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Corporate Governance System

Summary Chart of Corporate Governance System

Overview of Corporate Governance System

Akebono has adopted the "company with auditors" governance model. We have built a corporate governance system centered on the Board of Directors, Audit & Supervisory Board members, and the Audit & Supervisory Board. We introduced the Executive Officer System in April 2000 to clarify the responsibility and the authority for business execution, and to enhance management efficiency.

The Board of Directors meets regularly once a month, and extraordinary meetings are held as needed. In order to make prompt and accurate judgments on important management matters through sufficient discussion and reviews, Akebono established various important bodies, including the Management Council and the Board of Executive Officers. These bodies operate in accordance with prescribed internal rules. Furthermore, to complement the functions of the Board of Directors and strengthen the transparency and soundness of management, the Company has established the Director Nomination Advisory Committee and the Director Compensation Advisory Committee. As regards the selection criteria and candidates for the Board of Directors, the Audit & Supervisory Board, and executive officers, the Board of Directors determines these by resolutions after receiving and considering contributions and advice from the Nomination Advisory Committee.

In order to ensure that the compensation system applied to these officers possesses a high degree of objectivity and transparency, the Company receives reports about the basics of the system from the Compensation Advisory Committee.

Management information and suchlike is shared through electronic media, thereby ensuring efficient information sharing among management officers. The execution status of business matters that have been decided is reported to the Board of Directors or the Board of Executive Officers, as appropriate, by the member of the Board or the executive officer who is in charge. This status is also periodically audited by the Audit & Supervisory Board members and the Internal Audit Department.

The chairperson assigns a certain department (or an individual) as the secretariat of each internal important body. The secretariat is responsible for conducting paperwork such as notices of agenda and minutes.

In order to ensure appropriate business execution by members of management, a three-way audit system is applied by means of the Audit & Supervisory Board members and the Audit & Supervisory Board, the independent auditor, and the Internal Audit Department. Audit & Supervisory Board Members attend essential management meetings, such as the Board of Directors meetings, to monitor the processes of important decisionmaking and the execution status of business operations. These members also exchange opinions with directors in order to examine without delay any matters that could have a serious impact on Akebono's management or performance, and then respond promptly.

The remuneration for directors and Audit & Supervisory Board members is determined by the Company's rules and the compensation criteria are clearly disclosed. Compensation for directors consists of fixed remuneration and performance-based remuneration. The fixed portion is basic compensation for duties and is based on positions. The performance-based potion is determined based on the performance of the Company and individual directors. The total amount of directors' remuneration is determined by the General Meeting of Shareholders, and the individual allocations are decided by the Board of Directors. The total amount of Audit & Supervisory Board members' remuneration is also determined by the General Meeting of Shareholders, and the individual allocations are decided through consultation with the Audit & Supervisory Board.

The members of the Audit & Supervisory Board, Akebono's independent auditor Deloitte Touche Tohmatsu, and the Internal Audit Department closely cooperate together by mutually exchanging information such as annual plans and audit reports, and by holding regular opinion-exchanging meetings.

Outline of Akebono's Corporate Governance Structure (Fiscal 2015)

Type of governance model A company with auditors
Executive Officer System Yes
Director's term stipulated by the articles of incorporation Two years
Chairman of the Board Representative Director, Chairman and President
Number of acting directors Nine
Of whom, outside directors Three
Of whom, those registered as independent directors Three
Number of Board of Directors meetings held during fiscal 2015 15
Outside directors' average board meeting attendance rate during fiscal 2015 98%
Number of Audit & Supervisory Board members Five
Of whom, outside members Three
Of whom, those registered as independent auditors Three
Outside Audit & Supervisory Board members' board meeting attendance rate during fiscal 2015 100%
Board of Directors' advisory committees Nomination Advisory Committee, Compensation Advisory Committee
Independent auditor Deloitte Touche Tohmatsu

Board of Directors' advisory committees

Committee members' names Role Composition Committee head (Chairperson) Frequency of meetings
Director Compensation
Advisory Committee
Compensation structure of directors (including executive officers), compensation standards, process of compensation determination (including evaluation criteria and allocation) and other setting verifications, and reporting to the Board of Directors Internal director 2
Outside director 1
Outside expert 1
Internal director In principle once every three months, with extraordinary meetings as needed
Director Nomination
Advisory Committee
Formulation of selection criteria of directors, Audit & Supervisory Board members, including outside members, and executive officers, nomination of candidates, and appropriate involvement in the selection and development plans of successor candidates such as for Chief Executive Officer, together with reporting to the Board of Directors Internal director 2
Outside director 1
Outside expert 1
Internal director In principle once every three months, with extraordinary meetings as needed

Cooperation among Audit & Supervisory Board Members, the Independent Auditor, and the Internal Audit Department

The Audit & Supervisory Board members and the Audit & Supervisory Board receive appropriate explanations about the audit content from the independent auditor, and provide cooperation, such as witnessing the audits of the independent auditor, if necessary. In addition, they have regular meetings with the independent auditor as regards the audit system, the audit plan, and the audit implementation status.

The Audit & Supervisory Board members and the Internal Audit Department comprise a mutually complementary system in order to enhance the effectiveness of each audit. They cooperate together in conducting the pre-adjustment of the fiscal year's activities policy, in arranging the monthly report meeting, and in the mutual distribution of the audit report, together with conducting joint audits. Furthermore, the Internal Audit Department and the independent auditor formulate audit plans related to assessments of internal control over financial reporting. The results of these audit plans are discussed at meetings held from time to time on a regular basis, as necessary.