Corporate Governance System

Corporate Governance System

Governance system

Board of Directors

  • The Board of Directors consists of 13 directors, including six external directors, and their terms of office shall last until the conclusion of the Ordinary General Meeting of Shareholders held with respect to the final fiscal year ending within one year after election.
  • With a view to continuously enhancing its effectiveness, the Company's board of directors has been carrying out evaluations of the effectiveness of the board of directors once each year since 2018, with the support of an independent organization. For this fiscal year, a new evaluation methodology has been formulated that is focused on a more practical perspective, based on the recognition that a framework of governance involving the board of directors has largely been successfully established, as a result of the improvement initiatives derived from the evaluations undertaken on the past two occasions by the independent organization commissioned to conduct questionnaire-based surveys, interviews, etc.

    Evaluation process

    1. (1)
      Subjects of evaluation: Three representative directors, four external directors, and four audit & supervisory board members
    2. (2)
      Method of evaluation: Questionnaire-based survey and interview
    3. (3)
      Evaluation period: From January 2021 to June 2021
    4. (4)

      Evaluation process

      The effectiveness evaluation for FY2020 was carried out as follows.

      • -
        January 2021: Review of the key points of the evaluation and the items to be included in the questionnaire, based on the opinions of the independent organization
      • -
        February 2021: Distribution and collection of the questionnaire (compiled and analyzed by the independent organization)
      • -
        March 2021: Interviews based on the results of the analysis of the questionnaire (conducted by the independent organization)
      • -
        April 2021: Decision by the chairperson of the board on the issues to be addressed and a draft of the strategic direction for improvement, based on an identification of such issues and associated recommendations presented by the independent organization
      • -
        June 2021: Decision at the board of directors on the issues to be addressed and the strategic direction for improvement as a result of the evaluation of the effectiveness of the board of directors for this fiscal year
    5. (5)
      Key points of the evaluation
      1. Ⅰ.
        Ensuring that an autonomous PDCA cycle has been established at the board of directors (clarification of the annual and medium- to long-term targets at the board of directors, quality/expertise/diversity of the board of directors, validity/adequacy of the themes to be deliberated, validity/adequacy of the decision-making process regarding executive nominations and remuneration, adequacy of the information provided to the external directors, validity/adequacy of audits as a significant component of the supervisory function, etc.)
      2. Ⅱ.
        Critical themes on both offensive and defensive aspects of the supervision by the board of directors (supervision of SDGs/ESG initiatives, monitoring of expectations/requirements for stakeholders, supervision over the status and others of business model transformation, supervision of group governance and group risk management, etc.)
      3. Ⅲ.
        Adequacy of engagement in tackling the issues pointed out in the previous fiscal year, and the status of improvement
    6. (6)

      Results of the evaluation

      Summary
      The Company's board of directors confirmed that the vision of corporate governance envisaged by the Company has largely been materialized, with its effectiveness adequately ensured. Good scores were also given to the expertise/skill balance of the board of directors and the adequacy of information sharing, such as through pre-meeting briefings to the external directors. Supervision over the status and others of business model transformation particularly received a high evaluation, for speedy and in-depth discussions.
      Status of the response to the issues pointed out in the previous fiscal year
      Many opinions indicated that improvement was made as a whole regarding the points identified as issues to be addressed in the evaluation for the previous fiscal year. In particular, a high evaluation was given to the speedy actions in sharing of information on the deliberation at the nominating committee, as well as in establishing a system of reporting on the SDGs/ESG initiatives. On the other hand, not a few respondents voiced the concern that more should be done to enhance risk monitoring across the Group, as well as to further deepen the operation of the board of directors so that more substantial discussion is materialized.
      Issues to be addressed as identified in this fiscal year; group strategies in line with the pace of expansion of the Group, enhancing the supervision of the status of execution of risk management, ensuring sufficient time for discussion on strategies at the board of directors, and reflecting the opinions of the external directors in setting the agenda for board of directors and other meetings.

    With regard to the aforementioned issues, the Company's board of directors will remain engaged in initiatives to enhance its effectiveness, in view of the strategic direction of the Company and the business environment it faces.

  • The nominating committee, the remuneration committee and the SDGs promotion committee are established voluntarily as advisory bodies to the Board of Directors. The nominating committee and the remuneration committee comprise the CEO and four Independent External Directors (elected by a resolution of the board of directors) to ensure independence of the committees. The SDGs promotion committee is headed by the representative director, president & CEO, who is the officer ultimately in charge of SDGs promotion. In addition, the risk management committee is established as an internal committee.
  • The agenda items for discussion in the Board of Directors are set forth in the Articles of Incorporation and the Board of Directors Rules. In addition, the Company has introduced the executive officer system with the aim of strengthening corporate governance and speeding up decision-making and execution.

The Company stipulates the maximum number of directors at 15 in the Articles of Incorporation. The Board of Directors elects director candidates who are considered the most suitable for the position, regardless of their nationality, ethnicity, gender, or age, based on discussions by the nominating committee. At present, there are 13 directors serving, all of whom have a wealth of knowledge and experience regarding business management. Five Independent External Directors have been elected, and they hold constructive and lively discussions at the Board of Directors meetings from diverse perspectives, including outside perspectives

Audit & Supervisory Board Members
and the Audit & Supervisory Board

The Audit & Supervisory Board consists of four members, two of whom are external members (two full-time members and two part-time members).
The Internal Audit & Supervisory Board members consist of one full-time member and one part-time member. The full-time Internal Audit & Supervisory Board member has extensive knowledge and experience in the fields of corporate governance and compliance accumulated through serving as an executive officer, CCO, and head of the General Affairs Division of the Company, as well as in corporate management accumulated through serving as the president of a Group company. The part-time Internal Audit & Supervisory Board member is a certified public accountant and has extensive knowledge and experience in accounting, including many years in charge of the accounting unit of SoftBank Group Corp. The external Audit & Supervisory Board members consist of one full-time member and one part-time member, both of which are fully independent. The full-time external Audit & Supervisory Board member has extensive experience in heading compliance and risk management divisions of a financial institution. The part-time external Audit & Supervisory Board member has extensive knowledge and experience as a certified public accountant.

The Audit & Supervisory Board members, including the external Audit & Supervisory Board members, attend Board of Directors meetings to monitor and verify the status of decision-making by the Board of Directors and the fulfillment of its supervisory duties over each director. They also audit the execution of duties by the directors, etc., as well as the directors and the Audit & Supervisory Board members of major subsidiaries, through regular interviews and other means.

The Audit & Supervisory Board establishes an audit policy, audit plan and priority audit items for each fiscal year. It meets once a month in principle, receives regular reports from each department related to the internal control system to confirm the status of the execution of duties by directors based on the priority audit items, and confirms the appropriateness of business execution. In addition, the Audit & Supervisory Board receives quarterly reports on the progress and results, etc. of audits from the Independent Auditor, and exchanges information and opinions with them. It also receives explanations of individual matters from directors, etc. as necessary.

The Audit & Supervisory Board office has been established to support the duties of all the Audit & Supervisory Board Members, including the external members. The office comprises dedicated personnel who act under the directions of the Audit & Supervisory Board Members to gather information, investigate matters, and give other assistance.

Internal audits

The Internal Audit Department consisting of 28 members conducts internal audits of the overall duties of the Company as an organization directly under the CEO, and also conducts audits mainly of subsidiaries as a parent company. The Internal Audit Department mainly evaluates business compliance with laws and regulations and effectiveness of internal control, and reports the results of internal audits to the CEO and the Board of Directors of the Company while explaining them to the Audit & Supervisory Board Members.

Supporting System for External Directors and/or External Audit & Supervisory Board Members

Briefing session of the Board of Directors meetings

The Company seeks to ensure that all officers, including the external Audit & Supervisory Board members, can participate fully in the Board of Directors meetings having fully grasped the specific details of the agenda for discussion. The secretariat to the Board of Directors therefore provides them with materials for the Board of Directors meetings beforehand, including supplemental briefings and other information as required.
Prior to each Board of Directors meeting, a briefing session is held for the external directors and Audit & Supervisory Board members. With the CFO and/or other appropriate officers attending all these meetings, the departments in charge provide detailed explanation of the agenda items, followed by a question-and-answer session to ensure a clear understanding from the external directors and Audit & Supervisory Board members. In addition, in cases where issues are raised by external directors at such briefings, the department in charge clarifies such issues before the Board of Directors meeting.

Cooperation between the external directors
and the Audit & Supervisory Board

Approximately once every half year, the external directors and the Audit & Supervisory Board members hold informal meetings. The Audit & Supervisory Board members share opinions on the management interview results and the recent management issues, so that external directors can further deepen their understanding of the Company.

Cooperation between the external directors
and the Independent Auditor

The external directors and the Independent Auditor hold information sharing meetings once a year. They exchange opinions on topics including the business environment, the status of internal controls, and governance issues, in the presence of the CFO and/or other appropriate officers.

Transactions with controlling shareholder

Prior to their approval, all transactions at the Company are deliberated by specialist divisions such as the Accounting, Finance, and Legal divisions, based on internal regulations and according to the scale and materiality of the transaction. The process for approval is structured to enable audit and supervisory board members and the Internal Audit Department to check on the details at all times.
Related party transactions are monitored regularly based on the Related Party Regulations, while the status of transactions is disclosed in the Annual Securities Report and non-consolidated financial statements, and the board of directors oversees conflicts of interest.
With regard to important transactions that fall under the category of transactions with controlling shareholders, from the perspective of protecting minority shareholders, we take measures to ensure fairness and to avoid conflicts of interest. We obtain opinions from the external directors and the external Audit & Supervisory Board members, or other advisors who have no vested interest in the controlling shareholders that the transactions are not disadvantageous to minority shareholders. We also disclose the information.

Cooperation among Audit & Supervisory Board Members, Independent Auditors and Internal Audit Departments

Cooperation between the Audit & Supervisory Board Members
and the Independent Auditor

The Audit & Supervisory Board Members receive briefings from the Independent Auditor (Deloitte Touche Tohmatsu LLC) on the audit policy and audit plan, and exchange opinions. In addition to receiving reports on the main items to be audited and the method and results of audit, regarding the audit during and at the end of the fiscal year (including quarterly review), Audit & Supervisory Board Members cooperate with the Independent Auditor mainly by accompanying the Independent Auditor on the on-site audit and witnessing the audit.

Cooperation between the Audit & Supervisory Board Members
and the Internal Audit Department

The Audit & Supervisory Board Members regularly provide opportunities to exchange information with the Company's Internal Audit Department and Internal Control Division, cooperating organically with them including requesting them to conduct an investigation as necessary.
In particular, the Audit & Supervisory Board Members confirm the progress of the internal audit plan and exchange opinions with the Internal Audit Department every month such as by holding regular meetings attended by full-time Audit & Supervisory Board Members. In addition, the general manager of the Internal Audit Department reports the internal audit plan and results, among other matters, to the Audit & Supervisory Board Members semi-annually. Regarding the report of audit results to representative directors, materials are shared each time.

Cooperation between the Independent Auditor
and the Internal Audit Department

The Independent Auditor receives briefings from the Internal Audit Department on the audit plan and, when necessary, on the results of internal audits and other matters. The Internal Audit Department receives regular briefings from the Independent Auditor regarding audit results and other matters. Moreover, both parties cooperate with each other as necessary by exchanging information and opinions, among other measures.

Status of audit by the Independent Auditor

(a) Name of the independent auditor

Deloitte Touche Tohmatsu LLC.

(b) Consecutive auditing period

20 years

(c) Certified public accountants who executed the audit duties of the Company

Designated engagement partners: Mr. Tomoyasu Maruyama, Mr. Takafumi Shimodaira, Mr. Yusuke Masuda

(d) Composition of assistants for the audit duties of the Company

32 certified public accountants and 82 others

Reasons for Adoption of
Current Corporate Governance System

The Company has established the Board of Directors as a decision-making body for important matters and an oversight body for the status of business execution. The Board of Directors also plays a role of steering management to improve the long-term enterprise value. At present, the Board of Directors consists of 11 directors, including four external directors, and makes management decisions following “appropriate investigation” and “thorough consideration.”
In addition, the Company has established the Audit & Supervisory Board to conduct efficient and effective audits regarding the status of execution of duties by directors. The Audit & Supervisory Board consists of four Audit & Supervisory Board Members, including two external Audit & Supervisory Board Members, and formulates the “audit policy,” “audit plan” and “audit method.” Audit & Supervisory Board Members carry out audit activities in accordance with this policy and plan.
Moreover, the Company has introduced the executive officer system to ensure clarification of the management supervisory function, strengthening the business execution function of the Board of Directors, and expediting management.
The current system is thus selected because the Company judges that its corporate governance is functioning effectively.