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Corporate Governance

Basic policy@Corporate governance system

Remuneration for directors and corporate auditors

Status of designing of internal control system

 

Basic policy

In the process of realizing continuous growth and improvement of corporate value, the Company implements various initiatives and organizational design such as appropriately governing UKC group companies as a holding company in order to maintain and improve management efficiency, transparency, and soundness, and builds a relationship of trust with stockholders and other stakeholders.


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Corporate governance system

The Company is a corporation with board of corporate auditors and adopts a corporate governance system based on the collaboration between the outside director and the board of corporate auditors. The Company believes this system leads to sustainable growth of corporate value as well as interests of stakeholders centered on shareholders since the outside director ensures objectivity and rationality against the execution of operations and decision making by inside directors with operational expertise, and corporate directors with four-year term review the appropriateness of the management from middle- and long-term, and objective point of view.

The board of directors consists of as small as five directors including two outside members for prompt managerial judgments, resolves management basic policy of the Company and its Group, legal and other important managerial issues, and supervises the execution of business. The term of directors is limited to one year in order to clarify the management responsibilities. The outside director is registered as an independent officer in accordance with rules on the listing of securities established by Tokyo Stock Exchange.

Under the board of directors, Management Meeting is weekly held and attended by directors, a full-time corporate auditor and group executive officers in order to discuss business and other important issues of the Group.

Board of corporate auditors which consists of three auditors including two outside members receives reports, deliberates and resolves important issues. Corporate auditors attend important meetings such as the board of directors meeting, make efforts to grasp processes of important decisions and execution of business, exchange information with Internal Audit Office and the independent auditing firm, and strictly audit the executions of operations by directors.

The Company establishes Internal Audit Office that executes internal audits. Internal Audit Office consists of seven dedicated staff, who audit in collaboration with corporate auditors whether operations are executed in a lawful, appropriate and rational manner, point out issues, propose improvements, and do follow-ups.

Corporate auditors, internal audit and internal control division closely exchange information and improve effectiveness of audits by corporate auditors, internal audits and internal controls.

The Company makes a contract with Azusa LLP for independent audit pursuant to the Companies Act and Financial Instruments and Exchange Act. Certified public accountants who executed operating audits during this fiscal year are Mr. Junich Obi and Mr. Atsuhiro Tominaga, both designated limited liability and managing partners. Assistants include five certified public accountants and seven other members. There are no interests among the Company, Azusa, and the managing partners required to be specifically stated pursuant to Certified Public Accountants Act.

The Company designates one outside director in order to strengthen supervisory functions against the execution of operations and decision making by board of directors from an objective and neutral point of view, and build an appropriate corporate governance system. Thus, ensuring independence of outside director from the Company is regarded as highly important.

There is no personal, capital, business and/or other relationship between the Company and Mr. Shimazaki, Mr.Iwamoto.

The Company designates two outside corporate auditors in order to ensure soundness and transparency of management through neutral and objective audits conducted by those with abundant knowledge and experiences in various fields. Thus, ensuring independence of outside corporate auditors from the Company is regarded as highly important.

Although there are no clear standards or a policy for independence of outside directors or corporate auditors, the Company specifically judges whether career and relation with the Company of a candidate can ensure enough independence from the management of the Company to conduct his or her duty as an outside officer.

The Company makes every effort to establish a system for outside directors and corporate auditors to communicate with Internal Audit Office and the external auditing firm so that supervisions over and audits of management can fully function.

Corporate Governance System

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Remuneration for directors and corporate auditors

The remuneration system for directors and corporate auditors is closely related to corporate financial results. Remunerations are decided by reflecting corporate financial results on the baseline calculated by multiplying the maximum salary amount of employees by the weighting factor according to each rank. This basic policy was resolved by the board of directors.

Classification Total remuneration
(million yen)
Number of payees
Directors
(Excluding outside)
105 4
Corporate auditors
(Excluding outside)
14 1
Outside officers 21 4

Other than listed above, one outside corporate auditor is unpaid.


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Status of designing of internal control system

The Company regards approaches to CSR (Corporate Social Responsibility) as management basics, positively implement and improve a compliance system, recognize designing and operating of a system for appropriate executions of operation as important management responsibilities. Thus, the Company determines the following basic policy of internal control system and strives to improve and enrich it by ceaseless revisions depending on changes in social, economic and other situations.

1.

A system to ensure that the execution of duties by directors and employees complies with laws and regulations, and the articles of incorporation

The Company established gCode of Conducth for directors and employees to comply with corporate ethics and laws / regulations, take responsible actions, respect trust, have no relationship with antisocial forces, and eternally contribute to the society. Under president and the representative director responsible for management and operation, the Company strives to raise and instill sense of compliance thoroughly.

2.

A system for preservation and management of information regarding the execution of duties by directors

Based on gDocument Management Rulesh, information regarding the execution of duties by directors is appropriately and surely compiled and preserved with easiness to find depending on media for preservation, and managed accessible to directors, corporate auditors, and the external auditing firm if necessary.

3.

A system regarding rules managing risks of loss and others

The Company designs a basic management system against business and other specific risks of loss in order to appropriately recognize and assess various risks of loss which may cause significant impacts on management. Directors and employees, heads of each division, examine risks, take appropriate measures according to impact and probability of risks, and take actions necessary to minimize risks of loss.

4.

A system to ensure the efficiency of the execution of duties by directors

The Company makes a business plan for the fiscal year and a medium-term business plan as objectives for the growth of the Group according to environmental changes. The board of directors meeting is regularly held once a month in order to deliberately make decisions. The Company clarifies authorities and responsibilities of operations according to gSegregation of Duties Rulesh and gRules of Authorityh from the standpoint of the segregation of management and the execution of operations, has the representative director and other directors execute operations for prompt decision making, thus ensures the efficiency of the execution of duties by directors. Under the board of directors, Management Meeting is weekly held and attended by directors, a full-time corporate auditor and other key members in order to discuss business and other important issues of the Group.

5.

A system to ensure the appropriateness of operations of the Group composed of subsidiaries

The Company, as a holding company, performs an appropriate management over subsidiaries including overseas branches based on gGroup Companies Management Rulesh. In addition, corporate auditors and the internal audit division coordinate on operational audits for the subsidiaries and ensure the appropriateness of operations in the subsidiaries.

6.

Matters regarding employees in case corporate auditors request for their assistances and the independence of the employees from directors

The Company designates employees to support corporate auditors upon request from and after consultation with them although currently there is no nominee. The Company ensures the independence of the employees from directors by getting a consent of corporate auditors in advance in designating, transferring, evaluating, and punishing them.

7.

A system for directors and employees to report to corporate auditors, other system regarding reports to corporate auditors and a system to ensure the effectiveness of audits by corporate auditors

a)

Directors and employees promptly give reports to corporate auditors in case they realize legal violations in the execution of operations, violations against articles of incorporation, misconducts, or facts that cause damages to the Company and the group companies in addition to important matters with impacts on operations and performances of the Company and the group companies. Methods of reporting are determined upon discussion between directors and corporate auditors.

b)

The board of corporate auditors if necessary exchanges information with the representative director, shares a sense of importance and usefulness of audits by corporate auditors, thus ensures the effectiveness of audits.


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