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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.Matters related to Organizational Structure/Organizational Operations
| Organizational Format | Company with Designated Corporate Auditors |
|---|
Board of Director Relations
| Number of Directors per Articles of Incorporation | 0 |
|---|---|
| Director Term of Service per Articles of Incorporation | One year |
| Chairman of the Board | Company president |
| Number of Directors | Eight |
| External Directors Included? | Yes |
| Number of External Directors | One |
| Number of External Directors Designated as Independent Directors | One |
Relationship with the Company (1)
| Name | Affiliation | Relationship with the Company (*1) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| a | b | c | d | e | f | g | h | i | ||
| Shin Shiotani | Employee of another company | ○ | ||||||||
*1Selection category key
a Employee of parent company
b Employee of other affiliated company
c Major shareholder of the Company
d Serves concurrently as an external director or external corporate auditor at another company
e Serves as an executive operating officer or executive officer at another company
f A spouse, blood relative or equivalent of an executive operating officer or executive officer of the Company or a specified affiliate of the Company
g Receives compensation or other financial benefit as an officer from a parent company or parent company subsidiary
h A limited liability agreement has been signed between the individual and the Company
i Other
Relationship with the Company (2)
| Name | Independent Directors | Additional Comments related to Applicable Matters | Reason for Selection as an External Director (including reason for designation as an independent director, if applicable) |
|---|---|---|---|
| Shin Shiotani | ○ | - | The Company appoints external directors not only to ensure independent objectivity, but also secure effectiveness and expertise in corporate management and supervision. Mr.Shiotani 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 matters. Mr. Shiotani has experience as a business executive at Mizuho Corporate Bank Ltd. (The Fuji Bank Ltd. at the time of his service), which is one of the Company’s main banks. Mr. Shiotani worked at Mizuho Corporate Bank until June 1997, and has been retired from Mizuho Corporate Bank for 12 years nine months. After retiring from Mizuho Corporate Bank, Mr. Shiotani has been involved in the management of a manufacturing company (not a major transaction partner of the Company) for a period of approximately 12 years. At present, Mr. Shiotani 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. Shiotani as an independent director as of March 2010. |
Other Matters related to External Director Activities
Subsequent to assuming his position, Mr. Shiotani attended all 18 Board of Director meetings, offering appropriate counsel during deliberations, as well as providing valuable insight from an external perspective during executive officer meetings and other important Company policy-making councils.
Corporate Auditor Relationships
| Audit Committee Established? | Yes |
|---|---|
| Number of Corporate Auditors per Articles of Incorporation | 0 |
| Number of Corporate Auditors | Four |
Communications between Corporate Auditors and Audit Corporation
Audit corporation provides periodic explanations related to financial statement audit policies and results, including explanations of financial statement audit plans and financial statement audit implementation reports, etc. Corporate auditor participated in audit corporation audits as necessary, conducting coordination regarding specific audit methods, etc., maintaining close coordination with the audit corporation.
Communications between Corporate Auditors and Internal Audit Department
The corporate auditors and the General Audit Department engage in coordination with respect to schedules and audit matters from the audit planning stage to ensure effective audits of Company departments/group companies. Mutual audit results are reported in writing, and conferences are held often to exchange opinions to ensure that audits conducted by both parties are effective and efficient, maintaining close coordination between the two parties.
| External Corporate Auditors Included? | Yes |
|---|---|
| Number of External Corporate Auditors | Three |
| Number of External Corporate Auditors Designated as Independent Directors | Three |
Relationship with the Company (1)
| Name | Affiliation | Relationship with the Company (*1) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| a | b | c | d | e | f | g | h | i | ||
| Kaoru Kurokawa | Employee of another company | ○ | ||||||||
| Masatami Sasano | Employee of another company | ○ | ||||||||
| Kazunori Kameyama | Employee of another company | ○ | ○ | |||||||
*1Selection category key
a Employee of parent company
b Employee of other affiliated company
c Major shareholder of the Company
d Serves concurrently as an external director or external corporate auditor at another company
e Serves as an executive operating officer or executive officer at another company
f A spouse, blood relative or equivalent of an executive operating officer or executive officer of the Company or a specified affiliate of the Company
g Receives compensation or other financial benefit as an officer from a parent company or parent company subsidiary
h A limited liability agreement has been signed between the individual and the Company
I Other
Relationship with the Company (2)
| Name | Independent Directors | Additional Comments related to Applicable Matters | Reason for Selection as an External Director (including reason for designation as an independent director, if applicable) |
|---|---|---|---|
| Kaoru Kurokawa | ○ | - | The Company appoints external directors not only to ensure independent objectivity, but also secure effectiveness and expertise in corporate management and supervision. Mr. Kurokawa possesses an abundance of experience and expertise in corporate management, having advanced knowledge regarding management in the construction industry. Accordingly, the Company believes that Mr. Kurokawa has sufficient wherewithal to accomplish a role in ensuring the legality and appropriateness of Company business operations as an external corporate auditor for the Company. Mr. Kurokawa served as a business executive at Mizuho Corporate Bank (The Industrial Bank of Japan, Ltd. at the time of his service), which is one of the Company’s main banks. Mr. Kurokawa worked at Mizuho Corporate bank until March 2002, and has been retired from Mizuho Corporate Bank for eight years. After retiring from Mizuho Corporate Bank, Mr. Kurokawa has been involved in the management in the IT services industry and in an asset management company (not major transaction partners of the Company) for a period of four years. At present, Mr. Kurokawa 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. Kurokawa as an independent director as of March 2010. |
| Masatami Sasano | ○ | - | Mr. Masatami Sasano possesses an abundance of experience and expertise in corporate management through various positions at other companies. Accordingly, the Company believes that Mr. Sasano has sufficient wherewithal to accomplish a role in ensuring the legality and appropriateness of Company business operations as an external corporate auditor for the Company. Mr. Sasano has experience as a business executive at Meiji Yasuda Life Insurance Company, where he worked until March 2005. Meiji Yasuda is not 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. Sasano as an independent director as of March 2010. |
| Kazunori Kameyama | ○ | - | Mr. Kameyama has extensive experience in management in the financial industry, and possesses an abundance of experience and expertise in corporate management. Accordingly, the Company believes that Mr. Kameyama has sufficient wherewithal to accomplish a role in ensuring the legality and appropriateness of Company business operations as an external corporate auditor for the Company. Mr. Kameyama has experience as a business executive at Sompo Japan Insurance Inc., where he worked until March 2007. Sompo Japan Insurance Inc. is not 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. Kameyama as an independent director as of June 2010. |
Independent Directors
| Number of Independent Directors | Four |
|---|
Other Matters related to Independent Directors
Mr. Shiotani attended all 24 Board of Director meetings during fiscal 2010, offering appropriate counsel during deliberations, as well as providing valuable insight from an external perspective during executive officer meetings and other important Company policy-making councils.
Mr. Kurokawa attended 22 of 24 Board of Director meetings and all 13 Audit Committee meetings. Mr. Sasano attended all 24 Board of Director meetings and all 13 Audit Committee meetings. Mr. Kameyama attended all 19 Board of Director meetings and all 9 Audit Committee meetings held subsequent to his appointment as Corporate Auditor. Each of these individuals offered appropriate counsel during deliberations, and provided valuable insight from an external perspective during executive officer meetings and other important Company policy-making councils.
Incentives
| Policy regarding Incentive Compensation granted to Directors | Adoption of Earnings-Based Compensation System |
|---|
Additional Comments for related Matters
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. Directors serving concurrently as executive officers are also evaluated based on the performance of the respective departments under their management.
Director Compensation
| Degree of Disclosure | No Disclosure of Indivisual Compensation |
|---|
Additional Comments for related Matters
Total amounts are disclosed according to director/corporate auditor categorization.
Fiscal 2010 Compensation
.
Total Annual Director Compensation ¥184 million (¥9 million for external directors)
.
Total Annual Corporate Auditor Compensation ¥60 million (¥28 million for external corporate auditors) .
| 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 Directors (External Corporate Auditors)
The Company provides external directors and external corporate auditors 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 matters for deliberation to directors and corporate auditors.
2. Matters 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 matters as determined by law, Company articles of incorporation, internal corporate policies, and other important matters.
To further clarify the roles and responsibilities of directors and executive officers, the Company has adopted an Executive Performance Evaluation System linking executive compensation to corporate earnings.
(2)Matters related to External Directors
As a rule, external directors regularly attend board of director meetings held twice monthly. In addition, external directors 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 matters, and meeting their supervisory responsibilities over Company business.
(3)Audit Status
(1)The Company has adopted a Corporate Auditor System, with four of three corporate auditors being external corporate auditors. Corporate auditors 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 directors 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 2010, 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 Hidenori Takahashi Ernst & Young ShinNihon LLC
・Designated and Engagement Partner Hitoshi Sakurai Ernst & Young ShinNihon LLC
・Designated and Engagement Partner Masato Nakagawa Ernst & Young ShinNihon LLC
(Note) Continuous number of years on engagement are noted only for those who have exceeded seven years.
(2) Audit Staff
Certified public accountants: 11
Other:19
(3)Audit Compensation
Audit engagement compensation based on operations defined under Article 2 Paragraph 1 of the Certified Public Accountants Law was ¥95 million.
(4)Initiatives for Strengthening Corporate Auditor Function
“Support Structure for External Corporate Auditors” provides details related to securing personnel and support for corporate auditor audits. “Internal Controls Systems” provides that in the event a corporate auditor 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 director or executive officer.
At present, the Company does not have a corporate auditor who possesses special certifications related to finance or accounting. However, every corporate auditor has a long history of direct experience in corporate finance and/or accounting. In the opinion of the Company, these corporate auditors possess sufficient judgment required to accomplish the duties of that capacity.
As discussed in [Corporate Auditor Relationships]-“External Corporate Auditors Included?”-“Reasons for Selection as an External Corporate Auditor,” all three external corporate auditors have been designated as independent directors by the Company.
3. Rationale for Adopting the Current Corporate Governance Structure
The Company has appointed one external director (designated as an independent director) in order to facilitate stronger supervisory functions related to management through close coordination with the Audit Committee and directors in charge of internal audit/internal controls. Further, the Company has adopted an executive officer system for the purpose of engaging the board of directors, which will lead to more rapid decision-making, while at the same time clarifying operational responsibilities. The Company has also established a Human Resources Committee, which will submit board of director candidates and director compensation proposals to the Company board of directors. The Company believes this governance structure will result in greater fairness and transparency in business management.
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 | Notification sent out one week prior to legally mandated two-week lead time. |
| 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 | - |
Creation, Publication of Disclosure Policies |
| 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 the Company does not offer regularly scheduled briefings for overseas investors at present, the Company welcomes any opportunity to meet with overseas investors individually when they travel to 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 |
Initiatives to Respect Stakeholder Rights
| Additional Comments | |
|---|---|
| Company rules include regulations related to respect for stakeholder rights | The Company's Management Philosophy, Mid-Term Vision, and Basic CSR Policies all include basic policies related to Company stakeholders |
| Implementation of environmental conservation activities, CSR activities, etc | Each year the Company publishes a CSR 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. |
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 Promotion Committee and a CSR Promotion Office to ensure that CSR is positioned as a major component in our Management Philosophy and Mid-Term Business Vision. 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.
