Corporate Governance

* As of August 12, 2020

1. Basic Views

The basic policy of corporate governance of the Company is to secure the legality, transparency and agility of corporate management and improve the management efficiency in order to earn the trust of society and improve corporate value in the medium and long terms.

2. Implementation status

The Company has a “Board of Directors” and “Audit & Supervisory Board” in place. The Company also has a system of executive officers in place to clarify the function of making a decision and supervising business management and the function of executing business, and to promote agile and efficient business management while keeping an adequate number of directors and shortening their term of office.
The Board of Directors currently consists of 11 members (of those, four are outside directors) and holds a meeting each month in principle and as required. The Board of Directors passes a resolution for important matters based on the Rules for the Board of Directors as well as matters stipulated by laws and the Articles of Incorporation, and supervises the directors’ performance of their duties.
The term of directors is one year with specified management responsibility. Outside directors provide useful advice and opinions from an independent perspective while outside audit & supervisory board members provide useful advice and opinions from an objective and professional perspective by attending board meetings. As such, they try to fulfill the roles expected of outside officers.
The Board of Directors improves the efficiency of business management and secures the legality and validity of business execution by making important decisions on business execution and supervising the performance of duties by directors.
The Company signed a limited liability agreement for liability stipulated by Paragraph 1, Article 423 of the Companies Act with four outside directors which limits liability for damages to the total amount stipulated by each item of Paragraph 1, Article 425 of the Act when they perform their duties in good faith and free of gross negligence.

The Audit & Supervisory Board currently consists of five members (of those, three are outside audit & supervisory board members) and holds a meeting each month in principle and on an ad hoc basis. The Audit & Supervisory Board supervises the directors’ execution of their duties by reporting audit results to the Board of Directors.
In addition, to have full discussions on important matters for business management and expedite decision-making on allocation of management resources, the Company has established the Management Council which consists of the President and Director, the Director and Executive Vice President, Chief Executive Officers of Headquarters, and directors excluding outside directors. In addition, to promote development and management of the internal control system of the Company and the Group in a cross-sectoral manner, the Company established the Internal Control Committee which consists of the Chairman and Director, the President and Director, the Director and Executive Vice President, Officer in Charge of Compliance, Chief Executive Officers of Headquarters and the relevant General Managers. The Committee discusses development of an internal control system of the Group and revision/abolition of the basic policy for internal control system based on the status of its development, passes a resolution for revision/abolition of the rules for escalation to the Board of Directors, for the Internal Control Committee as well as organizations for compliance promotion and risk management of the Group and for compliance and risk management of the Company, passes a resolution for annual activities for compliance and risk management of the Company and reports to the Board of Directors.
As an optional advisory body to the Board of Directors, the Company established the Nomination and Remuneration Committee which consists of Representative Directors, the Chairman and Director, the President and Director, the Director and Executive Vice President, and outside directors. The Committee discusses appointment, reappointment and dismissal of directors, audit & supervisory board members, and executive officers of the Company and its subsidiaries, recommendations to the Board of Directors (however, appointment and reappointment of audit & supervisory board members requires approval of the Audit & Supervisory Board) and remuneration of directors and executive officers of the Company and its subsidiaries, and reviews the policy and the progress of the plan for successor of the Director and CEO formulated by Director and CEO.
Furthermore, as an optional advisory body to the Board of Directors, the Company established the Advisory Council which consists of Representative Directors, outside directors and outside audit & supervisory board members. The Council contributes to vitalization of the Board of Directors by reviewing the compositional balance of the overall Board of Directors, analyzing and evaluating the effectiveness and checking the policy for training of directors/audit & supervisory board members as well as provision of information.

In addition, audit & supervisory board members, accounting auditors and the Internal Audit Office work together to enhance corporate governance by conducting an effective audit.

  1. (1)Audit & Supervisory Board Members
    There are currently five audit & supervisory board members at the Company (of those, three are outside audit & supervisory board members). They monitor the status of corporate governance, attend board meetings and other important meetings, review important requests for approval and visit offices according to an audit policy/plan determined by the Audit & Supervisory Board. They also collaborate with accounting auditors and the Internal Audit Department to audit the performance of duties by directors in an effective audit. For subsidiaries, they exchange information and cooperate with directors and audit & supervisory board members thereof at a meeting of the Group Management Council and the Group Audit & Supervisory Board. Outside audit & supervisory board members including one lawyer obtain and provide information and work to monitor operations from an independent perspective. On the other hand, full-time audit & supervisory board members monitor operations based on their abundant knowledge and experience at the Company and enhance the effectiveness of audits from their respective position.
    The Company signed a limited liability agreement for liability stipulated by Paragraph 1, Article 423 of the Companies Act with three outside audit & supervisory board members which limits liability for damages to the total amount stipulated by each item of Paragraph 1, Article 425 of the Act when they perform duties in good faith and free of gross negligence.
  2. (2)Internal Audit
    For internal audits, the Company established the Internal Audit Office (six staff) under direct control of the President and it conducts an operational audit on the adequacy and efficiency of business operations based on a plan from an independent perspective according to the Rules for Internal Audit. For subsidiaries, the Office exchanges information as required. The Internal Audit Office checks the status of required measures and improvements while reporting audit results to President and Representative Director, COO. The Office evaluates the status of internal control over financial reporting of the Company and important consolidated subsidiaries. The Office also works with audit & supervisory board members and accounting auditors to ensure an effective internal audit is conducted.
  3. (3)Accounting Auditors
    The certified public accountants who are executing accounting audit work of the Company are Mr. Atsuki Kanezuka and Mr. Junichi Kimura and they are affiliated with KPMG AZSA LLC. The number of years of continuous auditing amount to three years for Mr. Kanezuka and four years for Mr. Kimura. In addition, they have six certified public accountants as their assistants plus six other assistants.
    In selecting an audit firm, the Company considers a quality management system, independence and expertise as an accounting auditor in a comprehensive manner.
    When it is considered difficult for the accounting auditor to conduct a proper audit, the Audit & Supervisory Board shall submit a proposal for dismissal or non-reappointment of the accounting auditor to a shareholders’ meeting. When any of the reasons described in each item of Paragraph 1, Article 340 of the Companies Act applies to the accounting auditor, the Audit & Supervisory Board shall dismiss the accounting auditor with the consent of all audit & supervisory board members.
    Furthermore, as part of the procedures to reappoint the accounting auditor, the Audit & Supervisory Board receives reports from KPMG AZSA LLC on its quality management system, audit plan and overview of audit status and interviews a department in charge on its assessment of the auditor to ensure that the firm properly conducts an audit.

3. Reasons for Adoption the current corporate governance system

Currently, four out of eleven directors of the Company are outside directors. Based on their abundant experience and knowledge, the outside directors perform the function of offering advice and supervising business management from an independent and objective perspective. In addition, three out of five audit & supervisory board members are outside audit & supervisory board members. Each outside audit & supervisory board member conducts a highly effective audit from an independent and objective perspective. The Company believes the current function to monitor and supervise business management is fully performed by these outside directors and outside audit & supervisory board members.

Company Corporate Governance Structure