National Public Service Ethics Act and Ethics Code

1. National Public Service Ethics Act and Ethics Code ～Background, Regulation and Lessons～ Akira Yamamoto Counselor, Secretariat of the National Public Service Ethics Board (NPSEB)

2. Ⅰ. Background (The problems which should be addressed) • Anti-corruption regulations varies greatly by country for different cultural and social environment. • In order to understand well Japanese anti-corruption system, it is important to understand the background. Ⅱ.Ethics Act & Ethics Code • Code of Conduct • Disciplinary Standards for Violations • Reporting System Ⅲ.Lessons Learned from Real Cases • Proactive Measures to Prevent Recurrence • Compatibility with Administrative Objective • Responding to Bad Habits

3. Ⅰ. Background 1. Anti-Corruption regulation (Before 2000) (1) Anti-corruption regulations Criminal Law Acceptance of bribes (Article 197) A public officer or arbitrator who accepts, solicits or promises to accept a bribe in connection with his/her duties shall be punished by imprisonment with work for not more than 5 years; and when the official agrees to perform an act in response to a request, imprisonment with work for not more than 7 years shall be imposed. Giving of bribes (Article 198) A person who gives, offers or promises to give a bribe provided for in Articles 197 through 197-4 shall be punished by imprisonment with work for not more than 3 years or a fine of not more than 2,500,000 yen.

4. (2) General regulations(Administrative sanctions) Disciplinary Actions (National Public Service Act) Administrative sanction regulated in the National Public Service act. They are dismissal, suspension, pay reduction or admonition. The effects of each disciplinary actions are also regulated. • Obligation to Obey Laws and Regulations and Orders of Superiors(98) • Prohibition of Acts Causing Discredit(99) • Obligation to Preserve Secrecy(100) • Obligation to Give Undivided Attention to Duty(101) • Restriction on Political Acts(102) • Exclusion from Private Enterprise(103) • Restriction on Participation in Other Undertaking or Business(104) Corrective Actions Administrative sanction for maintenance of order within the organization, regulated in each ministries. The standards and effects are differs among ministries.

5. 2. A series of Scandal Arrested: 0, Disciplinary: 0, Corrective: 2 2 Executive officers of the Ministry of Finance received excessive entertainment(food&drinks, etc.) from the ex-president of a bankrupt credit union and a management consultant (2) 1995 Arrested: 0, Disciplinary: 0, Corrective: 5 A series of executive officers of the Ministry of International Trade and Industries received excessive entertainment(food&drinks, golf, etc.) from the petroleum wholesaler. (5) 1996 Arrested: 2, Disciplinary: 11, Corrective: 0 A series of executive officers of the Ministry of Health and Welfare received excessive entertainment(food&drinks, golf, etc.) from the representative of social welfare corporation. (13) 1996 The Enactment of the Code of Ethics in each ministries and agencies. A series of executive officers of the Ministry of Finance received excessive entertainment(food&drinks, etc) from the representative of social welfare corporation. (116) Arrested: 4, Disciplinary: 32, Corrective: 80 1998 Total Arrested: 6, Disciplinary:43, Corrective: 87

6. 3. Characteristics of misconducts A series of executive officers Excessive entertainment Food & Drinks 1. No direct connection with his/her duties • The main purpose is to form and keep a long, smooth and deep relationship with executive officers through day-to-day treatment for the future benefits. Therefore, companies invested in a series of promising officers irrelevant to his/her current duties. 2. Excessive Treatment (Food and Drinks) • Suitable for the formation of a long, smooth and deep relationship with officers. • In Japanese society including private sector, treatment has been widely used to build relationships and “man-to-man” exchange of views. Food and drinks are considered just as a tool or ornament to encourage discussion. (Japanese culture) 3. Start small, but greatly expanded • At the beginning, the treatment could be considered within a rage of social ritual. But, over time, it had become too excessive.

7. 4. Cultural and Mental Background (Personal opinion of lecturer) • It would be rude to invite executives without food and drinks. • With over drinks, we can talk frankly. • In Japanese society including private sector, treatment has been widely used to build relationships and “man-to-man” exchange of views. Food and drinks are considered just as a tool or ornament to encourage discussion. (Japanese culture) • They are accused because the treatment which they received is excessive. In other words, Receiving ordinary treatment was OK. • Sending gifts is a part of culture • A culture to send gifts to seniors or superiors as a token of gratitude twice a year. • The private companies also send gifts to counterparties. • Everyone does, why not I? • A series of executive officers receive entertainment. It won’t be a problem if I do. • Wrong and Distorted Elitism • Private companies provide entertainment to promising officers. It means that the officers who receive entertainment are promising. A kind of benefit for my ability. • I do not request. They voluntarily offer entertainment. Maybe they have a value in the talk of knowledgeable and highly capable person like me. Justification of receiving entertainment. • The number of times of receiving entertainment is a kind of indicator of the height of his/her popularity, ability or social status. Sense of Ethics has been paralyzed.

8. 5. Limit of Criminal Law Acceptance of bribes (Article 197) A public officer or arbitrator who accepts, solicits or promises to accept a bribein connection with his/her duties shall be punished by imprisonment with work for not more than 5 years; and when the official agrees to perform an act in response to a request, imprisonment with work for not more than 7 years shall be imposed. Bribes includes any kind of benefits including food and drink. But , in case of food and drink ,it is not easy to tell the difference between the benefit and just courtesy in Japanese culture. 2. Excessive Treatment (Food and Drinks) Proof 1. No direct connection with his/her duties Relevance to duties It is required that the bribe must be related to his/her duties. 1. No direct connection with his/her duties 3. Start small, but greatly expanded It is required that the officer must recognize the such benefit is a bribe (a consideration for certain requests). Recognition Need of New Regulation 1. No direct connection with his/her duties Characteristics 2. Excessive Treatment (Food and Drinks) 3. Start small, but greatly expanded

9. Ⅱ.Ethics Act & Ethics Code Outline (1) Code of Conduct (prohibited act list) • The purpose is to cope with the activities which are not criminally illegal but not appropriate for a national public servant. • In order to be compatible with common sense or general practice, the range where corruption is highly likely to be supposed is classified as “interested parties”, and stringent restrictions are introduced there. • 5 years after the introduction of the ethics system, some amendments were made. (2) Reporting System • Prevention and detection are two main purposes of the reporting system. • Amount of information and efficiency: Too much information may inhibit efficiency. • Collecting minimal information sufficient for the purpose is the key.

10. 1. Code of Conduct (1) Interested parties • The business entities with high risk of adhesions for having direct interest to the job. • →Particularly stringent restrictions are applied. • - Judged objectively based on the job description. Permission, Authorization, etc. Contract Delivery ofsubsidy Assessment on budget, class fixed number and capacity Inspection, audit or supervision Interested Party Administration for developing, improving and adjusting business Disadvantageous action Administrative guidance

11. (2) Code of Conduct (original: FY2000~FY2004) Category A: Receiving Benefits from Interested Parties 1. Excessive Treatment (Food and Drinks) 3. Start small, but greatly expanded Receiving gifts, money, or any other benefits Being treated to dining and/or entertainment  Borrowing money Borrowing goods or receiving services for free, etc. Category B: Suspicious Activities with Interested Parties (although receiving no benefit) Playing golf together  Playing Mah-jongtogether Traveling together  Buying unlisted shares, etc Having Dinner together without the permission of the Secretary-General Having Dinner together without the permission of the Secretary-General Based on real cases Category C: Receiving Benefits from Non-Interested Parties Receiving benefits which exceed the extent approvable in the light of common sense 2. No direct connection with his/her duties Category D: Organizational Violation

12. (3) Code of Conduct (amended: FY2005~) Category A: Receiving Benefits from Interested Parties Category B: Suspicious Activities with Interested Parties (although receiving no benefit) Having Dinner together without the permission of the Secretary-General Category C: Receiving Benefits from Non-Interested Parties Category D: Organizational Violation Employees who knowingly received some of all of the profit obtained in violation of the Ethics Law or Code should be punished. Employees who make false statements about colleagues’ violation of code of conducts or hide it  Managers who tolerate violations of his/her subordinates

13. In addition to that Compatibility with Socially Approved Manners and Customs Establishment of the standard of sanctions Setting Some Exceptions • Introducing the standard of disciplinary actions for each violation. • Receiving generally and widely distributed advertising materials, tea and cookies in meeting, etc. • Attending buffet parties where openness and transparency is ensured. Uniform Criteria Publication of violations • All cases, in which employee is subject to disciplinary sanction, are published Uniform Criteria Administrative actions, but still effective • In case of dismissal, it is not possible to receive a retirement allowance. Administrative Action

14. (4) Disciplinary Standards for Violations The National Personnel Authority rules 22-1 (standards for disciplinary action in cases where orders based on the Ethics Act or equivalent laws have been violated) (e.g.) • Receiving money or gift from an interested party • · · · Dismissal, suspension, pay reduction or admonition • Receiving benefit in compensation for an act taken in line of official duty · · · Dismissal or suspension • Playing golf with an interested party · · · Admonition • Receiving expensive gifts from non-interested party· · · Pay reduction or admonition • Tolerating violations of his/her subordinate • · · · Suspension or pay reduction

15. (※) Effects of Disciplinary Sanctions Dismissal • Exclusion from public sector without Retirement Allowance • Leave without pay less than one year • Affect Promotion, End-of-Term Allowance and Diligence Allowance • Recorded on personal record Suspension • Reduction of salary less than 20% for less than one year • Affect Promotion and Diligence Allowance • Recorded on personal record Pay Reduction • Pursuit of responsibility • Affect Promotion and Diligence Allowance • Recorded on personal record Admonition + • Overview of the case • Disposal contents • Office and post of the disposed staff • Basically no name Publication of Cases

16. 2. Reporting System Staff dedicated to submit Frequency Report of Gift, Entertainment and Reward Deputy Director or above (about 30% of all staff) Each time Vice Director-General or above (about 3% of all staff) Once a year Report of Stock Dealings Vice Director-General or above (about 3% of all staff) Report of Income Once a year

17. Report of Gift, Entertainment and Reward • Content When receiving a donation, attend a reception, or obtain rewards for any labor, worth more than 5,000 JPY (equivalent to about 60 USD). • Staff dedicated to submit Deputy Director or above (about 30% of all staff) • Frequency Each time (deadline: ever 3 months)

18. Report of Stock Dealings • Content Stock dealings in the previous year • Staff dedicated to submit Vice Director-General or above (about 3% of all staff) • Frequency Categories - Stock certificates - Certificates of share options - Certificates of bond with share options -Others ( ) Once a year

19. Report of Income □ only employment income by the government (no need to fill the list below) • Content All incomes in the previous year • Staff dedicated to submit Vice Director-General or above (about 3% of all staff) • Frequency Once a year

20. Confirmation with each other Pressure Internet, investigation, etc Report from other participants

21. Ⅲ.Lessons Learned from Real Cases 1. Proactive Measures Basic Concept • Proactive measures must be based on the analysis of actual cases and situations Research & Investigation of actual cases Role of Central Body • Supporting ministries and agencies • Giving them appropriate incentives • Assisting in any difficulties they face Central Body(NPSEB) • Administration and coordination • Administration of investigation of ethics act violations • Approval of disciplinary actions on ethics Ministries and Agencies • Implementation of ethics policies for staff of each organization

22. Questionnaire to Offenders Response rate: 73% How often have you discussed ethics in meetings at your workplace? Did you have the recognition that the act you committedwould be a violation of the Code of Ethics or Ethics Act? If Yes, - Why did you dare to act so? - How did you recognize that you violated the rules? (the source of information) If No, - Do you remember that you have received ethics training? - Why did you not recognize that you violated the rules? 3. What additional information in the Code of Ethics and Ethics Actwould have prevented you from infringing the rules?

23. FINDING POINTS Based on the questionnaire to offenders& inspection in real cases Not enough opportunities to be aware of ethics in everyday life Increase opportunities 2. Despite participation in the training, offenders do not remember the contents More effective and attractive materials 3. Offenders often have no awareness that they have violated rules Promotion of understanding 4. Private companies (conflict of interest) have no sense of guilt Outreach to the private sector

24. Increase opportunities Ethics Training Rate (Rate: number of trainees in a year / number of staff) Number of Ministries and Agencies

25. Increase opportunities Ethics Training Rate (Rate: number of trainees in a year / number of staff) Number of staff Average 32% 66% 110%

26. More effective and attractive materials Reenactment Dramas on DVD E-learning Distribute to Ministries and Agencies

27. Promotion of understanding Booklets & Portable Cards Distribute to each staff FAQ and Case Studies on website

28. Outreach to the private sector Questionnaire to Private Companies • What seems to be an effective measure to promote the understanding of private companies inthe Code of Ethics and Ethics Act? Please choose a maximumof three from the following: • PR activities through mass media: 31% • Alert private companies through ministries and agencies with which they are actually in contact: 25% • PR activities through the Chamber of Commerce and Industry and other private sector organizations: 25% • Distribution of posters and pamphlets: 10% • Website: 7% • Articles on the PR magazine of the National Personnel Authority: 1% • Others: 1%

29. Outreach to the private sector Request for PR activities • Request to the Chamber of Commerce and Industry and other private sector organizations in each region for the PR activities of the Ethics Act to member companies (every year) Distribute pamphlets

30. Compatibility with Administrative Objective Original (2000～2004) Current (2005～) Staff Interested Party Prohibited Prohibited Treated Pay OK subject to the following condition Basically Prohibited Only admitted with prior approval of the Secretary-General Pay Pay In case of 10,000yen/person, prior report to the secretary General is required Pay Treated Negative Affect to Administrative Objectives

31. Responding to Bad Habits Ethics Violation Cases Bar in Taxi Improper Accounting Number of Staff Number of Cases 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 （FY）

32. Category D: Organizational Violation Employees who knowingly received some of all of the profit obtained in violation of the Ethics Law or Code should be punished. ・・・Dismissal, suspension, pay reduction or admonition Employees who make false statements about colleagues’ violation of code of conducts or hide it ・・・Suspension, pay reduction or admonition  Managers who tolerate violations of his/her subordinates ・・・Suspension or pay reduction