Basic Views on Corporate Governance
The Group Mission of the IMAGICA GROUP is to strive to create new value with honesty and sincerity, and aim to be a visual communications group that provides the world with surprise and excitement. We recognize that corporate governance is one of the important tasks of group management to achieve this, and implement various measures to improve management transparency, ensure compliance, and pursue swift decision-making.
In order to implement these views on corporate governance properly, we have established the Basic Policy on Establishing a System of Internal Controls, which sets forth our basic views on internal controls and our policy on implementing them.
We also established the Corporate Governance Guidelines on September 1, 2019. These guidelines express the basic position of the IMAGICA GROUP on corporate management and corporate governance.
Overview of the Current Corporate Governance Structure
1. Board of Directors
The Board of Directors consists of eight directors who make decisions regarding management and supervise the performance of duties. They are Fumio Nagase, chairman & representative director; Nobuo Fuse, president and representative director; Masakazu Morita and Toshiaki Okuno, directors; Atsuko Murakami, outside director; Jun Ando, director and audit & supervisory committee member; and Juro Nakauchi and Osamu Chiba, outside directors and audit & supervisory committee members.
2. Audit & Supervisory Committee
The Audit & Supervisory Committee consists of three directors who are also audit & supervisory committee members: Jun Ando, a full-time audit & supervisory committee member who also serves as committee chair, and Juro Nakauchi and Osamu Chiba, who are outside directors. The committee strives to strengthen the functions of auditing and supervising the performance of duties by directors and to enhance the corporate governance system.
3. Executive Officer System
The Company separates the functions of management supervision and operational execution to facilitate swift decision-making and respond appropriately to the external environment, and has adopted an executive officer system. The company has appointed eight executive officers: Nobuo Fuse, president & CEO; Masakazu Morita, managing executive officer; Toshiaki Okuno, executive officer in charge of animation in the Content Creation business segment; Takaaki Kabuto, executive officer in charge of movies and commercials in the Content Creation business segment; Katsumi Obayashi, executive officer in charge the Production Services business segment; Atsushi Shinohara, executive officer in charge of human resource consulting in the Production Services business segment; Takashi Takimizu, executive officer in charge of Imaging Systems & Solutions; and Shunjiro Nagase, executive officer in charge of global business.
4. Personnel Advisory Committee
The Personnel Advisory Committee examines and deliberates on policies concerning the appointment and dismissal of directors (including outside directors), individual director compensation, and overall compensation of directors and executive officers, and reports to the Board of Directors. The Personnel Advisory Committee has four committee members: Fumio Nagase, the chairman and representative director and committee chair; Atsuko Murakami, an outside director; and Juro Nakauchi and Osamu Chiba, who are both outside audit & supervisory committee members.
Basic Views on Establishment of an Internal Control System and Status of Establishment
- The Company has established a basic policy on the establishment of systems to ensure the proper conduct of business (hereafter, “internal controls”), based on the Companies Act and the Ordinance for Enforcement of the Companies Act.
- The objectives targeted in establishing a system of internal controls are compliance with laws and regulations, loss risk management, and appropriate and efficient business operation. The company has taken various steps to meet these objectives, including establishment of rules, organization and structure, formulation of implementation plans, and monitoring activities.
- We also take appropriate steps to ensure the reliability of the internal control system with respect to financial reporting, based on the Financial Instruments & Exchange Act.
- The Board of Directors determines the Basic Policy on Establishing a System of Internal Controls, and oversees and monitors the internal control system for the company.
- As the chief executive officer, the president and representative director is responsible for managing the internal control system based on the basic policy determined by the Board of Directors.
- The Corporate Planning Department is the department responsible for ensuring that the internal control system functions more effectively, and works to establish the internal control system from a company-wide, cross-organizational perspective.
- The Company continually evaluates the status of the internal control system based on this basic policy and take the steps necessary to improve it. The company also revises this policy on an ongoing basis to response to changes in the management environment, and works to establish a more effective internal control system.
We have established the following structure and elements based on the views noted above:
1) System to Ensure Directors and Employees Comply with Laws & Regulations and the Articles of Incorporation in Performing Duties
The company’s Board of Directors establishes rules on corporate ethics and other rules concerning the compliance system as standards to ensure the compliance of directors and employees with laws and regulations and social norms. The General Affairs Department oversees compliance initiatives across the company to ensure strict compliance, plays the main role in training and education, and has also established a whistleblowing and consultation hotline as a means of providing information directly to employees about actions and events they have questions about in regard to compliance.
The Company is resolutely opposed to antisocial forces that threaten social order and sound conduct of the company and takes systematic steps to oppose them.
2) Retention & Management of Information Concerning the Performance of Duties by Directors
nformation concerning the performance of duties by directors is recorded in writing or on electronic media (hereafter, “documentation”) and retained. Directors may view such documentation at any time.
3) Rules on Loss Risk Management and Other Systems
We have established internal rules on risk management to address various risks inherent to business activities, and have built a risk management structure that is overseen by the General Affairs Division. When a serious event occurs, a crisis response headquarters is established with the president and representative director as the head, and rapid action is taken to prevent even greater damage.
4) System to Ensure that Directors Perform their Duties Efficiently
The Board of Directors specifies shared company-wide goals for directors and employees, and uses the following management and operating systems to increase the efficiency of directors in performing their duties.
- Formulates internal rules on responsibilities and authority and on decision-making.
- Uses an executive officer system
- Formulates the Mid-Term Business Strategy, establishes performance goals and a budget based on the Mid-Term Business Strategy, and implements IT-based performance management
- Performance is reviewed in Board of Directors meetings and other meetings, and measures to improve performance are implemented regularly.
5. System to Ensure Proper Operation of the Corporate Group Consisting of IMAGICA and its Group Companies
As a holding company, IMAGICA GROUP allocates the necessary management resources from the perspective of what is optimal for the company as a whole. We also ensure appropriate operation of group companies as described below while respecting the autonomy of each company, in accordance with the Rules on Group Management.
- We require group companies to discuss or report on important management matters to the Company and receive regular reports on business plans and other matters from each group company.
- We manage risks for the group as a whole by working with each group company to respond to various risks related to the corporate activities of the group.
- We formulate a Mid-Term Business Strategy, set a budget and performance goals for each group company, and use IT to manage performance, based on that strategy. This ensures that the directors of each group company perform their duties efficiently.
- The Company has established a compliance whistleblowing and consultation hotline for the entire group. We ensure effective compliance in the group by making sure that everyone is aware of this.
- The Internal Auditing Office performs internal audits in a timely manner.
6. System to Ensure Reliability of Financial Reports
To ensure reliable financial statements, the group has established internal controls for financial statements. We evaluate these internal controls on a continuous basis as we implement them to make sure that they are functioning effectively, and implement improvements as necessary.
7. System to Ensure the Independence of Employees Requested to Assist the Audit & Supervisory Committee from Directors (Excluding Directors Who are Audit & Supervisory Committee Members)
The Audit & Supervisory Committee Office was established to assist the Audit & Supervisory Committee in performing its duties. Staff members are assigned to assist audit & supervisory committee members and decisions on the personnel evaluations for and transfer of these staff members require the consent of the Audit & Supervisory Committee.
8. System for Group Directors (Excluding Directors Who are Audit & Supervisory Committee Members) and Employees to Report to the Audit & Supervisory Committee and System for Others to Report to the Audit & Supervisory Committee
A system has been established for group directors (excluding directors who are also audit & supervisory committee members) and employees to promptly report to the Audit & Supervisory Committee on legally mandated matters, and also on important management matters, other matters that could have a serious adverse impact on the company and the corporate group, the status of internal control implementation, and the status of reporting via the compliance whistleblowing and consultation hotline. Directors (excluding directors who are also audit & supervisory committee members) and employees must report promptly to the Audit & Supervisory Committee when asked to do so by the Audit & Supervisory Committee.
The Company also prohibits retaliation against a director or employee who has reported to the Audit & Supervisory Committee, and makes sure that everyone in the company is aware of this.
9. System to Ensure Efficient Audits by the Audit & Supervisory Committee
The Audit & Supervisory Committee strives maintain mutual communication and exchange information with the accounting auditors, the Internal Auditing Office, and the auditors of each group company.
When the Audit & Supervisory Committee requests an advance or reimbursement for performing committee duties, the company pays these invoiced expenses except when such expenses are deemed unnecessary for the performance of Audit & Supervisory Committee duties.
The Rules on Officer Compensation contain the standards for calculating the compensation paid to directors and executive officers. These rules specify that compensation shall consist of base compensation, a variable bonus, and restricted stock compensation. Compensation is determined according to these rules and is calculated according to the following standards.
- Base compensation: Determined according to the compensation table for each officer position. It is calculated by designating the president’s compensation as 1 and multiplying that by a coefficient to calculate the compensation of each officer position.
- Variable bonus: The standard is 28%*1 of the base compensation. The percentage of the variable bonus is determined from the level of consolidated pre-tax profit (5% is standard) and KPI points for the previous fiscal year, and is calculated by multiplying the base compensation by this percentage. The minimum/maximum range is 0% to 50%.
- Stock compensation: The standard is 12%*2 of base compensation. This varies according to the degree to which the plan for the group consolidated operating income was achieved in the previous fiscal year. The minimum/maximum range is 0% to 24%.
Please note that the company plans to raise the percentages indicated by *1 and *2 to 33% and 33%, respectively in 2020.
The results of the calculations performed according to the criteria noted above are discussed by Personnel Advisory Committee, which consists of the chairman & representative director and three outside directors. The committee then reports its recommendations to the Board of Directors and receives approval.