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Governance Reforms for Further Growth

Course of Governance Reforms

One of the purposes of Capcom's governance reforms is the creation of systems for management - that is, making management more transparent and visible.

Generally, the strengths of an owner-run company are momentum via fast decision making, and managerial flexibility that makes it possible to not dwell on the past and implement structural reforms. Conversely, concerns over the founder's complacency and the difficulty of passing on management to the next generation can be presented as weaknesses of this system.

In order to eliminate these concerns, Capcom believes the creation of management systems which are easily visible from outside the company as well such as with external directors and stock markets. In addition, formal systems alone are meaningless; the systems must also be effective. To this end, Capcom has implemented the governance reforms listed in the table below.

Specifically, in 2001 Capcom was one of the first Japanese companies to bring on board external directors. This was because Capcom sought differing opinions, such as dispassionate judgement of our management and business activities by experts with high level knowledge in a variety of fields. In that same time period, Capcom strengthened its investor relations activities, the main point of which was to engage in highly transparent management by promoting dialogue with stock markets and releasing relevant information.
In addition, in 2011 Capcom established its own Audit Committee. From another perspective, legal auditing provided by corporate auditors was initiated as a unique organization in Capcom for the management of risk in the administration of business matters and preceded the concept of the "propriety audit" in today's company with an audit and supervisory committee. Since 2014, Capcom has released portions of Board of Directors meeting discussions and held meetings between external directors and institutional investors.
Amidst a string of corporate scandals both in Japan and overseas, the purpose of the meetings was to have institutional investors determine whether management monitoring by external directors was functioning effectively. And in 2016, Capcom significantly changed its organizational design, transitioning from being a company with a corporate auditor system to a company with an audit and supervisory committee. A more detailed description is provided on the following page, however Capcom has broadly strengthened supervisory functions across the entirety of its management, including 1) giving voting rights at Board of Directors meetings to directors who are Audit and Supervisory Committee members; 2) implementing propriety audits in addition to legal audits; and 3) making it possible for the Audit and Supervisory Committee to engage in systematic monitoring using internal control systems.

Capcom believes that corporate governance is essential to corporate growth and as such will continue to strengthen its governance system both in terms of organization and operation.

Main Governance Reform Initiatives

Month/year Measure Purpose
Jul. 1999 Introduced Corporate Officer System Clearly separated execution of management and supervision
Jun. 2001 Brought on board first two external directors Strengthened management monitoring functions
Jun. 2001 Increased number of external auditors by one, appointing three Strengthened auditing functions
Jun. 2001 Strengthened investor relation activities Secured transparency
Feb. 2002 Established Remuneration Committee Secured fairness and propriety of director remuneration decisions
Apr. 2003 Established Compliance Committee Prevented violations of laws and ordinances
Jun. 2003 Increased number of external directors by one, appointing three Strengthened management monitoring functions
Apr. 2011 Established Audit Committee Strengthening risk management through auditing the state of business administration
Jan. 2014 Strengthened shareholder relations activities Promoted understanding of agenda items
Jun. 2014 Shortened director terms from two years to one year Clarified director management responsibilities
Sep. 2014 Released major Board of Directors' meeting discussions in the annual report Provided example of effectiveness of management monitoring functions
Jun. 2015 Held small group meeting between external directors and
institutional investors
Provided example of effectiveness of management monitoring functions
Jun. 2016 Transitioned into a company with an audit and supervisory committee with a 50% ratio of external directors Strengthened supervisory function of Board of Directors meetings
Jun. 2016 Established Nominating Committee Secured objectivity and propriety of decision process for selecting director candidates

Four Features of Capcom Corporate Governance

1 Transition into a company with an audit and supervisory committee to strengthen governance

Capcom established an Audit and Supervisory Committee and grants voting rights at Board of Directors' meetings to directors who are also Audit and Supervisory Committee members. In addition, Capcom aims to further strengthen supervisory functions across the entirety of management and further enhance corporate governance via the implementation of propriety audits together with conventional legal audits.

Images: Transition into a company with an audit and supervisory committee

2 Proactive appointment of external directors

Capcom has reached our highest ever rate of external directors at 50% through proactively appointing external directors since June 2001. The advice, opinions, and scrutiny provided by external directors increases the transparency and credibility of Board of Directors' meetings and vitalizes the same while also strengthening the function of the meetings to supervise management.

図:社外取締役比率:50%

3 Full disclosure of 73 Corporate Governance Code items

Capcom has disclosed all 73 of its Corporate Governance Code items in order to revalidate the current state of the company's governance system and its ideal state, together with achieving accountability for each item. Capcom attaches particular importance to 26 items which are comprised of 10 items which contribute to our growth strategy, 3 items which contribute to our management system, and 13 items which serve as the base for achieving these, and provides greater detail concerning the same.

Items which contribute to growth strategy
  • Ensure diversity within the Company, including promoting the activity of women.
  • Thorough disclosure of information.
  • Duties, etc. of the Board of Directors, etc.
Items which contribute to management system
  • So-called cross-shareholdings.
  • Selection and dismissal of key members of management staff.
  • Quality and standard of determining independence of independent external directors.
Items which serve as a base for the above
  • Basic policy for capital policy.
  • Establishing an environment to support the risk-taking of the Board of Directors.
  • Role and duties of independent external directors, etc.

4 Mechanism for reflecting investor and analyst 3 opinions in management

Capcom's IR Department engages in discussions with analysts and investors over 350 times per year. In addition to promoting understanding of management policies and business strategies, the IR Department applies these activities to corporate management, summarizing market opinions and providing feedback to management personnel. Capcom is also further enhancing events and tools for investors, strengthening shareholder and investor relation activities.

図:投資家やアナリストからの声を経営に反映する仕組み

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