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Corporate Governance Structure and Initiatives

Shareholders and investors have made the practical and effective functioning of internal control into a key issue amidst an epidemic of corporate misconduct in Japan and overseas. In this section, Capcom will explain the corporate governance structure and systems that it has initiated so far based on the key concepts of "effectiveness and visibility" in terms of the results of third party assessment. (Assessment areas are highlighted in yellow.)

Image: Corporate Governance Structure and Initiatives

Corporate Governance Structure

Enhancing Management Health and Transparency while Responding to Changes in the Environment

Capcom is aware that comprehensive corporate governance ranks among management's most important priorities. Because of this, in addition to enhancing management soundness and transparency, by building a trusting relationship with our stakeholders, such as shareholders, business partners, employees and regional society, we are increasing corporate value.

Shareholders' Meeting (Convened on June 17, 2016)

Determines Important Matters as the Highest Decision-Making Body

Capcom's general shareholders' meeting serves as its highest decision-making body and determines important matters as well as reports audit results of consolidated financial statements.

We have scheduled the meeting to take place around 10 days prior to the date on which most other companies in Japan hold their general shareholders' meetings to ensure as many shareholders as possible can be in attendance. Seven resolutions were brought up for discussion at this year's shareholders' meeting, all of which were approved and passed.

Seven resolutions were brought up for discussion at this year's shareholders' meeting, all of which were approved and passed.

Board of Directors (Convened 14 times in the year ended March 31, 2016) Supervision

Management Decisions that Incorporate Outside Opinions

In addition to the regular Board of Directors meeting being convened once every month, it is also convened when the need arises.

The Board of Directors is composed of a total of twelve directors. Of that total, five directors are Audit and Supervisory Committee members. Also, of the twelve directors, six are external directors. All six of the external directors have been registered with Tokyo Stock Exchange, Inc. as independent directors.

Audit and Supervisory Committee
(newly established for the year ending March 31, 2017)NEW Audit

Accounting Auditors Partner with Internal Auditing Department to Monitor Management

The Audit and Supervisory Committee is composed of five directors (three of whom are external directors). Also, the collection and sharing of information is carried out by selecting two full time members of the Audit and Supervisory Committee in addition to using an internal control system to carryout organizational audits and supervision.

In addition to formulating auditing policies and providing consultation regarding audit results, the Audit and Supervisory Committee cooperates with the Internal Audit Division and gives advice to audited divisions regarding items to be improved, etc., working to see that internal control functions effectively in each division.

They also objectively and fairly check the legality and propriety of execution of operations by directors by exchanging opinions and information with the Accounting Auditors and attending important meetings.

The Nominating Committee NEW

A Consulting Organization For Selecting Candidates for Director

In June 2016 Capcom established a voluntary nominating committee with an external director as committee chairman as a consulting organization to the Board of Directors in order to ensure the objectivity and propriety of the decision process to select candidates for director.

The Remuneration Committee (Convened two times in the year ended March 31, 2016)

Recommending Details of Director Compensation

Capcom has established a voluntary remuneration committee with an external director as committee chairman as a consulting organization to the Board of Directors in order to ensure the objectivity and appropriateness of the decision process for setting compensation of directors (excluding directors who are members of the Audit and Supervisory Committee).

The Compliance Committee (Convened four times in the year ended March 31, 2016)

Focusing on Compliance as an Important Management Issue

In order to ensure compliance, the Compliance Committee meets quarterly and has an external director with the qualification of a lawyer as the chairman. In order to prevent illegal activities and misconduct Capcom has established Compliance Hotline Rules and, so that all employees can directly report illegal activities or misconduct, we have also established an internal hotline, and conduct periodic compliance checks to regularly monitor status, etc. To ensure effectiveness, problems confirmed by this committee and issues that must be dealt with are properly disposed of.

Accounting AuditorsAudit

Ensuring and Verifying Accounting Transparency

Capcom has engaged KPMG AZSA LLC for financial audits as prescribed by the Companies Act and financial audits as prescribed by the Financial Instruments and Exchange Law. There is no relationship involving financial or other interests between Capcom and this audit corporation or the engagement partners at this firm who perform audits at Capcom.

Auditor Remuneration (Year ended March 31, 2016)

  Audit Operations Non-Audit Operations
Delivery company 41 million yen 0 million yen
Consolidated subsidiary 2 million yen -
Total 43 million yen 0 million yen
Auditing Company Names of Certified Public Accountants
KPMG AZSA LLC Designated and Engagement Partner Masaaki Doi
Hiroshi Miura
Takuya Obata

Note: Assistants to certified audit operations; Certified public accountants: 10; Others: 7 (those who have passed the certified public accountant exam and persons in charge of system audits)

Internal Auditing Division Audit

Ensuring and Verifying Legal Compliance and Operating Efficiencies

We have established an internal auditing division as an internal audit organization in support of the Audit and Supervisory Committee. This division primarily conducts regular monitoring of each division and Group companies from the standpoint of risk management.
In addition information is collected and analyzed from the standpoint of legality, propriety, and efficiency so internal operational risk and inefficiencies are properly understood, working to prevent the occurrence of crises and improve operations. In addition, in the event of an unforeseen situation, the Audit and Supervisory Committee contributes to the formulation of appropriate management decisions by quickly reporting to the Audit and Supervisory Board with a report examining and analyzing the causal factors in an attempt to minimize losses to the company.

Corporate Management Council (Convened 24 times in the year ended March 31, 2016)Implementation

Supporting the Board of Directors' Decisions

The President and Executive Corporate Officers participate in the Corporate Management Meeting, which is held the day before a meeting of the Board of Directors. At the Corporate Management Meeting we ensure the fairness and transparency of the decision process with careful review of special items, items brought up to the Board of Directors and items delegated to executive corporate officers such as the President.

Board of Corporate Officers (Convened 12 times in the year ended March 31, 2016)Implementation

Executing Operations Based on Clear Management Policy

In order to clarify monitoring and business operation functions, Capcom adopted the corporate officer system. The Board of Corporate Officers is convened once a month. At the Board of Corporate Officers, in addition to executing business based on Board of Directors' decisions, there are reports on policies for execution of business and the formulation of plans. Also, there are reports at the monthly meetings of the Board of Directors about the status of business execution by the Corporate Officers.

Affiliate Companies Implementation

Ensuring Effective Government through Close, Group-wide Collaboration

We have developed a group-wide internal controls framework through close communication and collaboration between parent company and subsidiaries based on monthly subsidiary board meetings and the "Management Regulations for Subsidiaries." Through this framework, we ensure that our operations are being undertaken properly so that corporate governance functions effectively.

External Directors

Using External Perspectives to Ensure Effective Governance

External directors ensure the effectiveness of the corporate governance function by playing key roles in the Compliance, Nominating and Remuneration Committees. They also focus efforts on compliance and the prevention of corrupt or illegal activities, and openly exchange opinions and provide counsel at Board of Directors meetings in an effort to strengthen the management audit function.

Also, the Secretariat staff helps with the work of the external directors not Members of the Audit and Supervisory Committee and with regards to external directors who are Members of the Audit and Supervisory Committee, the full-time staff of the Internal Audit Task Force helps with their work.

Board of Directors and External Auditors Rate of Attendance (Year ended March 2016)

  Name Independent
director
Reasons for selection Board of Directors/Board of Corporate Auditors Rate of Attendance (Year ended March 2016)
External Directors Hiroshi Yasuda Appointed with overall consideration for character, business acumen and successive appointments to important posts Board of Directors Attended 14 of 14 meetings (100%)
Makoto Matsuo A legal professional able to provide precise guidance and advice and ensure the effectiveness of corporate governance Board of Directors Attended 13 of 14 meetings (92.9%)
Takayuki Morinaga Appointed with overall consideration for management experience at other companies, professional career, track record, and personal connections in the business world Board of Directors Attended 14 of 14 meetings (100%)
External Auditors Yoshihiko Iwasaki It was determined that his professional experience in tax administration would be of benefit to the company Board of Directors Attended 14 of 14 meetings (100%)
Board of Corporate Auditors Attended 13 of 13 meetings (100%)
Akihiko Matsuzaki Appointed to leverage the wealth of experience and knowledge accumulated during many years in law enforcement administration to help the company further enhance its corporate governance Board of Directors Attended 14 of 14 meetings (100%)
Board of Corporate Auditors Attended 13 of 13 meetings (100%)

Officer Remuneration

The Remuneration Committee Makes Recommendations to Ensure Fairness and Transparency

To ensure fairness and transparency, the compensation of Directors is consulted on with the voluntary Remuneration Committee which has an external director as chairman and is decided upon by the Board of Directors based on this committee's recommendations. The current remuneration system is composed of set monthly remuneration and performance-based bonuses paid in cash but the percentage of set remuneration is high. Because of this, we are looking into introducing a new remuneration system to increase the directors' incentive to increase corporate value over the medium- to long-term. And also, as part of an overall environment to support risk-taking, the remuneration linked to performance will be set to an appropriate percentage.

Policy Regarding Deciding the Calculation Method and Amount of Directors' Remuneration

1 Regarding Remuneration of Directors (excluding directors who are members of the Audit and Supervisory Committee)

To ensure fairness and transparency of Directors' remuneration, the Board of Directors consults the Remuneration Committee, which has an external director as chairman. The Remuneration Committee considers each board member's position, duties, tenure, full/part-time service, etc. as well as Capcom's earnings and individual job performance, and recommends an appropriation amount. The Board of Directors makes a decision based on this.

  • a. Monthly remuneration is fixed.
  • b. The amount of bonus is determined within the reasonable range based on the monthly remuneration and the Company's performance.
  • c. Other than the remunerations listed above, appropriate remuneration based on individual achievement may be paid within a determined range.
2 The remuneration of the directors who serve as members of the Audit and Supervisory Committee

The remuneration of the directors who serve as members of the Audit and Supervisory Committee is not linked to performance from the perspective of securing their independence and thus determined through discussions, taking the difference of full-time or part-time service into account, by the directors who serve as members of the Audit and Supervisory Committee.

Officer Remuneration (Year ended March 31, 2016)

Total remuneration, etc. by type of director for delivery companies, total amount by type of remuneration, etc.,
and number of directors the remuneration was paid to

Type of director Total Remuneration
(million yen)
Total of remuneration, etc. by type (million yen) Number of directors paid
Basic remuneration Stock options Bonus Severance
Director (excluding external directors) 324 265 - 50 9 7
Auditor (excluding external auditors) 28 28 - - 0 2
External director 56 56 - - - 5
  • Notes 1: The above includes three directors who left office due to their tenure ending at the conclusion of the 36th Regular General Meeting of Shareholders held on June 12, 2015.
  • 2: The above includes one auditor who died in office on March 2, 2016.

Total amount of consolidated remuneration, etc. by director of delivery company

Name Total of consolidated remuneration, etc.
(million yen)
Type of director Type of company Total of consolidated remuneration, etc. by type ((million yen)
Basic remuneration Stock options Bonus Severance
Kenzo Tsujimoto 100 Director Delivery company 80 - 20 -
  • Note: The listing of total of consolidated remuneration, etc. is restricted to persons with 100 million yen or more

Third-Party Assessment

Promoting More "Visible" Governance

An analysis of an assessment performed by a third-party organization into the validity and effectiveness of Capcom's corporate governance shows that the company ranked 35th among 3,460 listed companies in Japan in the "NEEDS-Cges" assessment developed by Nikkei Digital Media, Inc.

"NEEDS-Cges" has an established reputation as a system that quantitatively assesses corporate governance using scores on a scale of 1 to 10 for eight categories, including "capital efficiency," "information disclosure," and "shareholder and capital composition," among others, assigned based on some 130 indicators calculated from data of publicly released company documents, such as financial reports.

Capcom's total score was 8.75 points, placing us in the top 1.1% of Japan's listed companies. Our score also exceeded the average for all listed companies and for the industry, at 5.45 points and 7.77 points, respectively. We continued to receive the full 10 points for "shareholder and capital composition" and "information disclosure" important for corporate governance.

The main reasons for each of these perfect scores are given in the chart provided below, but in particular, areas highlighted in yellow indicate measures that received particular notice.

Going forward, we continue making improvements based on consideration of external data to earn an even stronger assessment, and further promote the external visibility of our governance by posting this and other data on our corporate website.

Third-Party Assessment Results of Capcom's Corporate Governance

Image: Third-Party Assessment Results of Capcom's Corporate Governance

Details of Capcom's Corporate Governance Assessment

Total Score 8.75
Rank 35
Categories Score
Capital efficiency 6
Equity market's assessment 9
Stability 7
Shareholder and capital composition 10
Board of Directors (organization) 9
Board of Directors (actions) 9
Shareholder returns 9
Information disclosure 10

 
Details of Highest Rated Categories

Highest Rated Categories Score Areas that Received Particular Notice
Equity market's assessment 9 Tobin's Q-related values
PBR-related values
Shareholder and capital composition 10 Ratio of institutional investor shareholdings
Ratio of foreign investor shareholdings
Cross-shareholding ratio
Board of Directors (organization) 9 Board of Director members
Managing Corporate Officers
External director ratio
Adoption of the Corporate Officer System
Board of Directors (actions) 9 Amount of director treasury stock holdings
Amount of president's treasury stock holding
Shareholder returns 9 Shareholder return ratio
Information disclosure 10 Changes in accounting policy
Date of general shareholders' meeting
shareholders' meeting Corporate website

Source: NEEDS-Cges from Nikkei Digital Media Inc.

Shareholders' Meeting Resolutions

The following presents the number of votes in favor, opposed or abstained for the matters to be resolved at the year ended March 31, 2015, general shareholders' meeting, and the results of voting.

Resolutions Approval Votes Votes Opposed Abstained Votes Approval Rate (%) Voting Results
First proposal:
Proposed Appropriation of Retained Earnings
453,673 3,570 0 98.60 Approved
Second proposal:
Partial Amendments to the Articles of Incorporation
453,725 3,517 0 98.61 Approved
Third proposal:
Election of Seven Directors (excluding Directors who are members of the audit and supervisory committee)
         
 Kenzo Tsujimoto 450,336 6,905 0 97.88 Approved
 Haruhiro Tsujimoto 446,497 10,744 0 97.04 Approved
 Yoichi Egawa 448,133 9,108 0 97.40 Approved
 Kenkichi Nomura 448,116 9,125 0 97.39 Approved
 Hiroshi Yasuda 445,388 11,854 0 96.80 Approved
 Masao Sato 455,128 2,115 0 98.92 Approved
 Toru Muranaka 438,455 18,788 0 95.29 Approved
Fourth proposal:
Appointment of Five Directors who are Members of the audit and supervisory committee
        Approved
 Kazushi Hirao 444,350 12,889 0 96.58 Approved
 Yoshihiko Iwasaki 454,862 2,380 0 98.86 Approved
"Tamio Oda 446,190 11,049 0 96.98 Approved
 Makoto Matsuo 427,051 30,191 0 92.82 Approved
 Takayuki Morinaga 54,919 2,323 0 98.87 Approved
Fifth proposal:
Election of One Director who is a substitute member of the audit and supervisory committee
457,069 174 0 99.34 Approved
Sixth Proposal:
Determination of the Amount of Remuneration for Directors (excluding Directors who are members of the audit and supervisory committee)
456,489 242 511 99.21 Approved
Seventh proposal:
Determination of Amount of Remuneration for Directors who are members of the audit and supervisory committee
456,467 264 511 99.21 Approved
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