Corporate Governance

(as of June 27, 2018)

Business Management Organization and Other Corporate Governance Systems Regarding Decision Making, Execution of Business, and Oversight in Management

1.Organizational Composition and Operation

Structure of Organization Company with Audit & Supervisory Committee.

Directors

Maximum Number of Directors Stipulated in Articles of Incorporation 16
Term of Office Stipulated in Articles of Incorporation 1 year
Chairperson of the Board President
Number of Directors 8
Election of Outside Directors Elected
Number of Outside Directors 6
Number of Independent Directors 6

Outside Directors’ Relationship with the Company (1)

Name Attribute Relationship with the Company*
a b c d e f g h i j k
Yukihiro Yamamura From Other Company
Yuji Nishiura From Other Company
Masato Ogawa From Other Company
Ryoichi Kobayashi From Other Company
Ryuji Matsuda Attorney
Tadao Toyoshima CPA
  • * Categories for “Relationship with the Company”:
  • “○” When the director currently falls or has recently fallen under the category
  • “△” When the director fell under the category in the past
  • “●” When a close relative of the director currently falls or has recently fallen under the category
  • “▲” When a close relative of the director fell under the category in the past
  • a. Executive of the Company or its subsidiaries
  • b. Non-executive director or executive of a parent company of the Company
  • c. Executive of a fellow subsidiary company of the Company
  • d. A party whose major client or supplier is the Company or an executive thereof
  • e. Major client or supplier of the Company or an executive thereof
  • f. Consultant, accountant, or legal professional who receives a large amount of monetary consideration or other property from the Company other than compensation as a director/auditor
  • g. Major shareholder of the Company (or an executive of said major shareholder if the shareholder is a legal entity)
  • h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only)
  • i. Executive of a company with which the Company engages in mutual appointment of outside directors/auditors (the director himself/herself only)
  • j. Executive of a company or organization that receives a donation from the Company (the director himself/herself only)
  • k. Others

Outside Directors’ Relationship with the Company (2)

Name Audit & Supervisory Committee Member Designation as Independent Director Supplementary Explanation of the Relationship Reasons for Appointment
Yukihiro Yamamura ――― Appointed an outside director in recognition of his track record of supervising and serving as a check on directors’ execution of operations based on his wealth of experience and breadth of insight as an executive; designated an independent director since he has no risk of developing a conflict of interest with general shareholders.
Yuji Nishiura ――― Appointed an outside director in recognition of his track record of supervising and serving as a check on directors’ execution of operations based on his wealth of experience and breadth of insight as an executive; designated an independent director since he has no risk of developing a conflict of interest with general shareholders.
Masato Ogawa ――― Appointed an outside director in recognition of his wealth of experience and breadth of insight in corporate management to supervise and serve as a check on directors’ execution of operations; designated an independent director since he has no risk of developing a conflict of interest with general shareholders.
Ryoichi Kobayashi ――― Possesses a wealth of experience and breadth of insight in corporate management, as well as a wealth of experience and a proven track record as an outside auditor for the Company. Appointed an outside director who is an Audit & Supervisory Committee Member to supervise and serve as a check on directors’ execution of operations; designated an independent director since he has no risk of developing a conflict of interest with general shareholders.
Ryuji Matsuda ――― A qualified attorney who possesses extensive expertise in finance and accounting matters and who has a wealth of experience and proven track record as an outside auditor for the Company. Appointed an outside director who is an Audit & Supervisory Committee Member to supervise and serve as a check on directors’ execution of operations; designated an independent director since he has no risk of developing a conflict of interest with general shareholders.
Tadao Toyoshima ――― A CPA who possesses extensive expertise in finance and accounting matters and who has a wealth of experience and proven track record as an outside auditor for the Company. Appointed an outside director who is an Audit & Supervisory Committee Member to supervise and serve as a check on directors’ execution of operations; designated an independent director since he has no risk of developing a conflict of interest with general shareholders.

Audit & Supervisory Committee

Committee’s Composition and Type of Chairperson

Audit & Supervisory Committee
Total Committee Members 3
Full-time Members 1
Directors 0
Outside Directors 3
Chairperson Outside Director
Directors and employees who support the execution of duties by the Audit & Supervisory Committee Assigned

Matters regarding the Independence of the Relevant Directors and Employees from the Executive Officers

The Company designates persons belonging to the Internal Audit Department as the employees that are to assist with the duties of the Audit & Supervisory Committee. In order to ensure the aforementioned employees’ independence from directors involved in operational execution, the Company specifies that persons belonging to the Internal Audit Department are to follow only the instructions and orders of the Audit & Supervisory Committee when providing assistance with its duties, and that decisions on personnel matters concerning the head of the Internal Audit Department, including but not limited to the appointment, transfer, and disciplining thereof, shall require the consent of the Audit & Supervisory Committee.

Cooperation Among Audit & Supervisory Committee, Accounting Auditors, and Internal Audit Department

Coordination between Audit & Supervisory Committee and Accounting Auditors
The Audit & Supervisory Committee and Accounting Auditors meet at the timing of quarterly and full-year results (i.e., a total of 4 times per annum) to report and exchange views. In addition, they arrange forums for exchanging views as appropriate, and incorporate the results of such discussions into the performance of their auditing duties.

Coordination between Audit & Supervisory Committee and Internal Audit Department
The Internal Audit Department regularly reports to the Audit & Supervisory Committee regarding operational audits, and, on an ongoing basis, incorporates the results of such discussions into the performance of its auditing duties.

Voluntary Committee

Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established

Committee’s Name, Composition, and Attributes of Chairperson

Committee Corresponding to Nomination Committee Committee Corresponding to Remuneration Committee
Committee’s Name Remuneration and Nomination Committee Remuneration and Nomination Committee
All Committee Members 5 5
Full-time Members 0 0
Directors 1 1
Outside Directors 4 4
Outside Experts 0 0
Other 0 0
Chairperson Director Director

Supplementary Explanation

In order to ensure the objectivity and transparency of decisions made regarding executive remuneration and candidates for director positions, the Company has at its discretion established a Remuneration and Nomination Committee comprising outside directors and the President and Representative Director. This committee makes decisions regarding the Basic Policy on the Executive Remuneration System, the individual remuneration amounts for directors (excluding Directors who are Audit & Supervisory Committee Members), and the Guidelines on the Nomination Criteria for Directors.

Independent Directors

Number of Independent Directors 6

Matters Relating to Independent Directors

The Company designates as independent directors all outside directors that fulfill the independent director criteria.

Incentives

Incentive Policies for Directors Stock Options

Supplementary Explanation

Stock options are granted based on the Company’s performance, with the number of stock options granted determined based upon the individual’s contribution to the Company’s performance. As of May 31, 2018, the Company had granted 2,029 stock options (202,900shares) to its 6 directors.

Recipients of Stock Options Directors, Outside Directors, Employees, Subsidiaries’ Directors and Subsidiaries’ Employees

Supplementary Explanation

Stock option recipients are determined on the basis of their contribution to the Company’s performance. The Company does not grant stock options to its directors who are Audit & Supervisory Committee Members or to its subsidiaries’ auditors.
As of May 31, 2018, the Company had granted 5,445 stock options (544,500 shares) to a cumulative total of 99 persons.

Remuneration for Directors

Disclosure of Individual Directors’ Remuneration Partial Disclosure

Supplementary Explanation

The total remuneration for the Company’s 6-member Board of Directors (of which, 2 are outside directors) in the fiscal year ended March 31, 2018 was ¥463 million (of which ¥30 million was paid to the outside directors). Three executives received total consolidated remuneration of ¥100 million or more. They were: Yosuke Matsuda, President and Representative Director, who received remuneration of ¥192 million; Philip Timo Rogers, Director, who received remuneration of ¥116 million (including remuneration from consolidated subsidiaries); and Keiji Honda, Director, who received remuneration of ¥104 million.

Policy on Determining Remuneration Amounts and Calculation Methods Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods

The Company’s basic policy and determination process regarding executive remuneration system is as described below. Moreover, in order to ensure the objectivity and transparency of decisions made regarding executive remuneration and candidates for director positions, the Company has at its discretion established a Remuneration and Nomination Committee comprising outside directors and the President and Representative Director. This committee makes decisions regarding the Guidelines on the Executive Remuneration System and the individual remuneration amounts for directors (excluding Directors who are Audit & Supervisory Committee Members).

・Basic Policy on the Executive Remuneration System

  • 1.Directors (excluding Directors who are Audit & Supervisory Committee Members):
    The remuneration system shall be more tightly linked to corporate performance and shall establish a linkage between shareholder value and remuneration, thereby incentivizing the creation of corporate value over the longer term. Remuneration shall comprise base remuneration, which is monetary, and equity remuneration.
  • 2.Directors who are Audit & Supervisory Committee Members:
    In consideration of independence from management, only monetary remuneration shall be made.
  • 3.Individual remuneration amounts shall be set within the confines of the remuneration allocation approved at the General Shareholders’ Meeting and shall be determined based upon a comprehensive consideration of annual earnings and each director’s performance in his/her role and contribution to corporate earnings, remuneration in past years, the need to retain talented human resources, remuneration trends at other comparable companies, and economic conditions.

・Director Remuneration Determination Process

  • 1.Based on the Basic Policy on the Executive Remuneration System, the Remuneration and Nomination Committee decides the individual remuneration amounts for directors (excluding Directors who are Audit & Supervisory Committee Members). The President and Representative Director extends final approval based on the aforementioned decisions.
  • 2.The Directors who are Audit & Supervisory Committee Members shall arrive by discussion at individual remuneration amounts for Directors who are Audit & Supervisory Committee Members based upon the Basic Policy on the Executive Remuneration System.

Supporting System for Outside Directors

The President and Representative Director makes reports as appropriate to the outside directors on key corporate matters and exchanges views with them. The President and Representative Director also arranges opportunities as appropriate for the outside directors to exchange information and views with the executive management.
Business-line managers also at appropriate times make reports to and exchanges views with the outside directors.
The full-time Audit & Supervisory Committee Member makes reports as appropriate to the outside directors who are Audit & Supervisory Committee Members on key corporate matters and exchanges views with them.

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