CAPCOM Investor Relations

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ONLINE INTEGRATED REPORT 2017

Leading World Creators

Latest version is available on the "Online Integrated Report 2019" top page.

Top page > [ESG-based Value Creation] Governance > Corporate Governance Structure and Initiatives

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.)

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, we are increasing corporate value by building a trusting relationship with our stakeholders. These stakeholders include shareholders, business partners, employees and regional societies.

❶ Shareholders' Meeting (Convened on June 9, 2017)

Determines Important Matters as the Highest Decision-Making Body

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

Invitations to the general shareholders' meeting are issued approximately three weeks before convening the session and efforts are made to allow for greater attendance by having the session about 10 days before the date on which most other companies hold their meetings. We have also made it possible for shareholders to exercise their voting rights over the Internet using a computer or smartphone. In addition, we participate in an electronic voting rights exercise platform for institutional investors.

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

❷ Board of Directors (Convened 15 times in the year ended March 31, 2017)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.

❸ Audit and Supervisory Committee (Convened nine times in the year ended March 31, 2017) Audit

Cooperating with Accounting Auditors and the Internal Audit Department to Audit and Supervise

The Audit and Supervisory Committee is composed of five directors (three of whom are external directors). We carry out organizational audits and supervision by selecting two full-time members of the Audit and Supervisory Committee to collect and share information, while also making use of our internal control system. In addition to formulating auditing policies and providing consultation regarding audit results, the Audit and Supervisory Committee cooperates with the Interna Audit Department and gives advice to audited divisions regarding items to be improved, etc., working to see that internal control functions effectively in each division.

❹ The Nominating Committee (Convened two times in the year ended March 31, 2017)

A Consulting Organization for Selecting Candidates for Director

Capcom has established a voluntary nominating committee with an external director as committee chairman. This committee functions 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.

❺ The Remuneration Committee (Convened two times in the year ended March 31, 2017)

Recommending Details of Director Compensation

Capcom has established a voluntary remuneration committee with an external director as committee chairman. This committee functions 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).

❻ The Compliance Committee (Convened four times in the year ended March 31, 2017)

Focusing on Compliance as an Important Management Issue

In order to ensure compliance, the Compliance Committee meets quarterly and has an external director, who is also a certified attorney, as the chairman. In order to prevent illegal activities and misconduct, and so that all employees can directly report any instances of these, Capcom has established Compliance Hotline Rules and an internal hotline. Capcom also regularly monitors its compliance status with a compliance check sheet. To ensure effectiveness, Capcom properly disposes of problems confirmed by this committee and other issues that must be dealt with.

❼ Accounting Auditors Audit

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, 2017)

  Audit Operations Non-Audit Operations
Delivery company 42 million yen 0 million yen
Consolidated subsidiary 2 million yen -
Total 44 million yen 0 million yen
Auditing Company Names of Certified Public Accountants
KPMG AZSA LLC,
a limited liability audit corporation
Designated Limited Liability and
Managing Partner
Masaaki Doi
Hiroshi Miura
Takuya Obata

Note: Assistants to certified audit operations; Certified public accountants: 8; Others: 9 (those who have passed the certified public accountant exam and persons in charge of system audits

❽ Internal Audit Department Audit

Ensuring and Verifying Legal Compliance and Operating Efficiencies

We have established an Internal Audit Division to support 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 legal, propriety, and efficiency standpoints so internal operational risk and inefficiencies are properly understood, in order 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 making appropriate management decisions by quickly giving a report examining and analyzing the causal factors to the Audit and Supervisory Board in order to minimize losses to the company.

❾ Corporate Management Council (Convened 25 times in the year ended March 31, 2017) Implementation

Supporting the Board of Directors' Decisions

The Chairman, 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.

❿ Board of Corporate Officers (Convened 11 times in the year ended March 31, 2017) 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 carrying out business based on Board of Directors' decisions, reports on business affairs policy are given and plans are formulated.

Status reports on business being carried out by Corporate Officers are given at the monthly meetings of the Board of Directors.

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. The Secretariat staff helps with the work of the external directors who are not members of the Audit and Supervisory Committee. For 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' Reason for Selection and Rate of Attendance (Year ended March 2017)

  Name Independent director Reasons for selection Board of Directors/Audit and Supervisory Committee Rate of Attendance (Year ended March 2017)
External Directors Hiroshi Yasuda In overall consideration of his excellent insight, wealth of experience, and career holding positions of importance Board of Directors Attended 14 of 15 meetings (93.3%)
Masao Sato Due to expectations for his ability to contribute to the auditing and supervision of the Board of Directors through his rich experience and knowledge from many years serving in the police administration Board of Directors Attended 11 of 11 meetings (100%)
Toru Muranaka Due to expectations for his ability to contribute to the auditing and supervision of the Board of Directors through precise counsel and advice as a legal expert Board of Directors Attended 10 of 11 meetings (90.9%)
External Directors
(Audit and Supervisory Committee)
Yoshihiko Iwasaki Due to the validity of his judgment, which will benefit the Company from his practical experience with tax administration Board of Directors Attended 15 of 15 meetings (100%)
Audit and Supervisory Committee Attended 9 of 9 meetings (100%)
Makoto Matsuo Due to his ability to enable effective corporate governance through precise counsel and advice as a legal expert Board of Directors Attended 14 of 15 meetings (93.3%)
Audit and Supervisory Committee Attended 9 of 9 meetings (100%)
Takayuki Morinaga Due to expectations for his ability to strengthen the auditing and supervision of the Board of Directors through management expertise, practical experience, and a track record that he has acquired at other companies Board of Directors Attended 15 of 15 meetings (100%) Audit and Supervisory Committee Attended 9 of 9 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. The Board of Directors sets remuneration based on this committee's recommendations. The current remuneration system is composed of set monthly remuneration and performance-based bonuses paid in cash, however 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. 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 appropriate amount. The Board of Directors makes a decision based on this.

  • Monthly remuneration is fixed
  • The bonuses are set within a reasonable range based on monthly remuneration and the Company's performance.
  • In addition to the remunerations listed above, appropriate remuneration based on individual achievement may be paid within a set range.

2 The remuneration of the directors who serve as members of the Audit and Supervisory Committee

In order to secure their independence, the remuneration of the directors who serve as members of the Audit and Supervisory Committee is not linked to performance; it is 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, 2017)

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 Audit and Supervisory Committee) (excluding external directors) 278 228 - 50 - 5
Directors (Audit and Supervisory Committee) (excluding external directors) 25 25 - - - 2
Auditor (excluding external auditors) 5 5 - - - 1
External director 69 69 - - - 10

Notes 1: The above includes one director who left office due to their tenure ending at the conclusion of the 37th Regular General Meeting of Shareholders held on June 17, 2016.

2: As of the end of the 37th General Shareholders' Meeting on June 17, 2016, Capcom transitioned from a company with a board of corporate auditors into a company with an audit and supervisory committee. Consequently, remuneration amounts for corporate auditors correspond to the period before this transition, while remuneration amounts for directors who are Audit and Supervisory Committee members correspond to the period after this transition.

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 101 Director Delivery company 80 - 21 -

Note: Total consolidated remuneration, etc. is listed only for those with remuneration of 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 174th among 3,488 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 150 indicators calculated from data of publicly released company documents, such as financial reports.

Accompanying the changes to the NEEDS-Cges assessment criteria, Capcom’s total score was 7.28 points, placing us in the top 5.0% of Japan’s listed companies. Our score also exceeded the average for all listed companies and for the industry, at 4.91 points and 7.15 points, respectively. We also received the maximum score of 10 for "information disclosure." Furthermore, accompanying our abolishment of takeover defense measures and our dividend increase, we improved our scores over the previous year for the two categories of external regulations and capital policies.

The main evaluation factors are given in the table below, but areas highlighted in yellow indicate measures that received particular notice. Additionally, we were awarded first place among the companies that comprise the TOPIX 1000 for the Nikko Governance Score, which was announced in August 2017. Going forward, we will 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 IR web page.

Third-Party Assessment Results of Capcom's Corporate Governance

Comparison of the Industry Average and the Average for All Listed Companies

Details of Capcom's Corporate Governance Assessment

Total Score 7.28
Rank 174
Categories Score
Capital efficiency 5
Equity market's assessment 7
External regulations 8
Board of Directors 8
Officer remuneration 8
Information disclosure 10
Capital policies 8
Effectiveness 4

Details of Highest Rated Categories

Highest Rated
Categories
Score Areas that Received Particular Notice
External regulations 8 Ratio of loyal long-term stockholders and presence (or absence) of takeover defense measures
Board of Directors 8 Matters related to independent external directors and the terms of members of the Board of Directors
Officer remuneration 8 President's shareholding ratio and amount of Company shares held by directors
Information disclosure 10 Timing of the General Shareholders’ Meeting (overlap with other companies) and website-related matters
Capital policies 8 Shareholder return ratio

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, 2017, 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
427,280 3,502 0 97.75 Approved
Second proposal:
Election of Seven Directors (excluding Directors who are members of the audit and supervisory committee)
         
 Kenzo Tsujimoto 427,328 3,448 0 97.76 Approved
 Haruhiro Tsujimoto 427,328 3,448 0 97.76 Approved
 Yoichi Egawa 427,773 3,003 0 97.86 Approved
 Kenkichi Nomura 427,558 3,218 0 97.81 Approved
 Hiroshi Yasuda 425,013 5,764 0 97.23 Approved
 Masao Sato 430,165 612 0 98.41 Approved
 Toru Muranaka 408,304 22,473 0 93.41 Approved

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