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Corporate Information

Corporate Governance

Basic Stance

In the business area in which we operate, used car distribution centering on the auto auction business, our group's management goal is “to increase corporate value” through continuous business expansion.
Clearly, it is natural that the increase in shareholder value is the most important issue as since we are an incorporated public company, but, as illustrated and exemplified by the six core elements of our corporate vision which are "the creation of a fair market", "achieving symbiosis with our members", "providing service to consumers", “delivering returns to our shareholders,” “respecting our employees,” and “making a contribution to the community”, our corporate value is the result of fulfilling our responsibilities to all of these interested parties (stakeholders). As such we conduct the management of our operations on the basis of the recognition that “shareholder value” is realized through “corporate value”.
In addition, since every company is a member of society, it is natural that it should comply with social norms in its business activities, and so it is essential to comply with and to fully satisfy the requirements of both the Basic Policy on Corporate Governance and of the Corporate Governance Code. By conducting thorough evaluations of our operations and by formulating an improvement plan for the next fiscal year at the final regular meetings of the Board of Directors held at the end of each business year, we make every effort to ensure high performance in terms of the quality of our accountability (duty to explain and account for our activities) and of highly transparent management, and to improve our corporate governance.

Corporate Governance System

Simplified Chart of Corporate Governance
Main Items Content
Form of Organizational Design Company with Board of Auditors
Number of Directors (Female Directors) 10 persons (1 person)
External Directors (Female Directors) 3 persons (1 person)
Number of Corporate Auditors (Female Corporate Auditors) 3 persons (-)
Outside Corporate Auditors (Female Corporate Auditors) 2 persons (-)
Number of Times Board Meetings Held (FY3/2019) 8 times
(Average Attendance Rate of External Directors) 100%
(Average Attendance Rate of External Corporate Auditors) 100%
Term of Office of Directors 1 year
Adoption of Executive Officer System Adopted
Voluntary Committee of Board of Directors Nomination and Compensation Committee
Audit Corporation KPMG AZSA LLC
The Board of Directors

The Board of Directors consists of 10 Directors (including 3 Outside Directors), and is within the scope of the number of members specified in the Articles of Incorporation (up to 12). The basic idea is to have the number of members considered appropriate from the perspective of ensuring substantial discussions at the Board of Directors, while giving due consideration to balance and diversity of knowledge, experience, and ability, etc., in each area of the Company’s business. The role of the Board of Directors is to make decisions on important matters concerning the management of the Company and on matters that the Board of Directors is to decide upon in accordance with laws and regulations and with the Articles of Incorporation, in accordance with the provisions of the Board of Directors and of reporting standards, with decisions that are to be made being delegated to Directors and other executive officers according to their importance and nature, etc., for (final) approval by means of a document being circulated to all decision makers.
When nominating Director candidates and selecting executive officers, persons with an abundance of experience, a significant degree of insight, and a high level of expertise as a Director or as an Executive Officer of the Company are to be selected as candidates, with nominating and compensation committees, including the President and CEO and independent Outside Directors being formed and consulted, to make decisions based on the reports of the committees at the board of directors meeting.

The Board of Corporate Auditors

The Board of Corporate Auditors consists of three members (including two Outside Corporate Auditors), who attend the meetings of the Board of Directors and conduct surveys and audits of the Directors' execution of their duties and other business and asset-related considerations. Furthermore, the Board works in cooperation with the Internal Auditing Office, which conducts audits of each division and office (including at the Company’s subsidiaries).
When nominating candidates for Corporate Auditor, persons with an abundance of experience, a significant degree of insight, and the high level of expertise appropriate for a Corporate Auditor of the Company are considered as candidates, with the final decision being made after obtaining the consent of the Board of Corporate Auditors.

Corporate Governance Flowchart

Outside Directors and Corporate Auditors

The Company has appointed three Outside Directors to ensure management transparency and fairness. We consider all three Outside Directors to be Outside Executives in relation to whom there is no concern of any possibility of conflicts of interest arising with our ordinary shareholders, and have filed a report about their status as independent officers at the Financial Instruments Exchange on which the Company is listed. It is expected that, in relation to such independent directors, actions can be taken, such as stating such opinions as need to be taken into consideration at the decision phase etc. regarding execution of business by the Board of Directors etc. to safeguard the interests of our ordinary shareholders. Furthermore, of the Company’s three Corporate Auditors, Mr. Toru Niwa and Mr. Ryoichi Miyazaki are Outside Corporate Auditors and have been reported as being independent officers because they both are possessed of a high degree of independence. These independent Corporate Auditors attend the meetings of the Board of Directors and conduct thorough investigations and audits of directors' execution of their duties and of other business operations and asset conditions.
Although there is no special provision stipulated in relation to the independence of the Company in its selecting Outside Directors and Outside Corporate Auditors, the Company is expected to maintain an objective and appropriate oversight or audit function and role, and one that is based on a wide range of experiences and professional insights, and so they have been appointed in accordance with the basic idea that there is no risk of any conflicts of interest arising with our ordinary shareholders.
Outside Directors and Outside Corporate Auditors regularly hold meetings to exchange information, share views among themselves, and work together. Furthermore, the Outside Corporate Auditors, the Internal Audit Department and the Accounting Auditors also exchange views and work together in a similar manner.

Reasons for Appointment of Outside Officers and Status of Activities
Category Name Reason for Appointment Status of Activities in the FY3/2019
Director Hitoshi Tamura Mr. Tamura has abundant experience in improving the quality of management having served as the Chief Judge of the Japan Quality Award for many years and also possesses a wide-ranging knowledge of customer satisfaction management. Since taking office as an Outside Director in June 2014, the Company has made use of Mr. Tamura’s knowledge to provide advice about various aspects of its overall management and to contribute to the improvement of its corporate value. Meetings of the Board of Directors
8 out of 8 (100% attendance rate)
Director Akihiko Kato Mr. Kato has experience of working at the Bank of Japan, as a Director of the Gifu Shinkin Bank, and also of corporate management as a Managing Director. Since taking office as an Outside Director in June 2014, the Company has made use of Mr. Kato’s knowledge to provide advice about various aspects of its overall management and to contribute to the improvement of its corporate value. Meetings of the Board of Directors
8 out of 8 (100% attendance rate)
Director Nobuko Takagi Ms. Takagi is a Certified Public Accountant, and has experience of working at both audit corporations and tax accountant corporations, and has also taken charge of M&A promotions at M&A advisory companies and operating companies, and so has abundant experience and specialized knowledge regarding finance and accounting, and M&A. Since taking office as an Outside Director in June 2018, the Company has also made use of Ms. Takagi’s knowledge for advice about various aspects relating to its overall management. Meetings of the Board of Directors
7 out of 7 (100% attendance rate)
Corporate Auditor Toru Niwa With abundant experience as a Certified Public Accountant and specialized knowledge in the areas of finance and accounting, Mr. Niwa contributes comments as required, from his professional standpoint as a Certified Public Accountant, at the meetings of the Board of Directors and at the meetings of the Board of Corporate Auditors. Meetings of the Board of Directors
8 out of 8 (100% attendance rate)
Meetings of the Board of Corporate Auditors
9 out of 9 (100% attendance rate)
Corporate Auditor Ryoichi Miyazaki Mr. Miyazaki has abundant experience as a lawyer and an extensive knowledge of corporate legal affairs and contributes comments as required, from his professional standpoint as a lawyer, at the meetings of the Board of Directors and at the meetings of the Board of Corporate Auditors. Meetings of the Board of Directors
8 out of 8 (100% attendance rate)
Meetings of the Board of Corporate Auditors
9 out of 9 (100% attendance rate)

Note: Attendance at meetings of the Board of Directors for Nobuko Takagi during the fiscal year that ended in March 2019 is for the period that began on June 12, 2018, which is when Ms. Takagi became a director.

Nomination and Compensation Committee

The Nomination and Compensation Committee, as an advisory body to the Board of Directors, deliberates on the appropriateness of the contents of the following proposals submitted to the Board of Directors and reports to the Board of Directors.
(1)Nominations of Director candidates and the appointment of Executive Officers
(2)Policy on the remuneration of Directors and Executive Officers and on the specific content of the remuneration for each individual
(3)The selection and dismissal of Representative Directors and Senior Directors
(4)The discharge of Directors and Executive Officers

Evaluation of the Effectiveness of the Board of Directors

In order to evaluate the effectiveness of the Board of Directors, the Company conducts a questionnaire about each Director and each Corporate Auditor, and reports the results to the Board of Directors. The outline is as follows.
[Evaluation Items]
(1) About the composition of the Board of Directors
(2) About the administration of the Board of Directors
(3) About the decision-making and supervisory functions of the Board of Directors
(4) About the support system(s) for the Directors and Corporate Auditors
(5) About training, information exchange, and dialogue with shareholders (investors)
[Summary of the Results of the Evaluation]
For fiscal year that ended in March 2019, the results of the Evaluation were reported at the meeting of the Board of Directors held in March 2019, and it was concluded that there were no problems with the effectiveness of the Board of Directors, in relation to issues such as the composition and frequency of the meetings of the Board of Directors or with the system for the provision of materials in advance. We shall continue to conduct this process of evaluation and analysis once a year to ensure that the effectiveness of the Board of Directors is maintained in the future.

Executive Remuneration

Remuneration for Directors is be a monthly remuneration that will be paid based on the size of the role and the scope of responsibility for each position. In addition, share-based compensation with stock options linked to the medium- and long-term performance of Directors (excluding Outside Directors), and stock-compensation-type stock options (with the condition of exercise to be that the holder of the option rights has lost any position as a Director, Corporate Auditor or Executive Officer) are to be granted. With regard to the remuneration of Directors, this is to be decided by the Board of Directors after consultation with the Nomination and Remuneration Committee, which consists of the Representative Director and President and Independent Outside Directors, with the aim of ensuring the appropriateness of the level and transparency of performance evaluation.
Furthermore, with regard to remuneration of Directors (excluding Outside Directors), the level and type, and the proportion, etc., of this compensation is to be subject to regular review decided by the Board of Directors will be further clarified in order to the link with the Company's performance and to further improve the medium- and long-term performance and corporate value of the Company.
With regard to the Corporate Auditors, remuneration is decided through discussions with the Corporate Auditors, and in order to ensure a high degree of independence, only monthly remuneration will be paid.

Executive Classification Total Amount of Remuneration etc. (Million yen) Total Amount by Type of Compensation, etc. (Million yen) Number of Eligible Executives (Persons)
Basic Remuneration Stock Remuneration-type Stock Options
Directors
(Excluding Outside Directors)
271 217 54 7
Auditors
(Excluding Outside Corporate Auditors)
6 6 1
Outside Executive Officers 24 24 6

(Notes):
1. The table above includes one director who retired as of the closure of the 38th Annual General Meeting of Shareholders held on June 12, 2018.
2. There are no officers who are also employees.

Internal Audits and Corporate Auditor Audits

As the organization responsible for the Company’s Internal Audits and Corporate Auditor Audits, the Internal Audit Office (3 members) is an independent organization and strives to strengthen and enhance the quality of the discharge of its functions, including the operation and evaluation of the internal controls related to financial reporting. Moreover, the Corporate Audit involves, three Corporate Auditors, including Tax Accountants, in addition to Certified Public Accountants and lawyers, attending the meetings of the Board of Directors and auditing the Directors' business execution and financial conditions. With regard to the Audit System, we collaborate with the Internal Audit Office and the Accounting Auditors to further improve internal control, including on-site audits of subsidiaries.

Accounting Audits

At the 27th Ordinary General Meeting of Shareholders held on June 26, 2007, the Azusa Audit Corporation (now the Azusa Limited Liability Audit Corporation) was appointed as the Accounting Auditor and has remained so to the present. The following persons are the Certified Public Accountants who have conducted accounting audits.

Names of the Certified Public Accountants Conducted the Audits Name of the Audit Corporation
Designated Limited Liability Partner/Engagement Partner Hideo Okano KPMG AZSA LLC
Designated Limited Liability Partner/Engagement Partner Atsushi Ohashi KPMG AZSA LLC

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