Corporate Governance StructureCorporate Governance

Corporate Governance Structure

JVCKENWOOD believes that one of its most important management issues is to increase the transparency and efficiency of its management decision-making process and improve corporate value by strengthening corporate governance. To this end, we make it a basic policy to enhance our corporate governance through the establishment of a structure that calls for “the separation of management from the execution of businesses,” “the appointment of External Directors and External Audit & Supervisory Board Members,” and “the improvement of the function of checking by establishing an Internal Audit Division,” thereby strengthening the Company’s internal control system on a Group-wide basis.

Organization System(As of June 23, 2017,)

Corporate Organizations

1. Basic Explanation of the Corporate Organizations

Corporate decisions are made at the General Meetings of Shareholders, the highest decision-making body of the Company, regarding fundamental matters stipulated in the Companies Act. However, unless otherwise specified in laws and regulations, matters stipulated in each item of Paragraph 1, Article 459 of the Companies Act, including dividends of surplus, are determined by resolutions of the Board of Directors, instead of resolutions at the General Meetings of Shareholders, in accordance with the Articles of Incorporation to enable the formulation of flexible capital and dividend policies.
JVCKENWOOD shall regard the Board of Directors as the fundamental and strategic decision-making body, as well as the supervisory body for business execution. The Board of Directors shall have a regular meeting once a month and an extraordinary meeting as necessary to discuss and resolve basic policies and important matters relating to management, as well as supervise and monitor the status of business execution. Directors shall have a fiduciary responsibility to shareholders. The term of office of Directors is one year to ensure the clarification of their responsibilities and swift management decision making. The Board of Directors is composed of persons with diverse experience, achievements, professional expertise, and insights. The Board of Directors shall also actively appoint External Directors to promote highly transparent decision making and take the initiative in corporate reform and governance.
JVCKENWOOD established the Nomination and Remuneration Advisory Committee, for which all of its External Directors serve as committee members, in December 2015, with the aim of strengthening the independence and objectivity of the functions of the Board of Directors. Since its establishment, the Nomination and Remuneration Advisory Committee has made proposals to JVCKENWOOD regarding candidate representatives for the Board of Directors, and reviewed the appropriateness of director candidates and directors’ compensation plans proposed by the representatives and others, and reported its opinions. The Board of Directors has determined director candidates and directors’ compensation, taking into consideration the opinions stated by the Nomination and Remuneration Advisory Committee. As of June 23, 2017, Junichi Hikita, who serves as external director, chairs the Nomination and Remuneration Advisory Committee, and Yasuyuki Abe and Shinjiro Iwata, who are external directors, serve as committee members.
Since June 2016, JVCKENWOOD has appointed an External Director independent from and neutral to the management of the Company as the Chairman of the Board of Directors. As of June 23, 2017, Mr. Yasuyuki Abe, who serves as External Director, chairs the Board of Directors.

2. Matters concerning Directors

The Articles of Incorporation stipulate that the number of Directors shall be nine or less, and that resolutions for electing Directors at the General Meetings of Shareholders 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. Nine Directors were elected at the 9th Ordinary General Meeting of Shareholders held on June 23, 2017.
With a view to limiting the scope of liability assumed by Directors to reasonable levels, the Articles of Incorporation of the Company stipulate, pursuant to Paragraph 1, Article 426 of the Companies Act, to exempt Directors, including those who served in the past, from liability for damages due to negligence of duties, subject to approval by resolution at the Board of Directors, and to the extent permitted by laws and regulations.
JVCKENWOOD works to ensure the effectiveness of the supervisory function of management based on experience, achievements, professional expertise, insights, and other attributes, as well as independence which avoid conflicts of interest with general shareholders. To this end, it elects candidates for the position of External Director by confirming their business backgrounds and ensuring that they are not major shareholders of the Company or have never been engaged in the execution of business at the Company’s main business partners (whose transactions with the Company exceed 1% of the Company’s consolidated net sales) based on its criteria and policies for independence set out in accordance with the “Guidelines for the Governance of Listed Companies (III 5. (3)-2),” established by the Tokyo Stock Exchange, Inc. On June 23, 2017, the Company appointed Mr. Yasuyuki Abe, Mr. Junichi Hikita and Mr. Shinjiro Iwata as External Directors.

Mr. Abe utilizes his proper advice as a corporate manager based on his extensive experience, knowledge, professional views and personal relationships in the electronics, machinery and information industry fields abroad that were obtained through his work at and management of companies outside the Group, in the Company’s management, and he gives advice and proposals as an objective third party not involved in the Group’s business execution in order to ensure the appropriateness and properness of the decision-making process by the Board of Directors.
No mutual relationship exists between Sumitomo Corporation and Orange and Partners Co., Ltd., where he concurrently holds office, and the Company, such as business transactions including donations, mutual dispatch of directors or shareholding.
SCSK Corporation (formerly Sumisho Electronics Co., Ltd. and Sumisho Computer Systems Corporation), where Mr. Abe previously served as a management executive, and the Company had business relations in the past regarding purchases. However, its transactions with the Company amounted to less than one (1) percent of the consolidated net sales of the Company and SCSK, and did not fall under major transactions for either the Company or SCSK. No transactions were recorded in the consolidated fiscal year under review. In addition, he resigned as a representative director of SCSK seven (7) years ago and currently has no relationship with the company. Additionally, no mutual relationship exists between SCSK and the Company including donations, mutual dispatch of directors or shareholding.
Furthermore, SUBARU CORPORATION, where Mr. Abe serves as an outside corporate auditor, currently has business relations with the Company with regard to purchases and sales. However, its transactions with the Company amounted to less than one (1) percent of the consolidated net sales of the Company and SUBARU in the consolidated fiscal year under review, and do not fall under major transactions for either the Company or the firm. In addition, no mutual relationship exists between SUBARU CORPORATION and the Company including donations, mutual dispatch of directors or shareholding. Furthermore, Mr. Abe has not been an operating officer or the like of our major business partners and major shareholders in the past other than that stated above. For these reasons, the Company regards him as independent.

Mr. Hikita utilizes his proper advice as a corporate manager and engineer based on his extensive experience, knowledge, professional views and personal relationships that were obtained through his work at and management of companies outside the Group, in the Company’s management, and he gives advice and proposals to the Company as an objective third party not involved in the Group’s business execution in order to ensure the appropriateness and properness of the decision-making process by the Board of Directors. No mutual relationship exists between Hikita Consulting Co., Ltd., where he concurrently holds office, and the Company, such as business transactions including donations, mutual dispatch of directors or shareholding.
ROHM Co., Ltd., where Mr.Hikita previously served as an executive, currently has business relations with the Company with regard to purchases. However, its transactions with the Company amounted to less than one (1) percent of the consolidated net sales of the Company and ROHM in the consolidated fiscal year under review and do not fall under major transactions for either the Company or the firm. In addition, he resigned as Senior Corporate Advisor of ROHM Co., Ltd. Nine (9) years ago and currently has no relationship with the firm. Although ROHM Co., Ltd. Holds 31,400 shares of the Company, the number of shares held is considered to be small, the shares are not cross-held, and no mutual relationship exists between the Company and ROHM Co., Ltd. including donations or mutual dispatch of directors.
Furthermore, Mr. Hikita has not been an operating officer or the like of our major business partners and major shareholders in the past other than that stated above. For these reasons, the Company regards him as independent.

Mr. Iwata was elected as an external director as he is expected to utilize his proper advice as a corporate manager based on his extensive experience, knowledge, professional views and personal relationships in management, information & communication area and automobile-related area of listed companies outside the Group, in the Company’s management, and he is expected to play an active role in supervising the Company’s management by providing advice and proposals to the Company as an objective third party not involved in the Group’s business execution in order to ensure the appropriateness and properness of the decision-making process by the Board of Directors.
While Hitachi Transport System, Ltd., where Mr. Iwata concurrently holds office, is a business partner of the Company with regard to purchases, and Hitachi, Ltd., where he concurrently holds office, is a business partner of the Company with regard to purchases and sales, the transactions amounted to less than one (1) percent of the consolidated net sales in the consolidated fiscal year under review of either the Company or each of these companies and do not fall under major transactions for any of the companies.
No mutual relationship exists between these companies and the Company, including donations, mutual dispatch of directors or shareholding. In addition, no mutual relationship exists between Benesse Holdings, Inc., where Mr. Iwata concurrently holds office, and the Company, including donations, mutual dispatch of directors or shareholding.
Moreover, while Hitachi Kokusai Electronic Inc. and Hitachi Automotive Systems, Ltd., where Mr. Iwata previously served as an executive, are business partners of the Company with regard to sales, the transactions amounted to less than one (1) percent of the consolidated net sales of the Company and each of these companies in the consolidated fiscal year under review and do not fall under major transactions for any of these companies. Additionally, no mutual relationship exists between the Company and these companies, including donations, mutual dispatch of directors or shareholding.
Moreover, no mutual relationship exists between Hitachi Data Systems Corporation and Hitachi Global Storage Technologies, Inc. (currently, HGST, Inc.), where Mr. Iwata previously served as an executive, and the Company including donations, mutual dispatch of directors or shareholding.
Furthermore, Mr. Iwata has not been an operating officer or the like of our major business partners and major shareholders in the past other than that stated above. For these reasons, the Company regards him as independent.

JVCKENWOOD has designated Mr. Yasuyuki Abe, Mr. Junichi Hikita, and Mr. Shinjiro Iwata as Independent Directors and notified the Tokyo Stock Exchange, Inc. of their appointments, pursuant to its provisions.
With a view to recruiting and retaining outstanding personnel as External Directors, the Articles of Incorporation of the Company stipulate, pursuant to Paragraph 1, Article 427 of the Companies Act, that the Company may enter into an agreement with an External Director to limit the liability for damages due to his/her negligence of duties within a certain level.

3. Matters concerning Executive Officer System

JVCKENWOOD has introduced an Executive Officer System under which the management supervisory function is separated from the business execution function to clarify management responsibility and business execution responsibility. Since June 23, 2017, nine Directors (including three External Directors) and 13 Executive Officers (six serving concurrently as Directors) have been performing their duties.
The Board of Directors, which leads the Company’s initiatives in corporate reform and governance, is chaired by an External Director to strengthen governance, holds active discussions between External Directors as independent directors and Directors concurrently serving as Executive Officers to make decisions, and entrusts the business execution to Executive Officers. In addition, the President and Representative Director of the Board, who is a member of the Board of Directors, serves as the Chief Executive Officer (CEO) to take responsibility for both management oversight and business execution. In accordance with decisions made at meetings of the Board of Directors, the CEO, serving as the Chairman, leads the Executive Officers Committee’s meetings, and Executive Officers take responsibility for the execution of business.
In June 2016, the Company established the position of Chief Operating Officer (COO) for executives who assume responsibility for the overall operation of all the businesses in the Americas, EMEA (Europe, Middle East and Africa), Asia Oceania, and China, as well as the post of COO in the Automotive Sector, Public Service Sector and Media Service Sector. Further, we established the positions of Chief Financial Officer (CFO), Chief Strategy Officer (CSO), Chief Technology Officer (CTO), and Chief Administration Officer (CAO) for officers who oversee corporate divisions, and appointed Executive Officers to those positions. In this way, we have shifted to a new execution system under which the appointed Executive Officers support the CEO, towards the achievement of Vision 2020, the Mid- to Long-term Business Plan released in May 2015.

4. Matters Concerning Audit & Supervisory Board

The Company adopts a company with an Audit & Supervisory Board framework as its organizational structure. 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 the execution of Directors’ duties, the business execution of the entire Group, and corporate accounting.
The Audit & Supervisory Board holds meetings once a month, and extra meetings as needed.

5. Matters Concerning Audit & Supervisory Board Members

Since June 23, 2017, four Audit & Supervisory Board Members (including two External Audit & Supervisory Board Members) have performed their roles and responsibilities.
Mr. Takayoshi Sakamoto and Mr. Satoshi Fujita, Audit & Supervisory Board Members, possess considerable knowledge of finance and accounting based on approximately 11 years of experience and 10 years of experience, respectively, of serving in the Finance & Accounting Division and other divisions of the Group.
With a view to limiting the scope of liability assumed by Audit & Supervisory Board Members to reasonable levels, the Articles of Incorporation of the Company stipulate, pursuant to Paragraph 1, Article 426 of the Companies Act, to exempt Audit & Supervisory Board Members, including those members who served in the past, from liability, subject to approval by resolution of the Board of Directors, for damages due to negligence of duties and to the extent permitted by laws and regulations.
The Company works to ensure the effectiveness of the supervisory function of management based on experience, achievements, professional expertise, insights, and other attributes, as well as independence, which avoid conflicts of interest with general shareholders. To this end, it elects candidates for the position of External Audit & Supervisory Board Member by confirming their business backgrounds and ensuring that they are not major shareholders of the Company or have never been engaged in the execution of business at the Company’s main business partners(whose transactions with the Company exceed 1% of the Company’s consolidated net sales) based on its criteria and policies for independence set out in accordance with the “Guidelines for the Governance of Listed Companies (III 5. (3)-2),” established by the Tokyo Stock Exchange, Inc. with the approval of the Audit & Supervisory Board. On June 24, 2016, the Company appointed Mr. Shojiro Asai and Mr. Nagaaki Ohyama as External Audit & Supervisory Board Members.

Mr. Shojiro Asai utilizes his extensive experience, knowledge, professional views and personal relationships that were obtained through his work at and management of companies outside the Group as well as his experience in carrying out audits as the Group’s external Audit & Supervisory Board Member. Moreover, he provides proper advice and proposals, including those as a corporate manager and engineer, at the Board of Directors and the Audit & Supervisory Board as an objective third party, separate from the Group.
No mutual relationship exists between Rigaku Corporation, where he concurrently holds office, and the Company, such as business transactions including donations, mutual dispatch of directors and shareholding.
In addition, The Japan Science and Technology Agency currently has business relations with the Company regarding purchases. However, its transactions with the Company amounted to less than one (1) percent of the consolidated net sales of the Company and The Japan Science and Technology Agency in the consolidated fiscal year under review, and do not fall under major transactions for either the Company or the entity. Furthermore, no mutual relationship exists between the Japan Science and Technology Agency and the Company including donations, mutual dispatch of directors or shareholding.
Hitachi, Ltd., where Mr. Asai previously served as a management executive, currently has business relations with the Company regarding purchases. However, its transactions with the Company amounted to less than one (1) percent of the consolidated net sales of the Company and Hitachi in the consolidated fiscal year under review, and do not fall under major transactions for either the Company or the firm. Mr. Asai resigned from Hitachi, Ltd. more than 10 years ago and currently has no relationship with the company. In addition, no mutual relationship exists between Hitachi, Ltd. and the Company including donations, mutual dispatch of directors or shareholding.
Furthermore, Hitachi Medical Corporation and Japan Analytical Instruments Manufacturers' Association, both of which he previously served in as a management executive, have no mutual relationship with the Company including donations, mutual dispatch of directors or shareholding. Furthermore, Mr. Asai has not been an operating officer or the like of our major business partners and major shareholders in the past other than that stated above. For these reasons, the Company regards him as independent.

Mr. Ohyama utilizes his extensive experience, knowledge, professional views and personal relationships as an academic in organizations outside the Group and provides proper advice and proposals, including those in his field of specialty, at the Board of Directors and the Audit & Supervisory Board as an objective third party, separate from the Group.
Tokyo Institute of Technology, where he concurrently holds office, currently has business relations with the Company regarding purchases and sales. However, its transactions with the Company amounted to less than one (1) percent of the consolidated net sales of the Company and Tokyo Institute of Technology in the consolidated fiscal year under review, and do not fall under major transactions for either the Company or the entity. Furthermore, no mutual relationship exists between the Tokyo Institute of Technology and the Company including donations, mutual dispatch of directors or shareholding.
Furthermore, Mr. Ohyama has not been an operating officer or the like of our major business partners and major shareholders in the past other than that stated above. For these reasons, the Company regards him as independent.

JVCKENWOOD has designated Mr. Shojiro Asai and Mr. Nagaaki Ohyama as Independent Audit & Supervisory Board Members and notified the Tokyo Stock Exchange, Inc. of their appointments, pursuant to its provisions. With a view to recruiting and retaining outstanding personnel as External Audit & Supervisory Board Members, the Articles of Incorporation of the Company stipulate, pursuant to Paragraph 1, Article 427 of the Companies Act, that the Company may enter into an agreement with an External Audit & Supervisory Board Member to limit the liability for damages due to his/her negligence of duties within a certain level.
To prepare for the possibility that the number of Audit & Supervisory Board Members falls below the statutory minimum number, pursuant to Paragraph 3, Article 329 of the Companies Act, the Company has appointed one substitute Audit & Supervisory Board Member.

6. Matters Concerning Compliance

JVCKENWOOD views compliance as responses to social needs, not merely as adherence to laws and regulations. This means that the objective of compliance is not merely to comply with laws and regulations, but to respond to social needs behind them through adherence to them. With the recognition of the objective, the Company enhances compliance activities of the Group comprehensively through the Compliance Committee chaired by the CEO.
The JVCKENWOOD Group Compliance Code of Conduct that target the entire Group were established in March 2010. The booklets (in three languages) were circulated to all Group officers and employees via the intranet and the compliance supervisors appointed by the Board of Directors of the Company at all affiliated companies to ensure full awareness of all Group members.
Compliance education is supervised by the Internal Governance Office under the leadership of the CEO. Compliance training by using e-learning training programs via the intranet and practical training is provided to officers and employees of the Company and its major affiliated companies.
If any suspicions about compliance matters arise, they will be directly reported to the Internal Whistle-blowing System (Helpline) set up by the Internal Governance Office in accordance with the Internal Whistle-blowing System Regulation and the said regulations, and corrective measures will be taken under the leadership of the Compliance Committee. In addition, the Auditing Informer System is in place at the Audit & Supervisory Board Office, and if suspicions arise about accounting or auditing operations, they will be directly reported to the system. These systems serve as infrastructure for exclusive communication to protect the confidentiality of reported contents and reporters’ names, and are operated by assigned staff to detect and correct activities that do not adhere to the needs of society.

7. Matters Concerning Consolidated Group Management

The Company has established the Group Governance Division to promote reform of consolidated Group management. The Group Governance Division designs, plans, and supports measures to prevent the recurrence of misconduct, facilitate management (operational) reforms, and enhance consolidated management and administration for the entire Group’s operations while serving as a division that comprehensively deals with matters for affiliates and operational divisions.

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