December 17, 1996
Japan Federation of Economic Organizations
Introduction
Keidanren Charter for Good Corporate Behavior
Mr.
Toshio Ono's comments on revising the Charter
During the five years that have elapsed since the previous Charter for Good Corporate Behavior was announced, various problems concerning corporate behavior have arisen and public distrust of corporations has intensified. At the same time, the global business environment has undergone major changes, which we list below. Having reviewed corporate behavior in view of these circumstances, Keidanren has decided to revise the Charter of 1991 in order to articulate the kind of corporate behavior that truly enriches and vitalizes civil society as we approach the twenty-first century.
First, because the socioeconomic system that sustained postwar rapid economic growth has reached its limits and has even become a factor constraining future development, concrete action for fundamental reform of the system is required.
Second, as the world becomes increasingly borderless, corporate globalization has taken on a broader dimension. It is now necessary to reassess our corporate behavior from a more global perspective.
Third, the ongoing development of a society of sophisticated information networks has generated new types of problems in corporate ethics. Innovative methods for dealing with these problems must now be found by corporate management.
Fourth, the times require that corporate management actively incorporate nature conservation, preservation of the global environment, and philanthropic activities in their business strategies.
Fifth, the coming into force of the Product Liability Law and the amendments to the Commercial Code in connection with the shareholders’ representative litigation system require corporations to strengthen self-responsibility and further enhance transparency.
Sixth, as deregulation proceeds, corporations must cease their reliance on government, and actively assume responsibility in their own business activities even in regard to roles hitherto considered the province of the public sector.
These changes require a reassessment of corporate behavior, including relations with consumers, users, shareholders, employees, customers and clients, local communities, and other stakeholders. Corporations, embodying the aims of this Charter for Good Corporate Behavior and resolving to coping with the change, must take the lead in this social reform.
Keidanren’s member corporations agree and proclaim that they will make the spirit of the following Charter for Good Corporate Behavior the criterion of their corporate behavior.
Keidanren Charter for Good Corporate Behavior
5. Corporations, as good corporate citizens, will actively undertake philanthropic activities.
10. When the Charter is violated, corporations’ top executives will resolve the problem, endeavoring to clarify its causes and prevent its recurrence. They will promptly disclose all relevant information to the public, and will mete out stern punishment upon identifying authority and responsibility, not excluding themselves.
Toshio Ono
Chairman of the Sub-Committee on the Charter for Good Corporate Behavior
1. Revising the Charter for Good Corporate Behavior to Regain the Public's Confidence
The Japan Federation of Economic Organizations, Keidanren, has on various occasions made proposals concerning corporate behavior and corporate ethics. In 1991, the "Keidanren Charter for Good Corporate Behavior" was released and members were called on to refrain from behavior contrary to social norms and to exercise greater self-discipline.
Unfortunately, even after the announcement of the Charter, various incidents of improper corporate behavior occurred which heightened the public's distrust in the corporate sector. As a further consideration, it was realized that the internal and external environments of Japanese corporations have undergone dramatic changes in the course of the five years since the creation of the Charter. For these reasons, the Keidanren decided in the summer of 1996 to review the original Charter. The process of review was initiated in September with the formation of the Sub-Committee on the Charter of Good Corporate Behavior (Sub-Committee Chairman: Toshio Ono, Executive Vice-President of NEC Corporation) within the Committee on Corporate Behavior (Committee Chairman: Sho Nasu, Vice Chairman of Keidanren. Co-Chairman: Toshifumi Suzuki, President and CEO of Ito-Yokado Company).
2. Survey of Corporate Ethics and Behavior Indicates Greater Need to Publicize the Charter
The Sub-Committee began its work by examining how corporations were dealing with the issue of corporate ethics. Specifically, a questionnaire survey entitled "Survey of Corporate Ethics and Corporate Behavior" was conducted between late September and late October of 1996. All corporate members of the Keidanren were surveyed. (Questionnaires were sent to approximately 1,000 member companies. Response rate was 44%. The results indicated that there was a need for more active education in the Charter and its principles. Only one-half of the respondents stated that they had read the entire Charter and knew it well, while only 45% of the respondents said they had made efforts to have the Charter known widely by publicizing it in their companies. (See Tables 1 and 2) On the subject of corporate ethics, 74% of the respondents said that their companies had established some form of rules and guidelines concerning corporate ethics and behavior. (See Table 3) However, only 30% of the respondents had established a general code of corporate ethics which existed independently of the rules of employment and company principles. This finding also indicated that greater efforts would have to be made on the part of individual companies in the area of corporate ethics.
3. Features of the New Charter for Good Corporate Behavior: Instilling the Charter in All Members
Based on these findings of the questionnaire survey, the Sub-Committee on the Charter of Good Corporate Behavior embarked on the process of drafting a new Charter. On December 6, 1996, the final draft of the new Charter was approved by the Committee on Corporate Behavior and was sent to the Board of Directors for its deliberation. The Board of Directors approved the new Charter on December 17 which was then released to the public.
Special attention has been given in the new Charter to means and ways for improving the effectiveness of implementation and instilling the principles of the Charter in all corporate members of the Keidanren. From this perspective, the new Charter contains the following six features.
First, the new Charter is divided into three sections: the Introduction which states the reasons for revision, the main body of the Charter, and the "Guide to Implementation" which consists of a manual to be used as a reference source for the actual implementation of the Charter. This construction of the Charter is designed to facilitate the installation of the Charter throughout the corporate community.
Second, the Introduction closes with the following pledge: "Keidanren's member corporations agree and proclaim that they will make the spirit of the following Charter for Good Corporate Behavior the criterion of their corporate behavior". As such, the Charter represents the consensus and joint pledge of all members.
Third, the new Charter has been simplified as much as possible to facilitate widespread familiarity. The 1991 Charter contained a total of 15 principles consisting of seven principles of "Good Corporate Citizenship," five principles of "Fairness," and three principles for "Top Management." By contrast, the new Charter summarizes corporate responsibilities to consumers, shareowners and other stakeholders, and the duties of top management in a total of ten principles.
Fourth, while the body of the new Charter has been simplified, the "Guide to Implementation" contains extensive background information on the need for each of the principles, the basic corporate approach and stance toward each item in the Charter, and a detailed action plan to be used as a reference in the process of actual implementation by individual companies. An example can be given in connection with the second principle of good corporate behavior regarding the pursuit of fair, transparent and free competition and the maintenance of sound and healthy relations with politics and government. In this case, the "Guide to Implementation" contains detailed and concrete information on the creation of a manual regarding observance of the anti-monopoly laws and guidelines for procurements and related transactions, and the proper corporate stance toward the employment of former bureaucrats. Regarding the sixth principle for maintaining a safe and comfortable working environment, and respecting the dignity and individuality of employees, extensive comments have been made on such matters as the fair treatment of employees, corporate responses to AIDS and incidents of sexual harassment, and proper security measures for overseas staff.
Fifth, the new Charter is not a mere listing of bans. Rather, its contents eye the coming 21st century and have a very positive orientation.
In addition, the Charter is fully adapted to the recent changes in the business environment. For example, in response to the growing trend towards globalization, all items of the Charter are phrased to apply to "all instances, both domestic and international." As another example, the Charter takes into consideration the enactment of product liability laws and calls for "giving full consideration to safety" in the development and marketing of goods and services.
Sixth, the new Charter states that companies found in violation of the Charter of Good Corporate Behavior must respond in accordance with the principle of self-responsibility. The Charter itself outlines the principles and rules which the members must voluntarily observe. However, under the new Charter, the top executives of member companies found in violation are to mete out stern punishment against members of their companies, not excluding themselves. In addition, top executives are to pass judgment on themselves and to report to the Keidanren on such matters as the continuation of their Keidanren membership, committee chairmanships and other executive posts.
4. Need for Continuous Follow-Up Activities
In order to truly implement the Charter, it will be important to maintain a continuous process of follow-up and review. The Keidanren is planning to publish the Charter in its various publications and materials in order to ensure that the Charter remains always in the sight of the members. In addition, from time to time, the Keidanren will be hosting various study sessions and symposiums concerning the Charter for Good Corporate Behavior at which time relevant cases studies will be introduced. To promote widespread domestic and international access, the English translation of the text of the Charter has been made available on the Internet.
The new Charter and the "Guide for Implementation" were sent out to the representatives of all member companies at the end of last year. At the same time, the Keidanren has asked its members to take positive action toward familiarizing its directors and employees with the Charter through such means as the company newsletter. Finally, the Keidanren has asked each member to use the new Charter as a reference in reviewing and formulating a specific code of corporate behavior which conforms to the particular features and needs of its business.