Governance Structure and Operations

Operations of the Board of Directors

Operation

As a general rule, the Board of Directors meets once each month. Before each meeting, the directors are expected to make themselves familiar with the proposed resolutions, and materials are distributed to outside directors in advance so that effective discussions can be held on the day of the meeting. In addition, before important management decisions are made, the executive officer responsible sometimes gives a preliminarily explanation concerning the matter at hand.
The seating position of the directors is changed at every meeting, except for that of the chairman and the President, and other such measures are taken to further enhance communication among the directors and ensure that the meetings are dynamic.

Attendance

The meeting results and attendance rates for the Board of Directors and the three committees in fiscal 2018 were as follows. Furthermore, the attendance rate at Board of Directors and the three committee meetings for the five outside directors ( Hiroshi Tomono, Kimikazu Noumi, Takashi Hatchoji, Taketsugu Fujiwara, and Chikatomo Hodo) was 99%.

Note:All the members of the Board of Directors are required to attend more than 80% of the meetings, and in order to achieve this attendance rate, the number of companies which they can serve as directors (officers under Japan’s Companies Act) is restricted to no more than three in principle.

Board of Directors Nominating Committee Audit Committee Compensation Committee Total
Number of meetings 12 7 13 6 38
Attendance rates for all directors (%) 100 100 99 100 99
Attendance rates for outside directors (%) 100 100 98 100 99

Support System for Outside Directors

  1. At the time of appointment, each outside director is provided with information including the company overview, business content, organizational structures and personnel, the Medium-Term Management Plan, the budget and the corporate governance of the company.
  2. After appointment, outside directors receive information about each business area of the company, such as its position in the whole company business portfolio, composition of the company’s business portfolio, the company’s position in each industry field and business environments. Outside directors also conduct frontline inspections in departments such as development, production, sales, and service in each business area, and they receive the latest information from the responsible executive officers.
  3. A Board of Directors Office has been established as the secretariat for the Board of Directors, Nominating Committee, and Compensation Committee, while the Audit Committee Office serves as the secretariat for the Audit Committee. The staff members of these offices support the outside directors to enable the Board of Directors and committees to function properly. Members of this office also distribute the document in advance concerning agenda items to outside directors, and create proposals and plans for visits to company facilities and accompany outside directors as needed as part of activities to these directors. The objectives are to enable outside directors to thoroughly discuss subjects at the Board of Directors meetings and to ensure that these meetings take place with no difficulties.

Feedback on Board of Directors Effectiveness

In 2003, the company became a company with committees (now a company with three committees). To determine if the corporate governance system is functioning as intended, the company started performing self-assessments in 2004 concerning the Board of Directors’ effectiveness. Self-assessments have been performed every year since then in order to make improvements.
The company now has a PDCA cycle that covers assessments and the analysis of results, the establishment of policies for the operation of the Board of Directors in the next fiscal year, and the creation and implementation of a plan for the board’s operations. PDCA is used as a tool for continuous improvements in the effectiveness of the Board of Directors.
The effectiveness assessment conducted in fiscal 2017 looked again at whether the matters that have been regarded as the basis of the company’s corporate governance system served the purpose of that system, which is to help promote sustainable growth and improved corporate value over the medium to long term.
In fiscal 2018, the company conducted an assessment that posed questions intended to ascertain what is lacking in efforts to increase effectiveness, considering the purpose of the company’s corporate governance. Details are outlined in the Corporate Governance Report.
Also, in order to increase objectivity by incorporating third-party viewpoints, and to clarify issues not identified through the conventional self-assessments, in fiscal 2016 the company had an external organization perform the questionnaires and interviews.
Regular evaluation by external organizations will be continued in the future.

Policy and Procedures for Appointing Director Candidates, and the Applicable Approaches and Standards, etc

Policy and Procedures for Appointing Director Candidates

The Nominating Committee starts each year by performing reviews of the composition of the Board of Directors and committees and of the standards for the selection of directors and committee members. By performing examinations from the standpoints of balance of career and skill, diversity and other factors, this committee aims to upgrade its selections of director candidates. The following process is used to make selections.

1.Board of Directors

(1) The Nominating Committee examines the objectives of the composition of the board and then confirms a proposal for the total number of directors, the number of outside directors, and the number of inside directors who do and do not concurrently serve as executive officers.

(2) Confirmation of directors who will resign due to standards for the number of years as a director or age, and expected number of new outside director and new inside director candidates.

Use the link below for detailed information.
Approach to the Overall Board of Directors Composition

2.Outside Directors

(1) To select outside director candidates, after the Nominating Committee confirms the selection process, the requirements (necessary careers and skills) for the new outside directors are determined, considering the combination with the outside directors to be re-appointed, in order to ensure that the company will obtain useful supervision and advice on operational issues. Based on these considerations, the Nominating Committee chairman asks for a broad range of recommendations for candidates, regardless of gender, based on information from Nominating Committee members, other outside directors and the President and CEO. To provide reference information, the Board of Directors Office distributes to Nominating Committee members a candidate database, centered on “chairmen” of excellent companies, which includes information about independence, age, concurrent positions and other characteristics of candidates.

(2) From the candidates recommended through the preceding process, the Nominating Committee uses the following steps to narrow down the number of candidates and establish an order of priority, without any selection conditions based on gender.

  • Selection Standards for Directors
  • Standard for independence of Outside Directors
  • Balance of Career and Skill Required for Outside Director Candidates and Diversity

(3) Using the order of priority for candidates, the Nominating Committee chairman and Chairman of the Board of Directors visit and approach the candidates to serve as an outside director.

3.Inside Directors

(1) An initial list of candidates for inside director is prepared through consultation between the chairman of the Board and the President and CEO, with emphasis on the following points.

  • Selection Standards for Directors
  • Roles of directors who do and do not concurrently serve as executive officers
  • Required skills, experience and other characteristics of directors who do and do not concurrently serve as executive officers

(2) The Nominating Committee uses the draft proposals to examine the candidates.

The Applicable Approaches and Standards for Appointing Director Candidates

1.Board of Directors

(1)Approach to the Overall Board of Directors Composition

The Board of Directors is composed of a number of directors within the scope provided in the Articles of Incorporation, taking into account the management issues the Board of Directors is required to address.

① To ensure management transparency and supervisory objectivity, it is require one-third or more of the directors be independent outside directors, and directors who do not concurrently serve as executive officers constitute the majority of the total number of directors.

② To enhance the management supervision function, liaise with the independent outside directors and strengthen communication and cooperation with executive officers, more than one inside directors not concurrently serving as executive officers will be appointed.

③ To further enhance deliberations on important decisions from a management standpoint, in addition to the President and CEO, several executive officers in charge of principal duties will be appointed as directors.

④ The Nominating, Audit and Compensation committees are all chaired by outside directors to ensure transparency and objectivity. In addition, to ensure that each committee adequately fulfills its role, at least four of the directors are independent outside directors.

⑤ Concerning the size of the Board of Directors, the company considers 10 or 12 directors to be the appropriate number from the standpoint of ensuring the proper composition of the board with respect to inside directors who do not concurrently serve as executive officers, inside directors who concurrently serve as executive officers, and outside directors.

⑥ For more information about the diversity of the Board of Directors, see "Balance of career and skill required for outside director candidates and diversity."

(2)Selection Standards for Directors

The Nominating Committee has selected candidates who satisfy the following standards as being suitable directors for achieving good corporate governance, i.e., ensuring the transparency, soundness and efficiency of the company's operations.

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 potential conflict of interest or outside business relations that may affect management decisions in the company's main business areas, and who has either organizational management experience in the business, academic, or governmental sectors or specialized knowledge in technology, accounting, law, or other fields.

⑥ For outside directors, a candidate with a history of performance and insight in their 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 The Nominating Committee has separately set points for consideration in the re-election of directors and requirements concerning the number of terms of office, age and other factors. Especially, in principle, existing terms of office for outside directors are up to four years.

In addition, the candidate must have the abilities necessary for a director to run and build a public corporation that is transparent, sound, and efficient.

2.Outside Directors

(1)Criteria on the Independence of Outside Directors

The following types of people are ineligible to serve as outside directors at Konica Minolta. Our Nomination Committee selects outside director candidates with a high level of independence, provided that none of the following criteria apply.

① Person affiliated with Konica Minolta

  • Former employee of the Konica Minolta Group
  • Having a family member (spouse, child, or any blood or marital relative twice removed or less) that has served as a director, executive officer, auditor or top manager in the Konica Minolta Group during the past five years.

② Person affiliated with a major supplier/client

  • Currently serving as a managing director, executive officer, or employee of a major supplier/client company/group that receives 2% or more of its consolidated sales from the Konica Minolta Group or vice versa.

③ Specialized service provider (lawyer, accountant, tax accountant, patent lawyer, judicial scrivener, or a consultant for management, finance, technology, or marketing)

  • Specialized service provider that received annual compensation of ¥5 million or more from the Konica Minolta Group during the past two years.

④ Other

  • A shareholder holding more than 10% of the voting rights in the company (executive directors, executives, or employees in the case of a corporate body)
  • A director taking part in a director exchange
  • A director, executive officer, auditor or equivalent position-holder of a company that competes with the Konica Minolta Group, or someone holding 3% or more of the shares of a competing company (who is not eligible to be a director of any kind)
  • Having some other conflict of interest with the Konica Minolta Group

The Company, under the rules of the Nominating Committee, in principle, limits the period in office of Outside Directors to four years (reappointment limit). This rule is based on the concern that the objectivity of these Directors may decline as the length of time in office increases.

(2)Balance of Career and Skill Required for Outside Director Candidates and Diversity.

① To ensure the diversity of directors, the Nominating Committee Rules for selection standards for directors state that candidates should "have experience operating an organization in the industrial, government or academic sector or have specialized skills involving technologies, accounting, law or other fields" and "have accomplishments and knowledge in their respective fields suitable for outside director candidates."

② Candidates should have the character, skill and experience needed for strengthening and upgrading management in order to enable the Board of Directors to determine the company's strategic direction.

③ Based on a full understanding of the importance of gender and international diversity, a career and skill matrix is prepared for each outside director candidate for reelection or election as a new director. The matrix includes the business sector, major management experience, fields of expertise and other characteristics of each candidate to provide information about the diversity of their careers and skills. The objective is to select candidates who can provide useful oversight and advice during discussions of management issues by the Board of Directors.

④ No specific gender, nationality, national origin, cultural background, racial or ethnic factor can be used as a reason for not considering a person a candidate.

⑤ With the selection of new outside director candidates for appointment at the General Meeting of Shareholders in 2018, the Nominating Committee confirmed that the new directors have abundant experience and extensive knowledge in the bio-healthcare, IoT, and digital business areas, and that they are well prepared to provide useful oversight and advice.

(3)Expected Roles of Outside Directors.

① To participate in important decisions made by the Board of Directors and supervise the decision-making process

② To submit advice about the establishment of management policies and plans and about reports concerning business operations by using their experience and knowledge

③ To oversee conflicts of interest among the company, its shareholders, senior executives and others

④ To supervise management to protect ordinary shareholders and to reflect the interests of shareholders from the standpoint of ordinary shareholders, which is independent from senior executives and special stakeholders

⑤ To supervise management as members of the Nominating, Audit and Compensation Committees

3.Inside Directors

(1)Stance Concerning Roles of Inside Directors and Selection of Candidates.

① The chairman of the Board of Directors calls meetings of the board and chairs the meetings. In addition, the chairman is responsible for overseeing improvements in the effectiveness of corporate governance. The chairman ensures that agenda items are handled in a manner that facilitates constructive discussions in an open and unrestricted manner. The chairman also asks questions and takes other actions from the standpoint of providing oversight and ideas and suggestions. Furthermore, based on assessments of the effectiveness of the board, the chairman establishes policies for the board's operations and explains these policies at the board meeting following ordinary general meeting of shareholders.
The company's previous president and CEO has been selected to serve as chairman in order to have a chairman who has a thorough knowledge of the company's management and can provide highly effective oversight of management. The company's Basic Policy on Corporate Governance and Corporate Organization Basic Regulations require that the chairman shall be a director who does not concurrently serve as executive officer, whether the individual is an outside or inside director.

② An inside director who is not concurrently an executive officer and who has the ability to ensure the quality of audits is selected as a full-time Audit Committee member.
The inside director who serves as a full-time Audit Committee member should have extensive management experience as an executive officer of the company in order to improve the effectiveness of the Audit Committee. The qualifications required in particular are experience in accounting and finance or business management and core business management.
This inside director also serves as the Nominating Committee member and Compensation Committee member.

③ Inside directors who are concurrently executive officers, other than the president and CEO, are selected based on their experience, capabilities and character. They are held accountable for their execution and contribute to energetic and meaningful discussions at Board of Directors meetings. Requirements for these inside directors include responsibility for overseeing major elements of the company's operations such as strategic planning, accounting and finance, technology, as well as for overseeing main business operations in the company.

Executive System and Appointment of Executive Officers

Executive System

  1. Under a mandate from the Board of Directors, executive officers make decisions about operations and then execute them. The business execution is overseen by the Board of Directors and reviewed by the Audit Committee to ensure the efficiency, adequacy, legality and soundness of management.
  2. Executive officers are appointed by the Board of Directors, which selects the President and CEO, selects senior executive officers from among the executive officers, and establishes a division of duties among the officers. The executive officers, including the President and CEO, make decisions concerning the execution of duties delegated by the Board of Directors, and execute their duties.

Selection or dismissals of Executive Officers

  1. The Board of Directors uses a fair, timely and appropriate method to select people who have the capabilities to serve as executive officers. These individuals must be able to create new value for the Group and earn the support of internal and external stakeholders. Standards for making these judgments about capabilities are defined in “Standards for the Selection of Executive Officers.”
    Individuals must have the ability and experience for the internal and external management of the Group's business operations. Qualification standards also take into consideration knowledge about specialized fields and technologies, an individual's age when the time for renewing the appointment comes, and other items. In addition, the Board of Directors selects individuals with a strong commitment to ethics, the ability to put customers first, the ability to drive innovation, strong motivation to achieve goals, and other such characteristics.
  2. To select new executive officers, candidates who have completed senior executive candidate training must pass through the first stage of the selection process, which involves submitting documents and completing an interview. Next, an assessment is performed in order to reach a highly objective and appropriate decision. This process includes input from both an external perspective and from the perspective of people at the Group who frequently interact with these candidates as part of their jobs. An evaluation conference, which consists of the President and CEO and the executive officer responsible for personnel, is held to examine the results of this process. This results in the selection of candidates to become executive officers.
  3. To determine the new team of executive officers, the president and CEO selects from the list of executive officer candidates the individuals believed to be well suited to serve as executive officers. Next, a proposal for the selection of executive officers for the new fiscal year is prepared and submitted to the Board of Directors, with a list of the duties for each executive officer.
  4. Prior to the submission of this proposal to the Board of Directors, the Nominating Committee performs oversight of the whole process, including a confirmation that a suitable process was used. Oversight includes receiving the proposal for the new Executive Officer team (including the proposed new Executive Officer selections from the President and CEO) and a report about the proposed duties of each Executive Officer.
  5. The Board of Directors takes the “Standards for the Selection of Executive Officers” into full consideration when deciding whether or not to dismiss an Executive Officer.

Compensation for Directors and Executive Officers

The company, which has adopted the company-with-three-committees system, has established a Compensation Committee. Outside directors account for the majority of members of the committee and the committee is chaired by an outside director to ensure transparency and to determine compensation in a fair and appropriate manner. The company’s directors’ compensation system is intended to strengthen the motivation of directors and executive officers to strive for the continuous medium-to-long-term improvement of the Group’s performance in line with management policies, to meet shareholder expectations and contribute to the optimization of the Group’s value. The company aims for a level of compensation that enables it to attract and retain talented people to take responsibility for the company’s development.

Revisions of the compensation policy

In fiscal 2017, the company revised its Compensation Determination Policy.
Major revisions to the compensation policy and reasons:

  1. The company started stock bonus linked to medium-term performance. The intent is to increase motivation to achieve the performance targets of the medium-term plan.
  2. Stock bonus linked to medium-term performance is company stock rather than cash. Owning company stock during their time at the company is intended to make individuals view the importance of medium- to long-term growth of corporate value from the same standpoint as shareholders.
  3. The structure of compensation was reexamined. This resulted in a reduction in the percentage of fixed compensation and the replacement of stock bonus-type stock options with stock bonus linked to medium-term performance. In addition, performance-linked compensation increased as a percentage of total compensation. Taking these actions made individuals even more aware of the importance of improving the company’s performance.
  4. Compensation includes a claw-back provision. By performing the required procedure, the company can limit compensation or demand the return of compensation. However, this is possible only when performance indicators that are the basis for calculating performance-linked compensation differ significantly from actual performance due to a major error or fraud.

These revisions were discussed and examined by the Compensation Committee starting in fiscal 2015. The company believes these revisions are consistent with Supplementary Rule 4-2-1 of the Corporate Governance Code (There should be a suitable division between compensation linked to medium to long- term performance and cash compensation and company stock bonus so that compensation functions as a sound incentive for senior executives to achieve sustained growth.

Compensation Policy

  1. Compensation system

    ① Compensation packages for directors (excluding directors who concurrently hold executive officer posts) exclude a short-term performance-based cash bonus because directors have a supervisory role, and consist of a base salary component in the form of a base salary and "medium-term stock bonus" that links with improvement of the shareholder value for the medium term. Outside directors receive base salary only.

    ② Compensation packages for executive officers consist of a base salary, an annual performance-based cash bonus, which reflects the performance of the Group and the performance of the business of which the officer is in charge each year, and a stock bonus linked to medium-term performance, which reflects the degree of attainment of the Medium Term Business Plan and improvement of shareholder value in the medium term.

  2. The total amount of individual compensation entitlement and base salary are set at an appropriate level for each position by considering value based upon objective data, evaluation data and other data collected at regular intervals.
  3. The amount of the annual performance-based cash bonus is determined based on the level of performance delivered for the fiscal year (consolidated operating income), the degree of attainment of annual performance targets, and the progress of each executive officer's key operational measures. The amount based on the degree of attainment of annual performance targets is determined in the 0% to 150% range of the standard amount of compensation. The targets are major consolidated performance indicators (operating income, operating income margin, ROA and others) associated with results of operations. Executive officers' key operational measures include those related to non-financial indicators, such as environment, society and governance (ESG) performance.
  4. Stock bonus plan

    ① In the medium-term stock bonus plan for directors, the company's shares are distributed to directors upon the conclusion of the Medium Term Business Plan, according to their roles and years in office. The plan is designed to enhance directors' motivation to contribute to improved shareholder value and to promote their ownership of the company's shares.

    ② In the medium-term stock bonus plan for executive officers, the company's shares are distributed to executive officers upon the conclusion of the Medium Term Business Plan in the 0% to 150% range. The plan is designed to enhance their incentives for attaining the targets of the Medium Term Business Plan and promote their ownership of the company's shares. The medium-term targets are major consolidated performance indicators (operating income, ROE and others) associated with the medium term management policy.

    ③ The standard number of shares is set according to the position each director or executive officer held in the first year of the Medium Term Business Plan.

    ④ Certain portions of shares are distributed in cash on the assumption that they are exchanged for cash.

    ⑤ Shares of the company obtained as stock bonus shall be held in principle for one (1) year after the date of retirement from the post of each director or executive officer.

  5. The standard for compensation of the president and chief executive officer is a 50:25:25 mix of a base salary, an annual performance-based cash bonus, and a medium term performance-based stock bonus. For the other executive officers, the base salary ratio is set higher than that for the President.
  6. Compensation for non-residents of Japan may be handled in different ways from the above-mentioned treatment above due to legal and other circumstances.
  7. If the Board of Directors must resolve a correction to financial statements after they are announced due to a material accounting error or fraud, the Compensation Committee shall consider corrections to performance-based bonuses and limit payment or request return of the bonuses when necessary.
  8. The company reviews levels, composition and other elements of compensation in a timely and proper manner in accordance with changes in the management environment.

Amount of compensation paid to directors and executive officers for the year ended March 2019

(Unit: 1 million yen)
Total Total base salary Performance-linked compensation Stock bonus
Persons Amount Persons Amount Persons Amount
Directors Outside 57 6 57 - - - -
Inside 159 4 127 - - 4 31
Total 216 10 184 - - 4 31
Executive officers 1,063 24 561 24 272 24 229

Notes

1.The numbers above include one outside director and one inside director who stepped down as of the date of the 114th Shareholders' Meeting held on June 19, 2018. At the end of the period (March 31, 2019), the company has five outside directors, three inside directors (not concurrently holding executive officer posts) and 25 executive officers.

2. In addition to the four inside directors shown above, the company has another four inside directors who concurrently hold executive officer posts, and the compensation to these directors is included in compensation to executive officers. Also, with respect to the one person who stepped down from an executive officer position and became a director as of the date of the 114th Shareholders' Meeting, this person's presence and compensation as an executive officer and director are split and included in the respective categories.

3.Regarding the performance-linked compensation, the amounts which were recorded as expense in the period are stated.

4.Regarding the stock-based compensation, the amounts shown are those to be recorded as expenses in the fiscal year concerned, based on calculation of the expected amount of compensation including future granting of the company's shares, in accordance with the expected number of points granted to Directors (excluding outside directors) and executive officers.

Total compensation for those individuals with a total compensation of 100 million yen or more in the fiscal year ended March 2019

(Unit: 1 million yen)
Position / Name Company type Total Total base salary Performance-linked compensation*2 Stock bonus
Directors
President and CEO
Shoei Yamana
Submitting
company
135 65 34 35
Executive Officers
Richard K.Taylor*1
Consolidated subsidiary
Konica Minolta Business Solutions U.S.A., Inc.
181 90 90 -

Notes

1.Executive Officer Richard K. Taylor is the CEO of the consolidated subsidiary, Konica Minolta Business Solutions U.S.A., Inc.

2.Regarding performance-linked compensation, the amounts to be expensed in this fiscal year are given.

3.Regarding the stock bonus, the amounts shown are those to be recorded as expenses in the fiscal year concerned, based on calculation of the expected amount of compensation including future granting of the company's shares, in accordance with the expected number of points granted.

Guidelines on Officer Ownership of Konica Minolta Shares

In order to further raise awareness of shareholders' expectations for performance improvement and growth in the stock price, a stock bonus linked to medium-term performance (for executive officers) and a medium-term stock bonus (for directors) have been introduced. Accordingly, Stock Ownership Guidelines have also been established for inside directors and executive officers.

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, share related information and strengthen the 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 six directors (who do not hold positions as executive officers), four 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 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-assessment 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 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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