External Audit & Supervisory Board Member Interview

Audit & Supervisory Board member, independent officer Hidekazu Kubokawa

Governance Underpins
Group Growth Strategies

Audit & Supervisory Board member,
independent officer
Hidekazu Kubokawa
Certified public accountant, certified tax accountant

Q1How do you rate corporate governance at SoftBank?

A1 I think that effective corporate governance at SoftBank is ensured in part by management’s characteristic style of active, open discussion, and strong adherence to the corporate philosophy and vision.

There are two sides to corporate governance. One is observing laws and regulations, and the other is maximizing enterprise value by promoting corporate activities based on growth strategies. The essential thing is to create systems and structures that achieve both of these aspects. SoftBank has the governance system that it needs, and I think that it is maintained in excellent working order thanks to three outstanding traits in the Company’s management.

The first is that the corporate philosophy and vision that form the heart of the Company are always steadfast, and senior management always makes them very clear to ensure they are understood by the executives and employees of the Group. I have served as an Audit & Supervisory Board member for SoftBank for over 20 years since 1989, and I remember Mr. Son declaring his long-term vision for the Company to develop the best infrastructure in the global IT industry at a meeting to announce the medium-term business plan in May 1995, at which he described the Company’s long-term growth strategy. Given that the Internet had yet to become widespread in those years, it’s amazing that he has described the same vision from that time right through to the present. I think this consistent message from top management has ingrained the corporate philosophy and vision in every part of the Group, enabling each organization within it to make the best decisions.

The second key trait in SoftBank’s management is that it really does take on new challenges and evolve. SoftBank’s journey has been one of constant and ambitious growth—we started out in software distribution, and from there we progressed through Internet, broadband, and now we work with mobile communications. We have had both successes and failures along the way as we’ve taken on these challenges, but the experiences have taught us to build systems, either to continue with a success, or to avoid repeating a failure. Sharing these systems has continued to drive the evolution of our management.

The third is a corporate culture of active, open discussion. SoftBank has had an image of being a company that just does whatever Mr. Son decides, but the reality is very different. In fact, Mr. Son has always emphasized the importance of discussion, and he listens very attentively to the opinions of everyone who attends at a meeting. In the Board of Directors meetings, management decisions are taken only after the directors have thoroughly discussed the issue at hand. Another important element that helps to deepen our discussions is that we always have a wealth of data and other related information prepared, and make good use of it. And the directors all speak actively and directly from the wealth of knowledge and experience they have accumulated through their various careers. What’s more, their discussion isn’t just limited to issues for decision and reporting matters—a good deal of time is spent in discussion about medium- and long-term strategies and prospects too. During fiscal 2012 SoftBank conducted major M&As with the eAccess and Sprint deals. It was because management had already been discussing overseas expansion and the medium- to long-term strategy for the mobile business for some time beforehand that they were able to make decisions on these deals so swiftly.

Q2SoftBank always sets ambitious management targets. Do you worry that this might lead to misconduct?

A2 Precisely because we have this corporate culture of ambitiously pursuing growth, management is always careful to ensure that we don’t trip up on important fundamentals like legal compliance and so forth.

As a corporation, SoftBank has an outstanding vision and business strategy, and is aggressively pursuing revenue growth. Recently we have outperformed our competitors in achieving high profit margins, but management has long been focused on profit as the essential yardstick for our performance. This has seen us introduce daily account settlements, separate profit management for each team, and other in-house measures. The management trait I mentioned earlier, about a business always needing to evolve, is something that Mr. Son is always reminding us. To reach these challenging targets we make continuous, daily improvements to generate profits. But at the same time, precisely because we have this corporate culture of ambitiously pursuing growth, management is always careful to ensure that we don’t trip up on important fundamentals like legal compliance and so forth. Mr. Son, in particular, leads by example here. While he insists that targets must be achieved, he certainly doesn’t accept that “any means will do.” He always searches for the best way within the framework of the law and other rules. Not only that, but he always makes time in his busy schedule to exchange opinions with myself and the other Audit & Supervisory Board members on a regular basis. I feel that he has a very enlightened view of governance.

The Audit & Supervisory Board members have an important role in making sure that governance functions effectively. The three external Audit & Supervisory Board members all bring a wealth of experience to their roles, as CPAs, tax accountants, and as a lawyer. We work closely with the full-time Audit & Supervisory Board member using our various expert knowledge and experience to conduct audits from an independent standpoint. Corporate M&A strategies and financial activities continue to grow more complex in structure day by day, and I think SoftBank is right at the forefront of this trend. To ensure proper audits from an independent perspective, it is essential to have Audit & Supervisory Board members who can understand these deals correctly. In this respect, I’d say our current system is functioning extremely well.

Q3What challenges in corporate governance will SoftBank face going forward?

A3 Our main challenges are to further strengthen governance for the entire Group, and to raise our self-awareness as a telecommunications operator even higher.

To ensure that the SoftBank Group continues to grow, it’s important to establish corporate governance not only at SoftBank Corp. but throughout the entire Group. Specifically, for example, we have an Audit & Supervisory Board for the Group made up of the Audit & Supervisory Board members from the core Group companies. This body meets several times each year and receives regular reports from the independent auditor and the full-time Audit & Supervisory Board members of each Group company. Currently, the SoftBank Group has 150 consolidated subsidiaries, which is no small number. “Group companies” for SoftBank includes a wide range from major telecommunications infrastructure companies to brand new venture startups. Part of our role is to propose appropriate organizations to suit each company’s scale and growth stage, appointment of directors and external directors, and voluntary accounting audits. Again, for companies that have been newly brought into the Group through M&As and other methods, we need to make sure that their governance is functioning in line with that of the SoftBank Group. An important challenge here will be to establish governance in our Group companies in Japan and overseas and conduct thorough checks on their management practices.

Finally, our experience in the Great East Japan Earthquake underscored the extremely important responsibility that we telecommunications operators have as providers of a lifeline to the public. SoftBank today has a number of telecommunications companies under its umbrella, and their respective customer bases continue to grow. We need to raise their awareness of their responsibilities as telecommunications operators even further, and encourage them to take steps to merit customers’ trust—things like improving the quality of their communications networks and developing internal systems to deal with emergency situations. As an Audit & Supervisory Board member, I plan to check up on these matters going forward.