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Corporate Governance

Fuji Electric is reinforcing its corporate governance toward the betterment of the management transparency and the oversight function. Furthermore, the Company has prepared its response measures to Japan’s Corporate Governance Code, which was instituted by the Tokyo Stock Exchange in June 2015. These measures have been compiled into the Company’s Corporate Governance Report.

 

Corporate Governance Framework

Fuji Electric’s corporate governance framework consists of a Board of Directors, which performs the functions of management supervision and making important decisions, and Auditors and the Board of Auditors, which are in charge of the management audit function.

Comprising eight Directors (including three Outside Directors) and five Auditors (including three Outside Auditors), the governance framework is designed to reinforce the Company’s management supervision and audit functions. To this end, the system actively calls on Outside Officers.

Fuji Electric uses the executive officer system to strengthen business execution functions.

Basic Policies

1. Protect shareholder rights and ensure fair treatment

2. Conduct appropriate collaboration with non-shareholder stakeholders

3. Guarantee proper information disclosure and ensure transparency

4. Carry out duties of the Board of Directors

5. Engage in communication with shareholders

 

Corporate Governance Framework

Directors and Board of Directors

The Board of Directors conducts decision making and oversight of the management of Fuji Electric and the execution of its important business. Fuji Electric proactively appoints Outside Directors with a view to strengthening the management supervisory function from an objective perspective and maintaining the validity and propriety of business decisions.

Auditors and Board of Auditors

The Board of Auditors inspects Fuji Electric’s management and business execution. In addition to our proactive appointment of Outside Auditors, auditing functions are enhanced by having Standing Auditors attend the Executive Committee.

President, Executive Officers and Executive Committee

The president has ultimate responsibility for execution of business and makes decisions on matters of business execution other than those decided upon by the Board of Directors. The Executive Committee is composed of Executive Officers and Standing Auditors and functions as a consulting system for the president. It fulfills such functions as deliberation of important matters and makes reports to enable monitoring of the status of management. Executive Officers control the execution of the business of which they are in charge.

 

Policies and procedures for nomination of Director and Auditor candidates by the Board of Directors

Nomination policies for Standing Directors dictate that candidates should be selected based on whether or not they possess the talents, experience, and other qualities necessary for implementing the Company’s management policies. Outside Director candidates are to be selected based on a comprehensive evaluation of the candidate’s insight and experience, to determine their ability to conduct multifaceted management decisions, as well as of their understanding with regard to Fuji Electric’s management and their independence from the Company. This approach is adopted to facilitate the reinforcement of Fuji Electric’s management supervision functions and ensure the appropriateness of important management decisions. For Standing Auditors, candidates are selected based on consideration of how versed they are on all aspects of Fuji Electric’s business operations and whether or not they possess the necessary specialized insight and experience to perform the duties of an Auditor. Outside Auditor candidates are to be selected based on a comprehensive evaluation of the candidate’s insight and experience, to determine their ability to make multifaceted management decisions, as well as of their understanding with regard to Fuji Electric’s management and their independence from the Company, and selected individuals should possess the specialized knowledge required for conducting audits. This approach is adopted to facilitate the reinforcement of Fuji Electric’s management audit functions and ensure that Outside Auditors can provide advice and instructions that are useful to management decisions.

When selecting Director and Auditor candidates, the Board of Directors nominates Director candidates in accordance with the Rules of the Board of Directors and nominates Auditor candidates after receiving consent from the Board of Auditors.

Establishment of Executive Committee

Internal regulations have been formulated defining the duties and authorities of executive officers and employees, and the Executive Committee has been established as an organization meant to play a central role in implementing these regulations while also functioning as a consulting system for the President.

The Executive Committee is membered by executive officers, and Standing Auditors of the Company frequently attended meetings of this committee.

Outside Officers

Outside Officers fulfill the role of providing management supervision and management audits from an objective perspective. At the same time, they offer useful advice and instructions from various perspectives on all areas of Fuji Electric’s management, helping to ensure the appropriateness of management decisions.

After their appointment, Outside Officers participate in internal technology presentations and business site inspections to deepen their understanding of Fuji Electric’s management. In fiscal 2016, business site inspections took place at three locations: the Suzuka Factory, Kawasaki Factory, and Mie Factory. During these inspections, Outside Officers were given explanations of the factories after which they toured the actual production floors and engaged in discussions with factory managers.

In fiscal 2016, the rates of attendance of Outside Officers at meetings of the Board of Directors (which were held 13 times) and meetings of the Board of Auditors (which were held 10 times) were 98% and 95%, respectively.


Outside Directors (Attendance at Board of Directors)※1


Toshihito Tamba (10/10)

Mr. Tamba offers useful advice and opinions on all areas of Fuji Electric’s management based on his professional standpoint and considerable insight as a manager of listed companies.


Naoomi Tachikawa (10/10)

Mr. Tachikawa offers useful advice and opinions on all areas of Fuji Electric’s management based on his professional standpoint and considerable insight as a manager of listed companies.


Yoshitsugu Hayashi (Appointed in June 2017)

Mr. Hayashi is expected to offer useful advice and opinions on all areas of Fuji Electric’s management based on his professional standpoint and considerable insight as an environmental engineer.

 

Outside Auditors (Attendance at Board of Directors / Board of Auditors)※1


Yoshiki Sato (10/13 / 8/10)

Mr. Sato offers useful advice and opinions concerning the business management of Fuji Electric in general, based on his extensive experience and considerable insight as a manager at financial institutions.


Akiko Kimura (13/13 / 10/10)

Ms. Kimura offers useful advice and opinions concerning the business management of Fuji Electric in general, based on her expert knowledge as an attorney.


Tetsuo Hiramatsu (10/10 / 7/7)

Mr. Hiramatsu offers useful advice and opinions on all areas of Fuji Electric’s management based on his professional standpoint and considerable insight as an individual with experience managing financial institutions.


*1 Ratios below the names represent the number of meetings of the Board of Directors and the Board of Auditors over the period from April 1, 2016, to March 31, 2017, attended by that officer.

Notification has been submitted that these Outside Officers are Independent Directors / Auditors as required by financial instruments exchanges.

Independence Standards for Independent Officers

To complement the independence standards defined by the Tokyo Stock Exchange and other domestic financial instruments exchanges, the Company has established its own standards stipulating that individuals not applicable under any of the following categories will be judged as sufficiently independent from the Company.


(1) Major shareholder

A major shareholder of the Company (a shareholder possessing 10% or more of the Company’s voting rights) or a person involved in operation of an entity that is a major shareholder of the Company

(2) Major business partner

A business partner or person involved in operation of a business partner (including attorneys, certified public accountants, tax accounts, and other consultants; law offices; and audit, tax accounting, and other consulting firms) with transactions with the Company that account for more than 2% of the total consolidated net sales of the business partner or the Company in each of the prior three fiscal years

(3) A main bank or other financial institution

A financial institution, major creditor, or a person involved in operation of such an entity on which the Company is dependent for fund procurement to a degree that makes the entity indispensable to the Company

(4) The Accounting Auditor

The certified public accountant that is the Company’s Accounting Auditor or an employee of the audit firm that is the Company’s Accounting Auditor

(5) A donation recipient

An a person involved in operation of an entity that receives donations that have exceeded \10 million and have accounted for more than 2% of the entity’s total income in each of the prior three fiscal years

Executive Remuneration

Fuji Electric has established a remuneration system and remuneration levels for Directors and Auditors that are deemed appropriate for their respective duties and in accordance with the shareholders’ mandate, giving due consideration to the aims of securing and maintaining competent personnel and providing incentives for the improvement of business performance.


Standing Directors

As Standing Directors are charged with the responsibility of improving consolidated operating performance for each fiscal year and realizing improvements in corporate value over the medium-to-long-term, their remuneration is structured and managed in two categories: base remuneration and performance linked remuneration.


・Base Remuneration

Base remuneration is a predetermined amount that is paid to executives according to their position. A portion of the base remuneration is contributed to the Director shareholding association to share the economic interests of shareholders and as an incentive to make management aware of share value.


・Performance-Linked Remuneration

Performance-linked remuneration is paid only in instances in which dividends are paid to all shareholders from retained earnings. The total amount of executive performance remuneration

 

Outside Directors and Auditors

Remuneration for Outside Directors and Auditors is paid as a predetermined amount according to their rank, as Outside Directors and Auditors are charged with the duty of supervising or auditing the execution of duties across Fuji Electric. Outside Directors and Auditors may acquire stock in the Company at their own discretion.


Total Amount of Remuneration Paid to Directors and Auditors (Fiscal 2016)

  Number of recipientsAmount of payment
(Millions of yen)
Directors
(of which, Outside Directors)
13
(5)
269
(22)

Auditors

 (of which Outside Auditors)

7
(4)
80
(22)

Notes

  1. The amount paid to Directors does not include performance-linked remuneration for fiscal 2016 .

  2. In addition to the above, \86 million was paid as performance-linked remuneration for fiscal 2015 to Standing Directors (six recipients).

  3. In addition to the above payment, the Company paid \17 million to employees who concurrently assumed the office of Director (2 employees) as salary for employees.

Clarification of policies for deciding officer remuneration

To ensure the objectivity and transparency of the remuneration of members of management, the Company has established the Policy for Deciding Remuneration Directors and Auditors (Japanese only) through the resolution of the Board of Directors and based on a consensus with the Board of Auditors. In accordance with this policy, officer remuneration is paid within the limits approved at the 131th Ordinary General Meeting of Shareholders, which was held on June 26, 2007, and the 137th Ordinary General Meeting of Shareholders, which was held on June 25, 2013.

Internal Control System

The Fuji Electric Board of Directors determines basic policies concerning the establishment of an internal control system as stipulated in the Companies Act of Japan, and the Company discloses those policies. In conjunction with the revision to the Companies Act, in fiscal 2016, Fuji Electric began disclosing information on the implementation of its internal control system, thereby taking steps to respond promptly and accurately to the demands placed upon the Company by society. Such information included descriptions of provisions for ensuring that Directors and employees perform their duties in a matter that is compliant with laws and the articles of incorporation.

Interactions with Investors

The Company takes proactive steps to interact with shareholders and other investors. The feedback gained through these interactions is relayed to the Board of Directors, Executive Officers, and relevant divisions so that this information may be shared and reflected in corporate activities as necessary.


Activities for Interacting with Investors (Fiscal 2016)

Private shareholders

and investors

・Factory tours for shareholders: 4 (participants: 365)
・Company briefings for private shareholders: 7 (participants: 237)

Auditors

institutional investors

? Financial results briefings: 4
  Management plan briefings: 1
  Business strategy briefings: 1 ( Total participants in 6 briefings: 467)
? Small meetings※2: 2 (participants: 12)
? Factory tours: 1 (participants: 17)

*2 Meetings held with a small number of analysts and other

Investor Relations

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