The status of corporate governance in Yamaha Corporation ( the Company ) is as follows:

Transcription

1 Date of last revision: June 23, 2016 YAMAHA Corporation Takuya Nakata President and Representative Director Contact: Stocks & Official Documents Department Legal Division Securities Code: 7951 The status of corporate governance in Yamaha Corporation ( the Company ) is as follows: I Basic Policies for Corporate Governance and Basic Information on Capital Structure, Corporate Attributes, and Other Matters 1. Basic Policy Yamaha Corporation and our Group companies (hereinafter referred to as Yamaha or the Company and the Yamaha Group or the Group ) have issued the Yamaha Philosophy as our corporate philosophy and our Promises to Stakeholders, which we have made to all related parties, starting with our shareholders. By fulfilling our social responsibilities in such areas as compliance, the environment, safety, and contribution to the community even as we ensure a high level of profitability based on our global competitive prowess and increased business efficiency, we are working to ensure sustainable growth and to enhance the enterprise value over the medium-to-longer term. To realize this vision, based on the Basic policies for corporate governance presented below and the policies stated in Chapter I and thereafter, along with putting in place the organizational design, operating framework, and mechanisms as well as implementing various measures to manage the Company, we are carrying out quality business management in a transparent manner through the appropriate disclosure of information. [Basic policies for corporate governance] From a shareholder s perspective, ensure the rights and equal treatment of shareholders Taking into consideration our relationships with all stakeholders, proactively fulfill the Company s social responsibilities Ensure that information is disclosed appropriately and the management is transparent By separating the oversight and executive functions and strengthening the oversight function, ensure that the Board of Directors is highly effective while at the same time executing decisions 1

2 with a sense of urgency Proactively engage in dialogue with shareholders [Yamaha Philosophy] Corporate Slogan: Corporate Philosophy: Customer Experience*1 Yamaha Quality*2 Yamaha Way*3 Sharing Passion & Performance With our unique expertise and sensibilities, gained from our devotion to sound and music, we are committed to creating excitement and cultural inspiration together with people around the world. Joy, Beauty, Confidence, Discovery Excellence, Authenticity, Innovation Embrace Your Will, Stand on Integrity, Take Proactive Actions, Go Beyond the Limits, Stick to the Goals *1 The Customer Experience exemplifies the meaning of "Sharing Passion & Performance" from the customer's viewpoint. When customers experience, use, or own Yamaha products and services they should experience a profound response that will stimulate both their emotions and senses. *2 The Yamaha Quality is a set of criteria that supports Yamaha's insistence on quality in products and services and our dedication to excellence in manufacturing. These criteria assist in making the Corporate Philosophy a reality. *3 The Yamaha Way explains the mindset that all employees of the Yamaha Group should adopt, and the manner in which they should act on a daily basis, in order to put the Corporate Philosophy into practice. [Promises to Stakeholders] Customer-Oriented and Quality-Conscious Management Yamaha fully satisfies its customers by offering quality products and services that incorporate new and traditional technologies as well as refined creativity and artistry. Transparent and Sound Management Yamaha delivers proper returns to shareholders by ensuring a solid business performance and achieves lasting development through transparent and sound management. Valuing People Yamaha strives to be an organization where each person s individuality and creativity are 2

3 respected and all can demonstrate their full potential through their work. Harmony with Society Yamaha is a good corporate citizen that contributes to the development of society, culture, and the economy by observing laws, demonstrating high ethical standards, and endeavoring to protect the environment. Our Corporate Governance Policies, including the basic policies above, can be seen on our website, here: Reasons why we are not able to fully comply all aspects of the Corporate Governance Code We fully comply all aspects of the Corporate Governance Code.. Disclosure based on the principles of the Corporate Governance Code [Principle 1-4] Cross-holdings It is Yamaha s basic policy to have cross-holdings only to the extent that this is reasonable because it contributes to the Company s sustainable growth and the enhancement of enterprise value over the medium-to-longer term. Reasonable because it contributes to the Company s sustainable growth and the enhancement of enterprise value over the medium-to-longer term refers to enhancing the value of our brand, supporting sustainable growth, and ensuring a strong financial base by maintaining stable relationships with companies with which we have important cooperative relationships, business partners, and financial institutions. Yamaha Motor Co., Ltd. uses the same Yamaha brand as the Company. Yamaha Motor Co., Ltd. and the Company have established the Joint Brand Committee, YAMAHA Brand Charter, and Joint Brand Regulations. Along with carrying out various initiatives together, initiatives in furtherance of each other s sustainable growth are monitored appropriately through shareholdings and the assignment of directors. By building this kind of relationship of monitoring and cooperation with Yamaha Motor Co., Ltd., the Company aims to maintain and enhance the value of the Yamaha brand, thereby contributing to the enhancement of the Company s enterprise value over the medium-to-longer term. 3

4 The Board of Directors regularly reviews the reasonableness of individual cross-holdings on an ongoing basis. In exercising the voting rights associated with cross-holdings, the decision of how to vote is made comprehensively from the standpoint of whether the resolution enhances the enterprise value of the company in question over the medium-to-longer term, whether it is in accordance with our Basic policy concerning cross-holdings, and whether it leads to the enhancement of our enterprise value over the medium-to-longer term. [Principle 1-7] Transactions with related parties When engaging in transactions with directors, corporate auditors, or close relatives thereof, necessary systems are put in place to ensure that they are not detrimental to the Company or the shareholders common interests. With the approval of the Board of Directors pursuant to the Companies Act, the results of related party transactions shall be reported after a transaction is completed. [Principle 3-1] Improving information disclosure 1. We have formulated a Corporate Philosophy and a Medium-Term Management Plan. They can be seen here: Corporate Philosophy Medium-term Management Plan. 2. Our Corporate Governance Pollicies contains our basic concept of corporate governance. It can be found on our Website here: 3. Director remuneration comprises, within the bounds of that approved in advance at the General Shareholders Meeting, fixed remuneration and performance-linked remuneration as well as director bonuses meant to reflect near-term performance, and acquired type remuneration of stock to provide more incentive to enhance enterprise value over the medium-to-longer term. These are decided by the Board of Directors after deliberation by the Corporate Directors Personnel Committee in which over half of the committee s members consists of outside directors. Remuneration for corporate auditors is set through discussions with the corporate auditors, within the scope approved at the General Shareholders Meeting. The remuneration for outside directors and corporate auditors comprises only the non-performance-linked fixed remuneration associated 4

5 with their role. The remuneration for executive officers is decided by the Board of Directors after deliberation by the Corporate Directors Personnel Committee. For details, see the section on Matters related to remunerations for Directors, under 1. Matters related to the structure, operation, etc. of the organization on Part II. 4. The Corporate Directors Personnel Committee establishes criteria for selecting director candidates, such as personality, insight, ability, and capability, and, after selecting candidates, they are nominated by the Board of Directors. The Corporate Directors Personnel Committee establishes criteria for selecting corporate auditor candidates, such as personality, insight, ability, and capability, and, after selecting candidates and obtaining the consent of the Board of Auditors, they are nominated by the Board of Directors. At least one of the corporate auditors must have appropriate expertise in finance and accounting. The Corporate Directors Personnel Committee establishes criteria for appointing executive officer candidates, such as personality, insight, ability, and capability, and, after selecting candidates, they are appointed by the Board of Directors. 5. Reasons for appointment of Directors and Corporate Auditors Takuya Nakata In terms of both personality and insight, Mr. Nakata is extremely well suited to be a member of the board. He has a wealth of experience and achievements, having served as Head of our Pro Audio and Digital Musical Instruments Division, President of Yamaha Corporation of America, and President and Representative Director of Yamaha Corporation He has been appointed as a director on expectations he will help strengthen the supervisory function and the decision-making function of the Board of Directors. Masato Oike In terms of both personality and insight, Mr. Oike is extremely well suited to be a member of the board, with vast experience and achievements. Formerly President of Yamaha Music Europe, is now Head of Musical Instruments & Audio Products Sales & Marketing Group. He has been appointed as a director based on expectations he will help strengthen the supervisory function and the decision-making function. Satoshi Yamahata In terms of both personality and insight, Mr. Yamahata is extremely well suited to be a member of the board, with vast experience and achievements. He has worked as General Manager of the Accounting and Finance Division and as General Manager of the Corporate Planning Division, and is now as Head of the Operations Group. He has been appointed as a director on expectations he will help strengthen the supervisory function and the 5

6 decision-making function. Hiroyuki Yanagi In terms of both personality and insight, extremely well suited to be a member of the board, with vast experience. He has served as President and Representative Director of Yamaha Motor Co.,Ltd. He has been appointed as a director based on expectations he will help strengthen the governance function, enhance the value of the brand, and offer appropriate advice from an objective standpoint. Shigeru Nosaka In terms of both personality and insight, Mr. Nosaka is extremely well suited to be a member of the board, with vast experience in other businesses. He has been appointed as a director based on expectations he will help strengthen the governance function and offer appropriate advice from an objective standpoint. Masatoshi Ito In terms of both personality and insight, Mr. Ito is extremely well suited to be a member of the board, with vast experience in other businesses. He has been appointed as a director based on expectations he will help strengthen the governance function and offer appropriate advice from an objective standpoint. Masahito Hosoi In terms of both personality and insight, Mr. Hosoi is extremely well suited to be an auditor, with vast experience and achievements. He has served as General Manager of the Human Resources Division, and as Head of the Corporate Administration Group. He has been appointed as a full-time corporate auditor based on expectations he will be an accurate, fair and equitable auditor. Takashi Dairokuno In terms of both personality and insight, Mr. Dairokuno is extremely well suited to be a corporate auditor, with vast experience and achievements. He has served as General Manager of the Human Resources and General Administration Division, and as General Manager of the Internal Auditing Division as well as having sufficient knowledge of finance and accounting. He has been appointed as a full-time corporate auditor based on expectations he will be an accurate, fair and equitable auditor. Hirohiko Ikeda In terms of both personality and insight, Mr. Ikeda is extremely well suited to be a corporate auditor. He is an attorney, with a thorough knowledge of laws and regulations. He has been appointed as a corporate auditor based on expectations he will be a fair and equitable 6

7 auditor from an objective standpoint. Junya Hakoda In terms of both personality and insight, Mr. Hakoda is extremely well suited to be a corporate auditor. He is a certified public accountant with a thorough knowledge of corporate accounting. He has been appointed as a corporate auditor based on expectations he will be a fair and equitable auditor from an objective standpoint. [Supplementary principle 4-1-1] Scope of delegation to the management team With the aim of achieving sustainable growth and the enhancement of enterprise value over the medium-to-longer term, along with deciding important matters as specified in the Articles of Incorporation and the Yamaha Board of Directors Regulations, the Board of Directors plays the role of supervising the execution of the duties of the directors and executive officers. By delegating decisions concerning matters other than these important matters to the director or executive officer who is responsible for their execution, the Company seeks to separate the oversight and execution functions, allowing execution with a sense of urgency. [Supplementary principle 4-1-3] Plan for successor to CEO Regarding the plans for the CEO and other directors successors, the Board of Directors conducts appropriate oversight through the system planning and oversight by the Corporate Directors Personnel Committee, an advisory body to the Board of Directors, in which over half of the committee s members consists of outside directors. [Principle 4-9] Standards and qualities of independence of the independent outside directors In addition to the requirements for independence established by the Companies Act and the Tokyo Stock Exchange, Yamaha has established independence criteria. The Company s standards for the independence of independent outside directors or corporate auditors are: (1) Persons for whom any of the following apply may not serve as independent outside directors or corporate auditors of the Company. If after the appointment of an independent outside director or corporate auditor any of the following are found to apply, the appointment shall be nullified. 1. Persons who do not meet the requirements and qualifications of an outside director or outside corporate auditor as stipulated in the Companies Act. 2. Persons or executives with whom the Group is a significant business partner, or persons or executives which are significant business partners for our Group. 7

8 Here, significant business partner means, in any one of the most recent three years, any company for which the amount the Company receives from the group of business partners exceeds 2% of the Company s consolidated net sales, or the amount to be paid to the Company that exceeds 2% of those companies consolidated net sales or any of the top five banks with which we transact business. 3. Principal shareholders in the Company or executives of the Company, or directors or corporate auditors of companies in which the Company is a principal shareholder. Here, principal shareholder means any entity holding more than 10% of the outstanding shares or other form of equity investment. 4. Persons who are directors or corporate auditors of companies in a mutual secondment relationship with the Group. 5. Consultants, accounting specialists or legal specialists who receive large sums of money or other assets other than executive remuneration from the Company. (If the entities receiving said assets are corporations, unions or other groups, then persons associated with these organizations.) Here, large sums of money or other assets means the amount of more than 10 million yen that is to be paid by the Company in any one of the most recent three fiscal years. (In cases of non-monetary compensation, this refers to the market value at the time of payment.) 6. Close relatives of anyone for whom (a) through (c) below apply (relations within the second degree). (a) Persons for whom 2. through 4. apply. (b) Executives of the Company or any of its subsidiaries. (c) Persons for whom (b) above applied at the time of the most recent General Shareholders Meeting when persons were appointed as directors or corporate auditors. (2) Even persons for whom 2. through 6. above apply may be appointed as independent outside directors or corporate auditors, or not have their appointment nullified, if it can be clearly determined there exists no possibility of conflict with the interests of ordinary shareholders, and those reasons are clearly stated. [Supplementary principle ] Composition of the Board of Directors The makeup of the Board of Directors is diverse and comprises persons with expertise and experience who have the necessary insight, high ethical values, sense of fairness, and integrity. The Board of Directors shall have the number of people that allows the Board of Directors to 8

9 perform its functions effectively and efficiently. Furthermore, the oversight and executive functions are separate, and in order to reinforce the oversight function, a number of independent outside directors are appointed. [Supplementary principle ] Concurrent services by directors and corporate auditors If a director or corporate auditor concurrently serves as a director and other positions at listed companies other than Yamaha, the scope of service will be kept within reason, and the circumstances will be presented in the business report attached to the notice for the General Shareholders Meeting. [Supplementary principle ] Policy for training of directors and corporate auditors The necessary training is provided to the directors and corporate auditors on an ongoing basis. In particular, when an outside director or outside corporate auditor takes office, opportunities are created to explain the Yamaha Philosophy, corporate governance, the system of our internal rules, and the progress on our medium-term management plan, helping them to gain an understanding of our current situation and an awareness of issues. In addition, they gain a deeper awareness of management issues by participating in sessions such as the management meeting to review business challenges. [Supplementary Principle ] Analyzing and evaluating of the effectiveness of the Board of Directors Yamaha carried out evaluations, including evaluations by outside specialists, in fiscal 2016 using the following processes. Implementation of survey to the directors and auditors regarding the roles and responsibilities of the Board of Directors, structure of the Board of Directors, roles and qualities of directors, and management of the Board of Directors Evaluations, including evaluations by outside specialists, and analyses based on survey answers and individual interviews Evaluation of the effectiveness of the Board of Directors based on the results of these analyses as well as debate on and materialization of improvements for applicable issues Through these processes, Yamaha assessed the Board Directors to be effective and functioning appropriately from the following perspectives. The Board of Directors is made up of directors and auditors, including multiple independent 9

10 outside directors, with a diverse range of perspectives and experience. The Board of Directors conducts highly effective oversight of managerial ranks from an independent and objective standpoint. The Board of Directors holds sincere and constructive debate on regarding important management issues. Meanwhile, constructive opinions were presented to further enhance the oversight functions of the Board. Based on the results of these evaluations, Yamaha will work to further improve the effectiveness of the Board of Directors by continually making improvements. [Principle 5-1] Policy for constructive dialogue with shareholders In order to have constructive dialogue with shareholders and investors, the Board of Directors designates a responsible director, and this activity is overseen by the President & Representative Director. If necessary due to a request for dialogue from a shareholder or investor, the responsible director, other directors, or executive officers will appear in person to explain matters such as the capital policy or medium-term management plan to the shareholder or investor in a clear and easy-to-understand manner. The legal division, IR department, and corporate finance division will cooperate and assist the responsible director to ensure that dialogue with shareholders and investors is conducted in a reasonable and orderly manner. In addition to visiting major shareholders and institutional investors, Yamaha offers presentations on its medium-term management plan and quarterly earnings presentations as well as business briefings, facilities tours, and presentations for individual investors. We also post our management plan and the explanatory materials used in earnings presentations on our website. The results of the dialogue with shareholders and investors are reported to the Board of Directors by the President & Representative Director, the responsible director, or other executive officers as timely, and they will be appropriately reflected in the management of the Company, leading to the Group s sustainable growth and enhancing enterprise value over the medium-to-longer term. Additionally, the voting is analyzed for each resolution at the Ordinary General Shareholders Meetings, and this is reported to the Board of Directors. Regarding measures to control insider information, pursuant to Yamaha s Disclosure Policy, due consideration is given to controlling insider information, and we endeavor to disclose information in a fair, prompt, and timely manner. When meeting with shareholders and investors, information is provided after verifying that the 10

11 information provided does not constitute insider information. The time between the day after the end of each quarter and the date of the earnings release is a quiet period during which we refrain from discussing earnings information. 2. Capital structure Percentage of shares owned by foreign shareholders More than 20%, Less than 30% [Major shareholders] Name Number of shares held (shares) Ratio to total (%) The Master Trust Bank of Japan, Ltd. (trust a/c) 20,048, Japan Trustee Service Bank, Ltd. (trust a/c) 16,568, Yamaha Motor Co., Ltd. 10,326, Mizuho Bank, Ltd. 8,555, The Shizuoka Bank, Limited 8,349, Mitsui Sumitomo Insurance Co., Ltd. 8,008, Sumitomo Life Insurance Company 7,300, Nippon Life Insurance Company 5,002, State Street Bank & Trust Company ,467, Trust & Custody Services Bank, Ltd. (trust a/c) 3,284, Existence of majority-owning shareholders (excluding parent company) None Existence of parent company None Supplementary explanation 1. Please note that the current status of our capital structure and major shareholders are stated as of March 31,

12 2. In a statement of major shareholdings dated July 6, 2015, and submitted for public inspection, BlackRock Japan Co., Ltd. said it and eight of its joint holders held 9,990 thousand shares as of June 30, 2015 (5.06% of shares outstanding); as of March 31, 2016, the Company has not been able to verify the actual number of shares held, so we have not included it in our listing of major shareholders, above. 3. In a statement of changes in major shareholdings dated August 6, 2015, and submitted for public inspection, Sumitomo Mitsui Trust Bank, Limited said it and two of its joint holders held 13,151 thousand shares as of July 31, 2015 (6.67% of shares outstanding); as of March 31, 2016, the Company has not been able to verify the actual number of shares held, so we have not included it in our listing of major shareholders, above. 4. In a statement of changes in major shareholdings dated September 24, 2015, and submitted for public inspection, Nomura Securities Co., Ltd. said it and two of its joint holders held 13,301 thousand shares as of September 15, 2015 (6.74% of shares outstanding); as of September 30, 2015, the Company has not been able to verify the actual number of shares held, so we have not included it in our listing of major shareholders, above. 3. Corporate attributes Stock exchange listings Tokyo, First section Business year end March 31 every year Category of business Other products Number of employees at the end of the immediately preceding fiscal year (consolidated) 1,000 or more persons Net sales at the end of the immediately preceding fiscal year (consolidated) 100 billion or more and less than 1,000 billion 12

13 Number of consolidated subsidiaries at the end of the immediately preceding fiscal year 50 or more and less than 100 companies 4. Guidelines concerning measures to protect minority shareholders in the dealing with majority-owning shareholders None 5. Other special conditions which may have material effects on corporate governance None II Organization of Management for Operational Decision-making, Execution and Supervision, and Other Corporate Governance Structures 1. Matters related to the structure, operation, etc. of the organization Form of the organization The Company adopts the Corporate Auditor system. [Matters related to the Directors] Quorum of Directors under the Articles of Incorporation 15 persons Term of Directors under the Articles of Incorporation 1 year Chairman of the Board of Directors President Number of Directors 6 persons 13

14 Are Any Outside Directors in Office? Yes Number of Outside Directors 3 persons Number of Outside Directors designated as Independent Directors/Audits 2 persons Relations with the Company (1) Name Attribute Relations with the Company (*1) a b c d e f g h i j k Hiroyuki Yanagi He is from a company other than this Company. Shigeru He is from a company Nosaka other than this Company. Masatoshi He is from a company Ito other than this Company. *1 With respect to the relations with the Company, applicable item(s) are marked in accordance with the descriptions below. a: He executes business of the Company or an Affiliated Company. b: He executes business or a non-executive director of a Parent Company. c: He executes business of a Fellow Subsidiary. d: He is a person/entity for which the Company is a major client or a person who executes business for such person/client. e: He a major client of the Company or a person who executes business for such client. f: He is a consultant, accounting expert, or legal expert who receives large amounts of cash or other assets in addition to director compensation from the Company. g: He is a major shareholder of the Company (in cases where the shareholder is a 14

15 corporation, a person who executes business of the corporation.) h: He executes business for a client of the Company (excluding persons categorized as any of d, e or f above.) i: He executes business for another company holding cross-directorships/ cross-auditorships with the Company. j: He/She executes business for an entity receiving contributions from the Company. k: Other relations 15

16 Relations with the Company (2) Name Independent Supplementary Reason for being elected as Director/ explanation on Outside Director (including reason for being Auditor the applicable designated as Independent Director/Auditor if item(s) he/she is designated as Independent Director/Auditor) Hiroyuki Hiroyuki Yanagi (Reason for being elected) Yanagi Doubles as President (1) He is a person of desirable personality and has and Representative considerable insight as a director. director of Yamaha (2) He has served as President and Representative Motor Co., Ltd., Director of Yamaha Motor Co., Ltd. with which the (3) He can be expected to supervise and provide Company conducts advice on the Company s management for transactions for the improving the Company s brand value. lease of real estate, (Consideration of independence) etc. He doubles as president and representative director of Yamaha Motor Co., Ltd., in which the Company has an equity stake as a major shareholder. Accordingly, the Company does not designate him as an Independent Director but appoints him as an outside director for the reasons described above. Shigeru Nosaka Yes None (Reason for being elected) (1) He is a person of desirable personality and has considerable insight as a director. (2) He has ample experience in running businesses in other industries. (3) He can be expected to strengthen governance function and provide appropriate advice from an objective viewpoint. (Consideration of independence) 16

17 Although he has been engaged in corporate management for many years, he himself and the companies he has been involved in as an executive have never been major customers or business partners of the Company. With respect to positional/financial independence, he is not in a position to be considerably controlled by, or to considerably control, the management of the Company and therefore will not have conflict of interests with ordinary shareholders of the Company. Masatoshi Ito Yes None (Reason for being elected) (1) He is a person of desirable personality and has considerable insight as a director. (2) He has ample experience in running businesses in other industries. (3) He can be expected to strengthen governance function and provide appropriate advice from an objective viewpoint. (Consideration of independence) Although he has been engaged in corporate management for many years, he himself and the companies he has been involved in as an executive have never been major customers or business partners of the Company. With respect to positional/financial independence, he is not in a position to be considerably controlled by, or to considerably control, the management of the Company and therefore will not have conflict of interests with ordinary shareholders of the Company. 17

18 Establishment of an optional committee which corresponds to the nominating committee or compensation committee Yes Establishment and composition of the optional committee and the attribute of the chairman Name Number of Number of Number of Number of Attribute members full-time Inside Outside of the members Directors Directors committee chairman A committee Corporate corresponds to the nominating Directors Personnel Inside Director committee Committee A committee Corporate corresponds to the compensation Directors Personnel Committee Inside Director committee Supplementary explanation As an advisory panel to the Board of Directors, Corporate Directors Personnel Committee is established. The Committee discusses the matters relating the personnel of directors, including compensation to directors, and reports to the Board of Directors. As the Committee consists of no less than half of Outside Directors, the transparency and fairness of the processes and contents of the discussion are secured. [Matters related to the Corporate Auditors] Establishment of the Board of Auditors Yes 18

19 Quorum of Auditors under the Articles of Incorporation 5 persons Number of Corporate Auditors 4 persons Cooperating among the Corporate Auditors, the Accounting Auditor and the Internal Auditing Division As part of an effort to reinforce corporate governance, the Company strives to conduct effective and efficient audits through the cooperating among the Internal Auditing Division, the Corporate Auditors (including the Outside Auditors) and the Accounting Auditor. Specifically, among these three auditing functions, all audit plans are mutually disclosed and adjusted at the start of each fiscal year, and audit results are shared during each fiscal year, while the Accounting Auditor provides reports on the results of quarterly reviews and closing audits, additionally arranging meetings for periodic exchange of information and opinions in an attempt to share information and agendas. In addition, the Internal Auditing Division updates the Board of Auditors with the presentation of the auditing status report on a monthly basis. The Internal Control Divisions (the Compliance Division, the Risk Management Division, and the Finance and Accounting Division, etc.) regularly report to the Board of Auditors or the Full-time Auditors on the status of priority tasks and the audit results conducted by each auditing division. Meanwhile, audit results by these three auditing functions are also notified to concerned divisions to share information and to improve problematic issues across the Company, in an effort to reinforce the Internal Control System. Are Any Outside Auditors in Office? Yes Number of Outside Auditors 2 persons 19

20 Number of Outside Auditors designated as Independent Directors/ Auditors 2 persons Relations with the Company (1) Name Attribute Relations with the Company (*1) a b c d e f g h i j k l m Hirohiko Ikeda Attorney at law Junya Hakoda Certified Public Accountant *1 With respect to the relations with the Company, applicable item(s) are marked in accordance with the descriptions below. a: He executes business of the Company or an Affiliated Company. b: He is a non-executive director or an accounting advisor of the Company. c: He executes business or a non-executive director of a Parent Company. d: He is an auditor of a Parent Company. e: He executes business of a Fellow Subsidiary. f: He is a person/entity for which the Company is a major client or a person who executes business for such person/client. g: He a major client of the Company or a person who executes business for such client. h: He is a consultant, accounting expert, or legal expert who receives large amounts of cash or other assets in addition to director compensation from the Company. i: He is a major shareholder of the Company (in cases where the shareholder is a corporation, a person who executes business of the corporation.) j: He executes business for a client of the Company (excluding persons categorized as any of f, g or h above.) k: He executes business for another company holding cross-directorships/ cross-auditorships with the Company. l: He executes business for an entity receiving contributions from the Company. m: Other relations 20

21 Relations with the Company (2) Name Hirohiko Ikeda Junya Hakoda Independent Director/ Auditor Supplementary explanation on the applicable item(s) Reason for being elected as Outside Auditors (including reason for being designated as Independent Director/ Auditors if he/she is designated as Independent Director/ Auditors) Yes None (Reason for being elected) (1) He is a person of desirable personality and has considerable insight as a corporate auditor. (2) He is an attorney at law and is acquainted with laws and regulations. (3) He can be expected to audit fairly and impartially from an objective viewpoint. (Consideration of independence) Although he has been working as an attorney at law for many years, with respect to positional/financial independence, he is not in a position to be considerably controlled by, or to considerably control, the management of the Company and therefore will not have conflict of interests with ordinary shareholders of the Company. Yes None (Reason for being elected) (1) He is a person of desirable personality and has considerable insight as a corporate auditor. (2) He is a certified public accountant and is acquainted with finance and accounting. (3) He can be expected to audit fairly and impartially from an objective viewpoint. (Consideration of independent) Although he has been working as a certified public 21

22 accountant for many years, with respect to positional/financial independence, he is not in a position to be considerably controlled by, or to considerably control, the management of the Company and therefore will not have conflict of interests with ordinary shareholders of the Company. [Matters related to the Independent Directors/ Auditors] Number of Independent Directors/ Auditors 4 persons Other matters related to the Independent Directors/ Auditors None [Matters related to incentives] Implementation of measures to grant incentives to the Directors Introduction of a performance-based pay system Supplementary explanation on related matters The content of the performance-based pay system is described in Disclosure of company policies in deciding the amount of remunerations for Directors or the method for calculating such remunerations under Matters related to remunerations for Directors below. Persons to whom stock options are to be granted Supplementary explanation on related matters 22

23 None [Matters related to remunerations for Directors] Scope of disclosure (remunerations for individual Directors) Remunerations for individual Directors are not disclosed. Supplementary explanation on related matters Amounts of remunerations, etc. paid to Directors and Corporate Auditors for the 192nd Fiscal Year Directors: 9 persons 277 million (including Outside Directors:3 persons, 21 million) Corporate Auditors: 6 persons 71 million (including Outside Auditors:2 persons, 10 million) Notes: 1. The above numbers of Directors and Corporate Auditors include three (3) Directors and two (2) Corporate Auditor who retired at the conclusion of the 191st Ordinary General Shareholders Meeting on June 23, The above figures for Directors (excluding Outside Directors) include the payment of bonuses of 77 million based on the resolution adopted at the 191th Ordinary General Shareholders Meeting on June 23, Any company policies in deciding the amount of remunerations for Directors or the method for calculating such remunerations Yes Disclosure of company policies in deciding the amount of remunerations for Directors or the method for calculating such remunerations Director remuneration comprises, within the bounds of that approved in advance at the General 23

24 Shareholders Meeting, fixed remuneration and performance-linked remuneration as well as director bonuses meant to reflect near-term performance, and acquired type remuneration of stock to provide more incentive to enhance enterprise value over the medium-to-longer term. These are decided by the Board of Directors after deliberation by the Corporate Directors Personnel Committee in which over half of the committee s members consists of outside directors. Remuneration for corporate auditors is set through discussions with the corporate auditors, within the scope approved at the General Shareholders Meeting. The remuneration for outside directors and corporate auditors comprises only the non-performance-linked fixed remuneration associated with their role. Remunerations for Directors Remunerations for Directors are determined based on the following standards, within the upper limit of remunerations predetermined at the General Shareholders Meeting, in consideration of the standards of remunerations at peer companies, including primarily listed corporations, as well as the standards of remunerations for the Company s own employees. The remuneration for each Director (excluding Outside Directors) is set to consist of (1) a fixed amount, (2) a performance-based amount, and (3) bonuses for Directors. The performance-based amount in (2) is determined based on evaluation indices, namely, rate of sales (ROS), return on equity (ROE), the degree of increase in sales compared to the same period of the previous fiscal year, and the degree of improvement in operating income compared to the same period of the previous fiscal year, on a consolidated basis. The performance-based amount changes within the range from 0% to 50% of the fixed amount, depending on the performance. Bonuses for Directors in (3) are calculated in tandem with consolidated net income, within the upper limit of 0.5% of the consolidated net income for the previous fiscal year as predetermined at the General Shareholders Meeting. Starting from July 2015, Directors will acquire the Company s shares via the Director Shareholding Association in an amount of 12.5% of the fixed amount, and will continue to hold the shares during their terms of office. This will further enhance the Directors incentive to improve medium- and long-term performance. Each Outside Director is paid remuneration in only a fixed amount determined in consideration of the balance with the remunerations for Directors and the scale of the Company s business operations. Remunerations for Corporate Auditors 24

25 Each Corporate Auditor is paid remuneration in only a fixed amount within the upper limit of remunerations predetermined at the General Shareholders Meeting and in consideration of the balance with the remunerations for Directors and the scale of the Company s business operations. [Support system for Outside Directors (Outside Auditors)] A management meeting to examine management issues and the directions of business strategies is held once a month, for the purpose of sharing important management proposals between all directors and corporate auditors and discussing with the executive officers in responsible positions. In addition, directors and corporate auditors receive explanations respectively about agenda of the Board of Directors and other reporting if necessary. When a proposal is to be submitted to the Board of Directors meeting or the Board of Auditors meeting to be attended by outside auditors, the staff member working for the corporate auditors explains on the proposal prior to the meeting, if necessary, and facilitate the corporate auditor s work to perform a complete preliminary study. With respect to other material matters, the Company also strives at all times to maintain an efficient auditing environment by providing information, supplying materials, hearing opinions, supporting investigations, collecting information, etc. 25

26 2. Matters related to functions of business execution, audit and supervision, nomination, determination of remuneration, etc. (Directors & Board of Directors) The number of Directors of the Company is six (6) as of June 23, 2016 (three (3) of them are Outside Directors). The Board Meeting held monthly (in principle). In keeping with its fiduciary duty, the Board of Directors presses for the Group s sustainable growth and enhancement of enterprise value over the medium-to-longer term. The Board of Directors performs its oversight function for the overall management of the Company by formulating basic management policies, making important decisions about the execution of the Company s business, overseeing plans for the CEO and other directors' successors with the help of the Corporate Directors Personnel Committee, nominating and appointing directors and others, making decisions about directors remuneration, approving transactions with related parties, and supervising the construction and operation of internal control systems. To fulfill this role, the Board of Directors freely engages in frank and constructive discussions and exchanges of ideas in order to make the best business decisions in a manner that is fair as well as quick and decisive. The Directors, in keeping with its fiduciary duty, the directors act to ensure the Company s sustainable growth and enhance its enterprise value over the medium-to-longer term, taking into consideration the relationships with all stakeholders. Directors understand relevant laws and regulations and the Company s Articles of Incorporation and gather sufficient information in order to proactively express their opinions and engage in constructive discussions at Board of Directors meetings as elsewhere. In keeping with their independent status, the independent outside directors perform a management oversight function, advisory function, and a conflict of interest oversight function as well as appropriately reflect the views of the stakeholders within the Board of Directors. To clarify the management responsibilities of the directors, their terms are set at one year. (Representative Director) The number of Representative Directors of the Company is one (1) as of June 23, 2016 (President and Representative Director). The President & Representative Director is the chief executive for all businesses of the Company and represents the Company. (Corporate Auditors & Board of Auditors) The number of corporate auditors of the Company is four (4) as of June 23, 2016 (two (2) of 26

27 them are outside corporate auditors). The Board of Auditors Meeting is held once a month in principle. In keeping with their fiduciary duty, the corporate auditors bear the responsibility of ensuring the sound and sustainable growth of the Company and the Group and establishing a good corporate governance system that is worthy of public trust by auditing the execution of the duties of the directors and executive officers as an independent body. The Board of Auditors prepares audit reports, appoints and dismisses full-time corporate auditors; determines audit policies, methods for reviewing the status of the business and finances, and other matters pertaining to the execution of the corporate auditors duties; decides the resolution for the appointment of the accounting auditor to be submitted at the General Shareholders Meeting; and gives its consent for corporate auditor appointment resolutions. To ensure correct decisions on the appropriateness of operational and accounting audit, one of Corporate Auditors with expertise in finance and accounting is appointed as the full-time corporate auditor. To enable fair and impartial audit from an objective viewpoint, professionals independent of the Company (such as certified public accountants, attorneys at law) is involved in the outside corporate auditors. In order to improve the auditing environment, the Company has established a Corporate Auditors Office staffed by employees working for the corporate auditors (staffed by one (1) personnel as of June 23, 2016). (Corporate Directors Personnel Committee) Yamaha has established a Corporate Directors Personnel Committee as an advisory body to the Board of Directors. To ensure the transparency and fairness of procedures, the majority of the members of the Corporate Directors Personnel Committee are outside directors. The Corporate Directors Personnel Committee deliberates on the selection of candidates to be nominated for the Board of Directors and other positions and on the determination of the remuneration for the directors and executive officers, and reports its findings to the Board of Directors. (Risk Management Committee) Yamaha established the Risk Management Committee as an advisory body to the President and Representative Director. The Committee discusses risk management-related matters from a Company-wide perspective and reports its findings to the President and Representative Director. (Managing Council and Corporate Committees) The Company holds the Managing Meeting twice a month as a rule in order to discuss company-wide management issues arising from time to time and unify the views thereof as a 27

28 company. The President & Representative Director, the Managing Executive Officers, the Senior Executive Officers and the full-time corporate auditors attend the meeting. Further, the Company establishes a Corporate Committee for each strategic issue to deepen discussions on management strategic issues of importance. (Executive Officer) The Company adopts the executive officer system in order to strengthen its business execution function. Fifteen (16) Executive Officers (including two (2) Managing Executive Officers, five (5) Senior Executive Officers) assumed office as of June 23, In consideration of the importance of their responsibilities, in principle, Senior Executive Officers are General Managers of Business Groups and/or Staff Groups. Each General Manager of the Group is responsible for the business results of the Group under his or her supervision and issues appropriate commands and orders to enable his or her Group to fulfill its functions to the fullest possible extent. Each Executive Officer is assigned to the Division(s) in charge of major management issues. (Internal Audit) The Company has established an Internal Auditing Division (staffed by fourteen (14) personnel as of June 23, 2016) to review and assess the Company s system for the control and operation of overall management activities, as well as the performance of business executions, in view of legitimacy, validity and efficiency. Based on the results of this review and assessment, the Internal Auditing Division provides information related thereto and advice and recommendations for improvement and realignment. It also endeavors to improve audit efficiency by closely communicating and consulting with the Corporate Auditors and Accounting Auditor. (Accounting Auditor) The Company employs Shin Nihon & Co. (English Name: Ernst & Young ShinNihon) as its Accounting Auditor. Two certified public accountants belonging to the said audit corporation, conduct the accounting audits of the Company. The said audit corporation has already introduced a voluntary shift system for Designated and Engagement Partners in order to ensure that the duration of the engagement does not exceed a certain fixed period. In addition, another fourteen (14) certified public accountants and sixteen (16) assistants help the aforementioned two certified public accountants conduct the auditing work. 28