Corporate Governance System
This section covering Link and Motivation's corporate governance system is excerpted from the Securities Report (Yuka Shoken Hokokusho) that Link and Motivation issued on November 15, 2006 as part of its application to list its shares.
- 1. Company Institutions and Internal Control System
- 2. Risk Management System
- 3. Internal Audits, Audits by Statutory Auditors and Accounting Audits
- 4. External Directors and External Auditors
- 5. Compensation of Directors and Statutory Auditors
- 6. Compensation of Independent Auditors
- 7. Institutions for Allocating Internal Capital Resources for Dividends and Other Purposes
- 8. Requirements for Electing and Removing Directors
- 9. Limitation of Liability of Directors and Statutory Auditors
- 10. Requirements for Extraordinary Resolutions of the General Meeting of Shareholders
1. Company Institutions and Internal Control System
Link and Motivation's management system employs the institutions of a joint stock corporation as defined by the Company Law, principally a Board of Directors responsible for deciding important matters and providing supervision, representative directors responsible for business execution, and a Board of Auditors responsible for audits.
The Board of Directors manages according to the following policies. The Board of Directors consists of seven directors and three auditors to allow swift decision making. In principle, the Board of Directors meets once a month, and may meet at other times should issues requiring its attention arise. The three auditors attend meetings of the Board of Directors to audit decisions that the Board of Directors makes. Moreover, the Group Management Committee, which consists of directors and the general managers of each of the business divisions, meets twice each month to discuss operational performance indicators and exchange opinions. The Company's Articles of Incorporation limit the number of directors to 12.
On the other hand, the Board of Auditors consists of three auditors: one full-time auditor and two external auditors. In principle, the Board of Auditors meets once a month and confirms issues including appropriate management by the Board of Directors by supervising the operational execution of directors and exchanging opinions on issues including compliance. In addition, Link and Motivation has created a forum where internal auditors and accounting auditors can discuss issues and engage in mutual communication in working to enhance the effectiveness of audits conducted by the Board of Auditors, internal audits and accounting audits.
2. Risk Management System
An executive within the Corporate Design Office of the General Affairs and Human Resources Unit is responsible for risk management to support comprehensive management of and response to risks that arise in the course of corporate management. The risk management executive's responsibilities include determining policies to preclude and respond to risks that arise in the course of corporate management including information leaks and accidents, revising operational rules, supervising information systems, and promoting thorough employee education. Moreover, this executive publicizes incidents that may occur using internal reporting systems.
3. Internal Audits, Audits by Statutory Auditors and Accounting Audits
- 1. Internal Audits
One full-time auditor who reports directly to the president is responsible for internal audits. This auditor regularly conducts required audits and examinations according to the instructions of the president and covering a broad array of areas including the propriety and efficiency of business execution and adherence to and maintenance of the risk management system. This auditor presents the results thereof to the president, and subsequently performs functions including progress management in working on a daily basis to ensure that findings are reflected in management.
- 2. Audits by the Statutory Auditors
Link and Motivation currently employs three statutory auditors. One is a full-time auditor, and two are external, part-time auditors. These auditors attend important meetings, including the monthly meeting of the Board of Directors and the twice monthly meetings of the Group Management Committee. This serves as a system that effectively permits audits of the Board of Directors' execution of its responsibilities. Moreover, auditors issue reports on the results of audits and exchange opinions in areas including compliance issues and provide advice to the Board of Directors as required.
- 3. Accounting Audits
Link and Motivation has concluded an auditing contract with the accounting firm Arata, which is a member firm of PricewaterhouseCoopers International Limited. Katsunori Sasayama and Takahiro Nakazawa are the certified public accountants who conduct accounting audits for Link and Motivation. Seven certified public accountants, six assistant certified public accountants and six others assist them in conducting accounting audits. These accountants have been conducting audits for less than seven years.
As discussed above, the internal auditors, statutory auditors and accounting auditors in charge of the above audits coordinate their efforts in order to raise the effectiveness of audits.
4. External Directors and External Auditors
Link and Motivation has no external directors. However, Link and Motivation employs external auditors as defined by Article 2, Paragraph 16 of the Corporation Law.
As of December 17, 2007, Kenji Tominaga, an external auditor, held 440 shares of Link and Motivation stock. In addition, Eiichi Kimura, an external auditor, held 40 shares of Link and Motivation stock. Link and Motivation acquired 12 shares of Ijust Inc. stock valued at 50 million yen from Kenji Tominaga, an external auditor, as a result of the June 2006 acquisition of Ijust Inc. (current name: Link Associa Inc.). Link and Motivation has no other interested parties to report.
5. Compensation of Directors and Statutory Auditors
Compensation of directors and statutory auditors in the year ended December 31, 2006 was as follows:
|Compensation paid to directors||99,270,000 yen (Link and Motivation has no external directors)|
|Compensation paid to statutory auditors||14,280,000 yen (Including 2,880,000 yen paid to external auditors)|
In addition to the compensation listed above, Link and Motivation paid 77,445,000 yen as employee compensation to directors who serve concurrently as employees.
6. Compensation of Independent Auditors
Compensation of independent auditors in the fiscal year ended December 31, 2006 was as follows:
|Compensation for work defined by Article 2, Paragraph 1 of the Certified Public Accountant Law||25,000,000 yen|
7. Institutions for Allocating Internal Capital Resources for Dividends and Other Purposes
Link and Motivation renders decisions regarding issues such as the use of internal capital reserves for dividend payments stipulated by Article 459, Paragraph 1 of the Company Law, except when otherwise required by law, according to the Articles of Incorporation as promulgated by the Board of Directors without recourse to the General Meeting of Shareholders. The Board of Directors is authorized to handle issues including the use of internal capital reserves for dividends within the objectives of the policies covering regular dividends and capital resources.
8. Requirements for Electing and Removing Directors
Link and Motivation's Articles of Incorporation stipulate that resolutions to elect directors require a simple majority of the votes of more than one-third of shareholders with voting rights.
Link and Motivation's Articles of Incorporation stipulate that resolutions to remove directors require a simple majority of the votes of more than two-thirds of shareholders with voting rights.
9. Limitation of Liability of Directors and Statutory Auditors
Link and Motivation's Articles of Incorporation stipulate a resolution by the Board of Directors limiting the responsibility borne by directors and statutory auditors within the scope defined by the Company Law so that directors and statutory auditors are able to fully execute their assigned duties.
10. Requirements for Extraordinary Resolutions of the General Meeting of Shareholders
For extraordinary resolutions by the General Meeting of Shareholders as defined by the Company Law, Article 309, Paragraph 2, Link and Motivation's Articles of Incorporation requires a two-thirds majority of the votes of at least one-third of shareholders with voting rights. The objective of this requirement is to permit smooth operation of the General Meeting of Shareholders because of its reduced quorum.