Corporate governance | From the president to investors
as of July, 2017
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
Supplement to principle 1-2-5 : Exercise of rights at a Shareholders' Meeting
In the case where institutional investors etc. that hold stocks in the name of a trust bank etc. wish to exercise their voting rights at a shareholders' meeting, we will appropriately respond to the request in consultation with the trust bank etc.
Also, we will continue to consider our response in consultation with a stock transfer agency, referring to the guidelines that the National Association of Stock Markets is scheduled to establish.
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.
Supplement to principle 4-2-1 : Incorporating a certain percentage of performance-based pay or stock options into the compensation for management
Our company does not provide incentives for Directors' compensation at present, but will consider it.
Supplement to principle 4-10-1 : Establishment of a voluntary committee
In our company, the directors' compensation is set by rank, based on the Executive Compensation Rules. When the Board of Directors makes personnel decisions regarding management staff, we refer to the opinions of independent external directors. Therefore, we have not established a voluntary committee.
Supplement to principle 4-11-3 : Assessment and disclosure of the effectiveness of the Board of Directors as a whole
Electing three external directors, our company is striving to ensure the effectiveness of the Board of Directors as a whole with respect to the judgements made by the Board of Directors and the management methods of its meetings.
We will consider disclosing the analysis findings and assessment of the Board of Directors' effectiveness.
Disclosure based on each principle of the Corporate Governance Code
Principle 1-4 : Stocks held as a policy measure
Our company had determined in principle not to hold assets not required for business. However, we shall decide whether we should hold stocks as a policy measure in cases where doing so is judged to contribute to the enhancement of our group's corporate value in the medium- to long-term. This decision will be made in overall consideration of our business strategy and the maintenance and enhancement of our stable relationship with our customers. Regarding the exercise of the voting rights for the stocks, we do not intend to unconditionally agree with proposals made by the corporation or corporations whose stocks are held by us. After meeting with the corporation(s) as needed, we would like to exercise the voting rights giving consideration to whether it contributes to the enhancement of our corporate value and whether the corporation concerned is making good decisions to enhance its corporate value in the medium- to 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 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, a personnel manager explains to a representative director the factors in the decision to be made, in total consideration of 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. After that, the matter is discussed and decided by the Board of Directors.
- (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. People who have the expertise required for business management, such as in law, accounting and risk management, are nominated as candidates for external directors. A personnel manager explains to a representative director about the candidates to be elected based on the said policy. After the candidacy is discussed at the management meeting, it is discussed and decided by the Board of Directors.
- (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 23rd 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 4-8 : Effective utilization of independent external directors
Our company elects three independent external directors who meet the requirements for independent officers stipulated in the rules on the listing of securities of the Tokyo Stock Exchange. We share information on matters such as discussions, potential risks and approvals, especially in the Administrative Department, with the external directors. We check their opinions as necessary.
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 23rd Ordinary General Shareholders' Meeting (pages 11,12).
Supplement to principle 4-11-3 : Analysis and assessment of the effectiveness of the Board of Directors as a whole
Electing two external directors, our company is striving to ensure the effectiveness of the Board of Directors as a whole with respect to the judgements made by the Board of Directors and the management methods of its meetings.
We will consider disclosing the analysis findings and assessment of the Board of Directors’ effectiveness.
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 stockholders
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 Office Manager of the Office of the President 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 stockholders. As the department in charge, the IR Section of the Office of the President 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, 2017, we had ten directors (including two 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. Contents of the company's organizations
- ＜Meetings of the Board of Directors＞
The Board of Directors consists of ten 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.
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.
Now the ten-member Board of Directors has two 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 meeting＞
The Audit Committee comprises one standing 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 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 audit corporation, which operates Internal Audit Office and 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 meeting＞
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 decisions after sufficient discussion.
- ＜Executive officer system＞
In order to clarify the business operation and management responsibility, PC DEPOT adopts the executive officer system. PC DEPOT has four executive officers.
Executive officers attend meetings of the Board of Directors and the Executive Committee. The role of these officers is to facilitate rapid decision-making concerning management issues and submit reports on business activities.
- ＜Accounting auditor＞
The Board of Directors comprises ten directors, (including two outside directors) and four corporate auditors (including three outside auditors). Furthermore, of the five outside directors/auditors, four are independent directors/auditors. This system strengthens corporate governance while protecting ordinary shareholder interests.
- ＜Compliance Committee＞
The Compliance Committee, which is made up primarily of directors, examines laws and regulations and reported risk as needed and enacts preventive measures if necessary.
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:
- 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.
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.
Outside directors Atsuomi Obayashi and Mineo 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, internal and external risks to which we may be exposed are monitored and evaluated.
The Company evaluates risk level based on its influence and 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. 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) may be given exemption with respect to the liability of board members under Article 423 (1) to the extent of the amount pursuant to laws and regulations by a resolution of the board of directors.
In addition, under the Companies Act Article 427 (1), PC DEPOT provides in its Articles of Incorporation that the Company may enter into contracts with the directors (excluding executive directors, etc.) to limit the liability of said directors under Article 423 (1).
Provided that, however, the amount shall be limited to either an amount specified in advance (1 million yen or more) or the amount specified by laws and regulations, whichever is higher.
- Under the Companies Act Article 426 (1), PC DEPOT stipulates in its Articles of Incorporation that corporate auditors (including former auditors) may be given exemption with respect to the liability of 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.
In addition, under the Companies Act Article 427 (1), PC DEPOT provides in its Articles of Incorporation that the Company may enter into contracts with the corporate auditors to limit the liability of said auditors under Article 423 (1).
Provided that, however, the amount shall be limited to either an amount specified in advance (500,000 yen or more) or the amount specified by laws and regulations, whichever is higher.
7. Overview of content of limited liability contracts
Pursuant to the Companies Act Article 427 (1) and the provisions of the Articles of Incorporation, PC DEPOTS 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.
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 behavior.
(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 General Manager of Comprehensive Management Headquarters is responsible for overseeing internal systems for the elimination of anti-social elements.
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.