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Foresight in sight

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 determined that an audit system that includes supervision by the Board of Directors that includes outside 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 Structure (As of October 1, 2020)
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 personnel and remuneration of our executives. Two of the four committee members are independent outside directors, and one of them 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. Members included corporate officers who concurrently serve as directors, and meetings are held weekly, in principle.
  • Various Other Committees
    Deliberate on Individual Management Issues Related to Directors’ Execution of Duties from a Practical Point of View
    • 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.
    • 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.
    • 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.
    • Sustainability
      Formulates measures and policies on achieving group SDGs, determines the appropriateness of overall business activities from an ESG perspective, comprehensively determines action promotion and evaluations, and requests a review as necessary.
    • Environmental Contribution
      Manages and monitors investigations of environmental contribution-related policies as well as the design and implementation of mechanisms to promote environmental contributions.
    • Social
      Consideration of policies on social fields, design of mechanisms to promote a social response and the management and supervision of the status of implementation, as well as other endeavors including corrective action on issues of concern.
    • 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
      Examines the validity of research on people within the Company reviewed by an independent organization from an ethical and scientific perspective, 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%(in FY2019).
    The attendance rate of outside Audit & Supervisory Board members at Board of Directors and Audit & Supervisory Board meetings was 98% (in FY2019).
    (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%
*Nihon Unisys has four directors and four Audit & Supervisory Board members from outside the Company. From FY2017, one director and one Audit & Supervisory Board member who serve concurrently as officers of a principal shareholder are no longer designated as outside officers, although they meet the legal requirements for outside officers, due to not meeting the Company’s independent criteria.
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. 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.
In FY2019, the Company set and implemented action policies for issues pointed out in the FY2018 evaluation of the effectiveness of the Board of Directors, including clarifying the selection criteria for outside directors, appointing an independent outside director as chair of the Nomination and Remuneration Committee and reconsidering the corporate officer remuneration system.
Based on these results, in FY2020 the Company has begun measures that include overhauling the corporate officer remuneration system to function as a healthy incentive aimed at the sustained growth of the Group as well as selecting candidates and increasing outside directors based on the selection criteria and procedures for outside directors.
  • 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
Nihon Unisys regards a succession plan for its senior management including the CEO as another priority item for ensuring transparent candidate selection and planned development of management. 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 in the table below that have been set as important qualifications required of CEOs including foresight and insight. The Committee believes that the degree to which each requirement is displayed may vary depending on the business environment (periods of change or continuity/ growth). The seven core competencies consist of the following three categories on the basis of integrity.
  • Our Ability to Create New Value
    Foresight refers to the ability to foresee the future of the Nihon Unisys Group, promote a vision with great aspirations and make a commitment to the future. Insight refers to the ability to understand global trends and changes, identify Japanese and worldwide economic swings, and perceive essential value in everything. Determination refers to the ability to decide on a direction with unwavering conviction despite unpredictable conditions and with an awareness of the risks involved.
  • Our Ability to Improve
    Innovation refers to the power to improve, leaving precedent and custom behind to ambitiously carve out a new path undeterred by difficulties. Passion refers to the ability to gain the cooperation, trust and encouragement from those around you while passionately engaging in all endeavors and communicating extensively. This also refers to such attributes as a high sensitivity toward information and receiving capabilities, as well as the ability to convey objectives in the direction of realizing dreams, goals to be achieved, and solving problems.
  • Staying Power
    Execution refers to the ability to steadfastly stay the course to achieve results by setting lofty goals companies should strive for and displaying leadership. Diversity & Inclusion refers to the ability to interact with wide array of people whether inside or outside the Company, recognizing the values of people with various standpoints without stereotyping and pigeonholing them. This also refers to the ability to build proactive relationships based on an understanding of ideas from various corporate and cultural perspectives.
In FY2018, the Company launched the Management Leader Program for managers to enhance the pool of candidates for senior management, including the CEO. The program includes sessions with experts from inside and outside the Company, evaluations 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.
Initiatives to Enhance Corporate Governance
In order to express its basic stance, the Nihon Unisys Group ceaselessly improves on initiatives for enhancing corporate governance as a mechanism for implementing transparent, fair, prompt, and decisive decision making.
Initiatives to Enhance Corporate Governance

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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