for compliance through such means as fostering the kind of legal mind that can constantly sense problems, and creating a system to check for risk.
![[image]](/csr/csr_images/management/comp_05.jpg)
The disaster simulation exercise
In February 2009, six major Group service companies*1 held a table top exercise based on an earthquake in Tokyo. These six companies provide essential products and services, including water and sewage equipment, elevators, computers, electrical machinery, and consumer electronics. Strengthening cooperation among these companies, this exercise underscored the need to quickly restore the infrastructure, such as the machinery and equipment that would be damaged by a major earthquake. The roughly 100 employees who participated took requests for assistance, provided information, and came up with responses. Through this emergency simulation, they learned to make decisions calmly and to act quickly.
Disaster simulation exercises have been held annually since 1998, so far at 17 sites throughout Japan. As well, we use a satellite communications system, and a function check of the system has also been done every month.
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