By enhancing corporate governance, the Hitachi Group is promoting speedier, more efficient management and is meeting the expectations of stakeholders as a business that merits the public’s trust.
Hitachi operates under a committee system.* We have strictly separated business supervision and execution to establish a business structure for speedy, highly transparent management. We task outside directors to draw on their knowledge, experience, and independent perspective when supervising executives and other senior managers to reinforce the role of the Board of Directors. We formulated the Hitachi Group Codes of Conduct to develop common values for all Group members and to enable us to share among all Group companies a common understanding of our corporate social responsibility.
Governance Structure of Hitachi, Ltd.
Compensation for every director and executive officer is set by the Compensation Committee based on the Japanese corporate law governing companies with committees.
Compensation for directors and executive officers consists of monthly salaries together with year-end allowances for directors and performance-based bonuses for executive officers. While compensation for directors is generally fixed, performance-based bonuses for executive officers are set at around 30 percent of annual compensation. Bonuses are determined individually according to business performance and the outcome of work carried out under the officers’ management.
Beginning with compensation for fiscal 2008, the scheme for directors and executive officers was revised to eliminate retirement allowances. In fiscal 2010, executives were compensated as follows:
FY 2010 Compensation
| Category | Salaries and year-end allowances or performance-based bonuses | |
|---|---|---|
| Recipients (number) | Total amount (millions of yen) | |
| Directors (outside directors) |
12 （5） |
231 （99） |
| Executive officers | 28 | 1,586 |
| Total | 40 | 1,817 |
As a public company listed on the New York Stock Exchange, Hitachi, Ltd. is registered with the U.S. Securities and Exchange Commission and is subject to the Sarbanes-Oxley Act (SOX*1). A comparable assessment and report on internal control over financial reporting (J-SOX*2) came into effect in Japan at the beginning of fiscal 2008. Accordingly, the Hitachi Group as a whole and all listed Group companies now evaluate internal control systems and report the results on a consolidated basis.
The Hitachi Group is committed to full compliance with these and other applicable laws and regulations. Beyond that, we consider it an important social responsibility to thoroughly implement our internal control systems, to improve the transparency and credibility of our businesses, and to strengthen our management structure by clarifying, examining, and visualizing our management and operational frameworks.
As a conglomerate of many companies, we have adopted a framework that assigns accountability at the Group level, including responsibilities for the design and operation of internal controls. Therefore, all Hitachi Group companies are required to revise, document, and evaluate the effectiveness of their operations in line with guidelines determined by specific levels of corporate scale and business content. Management assessment of each company is collected at the Group level, and is reported to Hitachi, Ltd. along with certifications.
Hitachi Internal Control Assessment Framework
Hitachi, Ltd. optimized the management structure and instituted an in-house company system in October 2009 to ensure swift management action and to become more competitive by restructuring, particularly in the Social Innovation Businesses. These eight in-house companies (businesses) are Power Systems, Rail Systems, Industrial & Social Infrastructure Systems, Urban Planning and Development Systems, Information & Control Systems, Information & Telecommunication Systems, Defense Systems, and Battery Systems. From fiscal 2011, we rated each company and transferred authority to them so that they could speedily pursue independent management. We base the ratings of each company on such factors as FIV,* operating profit, and cash flow, reflecting these ratings in compensation evaluations for company management teams.
The Group Strategy Committee deliberates on Group-wide management measures to optimize overall Group strategies and management resources.
