ESG

Response to Implementation of the Corporate Governance Code

Appointment of Senior Management; Nomination of Director Candidates

When nominating directors who are not already members of the Audit and Supervisory Committee, the representative director—the individual in a Japanese company who has the company seal and represents it in transactions—will submit the proposed names and, to ensure transparency, explain to the independent outside director members of the Audit and Supervisory Committee the reasons for having selected, and suitability of, nominees. Directors shall be nominated by the Board of Directors, which will take into consideration the opinions of outside directors. When nominating directors who are members of the Audit and Supervisory Committee, the representative director will submit a list of proposed names and, after they have been approved by the Audit and Supervisory Committee, the Board of Directors shall decide the new board members.

For the policies and procedures involved in nominating director candidates, please refer to the Corporate Governance Report.

Formulation of the Independence Standards for Outside Directors

In order to ensure transparency of the Group’s corporate governance structure, in November 2015, the Company formulated its Standards for the Independence of Outside Directors, as stated in part below. The Company deems that any directors who fall into any of the following categories do not meet the standards required of independent outside directors.

  1. Persons who have certain relationships with the Company or its subsidiaries
    a. Persons who perform executive roles (which means executive directors, statutory officers, executive officers, managers, employees, including advisors (the same applies hereafter), or such other persons as stipulated in Item 6 of Article 2, Section 3 of the Ministerial Order of Enforcement of the Companies Act; the same applies hereafter) in the Company or its subsidiaries
    b. Persons who were directors, executive officers, managers or employees of the Company or its subsidiaries during any period in the past 10 years
  2. Persons who hold the position of director or other executive of a corporation and who also perform an executive role in the Company
    Persons who perform an executive role such as that of director, officer, or corporate auditor in a corporation and who also perform an executive role in the Company
  3. Principal business partners
    Entities whose principal client is the Company1 or persons who perform executive roles therein, or principal clients of the Company2 or persons who perform executive roles therein
  4. Employees of an accounting firm of the Company
    Those who belong to an accounting firm that conducts audits of the Company under the Companies Act or the Financial Instruments and Exchange Act
  5. Outside experts of the Company
    Experts (including attorneys-at-law, accountants, tax accountants, patent attorneys, judicial scriveners and consultants) who receive a large amount3 of money or other property (except for remuneration as a director, officer, corporate auditor and the like) from the Company (or if the entity receiving such property is an organization, such as a corporation and association, persons belonging to such entity)
  6. Persons who received donations from the Company
    Persons who received a large amount4 of donations from the Company (or if the entity receiving such donations is an organization, such as a corporation and association, persons who perform an executive role in such entity)
  7. Major shareholders
    Entities that own 5% or more of the voting rights of the Company, or persons who perform an executive role therein
  8. Persons who have fallen under items 2 through 6 in the past
    Those who have fallen under any of items 2 through 6 during any period in the past five years
  9. Close relatives
    Close relatives of those who fall under any of items 1 through 8, except for persons who are deemed to be unimportant for the purpose hereof
  • 1 “Entities whose principal client is the Company” are those who received payments from the Company equivalent to more than 2% of their annual sales in the latest business year.
  • 2 “Principal clients of the Company” are those who made payments to the Company equivalent to more than 2% of the Company’s annual sales in the latest business year or those who provided loans to the Company the outstanding amount of which was more than 2% of the total assets of the Company in the latest business year.
  • 3 “Large amount” means, with respect to the amount of the property acquired by the relevant party in the latest business year, more than ¥10 million (in the case of a natural person) or more than 2% of its annual consolidated sales or gross revenue (in the case of an organization, such as a corporation or association).
  • 4 “Large amount” means, with respect to the amount of the donations received by the relevant party in the latest business year, more than ¥10 million or more than 2% of its annual gross revenue.

Self-evaluation of Board of Directors, Effectiveness

To consistently increase the effectiveness of the Board of Directors, Dentsu conducts a questionnaire survey of all directors. The questionnaire covers the Board of Directors’ effectiveness and appropriateness in supervising management and self-evaluations of the directors regarding the status of their operations. The Company also interviews outside directors. The Board of Directors secretariat reports the results of these evaluations to the Board of Directors, thereby analyzing and evaluating the overall efficacy of the Board of Directors. In fiscal 2016, this analysis and evaluation indicated that the composition, operation and content of deliberations of the Board of Directors was generally appropriate. It noted that deliberations were conducted sufficiently through the spirited exchange of opinions and confirmed that the Board of Directors remained effective and appropriate in its supervision of operations. At the same time, this analysis and evaluation elicited certain issues with regard to putting in place measures to promote understanding of agenda items, regular reporting concerning the state of progress on important strategies, the enhancement of measures and monitoring to ensure thorough compliance with corporate ethics, and the feedback of questions and opinions from investors. The Company will strive to make improvements in these areas, further enhancing the effectiveness and appropriateness of management oversight by the Board of Directors.

Questionnaire items

  1. Board of Directors composition and operation
  2. Management strategy and business strategy
  3. Corporate ethics and risk management
  4. Operating performance monitoring and evaluation; remuneration of the management team
  5. Organizational and business restructuring
  6. Dialogue with shareholders and other stakeholders
  7. Self-evaluation of individual directors

Training Directors and Executive Officers

Through ongoing training, opportunities will be made available for directors and executive officers to gain the knowledge necessary to properly carry out their work and responsibilities. Currently, when directors (excluding outside directors) and executive officers assume their roles, the Company provides them with lectures, given by in-house and outside experts, with respect to the Company’s strategies in areas including management, business, finance, laws, and regulations. This enables them to acquire and update the knowledge they require to fulfill their responsibilities. They also have opportunities to find, through discussions, issues to be addressed by the Company and their solutions. Moreover, after becoming directors or auditors, they have opportunities to hold monthly study seminars to obtain the latest information regarding best practices for megatrend issues, with emphasis on the positioning of the environmental, social, and governmental criteria in the Corporate Governance Code. When new outside directors assume their offices, they are provided with an explanation of the business, organizational structure, and other related Company matters. Then, periodically, they are updated regarding issues currently being addressed by the Company.

Remuneration

Policies, Procedures for Senior Management; Directors’ Remuneration

Internal directors who are not members of the Audit and Supervisory Committee have a performance-linked framework for remuneration. It is designed to ensure that the medium-term management plan goals are achieved, the focus is on the mid- to long-term profit of shareholders, and the motivation to maximize the corporate value of the Company remains high. The index used to evaluate business performance is the Company’s consolidated operating profit, while the total amount of bonuses varies according to the degree to which budgetary goals have been achieved. Performance-linked bonuses, meanwhile, account for 40% of the Company’s total remuneration. Remuneration of outside directors who are not Audit and Supervisory Committee members consists solely of a fixed monthly amount that takes into account their duties. The total amount of fixed monthly compensation and performance-linked bonuses for directors who are not Audit and Supervisory Committee members is within the scope of remuneration approved at the 167th Ordinary General Meeting of Shareholders (within ¥1.2 billion per year).

The amount of remuneration of each director who is not a member of the Audit and Supervisory Committee (as well as of each executive officer) is determined by a resolution of the Board of Directors within the above limit of remuneration, and must be approved at the same General Meeting of Shareholders. In order to ensure transparency, the suggested remuneration is explained to committee members, and the final decision is made by shareholders after they have taken into consideration the opinions of the Audit and Supervisory Committee members. Remuneration for directors who are members of the Audit and Supervisory Committee consists solely of a fixed monthly salary. The gross amount is within the remuneration limit approved at the 167th Ordinary General Meeting of Shareholders (within ¥150 million per year). The amount of remuneration for each director who is a member of the Audit and Supervisory Committee is determined through consultations conducted by the committee directors. The amount is within the above remuneration limit, as approved at the same Ordinary General Meeting of Shareholders.

Total Amount of Remuneration for Directors and Audit & Supervisory Board Members

  Directors
(excluding Audit and Supervisory Committee Members)
(Of which are Outside Directors)
DDirectors
(Audit and Supervisory Committee Members)
(Of which are Outside Directors)
Audit & Supervisory Board Members
(Of which are Outside Audit & Supervisory Board Members)
All Officers
(of which are Outside Officers)
Monthly Remuneration 246 million yen:
11 persons
(3 million yen)
(2 persons)
60 million yen:
4 persons
(33 million yen)
(3 persons)
25 million yen:
5 persons
(7 million yen)
(3 persons)
332 million yen:
16 persons
(44 million yen)
(5 persons)
Bonuses 111 million yen:
8 persons
(- yen)
(- persons)
- yen:
- persons
(- yen)
(- persons)
- yen:
- persons
(- yen)
(- persons)
111 million yen:
8 persons
(- yen)
(- persons)
Total 357 million yen:
11 persons
(3 million yen)
(2 persons)
60 million yen:
4 persons
(33 million yen)
(3 persons)
25 million yen:
5 persons
(7 million yen)
(3 persons)
443 million yen:
16 persons
(44 million yen)
(5 persons)
  Directors
(excluding Audit and Supervisory Committee Members)
(Of which are Outside Directors)
Monthly Remuneration 246 million yen:
11 persons
(3 million yen)
(2 persons)
Bonuses 111 million yen:
8 persons
(- yen)
(- persons)
Total 357 million yen:
11 persons
(3 million yen)
(2 persons)
  DDirectors
(Audit and Supervisory Committee Members)
(Of which are Outside Directors)
Monthly Remuneration 60 million yen:
4 persons
(33 million yen)
(3 persons)
Bonuses - yen:
- persons
(- yen)
(- persons)
Total 60 million yen:
4 persons
(33 million yen)
(3 persons)
  Audit & Supervisory Board Members
(Of which are Outside Audit & Supervisory Board Members)
Monthly Remuneration 25 million yen:
5 persons
(7 million yen)
(3 persons)
Bonuses - yen:
- persons
(- yen)
(- persons)
Total 25 million yen:
5 persons
(7 million yen)
(3 persons)
  All Officers
(of which are Outside Officers)
Monthly Remuneration 332 million yen:
16 persons
(44 million yen)
(5 persons)
Bonuses 111 million yen:
8 persons
(- yen)
(- persons)
Total 443 million yen:
16 persons
(44 million yen)
(5 persons)

Notes:

  1. On March 30, 2016, Dentsu transitioned from a company with a Board of Auditors to a company with an Audit and Supervisory Committee.
  2. Prior to the transition to a company with an Audit and Supervisory Committee, the limit on total remuneration for directors was resolved at the Ordinary General Meeting of Shareholders held on June 27, 2013, at ¥1.2 billion per year (including an amount within ¥18 million per year for outside directors). At that same Ordinary General Meeting of Shareholders, a resolution was passed limiting the annual amount of fixed remuneration for Audit and Supervisory Committee members to ¥132 million.
  3. Following the transition to a company with an Audit and Supervisory Committee, resolutions were passed at the Ordinary General Meeting of Shareholders held on March 30, 2016, limiting annual remuneration for directors who are not Audit and Supervisory Committee members to ¥1.2 billion per year and annual remuneration for directors who are Audit and Supervisory Committee members to ¥150 million per year.
  4. The above table on “directors who are not Audit and Supervisory Committee members” includes directors prior to the transition to a company with an Audit and Supervisory Committee. Monthly remuneration amounts include the portion for six directors and five Audit and Supervisory Committee members who stepped down at the close of the Ordinary General Meeting of Shareholders held on March 30, 2016.
  5. “Bonuses” in the above table are within the director remuneration limits outlined in note 3 above, and were resolved at a Board of Directors meeting held in February 2017. Bonuses are not paid to Audit and Supervisory Committee members and directors who are Audit and Supervisory Committee member.
  6. The above items have been considered by the Audit and Supervisory Committee. There were no items of special note.

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