Independence Criteria for Outside Directors and Auditors
The Company hereby establishes the “Independence Criteria for Outside Directors and Auditors” to clearly set the criteria for independence to be fulfilled by its outside Directors1 and outside Audit and Supervisory Board Members2 (collectively, “Outside Directors and Auditors”).
Independence Criteria for Outside Directors and Auditors
The Outside Directors and Auditors shall not fall under any of the following:
- A person who is, or was within the past ten years, a Director (excluding an Outside Director), Audit and Supervisory Board Member (excluding an Outside Audit and Supervisory Board Member) or employee of the Company and its consolidated subsidiaries (collectively, the “Group”);
- A person who executes or executed business4 within the past three years at a major business partner3 of the Group or at a company or entity of which the Group is a major business partner;
- A person who is, or was within the past three years, a major shareholder5 of the Company (in the case where such major shareholder is a corporation, a person who executes or executed business of such corporation) or a person who executes or executed business of a company or entity of which the Group is a major shareholder;
- A lawyer, certified public accountant, certified tax accountant or other consultant who receives or received in any of the past three fiscal years from the Group cash and/or other property worth more than 10 million yen annually in addition to director compensation;
- A person who is, or was within the past three years, an employee, partner or associate of a law firm, auditing firm, tax accountant firm or other consulting company of which the Group is a major client;
- A person who receives or received in any of the past three fiscal years donations exceeding 10 million yen annually from the Group, or a person who executes business of a corporation or organization which receives or received in any of the past three fiscal years such donations; or
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A spouse or a relative within the second degree of kinship of any of the following individuals:
- A person who is, or was within the past three years, a Director, Audit and Supervisory Board Member or important employee6 of the Group; or
- A person who falls under the above b), c), d), e) or f) (if such person is an employee, this applies only to an important employee).
- Outside Director refers to an outside director as set forth under Article 2, Paragraph 15 of the Companies Act.
- Outside Audit and Supervisory Board Member refers to an outside auditor as set forth under Article 2, Paragraph 16 of the Companies Act.
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“Major business partner” means:
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in any of the past three fiscal years,
ⅰ) a business counterparty with whom the Group performed transactions (sales or purchase) of an amount exceeding 2% of the annual consolidated net sales of the Group or
ⅱ) a business counterparty whose group performed with the Group transactions (sales or purchase) of an amount exceeding the higher of 100 million yen or 2% of the annual consolidated net sales of such group; or
- a financial institution group from which the Group borrows funds, if the outstanding amount of borrowings from such financial institution group exceeds 2% of the Group’s consolidated total assets as of the end of the previous fiscal year.
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- “Person who executes business” refers to a person who executes business as defined under Article 2, Paragraph 3, Item 6 of the Ordinance for Enforcement of the Companies Act.
- “Major shareholder” refers to a shareholder who directly or indirectly owns 10% or more of the total voting rights.
- “Important employee” refers to an employee at or above a general manager level.