AEON delight Corporate Governance Guidelines
Based on our Management Principle, "We pursue the creation of 'environmental value' for the customers and for the local communities," we fulfill our responsibilities to our stakeholders through sustainable growth of our company and by increasing the value of our company, and implement an optimal corporate governance system designed to best meet the needs of society and the business environment.
In AEON delight Corporate Governance Guidelines (hereafter the "AEON delight Guidelines"), we have defined our corporate governance system as "a mechanism that helps to bring about sustainable growth of our company by maintaining balance between 'offense' and 'defense' in the four areas as follows":
1) Means for integrating the business activities of the members (executives and employees) of our enterprise under one policy or vector and then utilizing managerial resources to the maximum degree.
2) Basic promises that underpin the trusting relationships with stakeholders who support our enterprise
3) Preparedness for unexpected ordinary or extraordinary events
4) Rules each enterprise should follow for surviving as a member of society
Corporate Governance System
Overview of current corporate governance structure
[Board of Directors]
The Board of Directors plays the second most important role after the general meeting of shareholders in our company's corporate governance system. It makes important decisions on business management as well as provides effective oversight over the senior management team, including the directors and executive officers.
[Board of Executive Officers]
The Board of Executive Officers was established with the introduction of the executive officer system on May 24, 2016. The purpose of creating the new system was to delegate some of the operational functions of the Board of Directors so that the Board of Directors can focus more of their energies on deliberation of important business management decisions and business management oversight. The executive officer system also brings an additional layer of officers to consider management issues in greater depth and from diverse angles and promotes coordination within the management.
[Nomination and Compensation Advisory Committee]
The Nomination and Compensation Advisory Committee was set up voluntarily by the Board of Directors to advise the Board on the nomination and selection of directors and corporate auditors, succession planning of the President and other senior executives, and incentive plans and compensation of directors.
[Evaluation Advisory Committee]
The Evaluation Advisory Committee was set up voluntarily by the Board of Directors to conduct analysis and assessment of the effectiveness of the overall performance of the Board, review the effectiveness of the Corporate Governance Guidelines, and advise the Board based on its findings.
The Corporate Audit Department periodically conducts internal audits, including audits of the company's subsidiaries, reports the audit results to the President and the Board of Directors, and provides appropriate supervision on business management.
[Corporate Auditors and Board of Auditors]
Corporate Auditors attend the meetings of the Board of Directors and Board of Executive Officers as well as other important meetings, and serve a key supervisory function with regard to decisions made and duties executed by the Directors and Board of Directors. Tsukasa Takahashi, an external corporate auditor, has been elected as an Independent Executive Officer.
Reason for adopting the current corporate governance system
The Board of Auditors established within the company inspects the execution of duties by directors and the Board of Directors. The Board of Directors has dual functions of executing the company's business operations as well as providing oversight over execution of those operations. To more quickly make decisions on the execution of operations, the Board of Directors has introduced the executive officer system and delegated some of the executive decision-making processes to the Board of Executive Officers.
The Board of Directors is composed of directors with diverse backgrounds in terms of specialist knowledge and experience. Three outside directors are on the Board to ensure independence and impartiality. To secure the independence of the Board of Auditors, the majority of auditors on the Board are outside auditors. At least one auditor is an independent auditor in compliance with the stock exchange requirement.
The company has voluntarily set up the Nomination and Compensation Advisory Committee, as an advisory body to the Board of Directors. The Committee will assure greater independence, objectivity, and accountability in drafting policies and standards related to nomination and appointment of directors and their compensation and in the decisions of the Board of Directors on the appointment and compensation of individual directors. Also as an advisory body to the Board of Directors, the company has voluntarily set up the Evaluation Advisory Committee. The Committee will provide greater independence and objectivity in the assessment and analysis of the effectiveness of the overall performance of the Board of Directors.
Corporate Governance Structure
|Election status of External Director||Elected|
|Number of External Directors||3|
|Number of External Directors designated as Independent Executive Officer||3|
|Election status of External Auditor||Elected|
|Number of External Auditors||2|
|Number of External Auditors designated as Independent Executive Officer||1|
Auditors hold meetings periodically and as required with the Accounting Auditor to exchange information. AEON delight has concluded an audit agreement with Deloitte Touche Tohmatsu LLC as the Accounting Auditor and receives audits based on the Company Act and the Financial Instruments and Exchange Act.
The Office of Corporate Audit has been established as the internal audit department and conducts assessments and audits in a planned manner to enhance appropriateness and efficiency of internal control across all business operations with efforts made to ensure smooth management and control of business affairs. Auditors work closely with the Office of Corporate Audit, meeting regularly, in the course of day-to-day activities and as required to exchange information and opinions.
AEON delight has elected Deloitte Touche Tohmatsu LLC as its Accounting Auditor and receives accounting audits from the company. The certified public accountants undertaking this role during the current fiscal period are Kazumi Mima and Hirokazu Miura, while eleven other certified public accountants as well as twelve junior accountants and certified public accountant exam passers offer assistance with the auditing procedure. There is no special vested interest between AEON delight and Deloitte Touche Tohmatsu LLC or any of the public accountants engaging in the auditing work.
Matters related to Internal Control Systems
Basic policy related to the internal control system and its implementation
ON May 18,2018, the Board of Directors adopted a resolution on the basic policy related to systems for ensuring that directors execute their duties in compliance with laws and regulations and with the Company's Articles of Incorporation and for ensuring just and fair execution of business operations of the Company. The resolution is as follows:
(1) The system to ensure that the execution of duties by its directors and employees complies with laws and regulations and with the Company's Articles of Incorporation (compliance system)
① In addition to complying with laws and regulations and with its Articles of Incorporation, the Company always adheres to its Management Principle and Code of Conduct and acts with high ethical standards.
② The Company will implement a system to ensure that the execution of duties by its directors and employees complies with laws and regulations and with its Articles of Incorporation, as follows:
(a) The Board of Directors will make decisions on matters of importance as prescribed by the Board of Directors rules and standards on deliberations as well as provide oversight over the execution of the Company's business operations. Directors will mutually exercise checks and balances within the Board and will ensure that decisions of the Board and the Company's execution of its business comply with laws and regulations and with its Articles of Incorporation;
(b) The Board of Directors will appoint a Compliance Officer, who will have a secretariat in the Office of Compliance set up within the Legal Affairs Department. The Compliance Officer and the Office of Compliance will implement measures necessary for strengthening compliance within the Company and its consolidated subsidiaries (hereafter, collectively, the "AEON delight Group");
(c) The Company will appoint a compliance officer and a compliance manager within each organization, including the AEON delight Group companies, and ensure compliance by all directors and employees;
(d) The Company will require all employees to adhere to laws, regulations, company rules, etc. in the Company's working rules and will organize compliance training periodically or whenever necessary to raise directors' and employees' compliance awareness;
(e) The Company will establish a whistleblower system for early detection and remedy of inappropriate corporate activities and prevention of similar incidents from happening again;
(f) The Corporate Audit Department, as an internal audit department, will examine and assess the effectiveness of the compliance system; and
(g) The Corporate Auditors and the Board of Auditors will, if they recognize problems in the system of compliance of laws and regulations and the Articles of Incorporations, request the Board of Directors to implement measures to remedy such problems.
(2) The system for preservation of information related to execution of duties by the directors (information preservation system)
① The Company will implement a system to appropriately store and preserve documents such as the minutes of the general meetings of shareholders and of the Board of Directors, the preservation of which is a statutory requirement, and other important information, as follows:
(a) In accordance with laws and regulations as well as the internal regulations on document management and other internal regulations, the Company will appropriately store and preserve important documents and electromagnetic digital media relating to execution of business by its directors;
(b) The Company will respond immediately to requests from directors and auditors to examine those documents and media; and
(c) The Company will manage information appropriately in accordance with internal regulations, including regulations on information security management and on protection of personal information, and review such regulations from time to time.
(3) The regulations and systems for management of risk of loss (risk management system)
① The Company will implement a system to make necessary decisions and take necessary steps in response to various risks that may arise during the course of business activities, as follows:
(a) As for risk management during the normal course of business, risk management departments, assigned for each risk category, will manage risk to prevent risk-related incidents and reduce loss;
(b) The Risk Management Committee, with the General Affairs Department serving as its secretariat, will summarize the results of risk assessment and analysis performed by each risk management department and the proposed countermeasures, and will periodically report its summaries to the Board of Directors and the Corporate Auditors. If risk becomes actualized and substantial damage can be expected, directors must promptly report it to the Corporate Auditors; and
(c) In times of emergencies, the Disaster Response Headquarters will be established, with the President acting as the head, to enable quicker decision making and execution than during normalcy. The Company will also maintain, and revise as necessary, regulations, procedures, and manuals for responding to emergencies, including regulations and manuals for responding to earthquakes, and regularly conduct drills; and
(d) The Corporate Audit Department will evaluate the effectiveness of the risk management system by inspecting the work of each risk management department.
② The Company, with its commitment to quality of its operations as a way to concretize "creation of environmental value" enshrined in its Management Principle, will implement a system for maintaining and improving quality so as to continue to win the support of its customers, as follows:
(a) The Company will prepare, and revise as necessary, an integrated quality manual, AEON delight cleaning standards, and other regulations and manuals on business process control.
(b) To ensure that operations are conducted based on such regulations and manuals on quality standards, the Company will provide qualification education for ISO audits to all Center Managers. Staffs who are certified for ISO audits will conduct mutual audits at all centers every year to measure the effectiveness of ISO audits.
(4) The system for ensuring that directors are executing their duties efficiently (system to ensure efficiency)
① The Company will implement a system to ensure that directors are executing their duties with efficiency, as follows:
(a) The Company will set out the rules of the Board of Directors and identify those issues that require the resolution of the Board and those issues that must be reported to the Board. As for other issues before the Board, the company will demarcate decision-making authority based on regulations on decision-making and on responsibilities and authority of the directors. It will also set out clearly the division of labor for executing business operations within the organization and the boundaries of jobs and responsibilities;
(b) The Board of Directors will ensure that sufficient deliberation is made for decisions on important management issues and for overseeing management and execution of business operations, promoting efficiency in the execution of business operations through the use of the executive officer system. Efficiency in the management of AEON delight Group will also be promoted through the use of the Operational Strategy Committee, Development Strategy Committee, Branch Management Committee, Meeting of the Presidents of AEON delight Group Companies, and other deliberative bodies;
(c) To strengthen its supervisory function and ensure its business operations are executed fairly, the Company will have multiple independent outside directors on the Board of Directors. The Board of Directors will voluntarily establish the Nomination and Compensation Advisory Committee and the Evaluation Advisory Committee composed of independent outside directors; and
(d) The basic concepts of the Company's corporate governance, which have been outlined above, will be set down in writing and disclosed in AEON delight Corporate Governance Guidelines.
(5) The system to ensure fair business transactions within the corporate group consisting of the Company, its parent company and subsidiaries (internal control within the corporate group)
① Transactions between AEON delight and any of AEON Co., Ltd., AEON Group companies, or AEON delight subsidiaries will be based on the market price. Measures will be implemented to prevent conflict of interest and to ensure fair transaction.
② AEON delight Group will implement a system for sharing its basic philosophy and principles and reinforcing internal control within the Group, as follows:
(a) The Company will set down the basic framework for governance of subsidiaries by parent companies in the regulations on management of affiliated companies, including provisions on matters that subsidiaries must report to the parent company and matters requiring prior approval of the parent company. The Company will also dispatch its directors and auditors to its subsidiaries to supervise management of the subsidiaries;
(b) The Company will receive monthly performance reports from its subsidiaries. It will organize the Meeting of the Presidents of AEON delight Group Companies to take stock of the performance of its subsidiaries and to share Group-wide information;
(c) AEON delight Group will have a common, unified framework for its compliance and whistleblower systems. The Company will provide training on compliance to AEON delight Group directors and employees every year to raise awareness and ensure compliance;
(d) As for internal control related to financial reporting, risk management, and internal audits, AEON delight will have basic policies implemented across the Group. On the other hand, it will also consider the nature, scope and complexity of the businesses of its subsidiaries so that it can determine the reporting and management systems of each of its subsidiaries; and
(e) The Corporate Auditors and the Corporate Audit Department will regularly inspect and supervise the subsidiaries. In conducting business operation audits, the Corporate Audit Department will place under close scrutiny those subsidiaries that are considered high risk in light of past performance audits and whistleblower incidents.
(6) Matters related to employees assisting the Corporate Auditors (assignment of auditor staff)
① If requested by the Corporate Auditors, the Company will assign employees to work exclusively for the auditors in the Audit Office as assistants.
② Such employees will follow the instructions of the Corporate Auditors and assist their work.
(7) Matters related to the independence of employees assisting the Corporate Auditors (independence of auditor staff)
① The Company must obtain prior approval of full-time Corporate Auditors or of the Board of Auditors on matters related to the employment, selection, transfer, and other personnel decisions related to the employees working in the Audit Office. Full-time Corporate Auditors will perform the performance evaluation of such employees.
② The Company must obtain prior approval of full-time Corporate Auditors or of the Board of Auditors before initiating disciplinary action against employees working in the Audit Office.
(8) The System for enabling directors and employees to report to the Corporate Auditors and other matters related to making reports to the Corporate Auditors (auditor reporting system)
① The directors and employees of AEON delight Group must report immediately to the Corporate Auditors or the Board of Auditors if they discover or come to have knowledge of any fact that will have a significant impact on the Group's business or business performance, or if they discover or come to have knowledge of any breach of laws and regulations or other compliance-related issues.
② The Corporate Audit Department, Office of Compliance of the Legal Affairs Department, and General Affairs Department will regularly report the statuses of internal audits, compliance, and risk management to the Corporate auditors.
③ The Corporate Auditors may attend the Board of Directors meetings and other important meetings related to the management of the Company's business and freely express their views.
④ The Office of Compliance in the Legal Affairs Department will be the office responsible for AEON delight Group's whistleblower system. The Corporate Auditors will, periodically or whenever necessary, receive reports from the office on the status of whistleblower reports made by AEON delight Group's directors and employees through the whistleblower system.
⑤ The Company prohibits anyone from unfavorably treating or taking retaliatory action against any director or employee of AEON delight Group or any user of the whistleblower system for having made a report to a Corporate Auditor or for having used the whistleblower system. The Company will ensure that directors and employees of AEON delight Group are made fully aware of this prohibition.
(9) Other systems for ensuring that the Corporate Auditors can execute their duties effectively (system for ensuring effective audit by auditors)
① The Company will implement a system to ensure that the Corporate Auditors can conduct their audits effectively, as follows:
(a) To enable effective execution of audit duties, the Corporate Auditors will have regular meetings with the President and exchange views on issues that need to be dealt with and other important issues pertaining to the audit;
(b) To enable effective execution of audit duties, the Corporate Auditors will work in close collaboration with the Corporate Audit Department;
(c) The Corporate Auditors will also exchange information with and work in close collaboration with the Accounting Auditor and with outside directors; and
(d) If requested by the Corporate Auditors to make a report or submit related documents and other materials on matters within the remit of the Corporate Auditors, the directors and employees of AEON delight Group will comply with the request promptly and in good faith.
② The Company will meet reasonable requests made by the Corporate Auditors for payment of expenses required for execution of their duties, as follows:
(a) If requested by the Corporate Auditors to make advance payment of costs related to execution of their duties pursuant to the provisions of the Companies Act, Article 388, the Company will promptly settle such expenses or debt; and
(b) The Company will allocate a budget for expenses that the Company deems necessary for the Corporate Auditors to execute their duties. Contingencies paid by the Corporate Auditors will be settled based on a claim made by the Corporate Auditors.
(10) System for eliminating anti-social forces
① The Company will sever any and all ties with anti-social forces. If unfair claims are made against the Company by anti-social forces, the Company will work with specialist outside organizations to take legal steps as an organization.
② If it comes to light that a business partner of the Company is an anti-social force, has business dealings with anti-social forces, or has resorted to a violent and intimidating anti-social behavior, the Company will immediately rescind all transactions and agreements with such a business partner.
(11) Internal control system for financial reporting
① The Company will set out the Regulations on Internal Control Related to Financial Reporting based on the Company's internal control and reporting system. The Company will work towards ensuring the accuracy and reliability of financial reporting of AEON delight Group through education, supervision, and evaluation.
Compensation for Directors and Auditors
Note that compensation of individual executives is not disclosed, as no director or auditor received a total executive compensation of 100 million yen or more on a consolidated basis.
The total executive compensation for directors and auditors in the year ended February 28, 2018, was as shown below.
Number of compensated directors: 13 (of which three were outside directors) (*excludes a director receiving no compensation)
Amount of compensation: 288 million yen (of which 24 million yen was compensation for outside directors)
Number of compensated auditors: 4 (of which two were outside auditors) (*excludes two auditors receiving no compensation)
Amount of compensation: 19 million yen (of which 14 million yen was compensation for outside auditors)
Total number:17 (of which five were outside directors and auditors)
Total amount of compensation: 307 million yen (of which 39 million yen was compensation for outside directors and auditors)
It was resolved at the annual shareholders' meeting on May 24, 2007, that executive compensation for directors may not exceed ¥590 million a year.
It was resolved at the annual shareholders' meeting on May 18, 1990, that executive compensation for auditors may not exceed ¥50 million a year.
System for Timely Disclosure
On information disclosure and transparency, it is stated as follows in the AEON delight Guidelines, Article 11:
1. Our company will disclose the following items in addition to those mentioned herein, for appropriately disclosing information pursuant to law, securing the transparency and fairness of decision making in our company, and achieving effective corporate governance. [Principle 3-1]
2. Basic policies for business administration, including managerial strategies, managerial plans, and capital measures
3. Basic philosophy and policy for corporate governance
4. Quantitative and qualitative information that is helpful for understanding the business conditions of our company, including the information that is found to be demanded by investors through the dialogues with them
5. We will make efforts to disclose and offer information in English within a reasonable range as much as possible, from the viewpoint of international information disclosure.
Important management information (facts that have been determined, facts that have occurred, financial information, etc.) shall be disclosed in a timely and appropriate manner using TDnet by the delight Communication Department in charge of PR and IR based on direction from the Group Strategy Division, which is in charge of handling information, upon discussion and reporting at the meetings of the Board of Directors.
Flow Chart of Internal System of Information Disclosure