Corporate Governance

Basic Stance on Corporate Governance

Guided by the slogan "Challenging Tomorrow's Changes" and the CTC Group Philosophy, which sets out our mission of leveraging IT's potential to change future for the Global Good, we are working to reinforce corporate governance in order to enhance management transparency and fairness as part of our efforts to maximize the Group's corporate value.

Corporate Governance Structure

CTC's corporate governance structure is as shown in the following diagram.

Overview of Corporate Governance Structure (as of )

Organization type Board of Corporate Auditors
Chairman of the Board of Directors President & CEO
Number of directors
(of which outside directors)
6 (2)
Term of duty for directors One year
Number of corporate auditors
(of which outside auditors)
4 (3)
Number of independent officers Outside directors: 2, Outside auditors: 2
Corporate Governance Framework

Corporate Governance Framework

Numbers of meetings held by major conference bodies and the status of attendance by outside directors and outside auditors (FY2018)

Number of board of directors meetings held 18 times
Number of board of oorporate auditors meetings held 14 times
Ratio of outside directors who attended board of directors meetings 100%
Ratio of outside auditors who attended board of directors meetings 100%
Ratio of outside auditors who attended board of corporate auditors meetings 100%

Board of Directors & Board of Corporate Auditors

To enhance the supervisory function of the Board of Directors and improve the transparency of the decision-making process, CTC has a Nomination Committee, Remuneration Committee, and Governance Committee in place as non-mandatory advisory bodies under the Board of Directors. Each committee consists of four members: an executive director, a chairperson, and three non-executive directors, including two independent directors. An auditor, who is also an independent officer, participates in each committee as an observer.

CTC has established an information sharing meeting for non-executive directors and an auditors-non-executive directors liaison meeting to enable the directors and auditors to fully implement the management oversight and auditing functions. In this way, CTC aims to enhance deliberations at the Board of Directors and ensures cooperation between the auditors and non-executive directors.

Outside Directors and Auditors Nominations

CTC has not clearly defined its standards or policies on the independence of outside directors and outside auditors, and elects outside directors and outside auditors according to the independence standards of the financial instruments exchange. In addition to the independence standards, the outside directors are elected according to whether they can view corporate management from an objective and expert perspective so that the Board of Directors can make decisions and supervise management appropriately from diverse perspectives. CTC elects outside auditors who can implement audits from an objective perspective based on a wealth of knowledge and experience in their areas of expertise to ensure the soundness and transparency of management.

Category Name Independent officer Reason for selection
Directors Naoko Iwasaki Yes does not have experience in being directly engaged in corporate management, but she possesses attributes such as a strong ethical perspective and fairness as a director as well as a high level of expertise and abundant knowledge as an academic. CTC appointed Ms. Iwasaki as an outside director, believing that she is necessary for its management. CTC also appointed Ms. Iwasaki as an independent director, because she is in an independent position with no risk of a conflict of interest with general shareholders.
Aya Motomura Yes does not have experience in being directly engaged in corporate management, but she possesses attributes such as a strong ethical perspective and fairness as a director as well as a high level of expertise as an attorney and abundant knowledge on corporate legal affairs. CTC appointed Ms. Motomura as an outside director, believing she is necessary for its management. CTC also appointed Ms. Motomura as an independent director, because she is in an independent position with no risk of a conflict of interest with general shareders.
Auditors Toshiaki Tada Yes Mr. Tada has been supplying the Board of Directors and the Board of Corporate Auditors with his opinions and comments based on his high degree of specialization as a lawyer. At an ordinary general meeting of shareholders held in , CTC appointed Mr. Tada as an outside auditor based on its assessment that such service proves he could properly audit job execution by its directors. CTC also appointed Mr. Tada as an independent director, because he is in an independent position with no risk of a conflict of interest with general shareholders.
Yasuyuki Harada - has been involved in management at ITOCHU Corporation and has gained a wide range of knowledge during his many years of service at ITOCHU. Believing that he will be able to properly audit the directors' execution of their duties, CTC appointed him as an outside auditor at the annual general meeting of shareholders held in .
Katsuhiko Hara Yes possesses a high level of expertise in finance and accounting as a certified public accountant. CTC thus believes that he will be able to audit the directors' execution of their duties properly and appointed him as an outside auditor at the Annual General Meeting of Shareholders held in . CTC also appointed Mr. Hara as an independent officer, because he is in an independent position with no risk of a conflict of interest with general shareholders.

*CIO(Chief Information Officer)
A position of responsibility within a company that involves formulation and execution of informatization strategies that match the company's management philosophy.

Director remuneration and calculation method

Directors' remuneration is paid according to the Director Remuneration System, which was established in consideration of the opinions from the Remuneration Committee mainly comprising of outside auditors and directors.
CTC decides monetary remuneration for directors of no more than 640 million yen per annum, monetary remuneration for corporate auditors of no more than 100 million yen per annum and stock-based remuneration for directors of no more than 180 million yen for the three subject fiscal years.
Remuneration comprises standard remuneration, which is fixed payments, bonuses, which are performance-linked cash compensation, and performance-linked stock-based remuneration* (paid upon retirement).
The amount of auditor remuneration is determined for each auditor based on a discussion among auditors.
Auditors and part-time directors, including outside directors are not paid performance-based bonuses.

*Performance-linked stock-based remuneration plan: CTC introduced the plan for its directors and executive officers (excluding part-time directors, outside directors and domestic non-residents) in . The plan replaces part of the amount calculated by the formula of the previous "performance-linked bonus" with stock, and is aimed at raising awareness of contributing to the improvement of medium- to long-term operating results and corporate value by further clarifying the link between directors' remuneration and CTC's operating results and equity value, as well as by directors sharing not only the advantages of rises in the share price with shareholders but also the risk of drops in the share price.

Calculation method of performance-linked stock-based remuneration and performance-linked cash remuneration (bonus)

The total fund amount of performance-linked remuneration is calculated by multiplying the net profit attributable to CTC's shareholders of the published management plan by the predetermined ratio of the total fund amount of performance-linked remuneration, the target achievement rate for the relevant fiscal year and the year-on-year growth rate. The total amount of performancelinked bonuses and performance-linked stock-based remuneration of each director is calculated according to the individual performance evaluation based on the director evaluation system from the total fund amount of performance-linked evaluation. The performance-linked bonuses and performance-linked stock-based remuneration amounts are determined by multiplying the above by the proportional division ratio.

Calculation method of standard remuneration (fixed payments)

TDetermined by using the predetermined standard remuneration table based on consideration of full and part-time work, responsibilities and individual evaluation.

Remuneration for Corporate Officers (as of the year ended March 2018)

Directors: 8 people
(excluding outside directors)
Basic remuneration 195 million yen
Bonuses 111 million yen
Auditors: 1 people
(excluding outside auditors)
Basic remuneration 25 million yen
Outside Auditors and Directors: 5 people Basic remuneration 54 million yen

Special Circumstances That Could Have a Significant Impact on Corporate Governance

ITOCHU Corporation, the parent company, holds 58.26% of CTC's voting rights. An employee of the parent company is a director of CTC mainly to share management information and expertise. CTC, however, aims to expand results while managing and strengthening its autonomy in business operations and maintains its independence.

Internal Control System

At a meeting held on , the Board of Directors resolved to adopt a Basic Policy on the Internal Control System, which describes systems to ensure the directors perform their duties in accordance with legal requirements, the Articles of Incorporation and systems to ensure that the business activities of CTC and those of the corporate group, consisting of CTC and its subsidiaries, are conducted appropriately.

Systems to Ensure Appropriate Financial Reporting

CTC has established accounting regulations, sales administration regulations, procurement administration regulations, and other internal company rules. CTC has a chief financial officer tasked with enhancing a system to ensure proper financial reporting that complies with accounting standards and other relevant laws and regulations. In addition, CTC has the Internal Control Committee in place, which is responsible for regularly evaluating the development and operation of internal systems to ensure appropriate financial reporting, thereby improving the internal systems.

Risk management

CTC recognizes risk management as an important management issue. In addition to establishing a Risk Management Committee and major core departments to handle a variety of risks (including compliance risks, information security and information system risks, disaster risks, fund management risks caused by currency exchange rates and investment risks), we also work to handle risks both comprehensively and on an individual basis by establishing the necessary risk management frameworks and management techniques, such as in the establishment of management regulations, business continuity plans, investment standards, credit limits, and reporting and monitoring frameworks. We also conduct regular reviews regarding the effectiveness of these management systems.

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