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| JCGR Corporate Governance Principles
Corporate Law, a corporation is established through the investment by
shareholders for the purpose of profit, but the management of the company is
left to the directors appointed by the shareholders at the general shareholders
meeting. The Board of Directors makes basic decisions to fulfill the business
of profit, and its execution is left to the executive officers selected by the
Board of Directors. Here, it is not required that directors and executive
officers be shareholders.
Shareholders contribute to investment and bear the risk of business, but they do not manage. For this reason, the conflict of interest between the shareholder who is the investor and the executive officer who actually manages is a problem. The mechanism to solve this is corporate governance.
A modern best practice in corporate governance is a system in which a board of directors is formed mainly by independent directors and management is entrusted to an executive officer of another person not necessarily from the director. In this case, division of business is devoted to executive officers focusing on management and the board of directors concentrating on supervision of executive officers. This is separation of governance and management.
Under this scheme, it is necessary to establish the executive structure - management system - optimum for profit-seeking by CEO, and governance system to motivate the CEO towards profit-seeking by the supervisory governance of the Board of Directors.
The JCGR Corporate Governance Principles is to show the code of conduct of the Directors, the Board of Directors, and the CEO under such a structure.
In this principle, the chief executive officer, or CEO, means the representative executive officer of a company with committees and the representative director of a company with a board of corporate auditors. In addition, management, management and business execution are synonyms.
| 【Corporate performance targets and
management system of CEO】
1. The Board of Directors appoints
excellent talent as CEO and utilizes incentive system that embed performance
into performance-linked remuneration so that CEOs will best manage for profit.
2. The CEO observes laws, internal
regulations, social ethics, etc. - Compliance - In addition to fulfilling
market principles, CEO will fair stakeholders as well as shareholders.
3. The CEO will do the best with responsibility.
|【Appointment of Board Members】
4. The majority of the board members shall
be independent directors defined by the Tokyo Stock Exchange.
5. Independent directors do not
concurrently serve as executive officers.
6. When nominating the candidates for
director to be submitted to the shareholders meeting, emphasis is placed on
diversity from the perspective of experience, gender, nationality and age.
7. When nominating the candidates for director,
their roles expected by the board to the individual candidate shall be clearly
8. The term of the directors shall be one
year and shall not prevent re-appointment. However, in reappointment, judge
strictly whether it is possible or not based on the criteria for election of
directors. Also, no limit should be placed on the number of directors
reappointed so as not to compromise the experience in the company.
9. Directors shall (1) submit their resignations
themselves and entrust their decision to advance or withdraw to the Board of
Directors when they judge themselves that they can no longer fulfill their
expected role or (2) when they reach a certain age (e.g. 75 years old).
10. The candidate for the board of
directors holds the number of shares held by the Board of Directors before
11. Newly appointed director must receive
training on corporate governance at authoritative institutions.
|【Duties of Directors】
| 12. Directors participate in decision-making
regarding business affairs of the company at the Board of Directors.
13. Directors confirm that contributions of
shareholders and creditors is properly preserved as assets. Also, directors
confirm that the financial control system and the internal control system
function soundly. When this cannot be confirmed, directors prompt the CEO to
take corrective action.
14. Directors acquire information from
executive officers, internal auditors, external experts and etc. as necessary. Therefore,
directors should be cautious enough in case of appointing executive officers,
external experts and so on.
15. Directors attend important management
meetings as well as board meetings to give advices and others. In order to
fulfill the duty, directors should prepare accordingly and should not spare
time and effort. At the same time, the company should appropriately provide
directors with information necessary.
16. Directors propose the agenda of the
Board meetings at their discretion before or at the meeting.
17. Independent directors and
non-management directors hold meetings with the approval of the board of
directors on regular basis and when necessary. Irrelevant of the board meeting
agenda, they discuss various matters freely. If necessary, they report or
advise to the Board of Directors or the CEO.
|【Duties of the Board of Directors】|
18. Based on the provisions of the Company
Law, the Board of Directors makes decisions regarding business affairs that
have a material impact on shareholders' interests.
19. The board of directors shall preside as
the chairman by the independent director. In the case where the CEO serves as
the Chairman of the Board, the Board of Directors will discuss the pros and
20. The Board of Directors defines the
qualities required of the directors and establishes criteria for election and
dismissal of directors. Necessary qualities are judgment, experience,
independence, comprehension about the company and industry, and other abilities
and knowledges that the Board deems necessary.
21. The Board of Directors meeting shall be
held at least six times a year. Prior to the meeting, the Chairman of the Board
notifies the Director of the agenda and provides information related to the
22. The Board of Directors meeting discusses
basic policies of management strategy, financial strategy and risk management
at least annually.
23. The burden of the CEO is dramatically
increasing under the modern complex management environment. Regarding matters
that are essentially related to the responsibility of the CEO but that may have
a significant influence on shareholder value, the Board of Directors should be
is involved in determining or confirming the basic policy of those matters. For
example, internal control systems, IT systems, corporate pension systems, CSR
(corporate social responsibility), environmental measures, and so on are such
|【Supervisory function of the Board of
|24. The Board of Directors shall secure the
functions of nomination, remuneration and audit to fulfill the supervisory
function. For that purpose, a nominating committee, a compensation committee
and an auditing committee shall be established under the Board of Directors,
with the majority of the independent directors.
25. In consideration of the characteristics of the company, the Nominating
Committee establishes requirements such as qualifications, knowledge, expertise,
etc. to be held by internal directors and external directors respectively.
In accordance with the requirement, the Nominating Committee determines
the candidates for the board of directors to submit to the shareholders
meeting. Because the most important duties of the directors are to oversee
the management by executive officers, emphasis is placed on independence
as a characteristic of the directors. In addition, the Nominating Committee
determines the sub committees to be established under the board of directors,
and the directors who are the members and chairpersons of the sub committees.
The three committees above are the fundamental sub committees for the supervision
of the Board of Directors.
26. The Compensation Committee determines an
incentive reward system centered on performance-based compensation, including
share-based compensation, to motivate CEO and other executive officers toward company
27. The Audit Committee examines the
independence of internal auditors who audit the effectiveness of the internal
control system as a part of the management system. Also examines the
independence of external auditors who audit the accounting report.
28. Three committees respectively shall determine
the purpose and the duties of each committee as a charter at the beginning of
the fiscal year, summarize the committee activities at the end of the fiscal
year. Finally, each committee evaluates its activities in accordance with the
purpose and the duties and report the evaluation to the Board of Directors.
29. Based on the reports of each committee,
the Board of Directors urges the CEO to take appropriate actions.
| 【Management System for CEO’s Business
30. CEO aims to realize performance targets
given by the Board of Directors. To ensure that CEO's management does not rely
solely on CEO's personal qualities, CEO must build and maintain a rational
31. Emphasizing importance of internal
control as a part of risk management, CEO strives to design and maintain the
best internal control system.
32. As for the internal audit, which is a
function to check the effectiveness of internal control, the CEO is in charge
of the internal audit and responsible for ensuring independence of internal
auditors who are CEO's subordinates.
33. It seems that it is not easy to find a
cheating by high rank officials' conspiracy, but it is by no means impossible.
Information on fraud is certainly shared by a few employees other than
conspirators. Internal auditors should make effective use of the internal
34. The CEO decomposes the performance
targets of the entire company into business divisions and subsidiaries, and
oversees the business department heads, subsidiary CEOs etc. according to their
performance targets. In other words, performance evaluation is conducted
according to performance targets, and an incentive compensation system based on
performance evaluation is implemented.
35. In order to secure the trust of
shareholders, CEO fulfills accountability by closely communicating with
shareholders through IR, shareholder meetings, etc.
36. In order to conduct fair transactions
with stakeholders other than shareholders, the CEO must observe the law and
observe market principles that are the premise of the capitalist economy. The
CEO must faithfully implement compliance management.
37. As a part of internal control, the CEO
ensures the ability to monitor compliance separately from internal audits.
38. In addition to reporting the status of compliance to the Board of Directors, the CEO must provide all stakeholders with appropriate disclosure.
Past revision: 2015/08/01 2014/11/24 2013/04/15 2012/8/20 2007/07/01 2003/04/01
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