Corporate Governance

(as of July 7, 2017)

Ⅰ.コーポレート・ガバナンスに関する基本的な考え方及び資本構成、企業属性その他の基本情報

1.Basic Views

The Company is a pure holding company governing SQUARE ENIX Group, which develops a wide range of content and services. The Company believes that it is essential for the achievement of the Group’s continuous growth and the maximization of its corporate value in the medium and long term to respect the interests of all of the Company’s stakeholders such as shareholders, customers, business partners, employees and society, and to maintain good relationships with them under an agile, transparent and sound management system.
As such, the Company recognizes that the enrichment and enhancement of its corporate governance platform is a key management challenge, and the entire SQUARE ENIX Group devotes itself to that end on an ongoing basis.

Reasons for Non-compliance with the Principles of the Corporate Governance Code

The Company complies with all the principles of the Corporate Governance Code.

Disclosure Based on the Principles of the Corporate Governance Code

[Principle 1.7: Related Party Transactions]

The Company respects provisions of the Companies Act related to conflict-of-interest transactions between the Company and its directors, by obtaining prior Board approval and submitting a report on the transaction to the Board. The Company also requires the same procedures for transactions with non-director executive officers and those with major shareholders.

[Principle 3.1: Enhancement of Disclosure]

(1) Company Objectives, Business Strategies and Business Plans
The Company discloses the Corporate Philosophy and the Management Guidelines on the Company’s website. http://www.hd.square-enix.com/eng/company/philosophy.htmlThe Company continuously discloses business strategies and business plans on the Company’s website, in Annual Reports, Securities Reports, Notices of Convocation of the Annual Shareholders’ Meeting, Earnings Summaries (Kessan Tanshin), results briefing materials, and so forth.
The Company also discloses English translations of the above business principles, business strategies and business plans on the Company’s website, and in Annual Reports, etc.

(2)Basic Views and Guideline on Corporate Governance
Please refer to “1. Basic Views” in I (Business Management Organization and Other Corporate Governance Systems Regarding Decision Making, Execution of Business, and Oversight in Management) of this Report.
The Company believes that the implementation of each principle of the Corporate Governance Code increases the Company’s corporate value, and therefore complies with all the principles.

(3)Remuneration for Directors
Please refer to “Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods” in [Remuneration for Directors] in 1 (Organizational Composition and Operation) in II (Business Management Organization and Other Corporate Governance Systems Regarding Decision Making, Execution of Business, and Oversight in Management) of this Report.

(4)Policies and Procedures for Nominating Directors and Auditors
Criteria and procedures for nominating directors and auditors are as follows:
-Nomination Criteria for Directors

    1.Nominees for directors shall meet the following criteria regardless of personal attributes such as gender and nationality:
  • (a)Have extensive management experience and knowledge, advanced professional expertise and deep insight.
  • (b)Be able to contribute to the Company’s sustainable growth and the enhancement of its corporate value over the mid to long term by understanding and implementing the Corporate Philosophy and Management Guidelines
  • (c)Be able to contribute to ensure the Board’s effectiveness through the enhancement of mutual checks and balances between directors.

2.No less than 2 outside directors shall be appointed so that the interests of general shareholders are directly represented at the Board. 3.Outside directors shall satisfy the requirements for outside directors prescribed by the Companies Act and the independence standards set by the Tokyo Stock Exchange.

- Nominations Procedures for Directors

    1.Determination of Nomination Procedures
  • 1)The Remuneration and Nomination Committee discusses the nomination procedures based on the nomination criteria for directors, and recommends them to the Board of Directors.
  • 2)The Board of Directors discusses and determines the nomination procedures in accordance with the recommendation by the Remuneration and Nomination Committee.
    2.Selection of Individual Nominee
  • 1)The President prepares a director nominee plan based on nomination criteria for directors and the nomination procedures, and refers the plan to the Remuneration and Nomination Committee.
  • 2)The Remuneration and Nomination Committee discusses the nominee plan, and advises the Board of Directors of its conclusions.

3.The Board of Directors discusses and determines the nominee plan for directors with reference to the advice of the Remuneration and Nomination Committee.

- Nomination Criteria for Auditors

    1.Nominees for auditors shall meet the following criteria regardless of personal attributes such as gender and nationality:
  • (a)Be able to exercise the authority of auditors appropriately with broad expertise and insight in fields of expertise such as finance, accounting, legal, management, etc.
  • (b)Present advice and opinions on the Company’s management from fair and neutral viewpoints

2.No less than one nominee shall have appropriate knowledge pertaining to finance and accounting. 3.In order to audit respective fields including finance, accounting, legal and management in an unbiased manner, the Board of Auditors shall have a well-balanced diversity of abilities, insight and experiences as a whole.

- Nominations Procedures for Auditors

    1.Determination of Nomination Procedures
  • 1)The Remuneration and Nomination Committee discusses the nomination procedures based on the nomination criteria for auditors, and recommends them to the Board of Directors.
  • 2)The Board of Directors discusses and determines the nomination procedures in accordance with the recommendations from the Remuneration and Nomination Committee.
    2.Selection of Individual Nominees
  • 1)The President prepares an auditor nominee plan based on the nomination criteria for auditors and the nomination procedures, and refers the plan to the Remuneration and Nomination Committee and the Board of Auditors.
  • 2)The Remuneration and Nomination Committee discusses the nominee plan, and advises the Board of Directors and Board of Auditors of its conclusions.
  • 3)The Board of Auditors discusses the auditor nominee plan and determines whether consents to the plan or not.
  • 4)The Board of Directors, after obtaining the consent of the Board of Auditors, discusses and determines the auditor nominee plan with reference to the recommendations of the Compensation and Nomination Committee.

(5)Explanation of Individual Appointments for Directors and Auditors
The Company individually discloses significant factors considered in the selection of nominees, such as detailed personal histories and backgrounds of each director and auditor nominee, in the Notice of Convocation of the Annual Shareholders’ Meeting. The reasons for appointing nominees for outside directors and outside auditors are described in [Directors] - (Outside Directors’ Relationship with the Company (2)) and [Auditors] - (Outside Auditors’ Relationship with the Company (2)) in 1 (Organizational Composition and Operation) in II (Business Management Organization and Other Corporate Governance Systems Regarding Decision Making, Execution of Business, and Oversight in Management) of this Report.

[Supplementary Principle 4.1.1: The Scope of the Delegation of Authority to the Management]

The Company’s Articles of Incorporation, Board of Directors’ Rules and Delegation of Authority Rules set forth clearly and objectively the allocation of authority between the Board and the management, including executive directors and executive officers. The Board retains the powers to resolve the matters that require the Board’s resolution under the Companies Act and/or other relevant laws and regulations, and any other significant management matters such as management plan, business plan, budget, etc., whereas decision-making authority for other operational matters is delegated on an item-by-item basis to the management in accordance with the Delegation of Authorities Rules.

[Principle 4.9: Independence Standards and Qualifications for Independent Directors]

It is the Company’s policy to appoint independent directors who meet the independence standards prescribed by the Companies Act and the Tokyo Stock Exchange.

[Supplementary Principle 4.11 (1): Overall Balance of the Board Composition, and the Policies and Procedures for Appointment]

It is the Company’s policy to maintain a Board with diversified professional expertise and knowledge in order to ensure sound and swift decision making, appropriate supervision of management, and mutual checks and balances between directors. No less than 2 independent outside directors shall be appointed so that the interests of general shareholders are directly represented at the Board.

Regarding how directors are appointed, please also refer to “(4) Policies and Procedures for Nominating Directors and Auditors” in [Principle 3.1: Enhancement of Disclosure]

[Supplementary Principle 4.11 (2): Common Directors and Auditors]

The Company discloses positions concurrently held by each director and auditor nominee in the Notice of Convocation of the Annual Shareholders’ Meeting.

[Supplementary Principle 4.11 (3): Analysis and Evaluation of the Effectiveness of the Board of Directors]

The Company conducted a questionnaire survey on effectiveness of the Board of Directors, and received a high evaluation on the effectiveness from the Board members. Based on these factors, the Company confirms that the Board is functioning in an effective manner.

  • - In principle, Board meetings are held once a month (16 meetings were held in the fiscal year ended March 31, 2017), whereupon the Board engages in discussions and makes decisions on matters that require the Board’s resolution in a timely manner.
  • - Each of the directors and auditors maintains a high attendance rate (100% for 5 directors and 2 auditors, 93.7% for 1 auditor, and 81.2% for 1 director in the fiscal year ended March 31, 2017). The Board meetings secure sufficient time for active discussions.
  • - The Board’s execution of operation is subject to effective discipline, with the Board at times deciding as the result of discussions to revise or revisit proposed items.

The Company will continue to make further efforts to improve the effectiveness of the Board with reflecting the Board members’ opinions in a timely manner.

[Supplementary Principle 4.14.2: Training Policy for Directors and Auditors]

The Company takes the following measures to provide, at the Company’s cost, the directors and auditors with opportunities to acquire knowledge of laws and regulations as required for executing their duties and to better understand the Company’s business and organizational, as well as other training opportunities.

  • - Explanations of each business unit’s businesses and operations to newly appointed directors and auditors by the management executives of each division.
  • - Meetings between outside directors and management executives including one-on-one interviews.
  • - Providing Board members with analyst reports and other objective information regarding the Company’s business on a regular basis.
  • - Providing Board members with opportunities to participate in trade shows and conferences hosted by industry organizations.
  • - Lectures by the Company’s outside counsel on the latest legislative revisions and other legal issues.

[Principle 5.1: Policy for Constructive Dialogue with Shareholders]

It is the Company’s policy to promote constructive dialogue with shareholders through the following mechanisms and initiatives:

  • - The Corporate Planning Division, which is responsible for shareholder/investor relations, is promoting dialogue with shareholders and investors under direct supervision of the President and with the cooperation of the management, accounting, legal and business divisions.
  • - The Company holds regular meetings for shareholders and investors such as semi-annual results briefings and small ad hoc meetings.
  • - The Company holds overseas IR meetings periodically.
  • - The Company actively discloses information to shareholders and investors in Annual Reports and on the Company’s website. The Company actively responds to the inquiries and interview requests of shareholders and investors.
  • - The Company reports, to the President and the Board, the results of dialogue with shareholders and investors, and opinions and concerns received from shareholders for information sharing.
  • - The Company centralizes the control of insider information by establishing the Most Sensitive Trade Secret Committee and appointing an Insider Information Management Manager. The Company also controls insider information in a strict manner in conducting dialogue with shareholders so as not to convey insider information due to a lack of caution.

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