Corporate Governance|Corporate Governance

June 30, 2014

Basic Thoughts

We recognize that in order to continuously enhance corporate value, bolstering management oversight functions aimed at enhancing transparency in management and at achieving management goals is extremely important. Based on this recognition we are implementing various efforts directed towards the reinforcement of corporate governance.

Protection of minority shareholders in transactions with the controlling shareholder and in general

Our company's controlling shareholder is our parent company, Canon, Inc. We operate with the understanding that we enjoy a certain degree of independence from the controlling shareholder, and the terms and conditions of transactions with the controlling shareholder are not determined arbitrarily. We protect the interests of all shareholders by carrying out all transactions, not only those with the controlling shareholder, in ways that are appropriate and fair, and do not result in the loss of independence or profits for our company.

Concerning our independence from our parent company

Our parent company is Canon Inc. which, as of June 30, 2014, holds 58.4% of our voting rights. Within the corporate group of our parent company, we are engaged in the overall control of the sales, servicing and marketing of Canon products in Japan as well as in the provision of IT solutions, etc. These activities are divided into clearly segmented businesses.

With regard to transactions with our parent company, we hold exclusive rights to sell within Japan all products (excluding semiconductor exposure device and liquid crystal substrate exposure device) manufactured by Canon Inc. under the Canon brand. The transaction terms are determined through negotiations similar to general transactions in which we present our desired price having taken into consideration the market price. With regard to human resource relations with the parent company, we do not have any directors who concurrently hold posts with the parent company. Given this as well, we are, from the perspective of our business activities, making management decisions and engaging in business activities based on our company’s own management judgments without any restrictions from the parent company and we believe we have secured a certain level of independence from the parent company.

In order to secure the effectiveness of corporate governance as a listed company, we are independently making efforts to also construct a multifaceted internal controls system by bolstering the internal audit section, fostering cooperation between corporate auditors and accounting auditors and by establishing various committees, etc.

Organizational Structure

Company with auditors

Board of Directors

Chairperson of the Board of DirectorsChairman
Number of directors7 directors
Appointment of outside directorsApplicable
Number of outside directors1 outside director
Number of outside directors appointed as independent executive1 outside director

Our company has seven Directors (including one outside director) who strive to ensure that our management decision-making is both rational and efficient. Directors are appointed to serve for terms of one year in a management system that is capable of quickly responding to changes in the business environment. At present, matters of importance are vigorously discussed and decisions on them are made in regular Board meetings held, in principle, once a month, as well as in extraordinary Board meetings held as necessary and management meetings joined by officers of our company and the Presidents of core group companies. In addition, we introduced an Executive Officer System on March 29, 2011. This system will help us speed up management decision-making in the Canon Marketing Japan Group by separating the management decision-making function from the business execution function and reducing the number of directors, and also bolster the business execution system by clarifying responsibility.

Independent outside directorNameReasons for Appointment of Outside Director
(including reasons for appointment as independent executive)
Outside director(independent executive)Norihisa DoiMr. Doi is appointed outside director as he has experience and knowledge as university professor, a member of the board of academic societies, etc. and meets the requirements for appointment as an independent executive.

Auditors and the Board of Auditors

Establishment of the board of corporate auditorsApplicable (established)
Number of corporate auditors5 corporate auditors

In addition to discussing the audit plan at the beginning of the fiscal year with the accounting auditors and exchanging opinions and information through periodic audit reports and timely meetings, our corporate auditors are working to enhance audit functions through, as necessary, accounting auditor onsite visits and attendance at audit reviews.

In addition to receiving explanations from the internal audit section concerning its annual plans and policies regarding internal audits, corporate auditors exchange information with and receive monthly reports from the internal audit section concerning the state of the implementation of internal audits. Additionally, the division supports, in with respect to the matters requested in consultations by the corporate auditors, administrative matters of the corporate auditors and the Board of Corporate Auditors.

Appointment of outside corporate auditorsApplicable
Number of outside corporate auditors3 outside corporate auditors (including two independent executives)

Our Board of Corporate Auditors has a membership of five, including three outside auditors. In accordance with auditing policy, allocation of duties, and other matters determined by the Board of Corporate Auditors, the auditors perform exacting audits through activities such as attendance at meetings of the Board of Directors, interviews with directors or other personnel, and perusal of documents for important decisions, and examination of operational and financial status of the company.

Remuneration for directors

(Remuneration makeup)

Remuneration for directors consists of the basic remuneration as compensation for execution of roles and duties, the executive bonus interlinked with the corporate performance in the fiscal year in question. We do not furnish directors with any incentives such as stock options. Remuneration for corporate auditors consists of basic remuneration that is not linked to corporate performance, based on our policy of ensuring the neutrality of audits.

(Method of determination)

Basic remuneration

Ceilings are placed on the total amount of remuneration for all directors and for all corporate auditors, respectively, by resolution at the general meeting of stockholders. The amount of remuneration paid to each director is determined by decision of the Board of Directors, and that for each auditor, by consultation among the auditors.

Executive bonus

A calculation is made of the total amount to be paid based on linkage with the corporate performance in the fiscal year in question. This amount is then placed before an ordinary general meeting of stockholders for its approval. The amount paid to each director is determined by decision of the Board of Directors based on the total amount approved at the general meeting of stockholders and with consideration of status and other factors.

Canon Marketing Japan Inc.

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