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Corporate Governance System

Corporate Governance Structure

Overview of Corporate Governance System

Akebono has adopted the "company with an Audit & Supervisory Board" 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 Director Nomination Advisory Committee. In order to ensure that the director 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 Director 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 Office.

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 Office. Audit & Supervisory Board Members attend essential management meetings, such as the Board of Directors meetings, to monitor the processes of important decision-making 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 portion is determined based on the performance of the Company and individual directors. The amount of remuneration for each director is allocated within limits approved by the General Meeting of Shareholders 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 Office closely cooperate 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 2016)

Type of governance model A company with an Audit & Supervisory Board
Executive Officer System Yes
Director's term stipulated by the articles of incorporation 2 years
Chairman of the Board Representative Director, Chairman and President
Number of acting directors 7
Of whom, outside directors 3
Of whom, those registered as independent directors 3
Number of Board of Directors meetings held during fiscal 2016 13
Outside directors' average board meeting attendance rate during fiscal 2016 100%
Number of Audit & Supervisory Board members 5
Of whom, outside members 3
Of whom, those registered as independent auditors 3
Outside Audit & Supervisory Board members' board meeting attendance rate during fiscal 2016 97%
Board of Directors' advisory organs (voluntary) Nomination Advisory Committee, Compensation Advisory Committee
Independent auditor Deloitte Touche Tohmatsu

Board of Directors’ Advisory Committees (voluntary)

Committee names Role Composition Committee member (Chairperson) Frequency of meetings
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 3
Internal director In principle once every half year, with special meetings as needed
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 3
Internal director In principle once every half year, with special meetings as needed

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

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 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 Office 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.