Annual Report 2004 [PDF/1.1MB]

Corporate Governance
1. Basic Corporate Governance Policies
Corporate governance reforms and other structural improvement
measures aimed at establishing systems to
make Kawasho more responsive to the fast-changing
and highly competitive business environment were initiated
after approval at the Annual Meeting of Shareholders
on June 27, 2003. These reforms specifically entailed
the introduction of an executive officer system in
June 2003, which strengthened governance and management
functions within the overall business structure
by making a clear separation between business decision-making
by the Board of Directors and management
supervisory functions, and policy execution functions.
This change served to clarify authority and responsibility
within the new structure.
In addition, recognizing the need for a more comprehensive
approach to observance of laws and corporate
ethics across the Kawasho Group, a Compliance Committee
was established in May 2003.
2. Corporate Governance System
Kawasho has adopted the auditor-based system of corporate
governance as specified in the Commercial
Code of Japan. This system establishes the Meeting of
Shareholders, the Board of Directors and the Board of
Corporate Auditors as the principal governance structures.
Kawasho has also introduced an executive officer
system, under which executive officers are responsible
for policy execution. Kawasho has not appointed
any external directors. Of the four corporate auditors,
three are external appointees, of whom two are parttime
auditors.
3. Internal Controls and Risk Management Status
(1) Reforms to Board of Directors
The decision-making and supervisory functions of
the Board of Directors are separated from its role in operational
execution through a clearer delineation of authority
and responsibilities.
With regard to corporate governance-related matters,
the Board of Directors supervises operations by
checking the legality and appropriateness of all operational
moves and strategic decisions.
The Board of Directors was reduced in size by an
amendment to the Articles of Incorporation lowering
the maximum number of directors from 35 to 15. This
reform aimed to promote an increased volume of more
dynamic debate while speeding up decision-making
processes.
(2) Introduction of executive officer system
An executive officer system was introduced in June
2003 to improve management functions. Appointed by
the Board of Directors, executive officers have terms of
1 year.
Besides the President & CEO, the executive officers
include appointees to positions at the levels of Senior
Managing Executive Officer, Managing Executive Officer
and Executive Officer.
The Board of Directors has determined all executive
officer roles and the division of responsibilities.
A Board of Executive Officers has been established
that reports directly to the President & CEO. This
change aims to promote smooth communication channels
between the directors and the executive officers,
and between executive officers, thereby enabling better
policy execution. This committee is composed of the
President & CEO, all Senior Managing Executive Officers
and Managing Executive Officers, and all Executive
Officers.
(3) Measures to strengthen compliance
Establishment of Compliance Committee
To raise company-wide awareness of compliance issues
and to upgrade risk management capabilities, the
Compliance Committee was established in May 2003.
Its main tasks are to integrate management of compliance
functions and to promote on a company-wide basis
(including all affiliates) awareness of the importance
of legal and regulatory compliance by executive
officers and employees at every level of the organization.
Chaired by the senior managing executive officer
in charge of general and administrative affairs, the
committee decides compliance-related policies and actions,
and is responsible for overseeing a quick company-wide
response in the event of any compliance violation.
Compliance system
In addition to the establishment of the Compliance
Committee, a Compliance Officer (at director level) and
compliance executives (at the levels of division heads,
executive officers, and presidents of affiliated companies)
were appointed to ensure the operation and maintenance
of the compliance system.
Institution of compliance violation reporting system
Any Kawasho Group employee may report or discuss
known compliance-related issues directly through a
new system that facilitates reporting of any compliance
violations through a mechanism independent of the operational
chain of command. Part of the secretariat of
the Compliance Committee, the Compliance Consultation
Office provides this facility. The confidentiality of
any information is strictly protected to ensure that informants’
interests are not prejudiced by their actions.
Compliance actions
Led by the Compliance Committee, the following measures
were taken during the year ended March 2004:
(a) Meetings were held to brief employees and presidents
of affiliated companies on the establishment of
the Compliance Committee.
(b) Compliance manuals were distributed to all employees
and executive officers of Kawasho and affiliated
companies.
(c) Employees and branch managers of Kawasho and
presidents of affiliated companies received management
level-specific training on compliance issues (including
case studies of compliance violations).
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