CSR

CORPORATE SOCIAL RESPONSIBILITYCompliance Program

Through the Global Compliance Program, SK hynix is demonstrating to society, the market and government its will to pursue fair competition based on on-going education, management and voluntary audits in order to observe related laws and regulations.
The Global Compliance Program was designed considering the particularity of the semi-conductor industry based on related laws of the countries where the company is doing business, international regulations and customers’ demands.

Compliance Declaration

SK hynix Semiconductor hereby declares that it will endeavor to put free and fair trade principles into practice and comply with both domestic and international fair trade laws and regulations.

  1. 01. The company will promote the fair trade practice as the highest value of corporate management and recognize it as true competitiveness.
  2. 02. The company does not engage in any unfair act in all areas of its business and business operations to establish order for fair trade, and cooperate with its business partners on a true partnership basis.
  3. 03. The company keeps training the entire employees, so that they will comply with the fair trade laws and regulations.
  4. 04. The company appoints a manager responsible for compliance with the fair trade laws and regulations ensuring compliance.
  5. 05. The company operates a voluntary compliance system to prevent any violation and punish the violation of its own accord.

Summary

In line with recent social trends that more strictly demand fair trade practices and prevention of corruption around the world, SK hynix has upgraded the existing compliance program and launched on its own initiative a new operating program, the Global ComplianceProgram, so that the company can observe and adhere to compliance-related international laws and regulations (anti-trust, anti-corruption, conflict minerals, strategic items, data protection, supply network management, etc.).

The Global Compliance Program demonstrates to our society, the market, and the government the willingness of SK hynix to implement fair competition practices through regular education, management, and internal audit in order to observe the related laws and regulations.
Our Global Compliance Program has been designed in consideration of the distinct characteristics of semiconductor industries and based upon the related laws and regulations of countries working with our company, international protocols, and requirements of customers.

Principle of Compliance Program Operation

Repeat the five-step process (Policy Making → Training → Audit → Correction → Report) by selecting major compliance risks and global standards established for world-class companies.

Principle of Compliance Program Operation

Internal Sanctions

1. Sanctions applied by each country for violation of anti-trust law

Classification Corporation Private Person
Fine Penalty Imprisonment Penalty
U.S.A. Less than US$ 100 mil. or twice the amount of the profit (loss) 10 years or less US$ 1mil.
Korea Within 10% of related sales 3 years or shorter 200 million won or less
EU Within 30% of sales, basic fines increase by 100% whenever a cartel period is extended a year
Japan 5 years or shorter Executives 5 billion Jpn ¥ or less
Workers 5 million Jpn ¥ or less
China 1-10% of sales

* Ban on sales, personnel disciplinary action, losses affecting incentives, stock options or bonuses, or losses related to other financial compensation

2. Sanctions applied by each country for violation of anti-trust law

  • Government investigation of related companies and civil and criminal punishment
  • Regarding individuals; personnel disciplinary actions, investigation by government agencies, punishment including fines and criminal charges
  • Losses related to other financial compensation, including individual performance-based pay, stock option and bonus
  • Lawsuits for dividends, class actions for stock trade
  • Lawsuits based on related contracts

3. Sanctions for violation of international laws and guidelines related to disputed minerals

  • Severance of relations with customers, contract termination, lawsuits among others
  • Possibility of pressure from institutions such as EICC regarding the electronics industry, NGOs, human rights activists, consumers and markets

4. Sanctions for violation of laws related to strategic materials

  • Criminal or civil punishments for related companies or executives and workers
  • Ban on imports from and exports to the United States, participation in supplies to the United States government, technical cooperation, financial aid, providing services, conducting activities in the United States, all business transactions by persons and companies located in the States with violators in and out of the States, transactions of U.S.-made materials and techniques by foreigners and foreign companies not located in the States with violating companies, and refusal of related persons’ entrance to the States
  • All persons, employees, executives and directors related to violation can be punished.
  • Losses related to other financial compensation, including performance-based pay, stock option and bonus

Incentives for the CP

The Fair Trade Commission formulated the Rule for Operating the Compliance Program & Granting Incentives enabling to increase or decrease the sanctions depending on the grade of the compliance program evaluation ("CP grade") in the event of violating the Fair Trading Act.

CP Grade
(grade evaluation A or higher)
Level of Reduction
Ex officio investigation exemption Correction order announcement reduction
A grade 1year
  • Publication announcement : Lower the amount of announcements and the number of media by one step
  • Company or electronic media announcement: The announcement period reduced additionally
AA grade 1 and half years
AAA grade 2year

Reasons for excluding application of “ex officio investigation”

1. Cases of being punished for preventing investigation activities for the past two years
2. When reporting of violation of laws for ex officio investigation (including Internet reporting) or civil appeals are considerably reliable
3. When it is admitted that there is violation of laws about ex officio investigation

Reasons for excluding application of “correction order announcement reduction”

4. When persons in charge of CP are involved in violation
5. When violations were made before introduction of CP
6. When reduction is a requisition in other regulations
7. Cases of unfair joint actions
8. When directors or higher executives of violating companies (all of registered and non-registered people) are directly involved in violations
9. When violating companies have five points or more of accumulated black points for violating regulations for fair trade three times or more for three years

CP Grades Lowered for Violating the Law

When companies that have introduced CP have violated the law, their grades will be lowered by two steps maximum in time of ‘grade assessment’, and the determined grades will be lowered by two steps uniformly for violating the law after ‘grade assessment.’

Related regulations

Regulations for operation of the Global Compliance Program and cause granting
(Fair Trade Commission Notification No. 2010-2, 2010.3.17)

V. Causes

1. Posteriori causes
A. To impose fines under [Notification for subcriteria about fine imposition]
B. To announce fact of receiving correction orders under [Operation guidelines for announcement of fact of receiving correction orders from Fair Trade Commission]

2. A Priori causes
Ex officio investigation by the Fair Trade Commission

Seven major constituents of the CP

  1. 01.Determination declared by the management to observe the compliance program

    The top management should emphasize the importance of observing provisions of the Fair Trade Act forming part of corporate management and encourage the employees to comply with it.
  2. 02.Appointing the manager for the compliance program and its operation

    The manager should be the one with authority enabling him to effectively implement the compliance program and be appointed by the board of directors.
  1. 03.Publishing and distributing a handbook for the compliance program

    The handbook is intended for distribution to the executives and staff members, which contains the Fair Trade Act and relevant precedents, examples and questions & answers.
  2. 04.Operating the training program

    On-and-off-line education should be provided to the executives and staff members working in an area likely to cause violation of the fair trade laws and regulations for more than 2 hours in every six months.
  1. 05.Constructing the internal supervision system

    Prior consultation by the CP manager should be institutionalized into the right of this Manager, so that any acts by the employees likely to cause violation of the Fair Trade Act can be referred to the Manger for consultation. Also an internal audit system performing the audit, reviewing and reporting should be installed to monitor the violation of the provisions.
  2. 06.Punishments for the employees violating the provisions

    Those violating the provisions should be punished promptly and appropriately to create a law-abiding environment within the company.
  1. 07.Constructing the document control system

    Documents such as a letter of appointment, compliance declaration, reports to the Fair Trade Commission and other submittals should be systematically kept and maintained in an orderly manner.

Implementation stages for the CP

Step01
  • CEO's declaration ensuring the implementation of the compliance program
  • Formulating the company rules for the compliance program
  • Appointing the Compliance Program Manager
  • Entrusting the Manager with appropriate authority and responsibility
  • Constructing an internal control system
Step02
  • Publishing a manual and a guidebook
  • Providing education on compliance with the Fair Trade Act
  • Monitoring compliance with the Fair Trade Act
  • Punishment of those violating the law
Step03
  • Controlling the documents effectively/systematicall
  • Evaluating the the program operation outcome
  • Improving the procedures and the system
  • Cooperation with the authorities

Implementation Overview

More

Manual

  1. Vol. 01 Fair Trade Act

    It describes each and every act prescribed in the monopoly regulation and fair trade act.

  2. Vol. 02 Anti-trust Law of USA and EU

    Outlined laws and regulations related to anti-trust in USA and EU.

  1. Vol. 03 Extraterritorial application of the law, procedures for resolving fair trade cases.

    It explains the meaning of the fair trade act and procedures for resolving the cases by the competition authorities in the U.S.A. and EU.

  2. Vol. 04 Fubcontract Act

    It describes unfair trade acts likely to occur in connection with the subcontracted business in such areas as service, contract work or outsourcing.

Monitoring and Organization

Our compliance checking system is composed of pre-checking, ex post facto checking and the monitoring.
Executives and staff members are required to familiarize themselves with the items on the check by interfacing with the system for the compliance program before proceeding with the task likely to cause violation of the Fair Trade Act. By doing this it is possible to prevent the violation in advance and detect the violation at an early stage.

Process for pre-checking and ex post facto checking

Monitoring Methods

  1. 1. Establishing the monitoring system

    • Pre-supervision : Preventing violation by checking the operation in advance as to its violation feasibility
    • Audit : Examining the business operations to detect the act violating the competition law at an early stage for rectification
    • Reporting : Reporting to CEO and the board of directors on the violations committed by executives and staff members and related information
  2. 2. Type of Monitoring

    • Scheduled monitoring : Global Compliance Team shall report the monitoring results to compliance assistant, CEO and board of directors.
    • Unscheduled monitoring : Implement monitoring at the appropriate time according to the instruction of compliance assistant.
  3. 3. Monitoring Procedures

    • Setting up a yearly monitoring plan : The Global Compliance Team makes an annual monitoring plan for the following year until December every year.
    • Setting up a monitoring team : The Global Compliance Team is made up of its members in principle. The team includes related departments of the company and outside experts if necessary.
    • Performing the monitoring : Monitoring is done complying with the company rules.
  4. 4. Monitoring Results

    • Violators will be punished depending on the severity of violation
    • Reward : Those reporting the violation or those executives and staff members of excellent performance will be given a reward.