Corporate governance | From the president to investors
as of July 9, 2019
PC DEPOT is currently striving to strengthen corporate governance to maintain transparent, healthy, and fair management by strengthening the supervisory function of the board of directors while promoting speedy management.
To achieve it, we emphasize the importance of securing transparency of management by disclosing appropriate information at appropriate timings as well as strengthening the management environment. We will continuously review our corporate governance system and enhance corporate values.
Reasons for not adhering to every principle of the Corporate Governance Code
The following item is not presented as it was implemented.
・Supplement to principle 4-2-1: Incorporating a certain percentage of performance-based pay or stock options into the compensation for management
Supplement to principle 4-1-3 : Plan for a successor to the Chief Executive Officer etc.
Our company will the procedure for selection and decision of a successor to the President.
Supplementary Principle 4-3-2: CEO election complying with an objective and transparent procedure
The Company is currently in the process of considering the procedure for CEO election.
Supplementary Principle 4-3-3: Establishment of an objective, timely and transparent procedure for CEO dismissal
The Company is currently also in the process of considering the procedure for CEO dismissal.
Disclosure based on each principle of the Corporate Governance Code
We have updated the following items:
• Principle 3-1: Enhancing disclosure of information
(3) Policy and procedure when determining the compensation for management and directors
(4) Policy and procedure when electing management and nominating candidates for directors
• Supplement to principle 4-11-3: Analysis and assessment of the effectiveness of the Board of Directors as a whole
Added "III Corresponding measures taken in the term ended March 2019"
Principle 1-4: Strategically held shares
- (1) Policy on strategic holding
- The Company has a policy of refraining from holding any unnecessary assets, in principle. We do not hold any strategically held shares, in principle, with the exception of cases where doing so is deemed to maintain or develop a collaboration or transactional relationship that is strategically important with the aim of delivering improved corporate value.
- (2) Verification of strategically held shares
- The Company currently does not hold any strategically held shares. If intending to do so in the future, we will comprehensively verify the significance of holding such shares and the financial rationality doing so as well as whether it will contribute to improving the organization's corporate value. In the event of holding any strategically held shares, we will periodically consider the rationality of doing so and the option of reducing such holdings.
- (3) Standard for exercising voting rights on strategically held shares
- While respecting the business policy of the enterprise concerned, we make a comprehensive judgment about the exercise of voting rights by checking on a proposal-by-proposal basis whether the exercise will contribute to improving the Company's enterprise value in the medium and long term.
Principle 1-7 : Related party transactions
In our company, transactions between related parties (e.g. competitive transactions by directors, transactions between director and company, etc.) are subject to discussion and resolution by the Board of Directors. The Board of Directors Rules stipulate that directors who have a special interest in the resolution may not participate in the vote. Once a year, we confirm in writing the existence of the related-party transactions, including those made by the directors of our company and our subsidiaries.
Principle 2-6: Fulfillment of function as a corporate pension asset owner
The Company has no corporate pension fund system in place.
* The Company has in place a corporate defined contribution pension system in order to allow employees to build assets steadily.
Principle 3-1 : Enhancing disclosure of information
- (1) Management philosophy, business strategy and business plan
- Our management philosophy, management policy and medium- to long-term business strategy are available on our website (http://www.pcdepot.co.jp/co_ir/)
- (2) Basic concept and policy concerning Corporate Governance
- This item is described in item "1. Basic concept" of this report.
- (3) Policy and procedure when determining the compensation for management and directors
Our company discloses the total maximum amount and the total payment amount of compensation for directors in our business report and annual securities report, but not the amount for each director.
In deciding the compensation for each director, the Appointment and Compensation Committee, a voluntary advisory body to the Board of Directors, deliberates on matters concerning policies related to the determination of the compensation and calculation method thereof, taking into overall consideration the achievements of each director in the previous year, the business results of the division of which he/she is in charge, and the contribution to our company. Going forward, the compensation shall be determined after deliberation and consultation with the committee.
- (4) Policy and procedure when electing management and nominating candidates for directors
- In our company, employees with good business results and the appropriate experience are elected or nominated as management or candidates for directors from the viewpoint of business continuity. Independent outside directors are elected from individuals with high levels of expertise and extensive experience who are capable of expressing opinions on such issues as growth strategy and a highly effective supervisory function from a standpoint independent of the management in order to improve the company's governance.
Regarding the candidates for outside auditors, we select multiple persons with professional expertise in law, accounting and risk management.
Following deliberations by the Audit Committee, decisions are made by the Board of Directors and referred for discussion and resolution at the General Shareholders' Meeting based on the said policy.
The removal of directors and corporate auditors shall be decided by the Board of Directors meetings attended by outside directors and referred for discussion and resolution at the General Shareholders' Meeting in case of any violation or suspected violation of any law, regulation or the Articles of Incorporation or if such removal is deemed reasonably appropriate.
In February 2019, our company established the Appointment and Compensation Committee as a voluntary advisory body to the Board of Directors. A majority of the committee members shall be outside directors.
Matters concerning policies related to the determination of compensation for directors or calculation method thereof shall be decided by the committee after deliberation and consultation.
- (5) Explanation about each candidate when electing management and nominating candidates for directors
- The reasons why a person is nominated as a candidate for external director or external auditor have been given in our "Notice of Convocation of Ordinary General Shareholders' Meeting." They are also disclosed on our website. Please see the reference documents attached to the Notice of Convocation of the 24rd Ordinary General Shareholders' Meeting.
Supplement to principle 4-1-1 : Scope of management responsibility
The Board of Directors makes lawful and timely decisions on important matters such as the business plan and business strategy, so as to realize our sustainable growth and enhance our corporate value in the medium- to long-term. The matters to be resolved by the Board of Directors are specifically stipulated in the Board of Directors Rules. The scope of management responsibility is clearly stipulated in the Official Authority Rules.
Principle 4-9 : Standards of independence and capability required for external directors
In our company, an external director requires the following abilities in addition to the requirements of the Companies Act:
1. Ability to supervise and evaluate overall management through voting in the Board of Directors;
2. Ability to supervise conflicts of interest between our company and management, or between our company and an interested party other than management;
3. Ability to give useful advice regarding our corporate governance, based on experience and knowledge.
Moreover, we elect independent external directors who are not liable to cause any conflict of interest with a stockholder, in addition to meeting the requirements for independent officers determined by the Tokyo Stock Exchange.
Supplement to principle 4-11-1 : Approach on balance, diversity and number of members of the Board of Directors, and policy and procedure when electing directors
Our company decides the appropriate number of candidate directors for the scale of our business, taking into consideration at the same time the appropriate diversity of the members of the Board of Directors in terms such as age, sex and skills.
Supplement to principle 4-11-2 : Concurrent holding of positions by external officers
The concurrent holding of important positions by directors and auditors is described in the Notice of Convocation of the 24rd Ordinary General Shareholders' Meeting (pages 5~11).
Supplement to principle 4-11-3 : Analysis and assessment of the effectiveness of the Board of Directors as a whole
The company will evaluate the general effectiveness of the Board of Directors, such as its role, function, size, structure, and management, and after deliberations at the board meeting, we will release a summary of the evaluation to the public and utilize it to enhance the functions of the board.
An overview of the evaluation of the Board of Directors’ effectiveness, carried out in 2017, is as follows.
I. Evaluation Framework and Method
a. Persons to Be Evaluated
All board members (10) and auditors (4) *Those serving as of March 2018
b. Execution Method
A questionnaire was distributed and collected (responses were anonymously collected)
c. Evaluation Criteria
i. Role and functions of the board
ii. Size and structure of the board
iii. Management of the board
iv. Coordination with auditing organizations
v. Relationships with external board members
vi. Relationships with shareholders and investors
d. Evaluation Process
Based on the results and entries of the collected questionnaire, we deliberated the outcome of the evaluation at a meeting of the Board of Directors.
II. Summary of the Evaluation Outcome
Based on the deliberation at the meeting of the Board of Directors, it was confirmed that the Board is being managed in an effective manner in general.
On the other hand, the three opportunities for improvement shown below were identified, and it was agreed to further enhance the effectiveness of the Board based on these improvement points.
1. Succession plan for the CEO, etc.
2. Discussions on appointment of board members and remuneration
3. Enhancement of the function of outside board members as auditors
III Corresponding measures taken in the term ended March 2019
Based on our overview of the assessment of the Board of Directors' effectiveness carried out in the term ended March 2018, our company established the Appointment and Compensation Committee as a voluntary advisory body to the Board of Directors chaired by an independent outside director. The committee aims to ensure objectivity, fairness and transparency concerning decisions related to the appointment of candidates for directors, compensation for directors, nomination of candidates for corporate auditors, and succession plans.
Supplement to principle 4-14-2 : Policy for training of directors and auditors
When employees assume the posts of executive officer and director or auditors, our company thoroughly notifies them again of their responsibilities and duties based on the main relevant laws, including the Companies Act etc. Moreover, we thoroughly notify each external director and each external auditor of our corporate philosophy and the contents of our group's business.
Principle 5-1: Policy on constructive dialogue with shareholders
In order to realize our sustainable growth and enhance our corporate value in the medium- to long-term, our company maintains constructive dialogue with investors through briefings on earnings and individual interviews, and discloses the necessary information on our website, etc. as needed.
The President and Chief Executive Officer and the Director and General Manager of the General Stakeholder Relations Office hold dialogue with investors based on reports from the relevant department(s), taking into consideration the purpose and consequences of the dialogue as well as the attributes of the shareholders.
As the department in charge, the IR/SR Section of the General Stakeholder Relation Office appropriately exchanges information in cooperation with the relevant departments, and appropriately conducts information management such as establishing a silent period based on the Insider Transactions Management Rules.
The Board of Directors considers the approach in the next quarter after receiving the quarterly report on the dialogue with investors from the department in charge.
Matters concerning the functions related to business administration, audit/supervision, appointments, decision making on remuneration, etc. (outline of the current corporate governance system)
1.Situation of the management system and auditor
PC DEPOT uses the corporate auditor system, and we invite outside directors and outside corporate auditors to assure the establishment of an objective management control system.
As of June 30, 2019, we had nine directors (including three outside directors) and four corporate auditors (including three outside auditors).
Outside corporate auditors were elected in order to strengthen management while at the same time assuring its continuing soundness.
2. Governing bodies of the company
- ＜Meetings of the Board of Directors＞
The Board of Directors consists of nine directors. The directors hold regular meetings once each month and also hold meetings at other times as and when required. Executions of duties are carried out according to the decisions of the Board of Directors. Specific rules are determined for responsibilities and procedures for activities in each delegated business sector. The Board of Directors meetings are chaired by Takahisa Nojima, President and Chief Executive Officer.
In order to strengthen the functions of management monitoring/supervision, and also to enhance the system enabling adequate and impartial decision making, we elected outside directors at the 15th Ordinary General Shareholders’ Meeting held on June 18, 2009. The nine-member Board of Directors now has three outside directors.
The Board of Directors has one year term to make decisions on important matters, to supervise execution of tasks of the other board members, as well as to clarify the responsibilities of the execution of tasks.
- ＜Audit Committee＞
The Audit Committee comprises one full-time corporate auditor and three part time corporate auditors (outside auditors). The Audit Committee draws up audit policies and audit plans in order to assure compliance with the relevant laws and regulations and the Articles of Incorporation. The auditors attend the meetings of Board of Directors. The full-time auditors also attend other important meetings such as management meetings. This way, they supervise the execution of tasks by the Board of Directors. They also collaborate with the Internal Audit Office and audit corporation, which operates accounting audit, and confirm the legality of the business operation of the entire company as well as investigate the situation of the company's assets.
- ＜Management meetings＞
In order to expedite the decision making process, management meetings are held as needed. At the meetings, the management shares information from relevant departments and makes important business decisions after sufficient discussion. Management meetings are chaired by Takahisa Nojima, President and Chief Executive Officer.
- ＜Compliance Committee＞
The Compliance Committee, which is made up primarily of three directors and two executive officers, holds regular meetings once a month, examines laws and regulations and reported risks as needed in coordination with the Compliance Office and enacts preventive measures if necessary. The meetings are chaired by Nobuyuki Tanaka, Director and General Manager of the Compliance Office.
- ＜Appointment and Compensation Committee＞
The Appointment and Compensation Committee is a voluntary advisory body to the Board of Directors, comprised of at least three directors. The majority of committee members are outside directors. Chaired by Mineo Fukuda, an independent outside director, the committee deliberates on the appointment of and compensation for directors by gaining insights and advice from outside officers. It also aims to ensure objectivity and the transparency of procedures related to the appointment of and compensation for directors and improve the monitoring function of the Board of Directors, thereby further enhancing corporate governance. The committee is comprised of one inside director, three outside directors, and one full-time corporate auditor.
- ＜Executive officer system＞
In order to clarify the business operation and management responsibility, PC DEPOT had adopted the executive officer system. PC DEPOT has eight executive officers. Executive officers attend management meetings as needed and play a role in facilitating rapid decision-making concerning management issues and reporting the execution thereof.
- ＜Outside directors/corporate auditors＞
The Board of Directors comprises nine directors (including three outside directors) and four corporate auditors (including three outside auditors). Furthermore, of the outside directors/corporate auditors, five are independent directors/corporate auditors. This system strengthens corporate governance while protecting ordinary shareholder interests.
3. Functions and roles of outside directors and outside corporate auditors from the standpoint of corporate governance
Outside directors and external auditors play an important role in monitoring and auditing the operations of the Company.
Opinions expressed by outside directors and outside corporate auditors in the deliberations and decision making at the Board of Directors meeting enhance the transparency, soundness, objectivity and appropriateness of the management process.
4. Concepts regarding independence of outside directors and outside corporate auditors
PC DEPOT has not drawn up specific standards regarding independence for the election of outside directors and outside corporate auditors.
The following factors are considered in the election of outside directors and outside corporate auditors:
In consideration of their capability to meet the Company’s expectations and carry out the above-described roles, the Company elects appropriate independent directors/corporate auditors (outside directors and outside corporate auditors who are unlikely to have conflicts of interest with general investors) as specified in Rule 436-2 “Securing Independent Director(s)/Auditor(s)” of the Securities Listing Regulations established by Tokyo Stock Exchange, Inc.
- 1. Overall management supervision/evaluation through the exercise of voting rights at the Board of Directors meetings.
- 2. Monitor conflict of interest issues arising between PC DEPOT and its management or other interested parties.
- 3. Provide useful advice on corporate governance based on experience, insight and knowledge.
Outside directors Mineo Fukuda and Hidetaka Fukuda and outside auditors Kazuo Yamamoto, Masaki Nishimura and Yoshinari Noguchi are deemed to have no potential conflicts of interest with ordinary shareholders and have been registered with the Tokyo Stock Exchange, Inc. as independent directors/auditors in accordance with the requirements thereof.
5. Risk management system
Under PC DEPOT’s risk management system, the General Stakeholder Relations Office is responsible for examining internal and external risks to which we may be exposed. It evaluates risk level based on its effect and the emergency level, and reports risk to the Compliance Committee if necessary. A Risk Management Team is organized as needed, which institutes preventive measures according to risk level.
6. Overview of content of limited liability contracts
Pursuant to the Companies Act Article 427 (1) and the provisions of the Articles of Incorporation, PC DEPOT has concluded contracts with directors (excluding executive directors, etc.) and corporate auditors to limit the liability of said directors and auditors specified under Article 423 (1) thereof. Under the contracts, the maximum amount of liability shall be limited to either an amount specified in advance (1 million yen or more for directors and 500,000 yen or more for corporate auditors) or the amount specified by laws and regulations, whichever is higher.
7. Limit on liability of directors and corporate auditors
Under the Companies Act Article 426 (1), PC DEPOT stipulates in its Articles of Incorporation that directors (including former board members) and corporate auditors (including former auditors) may be given an exemption with respect to the liability of board members and corporate auditors under Article 423 (1) to the extent of the amount pursuant to laws and regulations by a resolution of the Board of Directors. This aims to develop an environment for directors and corporate auditors to achieve their best performance and fulfill their expected roles in performing their duties.
[Corporate Governance System]
Fundamental Approach to Internal Control Systems and Status of These Systems
When establishing internal control systems, PC DEPOT complies with its fundamental policy that prescribes guidelines for business activities. In addition, PC DEPOT conducts business activities that are legal and efficient, maintains the reliability of its financial statements, and has controls and procedures concerning the disclosure of corporate information. Risk is managed based on the periodic analysis of risk exposure.
PC DEPOT has an organizational stance that is resolutely opposed to anti-social forces.
(Summary of Board of Directors resolutions concerning internal control systems)
1. System to ensure that activities of the Company’s directors and employees comply with laws, regulations and the Articles of Incorporation
PC DEPOT has a rigorous program to ensure that directors and employees comply with laws, regulations, the Articles of Incorporation and other rules.
The Company is also upgrading its internal control system by reinforcing risk management systems and taking other actions.
At monthly meetings of the board of directors, the directors reaffirm their commitment to compliance to laws and regulations. Furthermore, directors, executive officers and employees sign a Compliance Oath every six months. This system makes these individuals reaffirm their commitments to compliance and business ethics. In addition, there are compliance training programs and tests.
PC DEPOT has appointed independent outside auditors in order to strengthen the management supervision function. For further activating the board of directors, the Company has decided to appoint independent outside directors.
PC DEPOT examines internal and external risks.
The Company organizes the "Risk Management Team" as necessary, which is made up primarily of internal/external officers.
The team ranks risks depending on the magnitude of their potential impact on the Company and their urgency and enacts preventive measures that match the level of each risk.
The Compliance Committee, which is made up primarily of directors, cooperates with the Risk Management Team to prevent problems from reoccurring.
2. System for storage and management of information concerning business execution by the Company’s directors
Documents (minutes of meetings, documents used for decision-making, contracts, etc.) and other information concerning how the directors perform their duties are properly stored and managed as prescribed by internal rules (rules of the board of directors, rules for handling decision-making documents, etc.).
3. Rules and other systems for management of risks that may cause losses to the Company
- a．Internal Audit/Internal Control Department
This department establishes and maintains/operates internal controls for the entire group, including subsidiaries, and oversees internal control functions across the entire group.
It also performs periodic audits of individual departments and on-site audits of stores. Periodic audit reports are sent to the representative director and corporate auditors after which departments and stores audited receive audit results and directives to take preventive measures.
Internal rules are constantly revised to reflect these reports to prevent the reoccurrence of problems.
- b．Internal consultation contact, hot line and direct line to attorney
These items create a framework with a self-cleansing mechanism backed by a system of checks and balances.
4. System to ensure that the Company’s directors perform their duties efficiently
At PC DEPOT, there is a regular meeting of the board of directors once each month, in principle.
The directors reach decisions concerning important items and supervise the execution of business activities by the directors.
In addition, the term of office for directors is one year in order to clarify their responsibilities regarding business activities.
Moreover, for the performance of jobs that have been assigned to relevant directors by the board of directors, specific rules are determined for responsibilities and details of procedures for activities in each delegated business sector.
5. System to ensure proper activities at the Group, which includes PC DEPOT and its subsidiaries
- a. System for reporting to the Company regarding the performance of duties that have been assigned to relevant directors at subsidiaries
- PC DEPOT sends to its subsidiaries its officers, who report the status of the subsidiary’s business activities and performance of duties by its directors to the board of directors on a regular basis.
- b. Rules and other systems for management of risks that may cause losses at subsidiaries
- The Internal Audit/Internal Control Department establishes/operates internal controls for the entire group, including subsidiaries, by focusing on 42 control items at the group level.
In addition, the Department performs periodic on-site audits of subsidiaries.
Regular audit reports are submitted to the representative director and auditors, and after that, the divisions audited are notified of the results of the audits.
The Department receives from these divisions the reports on their preventive measures and the results of the measures taken.
- c. System to ensure that the subsidiaries’ directors perform their duties efficiently
- While respecting the autonomy of subsidiaries, PC DEPOT ensures efficiency in the performance of their directors’ duties by receiving periodic reports on their business activities and having important matters discussed at the board meeting of the relevant subsidiaries after prior consultation.
- d. System to ensure that activities of subsidiaries’ directors and employees comply with laws, regulations and the articles of incorporation
- The Group strives to enhance its internal control systems by ensuring that the directors and employees comply with laws and regulations and the articles of incorporation and by strengthening its risk management system.
At monthly meetings of the board of directors of subsidiaries, the directors reaffirm their commitment to compliance to laws and regulations.
Furthermore, directors, executive officers and employees sign a Compliance Oath every six months.
This system has these individuals at subsidiaries reaffirm their commitment to compliance and business ethics.
In addition, there are compliance training programs and tests.
6. Matters concerning employees assigned to assist the Company’s auditors in performing their duties upon a request by an auditor
In response to a request from a corporate auditor, directors will assign employees to assist the corporate auditors in performing their duties.
7. Matters for ensuring the independence of employees specified in 6 from the Company’s directors and the effectiveness of directions given to the employees by corporate auditors
In order to ensure the independence of corporate auditors when performing their duties, employees who are assigned to assist them in performing their duties shall comply with the directions given to them by the auditors.
Said employees shall not receive orders and instructions from the director of the organization that they belong to.
8. System for reports to the Company’s auditors
a. Directors and employees of the Company and its subsidiaries are required to provide reports and information that are requested by an auditor in the manner prescribed by the board of auditors.
b.The reports and information in the above item contain primarily the following items.
- 1. The status of activities of departments associated with establishing internal control systems
- 2. The status of activities of corporate auditors and internal audit departments at subsidiaries and affiliates
- 3. Significant accounting policies and standards of PC DEPOT and any revisions
- 4. Announcements of business results and forecasts and the contents of other significant public announcements
- 5. Operations of the internal reporting system and the reports received
- 6. Submission of contracts, internal documents for decision-making and minutes of meetings as requested by a corporate auditor
9. System to ensure that those who provide reports prescribed in 8 shall not be treated adversely due to their reporting
PC DEPOT stipulates in its Compliance Committee Provisions that it is prohibited to treat adversely those who submit reports prescribed in 8 due to their reporting.
10. Policy on treatment of expenses incurred in connection with duties of auditors
PC DEPOT has a system in place for the smooth execution of procedures for advance payments or reimbursement of expenses incurred by corporate auditors in executing their duties and any other processing of expenses or reimbursement of costs they incur in connection with their duties, upon request from the auditors.
(Fundamental Approach to Eliminating Anti-social Behavior and Status of Measures)
1. Fundamental approach
To fulfill its social obligations and defend itself, PC DEPOT refuses any and all contact, improper demands and other actions of anti-social elements. PC DEPOT has an uncompromising stance regarding the refusal of any relationship with anti-social elements.
2. Status of internal systems
PC DEPOT's Legal Affairs and Compliance Office is responsible for overseeing internal systems for the elimination of anti-social forces.
Employees confirm their commitment to refusing any contact with anti-social elements in the Compliance Oath that they sign every six months.
When selecting suppliers and other business partners, PC DEPOT performs a survey when the relationship is first established and periodically thereafter as prescribed by PC DEPOT's rules. Contracts with business partners include a provision concerning the refusal to associate with anti-social elements.
These contracts include a clause that allows PC DEPOT to terminate the contract if a business partner that signed a contract is later found to have a business relationship with anti-social elements. This provides a means for the elimination of any relationships with anti-social elements.
3. Cooperation with external organizations
The Company is a member of the Kanagawa Prefecture Corporate Defensive Measures Council. This council works closely with the police, attorneys, external survey agencies and other organizations to exchange and gather information. To respond to problems involving anti-social elements, the council works closely with the police, attorneys and other external organizations to achieve a resolution quickly.