We pursue initiatives in corporate governance,based on the respective principles of the Corporate Governance Code, with the aim of contributing to the sustainable growth of the Isetan Mitsukoshi Group and improving its corporate value over the medium to long terms.
Basic Views and Policy Regarding Corporate Governance Based on Each of the Principles in Japan’s Corporate Governance Code
In combination with measures to build excellent relationships with customers, employees, shareholders, business partners and local communities—our stakeholders—the Group is overhauling its corporate governance structure, along with management reform. This entails the establishment and strengthening of legal frameworks for the general meeting of shareholders, the Board of Directors and the accounting auditors.
As part of these efforts, for the purpose of further advancing corporate governance, the Company has adopted a company with a nominating committee, etc. as its organizational design.
The Group will work to secure the transparency of our corporate activities and ensure thorough compliance in our management, while taking measures to create and deliver value in various forms for all stakeholders associated with the Group. Aiming to become a corporate Group that is deeply trusted by all of its stakeholders, the Group will continue taking a range of measures including speeding up management decision-making, strengthening management oversight mechanisms and enhancing internal control systems.
Responsibilities of the Board of Directors
In light of the Company’s fiduciary responsibilities and accountability to shareholders, with the aim of promoting the Group’s sustainable growth and the enhancement of corporate value over mid- to long-term and further advancing corporate governance, the Company made a transition from a company with the Audit & Supervisory Board to a company with a nominating committee, etc. in June 2020.
The Company will clearly separate the roles between “execution” and “oversight” by the transition of its organizational design, whereby the Board of Directors’ roles are focused on the establishment of general direction of the Group and the oversight/monitoring of business execution, in order to enhance the oversight function of the Board of Directors. To this end, the Company will create a framework suited to monitoring “execution” and “oversight” through such measures as having Outside Directors comprise a majority of the Board of Directors. The Company will also clearly set forth in the Regulations of the Board of Directors and Regulations of Decision Making Process for the Group criteria for making proposals to be decided upon by the Board of Directors, and delegate authority to Executive Officers in order to enhance the agility of management.
Furthermore, the Company will establish the statutory Nominating Committee, Compensation Committee and Audit Committee in order to implement important governance measures such as selection and dismissal of top management in a highly objective and transparent manner under the leadership of Outside Directors.
Composition of the Board of Directors
The Company’s Articles of Incorporation stipulates that the number of Directors shall not exceed 15. In light of strengthening corporate governance, Outside Directors comprise the majority of the Board of Directors. Furthermore, the policy of the Company for the Board of Directors is to appoint a diverse range of people with broad and highly specialized knowledge and skills, as well as high ethical standards. All Outside Directors satisfy the Independence Standards of the Company. Furthermore, the Regulations of the Board of Directors set out that the Board of Directors shall be chaired by a non-executive Director, and the Board of Directors has been chaired by an Outside Director since April 2021.
The Company’s views on the composition of the Board of Directors, important concurrent positions of the Directors, and their attendance at the Company’s Board of Directors meetings are described and disclosed in the “Notice of the Convocation of the Ordinary General Meeting of Shareholders.“
Responsibilities and Composition of the Three Statutory Committees
(1) Nominating Committee
The Nominating Committee engages in discussion and makes decisions related to the “nomination” of officers with a high degree of objectivity and transparency, under the leadership of Outside Directors. To this end, in addition to providing quantitative information such as performance indicators, qualitative information such as personnel evaluations, and objective evaluations by third-party agencies, efforts are being made to enable Outside Directors to make independent judgments with regard to the reappointment and succession plan of the CEO, decisions on proposals for the appointment and dismissal of Directors to be submitted to the General Meeting of Shareholders, and deliberations on proposals of the members of the three statutory committees and proposals for executive appointment of Executive Officers, to be decided by the Board of Directors, including by conducting interviews between candidates and Outside Directors.
The Nominating Committee is composed of a majority of Outside Directors, and is also chaired by an Outside Director.
(2) Compensation Committee
Like the Nominating Committee, the Compensation Committee engages in discussion and makes decisions related to remuneration of officers and takes steps to further enhance corporate governance, under the leadership of an Outside Director. The committee discusses issues and policy related to officer remuneration plans, including the Company’s approach to incentives for officers to enhance corporate value, and utilizes various objective indicators, including quantitative information such as performance indicators and qualitative information such as personnel evaluation, to enable independent judgments by Outside Directors concerning the appropriateness of individual remuneration proposals. The Compensation Committee is comprised of Outside Directors only.
The Audit Committee audits the execution of duties by Executive Officers and Directors and the status of internal control systems, and carries out evaluations related to the appointment and dismissal of the Accounting Auditor, performing the oversight function of the Board of Directors through auditing. In addition, it has built an audit system to encompass the entire Group by coordinating with the Internal Audit Division and Audit & Supervisory Board Members at each Group company.
The Audit Committee is comprised of a majority of Outside Directors and internal non-executive Directors who are full-time members.
In addition, at last one person who has sufficient knowledge of finance and accounting is selected to ensure the effectiveness of the Audit Committee. The policy is to appoint an Outside Director as chair of the Audit Committee; however, the current chair is a full-time Audit Committee member who is an internal Director.
Audit Committee Member
|Director||Toru Takeuchi||Executive Vice President and Chief Merchandising Officer|
|Director||Shigeru Nishiyama||Managing Executive Officer and Chief Financial Officer/Chief Risk Officer/Chief Administrative Officer|
|Director||Toshinori Shirai||Chairman of Audit Committee|
|External Director||Michiko Kuboyama||Chairman of the Board of Directors|
|External Director||Masami Iijima||Chairman of Nomination Committee
Compensation Committee Member
|External Director||Miwako Doi||Chairman of Compensation Committee
Nomination Committee Member
|External Director||Takashi Oyamada||Nomination Committee Member
Audit Committee Member
|External Director||Takeo Hirata||Compensation Committee Member|
|External Director||Hidetoshi Furukawa||Nomination Committee Member
Audit Committee Member
|External Director||Fukutaka Hashimoto||Audit Committee Member|
|President and CEO||Toshiyuki Hosoya|
|Executive Vice President||Toru Takeuchi||Chief Merchandising Officer|
|Managing Executive Officer||Shigeru Nishiyama||Managing Executive Officer and Chief Financial Officer/Chief Risk Officer/Chief Administrative Officer|
|Managing Executive Officer||Yoshinori Makino||Chief Strategy and Digital Officer, Chief Human Resource Officer|
|Managing Executive Officer||Hideki Katagiri||General Manager of Business Operations Department|
|Managing Executive Officer||Satoru Tanaka||General Manager of Overseas Business Promotion Department|
|Managing Executive Officer||Akira Kimbara||General Manager of General Affairs Department|
|Operating Officer||Yoshihiro Kasahara|
|Operating Officer||Kenji Yamashita||General Manager of the Board of Directors Office|
|Operating Officer||Yasushi Miki||General Manager of Domestic Business Promotion Department|
|Operating Officer||Takayuki Suzuki||General Manager of Corporate Strategy Management Department|
|Operating Officer||Tomohide Sanbe||General Manager of IT Department|
|Operating Officer||Takashi Yamamuro||General Manager of Corporate Finance and IR Department|
|Operating Officer||Takeshi Fujimori||General Manager of Human Resources Management Department|
As a policy of selection and dismissal of senior management Executive Officers, including Representative Executive Officers, the Company stipulates the maximum age and the maximum term of office for each position in the Regulations of Age Limits of Executive Officers in Office to promote appropriate rotation. Given this, selection of Executive Officers, including Representative Executive Officers and Executive Officers with special titles, and their reappointment after the expiration of the appointment contract shall be determined by the Nominating Committee by appropriately evaluating quantitative results of respective Executive Officers during their term of appointment contract, along with qualitative aspects, such as contributions in materializing the Group’s “Our philosophy,” as well as objective data such as management personnel evaluation, etc. prepared by third-party agencies.
<Decision on selection and reappointment of the CEO>
The Company has positioned the selection and reappointment of the CEO and the succession plan as one of the most important tasks of the Nominating Committee, and has worked on this while ensuring transparency and fairness. The Committee actively discusses its approach to the matter and, in the process, is working to further enhance such initiatives, including by obtaining the opinions of all Outside Directors other than the Committee members.
(i) Decision on reappointment of the current CEO
With respect to acceptance or non-acceptance of reappointment of the current CEO (reappointment after expiration of the term of the appointment contract), the Nomination and Remuneration Committee undertook the following.
*At the time of inauguration of the CEO, the CEO submits in person a commitment (goals to be achieved) for the estimated term of office, of which acceptance/non-acceptance is discussed.
*In the following and subsequent years, the CEO explains progress for the commitment, the overall situation at the time, future outlook, issues to be addressed, etc. to the Nominating Committee after which the CEO leaves the meeting, and only the Outside Directors who are members of the Committee deliberate on the acceptance/non-acceptance of reappointment of the CEO.
(ii) Succession plan of the CEO
The Company actively created opportunities where Outside Directors can monitor candidates after the following contents were periodically reported and shared at the Nomination and Remuneration Committee.
*Listing of candidates for a CEO successor (for emergencies, at the time of change before expiration of term, and the maximum term of office)
*Clarification of requirement for the CEO
*Evaluation and training plans for each candidate by an external management personnel evaluation agency
*Plans for relocation to sectors that each candidate should experience in the future
In addition, the Company has systematically established a selective education program for managerial positions and educational opportunities for officers after assumption of office, to build a group of candidates for the next CEO.
With regard to nomination of candidates for Director, the policy of the Company is to have the Board of Directors comprised of members from a diverse range of people with broad and highly specialized knowledge and skills, as well as high ethical standards.
For Outside Directors in particular, the Company invites people from different fields and industries, primarily those with practical management and business-world experience, in order to actively take in a wide range of opinions from objective and specialist perspectives and ensure well-balanced management.
Candidates for Director are determined at the Nominating Committee, which is comprised of a majority of Outside Directors and chaired by one of them, and the proposal is submitted to the general meeting of shareholders.
Regarding senior management Executive Officers, the Board of Directors shall determine candidates after the deliberation by the Nominating Committee.
In designating Outside Directors and as independent officers, the Company has compiled its proprietary “Independence Standards for Independent Directors and Independent Auditors of Isetan Mitsukoshi Holdings Ltd.,” for assessing their independence and outside officers who do not come under any of the following categories are nominated as independent officers.
1) Business executives of the Group
2) A person for whom the Group is a major business partner, or an executive director, executive or manager thereof
3) A major business partner of the Group, or an executive director, executive, manager or other employee thereof
4) An executive officer of a principal lender of the Group
5) A consultant or accounting or legal expert who has received financial or other economic benefits from the Group exceeding a certain sum, other than remuneration of Directors or Audit & Supervisory Board Members
6) A shareholder or an executive officer thereof who holds at least 5% of the total issued shares of the Company
7) Any person who has come under categories 1) to 5) above in the last three years
8) Spouses or relatives within the second degree of kinship of anybody coming under categories 1) to 5) above
A “major business partner” in 2) and 3) above means “any business partner for whom the annual transaction amount with the Company, on a consolidated basis, exceeds 1% of the total annual transaction amount of either party, over the preceding three years, even if this occurs on only one occasion,” a “principal lender” in 4) above means “any lender from whom the Group’s balance of borrowings exceeds 2% of the consolidated total assets of the Company as of the end of the fiscal year,” and a “certain sum” in 5) above means “a sum of at least 10 million yen in any of the preceding three fiscal years.”
The Company has established the following four basic principles regarding executive remuneration (excluding Outside Directors).
1) Promotion of common interests between shareholders and officers
2) Expansion of incentive effects to improve financial results and shareholder value
3) Provision of remuneration at a level by no means inferior to the standards of overall industry (upon achieving goals)
4) Ensuring objectivity and transparency in methods of evaluation and remuneration decision
These basic principles have been formulated as “Director Remuneration Principles” in the “Director Remuneration Guidelines.” Based on these basic principles, the Compensation Committee, comprised only of Outside Directors, will decide on the policy regarding the remuneration of officers, deliberate and decide individual amounts of remuneration, and continue its deliberations so that the executive remuneration system functions better as a healthy incentive towards the sustainable growth of the Company.
Under the above Director Remuneration Principles, the objectivity and transparency of the entire process of determining executive remuneration are ensured through the effective deliberation at the Compensation Committee, a statutory committee that is comprised of a majority of Outside Directors and chaired by one of them.
Under the Director remuneration system of the Company, executive remuneration is composed of three elements: monthly “basic remuneration” along with “bonuses” and “share-based remuneration” which are paid or granted annually. For Executive Officers, including the President and CEO (Representative Executive Officer), bonuses that are paid as a form of performance-linked remuneration shall account for 25% of the total annual remuneration for each individual, with the aim of clarifying their responsibilities for business execution.
Meanwhile, share-based remuneration shall account for 15% of the total annual remuneration for each individual, with a view toward promoting shareholdings by officers and their common interests with the shareholders. (Bonuses shall not be paid to internal Directors except for those who concurrently serve as Executive Officer, and Outside Directors.)
The Company is currently conducting fundamental considerations on ways for linking to the short-term performance and the medium- to long-term performance in the entire remuneration and approach to the share-based remuneration system that has replaced the remuneration-type stock options scheme, so that the officer remuneration system functions better as a healthy incentive towards the sustainable growth of the Company. In FY2020 and onwards after the transition to a company with a nominating committee, etc., the Compensation Committee will continue such considerations and work to bring discussion results into shape.
For Executive Officers including President and CEO (Representative Executive Officer), performance-linked bonus as described hereunder has been introduced as a strong motivation towards the achievement of goals based on the Director Remuneration Principles. Bonuses are not paid to Directors who do not concurrently serve as Executive Officer.
Base amount of bonus = Basic remuneration x 5 (months)
Amount of bonus to be paid = Base amount of bonus x  Payout ratio (degree of achievement against the corporate performance goal) x  Allocation ratio (weight) + Base amount of bonus x  Payout ratio (personal qualitative evaluation) x  Allocation ratio (weight)
1) Payout ratio (degree of achievement against the corporate performance goal)
Since the Company’s foundation in FY2008, the Group has adopted consolidated operating income as its indicator to strongly motivate officers to achieve annual goals, with a view toward quickly establishing a sound operational base for the Group and launching its management on a growth track into the future.
Specifically, the payout ratio shall be 1.00 (100%) upon the full achievement of the operating income goal, and designed to vary within the range between 0.00 (0%) at minimum and 2.00 (200%) at maximum, in proportion to the degree of achievement. The amounts of consolidated operating income corresponding to such minimum and maximum factors shall be determined for each fiscal year, based on the absolute standards of the targeted amount, with a view toward providing clear and effective incentives.
2) Payout ratio (personal qualitative evaluation)
The payout ratio of qualitative evaluation shall be subject to a five-grade evaluation (between 0.50 (50%) at minimum and 1.50 (150%) at maximum) by President and CEO (Representative Executive Officer) at the end of each fiscal year, based on the assessment of the degree of achievement of the qualitative goals established through the interview with the President and CEO (Representative Executive Officer) at the beginning of each fiscal year. This evaluation will be put to deliberations by the Compensation Committee.
3) Allocation ratio (weight)
The allocation ratio (weight) between the degree of achievement against the corporate performance goal and the personal qualitative evaluation shall be determined for each fiscal year following a review of its positioning. For the President and CEO, who has ultimate responsibility for results, the allocation ratio of the degree of achievement against the corporate performance is set at 100%, and for other Executive Officers, it is set at 60%.
<Restricted Share-based Remuneration System>
In FY2020, we implemented a share-based remuneration system with restriction of transfer, with a view to further
enhancing the awareness of the Company’s Directors, including Outside Directors, and Executive Officers towards
improving shareholder value.
Since this system is aimed at strengthening incentives for Directors, excluding non-executive Directors such as
Outside Directors, and Executive Officers to enhance the Group’s medium- to long-term performance and our corporate value, the restriction of transfer is lifted at a rate determined on the basis of the Company’s share prices in a given period.
The basic policy of the Group is to not acquire or hold cross-shareholdings in principle, except when cross-shareholdings are deemed conducive to sustainable growth and enhancement of corporate value of the Group over the medium- to long- term. With regard to the cross-shareholdings the Company currently holds, every year at the Board of Directors, the Company comprehensively verifies whether it is rational to continue holding such cross-shareholdings from quantitative and qualitative aspects including the purpose of holding, transaction status, and dividend earnings. Regardless, the Company will proceed with phased sales in consideration of factors such as the market environment and status of shares held with the aim of reducing cross-shareholdings.
Regarding the exercise of voting rights for cross-shareholdings, an overall judgment is made as to whether or not exercise of such rights would spur sustainable corporate value of said company or contribute to sustainable growth and enhancement of corporate value of the Group over the mid- to long-term. Such voting rights are duly exercised for each agenda item.
When shareholders who hold the Company’s shares for the purpose of cross-shareholding (cross-shareholders) indicate their intention to sell their shares, the Company will not hinder the sale of the shares by, for instance, implying a possible reduction of business transactions.
The Company currently adopts a company with a nominating committee, etc. as its organizational design.
The Nominating Committee and the Compensation Committee strive to enable independent judgments by Outside Directors concerning discussions and decision-making related to the “nomination” and “remuneration.” To this end, the committees will take various measures, such as increasing contact with prospective nominees and utilizing personnel evaluations and other objective indicators. The Audit Committee endeavors to build and operate a system that ensures both the effectiveness and independence so as to sufficiently exercise its audit functions, including by internal non-executive Directors acting as full-time Audit Committee members to endeavor to identify in-house information.
Basic Approaches to the Internal Control System and the Progress of System Development Updated
Isetan Mitsukoshi Holdings Ltd. (hereinafter the “Company”) develops the system below (hereinafter the “Internal Control System”) to ensure the compliance of its business operations as part of its attempts to conduct healthy and transparent group management and maximize corporate value.
“Systems to ensure that business duties as executed by Executive Officers and employees of the Company are in compliance with laws, regulations, and the Articles of Incorporation” (Article 416, Paragraph 1, Item 1 (e) of the Companies Act and Article 112, Paragraph 2, Item 4 of the Companies Act Enforcement Regulations)
(1) The Board of Directors shall regularly hold meetings in accordance with the “Regulations of the Board of Directors,” where they shall resolve mainly the matters required by law to be discussed at the Board of Directors meetings (hereinafter the “Matters Required by Law to Be Discussed”) and supervise the execution of Executive Officers’ duties, preventing actions that are not in compliance with laws, regulations, and the Articles of Incorporation.
(2) The Group General Affairs Department shall establish sections and individuals with jurisdiction over compliance-related matters, maintaining and improving systems for compliance with internal control and laws and regulations.
(3) In order to increase the legal compliance, efficiency, and legitimacy of the Board of Directors’ decision-making and supervision, there shall be Outside Directors that constitute the majority of Directors.
(4) An independent, specialized Internal Audit Division shall be created. Internal audits will be in accordance with the “Regulations of Internal Audits” and be implemented as each division works with the Internal Audit Division to audit the legal compliance and legitimacy of business affairs.
(5) In the case that the Company or the Group commits an act of wrongdoing, the Company shall confirm the nature of the situation in a timely manner and form the “Isetan Mitsukoshi Group Hotline” as a point of contact for internal reports from employees for self-betterment.
“Regulations and other systems involving management of risks of loss to the Company” (Article 112, Paragraph 2, Item 2 of the Companies Act Enforcement Regulations)
(1) Risks shall be prevented from occurring by identifying, evaluating, and analyzing risks that may occur in the course of business operations and using this information to select risks that require prioritized response.
(2) In the case that a risk does occur, company-wide internal management systems that allow for rapid response shall be organized through methods such as the establishment of a countermeasures headquarters and the managing of information.
(3) Relevant regulations shall be established with regards to risk recognition, evaluation, and response and be made well-known and thoroughly understood.
(4) Audits by the Internal Audit Division will attempt to detect risks facing the Company at an early stage and settle them.
(5) Involvement with anti-social forces shall be eliminated and any unjust demands shall be rejected to prevent related damages.
“Systems to ensure the appropriateness of financial reporting” (Article 24-4-4 of the Financial Instruments and Exchange Act)
(1) Company-wide policies and procedures shall be indicated to ensure appropriate financial reporting and conduct that are adequately built and operated.
(2) Appropriate evaluation and response shall be taken regarding the risk of misstatements made on items of importance in financial reports, and systems shall be adequately built and operated to reduce such risk.
(3) The Company shall build and operate methods to identify, understand, and process truthful and impartial information that is then communicated to the appropriate parties in a timely manner.
(4) A financial reporting-related monitoring system shall be built and appropriately operated.
(5) A system shall be built to report internal control issues (deficiencies) understood through the course of monitoring in a timely and appropriate manner.
(6) Adequate support shall be given to information technologies relating to internal controls involved in financial reporting.
“Systems regarding the storage and management of information relating to the execution of business duties of Executive Officers of the Company” (Article 112, Paragraph 2, Item 1 of the Companies Act Enforcement Regulations)
(1) The following documents related to the execution of business duties by Executive Officers shall be recorded, stored, and managed together with related materials for a prescribed period according to the “Document Retention Policies”:
(i) Minutes of the general meeting of shareholders
(ii) Minutes of the meetings of the Board of Directors
(iii) Minutes of the meetings of the Board of Executive Officers
(iv) Financial statements
(v) Copies of documents submitted to government administrative offices, other public agencies, and markets for financial instruments
(vi) Other documents as determined by the Board of Directors
(2) Protection and management systems and other methodologies shall be used to create regulations such as the “Information Retention Policies” for management information, trade secrets, and personal information of customers, etc. that should be kept confidential according to laws and regulations including the Companies Act and the Financial Instruments and Exchange Act, and the compliance of related Directors, Executive Officers, and employees shall result in its safe storage.
“Systems to ensure the efficient performance of Executive Officers’ professional duties at the Company” (Article 112, Paragraph 2, Item 3 of the Companies Act Enforcement Regulations)
(1) The segregation of duties and hierarchy of commands among Executive Officers shall be determined by the Board of Directors.
(2) The Board of Directors shall resolve mainly the Matters Required by Law to Be Discussed and delegate the authority for decision-making on other matters of importance to Executive Officers. Those matters of importance shall be resolved/determined through the deliberation by the Board of Executive Officers, which mainly consists of Executive Officers.
(3) The Company shall adopt an executive officer system to streamline the business execution through clarification of the executive duties of executive officers.
(4) The Company shall adopt a chief officer system, whereby the Chief Officer assigned by the President and CEO (Representative Executive Officer) to be in charge of important areas of operation shall promote control of issues of the entire Group covering multiple divisions.
(5) The Company shall define details of duties, responsibilities and procedures in “Regulations of Duties and Authority”, “Regulations of the Conduct of the Business”, and “Regulations of Decision Making Process for the Group” for execution of duties.
“Systems to ensure the compliance of the business conducted by the corporate groups consisting of the Company and its subsidiaries” (Article 112, Paragraph 2, Item 5 of the Companies Act Enforcement Regulations) The Company shall develop a system to ensure the compliance of the business conducted by each company in the Group, as described below.
1. “Systems relating to reports to the Company on items relating to the execution of business duties by the Directors of the Company’s subsidiaries” (Article 112, Paragraph 2, Item 5 (a) of the Companies Act Enforcement Regulations) With regards to business management, in addition to the introduction of integrated accounting systems and efforts toward uniform management through the widening of target scope, approval and reporting systems shall be managed and monitored as necessary. Additionally, the “Regulations on Group Company Management” shall be used as a base for reporting by Group companies to the Company regarding matters of importance and for establishing rules regarding discussion in pursuit of improved risk management and efficiency across the entire Group.
2. “Regulations regarding the management of risk of loss to subsidiaries of the Company and other systems” (Article 112, Paragraph 2, Item 5 (b) of the Companies Act Enforcement Regulations)
(1) Regarding risk management for the Group, needed items shall be established in the “Basic Regulations on Risk Management,” and a specialized independent division as a division responsible for matters related to risk management shall be created within the Company. The said division shall work with companies in the Group in promoting risk management.
(2) In order to realize comprehensive risk management across the entire Group, a Compliance and Risk Management Promotion Committee shall be created consisting of the Company’s President and CEO (Representative Executive Officer) as the chairman as well as members selected by said chairman.
3. “Systems to ensure the efficient execution of business duties by Directors, etc. of subsidiaries of the Company” (Article 112, Paragraph 2, Item 5 (c) of the Companies Act Enforcement Regulations)
(1) The Company shall optimize its business operations by respecting the independence of the Group companies while also managing their managerial affairs and providing advice and guidance, as well as by dispatching Directors and Audit & Supervisory Board Members as necessary to understand the state of their management.
(2) The Group companies shall receive a resolution of approval by the Company’s Board of Executive Officers or Board of Directors for important items which are deemed to have major effects on their management.
4. “Systems to ensure the compliance of the execution of duties of Directors and employees of subsidiaries of the Company with laws, regulations, and Articles of Incorporation” (Article 112, Paragraph 2, Item 5 (d) of the Companies Act Enforcement Regulations)
(1) The Internal Audit Division shall conduct internal audits of Company Group companies, auditing the legal compliance, appropriateness, etc. of executed business duties.
(2) A compliance guidebook and other documents shall be created and thoroughly disseminated throughout the Group while training regarding appropriateness and legal compliances is held to foster an awareness of compliance.
(3) An “Isetan Mitsukoshi Group Hotline” shall be established as a point of contact for internal reports regarding the Group as a whole, and corrective measures and future prevention measures shall be undertaken from a compliance standpoint with regards to these reports from employees, etc.
“Items relating to Directors and employees to assist with the duties of the Audit Committee of the Company, items relating to these Directors’ and employees’ independence from Executive Officers, and items relating to the ensured efficacy of the Audit Committee’s instructions to these Directors and employees” (Article 112, Paragraph 1, Items 1, 2, and 3 of the Companies Act Enforcement Regulations)
(1) The organization dedicated to assist the duties of the Audit Committee shall be established with assigned staff (hereinafter “Audit Committee Staff”). The Audit Committee may give instructions to those staff regarding items necessary to auditing duties.
(2) Audit Committee Staff shall report on matters requested by the Audit Committee and have authority to collect information necessary for such reporting.
(3) Audit Committee Staff shall be independent from executive operational systems, be attached to the Audit Committee, and carry out their duties as instructed by the Audit Committee. Personnel changes, evaluation, discipline, and other such treatment pertaining to those staff shall require the consent of the Audit Committee.
(4) Audit Committee Staff shall be dispatched as part-time Audit & Supervisory Board Members to the Group companies in order to enhance the audit structure of the entire Group.
1. “Systems for reports to the Audit Committee of the Company by Directors (excluding Directors who are Audit Committee Members), Executive Officers, and employees of the Company as well as systems relating to other reports to the Audit Committee” (Article 112, Paragraph 1, Item 4 (a) of the Companies Act Enforcement Regulations)
(1) The Company shall stipulate in the “Audit Committee Regulations” established by the Board of Directors the items that should be reported by Directors, Executive Officers, and employees to the Audit Committee as requested by the Audit Committee or without delay upon the occurrence of any issue, and Directors, Executive Officers, and employees shall make any necessary report to the Audit Committee. Additionally, the Audit Committee may request reports from Directors, Executive Officers, and employees as necessary even when the previous conditions do not apply.
(2) Directors, Audit & Supervisory Board Members, etc., and employees of a subsidiary, or individuals who have received reports therefrom may report to the Audit Committee of the Company on important matters that may affect the business or performance of such subsidiary.
(3) The Company shall maintain the appropriate operation of the Group-wide internal hotline system, the Isetan Mitsukoshi Group Hotline, and regularly report to the Audit Committee about the operation status thereof, reported matters, and investigation results.
2. “Systems to ensure that individuals who give applicable reports under item a. are not subject to unfavorable treatment because of such reporting” (Article 112, Paragraph 1, Item 5 of the Companies Act Enforcement Regulations) It shall be forbidden to treat individuals who give reports to the Audit Committee in an unfavorable manner because of the applicable reports.
“Items relating to the advance payment of fees resulting from the execution of duties of Audit Committee Members of the Company, or fees resulting from the execution of applicable duties including repayment procedures, or policies involved in the processing of obligations” (Article 112, Paragraph 1, Item 6 of the Companies Act Enforcement Regulations)
When Audit Committee Members bill for prepayment of fees, etc. for the execution of their duties based on Article 404, Paragraph 4 of the Companies Act, fees or obligations related to those billings must be processed unless it is deemed that they are not necessary for the execution of those Audit Committee Members' duties.
“Other systems to ensure the efficient operation of the Company’s Audit Committee’s audits” (Article 112, Paragraph 1, Item 7 of the Companies Act Enforcement Regulations)
(1) The Audit Committee shall regularly hold meetings to exchange opinions with the Representative Executive Officer, Chairman of the Board of Directors, Directors who are not Audit Committee Members, and accounting auditors for the purpose of collecting information, sharing information, and sharing the understanding of issues.
(2) In addition to the Board of Directors, Audit Committee Members appointed by the Audit Committee may attend important meetings in order to understand the decision-making process for important matters as well as the state of executed duties.
(3) The Internal Audit Division shall report Group-wide internal auditing plans, the findings of audits, and the audit status to the Audit Committee and work together with the Audit Committee to exchange information, etc. The Audit Committee may request the Internal Audit Division to carry out an investigation and give any specific instruction to the Internal Audit Division if deemed necessary, including the case where the Audit Committee receives a report on any misconduct or material fact of violation of laws and regulations or the Articles of Incorporation in relation to the execution of the duties of an Executive Officer. Any personnel matter and discipline pertaining to the head of the Internal Audit Division shall require the consent of the Audit Committee.
Revised on April 1, 2021