KONICA MINOLTA

About Konica Minolta

Giving Shape to Ideas

Corporate Governance

Management and Governance Structure

Company-with-Committees System

Separating the directors' supervisory function from the executive officers' business-execution role

Konica Minolta believes that improving corporate governance is a vital part of fulfilling its responsibilities to stakeholders. The company is continuing to reform its management and governance structure to ensure more timely and appropriate decision-making on matters such as restructuring.

Company-with-Committees System Konica Minolta has adopted a company with-committees system, enabling the management supervisory function of the directors to be separated from the business execution function of the executive officers. The executive officers perform decision-making and business execution, as entrusted by the Board of Directors. The content of this business execution is subject to the oversight of the Board of Directors and to audits by the Audit Committee, which enhances effectiveness, validity, legality and soundness of the management.

The Board of Directors includes four outside directors, who are highly independent and have no significant business relations with the company. A majority of directors do not serve as executive officers.

There are three committees within the Board of Directors: Nominating, Audit, and Compensation Committees—all of which are chaired by outside directors. Although the law in Japan only requires that no executive officers serve on the Audit Committee, Konica Minolta has implemented a system in which its executive officers do not serve on any of these committees, in order to ensure better transparency.

Board of Directors and Three Committees (as of June 22, 2010)
Board of Directors and Three Committees
(as of June 19, 2014)

Corporate Structure

Executive officers appointed by the Board of Directors to execute business operations

The Board of Directors appoints the Company’s executive officers and selects the Representative Executive Officer and the President, as well as other executive officers in positions of responsibility, from among these officers. The division of executive duties is also determined by the Board. The Representative Executive Officer and President and other executive officers perform decision-making on and execute the business operations entrusted to them by the Board.

Matters of major importance to the management of the Group are deliberated and determined by the Management Council, a body established to provide support to the Representative Executive Officer and President in his or her decision-making capacity.

Executive Structure

The Board of Directors appoints the Company’s executive officers and selects the Representative Executive Officer and the President (positions currently served by one person), as well as other executive officers in positions of responsibility, from among these officers. The division of executive duties is also determined by the Board. The Representative Executive Officer and President and other executive officers perform decision-making on and execute the business entrusted by the Board.
Matters of major importance to the management of the Group are deliberated and determined by the Management Council, a body established to provide support to the Representative Executive Officer and President in his or her decision-making capacity.

Operations of Board of Directors

Recognizing the importance of providing information to outside directors

In principle, the Board of Directors meets once a month. Outside directors receive advance briefings on agenda items in order to facilitate lively discussions at meetings of the Board of Directors. In particular, explanations of important management decisions are provided by relevant executive officers.
The seating configuration changes at each Board meeting, except for the Chairman of the Board and the President, in an effort to encourage communication among board members and enliven the proceedings.
In fiscal 2013, the overall attendance by outside directors at meetings of the Board of Directors and of its three committees exceeded 90%.
Every year, each board member provides an evaluation of the Board of Directors, which serves as a general review of the composition and administration of the board and its three committees, as well as other matters. The evaluation by each board member is summarized and discussed by the outside directors, chairman, president and other directors in an effort to enhance corporate governance.

Appointment of Directors

The Nominating and appointment of directors and executive officers is based on clear standards

Nominating of director candidates

The Nominating Committee determines internal and outside director candidates to be put before the General Meeting of Shareholders, according to the following selection criteria.

  1. Good physical and mental health
  2. A person that is well liked, dignified, and ethical
  3. Completely law-abiding
  4. In addition to having objective decision-making abilities for management, the person must have good foresight and insight
  5. Someone with no possible conflict of interest or outside business relations that may affect management decisions in the company's main business areas, and who has organizational management experience in the business, academic, or governmental sectors. Otherwise, someone with specialized knowledge in technology, accounting, law or other fields (the independence of outside auditors is outlined separately)
  6. For outside directors, a candidate with a history of performance and insight in that person's field, someone with sufficient time to fulfill the duties of a director, and who has the ability to execute required duties as a member of the three relevant committees
  7. In addition, the candidate must have the abilities necessary for a director running and building a public corporation that is transparent, sound and efficient

For the selection of internal director candidates, the Nomination Committee can obtain the opinion of a president that is thoroughly familiar with the careers and track records of the candidates.

Ensuring the Independence of Outside Directors

In selecting outside directors, the highest priority is placed on their independence, as well as their experience in corporate management, which will enhance the supervisory functions of the Board of Directors. There are written criteria* on the independence of outside directors, stipulating, among others, that eligible candidates shall have no significant business relations with the Group or personal relationships with its executive officers. At the same time, it is preferable that outside directors have experience in corporate management, since their roles in the Board of Directors include decision-making regarding management issues, as well as supervision of corporate management.
In order to ensure the independence of outside directors, during the selection stage for new outside directors, recommendations are taken from the outside directors currently serving. To address the concern that long-serving outside directors have less independence, Konica Minolta limits their renominating to a four-year term of office in principle.
In June 2014, Mr. Kazuaki Kama was appointed as a new outside director.
All four outside directors have been appointed as independent executives in compliance with regulations established by the Tokyo Stock Exchange.

Outside Directors
Name Major position Inauguration
Mr. Shoji Kondo Chairman of the Board, Hino Motors, Ltd. June 2011
Mr. Hirokazu Yoshikawa Senior corporate adviser, Dowa Holdings Co., Ltd. June 2012
Takashi Enomoto Executive Advisor (former Representative Director and Senior Executive Vice President), NTT DATA Corporation June 2013
Kazuaki Kama Chairman of the Board and Representative Director, IHI Corporation June 2014
*
Criteria on the Independence of Outside Directors

Executive Officer Appointment

The president makes the initial proposals for the appointment of executive officers by the Board of Directors.
The president then determines the executive officer candidates through a candidate evaluation meeting, based on executive officer selection standards. The Nominating Committee receives information on the executive officer candidates ahead of the Board of Directors and supervises the validity of the selection process.

Compensation for Directors and Executive Officers

Konica Minolta’s role-based compensation system

The Compensation Committee determines the salaries and compensation system for directors and executive officers. In June 2005, the Committee abolished the conventional retirement benefit system for directors and executive officers, and revised the compensation policy (see table below) to make it a better fit for their roles in the company.

Compensation for directors and executive officers
Outside Directors Base salary only
Inside Directors Base salary + stock compensation as long-term incentive
Executive Officers Base salary + performance-based cash bonus as short-term incentive + stock compensation as long-term incentives

Konica Minolta regards it as important to clearly indicate the company’s policy on compensation for directors and executive officers, together with the ratio of incentive compensation for the achieved performance.
Consequently, the compensation policy in the business report in the fiscal year ended March 2013 stipulated that the executive officers’ compensation shall comprise base salary, a performance-based cash bonus as a short-term incentive, and stock compensation as a long-term incentive, with the ratio of the three being 60:25:15. The performance targets on which the performance-based cash bonus is determined are stipulated as major consolidated performance indicators, including sales, operating income, and ROE, associated with results of operations.
Konica Minolta participates in a survey on executive compensation for companies in Japan done by an independent party every year, and the amount of individual compensation for each position is benchmarked based upon objective data obtained from the survey.
The amount of compensation paid to directors and executive officers recorded as expense for the year ended March 2014 is shown in the table below.

Amount of compensation paid to directors and executive officers for the year ended March 2014
  Compensation (million yen)
Total Total base salary Performance-based cash bonus Stock compensation
Persons Amount Persons Amount Persons Amount
Directors Outside 43 5 43 - - - -
Inside 156 3 127 - - 3 28
Total 199 8 170 - - 3 28
Executive Officers 926 24 551 24 238 24 136

Note 1. As of March 31, 2014, there are 4 outside directors, 3 internal directors (excluding those who are also executive officers), and 24 executive officers.

Note 2. In addition to the 3 inside directors shown above, the Company has another 4 inside directors who concurrently hold executive officer posts, and the compensation to these directors is included in compensation to executive officers.

Note 3. Regarding the performance-based cash bonus, the amounts that should be recorded as expense for the period are stated.

Note 4. Regarding the compensation-type stock options, the amounts that should be recorded as expense based on an estimation of the fair value of the stock acquisition rights issued to directors (excluding outside directors) and executive officers as part of their compensation are stated.

Note 5. In addition to the compensation shown above, the conventional retirement benefit abolished in June 2005 was paid, as indicated below, during the current year, based on a resolution of the Compensation Committee:
• 2 million yen for 2 executive officers who retired on March 31, 2013.

Guidelines on Officer Ownership of Konica Minolta Shares

In order to provide incentives for the boosting of earnings results and the company's share price from the perspective of shareholders, Konica Minolta has established guidelines on ownership of Konica Minolta shares by internal directors and executive officers, along with stock options as part of their compensation system.

Group Auditing System

Creating a system that aims for effective audits

Konica Minolta Inc., which has adopted the company-with-committees system, has established an Audit Committee while its subsidiaries in Japan have appointed their own respective auditors. In addition, Konica Minolta Inc., has a Corporate Audit Division, which conducts an internal audit of the entire Group.
The members of the Audit Committee and the Corporate Audit Division, as well as auditors of the subsidiaries in Japan, where participants share related information and strengthen coordination of audit activities across the Group. With the aim of ensuring effective audits, the same parties hold regular meetings with the accounting auditors, review auditing systems and policies, and examine whether or not the accounting auditors can fulfill their tasks properly.

Audit Committee System and Roles

The Audit Committee is comprised of five directors (who do not hold positions as executive officers), three of whom are outside directors. The chairperson of the Audit Committee is selected from among the outside directors. To ensure effective operation of the committee, it has established its own office (Audit Committee Office) with two staff members who are independent of any sections committed to actual business operations.
The Audit Committee members evaluate the legality and validity of the management decisions made by directors and executive officers, monitor and validate internal control systems, and assess the adequacy of the accounting auditors. In principle, a committee meeting is held before the meeting of the Board of Directors, so that the committee members can present their opinions to the meeting of the Board of Directors, if deemed appropriate.

Corporate Audit Division Systems and Role

The Corporate Audit Division of Konica Minolta Inc., which directly reports to the president and CEO, is responsible for the Group-wide internal audit and performs internal audits of Konica Minolta and its subsidiaries, as well as major overseas affiliated companies. Using the risk approach, the division evaluates these companies in terms of the reliability of their financial statements, efficiency, and validity of their businesses and the level of their legal compliance. The division also conducts follow-up audits in which it examines improvement measures taken by respective companies in response to suggestions provided by the internal auditors.
In addition, major subsidiaries have their own internal audit divisions which work closely with the Corporate Audit Division of Konica Minolta Inc., and enhance the internal audit function of the entire Group.

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