Corporate Governance Structure

Corporate Governance System

The Company conducts a diverse range of business globally. Accordingly, the Company has established a corporate audit governance model of a Company with auditors in which the Board of Directors consisting of Internal Directors and External Directors has been established (to appoint External Directors and liaise with the Audit & Supervisory Board) in order to ensure rapid and efficient decision-making and appropriate supervisory functions in management. The Company has determined that this governance model is functioning effectively as set forth in items (a) and (b) below. Therefore, the Company will retain the current governance structure.

(a) Ensuring rapid and efficient decision-making

The Company ensures rapid and efficient decision-making by appointing Directors who serve concurrently as Executive Officers and are well-versed in the Company’s diverse business activities.

(b) Ensuring appropriate supervisory functions

The Company ensures appropriate supervisory functions by implementing various measures, including appointing External Directors that account for a third or more of the members of the Board of Directors; establishing the Audit & Supervisory Board Member’s Office; fostering collaboration among the Audit & Supervisory Board Members, the Audit Department and the Accounting Auditor; and carrying out advance briefings, on the same occasion, on matters referred to the Board of Directors for both External Directors and External Audit & Supervisory Board Members.

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Board of Directors

The Board of Directors comprises 10 Directors (including four External Directors; nine males and one female. The percentage of female director on the Board is 10.0%), and makes decisions regarding management policy and other important matters and supervises the execution of duties by Directors.

To clearly segregate management and execution, the Chairman of the Board without representative rights and the authority for business execution, in principle, chairs the Board of Directors Meetings.

The term of Board of Directors is one year to clarify management responsibility and flexibly build optimum management structure in response to changing management environment.

Audit & Supervisory Board

The Audit & Supervisory Board comprises five Audit & Supervisory Board Members (including three External Audit & Supervisory Board Members). The Company adopts a corporate audit governance system and each of Audit & Supervisory Board Members is responsible for overseeing Directors in the execution of their duties by attending important meetings, such as the Board of Directors Meetings, and by monitoring business activities and financial conditions in accordance with the auditing policies and plans set by the Audit & Supervisory Board.

The Audit & Supervisory Board Members and the Accounting Auditor are striving to grasp the audit status of each other through measures such as exchanging information at monthly meetings. The Company's Accounting Auditor for the FY2019 is Ernst & Young ShinNihon LLC. The Audit & Supervisory Board and the Audit Department, a department which performs internal audits, exchange opinions at monthly meetings and implement audit operations through close cooperation.

The President holds meetings with the Audit & Supervisory Board Members on a regular basis, reports on execution of duties and exchange opinions. Other Directors, Group CEOs, COOs and Corporate Staff Group General Managers report their duty execution status to the Audit & Supervisory Board Members every year.

Corporate Management Committee

The Corporate Management Committee is an advisory committee for the President and consists of five Representative Directors including the President, two Senior Managing Executive Officers and one Managing Executive Officer. It deliberates important matters related to management.

Committee of Heads of Divisions

The members of the Committee of Heads of Divisions are the President, the representative directors, the Division COOs and Regional CEOs and COOs appointed by the President. They discuss matters pertaining to budgeting, account settlement and financial planning as well as other issues related to the execution of business.

Committee of Executive Officers

The Committee of Executive Officers consists of 33 Executive Officers (five of whom also serve as Director) to communicate management policies issued by the President and other information and discuss matters that affect business execution such as financial performance and results of internal audits.

Nomination Committee

The Nomination Committee is an advisory body to the Board of Directors and the majority of its members are External Directors/Audit & Supervisory Board Members. The Nomination Committee deliberates on nomination of candidates for the positions of Director and Audit & Supervisory Board Member and reports to the Board of Directors.

Committee’s Members: Inside Directors 1, External Directors 2, External Audit & Supervisory Board Member 1
Chairperson: External Director

Governance and Remuneration Committee

The Governance and Remuneration Committee is an advisory body to the Board of Directors and the majority of its members are External Directors/Audit & Supervisory Board Members. The Governance and Remuneration Committee deliberates on the policy for determining remuneration for Directors and Executive Officers as well as appropriateness of the level of remuneration, and reports to the Board of Directors. The committee also conducts evaluation and review concerning the overall Board of Directors, including its composition and operation, and reports to the Board of Directors.

Committee’s Members: Inside Directors 2, External Directors 2, External Audit & Supervisory Board Members 2
Chairperson: External Director

Overview of Corporate Governance Systems

Organization Form Company with auditors
Chairperson of the Board Chairman (except when also serving as President)
Number of Directors 10 (including 4 External Directors)
Number of Audit & Supervisory Board Members 5 (including 3 External Members of Audit & Supervisory Board)

All External directors and audit & supervisory board members are independent officers as defined by the Tokyo Stock Exchange.

Number of Times convened in FY2018 : Major Board and Committee Meetings

Board of Directors 19 times
Audit & Supervisory Board 10 times
Corporate Management Committee 32 times
Committee of Heads of Divisions 3 times
Committee of Executive Officers 4 times

Committees

The Company has established various committees for strengthening of corporate governance. Main committees and their roles are as follows:

Committee Role Chairman Meeting Frequency
Investment and Credit Committee
The committee discusses projects subject to the internal approval (“Ringi”). The Investment and Credit Committee makes decisions on proposals to be submitted to the Corporate Management Committee. Senior Managing Executive Officer, Member of the Board
(Nobuhiro Yabe)
three times a month as a rule
Compliance Committee The committee provides support and guidance with regard to practicing compliance as well as establishment, maintenance and management of the compliance system of the Marubeni Group. Senior Executive Vice President, Member of the Board
(Yukihiko Matsumura)
four times a year, as a rule, and whenever necessary
Sustainability Management Committee The committee deals with the identification and periodic review of “Materiality” which takes into account the ESG (environmental value, social value and governance) point of view as it pertains to business fields as a whole and also operates in areas related to sustainability, including ESG support Senior Managing Executive Officer, Member of the Board
(Nobuhiro Yabe)
once a year, as a rule, and whenever necessary
Internal Control Committee The committee confirms and reviews status of formulation and operation of basic internal control policy in accordance with the Companies Act, drafts their revision proposals, develops and operates system and evaluates effectiveness regarding financial reporting in accordance with the Financial Instruments and Exchange Act and prepares internal control report drafts. Senior Executive Vice President, Member of the Board
(Yukihiko Matsumura)
held as necessary
Disclosure Committee

The committee formulates principles and basic policy drafts regarding disclosure, establishes and improves the internal system regarding statutory disclosure and timely disclosure and judges the significance and appropriateness regarding statutory disclosure and timely disclosure.

Senior Managing Executive Officer, Member of the Board
(Nobuhiro Yabe)
held as necessary

Roles and Functions of External Directors and External Audit & Supervisory Board Members

Roles and Functions of External Directors

External directors offer opinions on business management drawn from their broad experience and high-level perspective, and give advice to better implement corporate governance.
External directors attend the meetings of the Board of Directors and the Committee of Executive Officers, making active contributions from the perspective of internal control. Prior to meetings, External Directors are provided with agendas and fully briefed on management issues and project execution status. Two of the External Directors are members of the Governance and Remuneration Committee (one is the chairman) and two are members of the Nomination Committee (one is the chairman) . One of them is concurrently serving on both committees.

*Please refer to [the Corporate Governance Report]for Reasons of Appointment.

Roles and Functions of External Audit & Supervisory Board Members

External Audit & Supervisory Board Members monitor the directors' execution of duties and draw upon their wealth of professional expertise to offer various recommendations and advice to enhance the Audit & Supervisory Board.
External Audit & Supervisory Board Members attend meetings of the Audit & Supervisory Board and also the Board of Directors and Committee of Executive Officers. In addition, the External Audit & Supervisory Board Members meet with the President on a regular basis, as well as with members of the Audit Department, Corporate Accounting Department, and external auditors, for an exchange of opinions. They receive audit-related information from Full-time Audit & Supervisory Board Member, which they use in the execution of their auditing duties. Two of the External Audit & Supervisory Board Members are also members of the Governance and Remuneration Committee and one is a member of the Nomination Committee.

*Please refer to [the Corporate Governance Report]for Reasons of Appointment.

Executive Compensation

Amounts of executive compensation, details of policies regarding calculation methods used to decide compensation, and methods for making compensation decisions are as follows.
Compensation for directors and Audit & Supervisory Board Members is decided based on limits to the amount of total compensation for directors and Audit & Supervisory Board Members determined by the General Meeting of Shareholders. Compensation for directors is decided through a process involving discussion and formulation of proposals by the Compensation Consultative Committee, a body whose membership consists of a majority of external executives, with the proposals then being approved by the Board of Directors. Compensation for individual Audit & Supervisory Board Members is decided through deliberation by the Audit & Supervisory Board Members.
The remuneration of Directors other than External Directors consists of basic remuneration, which is a fixed amount that is in accordance with the roles of the Directors, performance-linked remuneration, which is linked to consolidated business results in the previous fiscal year, additional pay for Directors, and personal evaluation pay, and this remuneration is decided after reflecting a quantitative and qualitative evaluation of the individual in the basic remuneration portion.
An amount corresponding to 80% of the aggregation of basic compensation and performance-linked compensation is granted in cash, and an amount corresponding to 20% of that amount is granted as stock compensation-type stock options. Stock compensation-type stock options have been introduced with the aim of sharing the benefits and risks of stock price fluctuations with shareholders and further boosting motivation to improve the Company’s stock price and corporate value.
Also, in FY2019 and beyond, the Company will newly introduce stock compensation-type stock options with market value conditions, and this will be with the aim of boosting the incentive to improve future market value. And Audit & Supervisory Board Members, all of whom are completely independent from business execution, consists entirely of basic compensation.

The total of remuneration and other payments for Directors and Audit & Supervisory Board Members in the FY2018

  • Directors -- nine people: the total -- 611 million yen
  • Audit & Supervisory Board Members -- two people: the total -- 80 million yen
  • External Directors/Audit & Supervisory Board Members -- seven people: the total of remuneration, etc. -- 101 million yen
  • The amounts less than 1 million yen are rounded off.
  • By resolution of the General Meeting of Shareholders, the maximum annual amount of remuneration for Directors has been set at “1,100 million yen (including 60 million yen for External Directors)” (by resolution of the 92nd Ordinary General Meeting of Shareholders held on June 24, 2016, with 10 Directors related to the decision [including 4 External Directors]), the maximum monthly remuneration for Audit & Supervisory Board Members has been set at “12 million yen” (by resolution of the 88th Ordinary General Meeting of Shareholders held on June 22, 2012, with 5 Directors related to the decision), and the maximum annual amount of compensation concerning stock compensation-type stock options for Directors (excluding External Directors) has been set at 220 million yen (by resolution of the 92nd Ordinary General Meeting of Shareholders held on June 24, 2016, with 6 Directors related to the decision).
  • The Company abolished the retirement remuneration plan at the close of the 83rd Ordinary General Meeting of Shareholders held on June 22, 2007, and resolved on making a final payment of retirement remuneration accompanying the abolishment of the retirement remuneration plan. In accordance with the resolution, the Company decided to pay retirement remuneration to each Director who is eligible to receive the final payment either at the time of retirement as Director or at the time of retirement as Executive Officer, whichever is later, and to each Audit & Supervisory Board Member who is eligible to receive the final payment at the time of retirement as Audit & Supervisory Board Member. In the FY2018, retirement remuneration was not paid to Directors/Audit & Supervisory Board Members who are eligible to receive a final payment in relation to the abolition of the Retirement Remuneration plan.

Individuals to whom the total amount of compensation paid exceeded 100 million yen in the FY2018:

  • Teruo Asada (Director): The total – 128 million yen (cash compensation of 104 million yen and stock compensation-type stock options worth 24 million yen).
  • Fumiya Kokubu (Director): The total – 156 million yen (cash compensation of 127 million yen and stock compensation-type stock options worth 29 million yen).

Evaluation of the effectiveness of the board of directors

The evaluation of effectiveness of the Board of Directors in the FY2018 was conducted as described below:

I. Evaluation framework and techniques

1. Target persons

  • All Directors (10 people) and Audit & Supervisory Board Members (five people)

Current posts as of December 2018

2.Implementation method

  • Questionnaire (responded to anonymously)

Utilization of outside specialized organization for implementation

3. Evaluation items

  1. (1) Roles and responsibilities of the Board of Directors
  2. (2) Relationship between Board of Directors and management team executives
  3. (3) Organizational design and composition of the Board of Directors, etc.
  4. (4) Qualities and knowledge of Directors (meetings)
  5. (5) Deliberations at meetings of the Board of Directors
  6. (6) Relationship and dialogues with shareholders
  7. (7) Handling of stakeholders other than shareholders
  8. (8) Status of improvements regarding issues in previous fiscal year

4. Evaluation process

With the content of the questionnaire responses as a basis, the Board of Directors carried out deliberations based on assessments and reviews by the Governance and Remuneration Committee regarding the composition and operation, etc. of the Board of Directors and the Board of Directors overall.

II. Overview of evaluations results

Based on assessments and reviews by the Governance and Remuneration Committee, the Board of Directors has carried deliberations, and it has been confirmed that overall an effective Board of Directors is being operated. In regard to the “further enhancement of deliberations on important matters,” which was recognized as an issue in the previous fiscal year’s evaluation, an evaluation will be carried out regarding the responses that were implemented in the current fiscal year (improving reports on business execution by Directors, revising standards regarding matters to be submitted to the Board of Directors in individual cases, etc.), and opinions have been shared expressing expectations regarding further initiatives in the future related to the enhancement of substantive discussions concerning company-wide management policies.
Referring to the assessments and reviews on this occasion, the Company will work on maintaining and improving the effectiveness of the Board of Directors going forward.