SCSK is working to ensure transparency in management, strengthen appropriate governance and monitoring structures, and enhance the soundness of management through ongoing risk management.
Basic Approach and System for Corporate Governance
Embracing its focus on corporate social responsibility, the SCSK Group implements sustainability management with an eye to shareholders and other stakeholders.
From this perspective, the SCSK Group considers raising the efficiency and soundness of management as well as ensuring transparency in the decision-making process as the most basic components of its corporate governance. Rating these matters high among management priorities, we aim to build an optimal management structure that benefits SCSK the most.
We implement each of the principles set forth in the Tokyo Stock Exchange’s Corporate Governance Code and provide detailed disclosures within our Corporate Governance Report based on each principle.
Overview of Corporate Governance System (as of June 23, 2022)
History of Efforts to Strengthen Corporate Governance
Corporate Governance Structure
Corporate Governance Structure
Composition of Board of Directors and Committees
◎：Chairperson ○：Committee Member ( )：Attendance record*1
| Position | Name | Board of Directors | Audit and Supervisory Committee | Governance Committee*4 | |
|---|---|---|---|---|---|
| Conflict of Interest Advisory Subcommittee*4 | Nomination and Remuneration Advisory Subcomiittee | ||||
| Representative Director Chairman and Chief Executive Officer |
Hideki Yamano*3 | (−) | − | − | ○ |
| Representative Director President and Chief Operating Officer |
Takaaki Touma*3 | (−) | − | − | ○ |
| Director Exective Vice President |
Koji Tamefusa | (12/12 meetings) | − | − | − |
| Director Exective Vice President |
Tetsuya Fukunaga | (14/14 meetings) | − | − | − |
| Director | Shunichi Aramaki*3 | (−) | − | − | − |
| Director*2 | Tetsuya Kubo | ◎ (12/12 meetings) |
− | ○ | ○ |
| Director(Audit and Supervisory Committee Member) | Yasunori Anzai | (14/14 meetings) | ◎ (15/15 meetings) |
− | − |
| (14/14 meetings) | |||||
| Director(Audit and Supervisory Committee Member)*2 | Kimitoshi Yabuki | (14/14 meetings) | (15/15 meetings) | ◎ | ◎ |
| Director(Audit and Supervisory Committee Member)*2 | Masaichi Nakamura | (12/14 meetings) | (15/15 meetings) | ○ | ○ |
| Director(Audit and Supervisory Committee Member)*2 | Kazuko Shiraishi | (14/14 meetings) | (15/15 meetings) | ○ | ○ |
| Director(Audit and Supervisory Committee Member)*2 | Yasuo Miki*3 | (−) | (−) | ○ | ○ |
| Director(Audit and Supervisory Committee Member)*2 | Sadayo Hirata*3 | (−) | (−) | ○ | ○ |
*1 Attendance records from April 2021 to March 2022
*2 Outside Director
*3 Newly elected(from June 2022)
*4 In addition one independent outside expert (lawyer) has been appointed as a committee member, bringing the total number of committee members to 7.
Policy on the Protection of Minority Shareholders
Policy on the Protection of Minority Shareholders in Ensuring Independence from Parent Company
To protect minority shareholders, the Board of Directors consists of 12 directors, and 6 of those directors are independent outside directors, about whom there are no concerns about conflict of interest with general shareholders. The Board of Directors makes important management decisions and supervises the execution of operations from an independent perspective.
SCSK also gives appropriate consideration to the shared interest of SCSK and its shareholders and established the Governance Committee and the Conflict of Interest Advisory Subcommittee, which are composed of independent outside directors and independent outside experts, as advisory bodies to the Board of Directors in order to ensure fairness and transparency.
One SCSK director is from the parent company, and efforts are made to strengthen and expand the business foundation. Furthermore, material matters regarding the execution of operations when conducting business are decided based on agreement by the Board of Directors, which ensures the autonomy and independence of management decisions by SCSK, a listed company.
Policy on the Protection of Minority Shareholders in Transactions with Parent Company
SCSK takes steps so that transactions with its parent company Sumitomo Corporation are not detrimental to minority shareholders.
In FY2021, sales to the parent company accounted for 5.2% of total net sales. The parent company places no constraints on business activities, and transaction terms are the same as those that would be applied to regular transactions with clients that we do not have a capital relationship. We recognize this as ensuring a certain level of independence.
As for those transactions that are material, advance consultations are held with the Governance Committee and the Conflict of Interest Advisory Subcommittee, and the Board of Directors decides whether to conduct the transaction after receiving a report from these bodies.
Furthermore, we ensure fairness by having reports on the state of business with the parent company regularly submitted to the Governance Committee and the Conflict of Interest Advisory Subcommittee.
Election and Dismissal of Directors and Procedures
When electing and dismissing directors (excluding those who are Audit and Supervisory Committee members), the Governance Committee and Nomination and Remuneration Advisory Subcommittee are consulted, and the election and dismissal is tabled at the General Meeting of Shareholders after being voted on by the Board of Directors and taking into consideration the opinion of the Audit and Supervisory Committee. In addition, for candidates for directors who are Audit and Supervisory Committee members, the approval of the Audit and Supervisory Committee is obtained, and then they are elected or dismissed through the same process.
As for the composition and number of Board of Directors members, decisions are made taking into consideration the skills that should be possessed by the SCSK’s Board of Directors and the balance and diversity of skills possessed by each director.
To maintain and improve directors’ supervision of execution of duties, independent outside directors about whom there are no concerns of conflict of interest with general shareholders will continue to be selected. Independent outside directors who possess management judgement based on a wide range of business activities attend Board of Directors meetings and provide advice to maximize corporate value.
Selection Criteria
Directors (excluding directors who are Audit and Supervisory Committee members)
- Possess knowledge, experience, and track record required of SCSK directors
- Can constructively participate in deliberations at Board of Directors meetings
- Possess outstanding management skills and insight into thoroughly adhering to laws, regulations, and corporate ethics
- For directors who also serve as executive officers, possess extensive knowledge in responsible fields
Directors who are Audit and Supervisory Committee members
- Possess specialized insight into and experience as director who is Audit and Supervisory Committee member and can conduct audits from an objective perspective
Outside Directors
- In addition to the above, possess specialized and broad insights into corporate management and various fields
Reasons for Elections and Summary of Their Expected Roles
| Outside Directors | Reasons for Elections and Summary of Their Expected Roles | |
|---|---|---|
| Tetsuya Kubo (Chairman of the Board) |
Independent Director |
Mr.Tetsuya Kubo possesses robust management experience gained over years of serving in important positions at major Financial institutions as well as wide-ranging knowledge pertaining to global businesses. We believe that the knowledge and insights that he has acquired through his career qualify him to help maintain and enhance the supervision of execution of operations at SCSK and to offer advice on all areas of management, and we have thus selected him as an Outside Director. |
| Kimitoshi Yabuki (Governance Committee Chair) |
Audit and Supervisory Committee Member, Independent Director |
Mr. Kimitoshi Yabuki has specialized knowledge and experience as an attorney and broad insights into social issues and human rights issues. We believe that the knowledge and insights he has acquired through his career qualify him to help maintain and enhance supervision of execution of operations at SCSK and to offer advice for overall management, and we have thus selected him as an Outside Director that also serves as an Audit and Supervisory Committee Member. |
| Masaichi Nakamura | Audit and Supervisory Committee Member, Independent Director |
Mr. Masaichi Nakamura has specialized knowledge and experience as a certified public accountant and broad insights into risk management. We believe that the experience and insights he has acquired through his career qualify him to help maintain and enhance supervision of execution of operations at SCSK and to offer advice for overall management. We have thus selected him as an Outside Director who also serves as an Audit and Supervisory Committee Member |
| Kazuko Shiraishi | Audit and Supervisory Committee Member, Independent Director |
Ms.Kazuko Shiraishi possesses a strong, global background as well as wide-ranging knowledge pertaining to environmental, social,and human rights issues gained in her role as a diplomat. She was selected as an Outside Director and Audit and Supervisory Committee member because we believe the experience and insights she has acquired through her career qualify her to help maintain and enhance supervision of execution of operations at SCSK and to offer advice for overall management. |
| Yasuo Miki | Audit and Supervisory Committee Member, Independent Director |
Mr. Yasuo Miki possesses a breath of experience in maneging IT companies as well as wide-ranging technology knowledge. He was selected as an Outside Director and Audit and Supervisory Committee member because we believe the experience and insights he has acquired through his career qualify him to help maintain and enhance the supervision of execution of operations at SCSK and to provide advice on overall management. |
| Sadayo Hirata | Audit and Supervisory Committee Member, Independent Director |
Ms. Sadayo Hirata has a wealth of experience as an engineer as well as academic insight pertaining to IT and technology management. She was selected as an Outside Director and Audit and Supervisory Committee member because we believe the experience and insights she has acquired through her career qualify her to help maintain and enhance supervision of execution of operations at SCSK and to provide advice on overall management. |
Stimulating Deliberation on the Board of Directors
The secretariat of the Board of Directors led mainly by the Legal Department strives to endeavor handout materials for the Board of Directors and to ensure discussions during meetings of the Board of Directors are active and substantial by conducting prior explanations for outside directors.
Additionally, the secretariat determines the annual schedule and deliberation matters of the Board of Directors in advance to every extent possible, continuously reviews agenda standards, and carefully selects matters requiring resolution of the Board of Directors. In this manner, sufficient time is dedicated to deliberations on truly material matters.
Evaluating the Effectiveness of the Board of Directors
Initiatives to Improve the Effectiveness of the Board of Directors
Every year, SCSK carries out self-evaluation and analysis concerning the effectiveness of the Board of Directors since FY2016 in order to improve the functions of the Board of Directors and enhance corporate value as a result.
Looking ahead, taking into account the results of this evaluation, SCSK’s Board of Directors will swiftly address the issues identified based on a thorough review and will continue to promote measures for enhancing the functions of the Board of Directors.
Evaluation Method
As for the FY2021 self-evaluation and analysis, all directors who are Board of Directors members completed a questionnaire in February 2022 while receiving advice from an outside organization.
Anonymity was ensured by having directors submit completed questionnaires to the outside organization. After receiving a report on the results from the outside organization, an analysis, discussion, and evaluation were conducted at the Board of Directors meeting held in May 2022.
Remuneration for Directors
Basic Policy on Remuneration for Directors and Procedures for Deciding Amount of Remuneration
SCSK pays out annual remuneration to directors including performance-linked compensation, within the maximum amount as determined at the Ordinary General Meeting of Shareholders.
The policies, procedures, and calculation methods, and level of remuneration of directors (excluding outside directors, part-time directors and those directors that serve as Audit and Supervisory Committee members) are decided by resolution of the Board of Directors taking into account the results of examinations by the Governance Committee and Nomination and Remuneration Advisory Subcommittee, a majority of whose members consists of independent outside directors and independent outside experts. The Audit and Supervisory Committee confirms the validity of remuneration level based on roles and duties of directors considering the fairness of the calculation of remuneration and business performance.
In addition, directors that serve as Audit and Supervisory Committee members hold discussions regarding their own compensation pursuant to the provisions of Article 361, Paragraph 3 of the Companies Act.
Policy and Indicators for Performance-Linked Compensation
(1) Short-term performance-linked compensation (cash compensation)
The amount of short-term performance-linked compensation is decided based on the executive officer remuneration system. Short-term performance-linked compensation is variable as it is calculated by adjusting the standard amount set for each director position based on the target achievement rate and individual evaluation for the particular year. The weight of the target achievement rate and individual performance are 60% and 40%, respectively.
Individual evaluation = payout rate proportional to individual evaluation based on executive officer remuneration system
As for individual evaluations, the efforts of each officer related to the Medium-Term Management Plan and sustainable management are evaluated, which functions as a sound incentive to achieve the SCSK management strategy and sustainable growth.
(2) Medium- to long-term performance-linked compensation (stock-based compensation)
To provide an incentive that embodies the sustained improvement in corporate value depicted in Grand Design 2030 and promote greater sharing of value with all shareholders, from FY2022 SCSK grants its directors (excluding outside directors, part-time directors and those directors that serve as Audit and Supervisory Committee members) restricted stock as compensation linked to medium- to long-term performance.
The restricted transfer period is generally from the day the restricted shares are granted until the day the person resigns as a SCSK officer in order to share shareholders value over the medium to long term.
Both Senior Executive Officers and Senior Corporate Officers are also granted restricted shares.
Internal Control
SCSK has established the Basic Policy on Establishing the Internal Control System so that the execution of duties by directors conforms to laws and the Articles of Incorporation and that other operations along with the operations of the corporate group comprising SCSK and its subsidiaries are performed appropriately.
In accordance with this basic policy, we continuously check the effectiveness of the internal control system and conduct reviews based on the changing management climate, which allows us to modify the internal control system on occasion as the need arises. The SCSK Group is working to strengthen governance in order to reasonably guarantee the achievement of the four goals of (1) effectiveness and efficiency of operations, (2) reliability of financial reporting, (3) compliance with laws and regulations related to business activities, and (4) safeguarding of assets during the course of its business operations.
