Home > About Us > Corporate Social Responsibility > Sustainability Report > Sustainability Report 2009 > Strengthening Compliance

Strengthening Compliance

Kobe Steel regards compliance as one of most crucial elements of business management. With our executive officers taking the lead, we continue to verify that compliance remains at the heart of our activities as we strive to integrate a high degree of sensitivity to compliance in our corporate culture. Every company in the Kobe Steel Group participates in this effort.

Improper Contributions to Campaign Groups of Council Member Candidates and Steps Taken to Prevent Recurrence

In February 2009, Kobe Steel announced that several of its offices appeared to have made improper payments of campaign group expenses under the category of donations in support of local council member candidates that were endorsed by the Kobe Steel labor union. The Political Funds Control Law had been revised and enforced in 1995 and 2000. Despite the stricter regulations governing corporate donations to campaign groups, these offices continued, even after the law's revision, to assume part of the payment for campaign expenses, such as office and labor costs incurred by the campaign group.

Along with the air emissions problem at the Kakogawa and Kobe works in 2006, we took this as an opportunity to strengthen our compliance efforts. However, unable to pay sufficient attention to the new regulations, the offices concerned failed to perform the required check of its past practices, and thus caused a problem for the Company. Kobe Steel takes this matter seriously and will strictly abide by relevant business laws and regulations. At the same time, it will take steps to prevent the recurrence of this compliance problem with the goal of fostering a compliance-sensitive organizational culture.

Approach to Preventive Measures

Kobe Steel views compliance as underpinning its business activities. Accordingly, the Company has established a basic policy of creating a highly compliance-sensitive organization that identifies compliance risks and examines preventive measures, and fostering a corporate culture that is strongly disciplined and keenly responsive to potential compliance problems.

In specific terms, Kobe Steel focuses its efforts on carrying out risk management activities at each Group company.

In support of these activities, Kobe Steel implements a range of measures from the following standpoints: "systems and mechanisms," "education and training" and "organization and structure."

Three Main Means of Preventing Recurrence

Restructuring of Risk Management Activities

Having taken steps to address companywide risk management over the years, from fiscal 2009 Kobe Steel completely overhauled its existing risk management activities and designed an entirely new framework.

These activities include the organization and classification of compliance-related risk items by corporate headquarters, efforts to explain laws and regulations and provide information on their revision for each risk item, and the review of case studies of actual problems. Risk-related data derived from these activities is then compiled and sent to each business segment as "shared risks" for the entire Company. Each business segment then adds those business risks that are unique to their own business to the shared risks, prepares a risk management plan for each fiscal year, and executes the plan. Moreover, based on inspection requests from headquarters at the end of the fiscal year, all departments verify their organization's risk management status. A verification report is then submitted after having been signed by a departmental general manager or higher level executive.

While the new risk management plan is linked to the shared risks sent by headquarters in compliance with legal and social changes, by annually establishing, implementing and inspecting the risk management plan, Kobe Steel has set as its goal the steady application of the Plan-Do-Check-Action (PDCA) cycle.

Risk Management Activity Cycle

Initiatives Supporting Risk Management Activities

Kobe Steel continues to stress compliance education. It incorporates compliance-related information at every level of training and provides opportunities for employees to receive a broad range of compliance training at different points in their careers, including the "Compliance Top Seminar" aimed at Kobe Steel and Group company executives. We also introduced legal education via e-learning in 2006 and provided opportunities for their compliance comprehension to be verified at regular intervals.

In addition to these efforts, provide legal training to executives and employees who are at the center of risk management activities, which helps each business division deal with compliance risk. Moreover, as part of the training, we look at specific case studies of actual problems that Kobe Steel has faced so that past experience is not wasted.

To ensure that the PDCA cycle for companywide risk management activities has been properly applied, administration members from headquarters visit offices and verify what progress has been made while coordinating with members who hold concurrent positions in the Compliance Planning and Administration Section. The key to risk management activities is to coordinate them with the various policies and measures, with the goal of achieving a corporate culture that is more compliance-sensitive.

Compliance Manuals

The various items cited in the Standards of Corporate Conduct (included the Corporate Ethical Principles) are explained in greater detail in the Conduct Guide for Employees, which has been distributed to all employees. This manual is keyed to the "common risk" items that are shared by all Group companies as part of their risk management activities. It can therefore serve as a basic manual for Group-wide risk management.

In addition, we have prepared even more detailed manuals that deal with specific laws and ordinances, including the Antitrust Law, Subcontractors Law, Personal Information Law, and Security Trade Control regulations. These manuals provide an easy reference for employees who encounter questions in the course of performing their company duties.

The compliance manuals are also available to employees through the Group's intranet system for easy access and implementation.

Internal Reporting System

The internal (whistle-blowing) reporting system is one method we use to prevent the emergence and expansion of risks associated with legal violations or unethical behavior, while enabling us to quickly grasp a problem and formulate appropriate countermeasures. If an employee discovers unfair practices within the company that violate the law, or if it is reasonable to believe that such practices are occurring, the system allows the employee in question to report the matter directly to lawyers outside the company in a neutral environment. The complaint is then investigated by the Compliance Committee and appropriate remedial steps are taken.

The Internal Reporting System is being adopted by all companies within the Group and has become a major pillar of Group-wide efforts to monitor the compliance system.

	VOICE

Director's Message
Nurturing Compliance within Our Corporate Culture
Takashi Matsutani, Company-wide Compliance Director (Executive Vice President, Kobe Steel, Ltd.)

The Kobe Steel Group has long placed a high priority on compliance and has created and maintained systems to ensure that compliance is achieved. Despite these efforts, however, it recently came to light that certain Kobe Steel employees have given inappropriate financial support to local council members. This incident has undermined the trust that many people had in us. In response, we are resolved to go back to square one and recommit ourselves to achieving true compliance.

To prevent such an incident from reoccurring, each and every Kobe Steel employee must take a personal interest in compliance. Each employee must determine the compliance risk of his or her business activities, think of appropriate countermeasures, and implement them as needed. This requires steady attention, with each employee taking the initiative so that all policies implemented by the company help employees progress through their respective PDCA cycles. For the Kobe Steel Group to continue to enjoy public trust, company officers must take the lead in creating a corporate culture that encourages a high sensitivity to compliance.