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Management Information

Corporate Governance

As of June 26,2018

Corporate Governance System

1. Outline of corporate governance system

The Board of Directors of SECOM CO., LTD.("the Company"), of whom three are outside directors, makes decisions pertaining to business execution and other corporate matters. Executive officers, led by the President and Representative Director, are responsible for business execution. Audit & supervisory board members, of whom three are outside audit & supervisory board members, and the Board of Directors coordinate with internal audit departments, to audit and oversee directors and executive officers in the discharge of their duties. The Company has adopted the Audit & Supervisory Board System.
Pursuant to the provisions of Article 427, paragraph 1 of the Companies Act, the Company has entered into a contract with each of its three outside directors and three outside audit & supervisory board members that limits liability for compensation for damages under Article 423, paragraph 1 of the Companies Act. The contract states that:

(1) In the event the outside director or the outside audit & supervisory board member is liable to compensate the Company for damages due to negligence in the performance of his or her duty, compensation shall be limited to the minimum amount as provided for in Article 425, paragraph 1 of the Companies Act.
(2) The limitation on compensation described in (1) shall be restricted to instances in which the outside director or the outside audit & supervisory board member has discharged his or her duties in good faith and the liability has not resulted from gross negligence.
Outline of corporate governance system

2. Reasons for adoption of corporate governance system

The Company has adopted an executive officer system with the aim of strengthening field divisions and enhancing customer service systems by expediting business execution and clarifying responsibilities and authority. Audit & supervisory board members including three outside members are appointed to fulfill the Company's responsibility to conduct independent oversight of management performance that take into account the interests of stakeholders. Moreover, three outside directors are appointed to ensure the accountability and objectivity of the management based on the perspectives from the outside when the Company makes a decision.

3. Status of internal control system

To comply with Article 362, paragraph 4, Item 6 of the Companies Act, the Board of Directors passed a following resolution regarding the Company's basic policy on the establishment of an internal control system, i.e., the system under which execution of duties by directors is ensured to comply with laws and regulations and the Articles of Incorporation, and the system under which the Company and the group of enterprises consisting of the Company and its subsidiaries ensure to properly execute their businesses.

(1)
General

This resolution manifests the basic policy regarding the internal control system of the Company to be specifically established by the President and Representative Director based on Article 362, Paragraph 5 of the Companies Act. The internal control system based on this resolution shall be established urgently by Executive Officers in charge, and shall be constantly reviewed and improved.

(2)
System under which the execution of duties by Directors and employees is ensured to comply with laws and regulations and the Articles of Incorporation

Directors and employees are required to act in accordance with the SECOM Group Code of Employee Conduct, which sets behavioral standards for the execution of duties, including compliance with laws and regulations, and the Article of Incorporation. The SECOM Group Code of Employee Conduct is based on the philosophy of SECOM, which we have followed since the establishment of the business. These ethical guidelines prescribe ideals covering the official and private affairs of all executives and employees and action standards (including the blocking relationships with anti-social forces) to be followed in the execution of specific daily duties. As such, these guidelines provide the basis of all actions. The compliance management system is as follows:

(i)

From the start, compliance with laws and regulations and the Articles of Incorporation has been an indispensable requirement of our business, and we have always sought to operate in strict adherence to this spirit. Therefore, compliance is a part of the Company’s daily routines, which should not require a system in which a specific section or manager is responsible for implementation. Each and every employee is at the front line of promoting the code of conduct, including legal compliance. The implementation of guidelines is carried out by the line managers of the organization. Further control is provided by the Executive Officers in charge of departments under their control, with the President and Representative Director providing companywide control.

(ii)

The Executive Officers in charge of each area are responsible for having thorough knowledge particularly of regulations related to their duties and the relationships of such regulations with their own operations. They are responsible for proposing responses to any revisions of laws to the President and Representative Director. The Legal Affairs Department and other relevant departments and sections support them, providing cross-organization coordination.

(iii)

Following the orders of the President and Representative Director, the Audit and Compliance Department provides cross-organizational inspection in a timely manner over the execution of duties, indicating how to improve morale through the observance of laws and regulations and the Company’s rules and at the same time pointing out matters that need correction. The Audit and Compliance Department will promptly report the findings of the inspection to the President and Representative Director.

(iv)

When executives and employees of the Company become aware of unethical actions, they have the obligation to report such actions to the proper superior without hesitation. A “Hot Helpline” is established to facilitate direct contact with the Audit and Compliance Department if corrective actions are not taken even after reporting to superiors or it is difficult to report. Pursuant to the “Basic Policy of the SECOM Group for Compliance,” the Company will keep the reported matters confidential, and promptly take necessary investigation and appropriate measures. The reporter will suffer no disadvantage on the grounds of such report.

(v)

The Company establishes a standing Organizational Culture Committee, chaired by the President and Representative Director. The Organizational Culture Committee examines important organizational culture-related issues (including compliance-related matters), which are the cornerstone of developing and maintaining the corporate organization, and determines important official commendations and punishments.

(vi)

Revisions of the SECOM Group Code of Employee Conduct and/or critical compliance-related matters are undertaken after discussion with the Organizational Culture Committee and subject to the approval of the Board of Directors after obtaining the opinions of the Audit & Supervisory Board Members.

(vii)

Basic plans and policies concerning internal controls related to financial reporting are determined and evaluated in accordance with the standards of the Business Accounting Council.

(3)
System under which information regarding execution of business by Directors shall be maintained and controlled

Information regarding the execution of duties of Directors (minutes of the Meetings of the Board of Directors and decision-making documents), etc. shall be properly maintained, administered (including destruction) pursuant to the rules of the Company, which will be amended upon reviewing the operating conditions if necessary.

(4)
System regarding control of risk of loss and other system

(i)

The Company’s approach to risk management is embedded in day-to-day business activities, with acknowledgement that risk management itself is the Company’s business. Executive Officers in charge, under the direction of the President and Representative Director, analyze and assess business risk and fraud risk in the operational areas for which they are responsible, and revise established rules and manuals as conditions change. Rules and manuals are based on risk analysis and assessment, and stipulate preventive measures, prompt and appropriate communication and emergency preparedness when incidents occur, daily risk monitoring and other systems.

(ii)

The Executive Officer in charge shall report to the President and Representative Director and the Audit & Supervisory Board on the results of risk analysis and assessment.

(iii)

Any important changes of the Company’s risk control system shall be subject to the approval of the Board of Directors after obtaining the opinions of the Audit & Supervisory Board Members. The risks at times of large scale calamities and at ordinary times are as follows.

 Risk CategoryExample
Large scale calamity (1) Large scale calamity risk Earthquake, wind, flood, volcanic disasters, radiation leakage, etc.
Ordinary times (2) Compliance risk Noncompliance with “Constitution of SECOM’s Business and Operation,” “SECOM Group Code of Employee Conduct,” other internal rules and guidelines, etc., risk accompanied by establishment or changes in regulations (in the area of tax system, medical system, etc.), breach of law, etc.
(3) System risk Information system shut down, electronic data extinguishment, large scale blackout, wide area circuit disturbance, ICT (information and communication technology) related risk, etc.
(4) Service providing risk Risk incurred when providing services (Accidents related to security, fire alarm or equipment maintenance businesses, etc.)
(5) Administrative work and accounting risk Input error or input omission in administrative or account processing, estimation error for allowance, etc.
(6) Others Offence from outsiders (groundless rumor, calumniation, theft, terror, etc.), risk related to M&A, risk related to new system development, other risk related to business infrastructure (fire on the Company’s premises, pandemic influenza, disease epidemic, etc.), etc.
(5)
System by which efficient execution of duties of Directors shall be ensured

(i)

All Directors shall carry out the operation and execution of business on the basis of the “Constitution of SECOM’s Business and Operation” so that they may share the ideas essential to the execution of the duties such as decision making for management by the Board of Directors and decision making for the execution of duties by the Directors.

(ii)

On the basis of the preceding item, the Company, aiming to implement the execution of duties efficiently, introduces the system of Executive Officers so that decision making and the execution of business shall be further facilitated.

(iii)

The Company develops the IT system for dissemination of notices, etc., and decision making by managerial decision requests, and maintains the system for swiftly enabling full introduction and implementation.

(iv)

The Company will share the medium and long-term business vision, and for the purpose of the accomplishment thereof, the Board of Directors will design an annual business plan and deliberate the progress of the plan.

(6)
System under which the group of enterprises consisting of the Company and subsidiaries is ensured to properly execute its business

(6-1)

System under which the execution of duties by Directors, etc. and employees of subsidiaries is ensured to comply with laws and regulations and the Articles of Incorporation

(i)

Abiding by the “Constitution of SECOM’s Business and Operation,” each of the subsidiaries shares the SECOM Group Code of Employee Conduct, which applies to all executives and employees. United by these guidelines, the executives and employees work to accomplish the corporate goals in an appropriate manner.

(ii)

Each of the subsidiaries carries out IT controls in conformance with the “Basic Policy of the SECOM Group for Information Security.” The Company’s IT Executive Officers conduct timely inspections covering the IT management of major subsidiaries.

(iii)

The “SECOM Group Management Committee,” which is chaired by the Company’s President and Representative Director and whose members are composed of the presidents of major subsidiaries and other parties appointed by the chairperson, works to ensure that appropriate operations are carried out. It accomplishes this goal by conducting discussions of issues related to the Group’s internal controls in an effort to share Group information and operating philosophy. Where necessary, the President and Representative Director reports the results to the Board of Directors and the Audit & Supervisory Board.

(iv)

The President and Representative Director of the Company issues orders to the internal audit departments (Audit and Compliance Department and Group Governance Department) to inspect subsidiaries, if necessary. The subsidiaries accept the inspection by the Company, and at the same time promote the understanding and improvement of compliance-related issues by exchanging information with the Company. Furthermore, the Company establishes the whistle-blowing system “Group Head Office Helpline” which enables executives and employees of subsidiaries to directly report to the Company’s Group Governance Department, whenever they become aware of any non-compliance. Pursuant to the “Basic Policy of the SECOM Group for Compliance,” the Company will keep the reported matters confidential, and promptly take necessary investigation and appropriate measures. The reporter will suffer no disadvantage on the grounds of such report.

(v)

The Audit & Supervisory Board Members of the Company visit major subsidiaries and conduct audits regarding internal controls.

(vi)

The Company establishes a liaison meeting with Group Audit & Supervisory Board Members after discussion with its Audit & Supervisory Board in an attempt to share information.

(6-2)

System under which the matters related to the execution of duties by Directors, etc., of subsidiaries are reported to the Company

In order to enhance Group synergy leading to the achievement of the business vision by the entire SECOM Group, the Company establishes and implements the “Basic Rules for SECOM Group Corporate Management,” which clarify the guidelines for the reporting of the important items, the items to be coordinated in advance with the Company and the items to be approved by the Company.

(6-3)

Rules and other systems for controlling risks of loss of subsidiaries

Pursuant to the “Meaning of the Risk Control and Risk Control Basic Policy for SECOM and SECOM Group,” the subsidiaries develop risk control systems. Furthermore, upon the occurrence of important events, the subsidiaries will take appropriate measures under the Company’s control.

(6-4)

System which ensures that Directors, etc., of the subsidiaries execute their duties efficiently

(i)

All Directors of the subsidiaries will efficiently carry out the operation and execution of business on the basis of the “Constitution of SECOM’s Business and Operation.”

(ii)

The Company and the subsidiaries will formulate the business plans for the next year based on the business vision by the entire SECOM Group, and confirm the progress of the plans.

(7)
Matters related to employees to assist duties of Audit & Supervisory Board Members when Audit & Supervisory Board Members requests to do so

(i)

The Company establishes the system to assist audit duties, by establishing the Office of Audit & Supervisory Board manned by at least two employees who are fully familiarized with the exclusive duties and internal situations.

(ii)

The assistants for the Audit & Supervisory Board Members may conduct investigations necessary for the audit by the Audit & Supervisory Board Members, following the instructions of the Audit & Supervisory Board Members.

(8)
Matters related to the independence of the employees in item (7) from Directors and ensuring the effectiveness of the instructions of the Audit & Supervisory Board Members

Transfer and evaluation of the assistants for the Audit & Supervisory Board Members shall be subject to the approval of the Audit & Supervisory Board. The assistants who received necessary instruction on audit duties by Audit & Supervisory Board Members shall not be subject to any instruction or order from Directors and Executive Officers and employees with respect to the subject audit duties, nor be obligated to report to them.

(9)
The following systems and other systems under which any report is made to Audit & Supervisory Board Members

(9-1)

System under which Directors and Accounting Advisors and employees make any reports to the Audit & Supervisory Board Members

(i)

Upon discussion with the Audit & Supervisory Board, the following matters shall be considered as the matters to be reported by Directors to the Audit & Supervisory Board Members.

(1)

matters resolved by the Organization Culture Committee and other committees;

(2)

matters likely to be materially harming the Company;

(3)

important matters relating to monthly business conditions;

(4)

important matters relating to internal audit and risk management;

(5)

material violation of laws and regulations or the Articles of Incorporation; and

(6)

important matters from viewpoint of compliance.

(ii)

Notwithstanding (i) above, the Audit & Supervisory Board Members may, where necessary and in a timely manner, request that Directors and employees make a report.

(iii)

The matters reported to the “Hot Helpline” will be reported to the Audit & Supervisory Board Members from the Audit and Compliance Department.

(9-2)

System under which persons executing duties as the subsidiary’s Directors, Accounting Advisors, Audit & Supervisory Board Members, Executive Officers, members who execute the business, etc., other persons equivalent to such persons, and employees, or any persons receiving reports from these persons, make reports to the Audit & Supervisory Board Members

The matters reported to the “Group Head Office Helpline” will be reported to the Audit & Supervisory Board Members from the Group Governance Department.

(10)
System which ensures that the persons who made the reports under (9) above will not be treated disadvantageously on the grounds of such reports

Pursuant to the “Basic Policy of the SECOM Group for Compliance,” the Company will keep the reported matters confidential, and promptly take necessary investigation and appropriate measures, while the reporter will suffer no disadvantage on the grounds of such report.

(11)
Matters regarding the policies for the procedures of the advance payment or reimbursement of expenses incurred for the execution of duties by the Audit & Supervisory Board Members and other processing of expenses or debts incurred for the execution of such duties

The Company bears the expenses incurred for the execution of duties by the Audit & Supervisory Board Members.

(12)
System under which audit by Audit & Supervisory Board Members is ensured to be performed efficiently

(i)

The Company establishes the system under which the Audit & Supervisory Board shall regularly hold meetings with the President and Representative Director and the Accounting Auditor, to exchange opinions so that audits shall be performed efficiently.

(ii)

The Audit & Supervisory Board Members attend the meetings of the Board of Directors, attend important meetings to exchange opinions regarding overall management-related matters if necessary, and conduct periodical interviews with Directors and employees of the Company and the subsidiaries.

(iii)

The Company ensures that the Audit & Supervisory Board may retain attorneys-at-law at its discretion and, if necessary, have opportunities to retain and consult professional accountants with respect to their audit duties.

Internal Audits and Audits by Audit & Supervisory Board Members

1.

Organization of internal audits and audits by audit & supervisory board members

Audit & supervisory board members and the Audit & Supervisory Board

The Audit & Supervisory Board comprises five members, of whom two are full-time audit & supervisory board members and three are outside audit & supervisory board members. In principle, the Audit & Supervisory Board is held once every month. The Company appoints persons who are well versed in the Company's businesses and internal affairs, as well as in finance and accounting, to serve as full-time audit & supervisory board members. For outside audit & supervisory board members, the Company appoints persons who are independent of the management team, have extensive knowledge of management, legal, financial and other matters and are capable of providing appropriate oversight and supervision of management.
Audit & supervisory board members attend almost all meetings of the Board of Directors, as well as other important meetings, exchange opinions with directors and others on overall corporate management, collect reports on the discharge of duties from directors and other pertinent individuals and conduct audits focused on the possible occurrence of violations of laws, regulations, the Company's Articles of Incorporation and/or shareholders' interests. The Audit & Supervisory Board also conducts audits of the Company's general business activities, as well as those of subsidiaries and affiliates, in accordance with the annual audit plan.

Office of Audit & Supervisory Board Members

The Office of Audit & Supervisory Board Members, which is administered by the Audit & Supervisory Board, comprises a minimum of two full-time assistants who are well versed in the Company's businesses and internal affairs. These employees, who are assigned exclusively to this office, operate independent of the directors and are not subject to instructions or orders from directors, executive officers or other employees with respect to the discharge of their auditing duties. Transfers and evaluations of employees assigned to the Office of Audit & Supervisory Board Members are subject to approval by the Audit & Supervisory Board.

Internal Audit Departments

As internal audit departments, the Company established the Audit and Compliance Department and the Group Governance Division. The Audit and Compliance Department conducts cross-organizational inspections of administrative practices and the status of operations independent of day-to-day operations that aim to ensure business is conducted in an appropriate manner mainly for the Company. The Audit and Compliance Department also functions as a whistleblower program for employees who wish to report incidents or seek advice regarding compliance. The Group Governance Division endeavors to understand and improve compliance-related issues of SECOM Group by inspecting and instructing the subsidiaries, as well as exchanging information.

Organizational Culture Committee

The Company has established the Organizational Culture Committee, a standing committee chaired by the President and Representative Director that is tasked with examining key corporate culture-related issues, including compliance issues, as well as with determining important official commendations and punishments.

2.

Cooperation among internal audits, audits by audit & supervisory board members and accounting audits and relations with internal control departments

Regular meetings between the Representative Director and the audit & supervisory board members

Audit & supervisory board members hold regular meetings (once every month) with the Representative Director, during which they report on the results of audits and other matters and exchange opinions with the President and Representative Director on important management-related tasks with the aim of ensuring common understanding.

Meetings between audit & supervisory board members and accounting auditors

Audit & supervisory board members hold regular meetings (six times annually) with the accounting auditors, as well as additional meetings if necessary, for the purpose of exchanging opinions and information. The audit & supervisory board members receive explanations from the accounting auditors regarding the annual audit plan and audit results, and exchange opinions. If necessary, audit & supervisory board members also act as witnesses during audits and closing meetings conducted by the accounting auditors.

Cooperation with internal audit departments and other departments

Audit & supervisory board members hold regular meetings (once every month) with the Audit and Compliance Department, where they receive reports on internal audit results and exchange opinions. They receive reports on the results of inspections on subsidiaries and exchange opinions and information with the Group Governance Department. If necessary, to ensure the efficiency of audits, audit & supervisory board members also request internal audit departments to conduct investigations.

Outside Directors and Outside Audit & Supervisory Board Members

1.

Number of outside directors and outside audit & supervisory board members and relationships (personal, financial, business or otherwise) of these individuals with the Company

The Company has appointed three outside directors and three outside audit & supervisory board members. Except for transactions relating to the common services the Company provides, relationships (personal, financial, business or otherwise) of outside directors and outside audit & supervisory board members with the Company are as follows.

NameRelationships with the Company(personal, financial, business or otherwise)
Takaharu HiroseMr. Takaharu Hirose has served as a chairman and representative director of Monitas, Inc. There is no special interest regarding business or otherwise relationships between Monitas and the Company, except for the Company's services in the ordinary course of business. There is no concern that independence between Monitas and the Company is suspected, or a conflict of interest with general stockholders arises. Therefore, the Company considers that Mr. Takaharu Hirose has independence of expressing his views from an objective or neutral viewpoint. Since Mr. Takaharu Hirose maintains the independence in appearance and can exert the effective function of management supervision with consideration for interests of general stockholders, the notice of outside director, Mr. Takaharu Hirose being an independent officer was submitted to Tokyo Stock Exchange, Inc.
Hirobumi KawanoMr. Hirobumi Kawano has served as a special advisor, Japan Oil, Gas and Metals National Corporation (JOGMEC). There is no special interest regarding business or otherwise relationships between JOGMEC and the Company, except for the Company's services in the ordinary course of business. There is no concern that independence between JOGMEC and the Company is suspected, or a conflict of interest with general stockholders arises. Therefore, the Company considers that Mr. Hirobumi Kawano has independence of expressing his views from an objective or neutral viewpoint. Since Mr. Hirobumi Kawano maintains the independence in appearance and can exert the effective function of management supervision with consideration for interests of general stockholders, the notice of outside director, Mr. Hirobumi Kawano being an independent officer was submitted to Tokyo Stock Exchange, Inc.
Hajime WatanabeMr. Hajime Watanabe has served as a president and representative director of Watanabe Pipe Co., Ltd.. There is no special interest regarding business or otherwise relationships between Watanabe Pipe and the Company, except for the Company's services in the ordinary course of business. There is no concern that independence between Watanabe Pipe and the Company is suspected, or a conflict of interest with general stockholders arises. Therefore, the Company considers that Mr. Hajime Watanabe has independence of expressing his views from an objective or neutral viewpoint. Since Mr. Hajime Watanabe maintains the independence in appearance and can exert the effective function of management supervision with consideration for interests of general stockholders, the notice of outside director, Mr. Hajime Watanabe being an independent officer was submitted to Tokyo Stock Exchange, Inc.
Hideki KatoMr. Hideki Kato has served as a president of Shikoku Minka Museum, a public interest incorporated foundation. There is no special interest regarding business or otherwise relationships between Shikoku Minka Museum and the Company, except for the Company's services in the ordinary course of business. The Company pays a membership fee to forums, etc. held by Japan Initiative, a think tank, the representative of which is Mr. Hideki Kato. Except for aforesaid relationship as a one of numerous members of forums, there is no relationship between Japan Initiative and the Company. According to the property of Japan Initiative as a non-profit independent policy think tank, there is no concern that independence between Japan Initiative and Mr. Hideki Kato and the Company is suspected, or a conflict of interest with general stockholders arises. Therefore, the Company considers that Mr. Hideki Kato has independence of expressing his views from an objective or neutral viewpoint. Since Mr. Hideki Kato maintains the independence in appearance and can exert the effective function of management supervision with consideration for interests of general stockholders, the notice of outside audit & supervisory board member, Mr. Hideki Kato being an independent officer was submitted to Tokyo Stock Exchange, Inc.
Makoto YasudaMr. Makoto Yasuda has served as a president and representative director of Yasuda Makoto & Co., Ltd. and an outside director of Sanwa Holdings Corporation. There is no special interest regarding business or otherwise relationships between these companies and the Company, except for the Company's services in the ordinary course of business. There is no concern that independence between these companies and the Company is suspected, or a conflict of interest with general stockholders arises. Therefore, the Company considers that Mr. Makoto Yasuda has independence of expressing his views from an objective or neutral viewpoint. Also, there was no special interest regarding business or otherwise relationships between the Company and some companies, of which Mr. Makoto Yasuda had served as an audit and supervisory board member or a director. Since Mr. Makoto Yasuda maintains the independence in appearance and can exert the effective function of management supervision with consideration for interests of general stockholders, the notice of outside audit & supervisory board member, Mr. Makoto Yasuda being an independent officer was submitted to Tokyo Stock Exchange, Inc.
Masao YokomizoMr. Masao Yokomizo has served as an adviser of the Japan Association of Business Cycle studies. There is no special interest regarding business or otherwise relationships between the Japan Association of Business Cycle studies and the Company. There is no concern that independence between the Japan Association of Business Cycle studies and the Company is suspected, or a conflict of interest with general stockholders arises. Therefore, the Company considers that Mr. Masao Yokomizo has independence of expressing his views from an objective or neutral viewpoint. Since Mr. Masao Yokomizo maintains the independence in appearance and can exert the effective function of management supervision with consideration for interests of general stockholders, the notice of outside audit & supervisory board member, Mr. Masao Yokomizo being an independent officer was submitted to Tokyo Stock Exchange, Inc.

2.

Role of outside directors and outside audit & supervisory board members in corporate governance, standard or policy relating to independence upon the appointment of outside director and outside audit & supervisory board member, and status of the appointment of outside director and outside audit & supervisory board member

The Company establishes the governance system to ensure the accountability and objectivity of the management by appointing outside directors who have wealth of experience of business management and are expected to oversight from a wide range of views from the outside without being bound by internal affairs in the Board of Directors. Accordingly, the Company believes it fulfills its responsibility to conduct independent oversight of management performance and to ensure appropriateness of execution of operation.

The Company appoints audit & supervisory board members who have extensive knowledge of management, legal, financial and other matters (including three independent outside audit & supervisory board members.) Also, the Company has established auditing organizations (such as the Office of Audit & Supervisory Board Members) that operate independent of day-to-day operations and a process (includes periodic meetings between the Representative Director, etc. and the audit & supervisory board members) that ensures the objective and neutral opinions of audit & supervisory board members are reflected promptly in operations. As a consequence, the Company believes it fulfills its responsibility to conduct independent oversight of management performance that take into account the interests of stakeholders.

The Company does not establish the specific standard or policy concerning the independence to appoint outside directors and outside audit & supervisory board members. The Company appoints outside directors and outside audit & supervisory board members on the basis of requirements pursuant to the Companies Act and the standard concerning the independence pursuant to the Financial Instruments and Exchange Act.

3.

Cooperation among supervisions or audits by outside directors or outside audit & supervisory board members, internal audits, audits by audit & supervisory board members and accounting audits, and relations with internal control departments

Outside directors attend the board of directors held every month as a general rule, in which they receive the report regarding the basic policy and important audit items of audit plans prepared by audit & supervisory board and the status of the design and operation of internal control systems. They also understand situation and issues of the group by exchanging opinions with directors in timely manner. They expressed their view, as independent officers, with consideration for interests of general stockholders as independent officers at the board of directors as necessary.

Outside audit & supervisory board members attend the board of directors and audit & supervisory board held every month as a general rule, in which they receive the report from directors, full-time audit & supervisory board members, employees, etc. regarding internal audit, audits by audit & supervisory board members and accounting audits, and internal control audit. They ask explanation and express their view, as independent officers, with consideration for interests of general stockholders as necessary.

Remuneration of Directors

1.

Total amount of remuneration, breakdown of total amount of remuneration etc. and number of entitled officers

  Total amount of remuneration etc.(Millions of Yen) Breakdown of total amount of remuneration etc.(Millions of Yen) No. of entitled officers
Basic Stock option Bonus Restricted stock*
Directors(excluding Outside Directors) 319 261 - 46 11 8
Audit & Supervisory Board Members(excluding Outside Audit & Supervisory Board Members) 45 45 - - - 2
Outside Directors 28 28 - - - 3
Outside Audit & Supervisory Board Members 25 25 - - - 4
Total 418 360 - 46 11 17
* Shares with limited transfer.

2.

Total amount of consolidated remuneration of each director

The amount is not disclosed as none of the directors is rewarded the total amount of consolidated remuneration in excess of 100 million yen.

3.

Policy for determining the amount of remuneration of directors and audit & supervisory board members

(1)
Remuneration of Directors

The remuneration for the directors of the Company consists of pecuniary remuneration and share-based remuneration (by means of share with limited transfer). Outside directors receive only pecuniary remuneration.

The pecuniary remuneration of Directors is determined by the consultation of the Nomination and Compensation Committee, which is authorized by the Board of Directors meeting, within the limit of the amount of remuneration resolved at the General Meeting of Shareholders. The share-based remuneration is determined by the Board of Directors meeting, after considering the deliberations made by the Nomination and Compensation Committee with respect, within the limit of the amount of remuneration resolved at the General Meeting of Shareholders, which is separately set from the one of the pecuniary remuneration.

(2)
Remuneration of Audit & Supervisory Board Members

The remuneration for Audit & Supervisory Board Members of the Company consists of pecuniary remuneration. The remuneration of Audit & Supervisory Board Members is determined by the discussion among Audit & Supervisory Board Members, the amount of which is commensurate with the duties of Audit & Supervisory Board Members on an individual basis, within the limit of the amount of remuneration resolved at the General Meeting of Shareholders.