Basic Views and Basic Policy on Corporate Governance
The AIFUL Group understands that a key objective of corporate governance is to achieve corporate management with transparency, impartiality and efficiency by conducting corporate activities premised on compliance in accordance with our management philosophy of Earn the trust of society through corporate activity based in integrity to contribute to the development of the economy and society and thereby to gain the trust of society.
In line with the basic views on corporate governance, AIFUL will undertake enhancemento upgrade our corporate governance in accordance with the Basic Policy on Corporate Governance set out below in a bid to achieve continued growth and a medium- and long-term increase in corporate value through transparent, impartial, prompt and bold decision making.
- （1）We will respect the rights of shareholders and ensure their equality.
- （2）We will work on appropriate collaboration with all stakeholders including shareholders.
- （3）We will appropriately disclose our financial, non-financial and other corporate information to ensure transparency.
- （4）Our Board of Directors will recognize its fiduciary responsibility to shareholders and fulfill their roles and duties including making and keeping its function of supervising business execution effective.
- （5）We will hold constructive dialogues with shareholders for the sake of achieving continued growth and a medium- and long-term increase in corporate value.
Overview of the Corporate Governance Structure
Corporate Governance Structure
In order to strengthen the supervisory function of the Board of Directors and to enhance corporate governance, we have made the change from a company with a Board of Auditors to a company with an Audit and Supervisory Committee. This change went into effect on June 23, 2015.
The Audit and Supervisory Committee and directors belonging to the committee
The Audit and Supervisory Committee consists of three directors (including two directors who are outside members). It determines items such as the audit policy and plan, and discusses and decides on important audit matters based on the reports it receives. In addition to these performing these duties, it also audits legitimacy and appropriateness through the use of the internal control system. A meeting will generally be held every month, with extraordinary meetings held when necessary.
The directors who are members of the Audit and Supervisory Committee will cooperate with the Internal Auditing Department and the accounting auditors to enhance management’s supervisory functions. They will also share information with the auditors of affiliated companies in an effort to strengthen the auditing structure for the operations of the entire Group.
To improve these audit functions, the Group will establish an Auditor’s office as the exclusive body for supporting the duties of directors who belong to the Audit and Supervisory Committee. It will also take the necessary steps to secure independence, such as by requiring that the Auditor’s office does not follow any directions or orders from directors (other than directors belonging to the Audit and Supervisory Committee) when carrying out their duties.
Board of Directors and Directors
The Board of Directors consists of nine directors in total (as of the date of submission of the Annual Securities Report), with six directors (directors who are not on the Audit and Supervisory Committee) and three directors who are on the Audit and Supervisory Committee. It deliberates and decides on matters that cannot be delegated to directors pursuant to the provisions of laws, regulations, and the Articles of Incorporation, as well as important matters such as management strategies, and monitors these matters regularly. It generally holds semimonthly meetings and extraordinary meetings when necessary. The Company's Articles of Incorporation also stipulate that there be no more than fifteen directors (excluding directors on the Audit and Supervisory Committee) and no more than five directors on the Audit and Supervisory Committee.
Two of the three directors in the Audit and Supervisory Committee are outside directors (as of the date of the Annual Securities Report was submitted). We have developed a structure in which they can attend management meetings and other important meetings and committees to express their views.
The Company introduced an executive officer system in June 2007 to speed up the decision-making process and the performance of duties, and enhance the separation of supervisory and executive functions. The Board of Directors appoints executive officers and delegates its business by establishing the division of duties and authority.
The Management Committee is comprised of all directors and executive officers. It strives to promote sharing information and mutual verification of matters to be submitted to the Board of Directors, and issues and strategies, etc. based on the policies resolved at Board of Directors meetings, so that disagreements do not arise regarding decisions or the performance of duties. It holds meetings on a weekly basis, in general.
The Compliance Committee is placed as an advisory body under the direct control of the Board of Directors. The head of this committee is the executive officer in charge of the Corporate Risk Management Department and approved by the Board of Directors, and it is composed of outside experts, directors also serving as members of the Audit and Supervisory Committee and executive officers of related organizations. Its objectives are to create a corporate culture in which compliance is emphasized, to establish corporate ethics and to promote compliance programs. It makes deliberations and recommendations regarding compliance related important matters and delivers reports to the Board of Directors as required. In addition to six times a year meetings in general, it holds extraordinary meetings as necessary.
Risk Management Committee
AIFUL has the Risk Management Committee under the direct control of the Board of Directors. Headed by the president and representative director, it is composed of all the directors. For the purposes of preventing risks and mitigating losses in the event of a crisis by constructing a reasonable risk management structure, it regularly receives risk status reports to enable it to be constantly aware of risks and continuously review the risk management system to submit reports to directors. In addition to quarterly meetings in general, it holds extraordinary meetings as necessary.
Reasons for the current structure
As we have an auditor system, we appoint two outside corporate auditors for our three corporate auditors. We have ensured independent audits by developing a system where all corporate auditors attend Board of Directors meetings and other important meetings and committee meetings, including Management Committee meetings, to express their opinions. We have also ensured audits by establishing an Auditor's office as the exclusive body for supporting the duties of corporate auditors. Further, we separate management's supervisory functions and business execution functions by implementing an executive officer system and strengthening supervisory functions by establishing a Compliance Committee including outside experts and a Risk Management Committee, etc.
We have adopted our current system to achieve corporate management that is transparent, fair, and efficient.
The diagram below illustrates our Group's structure for business execution, management supervision, internal control and risk management as of the date of submission of the Annual Securities Report.
Matters concerning directors’ remuneration, etc.
We have established a policy on determining the amount of remuneration, etc. for directors and corporate auditors and the method for calculating such remuneration. The policy is that the remuneration functions as compensation for fulfilling their roles based on the management philosophy of "Earn the trust of society through corporate activity based in integrity," as incentives for improving corporate performance and expanding corporate value over the medium to long term.
The Board of Directors and the Audit and Supervisory Committee have authority to decide the amount of remuneration for the Company's officers and the policy on the calculation method thereof. The Board of Directors and the Audit and Supervisory Committee review the system and standards of remuneration as necessary based on the business environment and the status of business performance, and the allocation to each person is determined according to the size of the role for each position, the nature of each person's administrative duties, and the scope of their responsibilities.
The date of resolution of the General Meeting of Shareholders on remuneration, etc. for our officers is June 23, 2015. The contents of the resolution are as follows: the amount of remuneration for directors (excluding Audit and Supervisory Committee members) is within 500 million yen per year, and the amount of remuneration for directors who are Audit and Supervisory Committee members is within 80 million yen per year.
2. Policy on Determination of the Amount of Remuneration, etc. for Individuals of Basic Remuneration (Monetary Remuneration)
The basic remuneration (fixed amount) of our directors (excluding Audit and Supervisory Committee members) is a monthly fixed remuneration, and a remuneration table is established for each remuneration rank.
In addition, a certain standard for determining compensation rank is established for each position, and basic compensation is an amount based on compensation rank.
The remuneration system for Directors who are Audit and Supervisory Committee members does not vary depending on performance, etc. from the viewpoint of their independence, and only basic remuneration is paid.
3. Policy for Determining the Content and Amount or Method of Calculating the Amount of Performance-Linked Compensation, etc.
Performance-linked remuneration aims to increase motivation to raise stock prices and improve business performance, and increase corporate value. Performance-linked remuneration (variable amount) indicators are calculated based on an evaluation of each director and a company performance against the base amount of the remuneration rank, and these are paid at a certain time each year.
In order to reflect the performance of the divisions in charge by each director, the evaluation multiplier and the Company performance multiplier, which are based on the evaluation of each director, are grounded on the business environment, as well as operating indicators such as operating asset, operating revenue, ordinary profit, and ROA for each business in which each director is responsible, as important indicators. Each director evaluates performance against the targets of the division in charge, and the determination of the amount of performance-linked remuneration is made after consulting with and reporting to the Personnel Committee (established for the purpose of ensuring fairness and transparency in evaluation and appointed by the President and the Representative Director), which is the decision-making body for directors' remuneration.
The results of major management indicators for the fiscal year under review are as follows. Please refer to "(1) Overview of Business Results, etc. ① Financial Condition and Business Results in 3[Management's Discussion and Analysis of Financial Condition, Results of Operations and Cash Flows] " from the link to the "Corporate Governance Report" on the bottom of the page for information on business conditions in the fiscal year under review.
- Operating revenue:
- 127,481 million yen
- Operating expenses:
- 109,950 million yen
- Operating profit:
- 17,530 million yen
- Ordinary profit:
- 19,305 million yen
In addition, the Company contributes a certain percentage of basic remuneration to the Executive Stock Ownership Plan as stock acquisition-type remuneration (in principle, the amount of monthly base remuneration multiplied by 5% or more but less than 1 million yen per month is determined by each director), and the acquired shares of the Company are held for the period of service, thereby enhancing the linkage between remuneration and stock price.
4. Policy on Determination of Percentage of the Amount of Monetary Compensation, Performance-Linked Compensation, etc. to the Amount of Individual Compensation, etc. for Directors
The compensation percentages of our directors are reviewed by the Personnel Committee based on compensation levels benchmarked to companies of the same size of business and related industries and types of business as we do.
As described in 5, The President and Representative Director, who has been delegated, decides on the content of individual remuneration for directors in accordance with the content of the report issued by the Personnel Committee.
5. Matters concerning determination of the contents of individual remuneration, etc. for directors
Mitsuhide Fukuda, President and Chief Executive Officer, is entrusted with the specific content of the individual remuneration of directors based on a resolution of the Board of Directors. The content of the authority is the evaluation and allocation of performance-linked remuneration based on the amount of basic remuneration for each director and the performance of each director's business in charge.
The reason for delegating these authorities was that the Company determined that it was appropriate to ascertain the performance of each director's business in charge and conduct evaluations linked to that business.
The Board of Directors consults with the Personnel Committee on the draft of the determination of the amount of performance-linked remuneration to ensure that such authority is properly exercised by the President and Representative Director, and gathers opinions from the Audit and Supervisory Committee.
The President and Representative Director, who has been delegated as mentioned above, decides the specific content of remuneration in accordance with the results of such reports and the gathering of opinions.
6. Reasons for the Board of Directors determining that the contents of individual remuneration, etc. for Directors are in line with the decision-making policy
Regarding the remuneration, etc. of individual directors for the current fiscal year, the Board of Directors has judged that the method of determining the content of remuneration, etc. and the content of the determined remuneration, etc. are consistent with the decision-making policy decided by the Board of Directors, and that the results of the reports and gathering of opinions from the Personnel Committee and the Audit and Supervisory Committee are respected.
Standards and approaches concerning portfolio stock categories
Regarding categories of portfolio stock, namely portfolio stock held for purposes other than pure investment and portfolio stock held for the purpose of pure investment, stock held based on the judgement that such holding will contribute to the medium- to long-term development of the Company through the maintenance and strengthening of stable and medium- to long-term business relationships with business partners are categorized as portfolio stock held for purposes other than pure investment. Furthermore, the Company does not, in principle, hold portfolio stock other than portfolio stock held for purposes other than pure investment.
Holding policy and methods of verifying the rationality of holding and verification by the Board of Directors etc. concerning the appropriateness of holding specific issues
When stock in listed companies is held, each year the Board of Directors carefully examines whether the purpose of holding specific stocks is appropriate, whether the benefits and risks associated with holding specific stocks is reasonable given the cost of capital, etc., conducts investigations from the perspective of maintaining and strengthening relationships with business partners.
The “Report on Corporate Governance” (PDF file) can be downloaded below.