Formulation of Corporate Governance Policy

Transcription

1 November 20, 2015 Formulation of Corporate Governance Policy Dentsu Inc. (the Company ) has formulated this Corporate Governance Policy to put effective corporate governance into practice for the purpose of fulfilling its responsibilities to its stakeholders (such as its shareholders, clients, employees and local communities), ensuring sustainable growth, and enhancing mid- to long-term corporate value. The Company will change its governance structure into a company with an audit and supervisory committee at the 167th Ordinary General Meeting of Shareholders to be held in March 2016 in order to (i) promote expeditious decision-making by delegating certain authority from the board of directors to the management (i.e., executive officers), (ii) strengthen the monitoring function of the board of directors with respect to business execution and (iii) enhance effectiveness of auditing and internal control. With such change, the board of directors will shift to a body that mainly performs a monitoring function and enhance corporate value by encouraging executive directors and officers to make expeditious and resolute business decisions. It is also assumed in Chapter 5 Responsibilities of the Board of Directors and Related Matters of this Corporate Governance Policy that the Company will make the transition to a company with an audit and supervisory committee.

2 Corporate Governance Policy Formulated on November 20, 2015 Dentsu Inc. (the Company ) will put effective corporate governance into practice in order to fulfill its responsibilities to its stakeholders (such as its shareholders, clients, employees and local communities) and to ensure sustainable growth and enhance mid- to long-term corporate value. The board of directors has formulated this Policy, will continuously and periodically review it, and will work on improving and developing the Company s corporate governance to enhance corporate value. Chapter 1 General Provisions (Basic Policy for Corporate Governance) Under the corporate philosophy of the Company group, Good Innovation., the Company shall offer value to clients by resolving their problems through its core competence in the field of marketing communication. Further, the Company shall not only bring brightness and energy to the world, but shall also aim to create new social value and realize a sustainable society by putting its corporate philosophy into practice against continuous challenges. To realize the above, pursuing the best corporate governance is important. The Company shall ensure sustainable growth and enhance the mid- to long-term corporate value through transparent and fair decision-making, effective use of management resources and expeditious and resolute decision-making. For the above purposes, the Company shall work on enhancing the corporate governance in accordance with the basic concepts below. (1) To respect shareholders rights and ensure their equal treatment (2) To consider the interests of stakeholders, and cooperate with them appropriately (3) To appropriately disclose company information and ensure transparency (4) To enhance the effectiveness of the supervisory function of the board of directors concerning business execution (5) To engage in constructive dialogue with shareholders who have an investment policy that conforms to the mid- to long-term interests of shareholders Chapter 2 Ensuring Shareholders Rights and Equal Treatment 1. General meetings of shareholders The Company shall conduct a general meeting of shareholders under the basic policy that explanations should be thorough and easy to understand in order to make such meetings the highest decision-making body of the Company and a forum for constructive dialogue with shareholders. In addition, after the board of directors passes a resolution for

3 convocation of a general meeting of shareholders, the Company shall quickly publish a notice of such convocation together with an English translation thereof on its website and also send such notice of convocation to its shareholders not later than three weeks before the date of the general meeting of shareholders so that the shareholders may appropriately exercise their voting rights. The Company shall also improve its infrastructure (such as adopting the electronic voting platform) wherein all of the shareholders, including those shareholders who do not attend a general meeting of shareholders, are able to exercise their voting rights appropriately. As to how to treat the situation where institutional investors whose shares are being held in the name of trust banks or other parties wish in advance to vote by themselves at a general meeting of shareholders, the Company shall discuss such situation with the trust banks or other relevant parties beforehand, taking into consideration that there are some issues, such as how to check whether the relevant institutional investors are beneficial shareholders of the Company and how to avoid double voting by both the nominee shareholders and the beneficial shareholders. 2. Ensuring equal treatment of shareholders The Company shall effectively ensure the rights of all shareholders, including minority and foreign shareholders rights. The Company shall also enhance its dialogue with shareholders and investors through IR activities by properly and timely disclosing information to them with respect to management strategy, financial position, business performance and other related matters. 3. Analyzing votes against company proposal Every year, votes at a general meeting of shareholders are analyzed by the section in charge of general meetings of shareholders. The result thereof is shared by IR related sections, executive officers in charge of corporate matters and the management, and is also reported to the board of directors. With respect to any proposals against which many opposing votes were cast, the board of directors shall deliberate on matters such as how to obtain shareholders support based on the reasons for the opposition. 4. Capital policy The basic capital policy (concepts and measures for optimal capital structure), which aims to enhance intrinsic corporate value, and which is the Company s top priority for capital distribution that contributes to the Company s growth, shall be implemented on the basis of the policies stated below. (1) Profit growth by centering on proactive investments in growth areas across the globe (2) M&A transactions that realize scale (expansion of regional coverage), infill (expansion of national or regional service coverage) and innovation (acquiring new capabilities), and that contribute to the enhancement of corporate value Further, in addition to the above, the Company shall provide returns to shareholders through a combination of stable dividend distribution and repurchasing of the Company s

4 own shares, enhance capital efficiency and aim to increase the mid- to long-term ROE. 5. Shares owned by the Company on account of business relationships In order to enhance mid- to long-term corporate value by maintaining and strengthening business relationships with its business partners and other similar parties, it is possible that, apart from pure investment, the Company will hold shares in listed companies that are the Company s business partners. Of such shareholdings strategically held by the Company, with respect to important shareholdings, the board of directors shall examine the purpose and economic rationale for owning such shares every year, considering growth, profitability, business relationship and other relevant factors in light of restricting risks in owning the shares, capital efficiency and other issues. It is the Company s basic policy to sell such shares with the thorough understanding of the relevant business partners if the board of directors decides that there is no rationale for owning them. The Company may also sell such shares strategically owned by the Company considering the market environment, management and financial strategies and other relevant factors even if there is a rationale for owning them. The Company shall exercise the voting rights of such shares at general meetings of shareholders of the relevant companies considering, on a proposal-by-proposal basis, the enhancement of corporate value of such companies and the mid- to long-term increase in economic profit of the Company and its group companies, taken as a whole, to ensure appropriate voting. With respect to important shareholdings strategically held by the Company, how the votes of such shares are exercised shall be reported to the board of directors. 6. Related party transactions The rules of officers of the Company provide that directors who enter into business competition transactions or conflict of interest transactions stipulated in the Companies Act with the Company shall explain the transactions to the board of directors and obtain approval from the same. The rules also provide that such directors shall report the status of such transactions thereafter. The board of directors shall strictly implement the rules and appropriately monitor the relevant transactions. In addition, apart from the transactions stipulated in the Companies Act, the Company shall submit a questionnaire to each director once a year to ascertain whether there is any transaction between the Company and any directors of the Company or consolidated subsidiaries or their close relatives. Other related party transactions, including those with major shareholders, shall be properly disclosed in accordance with applicable laws and regulations, such as the Companies Act or the Financial Instruments and Exchange Act, and applicable rules of the Tokyo Stock Exchange. Chapter 3 Proper Cooperation with Stakeholders 1. Code of conduct and conflict of interest The Company understands that it is its social responsibility to tackle social problems, taking into consideration every stakeholder as well as compliance, a safe and healthy

5 working environment, respect for human rights, social contribution and environmental protection activities. In addition, the Dentsu Group Code of Conduct provides that the management and employees shall protect stakeholders interests and work with high ethical standards. The Company shall ensure that the management and employees fully understand such provisions. 2. Dealing with problems concerning sustainability The Company understands that it is its social role to create new social value by continuously discovering social issues and presenting solutions, and the Company aims to be a partner of its stakeholders that can contribute to sustainable growth of such stakeholders. In addition, the Company has formulated its CSR basic policy, the Dentsu Group Code of Conduct. as a code of conduct to be followed by employees of the Company group in order for each of such employees to fulfill their social responsibilities in the respective areas. Taking ISO as a guideline, the Company has set seven important fields (corporate governance, respect for human rights, ensuring a safe and civilized working environment, environmental protection, fair business practices, addressing consumer issues and contributing to the community) and is undertaking various actions in each field. 3. Whistleblowing system The Company has established its Compliance Line as a whistleblowing system inside the Company group, which is available via telephone, , letters and other means. The special section inside the Company and outside counsel fulfill a liaison role with respect to such Compliance Line. Moreover, the Company has established a consultation section for sexual harassment and power harassment apart from the Compliance Line. Under these systems, whistleblowers names and sections are kept confidential outside the secretariat, and rules of the Company stipulate that such whistleblowers shall not be treated adversely in their working environment due to such whistleblowing. The Company continues to implement such systems effectively. Chapter 4 Appropriate Information Disclosure The Company shall appropriately disclose in a fair, detailed and plain manner its business performance, financial conditions and other financial information as well as management strategy, business information, risks, governance and other nonfinancial information in compliance with applicable laws and regulations, such as the Companies Act and the Financial Instruments and Exchange Act, and applicable rules of stock exchanges. The Information Control Committee, chaired by the director in charge of information disclosure, fairly controls essential information, including insider information. Chapter 5 Responsibilities of the Board of Directors and Related Matters With respect to its corporate governance structure, the Company will make the transition from a company with a board of corporate auditors to a company with an audit and supervisory

6 committee at the 167th Ordinary General Meeting of Shareholders to be held in March Role of the board of directors The main role of the board of directors is to control the Company strategically along with its corporate philosophy. The board of directors delegates a large part of its decision-making authority regarding business execution to the management (including the representative director) and urges expeditious and resolute business judgment thereby. The board of directors also enhances corporate value by recognizing its fiduciary duties to shareholders and appropriately fulfilling its monitoring function under applicable laws and its Articles of Incorporation toward overall management, including its management strategy and Medium-term Management Plan. 2. Members of the board of directors and term of directors After making the transition to a company with an audit and supervisory committee, the number of directors will be nine (no more than 15 as the Articles of Incorporation stipulate) and three directors (one third of the total members of the board of directors) will be independent outside directors. The term of directors who are not members of the audit and supervisory committee is until the closing of the general meeting of shareholders concerning the last business year ending within one year after their assumption of office, while the term of directors who are members of the audit and supervisory committee is until the closing of the general meeting of shareholders concerning the last business year ending within two years after their assumption of office. Diversity in experience, insight and ability are among the factors that will be considered in nominating members of the board of directors. 3. Standards in nominating director candidates and process of nomination Standards in nominating director (excluding outside director) candidates shall be stipulated in the rules of officers of the Company, and those who have the attributes stated below shall be nominated as such candidates. (1) A person who is able to make determinations from a company-wide viewpoint (2) A person who has expertise with respect to the Company s business (3) A person who has remarkable business judgment and ability in business execution (4) A person who has remarkable leadership, foresight and decision and planning ability (5) A person who has character and insight suitable for directors Standards in nominating outside director candidates shall be stipulated in the rules of officers of the Company, and those who have the attributes stated below shall be nominated as such candidates. (1) A person who has extensive experience in management or who is a professional in legal, accounting, finance and other such fields (2) A person who can be independent of the representative director of the Company (3) A person who has character and insight suitable for outside directors In nominating directors, including outside directors, the representative director will

7 submit his candidate plan and, in order to secure transparency, explain to the independent outside directors, who are audit and supervisory committee members, the reason, suitability and other factors for such nomination. Considering the opinions of such independent outside directors, candidates shall be decided upon by the board of directors. The reasons for the nomination of each director candidate shall be described in the reference material of a general meeting of shareholders. 4. Scope delegated to the management In order to establish an expeditious and effective business execution system, the Company has (a) clarified in its rules those matters that must be decided by the board of directors under applicable laws and regulations and those matters that are considered to be appropriate to be decided by the board of directors, and (b) established the executive management committee that consists of the representative director and executive officers, including executive directors, and that deliberates on (i) important business matters, excluding those matters that must be decided by the board of directors, and (ii) matters to be decided by the board of directors before deliberation by the board of directors. The business execution system is divided into the Japan business sector and international business sector, and each has responsibility for profit and authority delegated by the board of directors. In addition, committees to which the executive management committee has delegated its authority are regarded as principal committees. In this regard, the business supervision committee was established in the Japan business sector and the Dentsu Aegis Network Board was established in the international business sector. Along with the transition to a company with an audit and supervisory committee, the board of directors of the Company will delegate more authority under the amended Articles of Incorporation in order to promote expeditious decision-making and strengthen the monitoring function by the board of directors. 5. Role of outside directors After making the transition to a company with an audit and supervisory committee, three of the Company s nine directors will be outside directors who meet the independence standards of the Company. In order to enhance corporate governance, the Company expects such outside directors to initiate discussion at board of directors meetings by raising questions and expressing opinions and to promote proper judgment by the board of directors by expressing opinions from their respective professional points of view. Outside directors will also have a role to verify and evaluate the business results and performance of the Company s management in light of the corporate strategy decided by the board of directors and to express their opinions in light of shareholders interests as to whether delegation of authority to the management is appropriate. The Independence Standards for Outside Directors decided by the Company are shown in the Schedule.

8 6. Members of the audit and supervisory committee The Company will nominate four directors (including three outside directors) as members of an audit and supervisory committee at the general meeting of shareholders to be held in March 2016 in order to make the transition to a company with an audit and supervisory committee. The purpose of such transition is to (i) make auditing and monitoring more effective through auditing and monitoring by members of the audit and supervisory committee who may vote at board of directors meetings, and (ii) make internal control more effective through auditing by the internal audit section of the Company. Of the four directors who are members of the audit and supervisory committee, all three outside directors will satisfy the independence standards formulated by the Company and are expected to fulfill a monitoring role on the board of directors with respect to business execution by making good use of each director s extensive experience in his or her respective field. Members of the audit and supervisory committee will also request reporting from the Company s accounting auditor and the internal control section as necessary with respect to the process and results of their respective audits, and ensure communications among the relevant parties through exchanging necessary information. They may also request reporting from the internal control section concerning the status of establishment and operation of internal control. Moreover, assistants of members of the audit and supervisory committee and a secretariat for the same committee will be provided. The employees in charge of such offices will be ensured independence from directors (other than members of the audit and supervisory committee). 7. Concurrent posts as officers at other listed companies Directors may concurrently serve as directors, corporate auditors or officers of other listed companies only to the reasonable extent that they are able to devote their necessary time and effort to appropriately fulfill their roles and responsibilities as directors of the Company and after following necessary procedures and obtaining approval by the board of directors. Important concurrent posts will be disclosed in the reference material of the relevant general meeting of shareholders and a business report under applicable laws and regulations. 8. Internal control To promote expeditious business execution under proper control, the board of directors has provided a basic policy on the internal control system and established systems and other means for compliance, effective business execution, risk management, and securing the appropriateness of financial reports, and the board of directors monitors the status of operation of such systems. 9. Accounting auditor In order to secure reliability of disclosure information and responsibility to shareholders

9 and investors, the Company will ensure that the accounting auditor (i) will be given ample time to conduct a high-quality audit, (ii) may cooperate with the internal audit section and directors who are members of the audit and supervisory committee, and (iii) may access the management, including the CEO and CFO. 10. Remuneration of directors Concerning remuneration for directors (excluding outside directors), a performance-linked framework is in place that takes into account encouragement of achieving goals set forth in the medium-term management plan in order to focus on the mid- to long-term profit of shareholders and to enhance motivation for maximizing the corporate value of the Company. The portion of the performance-linked bonus under the model business results accounts for 40% of the total remuneration, the index for performance evaluation of business results is consolidated operating profit, and the total amount of bonus remuneration varies in accordance with the level of achievement of the budget. Each director s remuneration shall be determined by a resolution of the board of directors. The total of monthly remuneration, which consists of fixed remuneration and performance-linked bonuses, will be within the limit of remuneration (1.2 billion yen per year (of which up to 18 million yen per year is applied to outside directors)) approved at the 164th Ordinary General Meeting of Shareholders. Remuneration to outside directors, however, will consist solely of fixed monthly remuneration because of the nature of their duties. The Company is considering changing this system since remuneration of directors who are members of the audit and supervisory committee will be required to be determined separately from the other directors after making the transition to a company with an audit and supervisory committee. The new budget for remuneration and other necessary matters are to be approved at the ordinary general meeting of shareholders to be held in March The amount of each director s remuneration (including that for the role of executive officers) will be determined by a resolution of the board of directors within the limit of remuneration to be approved at the same general meeting of shareholders; and from the view point of ensuring transparency, such decision will be made considering the opinions of the members of the audit and supervisory committee who are independent directors after explaining to them the reasonableness of the amount of remuneration. 11. Preparing and deciding the successor to the CEO The CEO must be aware that preparing his successor is one of his important responsibilities. Thus, the CEO shall prepare his successor by (i) providing executive officers with a mission in accordance with their respective duties together with the business performance targets and (ii) letting the executive officers participate in the management of the Company through attending important meetings, including the executive management committee and the business supervision committee. After making

10 the transition to a company with an audit and supervisory committee, the successor candidate will be determined by the board of directors considering the opinions of the independent outside directors who are members of the audit and supervisory committee after explaining to them the appropriateness and other applicable matters regarding such candidate. 12. Training policy of directors and executive officers Directors and executive officers shall be given opportunities for gaining indispensable knowledge for their offices and for continuous training so that they may perform their roles and responsibilities appropriately. Currently, when they become directors or executive officers, the Company provides them with lectures conducted by inside and outside experts with respect to the Company s strategies of management, business, finance and other applicable fields and important matters and laws and regulations related thereto, and enables them to acquire and update the knowledge required for their offices. They are also given opportunities through discussion to find issues to be addressed by the Company group and solutions thereto. Moreover, after becoming directors or executive officers, they are given opportunities to hold study seminars every month to gain the latest information as to the best practices for various megatrend issues. When new independent directors assume their offices, they are provided with an explanation of the business, organization structure and other related matters of the Company, and the necessary information related to issues to be addressed by the Company shall be provided to them periodically. The contents of lectures and other training matters will be reviewed as necessary. 13. Evaluating the board of directors After making the transition to a company with an audit and supervisory committee, directors will conduct a self-evaluation every year with respect to the effectiveness and appropriateness of the board of directors monitoring of the management of the Company and the performance of their own duties as directors. The results of such evaluation will be reported to the board of directors. The board of directors will analyze and evaluate the effectiveness of the board of directors as a whole based on the results of the self-evaluation conducted by each director. An overview of such analysis and evaluation will be disclosed. Chapter 6 Dialogue with Shareholders The Company is working on enhancing its mid- to long-term corporate value by disclosing various information, such as management strategy, financial information and non-financial information to shareholders and investors in a timely and proper manner and continuously engaging in constructive dialogue with shareholders and investors through IR activities. More specifically, mainly the CEO, CFO and officers in charge of disclosure carry out

11 various activities, such as regular meetings with analysts and institutional investors, roadshows both within and outside of Japan to visit investors individually, and sufficient information disclosure on the Company s website. The Company has established an IR section as a special section so that such activities may effectively function, and the IR section closely cooperates with the corporate strategy division, finance and accounting division, legal division and other relevant sections. Opinions and requests obtained through IR and other activities are reported to the executive management committee or the board of directors and utilized in the discussions for enhancement of corporate value. The Company has established the information control committee to appropriately control insider information and provides a silent period during which the Company must withhold dispatching information with respect to financial results. The Company also conducts a survey of its beneficial shareholders periodically and attempts to grasp the share ownership structure.

12 Independence Standards for Outside Directors at Dentsu Inc. (Formulated on November 20, 2015) The Company deems that any directors that fall under any of the following items do not meet the standards for independent outside directors. 1. Persons who have certain relationships with the Company or its subsidiaries a. Persons who perform executive roles (which means executive directors, statutory officers, executive officers, managers, employees, including advisors (the same applies hereafter), or such other persons as stipulated in Item 6 of Article 2, Section 3 of the Ministerial Order of Enforcement of the Companies Act; the same applies hereafter) in the Company or its subsidiaries. b. Persons who were directors, corporate auditors, executive officers, managers or employees of the Company or its subsidiaries during any period in the past ten years 2. Persons who hold the position of director or other executive of a corporation and who also perform an executive role in the Company Persons who perform an executive role such as a director, officer, corporate auditor and the like in a corporation and who also perform an executive role in the Company 3. Principal business partners Entities whose principal client is the Company *1 or persons who perform executive roles therein, or principal clients of the Company *2 or persons who perform executive roles therein 4. Employees of an accounting firm of the Company Those who belong to an accounting firm that conducts audits of the Company under the Companies Act or the Financial Instruments and Exchange Act 5. Outside experts of the Company Experts (including attorneys-at-law, accountants, tax accountants, patent attorneys, judicial scriveners and consultants) who receive a large amount *3 of money or other property (except for remuneration as a director, officer, corporate auditor and the like) from the Company (or if the entity receiving such property is an organization, such as a corporation and association, persons belonging to such entity) 6. Persons who received donations from the Company Persons who received a large amount *4 of donations from the Company (or if the entity receiving such donations is an organization, such as a corporation and association, persons who perform an executive role in such entity)

13 7. Major shareholders. Entities that substantially own 5% or more of the voting rights of the Company or persons who perform an executive role therein 8. Persons who have fallen under items 2 through 6 in the past Those who have fallen under any of items 2 through 6 during any period in the past five years 9. Close relatives Close relatives of those who fall under any of items 1 through 8, except for persons who are deemed to be unimportant for the purpose hereof *1 Entities whose principal client is the Company are those who received payments from the Company equivalent to more than 2% of their annual sales in the latest business year. *2 Principal clients of the Company are those who made payments to the Company equivalent to more than 2% of the Company s annual sales in the latest business year or those who provided loans to the Company the outstanding amount of which was more than 2% of the total assets of the Company in the latest business year. *3 Large amount means, with respect to the amount of the property acquired by the relevant party in the latest business year, more than 10 million yen (in the case of a natural person) or more than 2% of its annual consolidated sales or gross revenue (in the case of an organization, such as a corporation or association). *4 Large amount means, with respect to the amount of the donations received by the relevant party in the latest business year, more than 10 million yen or more than 2% of its annual gross revenue. END