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Hitachi and its listed subsidiaries are companies with Nominating Committee, etc., under the Companies Act of Japan. By demarcating responsibilities for management oversight and those for the execution of business operations, Hitachi is working to create a framework for quick business operation, while making management highly transparent.
In addition, Hitachi is executing business strategies formulated to enable the Group to demonstrate its collective strengths. Moreover, some of Hitachi’s Directors and Executive Officers serve concurrently as Directors and Executive Officers at Group companies, thereby strengthening integrated management of the Group and improving management oversight of Group companies. In these ways, Hitachi is working to increase corporate value.
The Board of Directors approves basic management policy for the Hitachi Group and supervises the execution of the duties of executive officers and directors in order to sustainably enhance corporate value and shareholders’ common interests. The basic management policy includes the medium-term management plan and annual budget compilation. The Board of Directors focuses on strategic issues related to the basic management policy as well as other items to be resolved that are provided in laws, regulations, the Articles of Incorporation, and Board of Directors Regulations. As of June 22, 2016, the Board of Directors was made up of 13 Directors, and two of them concurrently serve as Executive Officers. Hitachi aims to reinforce the oversight function of the Board of Directors, of which nine outside Directors, including non-Japanese, account for the majority, reflecting their global and diverse viewpoints. Furthermore, Hitachi formulated and published Corporate Governance Guidelines outlining the framework of corporate governance, such as the function and composition of the Board of Directors, qualifications for Directors, and criteria for assessing the independence of outside Directors.
Within the Board of Directors, there are three statutory committees-the Nominating Committee, the Audit Committee, and the Compensation Committee-with outside Directors accounting for the majority of members of each committee. The Board of Directors meetings were held 8 days during the fiscal year ended March 31, 2016, and the attendance rate of Directors at these meetings was 100%. To assist with the duties of the Board of Directors and each committee, staffs who are not subject to orders and instructions of Executive Officers are assigned.
The Nominating Committee has the authority to determine particular proposals submitted to the general meeting of shareholders for the election and dismissal of Directors. The Nominating Committee consists of four Directors, three of whom are outside Directors.
The Nominating Committee meetings were held 6 days during the fiscal year ended March 31, 2016.
The Audit Committee has the authority to audit the execution of duties of Directors and Executive Officers and to determine on proposals submitted to the general meeting of shareholders for the election and dismissal of accounting auditors. The Audit Committee consists of five Directors, including three outside Directors and one standing Audit Committee members.
The Audit Committee meetings were held 16 days during the fiscal year ended March 31, 2016.
The Compensation Committee has the authority to determine remuneration policies for Directors and Executive Officers and remuneration for individuals based on them. The Compensation Committee consists of four Directors, three of whom are outside Directors.
The Compensation Committee meetings were held 9 days during the fiscal year ended March 31, 2016.
Executive Officers decide on matters delegated to them by the Board of Directors and execute Hitachi’s business affairs within the scope of assignments determined by the Board of Directors. As of August 1, 2016, Hitachi had 34 Executive Officers.
The Senior Executive Committee is a council to ensure that President deliberately decides on important managerial matters, which may affect the business of Hitachi or the Hitachi Group, through discussing from diverse viewpoints. This committee consists of eight members as of June 22, 2016: President & CEO, four Executive Vice President and Executive Officers and three Senior Vice President and Executive Officers.
The Company’s Compensation Committee sets forth the policy on the determination of the amount of compensation, etc. of each Director and Executive Officer pursuant to applicable provisions of the Companies Act. Compensation will be commensurate with the ability required of, and the responsibilities to be borne by, the Company’s Directors and Executive Officers, taking into consideration compensation packages at other companies.
Compensation for Directors will consist of a monthly remuneration and a year-end allowance. Monthly remuneration will be decided by adjusting basic remuneration that reflect full-time or part-time status, committee membership and position, travel from place of residence, etc. Year-end allowance will be a predetermined amount equivalent to about 20% of the Director’s annual income based on monthly remuneration, although this amount may be reduced depending on financial results. A Director concurrently serving as an Executive Officer will not be paid compensation as a Director.
Compensation for Executive Officers will consist of a monthly remuneration, a performance-linked component and a medium and long-term incentive compensation. The higher position Executive Officers hold, the higher proportion of variable pay (the sum of performance-linked component and medium and long-term incentive compensation, except monthly remuneration as fixed pay) will be set to the total annual compensation. Monthly remuneration will be decided by adjusting a basic amount to reflect the results of an assessment. The basic amount is set in accordance with the relevant position. Performance-linked component will be decided by adjusting a basic amount to reflect financial results and individual performance. The basic amount is set within the range of about 25 to 35% of the total annual compensation of each Executive Officer in accordance with the relevant position. Medium and long-term incentive compensation* will be stock options as stock-based compensation with share price conditions (stock acquisition rights with the strike price of ¥1), the number of which to be granted will be determined within the range of about 10 to 40% of the total annual compensation of each Executive Officer in accordance with the relevant position. As for expatriates, cash award based on the value of the Company’s share price with the similar conditions will be substituted for the stock options.
The compensation structure for Directors and Executive Officers was re-examined starting with compensation for the fiscal year ended March 31, 2009, and the retirement allowance was abolished.
Compensation for Directors and Executive Officers for the fiscal year ended March 31, 2016, is as follows:
|Category||Total amount of compensation, etc.
(Millions of yen)
|Total amount of each type
(Millions of yen)
|Monthly remuneration||Year-end allowance and performance-linked component|
In addition, Directors or Executive Officers whose compensation from Hitachi and its subsidiaries is not less than ¥100 million and the amount of their compensation are as follows:
(Millions of yen)
|Total amount of each type (Millions of yen)|
Hitachi, Ltd. (The Company)
Hitachi, Ltd. (The Company)
Hitachi Rail Europe Ltd.
Executive Chairman and CEO
Hitachi Information &
Global Holding Corporation
(Consolidated subsidiary) *5
Chairman of the Board and CEO
To ensure the reliability of the financial reporting for the Group as a whole, the Hitachi Group has documented control procedures, from company-level controls to process-level controls, in accordance with policies determined by the J-SOX Committee. In regard to assessment of the internal control over financial reporting, Hitachi is advancing the establishment of systems for objective assessment at each business unit and major Group company. The J-SOX Committee’s office summarizes the assessment results of each company to confirm the effectiveness of internal control on a Group-wide, consolidated basis.