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Investor Relations

Corporate Governance and Internal Control System

The establishment of an effective corporate governance and internal control system is essential for sustainable growth and long-term improvements in corporate value, and accordingly the Company works to strengthen such structures.

Corporate Governance

Basic Stance
A mechanism of corporate governance that enables management to make prompt and sound management decisions under appropriate and effective supervision is indispensable to the Nihon Unisys Group’s continuous growth and increase in medium-to-long-term corporate value. The Company shall create, maintain, and ceaselessly improve this mechanism.

Furthermore, Nihon Unisys believes that a company’s raison d’etre lies in its ability to contribute to society. Based on this belief, the Company stipulates as part of its corporate philosophy, “Listen sincerely to our stakeholders to improve our corporate value” in order to create relationships of trust with all stakeholders, and shall proceed with its business activities in accordance with this principle.
Corporate Governance Structure
Nihon Unisys has judged that in order to realize effective corporate governance for the value creation process to create business ecosystems, an audit system that includes supervision by the Board of Directors and auditing by outside auditors is effective for monitoring management, and thus has adopted an Audit & Supervisory Board structure.

Given the decision-making speed required in light of the changing market environment, the Company aims to make decisions that combine a broader perspective with objectivity and transparency as well as to ensure the effectiveness of supervisory functions related to the execution of duties. It will accomplish this by utilizing internal directors who are well-versed in the state of the Company and its industry and appointing persons with extensive business experience and expertise as outside directors.
Corporate Governance and Internal Control
  • Nomination and Remuneration Committee;
    An advisory committee to the Board of Directors that deliberates and reports on matters pertaining to the appointment, removal and remuneration of directors and Audit & Supervisory Board members. Two of the four members are independent outside directors, one of whom serves as chairperson. The attendance of the independent outside director and the agreement of all members, including the independent outside director, are required when making resolutions.
  • Executive Council;
    The Executive Council is a decision-making body for deciding important matters of business execution. The Council is composed of members who are corporate officers serving as directors and who are appointed by the president. The meetings are held weekly, in principle.
  • Project Review
    Deliberate on Individual Management Issues Related to Directors’ Execution of Duties from a Practical Point of View
    • Project Review
      Determines the business risks and appropriate countermeasures for important development and service businesses, and decides whether to implement such countermeasures. Also evaluates actual results versus forecasts for such projects and requests a review as necessary.
    • R&D/Investment
      Deliberates on the advisability of plans for businesses, products and services based on the Group’s priority areas, and decides whether to invest in such plans. Also evaluates actual results versus forecasts for such plans and requests a review as necessary.
    • Information System Investment
      Deliberates on the advisability of cost, effectiveness, applied technologies and other matters for the Group’s own system development and operation and decides whether to invest in such systems. Also evaluates actual results versus forecasts for such plans and requests a review as necessary.
    • Compliance
      Oversees compliance programs such as Group compliance education and internal reporting.
    • Risk Management/
      Business Continuity Project
      Handles various risks that exert a material impact on Group management and ensures business continuity.
    • Information Security
      Formulates strategies for overall Group security and personal information protection, and considers and promotes various measures based on those strategies.
    • Life Science Research Ethics
      Deliberates and evaluates the appropriateness of the research plans regarding human beings from ethics and scientific perspectives based on “Declaration of Helsinki” and related regulations and requests a review as necessary.
Size and Diversity of the Board of Directors and the Audit & Supervisory Board
  • The Company maintains an appropriate number of members that can effectively and efficiently exercise the functions of the Board of Directors.
  • The Company has appointed eight directors with diverse and extensive careers and knowledge, including three independent outside directors (two of whom are women), accounting for at least one-third of the total.
  • A majority of the Audit & Supervisory Board consists of independent outside members, including one lawyer and one certified public accountant, one of whom is a woman.
  • The attendance rate of outside directors at Board of Directors meetings was 100%.
    The attendance rate of outside Audit & Supervisory Board members at Board of Directors and Audit & Supervisory Board meetings was 98%.
    (the Board of Directors met 11 times and the Audit & Supervisory Board met 14 times in FY2019).

(As of June 25, 2020)

  Total Memberes Outside Members
(Women)
Percentage of Board of Directors or Audit & Supervisory Board
  Independent Officers
Board of Directors 8 3*(2) 3 37.5%
Audit & Supervisory Board 5 3*(1) 3 60.0%
Total 13 6(3) 6 46.1%
Evaluation of Effectiveness of the Board of Directors
To continuously improve corporate value, Nihon Unisys considers it important for the Board of Directors to enhance governance by fully deploying its functions, including ensuring the appropriateness of operations. Every year since FY2016, the Company has analyzed and evaluated the effectiveness of the Board of Directors in the previous fiscal year and worked to improve its functionality.
For the evaluation of the effectiveness of the Board of Directors in FY2019, Japan Board Review Co., Ltd. (an external consulting company, hereinafter referred to as ‘BR’) distributed to all directors who were the members of the Board of Directors and all auditors the questionnaire, and analyzed the answers. BR also interviewed each director and auditor individually on the basis of their answers, and reported on the results to the Board of Directors.
The Board of Directors comprehended and evaluated the current situations on the basis of the report, made deliberations mainly on future visions of the board, and decided on actions for the Fiscal Year 2020.
  • Evaluation Results (excluding evaluation result regarding the progress of actions for the fiscal year 2019)
    The Board of Directors deliberated on the results of questionnaire and interviews. As a result, the board confirmed that high evaluations were given generally for the evaluation items. ‘Size and composition of the Board of Directors’ and ‘Operation of the Board of Directors’ results indicated that the board is well-balanced in light of experience and knowledge of the members, and that the board always enables open and lively discussions more on essence of business management.

    On the other hand, based on the role of the Board of Directors being significantly transformed while the business environment is drastically changing, the indications below were made, such as suggesting that the composition of the Board of Directors and contents of agenda need to be further considered in light of future visions.
    1. Although the current members fulfill appropriately their roles and functions, it is desirable to ensure further diversity through measures such as appointing outside directors with experience in management of major companies from the viewpoint of further transforming business models.
    2. The Board of Directors has been spending more time on deliberations on key issues of business management as a result of improved operations of the board. However, it is desirable to deliberate more on distributions of business resources (human resources and funds, etc.) and critical risks from a mid- to long-term perspective, etc.
    3. Deliberations on the composition and operations of the Nomination and Remuneration Committee should be made in the future. Furthermore, information sharing with the Board of Directors should be promoted.
  • Actions taken in the Fiscal Year 2019 and evaluation results of them
    1. Clarify the selection criteria and procedures for outside directors
      Created the selection criteria and procedures for outside directors on the basis of opinions of roles and functions as well as attribute and abilities of outside directors, which were obtained through interviewing members of the Board of Directors. We will nominate outside director candidates for the fiscal year 2020 pursuant to the criteria and procedures stated above.
    2. Review the remuneration system so that executives remuneration functions as a healthy incentive for sustainable growth.
      Although we had started to revise the remuneration system, we considered that the remuneration system for executives are to be revised in conjunction with making a next mid-term management plan in order to ensure a linkage between remuneration for executives and mid- to long-term performances and suspended the revision. We will resume it in the fiscal year 2020.
    3. Review the operations of the Board of Directors and further deepen discussions on business strategies, corporate culture reforms, sustainability and other themes related to the essence of management.
      The Board of Directors receives reports on the themes, and it deepens deliberations especially on diversity and business environments.
  • Actions for the Fiscal Year 2020
    First of all, we have increased the number of independent outside directors of the Nomination and Remuneration Committee to two, and the Committee has come to consist of four members in total, based on the evaluation results above. We will implement the actions below in the fiscal year 2020 in order to strengthen further the governance system of the Company.
    1. Revise the remuneration system for executives drastically in order to make it function as a healthy incentive for sustainable growth of our Group.
    2. Nominate candidates for outside director pursuant to the selection criteria and procedures. Increase the number of outside directors.
    3. Reconfirm roles and operation of the Nomination and Remuneration Committee, help the Committee deepen deliberations and have the Committee report on the contents of the deliberations to the Board of Directors timely and correctly.
    4. Secure time for sharing information and discussing with outside directors/auditors in order to deepen their understandings about key business management issues such as mid- to long-term directions and strategies for our Group.
Succession Plan for the CEO of Nihon Unisys Group
Nihon Unisys regards a succession plan for its senior management including the CEO as another priority item for accelerating its evolution. To ensure the transparency of the selection process, the Nomination and Remuneration Committee, which includes an independent outside director, deliberates and reports to the Board of Directors.

In this plan, integrity is the basis of the seven core competencies listed below that have been set as important qualifications required of senior management. The Committee believes that the degree to which each requirement is displayed may vary depending on the business environment.

In FY2018, the Company launched the Management Leader Program for managers above a specified level to select and cultivate candidates for senior management, including the CEO. The program includes sessions with experts from inside and outside the Company, self-evaluations and evaluations by superiors conducted with reference to the seven competencies, and challenging assignments.
Requirements (Qualifications/Competencies)
Remuneration of Directors and Audit & Supervisory Board Members
Directors are in principle paid according to their professional responsibilities, with a focus on performance-based pay and taking into account market-rate salaries and employees’ salary levels. Remuneration for directors consists of: (a) fixed remuneration (a monthly salary paid 90% in direct cash deposits), (b) annual performance-based bonuses using net income attributable to owners of the parent as an indicator, and (c) stock options as remuneration linked to medium-to-long-term business performance (appropriated from 10% of total monthly salary paid).
Stock options may not be exercised while the director or other grantee is in office at the Company or one of its subsidiaries. Non-executive directors, such as outside directors, are paid a fixed monthly salary only, without taking business performance into account. The exact amount of remuneration is decided by the Board of Directors after deliberation by the Nomination and Remuneration Committee, which includes one or more independent outside directors, within the amount as decided by resolution at general shareholders’ meetings.
Director Remuneration
Total Remuneration in FY2019 for Directors and Audit & Supervisory Board Members with Subtotals for Each Type of Remuneration and Numbers of Recipients
Classification Total Remuneration Paid
(Millions of yen)
Remuneration Paid by Type(Millions of yen) Recipients
(a)Fixed Remuneration (b)Stock Options (c)Bonuses
Directors
(Excluding outside directors)
312 215 25(*)1 71(*)1 6
Audit & Supervisory Board members
(Excluding outside Audit & Supervisory Board members)
33 33 -  (*)2 -  (*)2 2
Outside directors and outside Audit & Supervisory Board members 63 63 -  (*)2 -  (*)2 6
 
*1. One non-executive director is not eligible to receive stock options or bonuses.
*2. Outside directors and Audit & Supervisory Board members are not eligible to receive stock options or bonuses.
*3. Figures shown in millions of yen have been rounded down to the nearest million.

Internal Control System

The Nihon Unisys Group has strived to establish, operate, and continuously improve its internal control system as follows in order to achieve the aims of internal control: improving the effectiveness and efficiency of business, ensuring the reliability of financial reports, compliance with laws and regulations on business activities, and preservation of Company assets.
Improving the Effectiveness and Efficiency of Business
The Group has established a mid-term management plan and specific management targets, and it strives to develop sys-tems that will improve operational effectiveness and efficiency.
Ensuring the Reliability of Financial Reports
The Company's management and employees have conducted themselves in compliance with the basic policy for appropriate financial reporting established by the Group set forth for ensuring the reliability of financial reporting.
Compliance with Laws and Regulations on Business Activities
In recognition of compliance as one of the most critical issues to the execution of business operation, the Group has established the Nihon Unisys Group Charter of Corporate Behavior, the Group Compliance Basic Regulations, and the Nihon Unisys Group Code of Conduct, based on which all of the Group's employees act ethically in compliance with laws and regulations, social norms, and in-house regulations.
Preservation of company Assets (Risk Management)
The Nihon Unisys Group is faced with various kinds of risk in connection with its operating business activities. The Company has developed a common risk classification system for the Group to share and centralize the management of risks throughout the entire Group. Furthermore, it has developed preventive measures and countermeasures against the occurrence of risk events in order to safeguard its assets.

Accordingly, the Company has established a Risk Management Committee and Business Continuity Project chaired by the chief risk management officer (CRMO) to unify, lead, and manage risk management across the entire Group.

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