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.
Specifically, we have clearly stipulated the benchmarks for matters to be submitted to the Board of Directors for discussion and determination in our internal rules (including the Regulations of the Board of Directors and Regulations of Decision Making Process for the Group). At the same time, we review the benchmarks and delegate the authority to business execution organizations as necessary within the scope of a Company with a Board of Auditors to improve the mobility of business management. For further clarification of the division between business execution and supervision, our Board of Directors is chaired by the Chairman and Representative Director, who is not an executive officer, instead of the President and CEO.
In this environment, the Board of Directors is proactive in creating opportunities for discussing important management
issues from a broad perspective, instead of only discussing matters for resolution and reports to fulfill procedural requirements. The directors ensure that these discussions lead to the formulation of a medium- to long-term management plan,
while the status of the progress of the plan is reported to the Board of Directors on a timely basis and reflected in corrections of the plan and the formulation of the next plan. With these and other measures, we are striving to establish a PDCA cycle of management, with the Board of Directors as the starting point.
We are also striving to fulfill our accountability to our shareholders, investors, and other stakeholders by disclosing
information about our management plan and the status of its progress at the General Shareholders’ Meeting, biannual
results briefing, our official website, and others.
Structure of the Board of Directors
To ensure that the Board of Directors fulfills its roles and responsibilities in a highly effective manner, the Company has
prepared a system that enables the Board to secure diversity in its composition and perform its administrative oversight
function sufficiently. With regard to outside directors, the Company has invited individuals from industries where experience and areas of specialty vary since its establishment in 2008, taking their diversity into consideration, based on the idea of asking them to oversee and give advice on the appropriateness of decisions made by the management, in addition to supervising business execution.
Structure of the Board of Directors *12th Term (June 2019 to the present)
A total of nine directors, including four outside directors (two men and two women) and five directors (five men)
They include three independent outside directors who satisfy the Company’s criteria for independence.
The Company has established the Nomination and Remuneration Committee as a voluntary advisory body to the Board of Directors. This Committee deliberates on matters related to nomination, including the nomination of candidates for the President and CEO, his/her successor, officers, the presidents of the Company’s affiliates, and matters related to remuneration, including the officer remuneration system, bonuses for directors and executive officers, and the overall framework for the remuneration of directors and Audit & Supervisory Board members.
The Nomination and Remuneration Committee meets at least ten times a year. The Committee contributes significantly to enhancing governance functions as a key element of corporate governance.
Structure of the Nomination and Remuneration Committee *12th term (June 2019 to the present)
A total of five members, including the President and CEO and four outside directors (three independent outside directors and one outside director)
The Company has secured sufficient transparency and fairness in the Committee by appointing an outside director to the position of chairman.
Measures for stimulating deliberations by the Board of Directors
To stimulate deliberations by the Board of Directors, the Company is providing explanations to all outside directors individually before each Board meeting.
Furthermore, to secure sufficient time for discussions, the Company allocates two hours and 30 minutes for each meeting of the Board of Directors. The Company is encouraging directors to exchange opinions not only on resolutions and
reports required for decision-making procedures but also a wide range of agenda items, including management issues
for the Group, courses it should take in the medium and long terms and progress in its main businesses, in a manner that is free, vigorous and constructive.
Analyses and evaluations of the effectiveness of the Board of Directors
The Company evaluates the effectiveness of the Board of Directors by incorporating objective, quantitative methods including questionnaire surveys on all internal and outside directors and Audit & Supervisory Board members. The Company confirms the guaranteed effectiveness of the Board of Directors from a wide range of viewpoints including not only the structure and management of the Board but also its institutional design, nomination and remuneration. At the same time, the Company proposes measures for improving variety of issues surrounding the Board of Directors, which has been identified through the evaluation process, and implements those measures continuously to strengthen the functions of the Board.
These initiatives have produced specific effects, including an increase in the number of independent outside directors
(from June 2018) and improvements toward the timely, effective setting of agenda items. Furthermore, the Company has
determined that its governance became more transparent as a result of the greater disclosure of information related to matters that include methods for appointing and dismissing the CEO, and for implementing the succession plan and policies for nominating officers.
Policy and procedures on the nomination of candidates for directors and Audit & Supervisory Board members
As members of an independent body that has a mandate from its shareholders, Audit & Supervisory Board members oversee business execution by directors to achieve the Group’s sustained growth, realize Group value over the medium to long term and contribute to establishing a sound corporate governance system that can fulfill social trust. Furthermore, Audit & Supervisory Board members build a system for securing the effectiveness of audits by regularly exchanging opinions with representative directors and accounting auditors and sharing information on matters including audit results with the Internal Audit Division.
Recognizing certain expectations for the expression of objective opinions on audits from their independent, neutral positions, Outside Audit & Supervisory Board members convey their opinions frankly. Full-time Audit & Supervisory Board
members make constructive efforts to improve the auditing environment and collect internal information, taking the characteristics of full-timers into consideration. They also monitor and examine the establishment and management of internal control systems on a daily basis. Audit & Supervisory Board members also work to help non-executive officers exchange information and share awareness, and deepen relationships of mutual trust by exchanging opinions on matters, such as issues the Company should address and related risks, with outside directors at regular meetings and on other occasions.
Structure of the Audit & Supervisory Board *12th term (June 2019 to the present)
A total of five members, including three outside members and two full-time members
They include two independent outside members who satisfy the Company’s criteria for independence.
|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)