Corporate Governance System

Image of Corporate Governance System

Overview of the Corporate Governance System and Reasons for its Adoption

The GROUP has an Audit and Supervisory Committee governance structure and seeks to continually increase its corporate value by ensuring management transparency and fairness, and strengthening the supervisory functions. The GROUP also adopts the Corporate Officer system, separating the supervisory functions (Directors) and the business execution functions (Corporate Officers), with the intention of accelerating decision-making.
The GROUP has established a Nomination and Compensation Committee as an optional advisory body to ensure fairness, transparency and objectivity in the procedures for the nomination and compensation of the Directors and enhance corporate governance.

Board of Directors

The GROUP believes that the important roles and responsibilities of the Board of Directors are to determine the direction of strategies and the allocation of management resources and audit and supervise business execution by the Corporate Officers. The Board of Directors discusses and formulates the GROUP’s annual plan, medium-term management plan, management strategies and management plans and strives to strengthen the monitoring of business execution. Through this, the GROUP aims to continuously enhance corporate value in the medium and long terms to benefit all stakeholders.

To enable sufficient discussions and to accelerate decision-making, the Articles of Incorporation stipulate that the GROUP shall have no more than ten (10) Directors, excluding Directors who are Audit and Supervisory Committee Members, and no more than five (5) Directors who are Audit and Supervisory Committee Members. The Company’s Board of Directors consists of 10 Directors (three of whom are Audit and Supervisory Committee Members), including four Outside Directors (two of whom are Audit and Supervisory Committee Members). Consequently, Outside Directors account for more than one third of the total number of Directors, and the majority of the Audit and Supervisory Committee are Outside Directors.
The GROUP appoints individuals who understand and can implement the GROUP philosophy, have a good personality and extensive knowledge and can fulfill their responsibilities as Directors.

The Nomination and Compensation Committee, a committee consisting of the Representative Director and Outside Directors and chaired by an Outside Director that has been established to increase fairness, transparency and objectivity in the decision-making process at the Board of Directors and enhance the corporate governance system, discusses the appointment of Directors proposed by the Board of Directors and submits recommendations. The Board of Directors, the members of which include Outside Directors, decides on an agenda item about the appointment of Directors based on the recommendations of the committee. The reasons for the proposed appointment of Directors are included in the notice of a shareholders’ meeting and are posted on the website.

Audit and Supervisory Committee

The Audit and Supervisory Committee audits compliance with laws and regulations, the Articles of Incorporation and internal rules and regulations by the Directors, Corporate Officers, or employees at the Company and GROUP companies.
The Audit and Supervisory Committee consists of three (3) Directors who are also Audit and Supervisory Committee Members. The majority of the Members are Outside Directors. Each Audit and Supervisory Committee Member has extensive knowledge on and experience in audits, extensive experience in company management and international experience and a wealth of knowledge based on the experience, and extensive insight and experience primarily in corporate legal affairs. They actively express appropriate opinions to the Board of Directors and management from an independent, objective standpoint. Full-time Directors who are Audit and Supervisory Committee Members are appointed. The GROUP combines the objective and strong knowledge of Outside Directors and the information gathering capacity of full-time Directors who are Audit and Supervisory Committee Members to increase the Committee’s effectiveness.

Nomination and Compensation Committee

The Nomination and Compensation Committee aims to enhance the corporate governance system of the GROUP by securing appropriate opportunities for Outside Directors to be involved and give advice in decision-making on the nomination and compensation of Directors, etc., and improving the fairness, transparency and objectivity of the decision-making process at the Board of Directors.
Responding to requests for consultation from the Board of Directors, the Nomination and Compensation Committee discusses important matters, including the election and dismissal of Directors, the appointment and removal of the Representative Director and Executive Directors (matters to be resolved by the Board of Directors), policies for determining compensation for Directors, the limit of compensation for Directors and successor plans, and submits recommendations.
The Nomination and Compensation Committee consists of the Representative Director and Outside Directors. The chairperson is selected from the Outside Directors.

Executive Committee

The GROUP believes that thorough discussions and agile decision-making by people who are conversant with the Company’s business are necessary to achieve the GROUP philosophy. Based on that belief, the GROUP has established the Executive Committee consisting of the President and Corporate Officers.
The Executive Committee is chaired by the President. At the request of the President, the committee discusses important matters about management, prepares plans, conducts research and makes decisions, and determines the results of those activities. The committee then reports to the President. The process of holding thorough discussions and deliberations as well as decision-making in the Executive Committee is important for the training of successors to top management.

Accounting Auditor

The Accounting Auditor takes responsibility for shareholders and investors for proper audits and cooperates with the Audit and Supervisory Committee, the Accounting Department and other relevant departments to take appropriate actions to ensure that audits are conducted properly, including ensuring appropriate audit schedules and systems.
The Accounting Auditor, the Audit and Supervisory Committee and the Internal Audit Department hold meetings regularly to ensure sufficient cooperation.

Corporate Compliance Department

The GROUP has established the Corporate Compliance Department. It cooperates with the Audit and Supervisory Committee Members and the Accounting Auditor to carry out internal audits at the Company and GROUP companies. In addition, the department reinforces the GROUP’s activities to promote compliance and strengthens internal control related to financial reporting. It also improves the risk management system, anticipating future risks.

Reasons for the Adoption of the System

The Company believes that to achieve the GROUP philosophy, it is important to create a system that allows for prompt decision-making and a strong governance system to maintain a corporate culture of continuing to take on challenges and to meet the expectations of shareholders and other stakeholders.
Accordingly, the Company has established the Executive Committee, as described above, and has developed a system that allows for prompt and reasonable decision-making and business execution. The Company actively appoints Outside Directors to increase transparency and objectivity in decision-making by incorporating opinions from an independent perspective based on the views of shareholders and other stakeholders in discussions at Board of Directors meetings. In addition, the Company has adopted a system with an Audit and Supervisory Committee to strengthen auditing and supervisory functions through the Audit and Supervisory Committee members with voting rights in the Board of Directors.

Status of Other Corporate Governance

Criteria for Independence of Outside Directors

The Company has appointed one Outside Director (excluding Directors who are Audit and Supervisory Committee Members) to strengthen the supervisory functions of the Board of Directors and to ensure highly transparent management. The Company has also appointed two Outside Directors who are Audit and Supervisory Committee Members, to strengthen the corporate governance system and to enhance the audit system. The Company’s basic policy when appointing Independent Directors is to adhere to the standards for independence set forth by the Tokyo Stock Exchange. It has also established its own standards as more specific standards for judging materiality, and elects candidates only if it judges that there is no possibility of a conflict of interest arising between the candidate and general shareholders.
The two Outside Directors who are Audit and Supervisory Committee Members are registered as independent directors with the Tokyo Stock Exchange.

Matters to be resolved at the shareholders meeting that can be resolved at a meeting of the Board of Directors

(a) Acquisition of treasury stock
The Articles of Incorporation of Park24 stipulate that the Company may acquire its own shares in market and other transactions by resolution of a meeting of the Board of Directors, in accordance with the provision of Article 165, Paragraph 2 of the Companies Act, for the purpose of operating a flexible capital policy for its shareholders.

(b) Interim dividends
The Articles of Incorporation also stipulate that the Company may pay interim dividends with April 30 every year as the record date by resolution of a meeting of the Board of Directors for the purpose of executing a flexible dividend policy.

Number of Directors

The Articles of Incorporation stipulate that the Company shall have no more than ten Directors (excluding Directors who are Audit and Supervisory Committee Members), and that it shall have no more than five Directors who are Audit and Supervisory Committee Members.

Requirements for Resolutions for the Election of Directors

The Articles of Incorporation stipulate that the resolution to elect Directors shall be made by a majority of the eligible votes of shareholders present at a shareholders’ meeting, where shareholders holding at least one-third or more of the votes with voting rights are present. The Articles of Incorporation also stipulate that resolutions to elect directors shall not be by cumulative voting.

Agreements Limiting Liability

The Articles of Incorporation of Park24 stipulate that, pursuant to Article 427, Paragraph 1 of the Companies Act, the Company may enter into agreements with non-Executive Directors to limit their liability. In accordance with these provisions, the Company has entered into agreements with three Directors who are Audit and Supervisory Committee Members and one Director who is not an Audit and Supervisory Committee Member, limiting their liability under Article 423, Paragraph 1 of the Companies Act, and the maximum amount of the compensation for damage under such agreement shall be the minimum liability amount stipulated in Article 425, Paragraph 1 of the Companies Act.