REG - Mitsubishi Elect. - Statement re (Improper quality control practices)
27/10/2022 09:45
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221027:nRSa3334Ea&default-theme=true
RNS Number : 3334E Mitsubishi Electric Corporation 27 October 2022
FOR IMMEDIATE RELEASE No. 3552
Media Inquiries
Public Relations Division
Mitsubishi Electric Corporation
prd.gnews@nk.MitsubishiElectric.co.jp
(mailto:prd.gnews@nk.MitsubishiElectric.co.jp)
www.MitsubishiElectric.com/news/
Update on Investigation into Improper Quality Control Practices and
Implementation of Reform Roadmap (Final Report)
TOKYO, October 20, 2022 - Mitsubishi Electric Corporation
(http://www.mitsubishielectric.com/) (TOKYO: 6503) announced today that it has
received the update on the results of the investigation into improper quality
control practices (Fourth and Final Report) from the company's Investigative
Committee of outside experts, which has completed its investigation of
improper quality control practices in all 22 sites of the company, starting
with those of the HVAC for railcars and other products for railcars at the
company's Nagasaki Works in Japan, which came to light in June 2021. Today the
company also received its Governance Review Committee's evaluations on the
company's overall governance and internal controls as well as related
recommendations, and reports on additional assessment and evaluation on
Executive Officer and Director's responsibility. In addition, the company
announced today its summary of the current situation, the progress of three
reforms, and planned remedial measures to be implemented going forward.
So far, Mitsubishi Electric has taken a range of actions since the discovery
of the improper quality control practices. This has included the establishment
of an emergency response division led by the company president and the
Investigative Committee chaired by Hiroshi Kimeda, Partner (Attorney-at-law)
at Nishimura & Asahi, as announced on July 2, 2021, after which the
company cooperated with the in-depth investigation into the facts and root
causes underlying the improper inspection practices concerning quality
control.
Also, working under a new management structure, including a new company
president appointed in July 2021, the company formulated in October 2021 a
program of reforms in three key areas-quality assurance, organizational
culture and governance-including measures designed to prevent any recurrence
of improper quality control practices, along with other wide-ranging
company-wide reforms.
In addition, in October 20, 2021, the company established a Governance Review
Committee composed of outside experts and chaired by Toshiaki Yamaguchi,
Managing Partner (Attorney-at-Law, Certified Fraud Examiner), Yamaguchi
Toshiaki Law Office. This Board-commissioned body was tasked with assessing
Executive Officer and Director's responsibility and the company's overall
internal controls and governance.
Mitsubishi Electric again expresses its sincere apologies to all customers,
valued stakeholders and broader society for the impact of these incidents.
This situation as well as the findings and recommendations of both committees
are being taken very seriously by the company. Going forward, Mitsubishi
Electric is determined to emerge as a new company by working to prevent any
recurrence across the entire Group as well as by implementing three key
reforms to regain public and stakeholder trust.
The company's management is committed to demonstrating its earnestness to
employees by fundamentally overhauling existing internal-communication
practices and taking responsibility for getting involved in efforts to correct
issues at the workplace level. At the same time, Mitsubishi Electric's
management will resolutely forge ahead with efforts to institute company-wide
systems, frameworks and other reforms needed to eradicate any improper
quality-control practices.
1. Results of Investigative Committee's investigation
The Investigative Committee, established on July 2, 2021 and chaired by an
outside attorney, surveyed all company employees in Japan and then used
objective data and other information to verify the consistency of the
responses it received. It also conducted forensic investigations of Executive
Officers and other relevant individuals and carried out interviews and
inquiries with relevant individuals at the affected sites. Until The Fourth
and Final report received today was completed, the Committee had identified
2,362 cases necessarily to investigate in total from results of employee
questionnaires (targeting 55,302 employees, response rate is 93%) along with
the new additional information obtained from interviews and submitted to the
Committee individually, and it had finished all the investigations across
Mitsubishi Electric's 22 sites in Japan. The total number of the cases
reported from the First report through Fourth and Final report is 197.
The Fourth and Final report includes occurrences that came to light since the
Third report was received and disclosed on May 25, 2022. Table 1 provides an
overview.
Table 1: Overview of newly reported incidents of improper quality control
practices
Business Group Improper quality control practice
① Public Utility Systems Group 1．Itami Works: 10 cases
2．Nagasaki Works: 3 cases
3．Communication Networks Center: 2 cases
① Delayed notification of change of electrical equipment "type
classification"
② Inspection conditions differing from customer specifications
② Energy & Industrial Systems Group 1. Energy Systems Center: 1 case
① Some improper entries made in turbine generator test records
2. Transmission & Distribution Systems Center: 4 cases
① Some improper practices in test shipments of shell-type transformers
② Some improper practices in tests of accessory products
Additionally, 2 other cases
③ Building Systems Group 1．Inazawa Works: 2 cases
① Partial noncompliance with the Electrical Appliances and Materials Safety
Act for building equipment controllers
Additionally, 1 other case
④ Electronic Systems Group 1．Communication Systems Center: 2 cases
⑤ Living Environment & Digital Media Equipment Group 1．Nakatsugawa Works: 3 cases
① Some improper entries made in test records for industrial fans
② Some improper entries made in test records for electric fans
Additionally, 1 other case
⑥ Factory Automation Systems Group 1．Nagoya Works: 1 case
⑦ Automotive Equipment Group 1．Himeji Works: 33 cases
① Some improper practices in tests of pressure sensors
② Some improper practices in tests of cam angle sensors
③ Some improper practices in tests of fuel temperature/pressure sensors
Additionally, 30 other cases
2．Sanda Works: 9 cases
① Some improper practices in tests of car navigation products, etc.
② Some improper practices in tests of EGR valves
③ Some improper practices in tests of audio units
Additionally, 6 other cases
In cases where improper quality control practices constituted breaches of
applicable laws/standards, this information was provided to the related
organizational units and corrections were implemented. The company is working
with customers to resolve cases in which misconduct impacted contractual
requirements. Measures to prevent any recurrence are being implemented in all
cases.
With respect to improper quality control practices reported to the company
following the Investigative Committees' third report, the company is informing
customers about situations individually and taking steps to prevent any
recurrence by carrying out three key reforms.
2. Summary
Based on the Investigative Committee's reports to date, the company newly
analyzed the different types of improper quality control practices and their
underlying causes, and reexamined any need to strengthen three key reforms
that have been under way since October 2021. Although no need for major
changes in the direction of the reforms have been identified as a result,
further efforts are being taken to prevent any recurrence, including by
revising engineering processes, cultivating a culture of two-way
communication, and establishing internal controls and governance that focus
more on prevention.
(1) Summary of cases identified in Investigative Committee's report
The Investigative Committee's report identifies 197 cases in 22 sites of the
company, categorized as follows:
① Intentional misconducts: 112 cases in total, of which management was
involved in 62 cases. Nonconformance with customer contracts comprise the
majority of cases, with such incidents being particularly prevalent in certain
business divisions.
② Improper conducts due to negligence: 85 cases in total, of which 10
involved possibilities of legal or regulatory violations.
The cases are due to lack of procedural compliance based on lack of legal and
regulatory knowledge, found commonly in many sites.
(2) Case categorizations
As a result of the Corporate Quality Assurance Reengineering Group's
examination of work sites and conversations with employees based on the
Investigation Committee's investigation, improper quality control practices
have been categorized as below.
① Intentional misconducts
Intentional misconducts were prevalent in certain business divisions and can
be divided mainly into two types:
1) Test/inspections that differed from those specified contractually and were
performed to meet delivery times or to compensate for problems with test
equipment that made it difficult to meet contractually obligated
test/inspection processes. (Example: The contract requires inspection of all
items but since the test equipment capacity was insufficient, employees
performed, without notifying the customer, a sampling inspection on the
assumption that process capability was high and product variability was low.)
2) Inadequate technical validation at the planning/conceptual stage, or when
making design changes, which led to an inability to meet customer requirements
due to design-related product variability, but employees provided false
reports on the assumption that product quality would not be materially
affected
Many of these improper quality control practices were carried out without any
technical explanation being offered to customers under the justification that
there would not be any material problems with product quality. The company
believes that the underlying cause of such practices was a lack of awareness
of the need to take contracts with customer more seriously and a misguided
belief that such improper quality control practices were permissible as long
as product quality was maintained. Investigations also uncovered cases in
which employees, having become aware of problems with certain products that
had gone into mass production, proposed design changes but customers
subsequently rejected them, indicating that organizational leadership did not
adequately ensure that customers were provided with sufficient technical
explanations.
② Improper conducts due to negligence
This type of improper conducts was common across many sites and is thought to
be due to a lack of knowledge about laws and regulations as well as
assumptions/preconceptions that led to a lack of attention to procedural
details.
(3) Analysis of causes
The company, having analyzed the causes of the incidents, as shown below ①,
②, and ③, understands that to eliminate such causes it cannot rely solely
on the independent efforts and creativity of personnel in its work sites and
business divisions. Instead, company management also must take the initiative,
carefully identify priority issues and concerns at work site and divisional
levels, and then collaborate on devising solutions.
① The following direct causes of improper conduct are thought to have
been present at sites and divisions where improper quality control practices
occurred:
1) Work site heads and/or head office personnel did not make necessary 4M
(Man, Machine, Material, and Method) investments because they did not properly
highlight key issues, such as the size and technical/skill level of teams
engaged in development & design and quality control. Other factors
included inadequate testing and evaluation environments and management of
individual project progress. For instance, some tests were needlessly repeated
multiple times. Such problems led to delayed deliveries or performance
assessments that did not adequately validate/verify test results.
2) Estimates of required human resource of design engineers were inadequate,
resulting in continuously high loads. Some sites also did not have enough
design reviewers on site to support design personnel. At the same time,
efforts to develop mechanisms and introduce digital tools to streamline the
design process were inadequate. As a result, much time and many people were
required to develop novel and highly sophisticated projects, after which
assessments and reviews suited to conventional model designs and the
application of existing technologies were insufficient, both qualitatively and
quantitatively.
3) There also was a lack of opportunities or mechanisms to ensure that design
& development offices sufficiently knew about and understood applicable
laws, regulations and contracts. In addition, there were insufficient
processes for providing customers with data-supported technical explanations
in accordance with basic quality-control principles. As a result, in some
cases employees did not carry out necessary procedures. For example, after
signing contracts some customers agreed to changes in test specifications but
they were not provided with updated specification documents.
② The company believes that improper conduct occurred, and indeed was
allowed to persist, because the existing company culture did not allow or
encourage employees to speak up. In many cases involving issues at the design
and quality-control levels mentioned in ①, departmental and work site heads
were unaware of the problems. The Investigative and the Governance Review
committees also pointed out that when improper quality control practices were
carried out, even at multiple sites, managers were unable to properly
ascertain what was going on and thus were slow to address outstanding issues.
Moreover, it was not routine for work site heads to grasp workplace-level
issues and share insights to find solutions, or take matters to the head
office if necessary. The lack of a healthy regime for two-way communication
likely led to many improper quality control practices persisting for extended
periods of time. In other cases, work site heads were aware that improper
practices existed but neglected to report to or consult with the head office,
indicating that there were major problems with communication between work site
heads and both head office personnel and Executive Officers.
③ The company believes there is room for further improvement, not only
in terms of quality issues but also in deploying predictive indicators and
preventive measures, and in incorporating external perspectives when it comes
to internal controls and governance, including inspections and audits. Efforts
must be made to develop adequate internal controls for effective prevention,
such as systems that detect predictive indicators or failures in workplaces,
raise alarms and then facilitate improvements, especially before managers and
other personnel are overwhelmed by problems due to the lack of communication
mentioned in ②.
3. Progress of and path ahead for key reforms needed to prevent recurrences
As mentioned in "(3) Analysis of causes" of "2. Summary" above, the company
will conduct a fundamental review of communication between work site
employees, work site heads and head office managers, based on which it will
build a company-wide framework to prevent improper quality control practices
from arising in the first place, with managers taking responsibility for
getting involved in resolving the issues faced at the design and
quality-control levels. The company, which considers such efforts to be
crucial to rebuilding Mitsubishi Electric, will carry out reforms in the three
key areas of quality assurance, organizational culture and governance.
(1) Quality assurance reforms-Revising engineering processes
① Create an environment that facilitates reliable workplace management,
for example, by adding more personnel, streamlining work processes, and
rightsizing managerial scopes based on recognition of design and
quality-control resources and loads.
② Frontload development and design, for example, by assigning more
reviewers where needed to improve review effectiveness, etc.
③ Deploy data-driven quality control and procedures, and have managers
communicate such actions to customers.
Based on the above ①, ②, and ③, the company aims to provide customers
with technically correct explanations and reduce workloads by having managers
communicate and negotiate with customers. The goal is to restructure the
organization so that there is no need to engage in improper quality control
practices in the first place.
(2) Organizational culture reforms-Facilitating two-way communication
① Senior management will drive reforms through coaching and town-hall
meetings for people in leadership positions, and also through communications
from Executive Officers via internal social media networks, etc.
② The company will promote communication and help people to connect with
each other within and across departments to build a self-initiative
organization. This will include implementing cross-workplace/department
personnel rotations and one-on-one meetings, and also creating guidelines for
psychological safety, casual conversations and work-related discussions.
③ The company will institute behavioral changes to ensure that managers
actively listen for and seek to understand workplace issues rather than
waiting for people to report them, thus facilitating organizational solutions.
Based on the above ①, ②, and ③, the company aims to open up two-way
lines of communication and cultivate a culture in which people feel
comfortable in raising issues with their managers, and also in which people
collaborate to solve problems.
(3) Governance reforms-Building a compliance system focused on prevention
① Based on a review of Board of Directors composition that was conducted
over the past year, mechanisms will be instituted to share important
information fully, especially with outside directors, and further strengthen
the Board of Directors' monitoring functions.
② Strengthen cross-organizational functions company-wide, establish
internal controls to detect predictive indicators and prevent problems, and
strengthen company-wide risk-control functions.
③ Consistently accelerate and enhance the three key reforms through
monitoring by the Board of Directors with a majority of outside directors,
with an emphasis on stakeholder perspectives.
Based on the above ①, ②, and ③, the company aims to establish more
efficient and effective governance focused on identifying predictive
indicators and preventing problems.
The company will also address the recommendations of the Investigative and
Governance Review committees as it strengthens and accelerates the three key
reforms targeting quality assurance, organizational culture and governance
(Figure 1).
Figure 1: Recommendations by Investigative and Governance Review committees
and company strategies
The following are the details of reforms to be carried out in three key areas.
(1) Quality assurance reforms-Revising engineering processes
Table 2 shows the progress of measures set out by the Corporate Quality
Assurance Reengineering Group in October 2021. In addition to efforts
currently underway, the company will focus on enhancing engineering
capabilities and reforming manufacturing processes by implementing priority
initiatives shown in Table 3, aiming to create an organizational structure in
which there is no incentive to engage in improper quality control practices in
the first place, based on "(3) Analysis of causes" of "2. Summary" above.
Table 2: Progress of quality assurance reforms (formulated in October 2021)
Task Progress as of October 2022 and efforts going forward
①Restructure control functions 1) Greater independence and separation of chains of command
Since FY2023, the Corporate Quality Assurance Reengineering Group has had a
staff of 224 and Quality Assurance & Management Departments belonging to
this Group were set up with shipping authority at all work sites and began
operating (as of September 2022, Conducted 920 design and development review
and 278 assessments for product shipping had been carried out).
2) Strengthen quality assurance functions
Started conducting quality audits with an emphasis on ensuring products
conform to laws, standards and customer specifications, carrying them out at
10 sites as of FY2023 1H and planning to do so at all 28 sites, including
branch factories, by March 2023.
②Addressing technical capabilities and resources issues 1) Strengthen and ensure compliance with laws, regulations and public
standards
Since June 2022, employees have been using an external service to view
up-to-date information on government revisions/abolitions of legal standards
and standards documentation.
2) Enhance quality through IT and digitalization
The company is selecting and evaluating specific tools for the digital
management of customer specifications and inspection data, starting the
rollout in October 2022.
The company determined which infrastructure needs to be strengthened for
conformance with laws, standards, customer specifications and
quality-assurance processes, for which some 25 billion yen is being invested
in FY2023 and more than 30 billion yen in a two-year period to FY2024 1H.
3) Conduct plant health checks
To clarify problems (close calls and potential incidents) that tend to be
overshadowed by quality issues, the company began conducting health checks at
manufacturing sites. As of September 2022, checks had been conducted at 23 out
of 27 eligible sites, including branch factories, illuminating the
strengths/weaknesses of each site and revealing instructive examples that are
now being shared broadly across the company.
4) Train quality-control personnel
Surveyed the skills of quality-assurance and quality-control departments at
manufacturing sites to recognize the skill base, based on which weaknesses
began to be addressed under an enhancement plan from July 2022.
③Enhance awareness of quality compliance 1) Revitalize personnel rotations
Candidates selections for quality assurance department rotations from across
manufacturing sites to be completed, and rotations are to take place in April
2023.
2) Instill awareness of quality compliance
On the newly designated Company-wide Quality Day (July 2), the company
president, business group heads and other leaders issued messages to
employees.
Table 3: Additional quality assurance reform measures (to eliminate incentives
for improper quality control practices)
Task Specifics
①Normalize manufacturing management 1) Systematize methods for estimating required resources and assign additional
designers, design managers and testers.
2) Use factory health checks to recognize and facilitate upgrades of the 4M
status at manufacturing sites.
3) Highlight new-product project progress under the supervision of the
Corporate Quality Assurance Reengineering Group.
4) Create a company-wide team of legal & regulatory experts within the
Corporate Quality Assurance Reengineering Group.
②Design frontloading (enhance design and design-change validations) 1) Revise design-review (DR) methods, including and have external experts
introduce Quick DR (process for discovering/solving problems efficiently and
quickly by focusing on changes).
2) Introduce a DR Senior Expert system to foster designers.
3) Have corporate departments strengthen cross-department design functions
(share KPIs for design standardization, etc. with business divisions and
clarify accountability and authority).
③Data-driven quality control and procedures 1) Use statistical quality control (SQC) to conduct design studies and
determine mass-production testing and inspection methods
2) Develop rules for submitting test specifications to customers and closely
monitor test specifications' adherence to customer agreements (and use this as
a KPI for design development review).
(2) Organizational culture reforms-Facilitating two-way communication
To reform organizational culture, two-way communication will be fostered with
an emphasis on the following:
• Senior management will continue to drive new reforms through initiatives
including coaching; active debating at workshops for executives, work site
heads and other senior personnel to overcome departmental/organizational
barriers; holding town-hall meetings to facilitate frank discussions with
employees in workplaces; and engaging in dialogues with employees via internal
social-media networks.
• To encourage behavioral change among managers, coaching is being expanded
to managerial roles and one-on-one meetings, etc. are being held to actively
listen to what managers have to say.
• Various measures to enliven communication among all employees are already
underway, including encouraging people to greet and thank each other and
otherwise speak to each other with respect; issuing guidelines on
psychological safety, casual conversations and work-related discussions;
creating cross-department communities through learning opportunities; and
promoting personnel exchanges across workplace and departmental lines.
These activities are being carried out in harmony with efforts to renew the
human resources management system and in accord with the Robust Policies for
overarching plan for organizational culture reforms created in March 2022 by
the Team Sousei (Creation) company-wide transformation project, which kicked
off in October 2021. From May 2022, a total of 192 employees company-wide have
been working on individual reform projects within each business division, and
a total of 198 meetings on the overarching plan have been held to explain
these efforts to employees and to facilitate discussion. These organizational
culture reform efforts, which have until now focused on Mitsubishi Electric,
are now being expanded across the entire Group, including affiliates launching
initiatives tailored to their own particular track records. Table 4 shows the
progress of organizational culture reforms and efforts going forward.
Table 4: Progress of organizational culture reforms and efforts going forward
Task Progress as of October 2022, efforts going forward
Measures to improve the company's outmoded culture
①Promote positive, interactive communication Group-wide • Encouraging people to greet and thank each other and otherwise speak with
respect, and rolling out guidelines on psychological safety, casual
conversations and work-related discussions
• Accelerating the rollout of executive coaching for managers
• Trial introduction of one-on-one meetings (October 2022)
②Revise obsolete, burdensome work practices and emphasize productivity • Senior managers are leading efforts to reduce workloads
• Using DX to transform work practices
• Issued meeting guidelines company-wide (October 2022)
③Trust each other and share information transparently • Increase the use of internal social media and revamp the intranet, etc. to
facilitate direct communication with employees
• Enhance disclosures about the human resources system (evaluation
standards, processes, etc.) (December 2022)
Measures to build new culture
④Facilitate self-initiative among individuals and units by clarifying & • Review middle manager job scopes and authority (progressive effort
delegating roles, authority and accountability starting in October 2022)
• Place greater emphasis on human resource management in managerial
appointments/dismissals (October 2022)
⑤Collaborate across divisions to maximize Group strength • Rotate people across different work sites/roles (2,264 rotations in
April-September 2022)
• Stimulate discussions in workshops (4 in total for all executives, 5 in
total for executives and upper managers at head office, and 2 in total for
Senior General Managers（Works, Centers, Branch Offices） to further
problem-solving among upper managers, including executives and work site
heads, from a company-wide perspective
⑥Increase opportunities to learn from each other and grow • Establish the "Melcollege" learning community (October 2022)
• Revise systems for encouraging voluntary transfers (October 2022)
• Established Career Consulting Section to support employee's career
self-reliance development (October 2022)
• Establish internal committee to revise systems governing the treatment of
employees (June 2022)
Examples of other measures considered/underway within business divisions etc. • Hold lectures, open-discussion sessions, etc.
• Introduce shared-desk workplace layouts
• Adopt the use of "thank-you cards"
• Set up transformation projects at affiliates
(3) Governance reforms-Building a compliance system focused on preventive
measures
Governance reforms are a top priority that management must commit to when the
company is to restore public trust and continue building corporate value. As
such, and based on the quality control issues raised by the Investigative
Committee and the recommendations issued by the Governance Review Committee,
the company will build systems for governance and internal control that
incorporate external perspectives and eliminate any incentive to act
improperly. Specifically, the company pledges to take the following three
steps (①-③):
① Board of Director reforms to strengthen management supervisory
functions
In FY2022-'23, the company commissioned a third party (Board Advisors Japan,
Inc.) to assess the Board of Directors' effectiveness, based on which the
following evaluations were received:.
• A number of efforts to improve the issues on Board of Directors'
effectiveness which were pointed out during last years' assessment have been
confirmed.
o Strengthened supervisory functions by establishing a majority of
independent outside directors
o Newly appointed two people with manufacturing management experience
o New chairperson set a more appropriate agenda and facilitated proceedings
to enhance discussions
o Meetings were made more efficient by providing reference materials in
advance and sharing information
• Going forward, four specific issues for further effectiveness improvement
are expected to address:
o More advanced monitoring
o Further enhancement of agendas and discussions
o Further strengthening of Board of Directors Secretariat functions
o Strengthening of Nomination Committee functions
Based on these results of evaluations and recommendations of the Governance
Review Committee, the Board of Directors is now working on improvement of its
operations, including setting more appropriate priorities and further
strengthening its monitoring functions based on external perspectives.
② Strengthen cross-organizational functions company-wide and build an
internal control system that emphasizes predictive indicators and prevention
• The CRO will supervise company-wide risk-control functions relating to
quality, labor, information breaches, legal violations, etc., and, based on
the lessons learned from dealing with quality control issues, reform the
internal control system to make it simpler and more effective, especially in
terms of prevention.
• Specifically, the company will develop a Compliance Program combining a
wide range of measures to which all Executive Officers and employees must
adhere. The program's measures will include setting priority themes through
risk assessments; strengthening mechanisms for inspections and training to
eliminate low awareness; identifying predictive signs through factory health
checks and engagement surveys and building systems to provide intensive
support to key work sites; establishing systems that make it easier to raise
issues, such as internal reporting systems, consultation systems and
questionnaire surveys; and introducing systems that prevent improper conduct
via digitalization.
③ Monitoring of the three company-wide reforms by Board of Directors
with an emphasis on stakeholder perspectives
• Taking over the functions of the emergency response division established
under the president in response to the quality issues that came to light in
July 2021, the CSO, CRO and other relevant executives will form the Three Key
Reforms Div. (Provisional) that reports directly to the company president to
ensure that the company's reforms in the key areas of quality assurance,
organizational culture and governance are carried out. The Board of Directors
with a majority of outside directors will monthly monitor and supervise the
progress of these efforts from a broad perspective.
• In addition, information on the progress of the three company-wide reforms
will be disclosed properly to stakeholders, including shareholders, investors,
employees, customers and business partners. Also, the company will pursue
opportunities for dialogue through investor and shareholder relations
programs, integrated reports, etc.
• Instituting these processes will make it easier for the company to
consider stakeholder opinions, continuously accelerate and improve its three
company-wide reforms, and act accountably by disclosing and explaining
information.
Table 5: Progress of governance reforms and efforts going forward
Task Progress as of October 2022 and efforts going forward
①Strengthen supervisory functions (Board reforms) In light of the improvements made to Board of Directors-appointment of outside
directors as Board chairperson and heads of the three statutory committees,
appointment of two directors with manufacturing industry experience, and a
majority of outside directors-the following additional improvements will be
made to further strengthen the Board's monitoring role.
1) Set priority agenda
• Review the Board's agenda and decide on important items to discuss,
including the company's vision and reforming organizational culture: from July
2022 (after appointment of directors).
• In the Board's agenda, include the top-priority task of monitoring the
progress and execution of the three reforms including recurrence-prevention of
improper quality control practices.
2) Set priority key themes for the three statutory committees
• Nomination Committee: Leads succession planning for outside directors and
supervises company president succession planning.
• Compensation Committee: Operates the newly introduced executive officer
compensation system.
• Audit Committee: Strengthen coordination with Board and Executive Officers
to monitor key reforms.
3) Strengthen functions of the Board of Directors Secretariat
• Increase the number of full-time personnel and number of nonbusiness
division personnel concurrently in the Secretariat (2 people added so far).
• Improve effectiveness including effective monitoring by strengthening
collaboration between the Board of Directors Secretariat and Audit Committee
Secretariat
• Hold regular open discussions with Executive Officers to improve
information sharing with outside directors, and also step up on-site
inspections.
4) Continue third-party evaluations of Board's effectiveness
• Evaluate composition and operations, and improve monitoring functions.
②Strengthening of cross-organizational functions and improvement of internal 1) Strengthen cross-organizational functions of head office corporate
control system by head office corporate divisions divisions
• Strengthen cross-organizational initiatives
Corporate divisions provide checks and balances on business divisions'
activities. Also, the CRO, Corporate Risk Management Div. and Corporate Legal
& Compliance Div. guide corporate-related divisions in properly fulfilling
their checks-and-balances roles and formulating/implementing company-wide
strategies for internal controls that emphasizes predictive indicators and
prevention.
2) Build internal control system that emphasizes predictive indicators and
prevention
• Prioritization based on risk analysis
Use risk analysis to identify key themes and predictive analysis to identify
priority work sites (risk recognition).
• Strengthen mechanisms for eliminating employee unawareness
Reevaluate self-inspection activities and introduce risk-response audits to
eradicate improper conduct due to unawareness and negligence and
reduce/simplify unproductive work practices.
• Expand mechanisms to prevent improper conduct
Utilize DX to expand mechanisms that prevent improper conduct.
• Institute mechanisms that make it easier to speak up
Nurture an organizational culture as well as mechanisms that make it easier
for employees to speak up, facilitating such behavioral changes by
communicating the Code of Conduct, strengthening the internal whistleblower
system and conducting timely surveys.
3) Formulate a compliance program (draft during FY2023, trial from FY2024)
• Formulate a Compliance Program that embodies internal controls focused on
prevention and implement it as a common framework across the Group, and
encourage all Executive Officers and employees to work to prevent improper
conduct before it occurs.
③Monitoring of company-wide reforms by the Board of Directors with an • Taking over the functions of the emergency response division, the CSO, CRO
emphasis on stakeholder perspectives and other relevant executive officers will form a Three Key Reforms Div.
(Provisional）, reporting directly to the company president, to ensure that
the three company-wide reforms of quality assurance, organizational culture
and governance are carried out. The Board of Directors with a majority of
outside directors will monitor and supervise the progress of these efforts.
• Properly disclose information on the progress of the three company-wide
reforms to stakeholders-shareholders, investors, employees, customers and
business partners-and pursue opportunities for dialogue through investor
relations and shareholder relations programs, integrated reports, and so
forth.
• Consider diverse opinions of stakeholders and continuously accelerate and
improve the three company-wide reforms as well as disclose and explain
information.
4. Executive responsibility and disciplinary action
As disclosed in the October 20, 2021 press release "Mitsubishi Electric
Announces Establishment of Governance Review Committee," the Board of
Directors established a Governance Review Committee comprising external
experts who do not have any business relationship with Mitsubishi Electric.
The committee's activities have included assessing the company's internal
control and governance systems and clarifying the responsibility of Executive
Officers and Directors regarding improper quality control practices. In light
of the Governance Review Committee's report on additional assessments and
evaluations of Executive Officer and Director's responsibility for improper
quality control practices, Mitsubishi Electric takes the findings of this
report seriously. At meetings of the Board of Directors and Compensation
Committee today, decisions were made on disciplinary action for the Executive
Officers and Directors involved. For details, please see press release titled
"Mitsubishi Electric Announces Disciplinary Actions against Directors &
Officers in Connection with Improper Quality Control Practices" dated October
20, 2022.
5. Looking ahead
While receipt of the final report marks the completion of the Investigative
Committee's investigation into improper quality control practices at
Mitsubishi Electric, which began with a questionnaire survey conducted by the
Investigative Committee of external experts in July 2021, the company will
continue to pursue reforms in three key areas as a top priority. Also, the
Board of Directors will monitor the progress of these efforts and the company
will provide updates to internal and external stakeholders via its website.(*)
Based on the lessons and insights provided by the investigation, the company's
CQO has begun conducting quality assessments at Group affiliates as well to
grasp the actual situation. Based on the results of the assessments and
depending on each Group affiliate's traits, Mitsubishi Electric will shed a
light on improvement of their capabilities to prevent improper quality control
practices before they manifest. Improvements tailored to each company will be
implemented and instructive examples will be shared across the Group as part
of ongoing efforts to institute systems and frameworks that do not allow
improper quality control practices to arise in the first place.
Finally, Mitsubishi Electric again expresses its most sincere apology to all
stakeholders for the impact the Investigative Committee's investigation over a
period of approximately 16 months. Drawing on the lessons of these incidents,
the entire Group is dedicated to reembracing its fundamental commitment to
contribute to society with reliable quality and ensuring that such incidents
do not recur. Management and employees will work as one and spare no effort to
carry out reforms aimed at forging a new Mitsubishi Electric that is fully
capable of earning its customers' trust and fulfilling the expectations of its
stakeholders.
###
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
http://www.rns-pdf.londonstockexchange.com/rns/3334E_1-2022-10-27.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3334E_1-2022-10-27.pdf)
http://www.rns-pdf.londonstockexchange.com/rns/3334E_2-2022-10-27.pdf (http://www.rns-pdf.londonstockexchange.com/rns/3334E_2-2022-10-27.pdf)
http://www.rns-pdf.londonstockexchange.com/rns/3334E_3-2022-10-27.pdf (http://www.rns-pdf.londonstockexchange.com/rns/3334E_3-2022-10-27.pdf)
http://www.rns-pdf.londonstockexchange.com/rns/3334E_4-2022-10-27.pdf (http://www.rns-pdf.londonstockexchange.com/rns/3334E_4-2022-10-27.pdf)
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END STRMZMZGRNNGZZG Recent news on Mitsubishi Electric
See all newsRCS - Informa Markets - Battery Show Europe Announces New Advisory Board
AnnouncementRCS - Informa Markets - Battery Show Europe Announces New Advisory Board
AnnouncementREG - Mitsubishi Elect. - Statement re (Delisting from the LSE)
AnnouncementREG - Stock Exch Notice Mitsubishi Elect. - Cancellation - MITSUBISHI ELECTRIC CORPORATION
AnnouncementREG - Mitsubishi Elect. - Statement re (JIS Q 9100/ ISO9001)
Announcement