JVCKENWOOD believes that one of its most important management issues is to increase the transparency and efficiency of its managerial decision-making process and improve corporate value by strengthening corporate governance. To this end, we make it a basic policy to enhance corporate governance through the establishment of a structure that includes checks and balances. That policy calls for separating management from the execution of operations, recruiting external directors and auditors, improving the function of acting as a check by establishing internal audit sections, and thereby strengthening the Company’s internal control system on a Group-wide basis.
1. Matters concerning the Board of Directors and Directors
Shareholders’ meetings are held, as the highest decision-making body, to make corporate decisions about fundamental matters that are stipulated in the Companies Act of Japan. However, unless otherwise specified in law, matters stipulated in Article 459, Paragraph 1 of the Companies Act, including dividends from surplus, are determined by resolutions of the Board of Directors — instead of shareholder resolutions — in accordance with the Companyʼs Articles of Incorporation to enable the formulation of flexible capital and dividend policies.
The Board of Directors, regarded as an organization that makes fundamental and strategic decisions while overseeing business execution, holds regular meetings once a month and extraordinary meetings when necessary to deliberate and decide on basic management policies and important matters as well as monitor and oversee the status of business execution. Directorsʼ terms of office are one year in order to make their responsibilities clear and to make management decision-making processes quicker. In addition, we proactively recruit external directors in order to increase the transparency of decision-making and lead innovation and governance.
The Articles of Incorporation stipulate that the number of directors shall be nine at maximum, and resolutions for electing directors at a shareholders’ meeting shall require the presence of shareholders holding one-third or more of the exercisable voting rights of shareholders and the majority of votes thereof. Moreover, no cumulative voting shall be accepted. Eight directors were elected at the 7th annual shareholder’s meeting held on June 19, 2015.
To ensure the effectiveness of the management supervisory function based on experience, achievements, professional viewpoints, and insights, etc., as well as independence having no potential conflicts of interest with general shareholders, JVCKENWOOD elects candidates for external directors, in principle, by confirming their business backgrounds (i.e. confirming they have not been major shareholders of JVCKENWOOD or engaged in the execution of operations of any of JVCKENWOOD’s main business partners, etc.) based on its independence standards and policies, which are stipulated in the “Guideline for the governance of listed companies” (III 5, (3)-2) issued by the Tokyo Stock Exchange. Since June 19, 2015, JVCKENWOOD has appointed Junichi Hikita, Masanori Yoshikai and Yasuyuki Abe as external directors.
2. Matters concerning Executive Officer System
JVCKENWOOD adopts an executive officer system, differentiating business execution function to clarify management responsibility and business execution responsibility. Since June 19, 2015, eight directors (including three external directors) and 15 executive officers (five concurrently holding positions as directors) have performed their duties.
The Board of Directors which leads corporate transformation and establishment of corporate governance makes decisions through discussions between external directors as independent directors and directors serving concurrently as executive officers, and delegate authority for business execution to executive officers. In addition, the Chairman and the Representative Director of the Board serves as the Chief Executive Officer (CEO), while President and the Representative Director of the Board serves as the Chief Operating Officer (COO). They are responsible for both management supervision and business execution. According to the decisions at meetings of the Board of Directors, the CEO chairs the Board of Executive Officers’ meetings, and the COO executes business operations with responsibility.
The regional CEO structure started on May 14, 2014 was replaced by a structure on April 1, 2015, under which a CEO position is created in China, in addition to each of existing four regional segments: United States, Europe, Japan, and Asia. By shifting to a market- and customer-oriented approach that responds to core overseas businesses and growing professional businesses, JVCKENWOOD is shaping the results of M&A and strategic alliances and accelerating the development of next-generation businesses, while expanding both domestic and overseas sales of its current businesses.
3. Matters concerning Audit & Supervisory Board and Audit & Supervisory Board Members
JVCKENWOOD is a company with Audit & Supervisory Board. Audit & Supervisory Board Members are responsible for the corporate audit function and their duties include attending Board of Directors’ meetings and other important meetings, as well as holding Audit & Supervisory Board meetings, auditing execution of Directors’ duties, business execution of the entire Group, and corporate accounting.
The Audit & Supervisory Board holds meetings once a month, and extra as needed.
Since June 26, 2012, three Audit & Supervisory Board Members (including two external audit & supervisory board members) have performed their roles and responsibilities.
To ensure the effectiveness of the management supervisory function based on experience, achievements, professional viewpoints, and insights, etc., as well as independence, having no potential conflicts of interest with general shareholders, JVCKENWOOD nominates candidates for external audit & supervisory board members in principle after confirming their business backgrounds (i.e. confirming they have not been major shareholders of JVCKENWOOD or engaged in the execution of operations of any of JVCKENWOODʼs main business partners, etc.) based on its independence standards and policies, which are stipulated in the “Guideline for the governance of listed companies” (III 5, (3)-2) issued by the Tokyo Stock Exchange, with the approval of the Board of Auditors. On June 26, 2012, JVCKENWOOD appointed Akihiko Washida and Shojiro Asai as external audit & supervisory board members.
Internal Audit, Audit by Audit & Supervisory Board Members and Accounting Audit Systems
JVCKENWOOD positions the Corporate Audit Office which conducts internal audit on the overall business execution of the entire Group and reports the audit results to the Board of Directors that serves as an oversight organization. The Corporate Audit Office has five staff members engaged in operational audits and internal control audits. As the audit scope covers the entire Group, when planning an audit schedule, the Corporate Audit Office prepares a Risk Assessment Form and selects audit targets based on risk assessment to improve the effectiveness of internal audits. It also improves the quality of audits by having external experts evaluate the quality of internal audits of JVCKENWOOD.
Audit by Audit & Supervisory Board Members implements audits according to the audit schedule, audits the entire Groupʼs operations, and checks in-house approval documents based on the monitoring of directors and executive officers. Audit & Supervisory Board Members also accompany audits performed by the Corporate Audit Office, thereby broadening the scope of audit by Audit & Supervisory Board Members.
During the fiscal year ended March 2015, three certificated public accountants, Yasunari Kunii, Yasuhiko Haga, and Nobuo Son, performed accounting audits of JVCKENWOOD and the Group. They are limited liability partners and managing partners of Deloitte Touche Tohmatsu Limited. Nobuo Son and Yasuhiko Haga have performed audits consecutively for six and three years, respectively, while Yasunari Kunii has been engaged in these audits for two year. The number of consecutive years of audits performed by Nobuo Son does not include his participation in the audit report pertaining to the Correction Report on the Securities Report for the fiscal year ended March 2009. The total number of audit assistants is 28 (11 certified public accountants and 17 other assistants).
Coordination among Internal Audit, Audit by Audit & Supervisory Board Members, and Accounting Audit
All the Audit & Supervisory Board Members including external audit & supervisory board members perform management audit by themselves, attend Board of Directorsʼ meetings, obtain the results of internal audit performed by the Corporate Audit Office in relation to the Groupʼs overall business operations, and exchange and confirm relevant information by holding meetings with the Corporate Audit Office whenever necessary. If there is a sign of fraud, etc. committed by management, the Corporate Audit Office is required to report it to Audit & Supervisory Board Members in accordance with the internal rules.
At the Audit & Supervisory Board meeting, the results of accounting audits performed by independent accounting auditors are regularly reported to Audit & Supervisory Board Members. As a result, the validity of mutual coordination between audits has been improved.
JVCKENWOOD has established its internal audit system so that it can strengthen monitoring functions by performing audits for each compliance theme in collaboration with the Compliance Committee, and by other means.
External directors attend Board of Directorsʼ meetings, and recognize the Groupʼs overall business performance by obtaining the results of internal audits performed by the Corporate Audit Office. As a result, they can oversee the Groupʼs business execution, give advice, and make proposals whenever necessary from a professional as well as independent standpoint with no conflicts of interest.