REG - Mitsubishi Elect. - Statement re (Improper QC Practices Investigation)
01/06/2022 10:15
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RNS Number : 5518N Mitsubishi Electric Corporation 01 June 2022
FOR IMMEDIATE RELEASE No. 3526
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Mitsubishi Electric Corporation
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Update on Investigation into Improper Quality Control Practices and
Implementation of Reform Roadmap (Third Report)
TOKYO, May 25, 2022 - Mitsubishi Electric Corporation
(http://www.mitsubishielectric.com/) (TOKYO: 6503) announced today it has
received the third report of its Investigative Committee (Chaired by Hiroshi
Kimeda, Partner (Attorney-at-law), Nishimura & Asahi, announced on July 2,
2021) regarding improper quality control practices that were carried out by
the company. The company also issued today an update on reforms being carried
out in three key areas-quality assurance, organizational culture, and
governance-including measures designed to prevent any recurrence of the
improper quality control practices, as first announced on October 1.
So far, the Investigative Committee has completed its investigations into
1,933 out of 2,303 reports extracted from those on quality related issues
which were applied, or around 80% of the total. The Investigative Committee
expressed the view that the root causes identified in its first and second
reports are equally applicable to the improper quality control practices newly
revealed in the third report. The Investigative Committee will continue its
investigation on the remaining 14 sites, and the company will continue to
cooperate fully with the Investigative Committee in an effort to bring the
investigations at all works sites to completion as early as possible.
The committee also confirmed that the three areas of reforms, including
measures to prevent recurrence, the company has been carrying out since
October 2021 appear to be based on the committee's recommendations, and that
the company's directions toward the reforms and initiatives to them have been
positively noted. The committee also provided new recommendations to increase
the effectiveness of the measures, including a recommendation to be mindful of
any excessive burdens that the preventive measures may pose at the workplace
level. As it carries out the three reforms, the company will continue to
refine and enhance its efforts based on these recommendations.
Based on the committee's final investigation results, the Governance Review
Committee (Chaired by Toshiaki Yamaguchi (Attorney-at-law), Yamaguchi Toshiaki
Law Office, established on October 20, 2021) intends to tender its report on
the accountability of the company's Executive Officers and Board of Directors
and its assessment and recommendations on the company's internal control and
governance systems. The company will issue an announcement as soon as this
report is available.
Mitsubishi Electric also takes this opportunity to reiterate its sincere
apologies to all customers, valued stakeholders, and broader society for the
impact of these incidents, including the delay in completing the
investigation.
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1. Status of Investigative Committee's investigation
The Investigative Committee, established on July 2, 2021 and chaired by an
outside attorney, conducted a survey of all employees in Japan. The
committee has used objective data and other information to verify the
consistency of the responses it received, and it has conducted forensic
investigations into Executive Officers and other relevant parties as well as
carried out interviews and inquiries with relevant parties at the affected
sites.
As of the third report received today, the Investigative Committee had
identified a total of 2,303 matters requiring investigation, of which it had
completed its investigation into 1,933. The committee will continue to
investigate the remaining matters.
The findings in the third report issued today describe occurrences that have
come to light since the second report was received and disclosed on December
23, 2021. Tables 1 and 2 provide overviews. Table 3 summarizes the company's
latest responses to improper quality control practices covered in the second
report.
Table 1: Status of company-wide investigation (as of May 25, 2022)
Progress level Manufacturing site
1) Completed investigations 8 works sites
Nagasaki Works, Power Distribution Systems Center, Kamakura Works, Fukuyama
Works, Air-Conditioning & Refrigeration Systems Works, Kyoto Works,
Shizuoka Works, Industrial Mechatronics Systems Works,
(including the LCD Div.)
2) Ongoing investigations 14 works sites
Kobe Works, Itami Works, Energy Systems Center, Communication Networks Center,
Transmission & Distribution Systems Center, Inazawa Works, Communication
Systems Center, Nakatsugawa Works, Gunma Works, Nagoya Works, Himeji Works,
Sanda Works, Power Device Works, High Frequency & Optical Device Works
- Temporary suspensions of ISO9001 certifications: 3 sites (Fukuyama Works,
Kamakura Works, Transmission & Distribution Systems Center)
- Partial withdrawal of ISO9001 certifications: 2 sites (Nagasaki Works, Power
Distribution Systems Center)
Table 2: Overview of newly reported incidents of improper quality control
practices (as of May 25, 2022)
Site Improper quality control practice
① Public Utility Systems Group 1．Kobe Works: 9 cases
① Some sequence tests not carried out on controllers or auxiliary electric
relays.
② Some improper entries made in record of processing time measurements on
monitoring control device.
③ Some improper entries made in film thickness measurement inspection
reports on operation panels.
④ Some continuous energization tests not conducted on power supply units.
⑤ Some improper entries made in record of environment used to test control
panels.
⑥ Some film thickness measurement inspections not conducted on on-site
operation panels.
plus 3 other cases
2．Itami Works: 19 cases
① Some vibration tests on railcar equipment not carried out.
② Some protection tests on auxiliary power supplies not carried out.
③ Some improper entries made in vibration test reports on propulsion control
devices.
④ Some improper entries made in test record of serial numbers for vehicle
motors.
⑤ Some aging tests on gate control units not carried out.
plus 14 other cases
3．Nagasaki Works: 1 case
① Some improper entries made in cooling capacity deterioration diagnosis of
vehicle HVAC systems.
4．Communication Networks Center: 4 cases
① Some inspections of radio equipment, etc., carried out improperly.
plus 3 other cases
② Energy & Industrial Systems Group 1. Energy Systems Center: 2 cases
① Some analog input/output confirmation tests on instrumentation control
devices not carried out.
② Some sudden three-phase tests on turbine generators carried out
improperly.
2. Transmission & Distribution Systems Center: 4 cases
① Some improper practices in shipping tests on shell-type transformers.
② Designs that fall partially short of internal design standards for
shell-type transformers.
③ Some improper practices in shipping tests on core-type transformers.
④ Designs that fall partially short of internal design standards for
core-type transformers.
3. Power Distribution Systems Center: 4 cases
③ Building Systems Group 1. Inazawa Works: 10 cases
① Some withstand voltage tests on elevators parts for the US market not
carried out.
②Discrepancies in location where task of attaching certification label is
performed on elevators for the US market.
③ Discrepancies in elevator parts specifications required in Singapore
market.
plus 7 other cases
④ Living Environment & Digital Media Equipment Group 1. Nakatsugawa Works: 1 case
① Some improper entries made in test reports on commercial Lossnay products.
2. Air-Conditioning & Refrigeration Systems Works: 2 cases
⑤ Factory Automation Systems Group 1. Nagoya Works: 7 cases
① Improper entries in motor defect reports.
plus 6 other cases
2. Fukuyama Works: 1 case
① Improper practices in UL periodic factory audits of low-voltage circuit
breakers.
⑥ Automotive Equipment Group 1. Himeji Works: 4 cases
① Some manufacturing processes not carried out on inverters.
② Discrepancies in IMDS entries on rotor bobbin materials.
③ Some periodic sampling inspections of sensors not carried out.
④ Improper practices in motor generator development tests.
2. Sanda Works: 32 cases
① Some periodic sampling inspections of EGR valves not carried out.
② Some ICS development tests not carried out.
③ Some vibration tests on car navigation and other products not carried out.
④ Some display audio manufacturing carried out in different locations.
⑤ Some improper reports of decision on approval for transition to mass
production in display products.
⑥ Some display audio evaluation tests not carried out.
⑦ Improper practices in EGR valve manufacturing line customer audits.
⑧ Some work on car navigation products not carried out.
plus 24 other cases
⑦ Semiconductor & Device Group 1. Power Device Works: 1 case
In cases where the improper quality control practices listed above constitute
breaches of applicable laws/standards, this information has already been
provided to the related organization units and corrections implemented. As for
the company is working proactively with customers to arrive at a solution for
cases in which misconduct impacted contractual requirements. Measures to
prevent any recurrence are being implemented in all cases.
Table 3: Status of responses to previously reported cases (as of May 25, 2022)
Site and details Current status
① Nagasaki Works 1) Rectifying situation with emergency power supply equipment
1. Improper inspection practices for HVAC systems for railcars. ① Stopgap measures :99.6% (1,092/1,096 units) complete
2. Delayed reporting to customers and public on emergency power supply ②Permanent fixes :74.0% (811/1,096 units) complete
equipment.
2) To foster quality awareness that makes quality a top priority, set out
implementation rules for quality self-inspections and quality declarations
performed by employees (April 2022).
3) Revised product development management rules to strengthen mechanisms for
complying with customer specifications (December 2021).
4) Created a guidance document designed to encourage active communication
between managers and their reports (March 2022).
② Air-Conditioning & Refrigeration Systems Works 1) Progress of commercial product inspections
1. Some inspections not carried out owing to inadequacies with commercial ① Survey of product installation destinations:
air-conditioning & refrigeration system inspection equipment.
97.9% (2,375/2,427 units) complete
② Inspections:
68.2% (1,656/2,427 units) complete
Surveys/briefings, explanations and inspections are ongoing with a view to
early completion.
2) Established development/operating rules for testing machines and inspection
equipment; inspection details are discussed and inspection scopes reviewed on
a regular basis (October 2021).
3) Recurrence prevention report provided to Ministry of Economy, Trade and
Industry (December 2021).
③ Power Distribution Systems Center 1) Third-party departments attend C-GIS shipping inspections (provisional
measures ongoing).
1. Some tests not conducted on 72/84kV CGIS (cubicle-type gas-insulated
switchgear) units. 2) Revised frameworks, including for better checking of requirements imposed
by law/regulations and external standards, and reviews of departmental
education/training details (April 2022).
3) Digitize manual test data, create test results database, promote automated
evaluations.
(targeting September 2022)
④ Fukuyama Works 1) Testing sections within manufacturing departments transferred to Quality
Assurance Department (January 2022).
1. Improper quality control practice discovered with respect to UL489-listed
low-voltage circuit breakers when conducting regular factory inspections. 2) Continuous improvement of UL periodic factory inspections, including
measures to prevent improper use of test equipment and thus prevent improper
2. Did not make sufficient applications under the Radio Act for CO(2) laser testing practices (January 2022).
marker equipment.
3) Completed additional applications under the Radio Act to rectify
missing/insufficient applications; recurrence prevention report provided to
Ministry of Internal Affairs and Communications (May 2022).
⑤ Kamakura Works 1) Finished product inspections performed by the quality assurance section
within the IT systems department handling ETC transferred to the Quality
1. Improper quality control practices for ETC equipment Assurance Department (April 2022).
2) Revised development management rules to strengthen management of
specifications, prescribed procedures, etc. (March 2022).
2. Summary
As of the third report, the Investigative Committee has completed its
investigations on 8 sites out of Mitsubishi Electric's 22 sites in total. As
described in the report, investigations on the remaining 14 sites are
progressing, and the company will continue to cooperate fully with the
Investigative Committee's ongoing investigations.
The table below shows the number of cases of improper quality control
practices now identified, including cases identified in the investigative
reports of October 1 and December 23, 2021.
Table 4: Number of improper quality control practices identified by the
Investigative Committee
Announced in October Announced in December Announced in most recent report Total
Sites investigated 2 5 22 22
Number of improper practices 2 5 15 16
Number of improper quality control practices 18 29 101 148
In the recent investigations, no improper practices were confirmed at the
Communication Systems Center, Shizuoka Works, Gunma Works, Kyoto Works,
Industrial Mechatronics Systems Works, or High Frequency & Optical Device
Works. But given that several best practices issues related to quality of
operations were identified at these sites as well, Mitsubishi Electric
recognizes the need for efforts to improve quality levels across the entire
company, and will proceed with the following initiatives.
(1) The Investigative Committee's third report provides specific examples
of issues at a number of sites relevant to what the committee's first report
identified as the four direct causes of improper quality control practices
(① Lack of emphasis on realizing quality assurance through adherence of
protocols, ② Vulnerability of the Quality Division, ③ Exhaustion of middle
management, ④ Distance between head office and the front line) and the three
characteristics of organizational culture that led to these practices
(⑤Closed organizational system due to independence of individual sites, ⑥
Highly independent Business Unit System, ⑦The resolve of management).
The report also gives some recognition to the direction and steps taken so far
by the company on its reforms in three key areas-quality assurance,
organizational culture, and governance.
In addition, the Investigative Committee provided seven specific
recommendations for enhancing the effectiveness of these reforms. Mitsubishi
Electric takes these recommendations seriously and will continue to carry out
its reforms, adding new measures to these three areas if and as necessary.
(See Table 5, Table 6, and Table 7 for progress on the three reform areas, and
Table 8 for the specific recommendations and the company's responses to them.)
(2) As to the three items identified by the Investigation Committee as
problems with organizational culture that led directly to the improper
practices, Mitsubishi Electric will work to resolve these problems through its
April 2022 management reforms as well. Further, the company will rethink its
management policies to make them more socially conscious, instill an
understanding of this in all managers, and work to raise awareness of the
social responsibilities the company bears as a whole.
(See Section 4 for information on the management reforms and revision of
management policies.)
(3) Going forward, the company will also do a deep dive into its measures
to prevent a recurrence, including its three areas of reform, through a
detailed analysis that includes identifying the characteristics and
systematically categorizing the details of improper practices that occurred at
each of its business divisions, works sites, and other organizational units,
and, on that basis, institute strategies tailored to each individual
workplace.
3. Progress in carrying out three reforms, including measures to prevent any
recurrence
Below is an update on the company's progress in reforming its quality
assurance, organizational culture, and governance reform in accordance with
the Investigative Committee's recommendations.
(1) Quality assurance reforms
The Corporate Quality Assurance Reengineering Group, which was established on
October 1 and reports to the CEO, is executing the company-wide measures shown
in Table 5. Its aims are to strengthen new company-wide functions for quality
assurance led by the head office, and to share knowledge and to provide
flexible support across business divisions.
It has become clear that many of the quality matters discovered during the
Investigative Committee's investigations to this point have been test
deficiencies and problems due to test results not meeting required values, and
these are issues that should be resolved between the initial stages of product
development and the point at which preparations to produce the product have
been completed. The company believes that this points to a problem in the way
quality control is carried out, in the sense that quality, and communications
with customers as well, are built into products upstream (in the design and
production technology phases) and visualized on that basis.
The quality assurance reform measures titled "Greater independence and
separation of chain of command" and "Strengthen quality assurance functions"
imply that the Corporate Quality Assurance Reengineering Group should
coordinate with the Corporate Total Productivity Management &
Environmental Programs Group and Corporate Research and Development Group to
confirm whether designs are correct and production preparations are ready in
all phases of manufacturing, and make improvements through the
Plan-Do-Check-Act (PDCA) cycle. The company believes this will be an effective
means of addressing the currently identified quality matters.
The company also reaffirms that enhancing quality through IT and
digitalization will be crucial to running the PDCA cycle efficiently. To
implement detailed responses tailored to its diverse products, differing
customer specifications, and the rules and requirements in different
countries, and accelerate its efforts to resolve the present problems, the
company will pursue digital transformation (DX) initiatives across its quality
processes and work to eliminate human error and enhance and streamline quality
control.
The company also sees the need to clarify issues (close calls, potential
incidents) that tend to be overshadowed by the presently pressing quality
issues, and to take steps to prevent them.
To address this, the company will assess the health and soundness of each of
its sites and production lines, quickly find problems, and implement efforts
whereby all relevant employees provide support.
As a company, Mitsubishi Electric aims to achieve integrity through the PDCA
cycle, using the clarification of problems to keep its activities in check and
mobilizing its entire workforce to provide support in implementing solutions.
Table 5: Progress of quality assurance reforms
Task Progress as of May 2022
① Creating a new company-wide structure for quality assurance (led by head • In April 2022, a Chief Quality Officer (CQO) was appointed from outside
office) the company to oversee the Corporate Quality Assurance Reengineering Group.
• The Corporate Compliance Committee's quality governance subcommittee has
assessed the Corporate Quality Assurance Reengineering Group's activity every
two months (December 6, 2021; February 28, 2022; April 27, 2022).
• The company has identified the infrastructure it needs to ensure
compliance with law, standards, and customer specifications and strengthen the
quality assurance process, and has decided to invest ~5 billion yen in FY2022
and plans to invest 30 billion yen or more over two years.
② Company-wide measures for quality assurance reforms
②-1. Restructure the control functions 1) Greater independence and separation of chain of command.
In April 2022, Corporate Quality Assurance Reengineering Groups and Quality
Assurance & Management Departments were established at all work sites,
provided shipping authority, and began operating.
2) Strengthening of quality assurance functions
In FY2022, quality audits were conducted at five sites with an emphasis on
ensuring products conform to laws, standards, and customer specifications.
From April 2022, the auditing process will be improved to help identify issues
at sites and facilitate improvements; these improved audits are planned for 28
work sites.
②-2. Addressing technical capabilities and resources issues 1) Strengthen and ensure compliance with laws, regulations and public
standards.
Different from conventional management of information on laws and regulations
relevant to each site, in March 2022 the company finished drafting the outline
of a system via which the Corporate Quality Assurance Reengineering Group will
centrally collect and manage information on laws and regulations common to all
sites.
Using an external organization, from June 2022 the company plans to start
viewings of information on the revision/abolition of legal standards and
standards documents.
2) Enhance quality through IT and digitalization
• In April 2022, the company decided on basic specifications clearly
defining what points should be checked when assessing consistency between
customer specifications and shipped products.
• The company is selecting and evaluating specific tools for the digital
management of customer specifications and inspection data. Details of the
tools' characteristics, etc., have been shared company-wide (March 2022); they
are scheduled to be introduced in October 2022.
3) Strengthen head office support for manufacturing sites
The quality support team is gathering information on problems experienced in
three specific workplaces. This will be used to provide support going forward.
A contact center has also been set up to handle inquiries on technical issues
from manufacturing sites.
4) Training of quality-control personnel
• A survey of the skills possessed by manufacturing sites' quality assurance
and quality control departments was completed in April 2022. Internal training
courses tailored to skill levels were rolled out company-wide in February
2022. The survey results will be used to visualize skills strengths and
weaknesses and an enhancement plan will be formulated (June 2022).
• A quality assurance and quality control department leadership training
course is scheduled to start in June 2022.
②-3 Enhance an awareness of quality compliance 1) Revitalize personnel rotation
Candidates for quality assurance department personnel rotations have been
selected from across manufacturing sites. A plan is to be formulated by June
2022.
2) Instill awareness of quality compliance among senior managers
A compliance seminar for executives was held in February 2022.
3) Quality Compliance Awareness Training
• Improper Conduct Prevention meetings using the Kani Factory as a case
study were held in all workplaces (November 15 - December 29, 2021).
• July 2 is designated Company-wide Quality Day; the CEO and business
division heads are slated to issue messages to employees.
(2) Organizational culture reforms
In March 2022, the "Team Sousei (Creation)" company-wide transformation
project, comprised of employees selected through internal recruitment, set out
its Robust Policies for reforming corporate culture with the aim of creating a
new Mitsubishi Electric. The team came up with the slogan "Changes for the
Better start with ME", with "ME" signifying that everyone in the Mitsubishi
Electric Group will act as driving forces for change. In other words, it
signifies that both individuals and the Mitsubishi Electric Group as a whole
must act to effect change.
This overarching plan was put into action from April 2022, with a total of 148
employees company-wide involved in a range of reform projects within each
business division. Briefing and discussion sessions for emplpyees on the
Robust Policies by Executive Officers, Business Group President and members of
"Team Sousei (Creation)" have been implemented since the middle of April, with
a total of 59 sessions having been completed. These activities will be
continuously carried out in all the work sites and offices within the company.
With respect to initiatives that will be deployed on a company-wide basis such
as personnel systems, the relevant divisions have already begun putting
together appropriate measures and reviewing existing systems. FY2023 marks the
company's first step toward change, with these efforts to continue toward the
goal of establishing a new culture and building a connected, self-powered
organization, which the company envisions achieving by around FY2026.
The company will steadily carry out its efforts to renew its human resources
management system to meet the objectives of the overarching plan described in
Table 6. Specifically, the company seeks to overcome its inward-looking
organizational culture, and to drive change in the behavior of senior
management and foster diversity to facilitate open communication. The company
will also take steps to reform its organizational culture and ensure its new
culture takes hold. These will include running training rotations designed to
foster independent growth and cooperation across organizational boundaries,
striving to improve the working environment of middle management by ensuring
that managerial scope is appropriate and building systems for decentralized
authority, and ensuring that senior management provides appropriate support.
It will also entail fostering mindfulness of the fundamental role of managers
and fleshing out the managerial education and training programs that enable
managers to fulfill their role. The company will continuously monitor the
progress of these measures in an effort to gauge and enhance their
effectiveness.
Table 6: Progress of organizational culture reforms
Task Progress as of May 2022
① "Team Sousei (Creation)" company-wide transformation project 1) Formulation of Robust Policies
【Timeline】
Step 1: Identify key issues and underlying causes (Oct - Dec 2021).
Step 2: Work out how to address them (Dec 2021 - Feb 2022).
Step 3: In March 2022, the Robust Policies were created (released on April 8,
2022).
【Outline】
• The Robust Policies set out six objectives with the aim of taking
Mitsubishi Electric "from minus to zero, and from zero to an even better
tomorrow."
◎Ｍeasures to improve the company's outmoded culture:
① promote positive, interactive communication
② prioritize productivity
③ share information transparently.
◎Ｍeasures to build a new culture:
④ facilitate self-initiative among individuals and units through
clarification and delegation,
⑤ collaborate across divisions to maximize Group strength, and
⑥ increase opportunities to learn from each other and grow spontaneously.
• The plan sets out the slogan: "Changes for the better start with 'ME' and
the Mitsubishi Electric Group, so let's do what we can, step by step, as
individuals and as collective members of the Mitsubishi Electric Group!"
2) Progress and future plans
• In addition to the company-wide transformation project established in
October 2021, departmental transformation projects will be set up in each
business division to help the company achieve the Robust Policies and also
look at issues specific to each organizational unit (a total of 148 people are
engaged in reform projects across the business divisions).
• The Robust Policies are being widely explained and discussed, from the
level of executives through to employees at each of the company's sites (a
total of 59 sessions held as of May 2022).
② Renewal of the personnel system 1) Measures to improve the outmoded culture
-Creating a culture that enables open communication-
① Change in behavior of senior management aimed at creating an open culture
(a) Executive officer coaching aimed at effecting behavioral change from the
top
• Coaching is being carried out for all Executive Officers since November
2021.
• Coaching also slated for Executive Officers and Executive Officers
(Associate) newly appointed in FY2023.
(b) Reform of Executive Officer compensation system
• Implemented reforms including those with a view to reflecting employee
engagement in compensation (announced May 25, 2022).
② Promoting diversity to overcome the inward-looking organizational culture
(a) Promote women's participation and recruit experienced people with an
emphasis on different types of experience
(b) Promote interaction/exchanges with overseas employees.
• Formulate guidelines premised on receiving employees seconded from
overseas locations and trialing remote working schemes (scheduled for
September 2022).
2) Measures to build a new culture
-Creating a culture of independent growth and cooperation across departments-
① Consider a new development programs aimed at expanding the careers of
younger employees
• Currently looking at facilitating experience in other workplaces according
to the individual's wishes, strengthening career consulting functions, etc.
(trial introduction from October 2022).
② Personnel rotations designed to break down inter-departmental barriers
• Guidelines for the cross-department rotation of employees at all levels,
including management, rolled out company-wide (March 2022).
③ Supporting middle management and optimizing the organization
(a) Create/deploy requirements for appointing managers with more emphasis on
human resources management (trial introduction from October 2022).
(b) Formulate standards for distributing authority and rightsizing managerial
scope of control to reduce the burden on middle management (scheduled for
October 2022).
(c) Enhance training programs to foster consciousness of managerial
roles/functions.
• Started management enhancement training for newly appointed managers (from
October 2021)
• Video content to be provided to incumbents (scheduled for first half of
2022).
③ Encouraging mindset and behavioral change • Continue to convey the CEO's thoughts on reforms and continuously arrange
opportunities for dialogue between the CEO and personnel at company sites to
facilitate the two-way exchange of views. Sessions held at all 42 sites in
FY2022. To facilitate deeper discussion in FY 2023, the sessions will be held
in a town-hall format-small-scale meetings for the different employee levels
(total of 42 sessions planned, nine held so far).
• Holding Executive Officer workshops to deepen mutual understanding and
facilitate shared recognition of issues and plans (from November 2021;3
sessions have been held).
(3) Governance reform
To strengthen the company's management oversight functions and realize
sustainable medium- to long-term growth in its corporate value, Mitsubishi
Electric has initiated a reform of its Board of Directors. On October 20,
2021, it established the Governance Review Committee comprising third-party
lawyers to begin assessing the company's internal-control and governance
systems in order to identify problems and provide recommendations for
improvement. Going forward, the company plans to devise and implement further
improvements to its internal-control and governance systems, with reference to
the committee's recommendations.
On the issue of governance reform, the Board of Directors, including the three
statutory committees, is working toward an appropriate vision of governance
and oversight in a way that builds on the fundamental separation of execution
and oversight by structuring the "Company with a Nomination Committee, etc."
while also taking note of trends in governance across the world at large.
To institute the oversight functionality required of a Company with a
Nomination Committee, etc., the company will work to create and enhance the
environment necessary to facilitate proper oversight (Board of Directors
function and composition, support for outside directors) while also enacting
specific individual measures for strengthening oversight functions based on
the Governance Review Committee's recommendations.
In addition, to strengthen risk management, in January 2022 the company set up
a specialist panel reporting directly to the CEO and appointed a new Chief
Risk Officer (CRO). The panel will monitor the company's internal risk
management activities from a high level, examine the company's multilayered
internal control measures, and assess whether management systems are effective
and whether any procedures have become obsolete/unnecessary. It will thus work
to catalog and improve the company's various internal control measures.
Table 7: Progress of governance reforms
Task Progress as of May 2022
① Strengthen management supervisory functions (Board of Directors reforms) 1) Strengthen the functions of the Board of Directors
The Board of Directors' agenda was reviewed, and the Board decided on key
issues to discuss, including what the company should be like and
organizational reform measures (March 31, 2022, board meeting). To be applied
from July 2022 (after directors have been appointed).
2) Review of the composition of the Board of Directors
• Appointed an independent outside director as chairman of the Board of
Directors (October 2021).
• Decided on director candidates to be submitted to this year's general
meeting of shareholders (announced on May 25, 2022). Planning to invite
managers with manufacturing industry experience to serve, and to have a
majority of independent outside directors.
3) Strengthen the functions of the Board of Directors Secretariat
• Strengthened cooperation between corporate-related divisions and the Board
of Directors Secretariat by having selected personnel serve on the Secretariat
and corporate departments concurrently (November 2021).
• Corporate Strategic Planning Division also to participate in the Board of
Directors Secretariat to ensure the Board of Directors handles important
agenda items (October 2022).
• One experienced person appointed to strengthen the functions of the
Secretariat (May 2022).
4) Strengthen the functions of the three statutory committees
•Nomination Committee: Review of positioning and role (Nomination Committee
rules revised; November 25, 2021 Board meeting).
•Compensation Committee: Introducing new executive officer
compensation system (announced May 25, 2022).
• Audit Committee: To be reviewed as necessary based on the results of the
Governance Review Committee's assessment.
5) Other
• Planning to consider/implement additional improvements based on the
Governance Review Committee's assessment.
② Assessment of internal control system (Governance Review Committee) Established Governance Review Committee (October 20, 2021)
- Chair: Toshiaki Yamaguchi, Managing Partner (Attorney-at-Law, Certified
Fraud Examiner), Yamaguchi Toshiaki Law Office.
- Members:
Junya Naito, Partner (Attorney-at-Law), Momo-o, Matsuo & Namba
Takashi Kiuchi, Partner (Attorney-at-Law, Certified Public Accountant), Miura
& Partners.
• The company received the committee's report on Executive Officer and
Director accountability, and the Board of Directors decided and disclosed
disciplinary action for those involved on December 23, 2021.
• The committee will continue to assess the company's internal control and
governance systems and will submit its conclusions and recommendations, with
reference to the results of the Investigative Committee's investigation as
well. The committee also plans to assess Exexutive Officer and Director
accountability for the improper quality control practices identified in the
Investigative Committee's second report (December 2021) and thereafter.
③ Strengthen risk-management systems To respond swiftly and strengthen cross-divisional responses in times of
crisis and address various risks that could affect the execution of group
business, the company has set up a specialist panel and appointed a new Chief
Risk Officer (CRO) in January 2022.
(4) Investigative Committee's specific recommendations and the company's
responses
The committee's third report contains the following seven new specific
recommendations. The company takes these recommendations and will implement
tangible responses, as described below, as part of its three key areas of
reform.
Table 8: Investigative Committee's specific recommendations and the company's
responses
Investigative Committee's specific recommendations Company's responses
① Take steps to prevent excessive countermeasures from posing undue burden • The head office's Quality Assurance & Management Department maintains
at the workplace level. a presence at all sites, via which it ascertains conditions at those sites and
coordinates with head office. Requests company-wide support as needed.
(Table 5 ②-1)
•The quality governance subcommittee periodically checks that measures are
effective and that the necessary resources are deployed, and provides
company-wide support as necessary. (Table 5 ①)
② Deloy individual workplace initiatives horizontally. •Through quality audits and trouble consultations, initiatives of each site
are to be drawn up and deployed horizontally. (Table 5 ②-1, ②-2)
• The company will work to optimize section headcounts and establish
intermediate positions (deputy section chief, team leader, etc.).
(Table 6 ②)
③ Collaborate with manufacturing sites. • As part of the Corporate Quality Assurance Reengineering Group tours of
manufacturing sites, discussions on quality assurance reform initiatives are
held. (Table 5 ②-2)
④ Prioritize initiatives for branch factories. • Implementing integrated management and operations at main factories.
• Quality audits by the Corporate Quality Assurance Reengineering Group are
conducted annually at 21 works sites as well as seven branch factories. (Table
5 ②-1)
⑤ Support system to handle, e.g., negotiations with foreign certification • The Corporate Quality Legal Departmant
authorities.
within the Corporate Quality Assurance Reengineering Group handles this,
including through the use of external organizations. (Table 5 ②-2)
⑥ Use a tangible how-to format for education and training of managers and • Training for all new section manager company-wide will incorporate
staff, changing management mindsets. specific instructions, including examples, on how to deal with problems that
are reported to them. (Table 6 ②)
⑦ Rigorous employee education on quality. • On top of the conventional quality education provided so far, the company
will add content on the improper practices recently uncovered and roll out
newly organized education programs to employees again.
• Look at whether to revise internal rules and work to simplify them.
• Develop specific measures in response to the improper quality control
practices discovered.
• In addition to the compliance education already provided to executives,
the company plans to provide education programs on quality governance
conducted by external lecturers. (Table 5 ②-3)
4. Management structure・Management policy
The company also seeks to resolve the three organizational culture problems
identified by the Investigative Committee as direct underlying causes of the
improper practices (⑤ Closed organizational system due to independence of
individual sites, ⑥ Highly independent business unit system, ⑦ The focus
of management) through a reform of management structure and a reform of
management policies/guidelines.
(1) Revision of management structure
As of April this year, the company has classified nine business groups into
four business areas (BAs): Infrastructure, Industry and Mobility, Life, and
Business Platforms. It has also appointed four BA Owners tasked with
implementing initiatives to maximize corporate value over the medium/long term
based on a high-level overview of the entire company's business with a view to
addressing social issues. They will work to enhance the competitiveness of the
business groups' individual businesses while also helping to reform the
inward-looking organizational culture-i.e., insular at the site and business
group level-through BA-driven efforts to strengthen cross-organizational
functions.
In corporate divisions, the company will expand the chief officer structure to
drive company-wide management from a high-level perspective, strengthen the
entire company's shared capabilities, develop infrastructure, implement
effective risk management and control, and support flexible business
management.
(2) Revision of management policies
From May 2022, the company's management policies will clearly state that the
tasks of resolving social issues through the company's business and achieving
sustainability are fundamental to its operations. Through internal newsletters
and executive town hall meetings, this policy will be clearly communicated
across the company to ensure that all executives and employees recognize that
they are part of this effort, fostering an awareness of social responsibility
and norms.
5. Executive accountability and disciplinary action
As disclosed in the October 20, 2021 press release "Mitsubishi Electric
Announces Establishment of Governance Review Committee," the company set up a
Governance Review Committee comprising external experts who do not have any
business relationship with Mitsubishi Electric. The committee's objectives
include assessing the company's internal control and governance systems and
clarifying the accountability of Executive Officers and Directors regarding
improper quality control practices.
The committee intends to assess the accountability of Executive Officers and
Directors based on the results of the Investigative Committee's investigation,
and based on the committee's Reports, the company will also consider what
executive disciplinary action should be taken to address the improper quality
control practices identified in the Investigative Committee's second report
which was released and received on December 23, 2021, and thereafter.
6. Looking ahead
So far, investigations have been completed across 14 of the total of 22 sites,
and the company will continue to provide its full support to the Investigative
Committee with a view to arrive at a full picture of the improper quality
control practices and root them out as the company's top priority.
The company will conduct detailed analyses of the improper quality control
practices identified to this point, and implement extensive recurrence
prevention measures tailored to each of its sites.
Under its new management structure, the company will steadily implement its
three key areas of reform, which will include carrying out its responses to
the Investigative Committee's specific recommendations, as it strives to
regain the trust of all stakeholders, including society at large, its
customers, business partners, and employees.
###
About Mitsubishi Electric Corporation
With more than 100 years of experience in providing reliable, high-quality
products, Mitsubishi Electric Corporation (TOKYO: 6503) is a recognized world
leader in the manufacture, marketing and sales of electrical and electronic
equipment used in information processing and communications, space development
and satellite communications, consumer electronics, industrial technology,
energy, transportation and building equipment. Mitsubishi Electric enriches
society with technology in the spirit of its "Changes for the Better." The
company recorded a revenue of 4,476.7 billion yen (U.S.$ 36.7 billion*) in the
fiscal year ended March 31, 2022. For more information, please visit
www.MitsubishiElectric.com
*U.S. dollar amounts are translated from yen at the rate of ¥122=U.S.$1, the
approximate rate on the Tokyo Foreign Exchange Market on March 31, 2022
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