Social Responsibility

Corporate Governance

Management and Governance Structure

Company-with-Committees System

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

Konica Minolta Holdings, Inc. 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 are entrusted by the Board of Directors with the task of business execution. 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 the soundness of management and compliance.

Holding Company System

A holding company plus separate business and common function companies

The Konica Minolta Group has adopted a holding company system comprised of a holding company, business companies and common function companies. To establish separate business companies by each business category, enables to speed up decision-making processes and enhance competitiveness. Moreover, the common function companies enable the centralization of basic research and back-office operations within the Group, to help achieve greater efficiency and stronger functionality. Each president of the business companies and common function companies is also an executive officer of Konica Minolta Holdings, Inc. They have the authority and responsibilities necessary for directly executing the management activities in their respective business. Thanks to this system, the holding company is able to focus on Group management and governance with greater leadership ability, which improves corporate value for the entire Group.

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. In fiscal 2008, 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. This evaluation is summarized and discussed by the outside directors, chairman and president 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 too 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 of 2009, Mr. Yozo Izuhara was appointed as a new outside director.

*

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 has a 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.

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 policies stipulate that the executive officers' compensation shall comprise base salary, a performance-based cash bonus as short-term incentive, and stock compensation as long-term incentive, with the ratio of the three being 60:20:20.
The amount of compensation to directors and executive officers recorded as expense for the year ended March 2009 is shown in the table below.

Note 1. As of March 31, 2009, there are 4 outside directors, 3 internal directors (excluding those who are also executive officers), and 22 executive officers.

Note 2. In addition to the 3 inside directors shown above, the Company has another 7 inside directors who concurrently hold executive officer posts (6 at the end of the period), and the compensation to these directors is included in compensation to executive officers.

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

Note 4. Regarding the compensation-type stock options, the amounts which 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. Figures for executive officers in the table above include base salary and performance-based cash bonus given to 14 executive officers who are primarily responsible for the company's subsidiaries which are partially paid by the subsidiaries concerned.

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 Holdings, Inc., which has adopted the company-with-committees system, has established an Audit Committee while its business companies, common function companies and other subsidiaries have appointed their own respective auditors. In addition, Konica Minolta Holdings 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 individual Group companies, hold an Audit Council meeting every three months, 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, review internal control systems, as well as evaluate, select, dismiss, refuse renomination and approve compensation for 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. During fiscal year 2008, a total of 13 meetings were held by the Audit Committee.

Corporate Audit Division Systems and Role

The Corporate Audit Division, which directly reports to the president and CEO, is responsible for the Group-wide internal audit and performs internal audits of business and common function companies, 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 2007, Konica Minolta Business Technologies, Inc., the largest business company in the Group, established an internal audit office. The office promotes the Group's internal audit through cooperation with the Corporate Audit Division at Konica Minolta Holdings.