For the purpose of practicing the management philosophy of our company and increasing corporate value, we consider it essential to establish a sound management system, and under it reinforce corporate governance through activities such as ensuring management transparency by timely and appropriate information disclosure.

We consider "compliance" as an important aspect of fulfilling our social responsibilities and recognize its thoroughgoing practice as an indispensable element in sustaining business activities. Based on this view, we are proactively promoting group-wide compliance management as well as reinforcing corporate governance. We have made the SANYO Electric Group's Principles of Conduct as the guideline to which all executives and corporate members throughout the group should conform in conducting every business activity. Further, by defining compliance to encompass a wide range, including not only compliance to laws and regulations and the company regulations but also pursuance of corporate ethics, we have established the code of conduct as a practical guideline to be followed in practicing the work standards, which has been disseminated to all executives and corporate members throughout the group.

• State of business administrative structure concerning managerial decision-making, operation, and oversight, and other corporate governance systems
  • Directors and the Board of Directors
    At our company, a regular meeting of the Board of Directors is held once a month to make decisions regarding important concerns and oversee the execution status of business operations. In addition, for certain important matters, more than two-thirds (2/3) of the total vote of the Board of Directors is necessary for a resolution to be adopted. In order to facilitate careful deliberations at the meeting of the Board of Directors and to improve management efficiency, the Steering Committee, which as a rule all Directors are expected to attend, is held at least twice a month, where matters to be brought up at a meeting of the Board of Directors are deliberated in advance and decisions are made for basic and important matters concerning execution of certain business operations. As of June 2007, the Board of Directors consists of 9 members, of which two are Outside Directors.
  • Corporate Auditors and Board of Auditors
    Our company has adopted an auditing system and the Corporate Auditors audit the execution of business operations by the Directors through attending important meetings such as the meetings of the Board of Directors, viewing materials such as important documents of decision, and listening to reports of the Internal Auditing Division and those who are concerned. Further, the Corporate Auditors maintain mutual cooperation with the accounting auditors through listening to their audit policies and plans and sharing reports and explanations regarding auditing whenever necessary. As of June 2007, the Board of Auditors consists of 6 members, of which three are Outside Corporate Auditors.
  • Special Committees
    To properly maintain the governance system, we have created the following special committees that make deliberations of specialized matters regarding internal control and present recommendations and reports to the Board of Directors. Each committee deliberates the items stated below:
    
    • Personnel/Nominating Committee
      1. Details of bills to be submitted to the stockholders' meeting regarding selection of candidates for Director and removal of Director(s); and
      2. Bills regarding personnel decisions about important persons in terms of execution of business such as Executive Officers.
    • Compensation Committee
      1. Details of bills to be submitted to the stockholders' meeting regarding the total amount of compensation to be paid to Directors; and
      2. Amount of compensation to be paid to each Director (and Executive Officer). (Policymaking, calculation logic etc.)
      
    • Audit/Governance Committee
      1. Subjects related to group-wide audit and internal control, in terms of basic policies, structure building, plans, and measures; and
      2. Subjects related to operation of the current governance system, in terms of policies, structure creation, and thoroughgoing operation.
  • Directors and Corporate Auditors of SANYO Electric
  
• State of Internal Control System
  In order to win the trust of our stakeholders and to enhance corporate sustainability, our company pursues improvement of corporate management, in terms of soundness, efficiency, and transparency. To that end, as well as observing the relevant laws and regulations, we consider that it is essential to properly maintain the internal control system and make it work effectively.
  • Internal Audit
    For the purpose of improving and strengthening internal control from the following three standpoints: financial reporting control; risk management control; and compliance control, we have established the Internal Auditing Division in the company and make efforts to ensure the legality and efficiency of business management. In addition, the Internal Auditing Division coordinates closely with the Corporate Auditors through engaging in proper exchanges of information, such as reporting internal auditing results, to improve the efficiency and effectiveness of auditing. Thus, we are working to maintain and upgrade auditing quality.
  • Risk Management
    With an Executive Officer being the administrator, a department to assist the administrator has been set up. Under this structure, we control and adjust group-wide risk management in a cross-sectional manner to ensure thoroughgoing practice of risk management policies and facilitate solutions for across-the-board common risks. Thus, we are working to further improve the risk response capabilities throughout SANYO Electric Group.
  • Promotion of Compliance
    With the Executive Director & President being the administrator and an Executive Officer being the Compliance Officer, a promotion department has been set up in the head office. At the same time, a promotion system has been established and is operated at the respective companies within the Business Groups.
  • Promotion and Strengthening of Internal Control
    For the purpose of strengthening internal control, the "Internal Control Promotion Office" has been set up in the head office as the permanent body specializing in promotion of internal control that used to be an internal project based activity. With this office being at the center, the top executives, head office, and business divisions are working together as one to promote the improvement of the internal control system.
• Compensation for Directors and Corporate Auditors
  For fiscal 2006, 217 million yen was paid as compensation for Directors and 54 million yen as compensation for Corporate Auditors.
  
  - According to the resolution of the stockholders' meeting, the maximum payable amount of annual compensation for Directors is 600 million yen and that for Corporate Auditors is 100 million yen. (Resolution at the 75th Ordinary General Meeting of Shareholders on June 29, 1999)
• Compensation for Accounting Auditors
  For fiscal 2006, to our company's accounting auditor KPMG AZSA & Co., 381 million yen was paid as compensation for audit certification services specified in Clause 1, Article 2 of the Certified Public Accountant Law and 20 million yen as compensation for other services.
  

Based on the compliance promotion system established under the leadership of the Chief Supervisor (Executive Director & President) and the Compliance Officer (one person selected from among the Executive Directors), we are making continued efforts to promote compliance. Heads of the respective internal companies and divisions select a person to be a compliance leader who undertakes a core role in compliance promotion. Audit/Governance Committee, which is one of the special committees of the Board of Directors, oversees the state of compliance promotion as part of the internal control system of SANYO Electric Group.

As for promotion of compliance in the specific areas where group-wide efforts must be made (including compliance with the antitrust law, compliance with the subcontract act, export control, personal information protection, health and safety, environment conservation, and product quality), we prepare individual internal rules and conduct management accordingly, in terms of thoroughgoing practice of compliance, early detection and solution of problems, and education/training.

SANYO Electric Group installed Compliance Hotlines in January 2002 as a window to accept compliance-related inquiries and information. Today, in addition to the contact windows at the head office and internal companies, an external window is set up (lawyer) to enable people to choose between an internal window and external window for making inquiries and providing information.