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The Company believes that the cornerstone of corporate governance is ensuring management soundness and transparency by establishing a management system that enables quick decision-making to respond promptly to changes in the operating environment, and by practicing timely, appropriate disclosure. To that end, the Company has adopted a Board of Corporate Auditors system and has established a corporate governance system in which the Board of Directors and Board of Corporate Auditors play key roles.
The Company has also adopted an executive officer system to clearly demarcate the supervisory function and the business execution function. To enhance management transparency, the Company has outside directors and outside corporate auditors and seeks to achieve sound management by encouraging cooperation among corporate auditors, the Internal Auditing Division, and independent auditors.
The Board of Directors is composed of eight directors, including two outside directors. In addition to maintaining the number of directors at an optimum level for quick decision making, the Company has reduced the terms of directors to one year in order to clarify the management responsibility of directors and strengthen its management structure.
Based on an executive officer system, the Company also formed the Executive Committee, consisting of executive officers at senior vice president level and higher and corporate auditors, to discuss policies pertaining to key management and operating issues, and the Business Execution Committee, which consists primarily of executive officers and general managers, to monitor the progress of and report on significant matters concerning business execution.
The Board of Corporate Auditors consists of four corporate auditors, including three outside auditors. It decides audit policies and related matters, and reports on the status of audits performed by each auditor. Corporate auditors also attend Board of Directors meetings and other important meetings, examine significant documents related to final decisions, and listen to directors and employees on performance of their duties, thus contributing to a system for sufficiently scrutinizing directors' performance of their duties.
The Internal Auditing Division, has been established as an internal audit unit independent from the business execution divisions. It examines through internal audits whether business execution is being conducted legally and properly according to relevant laws, regulations and Company rules.
The Company has an audit contract with KPMG AZSA & Co. as its independent auditors to audit its accounts. KPMG AZSA & Co. expresses its views on the financial statements as an auditor from an independent viewpoint.
The Company has established a basic policy for the development of internal control systems, as shown below, under Article 362, Paragraph 4, Item 6 of the Company Law and Article 100, Paragraphs 1 and 3 of the Enforcement Regulations of the Company Law. The Company maintains the appropriate execution of operations under the basic policy, laws and regulations, and internal regulations.
The Company's mechanisms of business execution, management oversight, and internal control
Of the Company's eight directors, two are outside directors. The Company believes this number is appropriate for giving advice and participating in decision making from fair and objective standpoints, strengthening the Company's corporate governance.
Outside Director Takayuki Matsui is a professor at the Graduate School of Professional Accountancy of Aoyama Gakuin University. The Company has Mr. Matsui use his expert knowledge in business administration, including internal control, to ensure transparency in the management of the Company and to strengthen corporate governance. Mr. Matsui attended all 13 meetings of the Board of Directors held in FY2010 ended March 31, 2011. He has been designated as an independent director defined in Rule 436-2, Paragraph 1 of the Securities Listing Regulations of the Tokyo Stock Exchange.
Outside Director Hideki Niwaya is engaged in the network solution business of NEC Corporation and uses his extensive experience and knowledge for the management of the Company. He became an outside director at the ordinary general meeting of shareholders held on June 23, 2011.
Of the Company's four corporate auditors, three are outside corporate auditors. We believe this number is appropriate for auditing the directors' execution of their duties from fair and objective standpoints, to strengthen the Company's corporate governance.
Outside Corporate Auditor Harutame Umezawa is qualified as a lawyer and has considerable knowledge in finance and accounting. Using his professional knowledge and viewpoint about the law, Mr. Umezawa audits the directors' performance of their duties from a fair and objective standpoint of an outsider. He attended 12 of 13 meetings of the Board of Directors and all 13 meetings of the Board of Corporate Auditors held in FY2010. Mr. Umezawa has been designated as an independent auditor defined in Rule 436-2, Paragraph 1 of the Securities Listing Regulations of the Tokyo Stock Exchange.
Outside Corporate Auditor Takao Kaneko has been engaged in accounting and auditing for many years and has considerable knowledge about finance and accounting. Taking advantage of his extensive experience and knowledge relating to internal control, Mr. Kaneko primarily audits the legality of business execution from a fair and objective standpoint. He attended all 13 meetings of the Board of Directors and all 13 meetings of the Board of Corporate Auditors held in FY2010.
Outside Corporate Auditor Yasuo Totsuka is dealing with procurement in NEC Corporation. Making full use of his extensive experience and knowledge relating to internal control, Mr. Totsuka chiefly audits the legality of business execution from a fair and objective standpoint. He attended 12 of 13 meetings of the Board of Directors and all 13 meetings of the Board of Corporate Auditors held in FY2010.
There are no special interests between the Company and its outside directors or outside corporate auditors.
The outside directors and outside corporate auditors regularly exchange information and consult with the Internal Auditing Division and staff departments, receiving reports on business execution at meetings of the Board of Directors and on other occasions.
The outside corporate auditors cooperate with the independent auditors, exchanging information and consulting with them regularly at meetings of the Board of Corporate Auditors and on other occasions.
The Internal Auditing Division cooperates with the corporate auditors. The division reports the results of audits carried out under an audit plan for each fiscal year to the corporate auditors once a year and exchanges opinions with them as necessary.
The corporate auditors, the Internal Auditing Division, and the independent auditors cooperate with each other, exchanging opinions as necessary for statutory audits.
