Corporate Governance

Our corporate governance vision

The Company’s corporate philosophy is “Loved by citizens, working for citizens,” and it derives its name from this. The Company works to contribute to society and increase its corporate value through sustainable corporate activities, in harmony with the local community and the global environment. To continue to promote its aims, the Company believes that it is important to secure transparency in management and monitor many fields of management. Accordingly, the Company is striving to expand and improve its corporate governance.

Summary of corporate governance system and reasons for its adoption

The Board of Directors of the Company is composed of seven (7) Directors who oversee the Corporate Group while executing operations of the major businesses, and two (2) Outside Directors who leverage their wealth of experience and extensive knowledge as executives to check and supervise the management from an independent position. Audits are conducted by three (3) Audit & Supervisory Board Members, including two (2) Outside Audit & Supervisory Board Members who possess extensive knowledge on corporate financial and legal affairs.
Furthermore, the Company has established the Nominating Committee and the Compensation Committee as voluntary institutions to improve the transparency of the management of the Company. The main duties of the Nominating Committee include discussions on matters concerning the appointment of the Representative Director, the President and CEO, and the Chairman of the Board of Directors, and proposals of such matters to the Board of Directors, while the main duties of the Compensation Committee include discussions on matters concerning the policies and standards of the compensation to be received by Directors, and the provision of advice concerning the same to the Board of Directors. Each of the above-mentioned Committees is composed of three (3) or more Directors who are appointed by a resolution of the Board of Directors, the majority of which are Outside Directors and which shall include at least one (1) Representative Director. The Chairperson of each of the Committees shall be an Outside Director, and shall be elected by mutual election of the members of the Committees.
By adopting the above systems, the Company believes it can secure appropriate and effective performance of duties and achieve transparency in management, as well as effectively monitor many fields of management.

Organization and status, etc. of development of internal control system

  • 1. Summary of the Company's organization

    The Company has a Board of Directors, which is comprised of seven (7) Directors who are familiar with the Company’s business lines, and two (2) Outside Directors (as of June 29, 2017) who are independent from the Company’s management.
    The Company also employs an Audit & Supervisory Board system and has an Audit & Supervisory Board comprised of three (3) Audit & Supervisory Board Members (as of June 29, 2017), two (2) of whom are Outside Audit & Supervisory Board Members.

  • 2. Details of the Company's organization and status of development of internal control system

    The Company holds Group Management Committee meetings and Management Committee meetings that are attended by the full-time Directors and full-time Audit & Supervisory Board Members to maintain prompt business judgment and management transparency. Matters to be resolved at the Board of Directors meetings and other important managerial issues are fully discussed and deliberated in advance at these meetings.
    The Board of Directors makes decisions about the performance of business and supervises these performances. Management of business operations is carried out by the Representative Director, the Directors in charge of operations and the Operating Officers.
    The Board of Directors meetings were held seventeen (17) times during the fiscal year ended March 31, 2017, and all Directors and all Audit & Supervisory Board Members attended approximately 94% or more of the Board of Directors meetings held during the fiscal year ended March 31, 2017 during the term of their office.

  • 3. Status of audits by Audit & Supervisory Board Members, audits by Independent Auditors, and internal audits

    Each Audit & Supervisory Board Member conducts strict audits on the Directors’ performance of their duties, in accordance with the audit policy and audit program stipulated by the Audit & Supervisory Board, by attending the Board of Directors meetings, the Group Management Committee meetings, Management Committee meetings, division meetings, or other such meetings; receiving from the Directors and other officers reports on the status of the performance of their duties; reviewing important written decisions and other documents; and investigating the business and financial status of the Company. The Company also receives a financial audit report from Nihombashi Corporation, which is an Independent Auditor. The Company conducts effective audits on itself and its subsidiaries in collaboration with the Independent Auditor, and is working on the further expansion and improvement of corporate governance. Full-time Audit & Supervisory Board Member Mr. Haruhisa Shiraishi has been managing banks and companies for many years and has extensive knowledge of finance and accounting. Full-time Audit & Supervisory Board Member Mr. Yoshio Takada has been involved in the accounting operations at the Company and its subsidiaries for many years and has extensive knowledge of finance and accounting. Outside Audit & Supervisory Board Member Ms. Toshiko Kuboki is thoroughly experienced in corporate legal affairs as an attorney-at-law and has extensive knowledge of finance and accounting.
    Audit & Supervisory Board meetings were held thirteen (13) times during the fiscal year ended March 31, 2017, and all Audit & Supervisory Board Members who served in the fiscal year ended March 31, 2017 attended all meetings of the Audit & Supervisory Board held during the fiscal year ended March 31, 2017 during the term of their office.
    With respect to the financial audits, the certified public accountants who independently audited the Company are Mr. Masahiko Kinoshita, Mr. Akira Ogura and Mr. Hidekazu Takahashi, associates of Nihombashi Corporation. In addition, six (6) certified public accountants, seven (7) successful candidates who have passed the Certified Public Accountants Examination, etc. assisted in the audit of the Company. The Company ensures fairness and independence while it is audited by the Independent Auditors.
    The Audit & Supervisory Board deliberates on and resolves the reappointment of the Independent Auditors. If the Audit & Supervisory Board does not approve the reappointment of the Independent Auditors, such proposal will be deliberated on at the Ordinary General Meeting of Shareholders pursuant to the Companies Act.
    Further, the Company has established the Internal Audit & CSR Division as an internal audit division and conducts audits in accordance with an annual audit program to confirm that the business execution of the Company and its subsidiaries is appropriate and reasonable. The Internal Audit & CSR Division is composed of ten (10) members (as of June 29, 2017).

  • 4. Relationship with Outside Directors and Outside Audit & Supervisory Board Members

    The Company has appointed two (2) Outside Directors and two (2) Outside Audit & Supervisory Board Members. The two (2) Outside Directors leverage their wealth of experience and extensive knowledge as executives to check and supervise the management of the Company, and the two (2) Outside Audit & Supervisory Board Members leverage their wealth of experience and extensive knowledge as bank executives and lawyers, and their extensive knowledge of finance and accounting, to conduct audits. The Company believes that it has a system sufficient to maintain and promote its corporate governance.
    The Company has no special interest with Outside Directors Mr. Masaaki Komatsu and Mr. Fumiaki Terasaka, and Outside Audit & Supervisory Board Members Mr. Haruhisa Shiraishi and Ms. Toshiko Kuboki. The Company believes that each officer maintains an independent position without causing any conflicts of interest with general shareholders. Mizuho Bank, Ltd., where Mr. Haruhisa Shiraishi formerly served as Managing Director, was dissolved on July 1, 2013 when it merged with Mizuho Corporate Bank, Ltd. (hereafter, “The Present Mizuho Bank, Ltd.). The Company and its subsidiaries have had transactions with The Present Mizuho Bank, Ltd., including borrowing, the Company judges that no conflicts of interest with general shareholders are likely to be caused. In addition, Mr. Shiraishi has also served as President and Representative Director of FUJI SOFT INCORPORATED. Although a subsidiary of the Company has had transactions with FUJI SOFT INCORPORATED including purchasing of software, the Company judges that no conflicts of interest with general shareholders are likely to be caused in light of the scale of such transactions.

    The numbers of the Company’s shares held by Outside Directors and Outside Audit & Supervisory Board Members as of June 29, 2017 are as follows.
    Mr. Masaaki Komatsu: 6,000 shares, Mr. Haruhisa Shiraishi: 5,000 shares, Ms. Toshiko Kuboki: 5,000 shares
    The Company endeavors to appoint Outside Directors or Outside Audit & Supervisory Board Members who carry no risk of causing any conflicts of interests with general shareholders. The Company works to ensure this by placing an emphasis on candidates that have a wealth of experience and extensive knowledge as executives, or extensive knowledge on corporate financial and legal affairs. The Company stipulates the following as its criteria on independence from the Company for the purpose of appointing Outside Directors or Outside Audit & Supervisory Board Members.

    Criteria on Independence of Outside Officers

    The Company deems that an Outside Director or Outside Audit & Supervisory Board Member of the Company (“Outside Officer”) or a candidate for Outside Officer possesses independence such that the interests of the Outside Officer or candidate for Outside Officer are unlikely to have conflict with the interests of general shareholders if, after the Company investigates to practically possible and reasonable extent, one or more of the following criteria do not apply with respect to the said individual.
    (1) A party who is now or was previously an officer (excluding the Company’s Outside Director or Outside Audit & Supervisory Board Member) or an employee of the Citizen Group (the “Citizen Group” refers to the group of companies made up of the Company and its subsidiaries; hereinafter the same).
    (2) A party whose major business partner is the Company (Note 1) or an executive of such party (“executive” refers to an executive as defined in Article 2, paragraph 3, item 6 of the Enforcement Regulations of the Companies Act (Order of the Ministry of Justice No. 12 of 2006); hereinafter, the same).
    (3) A major business partner of the Company (Note 2) or an executive of such party.
    (4) A consultant, accounting professional, or legal professional who receives cash or other financial benefits of \10 million or higher as payment from the Citizen Group for reasons other than Director’s or Audit & Supervisory Board Member’s remuneration (if the party receiving such financial benefits is an incorporated entity, association or other organization, then a person belonging to such organization).
    (5) A party receiving donations of cash or other financial benefits of \10 million or higher from the Citizen Group (if the party receiving such donation is an incorporated entity, association or other organization, then a person belonging to such organization).
    (6) A party directly or indirectly holding 10% or more of the total number of voting rights held by the Company’s shareholders or an executive of such party.
    (7) In the case that an officer or employee of the Citizen Group is serving as an outside officer at an other company, an officer or employee of the company other than the aforementioned outside officer.
    (8) A person to whom any of the criteria (2) through (7) applied in the most recent fiscal year or the past three fiscal years of the Company.
    (9) A spouse or relative within the second degree of kinship of a person to whom any of the criteria (1) through (8) applies.
    Notes:
    1. “Party whose major business partner is the Company” refers to a party whose sales to the Citizen Group makes up 2% or more of the consolidated net sales of the party’s group (“group” refers to the group of companies made up of the party, its parent, and its subsidiaries; hereinafter the same).
    2. “Major business partner of the Company” refers to a party whose group provides the Citizen Group with sales amounting to 2% or more of the consolidated net sales of the Company.

Status of development of risk management system

In order to achieve Group-wide business targets and ensure sound and sustainable development, the Citizen Group assesses, analyzes, and evaluates risk and engages in activities to appropriately manage risk based on the results of these efforts. The Citizen Group has established the Group Risk Management Committee, with the President and CEO of the Company serving as the committee chairman, to promote the establishment, operation, and monitoring of risk management Group-wide.
The Group has stationed risk management officers and established the risk management department at Citizen Watch Co., Ltd. in accordance with the specific risks that the Citizen Group faces. The Group has also set up committees to respond to each major risk theme in an effort to support Group-wide risk management activities.
Furthermore, to prepare for and respond to major crises, including accidents, terrorist attacks, natural disasters, scandals, and other incidents, that could occur in any area in which it operates, the Citizen Group is working to establish a crisis management structure on a global basis. With the aim of collecting, evaluating, and disclosing crisis-related information in a swift and appropriate manner, the Group has taken steps to clarify standards for making reports to Head Office. Further, in the event of a crisis, measures have been put in place to convene emergency meetings to evaluate its severity. The Group has also established the Crisis Task Force, which examines specific ways to respond to risk. In these ways, the Group has put in place a system to minimize the impact risks have on its business and stakeholders.
The Citizen Group, under the corporate philosophy “Loved by citizens, working for citizens,” established the “Citizen Group Code of Conduct.” The Citizen Group understands “CSR activities” as activities that contribute to solving society’s problems and strives to realize this through ensuring every employee of the Citizen Group becomes familiar with the “Citizen Group Code of Conduct” and puts it into practice.
In addition, through setting up the structure for an internal reporting system, the Citizen Group is striving to conduct its operations under an environment that enables early detection of internal problems, and prevents occurrence or expansion of damage. While working to discover and solve problems before they become serious and improving organizations’ capability for resolving their own issues, the Citizen Group is promoting compliance management.

Status of provision of systems to ensure appropriate business operations at subsidiaries

The Company shall manage or instruct its subsidiaries concerning the development of the management and internal control systems for the subsidiaries pursuant to the Affiliates Management Rules or other similar rules.
Regarding individual business activities of the Citizen Group, the Company shall familiarize the companies belonging to the Citizen Group (hereinafter, the “Group companies”) with the management policies and the management plan established by the Company, and shall clearly define the authorities and responsibilities of the Group companies. Based on this understanding, each of the Group companies shall independently carry out their management of business in consideration of the features of the industry in which each of the Group companies engages.
The Company shall hold meetings or liaison conference, or the like which consists of the Group Management Committee, Management Committee and other Group companies to share information and enhance the partnerships concerning the significant matters of business in the Citizen Group.
Furthermore, the Company shall request that the subsidiaries regularly report to the Company regarding whether the business of the subsidiaries is properly performed, in the Business Control and Management Committee meetings, Watch Group Control Committee meetings or at other similar opportunities, and in addition, shall monitor the same by an audit implemented by the Internal Audit & CSR Division, etc.