TIDMMEL
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
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
(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
Public Utility 1 Itami Works: 10 cases
Systems Group 2 Nagasaki Works: 3 cases
3 Communication Networks Center: 2 cases
Delayed notification of change of electrical
equipment "type classification"
Inspection conditions differing from customer
specifications
-------------------- -----------------------------------------------------------------
Energy & Industrial 1. Energy Systems Center: 1 case
Systems Group Some improper entries made in turbine generator
test records
2. Transmission & Distribution Systems Center:
4 cases
Some improper practices in test shipments
of shell-type transformers
Some improper practices in tests of accessory
products
Additionally, 2 other cases
-------------------- -----------------------------------------------------------------
Building Systems 1 Inazawa Works: 2 cases
Group Partial noncompliance with the Electrical
Appliances and Materials Safety Act for building
equipment controllers
Additionally, 1 other case
-------------------- -----------------------------------------------------------------
Electronic 1 Communication Systems Center: 2 cases
Systems Group
-------------------- -----------------------------------------------------------------
Living Environment 1 Nakatsugawa Works: 3 cases
& Digital Media Some improper entries made in test records
Equipment Group for industrial fans
Some improper entries made in test records
for electric fans
Additionally, 1 other case
-------------------- -----------------------------------------------------------------
Factory Automation 1 Nagoya Works: 1 case
Systems Group
-------------------- -----------------------------------------------------------------
Automotive 1 Himeji Works: 33 cases
Equipment Group Some improper practices in tests of pressure
sensors
Some improper practices in tests of cam angle
sensors
Some improper practices in tests of fuel temperature/pressure
sensors
Additionally, 30 other cases
2 Sanda Works: 9 cases
Some improper practices in tests of car navigation
products, etc.
Some improper practices in tests of EGR valves
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:
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.
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.
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.
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 , , and , 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.
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.
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 , 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.
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 .
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
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.
Frontload development and design, for example, by assigning more
reviewers where needed to improve review effectiveness, etc.
Deploy data-driven quality control and procedures, and have
managers communicate such actions to customers.
Based on the above , , and , 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
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.
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.
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 , , and , 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
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.
Strengthen cross-organizational functions company-wide,
establish internal controls to detect predictive indicators and
prevent problems, and strengthen company-wide risk-control
functions.
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 , , and , 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
Restructure control 1) Greater independence and separation of chains
functions 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.
------------------------------------------------------
Addressing technical 1) Strengthen and ensure compliance with laws,
capabilities and regulations and public standards
resources issues 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.
------------------------------------------------------
Enhance awareness 1) Revitalize personnel rotations
of quality compliance 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
Normalize manufacturing 1) Systematize methods for estimating required
management 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.
-----------------------------------------------------------
Design frontloading 1) Revise design-review (DR) methods, including
(enhance design and have external experts introduce Quick DR
and design-change (process for discovering/solving problems efficiently
validations) 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).
-----------------------------------------------------------
Data-driven quality 1) Use statistical quality control (SQC) to
control and procedures 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
Promote positive,
interactive communication * Encouraging people to greet and thank each other and
Group-wide 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)
Revise obsolete,
burdensome work * Senior managers are leading efforts to reduce
practices and emphasize workloads
productivity
* Using DX to transform work practices
* Issued meeting guidelines company-wide (October 2022)
------------------------------ -------------------------------------------------------------
Trust each other
and share information * Increase the use of internal social media and revamp
transparently 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
Facilitate self-initiative
among individuals * Review middle manager job scopes and authority
and units by clarifying (progressive effort starting in October 2022)
& delegating roles,
authority and accountability
* Place greater emphasis on human resource management
in managerial appointments/dismissals (October 2022)
Collaborate across
divisions to maximize * Rotate people across different work sites/roles
Group strength (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
------------------------------ -------------------------------------------------------------
Increase opportunities
to learn from each * Establish the "Melcollege" learning community
other and grow (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 * Hold lectures, open-discussion sessions, etc.
within business divisions
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 ( - ):
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:.
<Results of evaluations by a third party>
-- 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.
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.
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
Strengthen In light of the improvements made to Board of
supervisory Directors-appointment of outside directors as
functions (Board Board chairperson and heads of the three statutory
reforms) 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.
-----------------------------------------------------------------
Strengthening 1) Strengthen cross-organizational functions
of cross-organizational of head office corporate divisions
functions and -- Strengthen cross-organizational initiatives
improvement Corporate divisions provide checks and balances
of internal on business divisions' activities. Also, the
control system CRO, Corporate Risk Management Div. and Corporate
by head office Legal & Compliance Div. guide corporate-related
corporate divisions 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.
-----------------------------------------------------------------
Monitoring
of company-wide * Taking over the functions of the emergency response
reforms by division, the CSO, CRO and other relevant executive
the Board of officers will form a Three Key Reforms Div.
Directors with (Provisional , reporting directly to the company
an emphasis president, to ensure that the three company-wide
on stakeholder reforms of quality assurance, organizational culture
perspectives 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
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October 27, 2022 04:33 ET (08:33 GMT)
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