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Corporate Governance

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How the Company has Addressed the Corporate Governance Code

(as of June 30, 2017)

All 73 principles of the Corporate Governance Code, comprised of General Principles, Principles, and Supplementary Principles, and including disclosures based on each principle, are listed in this report. Please refer to the following page for the content of the General Principles, Principles, and Supplementary Principles.

Japan's Corporate Governance Code (PDF) (Jump to Japan Exchange Group, Inc. Website)

PDF Capcom's basic policy for Japan's Corporate Governance Code ( PDF: 360KB/46 pages )
(June 12, 2017)

Section 4: Responsibilities of the Board

General / Supplementary Principle Compliance
Status
The Company’s Stance
General Principle 4 (1) The Board of Directors of the Company has adopted the "single content multiple usage strategy" as its basic strategy and regards the development of unique contents as the source of its corporate value. Based on this strategy, the Board has authorized the growth strategies to develop it into multiple businesses globally and in multiple directions.
(2) The Company has appointed "Shikko Yakuin" (corporate officers) in order to clarify function of oversight of management and business execution. The executive directors as well as corporate officers will execute business based on what the Board of Directors resolved and the Board as a whole supervise their execution appropriately.
(3) Under these clear roles of the board, which is responsible for making decisions on management policies, and those of executive directors and corporate officers, who are responsible for business execution, as well as the delegation of authorities regarding a certain important matters on business execution, including personnel relocation and reorganization, to the representative director, prompt and agile business development is attainable and management efficiency has been improved with respect to the execution of the medium to long-term growth strategies of the Company.
(4) Furthermore, aiming to achieve sustainable growth, the Company will strive to ensure that both "offensive governance" based on risk taking and "defensive governance" as a brake function together as the two wheels of the Company.
(5) The Board of Directors of the Company makes decisions in a rational manner through an adequate deliberation process taking into consideration forecasts, objectivity, transparency, fairness, etc.

[Related]

Principle 4.1
Roles and Responsibilities of the Board (1)
Aiming to achieve sustainable growth and medium/long-term enhancement of the corporate value of the Company, the Board discusses growth strategies based on the business principles of the Company and develops the basic management policy and management strategies.
In addition, the Board properly supervises major operational decisions in consideration of the risk control based on these strategies.

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Supplementary Principle 4.1.1 (1) The Board of Directors makes decisions on the matters prescribed by laws and regulations, the articles of incorporation, and the Board of Directors Rules. The roles and responsibilities of directors are prescribed by, among others, resolutions of the Board of Directors and the Job Authority Regulations.
(2) The Company has adopted the "Shikko Yakuin"(corporate officer) system and operational decisions made by the Board are promptly executed by executive directors and the corporate officers.
(3) In addition, the Company delegates authorities regarding certain important matters on business execution, including personnel relocation and reorganization, to the representative director to ensure prompt, agile and efficient business development.
Supplementary Principle 4.1.2 (1) The Company fully recognizes that the mid-term business plan is an important commitment to shareholders.
(2) The Company not only explains the progress status of the mid-term business plan, but also analyzes the internal external factors thoroughly if the target is not met and explains these factors and issues to be resolved going forward in results briefings as appropriate, in addition to the publication on the website of the Company and in the integrated reports (annual reports).
(3) The Company strives to respond to any management issues by, for example, promptly putting in place the necessary internal structure.
Supplementary Principle 4.1.3 Our corporate philosophy is to be a "creator of entertainment culture that stimulates your senses" through the entertainment in the form of games that move and excite people. Our top executives, who are in charge of the management of the Company based on this basic philosophy, are appropriately appointed by the Board of Directors through sufficient deliberation including the evaluation of their foresight, future potential, and appropriateness. The Board of Directors of the Company also pays attention to raise potential candidates for the CEO and other top executives.
Principle 4.2
Roles and Responsibilities of the Board (2)
(1) For any proposals submitted to the Board, their reason and content are duly analyzed and discussed. Independent external directors state their opinions from the neutral and independent perspective through a free and open-minded discussion to secure the objectivity and enhance the supervisory function. Based on the above, the Board makes decisions in a rational manner through an adequate deliberation process to realize sustainable growth and secure transparency and fairness, while all directors present comply with their duties including the duty of due care of prudent manager.
(2) The remuneration of individual directors (excluding directors who serve as members of the Audit and Supervisory Committee) is determined by the Board of directors after receiving advice from the Remuneration Committee chaired by an external director to ensure its transparency and fairness.
(3) The remuneration of directors (excluding directors who serve as members of the Audit and Supervisory Committee) consists of the fixed monthly remuneration and the performance-based remuneration in the form of bonus payment in cash and the percentage of the fixed remuneration is high. Therefore, as part of efforts to create an environment that supports risk taking, the Company is considering, from the perspective of total optimization, the introduction of a new incentive plan to achieve an appropriate percentage of the performance-based remuneration.

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Supplementary Principle 4.2.1   To realize medium- to long-term sustainable growth, the Company is considering, from the medium/long-term perspective, the introduction of new performance-based remunerations such as stock-based compensation as an incentive plan to appropriately reflect the performance evaluation of respective directors excluding directors who serve as members of the Audit and Supervisory Committee in their remuneration and reward them in accordance with their performance.
Principle 4.3
Roles and Responsibilities of the Board (3)
(1) The CEO, the COO and the CFO, who are responsible for the financial results of the Company, are appropriately appointed by the Board of Directors in consideration not only of the latest performance evaluation, but also of their qualitative evaluation including leadership, judgment, ability to make decisions, and foresight.
(2) The Company ensures timely and accurate disclosure of information such as financial results for each period and other material information that are relevant to investment decisions, while striving to improve and operate the timely disclosure system to ensure appropriate internal control and risk management.
(3) Any conflict of interest transaction with a related party is subject to the prior resolution of the Board of Directors and the status of the transaction is also reported after it is carried out.

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Supplementary Principle 4.3.1 (1) The Board of Directors appoints the senior management in comprehensive consideration of work experience, insight, expertise, the degree of contribution to the financial results of the Company, etc.
(2) Any dismissal of the senior management is determined appropriate by the Board of Directors in consideration of the management's responsibility for the financial results of the Company.
(3) The Company works to introduce a more rigorous process for the appointment and dismissal of the senior management with respect to, for example, the selection of the appropriate person.
Supplementary Principle 4.3.2 (1) Regarding the risk management system, the status of risk management is inspected by the Compliance Committee, which is chaired by an external director who is a lawyer, using the “Periodic Compliance Check Sheet” and other methods and the results are reported to the Board as necessary.
(2) Internal controls over financial reporting process are reviewed by the Internal Audit Division and also audited by the accounting auditor. The results of these reviews and audits are then reported to the Board of Directors.
Principle 4.4
Roles and Responsibilities of Kansayaku and the Kansayaku Board
(1) The Audit and Supervisory Committee of the Company consists of five members including three external directors. The Committee includes two full-time members of the Audit and Supervisory Committee and is chaired by an external director.
(2) The Audit and Supervisory Committee develops the audit policy and discusses audit results. It also submits to the representative director any deficiencies and recommendations pointed out by the Committee as well as the accounting auditor and exchanges opinions and information with the accounting auditor as appropriate.
(3) The Audit and Supervisory Committee members also attend the Board of Directors' meetings and other important meetings to check the execution of duties by the directors to ensure its legal compliance and appropriateness by, for example, stating objective and fair opinions.
(4) The Audit and Supervisory Committee supervises the staff members of the Internal Audit Division, etc., directly under it in order to conduct organized audits utilizing the internal control system, and the Audit and Supervisory Committee members designated by the Audit and Supervisory Committee conduct field audits as necessary.

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Supplementary Principle 4.4.1 (1) To inspect any execution of duties by the directors involving a violation of laws and regulations or the articles of incorporation or extremely unjust acts, the Audit and Supervisory Committee and the audit and supervisory committee members designated by said committee attend the meetings of the Board of Directors and other important meetings, conduct on-site audits, solicit reports from directors, corporate officers and employees and investigate business properties. Furthermore, they also understand the status of management and operation through operational audits, inspect important approval documents, conduct on-site inspection of individual offices and subsidiaries, and otherwise communicate with various departments.
(2) In addition, the Audit and Supervisory Committee gives instructions to the Internal Audit Division, etc., as appropriate to perform duties and conducts effective audits through close coordination with the accounting auditor.
Principle 4.5
Fiduciary Responsibilities of Directors and Kansayaku
(1) The Company regards the improvement of corporate governance as one of the important management issues.
(2) Accordingly, the Company strives to increase management transparency and soundness and to put in place a system that allows us to respond to the changes in the environment, thereby working to increase the satisfaction of shareholders, customers, employees, and other stakeholders.

[Related]

Principle 4.6
Business Execution and Oversight of the Management
The Company has appointed three external directors out of seven directors (excluding those who serve as members of the Audit and Supervisory Committee) and, including five directors who serve as members of the Audit and Supervisory Committee (three of which are external directors), six external directors, as well as eight non-executive directors, or two- thirds of the board, are included in the twelve board members in total. Non-executive directors audit and supervise the legality and validity of business execution properly through information gathering and the opinion exchange of opinions as appropriate.

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Principle 4.7
Roles and Responsibilities of Independent Directors
(1) The Company believes that proper risk control by the Board of Directors will play an important role in the implementation of its growth strategies such as the mid-term business plan.
(2) The Company believes that an essential role is played by independent external directors who have no economic or psychological dependence on the Company or its senior management, while having the "spirit of acting according to one's own beliefs" and being willing to speak frankly.
(3) The current independent external directors of the Company have been selected from those in legal community, business community and civil service background who have a wide variety of knowledge experience. In addition, the total number of current independent external directors is six, consisting of three independent external directors who are not members of the Audit and Supervisory Committee and three independent external directors who serve as members of the Audit and Supervisory Committee. As a result, the three independent external directors each conducts appropriate supervision by offering opinions and advice as appropriate either at the board meetings or at the Audit and Supervisory Committee based on their outstanding insight and extensive experience.

[Related]

Principle 4.8
Effective Use of Independent Directors
(1) The Company is working to strengthen the supervisory function of the Board of Directors by appointing more than one independent external directors and make the most of them in order to increase management transparency from the external perspective.
(2) The Company ensures that independent external directors are selected from experts in such fields as corporate management, risk management, legal, accounting/tax, and administration, in consideration of their independence and objectivity.
(3) The Company also strives to increase the effectiveness of the Board and improve profitability by appointing highly independent external directors so that, in principle, more than one-third of directors of the Company are external directors.
Currently, six out of the twelve directors of the Company are external directors, each of whom has outstanding insight and expertise.

[Related]

Supplementary Principle 4.8.1   (1) Independent external directors excluding those who serve as members of the Audit and Supervisory Committee (three persons), independent external directors who serve as members of the Audit and Supervisory Committee (three persons) and non-executive directors (two persons) who serve as members of the Audit and Supervisory Committee review the business execution of directors together through information gathering and the sharing of perspectives in order to perform their duties appropriately.
(2) The participation of members of the Audit and Supervisory Committee in the exchange of opinions mentioned in the preceding paragraph is expected. With such increased exchange of information and sharing of perspectives, external directors are expected to contribute further to sustainable growth and medium/long-term enhancement of the corporate value of the Company.
(3) The Company does not hold regular meetings consisting solely of independent external directors, since the Company has established the Remuneration Committee, the Nominating Committee and the Compliance Committee as voluntary committees and independent external directors exchange opinions and share understanding through the activities of such committees.
(4) In order to execute their duties properly, independent external directors conduct information gathering and exchange of opinions with persons in charge of business execution such as executive directors, corporate officers, and employees, as necessary.
Supplementary Principle 4.8.2   (1) Independent external directors excluding those who serve as members of the Audit and Supervisory Committee (three persons) and independent external directors (three persons) and non-executive directors (two persons) who serve as members of the Audit and Supervisory Committee make efforts to ensure the appropriate functioning of audits and supervision by establishing opportunities to exchange opinions and share understanding, as well as conducting meetings with top management as appropriate.
(2) Therefore, the Company does not currently recognize the need for appointing the "lead independent external director."
Principle 4.9
Independence Standards and Qualification for Independent Directors
(1) The Company established judgment criteria of independence of External Director by which the Company makes judgment that he/she should be independent External Director if he/she does not fall under any of the following events:
  • (i) A business executer of the Company group ("the Company and its consolidated subsidiaries" and the same applicable hereinafter) currently or in the past ten (10) years;
  • (ii) A main business partner or a business executer of such business partner (enterprise and the like), "main" meaning that an amount involved in transactions between the Company group and the business partner accounts for not less than one (1) % of the Company group or the business partner (as the case may be) on an annual basis;
  • (iii) A person or enterprise having main business relationship with the Company group or a business executer of such enterprise, "main" meaning that an amount involved in transactions between the Company group and such enterprise accounts for not less than one (1) % of the Company group or such enterprise (as the case may be) on an annual basis;
  • (iv) The principle shareholders of the Company (holding 10% or more of the total voting rights) or a business executer of such shareholder or corporation of which the Company group is principle shareholder;
  • (v) A business executer of organization or corporation to which the Company group donated, financed or guaranteed in a large amount;
  • (vi) A business executer of corporation with which the Company group has cross Directorship;
  • (vii) Lawyer, certified public accountant, consultant and the like who received ¥10 million or more in cash or assets per annum (in case of corporation or association who receives such assets, person belonging to such corporation or association that an amount involved in transactions between the Company group accounts for not less than one (1) % of the consolidated net sales or trading value of the Company group (as the case may be) on an annual basis) and ¥10 million or more.
  • (viii) In case of (ii) to (vii) above, person falling under any of business year in the past five (5) years; and
  • (ix) Spouse or relative within the second degree of kinship of the person falling under any of (i) to (viii) above.
(2) The nomination of candidates for an independent external director position of the Company is determined by the Board after receiving advice from the Nominating Committee.
(3) None of the six current external directors of the Company has been a person in charge of business execution at the Company or its affiliates. In addition, the amount of transactions between the Company and major business partners, major shareholders and the law firm to which the director belongs is less than 1% of the consolidated net sales or the total transaction amount of either side and less than 10 million yen excluding the director remuneration.

[Related]

Principle 4.10
Use of Optional Approach
(1) The Company has adopted the Audit and Supervisory Committee with an aim to further strengthen corporate governance.
(2) The Company has also adopted the "Shikko Yakuin"(corporate officer) system. Under the clear separation of the roles of the Board of Directors, which is responsible for making decisions on management policies, and those of corporate officers, who are responsible for business execution, smooth and agile business development is attainable and the management efficiency has been improved.
(3) The Company has established the Remuneration Committee, the Nominating Committee and the Compliance Committee as voluntary advisory organizations for the Board of Directors in order to support the appropriate functioning of corporate governance. Furthermore, each of these committees is made up of by a majority of external directors and chaired by an external director.

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Supplementary Principle 4.10.1 (1) The Company has appointed independent external directors excluding those who serve as members of the Audit and Supervisory Committee (three persons) and independent external directors (three persons) and non-executive directors (two persons) who serve as members of the Audit and Supervisory Committee and thereby aims to enhance the audits and supervision of the Company through a lineup of this variety of talented persons. The Company is working to strengthen the supervision of the management by receiving opinions, advice, checks, etc., from these external directors to increase the transparency and reliability as well as the effectiveness of the Board.
(2) In addition, in order to make the further functioning of corporate governance, the Company has established four committees which consist of the mandatory Audit and Supervisory Committee, as well as the Remuneration Committee, the Nominating Committee and the Compliance Committee as voluntary advisory organizations for the Board of Directors, each of which is made up of a majority of independent external directors and chaired by an independent external director.
(3) The nomination of candidates for the position of director of the Company is determined by the Board after receiving advice from the Nominating Committee as a voluntary committee. Furthermore, the remuneration of individual directors (excluding those who serve as audit and supervisory committee members), the total amount of which is approved by the general meeting of shareholders, is determined by the Board after receiving advice from the Remuneration Committee as a voluntary committee. It should be noted that the remuneration of individual directors who serve as Audit and Supervisory Committee members is determined through discussions by the directors who serve as Audit and Supervisory Committee members.
Principle 4.11
Preconditions for Board and Kansayaku Board Effectiveness
(1) The Company appoints independent external directors in comprehensive consideration of their personal characteristics, insight, important positions held, legal expertise, management skills demonstrated at other companies, work experience, performance, personal connections in business community, etc. Six out of the twelve directors of the Company are currently independent external directors. The Company is working to strengthen the supervision of the management by receiving opinions, advice, etc., from these external directors to increase the transparency and reliability as well as the effectiveness of the Board.
(2) In addition, the Audit and Supervisory Committee consists of two former corporate auditors, one former executive director and two external directors, each of whom has excellent insight, expertise and extensive experience in their respective fields, and thereby conducts audits and supervision from a diversified perspective.

[Related]

Supplementary Principle 4.11.1 (1) The nomination of candidates for the position of director of the Company is determined by the Board after receiving advice from the Nominating Committee as a voluntary committee.
(2) Each of executive directors, external directors, and directors who serve as members of the Audit and Supervisory Committee each fulfills his/her own roles and responsibilities by, for example, making necessary statements as appropriate based on their extensive experience, expertise, and insight in such broad fields as corporate management, risk management, legal, accounting/tax, and civil service administration, thereby striving to optimize the Board of Directors as a whole.
Supplementary Principle 4.11.2 The status of concurrent positions held by directors is disclosed annually in the notice of convocation of the ordinary general meeting of shareholders, and in "Yuka Shoken Hokokusho" (annual securities reports), etc. As the concurrent positions held by directors fall within the reasonable range including positions at the Company's subsidiaries, directors are executing their duties as directors of the Company appropriately.
Supplementary Principle 4.11.3 (1) The Company prepares the "Internal Control System" concerning the overall business operations based on the Companies Act and the "Internal Control Report" concerning financial reporting as prescribed by the Financial Instruments and Exchange Act. The "Internal Control System" is audited by the Audit and Supervisory Committee and the "Internal Control Report" is audited by the accounting auditor, respectively, so as to be relied upon by the Board of Directors and the management.
(2) The "Internal Control System" and the "Internal Control Report" are disclosed in the business report of the notice of convocation of the ordinary general meeting of shareholders and the "Yuka Shoken Hokokusho"(annual securities report), respectively in Japanese.
(3) As an unqualified opinion of the Audit and Supervisory Committee and the accounting auditor has been obtained for the "Internal Control System" and the "Internal Control Report," respectively, the Company understands that the basic spirit of corporate governance is complied with.
(4) In addition, the Company provides external directors with informal opportunities as necessary with an aim at gathering information and having their opinions exchanged freely. Further, through those face-to-face opportunities external directors express their frank opinions or suggestions to improving effectiveness and operation of the Board of Directors, which helps evaluation of the Board and its directors. Since six independent external directors are as members of the Board consisting of twelve directors in total, brisk exchanges of opinions among them help enhance the functionality of the Board as those are quite objectively discussed.
The outline of those discussions will be made known at the Integrated Report (Annual Report) of the Company.
Principle 4.12
Active Board Deliberations
Six out of the twelve directors of the Company (i.e. half of the Board members) are currently independent external directors. The Board is chaired by the Chairman and Representative Director, who ensures that external directors consisting of diverse and talented members with different expertise can express their opinions.

[Related]

Supplementary Principle 4.12.1 (1) The Company prepares the annual schedule of the meeting of Board of Directors. The meetings are held on a monthly basis. The Board also holds meetings on an ad hoc basis as necessary.
(2) The Company makes efforts to enable productive deliberations and streamline the Board of Directors through the delegation of authorities regarding certain important matters on business execution, including personnel relocation and reorganization, to the representative director, aiming at reducing the matters to be discussed at the Board of Directors' meetings.
(3) The Company strives to prepare materials for board meetings in a manner to allow the directors to easily understand their outline.
Principle 4.13
Information Gathering and Support Structure
(1) Directors and directors who serve as members of the Audit and Supervisory Committee request the departments concerned to submit relevant materials for any information that is necessary for their execution of duties. The departments concerned respond to such a request promptly and appropriately to satisfy their needs.
(2) In addition, the staff of the Executive Secretariat Office and the Internal Audit Division provide assistance to external directors excluding directors who serve as members of the Audit and Supervisory Committee and external directors and non-executive directors who serve as members of the Audit and Supervisory Committee to enable those directors to perform their duties in a smooth manner.

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Supplementary Principle 4.13.1 (1) If the information at hand is insufficient, directors shall request the department that submitted the proposal to provide necessary information and materials to make appropriate decisions. Corporate officers in charge attend the board meetings as appropriate to provide the explanation of the agenda and to answer any questions so that external directors can make timely and appropriate decisions on the agenda.
(2) The Audit and Supervisory Committee directly supervises the Internal Audit Division, etc., with which said committee exchanges opinions and information to enhance the effectiveness and efficiency of the audit function. In addition, nineteen dedicated staff support directors who serve as members of the Audit and Supervisory Committee to enable those directors to perform their duties in a smooth and appropriate manner.
Supplementary Principle 4.13.2 (1) Our directors consist of a variety of talented persons including two legal specialists qualified as lawyers, as well as one who has insight into finance and accounting, one who was engaged in police administration and one who has been engaged in business execution for a long time.
(2) In addition, there are a number of officers who have broad personal relationships in the gaming industry and the business community, as well as directors who have actual management experience at other companies, and they share information and exchange opinions as appropriate.
(3) The Company has also established a necessary support system including the necessary budget to prepare for cases where services of external experts such as consultants are necessary to ensure that directors and directors who serve as members of the Audit and Supervisory Committee can execute their duties smoothly and appropriately.
Supplementary Principle 4.13.3 (1) The Company has established Internal Audit Division, etc., which is independent from business execution departments, as internal audit organizations.
(2) Furthermore, the Audit and Supervisory Committee supervises, gives instructions to, and exchanges information with the Internal Audit Division, etc., in order to enhance the effectiveness and efficiency of the audit function as appropriate.
Principle 4.14
Director and Kansayaku Training
The Company believes that it is providing sufficient information to directors to help them obtain sufficient knowledge and endeavor to improve their knowledge and skills so that all directors can fulfill their expected roles and responsibilities. The Company also responds sufficiently to any request of individual directors and directors for such support as the reimbursement of the cost for attending seminars or conducting exchanges of information, as necessary and appropriate.
Supplementary Principle 4.14.1 The Company ensures that new directors receive the explanation of the Company's business, financial position, organization, from the senior management when they assume their position. They are also provided with an opportunity to visit individual offices of the Company and the Company furnishes them with the information about the business environment.
The Company also intends to respond sufficiently to any request of individual directors for such opportunities, as necessary and appropriate.
Supplementary Principle 4.14.2 (1) As stated in Principle 4.14.1, the Company ensures that all necessary information about the business and its operations are timely provided to the Directorsincluding physical site verification.
(2) There are legal and accounting/tax professionals among the members of the Board of Directors and those members have been giving tips at board meetings regarding legal and other relative issues.
(3) In addition, as part of the efforts to execute the audit function appropriately, directors who serve as members of the Audit and Supervisory Committee are taking necessary seminars to improve their audit skills, such as the ones provided by the Japan Audit & Supervisory Board Members Association.
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