Basic Approach

PILOT Corporation and the PILOT Group believe that it is our social responsibility as a corporation to contribute to the development of a sustainable society by seeking to increase our corporate value through business activities.
To achieve sustainable growth and increase our corporate value, we will improve the objectivity and transparency of management and strive to strengthen and improve our corporate governance system to be more effective, from the perspectives of our shareholders, customers, employees, and the local community.

Internal Control System

Internal Control System: Basic Approach and Current State

PILOT’s Basic Policy on Internal Controls, adopted by the Board of Directors as a system to ensure the effectiveness of its operations, is outlines on our website. The following shows the details of the Basic Policy, as posted online on the Company’s website.
This Policy resolved by the Board of Directors is continually reviewed in response to changes in the business environment and other factors.

1. System for ensuring that the execution of duties by Directors, Executive Officers, and other employees complies with laws, regulations, and our Articles of Incorporation

1. The Company’s Directors, Executive Officers and other employees will promote compliance with high ethical standards, guided by the Basic Compliance Provisions and the PILOT Group Code of Conduct established by the Company.
2. The Internal Audit Section audits the state of compliance based on this Policy.
3. To discover compliance issues at an early stage, the Company operates an Internal Reporting System set up by the Company. In addition, following the Basic Compliance Provisions, the Company thoroughly ensures that whistleblowers are not disadvantaged because of their reporting, etc., by fully respecting their privacy, and that all employees are aware of this rule.
4. The Internal Audit Section regularly reports on any issues to the Executive Committee, the Board of Directors, and the Audit & Supervisory Committee.
5. At the same time, the General Affairs Department oversees compliance initiatives and conducts employee training in cooperation with related divisions.

2. System to store and manage information on the execution of duties by Directors, Executive Officers, and other employees

1. Information on the execution of duties by Directors, Executive Officers, and other employees is recorded and stored in documents or electromagnetic recording media (“Documents, etc.”) following the Detailed Information Risk Management Regulations and attached manuals.
2. Directors, Executive Officers, and other employees can access these Documents, etc. at any time in line with the Detailed Information Risk Management Rules and the related Document Handling Manual, etc.

3. Rules and other systems for managing the risk of losses

1. The Company responds to the risks associated with important management issues, such as the management risks defined in the Enterprise Risk Management Provisions (including but not limited to compliance, environment, disaster, quality, stock buyouts, information security, etc.) based on the Rules and attached rules, etc.
   In addition, the Company prepares, revises, and distributes information on these rules and other company rules and conducts employee training, as necessary.
2. The Executive Officer in charge of the General Affairs Department is the person responsible for business risk management.
3. Monitoring cross-organizational risks and company-wide responses to risk is conducted by the General Affairs Department based on instructions from the person responsible for business risk management.
4. The Internal Audit Division audits the state of risk management in each division and regularly reports on these activities to the Executive Committee, the Board of Directors, and the Audit & Supervisory Committee.

4. System for ensuring that the execution of duties by Directors, Executive Officers, and other employees is done efficiently

1. The Board of Directors establish company-wide targets to be shared by Directors, Executive Officers, and other employees.
2. The Board of Directors and the Executive Committee regularly evaluate the progress of these targets and has established a system to promote the efficiency of company-wide operations.
3. Directors must establish a system that enables them to completely fulfill their roles and responsibilities related to corporate governance that match with the Rules of the Board of Directors established by the Company.
4. The Company has adopted an Executive Officer system to separate management oversight from execution and to ensure that business is executed quickly. Executive Officers execute their duties sincerely, faithfully, and efficiently based on instructions and orders from the President and Executive Officer, who has been delegated with the authority to oversee business execution by the Board of Directors and the Representative Director and President based on the Executive Officer Rules established by the Company.

5. System for ensure appropriateness of operations of the corporate group, including the Company and subsidiaries

1. The Directors or Executive Officers of the Company who are responsible for the operations of the Company and subsidiaries are given the authority and responsibility to establish compliance and risk management systems, guided by the Basic Compliance Provisions, the PILOT Group Code of Conduct, and the Enterprise Risk Management Provisions established by the Company.
2. For reporting any issues to the Company regarding the execution of duties by Directors, etc. of subsidiaries, the subsidiaries are required to report to the Company on the execution of their duties, following the Company’s PILOT Group Company Management Provisions.
3. Subsidiaries establish rules and other systems concerning the management of risk of loss with reference to the Business Risk Management Rules established by the Company, and respond to business risks that are affected by laws, regulations, and the environment surrounding each company.
   In addition, if the risk of loss becomes apparent at a subsidiary, the subsidiary is required to report this situation to the Company following the PILOT Group Company Management Provisions.
   Divisions of the Company analyze the likelihood of the risk occurring and the impact of that risk according to the reports from subsidiaries, then identify those risks that could have a significant impact on management and determine whether priority countermeasures should be taken.
4. To ensure the effectiveness of the execution of duties by Directors, etc. of subsidiaries, the Company’s management philosophy, Basic Management Policies and management plans, etc., are shared by the Group, and each subsidiary sets its own targets. The Company’s Board of Directors and the Executive Committee regularly evaluate the state of progress of these targets and establish a system to achieve company-wide efficiency, which includes promoting improvements.
   Subsidiaries encourage management based on corporate governance that follows the PILOT Group Company Management Provisions.
5. The Company specifies the execution of management based on compliance in the PILOT Group Company Management Provisions, Basic Compliance Provisions, and PILOT Group Code of Conduct. This system ensures that the execution of duties by Directors, etc. of subsidiaries complies with laws, regulations, and the Articles of Incorporation, and that each subsidiary is managed based on that compliance.
6. The Internal Audit Division, in cooperation with other related divisions, provides instructions and support to improve the effectiveness of internal controls at subsidiaries based on this Policy.

6. Issues concerning employees who assist with the duties of the Audit & Supervisory Committee, independence of these employees from Directors (excluding Directors who are Audit & Supervisory Committee Members), and other issues to ensure the effectiveness of instructions given to these employees

1. The secretariat of the Audit & Supervisory Committee assists the Audit & Supervisory Committee.
2. Personnel matters such as the appointment and transfer of employees who assist the work of the Audit & Supervisory Committee, require the consent of the Audit & Supervisory Committee.
3. Employees who assist the work of the Audit & Supervisory Committee must comply with instructions and orders from the Audit & Supervisory Committee when assisting the Audit & Supervisory Committee in its duties and these employees should not receive instructions and orders from Directors (excluding Directors who are Audit & Supervisory Committee Members).

7. System for reporting to the Audit & Supervisory Committee by Directors (excluding Directors who are Audit & Supervisory Committee Members), Executive Officers, and employees, as well as other systems for reporting to the Audit & Supervisory Committee and systems to ensure that these officers and employees are not disadvantaged because of their reporting

1. The Company’s Directors (excluding Directors who are Audit & Supervisory Committee Members), Executive Officers and other employees must promptly report statutory issues, issues that have a material impact on the Company and subsidiaries, as well as details of the state of compliance, etc. to the Audit & Supervisory Committee.
   In addition, the Audit & Supervisory Committee can request reports from Directors (excluding Directors who are Audit & Supervisory Committee Members), Executive Officers and other employees as necessary.
2. Directors, Corporate Auditors, Executive Officers, and other employees of subsidiaries, or others who receive reports from these people must report issues that have a material impact on subsidiaries and details of the state of compliance, etc. to the Company’s Audit & Supervisory Committee.
   In addition, the Audit & Supervisory Committee can request reports from Directors, etc. of subsidiaries as necessary.
3. The Company specifies in the company rules, etc. that anyone who reports to the Audit & Supervisory Committee cannot be disadvantaged because of their reporting.

8. Procedures for prepayment or reimbursement of expenses incurred in the performance of duties by Audit & Supervisory Committee Members and other policies for the settlement of expenses or liabilities incurred in the performance of these duties

If the Audit & Supervisory Committee requests advance payment or payment of amounts already disbursed or the settlement of liabilities for expenses incurred in connection with the execution of committee duties (limited to expenses related to the execution of duties by the Audit & Supervisory Committee), these expenses are paid or liabilities are settled promptly, unless it is shown that these expenses were not necessary for the execution of their duties.

9. Systems to ensure that audits by the Audit & Supervisory Committee are conducted effectively

1. Regular opinion exchange meetings are arranged between the Audit & Supervisory Committee and the Representative Director and other Directors (excluding Directors who are Audit & Supervisory Committee Members).
2. The Audit & Supervisory Committee, the Internal Audit Division and the Financial Auditor collaborate and exchange information, and develop a system to ensure the efficiency and effectiveness of audits.

10. Establishing a system to ensure the appropriateness of financial reporting

To ensure the reliability of financial reporting by the Company and subsidiaries, the Company establishes a system to ensure the appropriateness of financial reporting as required by the Financial Instruments and Exchange Act and other related laws and regulations, etc. based on the PILOT Group Company Accounting Provisions established by the Company.

11. Establishment of a system to help eliminate antisocial forces

The Company does not have any involvement with any antisocial forces that threaten the social order or the sound activities of the Company, and responds resolutely and systematically when receiving unreasonable demands, following the PILOT Group Code of Conduct.

Current State of Establishing a System to Help Eliminate Antisocial Forces

1. The PILOT Group Code of Conduct requires that the Company does not have any involvement with any antisocial forces that threaten the social order or the sound activities of the Company, responds resolutely and systematically when receiving unreasonable demands, and has no relations with antisocial forces.
2. The Company has designated the General Affairs Department as the department in charge of overseeing countermeasures against antisocial forces and is in contact with the Tokyo Metropolitan Police Department. The Company also gathers information on antisocial forces through regular information exchanges with local police stations.

Basic Compliance Provisions

Grounded in the fundamental management philosophy of San-Sha-Tei-Ritsu: Three forces in balance with each other, one of PILOT’s guiding principles, the Company established the PILOT Group Code of Conduct as a common code of conduct within all of the PILOT Group, ensuring that compliance is prioritized in all actions by familiarizing all officers and employees with the conduct that should be taken.

Systems to Promote Compliance

The company and main subsidiaries in Japan promote routine compliance focused on the compliance promotion leader in each division under the management of the compliance officer.
Further, the other subsidiaries in Japan and overseas adhere to the company’s basic principle on internal control systems to promote and encourage compliance with the suitable details and methods tailored to each circumstance.

Compliance Training

The Compliance Promotion Division of the Company issues an annual Compliance Guide to educate compliance promotion leaders and to raise awareness of compliance among employees.
Further, the PILOT Group provides education and training on the laws, regulations, and internal rules to be complied with in order to ensure employees have the knowledge of compliance necessary for business operations.

Internal Reporting System

The PILOT Group has introduced an internal reporting system for the prevention and early detection of misconduct, including acts of noncompliance with laws, regulations, internal rules and the codes of conduct, corporate ethics, and corporate social responsibility, and to improve the Company’s ability to eliminate internal issues and ensure public trust.
The Company has established three contact points for internal reporting: an internal hotline, an external hotline, and a hotline to the Audit & Supervisory Committee.