At Otsuka Holdings, the Board of Directors, which includes outside directors, supervises the execution of management plans to ensure sustainable growth and raise corporate value over the medium to long term, and fulfills its roles and responsibilities regarding improving profitability and capital efficiency. At Otsuka Holdings, a company with an Audit & Supervisory Board, the Audit & Supervisory Board members, who are independent from the Board of Directors, take the lead in monitoring the execution of operations by the Board of Directors, while coordinating with accounting auditors and the Internal Audit Department. This ensures the Company’s health and maintains a solid corporate governance system that can satisfy society’s trust.
・Directors and the Board of Directors
In accordance with Board regulations, the Board of Directors convenes once a month and holds extraordinary meetings as necessary to make important business decisions and supervise the execution of operations. The total number of Directors is nine, including three outside directors.
・The Audit & Supervisory Board and Its Members
Each Audit & Supervisory Board member attends and expresses opinions in meetings of the Board of Directors and monitors the legality and soundness of management as represented by the directors’ performance of their duties, with audits by the Audit & Supervisory Board at the core of this process. The total number of Audit & Supervisory Board members is four, including three outside members.
・Outside Directors and Outside Audit & Supervisory Board Members
The role of the outside directors is to enhance the governance function of the Board of Directors, which supervises business execution and ensures appropriate decision making, by providing effective advice from a neutral and objective viewpoint, based on broad insights and extensive experience.
The outside Audit & Supervisory Board members conduct audit work from a neutral and objective viewpoint, based on a wealth of experience relating to corporate finance, accounting, legal work, and management. Their role is to strengthen the oversight function while improving management transparency by providing appropriate advice to the Board of Directors.
・Standards for the Selection of Outside Directors and Outside Audit & Supervisory Board Members
With respect to outside directors and outside Audit & Supervisory Board members, the company has set standards to appoint talented persons who have extensive knowledge and experience, and are able to exert their abilities adequately for oversight to the Directors by supervising, monitoring or auditing Directors’ performance of their duties fairly and objectively from a neutral and objective viewpoint. The Company realizes that one criterion for ensuring neutrality and objectivity of outside directors and outside Audit & Supervisory Board members is independence from the management team. Otsuka Holdings has established standards of independence for outside directors in order to ensure their independence in the Corporate Governance Guidelines of the Company. The Company also determines the independency of outside Audit & Supervisory Board members in accordance with the standards.
・Corporate Governance Committee
Otsuka Holdings established a Corporate Governance Committee in February 2017. As an advisory council to the Board of Directors, the Committee discusses the nomination of directors and Audit & Supervisory Board members, director remuneration, and other corporate governance issues, and then reports to the Board of Directors. The Committee consists of the CEO, director in charge of administration, as well as outside directors. The CEO becomes the chair of the Committee.
Matters to be Discussed
- Appointment of directors and Audit & Supervisory Board Members
- Regarding the election and dismissal, etc. of directors and Audit & Supervisory Board Members, the Committee discusses their suitability and fairness and submits reports to the Board of Directors. The Committee shall obtain consent on Audit & Supervisory Board Member candidates from the Audit & Supervisory Board prior to submitting the report to the Board of Directors. The CEO makes the final recommendation of director and Audit & Supervisory Board Member candidates to the Board of Directors.
- Remunerations of directors
- The Committee discusses the remuneration structure and criteria of directors and reports to the Board of Directors
・Evaluating Board of Director Effectiveness
- The Committee deliberates on matters relating to enhancement of the corporate governance, and reports as necessary to the Board of Directors.
Japan’s Corporate Governance Code calls for ensuring that boards of directors operate effectively, and this is a matter of increasing interest to stakeholders.
To analyze and evaluate the effectiveness of its Board of Directors in fiscal 2016, Otsuka Holdings distributed a survey drafted on the advice of outside expert agencies to all directors and Audit & Supervisory Board Members in January and February 2017. Following review by the corporate lawyers, the matter was discussed by the Board of Directors in March.
The survey found that the Otsuka Holdings Board of Directors is functioning in a sufficiently effective and productive manner with regard to the current state of operation and its deliberations. Building on these positive findings, the group is taking steps to further improve the quality of the Board of Directors, going forward.
・Internal Audit Department
The Internal Audit Department, under the direct supervision of the president, regularly conducts audits to verify that operations are being executed appropriately and efficiently regarding the assets and overall affairs of the group. When the need for improvement is indicated, the department issues recommendations and afterward confirms the status of implementation in an effort to optimize the performance of duties. The department also works with Audit & Supervisory Board members and the accounting auditor to share information and otherwise coordinate efforts.
・Internal Control Department
The Internal Control Department handles internal controls relating to the group’s financial reporting. The department formulates regulations, provides training and ensures that employees thoroughly understand operational rules. The department also works in cooperation with the Internal Audit Department to monitor the status of operation, and has established a system in which the assessment of internal controls by executives is conducted reliably.
・System for Ensuring Appropriateness of Operations in Otsuka Holdings and the Corporate Group Consisting of Its Subsidiaries
As a holding company responsible for maximizing the corporate value of the group, Otsuka Holdings has established a system to ensure the appropriateness of operations from a group-wide perspective.
Affiliated companies report matters prescribed in the Affiliated Companies Management Rules to Otsuka Holdings as needed, and the approval of Otsuka Holdings is required. The Company has established a structure for coordination within the Otsuka group.
The Otsuka group has adopted a statutory auditor system and appointed a number of auditors, who work together to audit the directors’ performance of duties and thereby enhance the effectiveness of the audit.
Pursuant to the Internal Audit Rules, Otsuka Holdings’ Internal Audit Department supervises or conducts audits that also include affiliated companies. In this way, the Company has established a cross-divisional risk management system and compliance system to ensure the appropriateness of operations throughout the group.