Compliance

Compliance

System to Promote Compliance

Sharp defines compliance as “observing laws, regulations, and company rules, and acting in line with corporate ethics.” Accordingly, Sharp is pursuing management practices that give priority to compliance.

The person most responsible for leading compliance at Sharp is the CEO. This person’s job is to take a global outlook in formulating basic policies for compliance and making sure these policies are firmly established within the company. Meanwhile, the person responsible for leading compliance for the entire Sharp Group is the head of the Corporate Strategic Planning and Control Group. This person is in charge of devising concrete measures for compliance and thoroughly implementing them. As well as affirming the implementation status of compliance measures, they draw up corrective measures where necessary and makes sure they are thoroughly executed.

Under these two heads, the presidents of the business units are responsible for compliance within their respective organizations. The business unit presidents are also responsible for guiding and supervising compliance measures at subsidiaries and affiliated companies (hereafter, “affiliates”) under their business units. Promoting compliance at each affiliate in and outside Japan is the responsibility of the affiliate president.

Among the laws and regulations that pertain to business execution, some are considered to be critically important and capable of affecting the entire Sharp Group. For each of these material categories of laws and regulations, the company sets up a dedicated legal department. The aim is to achieve thorough compliance with these laws and regulations. Each legal department fully understands the content of the critically important law and studies the effects it could have on the business of the entire Sharp Group and on operations shared by different departments. It then reviews—as needed—business operations and processes, revises company regulations, formulates or revises routine operation standards, communicates these changes, and provides guidance and supervision to executives and employees.

If a compliance-related risk occurs, Sharp will respond appropriately in accordance with the Basic Rules for Compliance and the Rules for Business Risk Management, and take comprehensive corrective measures and prevent recurrence.

Compliance Training

As a means of promoting compliance, the Sharp Group has formulated the Sharp Group Compliance Guidebook, which states defined standards for matters to be observed, matters which are prohibited, and actions to be taken for all executives and employees, and publishes and disseminates this throughout the company.

Sharp also periodically carries out training (including e-learning) on the Sharp Code of Conduct and material categories of laws and regulations (such as competition laws, anticorruption, and personal information protection). In fiscal 2023, the approximately 18,000 who took part in this training included members of Sharp Corporation, affiliated companies in Japan, and the labor union. The Sharp Code of Conduct was communicated to employees at all Sharp overseas bases.

Hotline for Compliance Issues

In line with revisions to Japan’s Whistleblower Protection Act in June 2022, Sharp Corporation and its affiliated companies in Japan have established the Crystal Hotline, a hotline to report problems in the workplace, such as work-related violations of laws, and words and actions that are counter to the Sharp Group Charter of Corporate Behavior, the Sharp Code of Conduct, in-house rules, social norms, and ethics. The company has also set up a competition law hotline, which serves as a contact point specifically for issues related to competition laws. These hotlines have been set up both inside the company and externally (via an outside law firm providing legal counsel). They are available via email, phone, and other means for employees and temporary staff, as well as business partners*, to make reports. The Crystal Hotline also accepts anonymous reports. Sharp also has a consultation service dedicated to addressing workplace harassment (which includes sexual harassment, pregnancy discrimination, and abuse of authority).

The hotlines and consultation service receive reports and conduct fact-finding investigations in line with strict operating rules. Those who have submitted a report or requested a consultation are informed of the details of the response. If the investigation reveals any violation of laws, regulations, or company rules, or any other compliance issues (actions counter to social norms or ethics), Sharp will put into effect measures for remediation and recurrence prevention.

The hotlines are operated in line with the clear stipulation of both the Sharp Code of Conduct and the rules governing hotline service operation that information identifying the individual contacting the hotlines and details of the individual’s report will be strictly protected and that those persons will suffer no unfavorable treatment or penalties. Such rules are thoroughly communicated to all executives and employees through training and other means.

Six months after any corrective action is taken, we check that the whistleblower contacting the Crystal Hotline has not been disadvantaged. After a further period, we also check whether the corrective actions and recurrence prevention measures are working effectively.

In fiscal 2023, the Crystal Hotline received 44 reports and the harassment consultation service received three reports. For each of these, Sharp investigated the facts of the matter and issued orders for any necessary corrective measures. Meanwhile, the competition law hotline received zero reports in fiscal 2023.

Hotlines have been set up at Sharp’s major overseas bases, with consideration for the legal system and other matters in each country. Action is taken to swiftly address any problems. In fiscal 2023, there were 92 reports.

The number of cases in and outside Japan and their summaries are reported regularly to the Internal Control Committee, which is chaired by the president & CEO, and to the Board of Directors and the Audit and Supervisory Committee.

• Only the Crystal Hotline is available for use by employees of business partners.

Crystal Hotline Reporting System

Breakdown of Whistleblowing/Reports

Compliance with Competition Laws

In order to comply with Japan’s Act on Prohibition of Private Monopolization and Maintenance of Fair Trade, as well as with equivalent overseas laws and treaties enacted to protect the interests of consumers by maintaining and promoting free and fair markets (hereafter, “competition laws”), Sharp has put in place rules across the entire Sharp Group on observing competition laws. It has also created an Antimonopoly Act Compliance Manual (Action Guidelines). These guidelines stipulate basic compliance matters that employees must adhere to in their duties with regard to cartels.

To raise awareness amongst employees, Sharp has prepared and revised a guidebook summarizing the key points of competition laws for each field of business, and it carries out periodic internal training via e-learning. Sharp also raises awareness internally of case studies relating to competition laws from within Japan and internationally as well as information on major revisions to the laws.

When considering raising product prices in response to rising costs in society, to ensure that Sharp does not violate competition laws by, for example, taking part in cartels, circulars are sent periodically to every part of the company. Sharp prevents actualization of competition law-related risks in transactions by reviewing all contracts and consulting with its legal department when approving new contracts.

To enable Sharp to more effectively prevent the occurrence of competition law risks (such as cartel activities or bid-rigging), business departments periodically confirm their dealings and interactions with competing companies. Depending on the risk, it may be reported to the legal department, which monitors the status of Sharp’s compliance with competition laws. Such efforts maintain the effectiveness of Sharp’s compliance program.

Preventing Corruption in All Forms and Dealing Properly with Donations

General Policy

The Sharp Group Charter of Corporate Behavior and the Sharp Code of Conduct contain provisions that strictly prohibit any form of corrupt behavior, such as extortion or direct or indirect bribes of money, goods, or services. The Group Charter and Code of Conduct also stipulate that donations must be handled in a proper manner.

The Compliance Guidebook follows the Sharp Group Charter of Corporate Behavior and the Sharp Code of Conduct in stipulating policies, for example, on providing gifts and entertainment, and on prohibiting bribery.

We also have the Rules for Prohibition of Bribery (hereinafter “the Rules”), which detail the actions that both executives and employees should and should not take in order to prevent corruption such as bribes, and which describe Sharp’s system for preventing bribery (see below). Under the Rules, Sharp is working to clarify and strengthen an internal checking system and prevent any act of bribery. In order to amend or abolish the Rules, in principle, a proposal must be submitted to the Executive Management Meeting, which is chaired by the CEO and comprised of executive officers.

Systems and Rules for Preventing Bribery and Other Forms of Corruption

Sharp has established a clear and effective system for preventing bribery with regard to the offering of entertainment, gifts or invitations to government officials and others, the providing of entertainment or gifts to executives and staff in private businesses, the use of agents, consultants and other third parties (hereinafter “third parties, such as agents”), or the leveraging of memberships in organizations. This system includes an internal approval process that uses a checklist covering all points that should be confirmed in advance by the relevant departments. In addition, Sharp has established prohibitions and determination criteria for each of the following.

1. Offering entertainment, gifts, or invitations to government officials and others

The Rules for Prohibition of Bribery specify the maximum amounts, and prohibited matters, for offering entertainment, gifts, or invitations to public officials and others. The rules define “facilitation payments” as “small payments to government officials and others for the sole purpose of speeding up routine administrative procedures.” The rules clearly state that these payments are considered a form of bribery and are prohibited in principle.

2. Using third parties, such as agents

The Rules for Prohibition of Bribery stipulate that the use of third parties, such as agents, is permitted only when there is a reasonable basis from which to confirm that remuneration and other payments to these third parties are not likely to constitute bribery. In addition, in Sharp’s contracts with third parties, such as agents, they are required to comply with Sharp’s prohibition of bribery as well as the anti-corruption laws of each country, and Sharp carefully monitors these third parties to ensure that they do not engage in any acts of bribery.

Working with Business Partners

We only deal with business partners who agree to abide by our Basic Purchasing Principles, which were created to prevent things like bribes and unfair actions.

We also ensure that our business partners abide by the Sharp Supply-Chain CSR Deployment Guidebook, aimed at preventing inappropriate profits.

Working with Overseas Affiliates

Sharp’s overseas affiliates also follow the Sharp Group Compliance Guidebook and the Sharp Code of Conduct, which stipulate rules that employees must abide by, such as avoiding bribery and other corrupt actions.

In order to ascertain the risk of bribery and corruption among overseas affiliates and institute a more effective checking system, Sharp has investigated and analyzed risks at overseas affiliates. Based on the results, Sharp has proceeded to update its overseas affiliates’ internal rules of anti-bribery and introduce to overseas affiliates the bribery risk management processes utilized at Sharp in Japan, depending on the level and type of risk at each overseas affiliate.

Raising Awareness within the Sharp Group

To raise awareness among Sharp Group employees in Japan and overseas, Sharp has created and published an in-house guidebook and training materials, which give information on anti-corruption and anti-bribery laws and describe real world examples. Sharp also conducts annual in-house training related to preventing bribery and other corrupt actions.

Sharp’s intranet for affiliates in Japan and its global intranet for overseas affiliates periodically feature articles on bribery and corruption in Japanese, English, and Chinese. These articles present bribery- and corruption-related cases and analyze and explain related issues. The aim is to deepen understanding and raise awareness of bribery among employees of affiliates in Japan and overseas.

As a result of these efforts, there were no violations of any bribery-related rules in fiscal 2023.

Dealing Properly with Donations

In Japan, Sharp prevents illegal payoffs and improper expenditures through a system of reviews that check legality, reasonableness, and transparency. In place since December 2008, this system serves to assess the propriety of monetary disbursements such as donations and contributions made by Sharp Corporation and its affiliated companies. In fiscal 2022, 12 cases of contributions were reviewed.

The Sharp Code of Conduct states, “Regarding political donations, we will observe all applicable laws and regulations and we will ensure transparency and proceed in strict conformance with internal company rules when making such donations in line with the company policy to build a healthy and responsible relationship with politics and government.” Based on this policy, any political donations abide by relevant laws and follow the necessary internal procedures.

Exclusion of Antisocial Forces

Basic Policy

As a matter of basic policy, Sharp prevents or excludes any association with antisocial forces without exception, and deals with them in a resolute manner. It has established specific guidelines in the Sharp Group Charter of Corporate Behavior under the section entitled “Practice of Fair and Open Management,” as well as clearly stipulated in the Sharp Code of Conduct that Sharp shall seek to exclude antisocial forces by being “cooperative in the maintenance of social order, and will not engage in antisocial activity.”

Activities Aimed at Excluding Antisocial Forces

Sharp Corporation has established Rules for Excluding Antisocial Forces, which serve as the basis for Sharp’s effort to prevent antisocial transactions, as well as Sharp’s preparation and updating, as needed, of such resources as manuals for dealing with antisocial forces.

In order to facilitate its handling of antisocial forces, Sharp maintains a system of prompt communication and cooperation with the police, legal advisors, and other external experts, from whom it regularly obtains information, which is then thoroughly disseminated and managed amongst the Sharp Group. Sharp also works to raise employee awareness by conducting once-a-year compliance training, which includes how to deal with antisocial forces.

In addition, Sharp Corporation and its affiliated companies in Japan take other steps to exclude antisocial forces, such as including a stipulation of antisocial forces exclusion in all basic agreements for ongoing transactions and concluding memorandums containing the equivalent stipulation with existing suppliers.

Management of Personal Information

Companywide Policy

The Sharp Group Charter of Corporate Behavior and the Sharp Code of Conduct clearly state the principles and standards of conduct to be followed to ensure strict management of the personal information of customers, business partners, employees, and others held by the Sharp Group.

With regard to the handling of the personal information of customers and business partners held by the Sharp Group, the Group has announced its “Privacy policies” and “Privacy notice for business partners.” For each of Sharp’s services that handle customer personal information, the company has formulated and announced its privacy policies.

Personal Information Protection System and Regulations

Sharp has appointed a chief information officer (CIO) and chief privacy officer (CPO). The CIO, who is responsible for overall information management across the company, oversees the information management department, responding to any issues that arise regarding information management across the company and promoting information management. In addition, the CIO appoints information managers in each business unit and affiliated company to implement measures related to information management.

Meanwhile, the CPO, who is responsible for personal information protection across the company, oversees the Personal Information Protection Team to promote measures related to personal information protection. In addition, the CPO appoints managers in each business unit and affiliated company to implement measures related to personal information protection.

As part of Sharp’s efforts to protect personal information, it has established internal rules and guidelines regarding personal information protection, as well as prepared a guidebook explaining these rules and guidelines, and is working to ensure that these are thoroughly disseminated throughout the Group. Sharp’s internal rules and guidebooks are updated as necessary when relevant laws and regulations are enacted or amended.

To ensure the effectiveness of Sharp’s efforts to protect personal information, processes that require approval from the department specialized in personal information protection (for customer personal information this is the legal department, for employee personal information this is the HR department) are incorporated into Sharp’s internal approval system regarding the handling of personal information. This contributes to consistently appropriate management of personal information obtainment, sub-processing, and provision to third parties by relevant departments. Also, following approval, the handling status—e.g., obtainment, storage, management, usage, deletion—of each customer’s personal information is to be recorded in Sharp’s own management database and updated as needed so that it can be checked and reviewed by the legal department on an ongoing basis.

In addition, the Personal Information Protection Team takes the lead in using the management system to conduct audits of all departments that acquire customer personal information to check whether the information is handled in accordance with the contents of the database for registration. For specific departments that require stricter management, on-site audits are also conducted to ensure thorough management.

Working with Business Partners

When personal information held by the Sharp Group is provided to a business partner, the Sharp Group requires that the business partner handle the personal information appropriately and strive to ensure strict management of such information in accordance with the circumstances of the specific transaction being undertaken. This is done through the stipulation of various matters in the agreement concluded with the business partner, such as prohibitions on taking actions that would identify individuals or on using the information for purposes other than those intended and stipulation of the terms of data use.

Working with Overseas Affiliates

Data protection has become an increasingly important issue around the world. Sharp has been sharing information with its overseas subsidiaries as part of periodic group-wide fact-finding surveys and risk analysis on the various areas related to the acquisition and processing of personal information in the EU and other overseas regions. Based on findings, the company has been taking measures that include providing appropriate advance notice of personal data to be handled, concluding agreements that set forth necessary conditions, and putting in place internal rules required for proper handling of personal data. Sharp is also raising awareness among employees by periodically issuing information about the enactment of—and amendments to—laws and regulations on global protection of personal information. Along with that, Sharp shares examples of financial penalties for breaches of these laws and regulations. This information is posted on the company intranet for all employees to see.

Raising Awareness within the Sharp Group

To ensure that personal information is appropriately managed and to prevent incidents of data leakage, Sharp provides regular compliance training (including e-learning). In addition, individual training sessions are held for employees who handle personal information as part of their job duties.

Appropriate Advertising and Promotion, Representation-Related Law Compliance

Under its business creed of “Sincerity and Creativity,” Sharp strives to reliably fulfill its corporate social responsibilities to customers and all stakeholders in the provision of correct information useful for selecting products and services. To this end, Sharp prioritizes appropriate advertising and promotion activities. It also complies with product and service representation-related laws, such as the Act against Unjustifiable Premiums and Misleading Representations, Pharmaceutical and Medical Device Act*1, and Fair Competition Code. Sharp positions compliance with these laws as a control item within its Rules of Business Risk Management, and implements various measures to promote compliance.

Systems and Rules for Preventing Legal Violations

With regard to product and service representation within Japan, Sharp follows internal rules (listed below), which stipulate the basic approach to representation and a system for checking appropriate representations.

Also, overseas, Sharp follows local laws along with the Fair Expression Guidelines, which have been developed based on the same thinking utilized in Japan, in order to facilitate appropriate decision-making.

• Act on Securing Quality, Efficacy, and Safety of Products Including Pharmaceuticals and Medical Devices.
• Voluntary industry standards formulated by the Home Electric Appliances Fair Trade Conference and recognized by the Consumer Affairs Agency and Japan Fair Trade Commission.
• Home Electric Appliances Fair Trade Conference, Japan Advertising Review Organization (JARO), others.

Representation Review Framework

Awareness Activities Boost Knowledge for Relevant Personnel

Awareness activities are held for employees in departments involved in the production of representations.　

In fiscal 2023, there were no violations of the Premiums and Representations Act or the Pharmaceutical and Medical Device Act by the Sharp Group.

Sharp will continue to work to ensure there are zero violations in fiscal 2024.

Adapting to Stricter Laws and Regulations

In response to the stealth marketing regulations that came into effect in Japan in October 2023, Sharp has, in addition to issuing a company-wide caution notice, sought to ascertain the status of implementation of promotional measures that use social media and to provide individual guidance to the relevant departments on important points to note.

Sharp is also gathering information in relation to the revised Premiums and Representations Act (including direct punishment provisions), which is scheduled to come into effect in 2024.

Tax Management Initiatives

Tax Policy

Sharp demonstrates sincerity and creativity in its pursuit of sound business activities, in the process fulfilling its responsibilities as a member of society. A basic policy of the Sharp Group Charter of Corporate Behavior and Sharp Code of Conduct is the “Practice of fair and open management” in all corporate activities and operations, conforming to the laws and regulations of each country and region, international rules and company rules, as well as social norms and corporate ethics. Based on this basic policy, Sharp works to maintain and improve its compliance with tax laws and other tax-related regulations through proper payment of taxes and employee education.

Tax Governance System

The general manager of the Finance and Administration Office oversees tax obligations for the Sharp Group as a whole. In line with Sharp’s global tax policy, group companies have a responsibility to understand and comply with the relevant tax laws and regulations that apply to their operations. The Accounting Department in the Finance and Administration Office supports group companies and handles overall tax-related duties for the Sharp Group to reduce tax-related risk.

When faced with a tax-related issue, Sharp works together with relevant affiliated companies in Japan and overseas and, when necessary, seeks advice from tax professionals in order to address the issue. When the issue is deemed to be one of significant importance, it is reported to top management who then decide on a course of action.

Proper Payment of Taxes

Legal and regulatory compliance is Sharp’s top priority, endeavoring to fulfill all fair and appropriate tax obligations. When filing tax returns, we do not seek to evade the legislative intent of the tax system nor engage in tax avoidance in violation of international tax rules. Sharp endeavors to appropriately meet its tax obligations while making use of preferential tax measures available to it as part of normal business operations.

In fiscal 2022, Sharp recorded 15.7 billion yen* (Japan: 34%, overseas: 66%) in corporate income tax.

• Based on Country-by-Country Report submitted to the tax authority.

Compliance with Transfer Pricing Rules

Regarding transactions with parties related to the Sharp Group, appropriate pricing is established based on the arm’s-length principle, in line with OECD (Organisation for Economic Co-operation and Development) transfer pricing guidelines and in accordance with each company’s functions and risks. Sharp also draws up transfer pricing documentation based on the laws and regulations of each country. Also, for important transactions, Sharp takes steps, such as actively working with tax authorities to make use of APAs (Advance Pricing Arrangements), to reduce tax-related uncertainty, and to prevent double taxation.

Relationship with Tax Authorities

In order to maintain good relations with tax authorities, Sharp endeavors to be diligent and responsive to the requests of tax authorities in each country, such as by providing them with information in an appropriate and timely manner. Whenever tax authorities raise questions about Sharp’s filing and payment of taxes, Sharp examines the validity of their claims and, if it has an objection, may opt to formally file a petition against the tax authority with regard to the matter. However, if any corrective action is required, such action will be promptly implemented.