We pursue initiatives in corporate governance 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.
In the Isetan Mitsukoshi Group, we take steps to build excellent relationships with customers, employees, shareholders, business partners, and local communities as our stakeholders. At the same time, we promote corporate governance reforms by establishing and reinforcing our legal framework, which includes the general meeting of shareholders, the Board of Directors, the Audit & Supervisory Board, and accounting auditors. To ensure that we fulfill our social responsibilities, we also work to increase 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. With the aim of becoming a corporate group that is trusted by all its diverse stakeholders, we take a range of ongoing measures including speeding up management decision-making, strengthening the administrative supervision function, and enhancing internal control systems.
Roles and responsibilities of the Board of Directors
To achieve the sustainable growth of the Group, improve its corporate value over the medium to long term, and fulfill our fiduciary responsibility to shareholders, we are striving to develop an environment that will permit the Board of Directors to fulfill its roles and responsibilities in a highly effective manner. As a measure for achieving these goals, we promote the separation of the supervision and business execution functions and strengthen the decision-making and supervisory functions to be fulfilled by the Board of Directors, while having adopted the Company with Board of Auditors as the institutional design.
Under this environment, in addition to resolutions necessary for procedures and reporting, the Companys Board of the Directors actively arranges opportunities where important managerial issues are discussed from a wide perspective. Those discussions are utilized for preparing the mid- to long-term management plan and the progress of the plan is reported to the Board of Directors in a timely manner so that it is reflected in plan revisions and establishment of the next management plan. Thus, the Company makes efforts to establish the management PDCA cycle with the Board of Directors as the starting point.
Structure of the Board of Directors
To ensure that our Board of Directors fulfills its roles and responsibilities in a highly effective manner, we make sure that it consists of diverse members and have established a system that enables it to fulfill its administrative oversight function. With regard to outside directors, we have been placing emphasis on their diversity since the establishment of the company in 2008, and we invite people with a range of experience and from industries in different areas of specialty to take up the positions. This reflects our intention to have them oversee and advise on the appropriateness of decisions made by the management, in addition to supervising business execution.
Structure of the Board of Directors
A total of nine directors, including four outside directors (two men and two woman) and five directors (five men)
They include three independent outside directors who meet our independence standards.
We disclose our policy on the structure of the Board of Directors, the important concurrent positions held by the directors and Audit Supervisory Board members, and the record of their attendance at meetings of the Board of Directors and the Audit Supervisory Board by describing them in the notice of convocation of the General Shareholders Meeting.
We have voluntarily established the Nomination and Remuneration Committee as an advisory body to the Board of Directors. This committee deliberates overall matters related to nomination, including the nomination of candidates for the President and CEO, his/her successor, officers, and presidents of affiliates, as well as overall matters related to remuneration, including the officer remuneration system, bonuses of directors and executive officers, and the framework for the remuneration of directors and Audit Supervisory Board members. The committee reports its findings made in the deliberations to the Board of Directors.
The Nomination and Remuneration Committee meets at least ten times a year and makes a significant contribution to enhancing governance functions as a key element of corporate governance.
Structure of the Nomination and Remuneration Committee
A total of five members including the President and CEO and outside directors (three independent outside directors and one outside director)
We have this committee chaired by an outside director, thereby ensuring sufficient transparency and fairness.
As members of an independent body that has a mandate from its shareholders, the Audit Supervisory Board members oversee the directors in the performance of their duties, thereby helping achieve the sustainable growth of the Group and the creation of corporate value over the medium to long term and establish a sound corporate governance system that meets the expectations of society. In addition, they regularly exchange opinions with the representative directors and accounting auditors, and share information on internal audit results and other matters with the Internal Audit Division, within a system intended to ensure effective audits.
The outside Audit Supervisory Board members express frank opinions, recognizing that they are expected to express opinions on audits objectively from an independent, neutral perspective. Full-time Audit Supervisory Board members strive to improve the audit environment and collect internal information proactively and monitor and examine the status of the establishment and operation of the internal control system on a daily basis, based on the characteristics of their positions as full-time members. In addition, the Audit Supervisory Board meets regularly with outside directors and creates other opportunities to exchange opinions with other non-executive officers concerning issues to be addressed by the company, the risks surrounding it, important audit issues, and other matters. They thus strive to exchange information and share recognition with other non-executive officers and deepen relationships of trust with them.
Board by describing them in the notice of convocation of the General Shareholders Meeting.
Structure of the Audit Supervisory Board
A total of five members, including three outside members and two full-time members
They include two independent outside members who meet our independence standards.
In nominating candidates for directors and Audit Supervisory Board members, we consider the breadth of knowledge, ethical standards, and depth of experience of potential candidates, in addition to their eligibility in light of laws and regulations.
|Outside Directors||Michiko Kuboyama(Independent Officer)|
|Masami Iijima(Independent Officer)|
|Miwako Doi(Independent Officer)|
|Audit Supervisory Board Members||Yoshio Takino|
|Outside Directors||Koichi Miyata|
|Hirotaka Fujiwara(Independent Officer)|
|Takeo Hirata(Independent Officer)|
We define the upper age limits of incumbent officers and their maximum terms of office on a position-by-position basis in accordance with our Rules on Upper Age Limits of Incumbent Officers. We use these limits as the prior conditions for the nomination of officers so that they will be replaced appropriately.
Based on this, we have made it a requirement that nominations of officers, including the appointment and dismissal of the CEO, should be deliberated by the Nomination and Remuneration Committee to ensure the transparency and fairness of the process. Specifically, we take the following initiatives.
We position the judgments regarding the appointment of the CEO and whether to allow the CEO to remain in office as the most important agenda items of the Nomination and Remuneration Committee and focus our efforts on them
We are proactive in creating opportunities for outside directors to monitor candidates after the Nomination and Remuneration Committee report, and we share the following details on a regular basis.
We have also systematically introduced training programs. These include the Business Leader Program, which is given to selected managers, and the Business Executive Program, which is given to people who have been appointed as executive officers. We invest sufficient time and resources to develop candidates for the next CEO.
We consider the breadth of knowledge, ethical standards, and depth of experience of potential candidates, in addition to their eligibility in light of laws and regulations.
We appoint human resources from different fields and industries to manage the company in a balanced manner by absorbing a wide range of opinions provided from objective, specialist perspectives. We mainly invite people with sufficient practical experience in the business world because we expect outside directors to oversee and advise on the appropriateness of decisions made by the management, in addition to supervising business execution.
We appoint human resources from different fields and industries to ensure supervision from a neutral, objective perspective. In particular, we expect outside Audit Supervisory Board members to check the appropriateness of the decision-making process by the management and the contents of the decisions from legal and accounting perspectives. We therefore invite people with a wealth of knowledge and experience in each field.
We have established our own Independence Standards of Outside Officers of Isetan Mitsukoshi Holdings as the judgment criteria for the independence of outside directors and outside Audit Supervisory Board members who will be appointed as independent officers. We appoint five outside officers (three outside directors and two outside Audit Supervisory Board members) who fall under none of the following categories as independent officers.
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, 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 and Audit & Supervisory Board Members).
(1) Promotion of common interests between shareholders and executives
(2) Expansion of incentive effects to improve financial results and shareholder value
(3) Provision of remuneration at a level by no means inferior to competing companies (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” established by the resolution of the Board of Directors 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 Nomination and Remuneration Committee, an advisory body to the Board of Directors comprising five committee members, four of whom are Outside Directors, and chaired by an Outside Director.
Under the Director remuneration system of the Company, executive remuneration is composed of three elements: monthly “basic remuneration” along with “bonuses” and “remuneration-type stock options” which are paid or granted annually. For Directors concurrently serving as executive officers, including the President & CEO, 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, stock options shall also account for 25% of the total annual remuneration for each individual, with a view toward promoting shareholdings by executives and their common interests with the shareholders. (Bonuses shall not be paid to the Chairman, Outside Directors or Audit & Supervisory Board Members, while stock options shall not be granted to Outside Directors or Audit & Supervisory Board Members.)
For Directors (excluding those who are not concurrently serving as executive officers), performance-linked bonus as described hereunder has been introduced as a strong motivation towards the achievement of goals based on the remuneration principles.
Base amount of bonus = Basic remuneration x 6 (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)
 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 executives 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.
 Payout ratio (personal qualitative evaluation)
The payout ratio of qualitative evaluation shall be subject to a seven-grade evaluation (between 0.00 (0%) at minimum and 2.00 (200%) at maximum) by the President and CEO 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 at the beginning of each fiscal year.
 Allocation ratio (weight)
The allocation ratio (weight) between the degree of achievement against the corporate performance goal and the personal qualitative evaluation shall also be determined for each fiscal year following a review of its positioning.
< Remuneration-type Stock Options>
Stock options shall be granted to Directors (excluding Outside Directors) as follows, based on the remuneration-type stock options scheme involving an exercise price set at one yen, with a view toward promoting shareholdings by executives and enhancing awareness towards improving shareholder value over the long-term.
Maximum number of stock options to be granted (each stock option being equivalent to 100 shares of the Company) = Basic remuneration x 6 (months) / Reference price of a share of the Company (*)
* Reference share price = “Average price of share over the three months up to the month prior to the resolution on issuance” or “the price of a share on the day four days prior to the date of the resolution on issuance (if no closing price is quoted on such day, the closing price of the immediately preceding business day)” at the Tokyo Stock Exchange, whichever is higher.
We employ an executive officer system to ensure prompt business execution. General managers of divisions that are important for achieving the management goals of the Group are appointed as executive officers, and a significant portion of the authority has been transferred to them by clarifying their executive responsibilities.
In the current fiscal year, we introduced the Chief Officer System to powerfully promote the Medium-Term Management Plan and improve our earnings strength as quickly as possible. We have clarified the administrative operations of the chief officers to strengthen their cross-divisional coordination functions
We have the following chief officers.
CEO : Chief Executive Officer
CMO : Chief Merchandsing Officer
CFO : Chief Financial Officer
CAO : Chief Administrative Officer
The Chief Officer Committee is convened by the President and CEO and meets once a week, in principle. It is a body for resolving and deliberating on matters of importance related to the Group’s business execution that are equivalent to the agenda items of the Board of Directors in a timely and flexible manner.
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 Directors and employees of the Company are in compliance with laws, regulations, and the Articles of Incorporation” (Article 362, Paragraph 4, Item 6 of the Companies Act and Article 100, Paragraph 1, Item 4 of the Companies Act Enforcement Regulations)
“Regulations and other systems involving management of risks of loss to the Company” (Article 100, Paragraph 1, Item 2 of the Companies Act Enforcement Regulations)
“Systems to ensure the appropriateness of financial reporting” (Article 24-4-4 of the Financial Instruments and Exchange Act)
“Systems regarding the storage and management of information relating to the execution of business duties of Directors at the Company” (Article 100, Paragraph 1, Item 1 of the Companies Act Enforcement Regulations)
“Systems to ensure the efficient performance of Directors’ professional duties at the Company” (Article 100, Paragraph 1, Item 3 of the Companies Act Enforcement Regulations)
“Systems to ensure the compliance of the business conducted by the Company and the corporate groups consisting of their parent companies and subsidiaries” (Article 100, Paragraph 1, 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.
“Items relating to applicable employees in the case that Audit & Supervisory Board Members of a company with Audit & Supervisory Board Members request the placement of employees to assist with their duties, items relating to these employees’ independence from Directors, and items relating to the ensured efficacy of Audit & Supervisory Board Members’ instructions to these employees” (Article 100, Paragraph 3, Items 1-3 of the Companies Act Enforcement Regulations)
“Other systems to ensure the efficient operation of Audit & Supervisory Board Members’ audits” (Article 100, Paragraph 3, Item 7 of the Revised Enforcement Regulations)