Bridgestone Releases Report on Improper Payments Investigation

Since disclosing on February 12 this year incidents of improper monetary payments to foreign agents, all or a part of which may have been provided to foreign governmental officials, the CEO of Bridgestone Corporation, Mr. Shush Arakawa, has directed an ongoing investigation through an ‘Investigation Committee (the ‘committee’) comprised of external attorneys. On the three-month anniversary of the committee’s initial establishment, the company presented its interim report, which is outlined below:

1. Investigation

Since the announcement on February 12, the committee has conducted the investigation ‘vigorously’, says Bridgestone. However, the scope of this investigation is extensive and includes some of the company’s overseas subsidiaries. The subject of the investigation has now expanded to the entirety of Bridgestone’s Industrial Products division. Moreover, since the committee needs to consider not only Japan’s Unfair Competition Act but also the regulations of other countries, this latest report remains an interim report and has not been made final.

In the course of the investigation, the committee has discovered more “questionable incidents”, state Bridgestone. There have been some cases where further investigations were required and cases where suspicions were cleared up. However, Bridgestone notes that the investigation is still ongoing and sufficient evidence to amend the number of incidents and the amount of improper payments reported previously has not been confirmed. The committee has pointed out that both the number of incidents and the amount of improper payments are likely to increase, especially as suspicious transactions have been found in other products as well as in other regions.

At the same time, Bridgestone has worked in cooperation with the relevant authorities, reporting the results of its investigation to the US Department of Justice and the Japanese Public Prosecutor’s Office. The company says it will continue to report on cartel issues pertaining to marine hose in connection with the current investigation as appropriate. As to agents where suspicions of improper activity has been identified, Bridgestone is in the process of terminating or, where appropriate, reforming our relationships with these agents, to establish new sales channels that comply with company policies and applicable laws.

2. Preventative Measures

Bridgestone reports it has also acted swiftly to adopt preventative measures regarding the making of improper payments, as announced on February 12 and detailed below:

(1) Withdrawal from Marine Hose Business

The company established a Marine Hose Business Withdrawal Project Team. The function of this team is to assist with the withdrawal from the marine hose business, and also answer customer queries. Bridgestone reports it is also carefully considering the potential harm that may be caused to customers and society as a result of the withdrawal.

(2) Provision of Comprehensive Compliance Training

Training and seminars focusing on compliance related to the present issue and competition laws have been provided by the company, and high priority has been given to issues such as the export of Industrial Products. Bridgestone is planning to provide such training to all relevant employees including those at its subsidiaries. In addition, the company has held seminars for top management and will continue to hold them in the future as the leadership of top management is required to prevent a re-occurrence of the same problem.

(3) Strengthening Measures against Improper Acts

Bridgestone has reviewed its internal Retail Sales Calculation System, and set up a system that prevents the sales team from solely determining sales prices. It has also strengthened the ability of its head office to monitor the commission payments made to agents by sales subsidiaries in issue. Furthermore, the company has tightened its head office’s surveillance of agents who have business relationships with subsidiaries, and are reviewing the businesses.

(4) Corporate-wide Organisational Change and Tightening of Internal Controls

Bridgestone’s International Engineered Products Department (“IEPD”), which was in issue, has been dissolved. The business operations of the Chemical and Industrial Products Division have also been consolidated. In addition, the company has reinforced its management and audit system by establishing an Industrial Products and Construction Materials Business Administration Department and a CSR and Audit Unit. These will serve as internal mechanisms to strengthen the administrative, human resources and audit systems within each division and strengthen the management audit framework. Furthermore, the company has appointed a vice president and senior officer who is responsible for the diversified products business and for providing strengthened control over the Chemical and Industrial Products Division.

Bridgestone believes it needs to continue the investigation by the committee. Results of the committee’s investigation will be collected and the company states it will make fresh announcements when new important discoveries are reported. Bridgestone will, furthermore, continue to fully cooperate with and report results from its committee’s investigations to the relevant authorities.