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Corporate ProfileCorporate GovernanceCorporate GovernanceCorporate Governance Report
Corporate Governance Report
Business Management Organization related to Decision-Making, Execution and Oversight; Other Corporate Governance Systems
1.Items related to Organizational Structure/Organizational Operations
| Organizational Format | Company with Designated Audit & Supervisory Board |
|---|
Members of the Board
| Number of Members of the Board per Articles of Incorporation | Unlimited |
|---|---|
| Members of the Board Term of Service per Articles of Incorporation | One year |
| Chairman of the Board of Directors | President |
| Number of Members of the Board | Ten |
| External Members of the Board Included? | Yes |
| Number of External Members of the Board | One |
| Number of External Members of the Board Designated as Independent Directors | One |
Relationship with the Company (1)
| Name | Affiliation | Relationship with the Company (*) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| a | b | c | d | e | f | g | h | i | j | k | ||
| Hisanori Ohara | Employee of another company | △ | ||||||||||
- * Selection items regarding relationship with company
- * "○" represents if the item applies to the individual "currently/recently", and "△" represents if the item applies the individual "previously".
- * "●" represents if the item applies to the closest family member"currently/recently", and "▲" represents if the item applies the closest family member "previously".
- a. An executive officer of a listed company or its subsidiary
- b. An executive officer or non-executive director of a parent company of a listed company
- c. An executive officer of an affiliated company of a listed company
- d. A person whose major business contact is a listed company or an executive operator of such person or a company (if such person becomes a company)
- e. A major business contact of a listed company or an executive operator of such business contact
- f. A consultant, an accounting expert or a lawyer who obtains a large sum of money from a listed company other than the officer's remuneration
- g. A major shareholder of a listed company (an executive officer of the company if such major shareholder is a company)
- h. An executive officer (applies only to the individual) of a business contact of a listed company (does not apply to d, e and f)
- i. An executive officer of a company that has a relationship with a reciprocal external director installment (applies only to the individual)
- j. An executive officer (applies only to the individual) of a company to which a listed company gives a donation
- k. Others
Relationship with the Company (2)
| Name | Independent Directors | Additional Comments related to Applicable Items | Reason for Selection as an External Director (including reason for designation as an independent director, if applicable) |
|---|---|---|---|
| Hisanori Ohara | ○ | Mr. Ohara was originally associated with the Mizuho Corporate Bank, Ltd. (the current Mizuho Bank, Ltd.) and Fuyo General Lease Co., Ltd., and now acts as an External Corporate Auditor with BIC CAMERA INC. The Company’s borrowings from Mizuho Corporate Bank amount to ¥12,659 million (according to the balance for the period to March 2015) and the value of the Company’s transactions with Fuyo General Lease is ¥534 million (according to the results for the period to March 2015). There have been no transactions between BIC CAMERA Inc. and the Company (according to the results for the period to March 2015). |
The Company appoints External Members of the Board not only to ensure independent objectivity, but also secure effectiveness and expertise in corporate management and supervision. approximately nine years. At present, Mr. Ohara serves as an External Corporate Auditor BIC CAMERA Inc.; but this company is a major transaction partner of the Company. The Company maintains business relationships with several other financial institutions besides Mizuho Bank. Approximately 20% of the Company’s borrowings (as a percentage of all loans) come from Mizuho Corporate Bank and Mizuho Corporate Bank does not have a significant degree of influence on the Company’s management decisions or supervision over Company business operations. |
| Existence or non-existence of a committee which corresponds to the nomination committee or renumeration committee | None |
|---|
Audit and Supervisory Board
| Committee of Audit & Supervisory Board Established? | Yes |
|---|---|
| Number of Audit & Supervisory Board Members per Articles of Incorporation | Unlimited |
| Number of Audit & Supervisory Board Members | Four |
Communications between Audit & Supervisory Board and Internal Audit Department
Each Audit & Supervisory Board Member receives briefings on the accounting auditing plan, performance reports on accounting audits and briefings and reports on the evaluation of internal control, etc. from the Accounting Auditor, while also closely coordinating with the Accounting Auditor by observing accounting audits, holding meetings on the specific auditing methods used and seeking explanations where necessary.
Audit & Supervisory Board closely coordinates closely coordinates with the Internal Audit Department by receiving briefings on internal audit plans, regularly communicating and coordinating with the Department on the execution of sa
id plans, receiving reports on audit results and seeking explanations where necessary.
| External Audit & Supervisory Board Members Included? | Yes |
|---|---|
| Number of External Audit & Supervisory Board Members | Three |
| Number of External Audit & Supervisory Board Members Designated as Independent Directors | Three |
Relationship with the Company (1)
| Name | Affiliation | Relationship with the Company (*) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| a | b | c | d | e | f | g | h | i | j | k | l | m | ||
| Tatsushi Higuchi | Employee of another company | △ | ||||||||||||
| Hironaga Fukuda | Employee of another company | △ | ||||||||||||
| Tatsuya Toyoshima | Employee of another company | △ | ||||||||||||
- * Selection items regarding relationship with company
- * "○" represents if the item applies to the individual "currently/recently", and "△" represents if the item applies the individual "previously".
- * "●" represents if the item applies to the closest family member"currently/recently", and "▲" represents if the item applies the closest family member "previously".
- a. An executive officer of a listed company or its subsidiary
- b. Non-executive director or an accounting advisor of a listed company or its subsidiary
- c. An executive officer or non-executive director of a parent company of a listed company
- d. A corporate auditor of a parent company of a listed company
- e. An executive officer of an affiliated company of a listed company
- f. A person whose major business contact is a listed company or an executive operator of such person or a company (if such person becomes a company)
- g. A major business contact of a listed company or an executive operator of such business contact
- h. A consultant, an accounting expert or a lawyer who obtains a large sum of money from a listed company other than the officer's remuneration
- i. A major shareholder of a listed company (an executive officer of the company if such major shareholder is a company)
- j. An executive officer (applies only to the individual) of a business contact of a listed company (does not apply to f, g and h)
- k. An executive officer of a company that has a relationship with a reciprocal external director installment (applies only to the individual)
- l. An executive officer (applies only to the individual) of a company to which a listed company gives a donation
- m. Others
Relationship with the Company (2)
| Name | Independent Directors | Additional Comments related to Applicable Items | Reason for Selection as an External Director (including reason for designation as an independent director, if applicable) |
|---|---|---|---|
| Tatsushi Higuchi | ○ | Previously, Mr. Higuchi worked at Mizuho Corporate Bank, Ltd. (the current Mizuho Bank, Ltd.)., Unipres Corporation and Business Challenged, Ltd. The Company’s borrowings from Mizuho Bank amount to ¥12,659 million (balance for the period ending March 2015). There have been no transactions between Unipres Corporation or Business Challenged and the Company (according to the results for the period to March 2015). |
The Company appoints External Members of the Board not only to ensure independent objectivity, but also secure effectiveness and expertise in corporate management and supervision.
Mr. Higuchi possesses an abundance of experience and insight in business management, having been involved in the financial and manufacturing industries for many years. We believe this individual will be able to accomplish his role in monitoring the decisions and execution related to important Company issues. Accordingly, the Company believes that Mr. Higuchi has sufficient wherewithal to accomplish a role in ensuring the legality and appropriateness of Company business operations as an External Audit & Supervisory Board Member for the Company. Mr. Higuchi has experience as a business executive at Mizuho Corporate Bank, Ltd. (the current Mizuho Bank, Ltd.) which is one of the Company’s main banks. Mr. Higuchi worked at Mizuho Corporate Bank until March 2005, and has been retired from Mizuho Corporate Bank for 10 years. After retiring from Mizuho Corporate Bank, Mr. Higuchi worked for approximately five years as a business executive at Unipres Corporation(not a major transaction partner of the Company). Subsequently, Mr. Higuchi has been involved in the management of Business Challenged (also not a major transaction partner of the Company) for approximately five years. At present, Mr. Higuchi does not have a position as an executive, etc. with Mizuho Corporate Bank. The Company maintains business relationships with several other financial institutions besides Mizuho Corporate Bank. Approximately 20% of the Company’s borrowings (as a percentage of all loans) come from Mizuho Corporate Bank, and Mizuho Corporate Bank does not have a significant degree of influence on the Company’s management decisions or supervision over Company business operations. Given the preceding facts, it is the Company’s opinion that there is no potential for a conflict of interest with our general shareholders, and as such, we have designated Mr. Higuchi as an independent director as of June 2012. |
| Hironaga Fukuda | ○ | Previously, Mr.Fukuda worked at Meiji Yasuda Life Insurance Company and Meiji Yasuda Life Planning Center Co., Ltd. The Company’s borrowings from Meiji Yasuda Life Insurance amount to ¥1,832 million (balance for the period ending March 2015), and the value of the Company’s transactions with Meiji Yasuda Life Insurance is ¥45 million (according to the results for the period to March 2015). There have been no transactions between Meiji Yasuda Life Planning Center and the Company (according to the results for the period to March 2015). |
The Company appoints External Members of the Board not only to ensure independent objectivity, but also secure effectiveness and expertise in corporate management and supervision. Mr. Fukuda possesses an abundance of experience and insight in business management, having been involved in the financial and manufacturing industries for many years. We believe this individual will be able to accomplish his role in monitoring the decisions and execution related to important Company issues. Accordingly, the Company believes that Mr. Fukuda has sufficient wherewithal to accomplish a role in ensuring the legality and appropriateness of Company business operations as an External Audit & Supervisory Board Member for the Company. Mr. Fukuda has experience as a business executive at Meiji Yasuda Life Insurance, where he worked until March 2010. After retiring from Meiji Yasuda Life Insurance, Mr. Fukuda was involved in the management of Meiji Yasuda Life Planning Center until March 2012. Neither of these companies is considered a major transaction partner with the Company. It is the Company’s opinion that there is no potential for a conflict of interest with our general shareholders, and as such, we have designated Mr. Fukuda as an independent director as of June 2012. |
| Tatsuya Toyoshima | ○ | Mr. Toyoshima was originally associated with Sompo Japan Insurance Inc.(the current Sompo Japan Nipponkoa Insurance Inc), and currently serves as the President of Sompo Japan Nipponkoa Credit Inc. The Company has loans payable to the value of ¥664 million (balance accurate as of the period ending March 2015) and annual transactions of ¥106 million (balance accurate as of the period ending March 2015) with Sompo Japan Nipponkoa Insurance Inc. There have been no transactions the Company and Sompo Japan Nipponkoa Credit Inc. exist (results for the period ending March 2015). |
The Company appoints External Members of the Board not only to ensure independent objectivity, but also secure effectiveness and expertise in corporate management and supervision. Mr. Toyoshima was elected as being sufficiently capable of fulfilling the role of supervising on the legitimacy and adequateness of tasks performed as an External Audit & Supervisory Board Member for the Company based on the extensive experience and wide range of knowledge on corporate management he has obtained from his long-term engagement in financial business management. He served as an executing person at Sompo Japan Insurance Inc.(the current Sompo Japan Nipponkoa Insurance Inc.) until March 2014, and is currently involved with the management of Sompo Japan Nipponkoa Credit Inc. as manager. Sompo Japan Nipponkoa Credit Inc. is not a major business partner of the Company, and for these reasons the Company designated Mr. Toyoshima as an independent officer in June 2014, determining that his appointment does not pose the risk of a conflict of interest with general shareholders. |
Independent Directors
| Number of Independent Directors | Four |
|---|
Other Items related to Independent Directors
Mr. Hisanori Ohara attended all 24 board of directors’ meetings held in FY2014, gave his opinion where needed on agenda items discussed while also attending Executive Officer meetings and important meetings relating to the management of the Group, providing the Company with his valued insights from a perspective external the Company.
Mr. Tatsushi Higuchi and Mr. Hironaga Fukuda attended all 24 board of directors’ meetings and all 13 Audit & Supervisory Board meetings held in FY2014, gave their opinion where needed on agenda items discussed while also attending Executive Officer meetings and important meetings relating to the management of the Group, providing the Company with their valued insights from a perspective external the Company.
Mr. Tatsuya Toyoshima attended 17 of 19 times board of directors’ meetings and all 9 Audit & Supervisory Board meetings held after his appointment, gave his opinion where needed on agenda items discussed while also attending Executive Officer meetings and important meetings relating to the management of the Group, providing the Company with their valued insights from a perspective External the Company.
Incentives
| Policy regarding Incentive Compensation granted to Members of the Board | Adoption of Earnings-Based Compensation System |
|---|
Additional Comments for related items
The Company has identified construction orders received (an indicator of future net sales), operating income (an indicator of current profitability), and share price (an indicator of corporate value) as objective evaluation factors. Decisions also reflect qualitative evaluations of personal performance. Members of the Board serving concurrently as Executive Officers are also evaluated based on the performance of the respective departments under their management.
Members of the Board Compensation
| Degree of Disclosure | No Disclosure of Indivisual Compensation |
|---|
Additional Comments for related items
Total amounts are disclosed according to Members of the Board/Audit & Supervisory Board Members categorization.
Fiscal 2014 Compensation
.
Total Annual Members of the Board Compensation ¥268 million (¥8 million for External Members of the Board)
.
Total Annual Audit & Supervisory Board Members Compensation ¥49 million (¥30 million for External Audit & Supervisory Board Members) .
| Policies Adopted for Determining Compensation and Compensation Calculations | Yes |
|---|
Disclosures related to Policy for Compensation and Compensation Calculations
The Company has adopted a performance-based evaluation system that ties compensation to business results. The Company has identified construction orders received (an indicator of future net sales), operating income (an indicator of current profitability), and share price (an indicator of corporate value) as objective evaluation factors. Decisions also reflect qualitative evaluations of personal performance.
Support Structure for External Members of the Board (External Audit & Supervisory Board Members)
The Company provides External Members of the Board and External Audit & Supervisory Board Members with information regarding resolutions and items for deliberation prior to board of director meetings and/or other major management meetings. The Company creates and distributes documents related to issues for deliberation to Members of the Board and Audit & Supervisory Board Members.
2.Items related to Operations, Audit/Supervision, Appointments, Compensation Decisions and Other Functions (Overview of Current Corporate Governance System)
(1)Status of Execution of Duties
As a rule, board of director meetings are conducted twice per month, deliberating/resolving issues as determined by law, Company articles of incorporation, internal corporate policies, and other important issues.
To further clarify the roles and responsibilities of Members of the Board and Executive Officers, the Company has adopted an Executive Performance Evaluation System linking executive compensation to corporate earnings.
(2)Items related to External Members of the Board
As a rule, External Members of the Board regularly attend board of director meetings held twice monthly. In addition,External Members of the Board actively participate in important internal company meetings, including Executive Officer meetings, offering their opinions and advice from an independent perspective, participating in decisions regarding important management issues, and meeting their supervisory responsibilities over Company business.
(3)Audit Status
-Status of Audit & Supervisory Board Audits, Internal Audits
(1)The Company has adopted a Audit & Supervisory Board System, with three of four Audit & Supervisory Board Members being External Audit & Supervisory Board Members. Audit & Supervisory Board Members regularly attend board of director meetings, as well as important corporate meetings including, but not limited to, the Executive Officer Meeting, monitoring the state of Members of the Board in their pursuit of corporate duties.(2)The General Audit Department reports directly to the president of the Company, coordinating internal audits with the Audit Committee, auditing the state of operations in individual Company departments and group companies.
-Financial Statement Audits
Financial statement audits shall be conducted by Ernst & Young ShinNihon LLC as the Audit Corporation with whom the Company has executed an audit engagement contract. The Audit Committee and the General Audit Department shall maintain communications with the audit corporation with respect to periodic audit planning and the exchange of information related to audit results in order to increase audit efficiency.
The names of the certified public accountants engaged to conduct work during fiscal 2014, and the composition of assistants in connection with audit work are as follows
(1)Names of certified public accountants engaged in audit work, name of affiliated audit corporation, and number of continuous years on this engagement:
・Designated and Engagement Partner Sadayoshi Yamamoto Ernst & Young ShinNihon LLC
・Designated and Engagement Partner Hitoshi Sakurai Ernst & Young ShinNihon LLC
・Designated and Engagement Partner Naohiko Sawabe Ernst & Young ShinNihon LLC
(Notes):
• Because none of the Audit & Supervisory Board Members has been continuously engaged for more than seven years, the Audit & Supervisory Board Members’ number of years of engagement is not stated.
• The above audit corporationallows any of its employees engaged in auditing the Company to be so engaged for a fixed period only.
(2)Audit Staff
Certified public accountants: 10
Other:17
(3)Audit Compensation
Audit engagement compensation based on operations defined under Article 2 Paragraph 1 of the Certified Public Accountants Law was ¥90 million.
(4)Initiatives for Strengthening Audit & Supervisory Board Function
“Support Structure for External Audit & Supervisory Board Members” provides details related to securing personnel and support for Audit & Supervisory Board audits. “Internal Controls Systems” provides that in the event a Audit & Supervisory Board Member requests that the Company provide staff to assist in the performance of audit-related work, such staff shall not be an employee who reports directly to any Members of the Board or Executive Officers.
At present, the Company does not have a Audit & Supervisory Board Member who possesses special certifications related to finance or accounting. However, every Audit & Supervisory Board Member has a long history of direct experience in corporate finance and/or accounting. In the opinion of the Company, these Audit & Supervisory Board Members possess sufficient judgment required to accomplish the duties of that capacity.
As discussed in [Audit & Supervisory Board Relationships]-“External Audit & Supervisory Board Members Included?”-“Reasons for Selection as an External Audit & Supervisory Board Member,” all three External Audit & Supervisory Board Members have been designated as independent directors by the Company.
As noted in the section Audit & Supervisory Board Relationships/Relationship with the Company (2)/Reasons for Selection as an External Audit & Supervisory Board Member, in order to maintain a high degree of independence for the External Audit & Supervisory Board Members appointed by the Company, all three External Audit & Supervisory Board Members have been designated independent directors.
Rationale for Adopting the Current Corporate Governance Structure
The company constitutes the board of directors of ten Members of the Board including one External Member of the Board and operates it based on applicable laws, the articles of incorporation and in-house rules. The board of directors meeting will basically be held twice a month to determine material issues in relation to the management and supervise operation execution status. In order to clarify the responsibility of business execution, we have introduced the executive officer system. With regard to the selection of the candidates of officers and the officers' renumeration plan, these issues will be deliberated at the personnel committee that consists of several Members of the Board including an External Member of the Board and be submitted to the board of directors. With regard to Members of the Board renumeration, the company has introduced a Members of the Board performance evaluation system which is linked with their performance. The company is a Company with Committee of Audit & Supervisory Board and the Committee of Audit & Supervisory Board consists of four Audit & Supervisory Board Members including three External Audit & Supervisory Board Members. Each Audit & Supervisory Board Member attends important meetings ranging from the board of directors meeting, Executive Officers meeting to group management meeting, etc. to monitor the duty execution of Members of the Board. By adopting such corporate governance system, the company believes that it can implement a fair and transparent management operation.
3.Implementation of Policies regarding Shareholders and Other Stakeholders
Initiatives to Ensure Effective General Shareholders' Meetings and Orderly Exercise of Voting Rights
| Additional Comments | |
|---|---|
| Early Notification of General Shareholders' Meeting | The Company has dispatched this convocation notice one week earlier than statutory designated two weeks as well as we have announced it on our website before dispatching the notice. |
| Execution of the voting right by means of the electro-magnetic method | The Company has adopted, from the current shareholders meeting held in this year, the execution of voting right by using the Internet, etc. |
| Participation in the electronic voting right execution platform and other efforts aiming at enhancing environment for voting right execution by institutional investors | The company has participated in the current shareholders meeting held this year, electronic voting right execution platform operated by ICJ, Inc. |
| Provision of convocation of notice (summary) in English | A part of the Notice of Convocation for the ordinary shareholders meeting has been translated into English to display in the English version of our website and is additionally being disclosed in the electronic voting right execution platform operated by ICJ, Inc. |
| Other | The Company utilizes multimedia presentations during the General Shareholders' Meeting, while introducing completed construction etc. during the period in question, to facilitate an understanding of Company management policies and original technologies among general shareholders |
IR Activities
| Briefings Provided Personally by Representative? | Additional Comments | |
|---|---|---|
| Creation, Publication of Disclosure Policies | - |
The Company has announced them on the company website. |
| Periodic Briefings for Analysts and Institutional Investors | Yes |
The Company sponsors financial briefings twice per year with the Company president in attendance. The Company conducts teleconferences during the first and third quarters of the fiscal year. |
| Periodic Briefings for Overseas Investors | No | While no regular briefings are held for overseas investors, Company representatives do travel overseas several times a year to hold meetings with investors and participate in overseas investor-orientated IR events held in Japan. The Company actively accepts individual meetings arranged when overseas investors visit Japan. |
| IR Documents Published via Corporate Website | - |
In addition to financial briefings and other timely disclosures, the Company also publishes fact books, annual reports, mid-term management plans and other materials via the corporate website. |
| IR Department | - |
General Administration Divisions Corporate Planning Division has executed IR Activities. |
Initiatives to Respect Stakeholder Rights
| Additional Comments | |
|---|---|
| Company regulations include to respect stakeholder rights | The Company has specified the basic policies related to company shareholders in Corporate Policy,Corporate Visions,Corporate Social Responcibility Policy. |
| Implementation of environmental conservation activities, CSR activities, etc | Each year the Company publishes a Corporate Report as a means of publicizing the Company's involvement in such initiatives |
| Company has created policies regarding providing stakeholders with information | The Company has created corporate disclosure policies, which have been published on the corporate website. |
4.Internal Controls System
Status of Internal Controls System
- Internal Controls System Design/Implementation
In accordance with basic policy decisions resolved by the board of directors, the Company is engaged in the systematization of internal Company rules, the review of the Company's risk management system, and the creation of an efficient and practicable system of internal controls. - Emphasis on CSR (Corporate Social responsibility)
The Company group has established a CSR Planning Committee and a CSR Planning Office to ensure that CSR is positioned as a major component in our Corporate Policy and Corporate Visions. These organizations are responsible for planning and monitoring Company CSR activities, as well as for summarizing the results of said activities in the Company's Sustainability Report. - Ensuring Greater Compliance
The Company has established a Risk Management Committee as a means to practice equitable corporate activities that demonstrate our respect for the law, social standards and ethics. The Company distributes a Compliance Handbook to executives and employees, presenting information related to Company compliance policies, systems, guidance, etc. The Company provides executives and employees with access to a compliance-related information database via the corporate intranet, as well as teaching compliance through training and other activities.
Basic Approach and Initiatives to Rejecting Anti-Social Influences
- Basic Policy
The Company firmly opposes any and all anti-social influences or groups that threaten the order and safety of society, exercising a basic policy of rejecting association with such influences and/or groups. - Initiatives
a. Placement under internal controls system As one component of compliance risk, risks associated with anti-social influences have been placed under the purview of the Risk Management Committee, utilizing our system of internal controls to prevent such risks from occurring, or to respond rapidly and appropriately in the event such risk does occur.
b. Organizational response The Company has assigned a person responsible for the prevention of unjust demands within the General Affairs Department at corporate headquarters to act as a central office for responding to risks associated with anti-social influences.
c. Coordination with External Organizations The Company coordinates and exchanges information with external specialized organizations such as the Special Federation for the Prevention of Organized Violence and the Center for Reporting on Violent Organizations.
d. Employee education Specific action guidelines have been provided in the Company code of conduct and Compliance Handbook, as well as subjects covered during employee training.
