Formulated on November 20, 2015
Amended on March 30, 2016
Dentsu Inc. (the "Company") will put effective corporate governance into practice in order to fulfill its responsibilities to its stakeholders (such as its shareholders, clients, employees and local communities) and to ensure sustainable growth and enhance mid- to long-term corporate value.
The Board of Directors has formulated this Policy, will continuously and periodically review it, and will work on improving and developing the Company's corporate governance to enhance corporate value.
- Chapter 1 General Provisions
- Chapter 2 Ensuring Shareholders' Rights and Equal Treatment
- Chapter 3 Proper Cooperation with Stakeholders including Shareholders
- Chapter 4 Appropriate Information Disclosure
- Chapter 5 Responsibilities of the Board of Directors and Related Matters
- Chapter 6 Dialogue with Shareholders
Chapter 1 General Provisions
(Basic Policy for Corporate Governance)
Under the corporate philosophy of the Company group, "Good Innovation.," the Company shall offer value to clients by resolving their problems through its core competence in the field of marketing communication. Further, the Company shall not only bring brightness and energy to the world, but shall also aim to create new social value and realize a sustainable society by putting its corporate philosophy into practice against continuous challenges.
To realize the above, pursuing the best corporate governance is important. The Company shall ensure sustainable growth and enhance the mid- to long-term corporate value through transparent and fair decision-making, effective use of management resources and expeditious and resolute decision-making.
For the above purposes, the Company shall work on enhancing the corporate governance in accordance with the basic concepts below.
- (1) To respect shareholders' rights and ensure their equal treatment
- (2) To consider the interests of stakeholders, including shareholders, and cooperate with them appropriately
- (3) To appropriately disclose company information and ensure transparency
- (4) To enhance the effectiveness of the supervisory function of the Board of Directors concerning business execution
- (5) To engage in constructive dialogue with shareholders who have an investment policy that conforms to the mid- to long-term interests of shareholders
Chapter 2 Ensuring Shareholders' Rights and Equal Treatment
1. General meetings of shareholders
The Company shall conduct a general meeting of shareholders under the basic policy that explanations should be thorough and easy to understand in order to make such meetings the highest decision-making body of the Company and a forum for constructive dialogue with shareholders. In addition, after the Board of Directors passes a resolution for convocation of a general meeting of shareholders, the Company shall quickly publish a notice of such convocation together with an English translation thereof on its website and also send such notice of convocation to its shareholders not later than three weeks before the date of the general meeting of shareholders so that the shareholders may appropriately exercise their voting rights. The Company shall also improve its infrastructure (such as adopting the electronic voting platform) wherein all of the shareholders, including those shareholders who do not attend a general meeting of shareholders, are able to exercise their voting rights appropriately.
As to how to treat the situation where institutional investors whose shares are being held in the name of trust banks or other parties wish in advance to exercise their voting rights by themselves at a general meeting of shareholders, the Company shall discuss such situation with the trust banks or other relevant parties beforehand, taking into consideration that there are some issues, such as how to check whether the relevant institutional investors are beneficial shareholders of the Company and how to avoid double voting by both the nominee shareholders and the beneficial shareholders.
2. Ensuring equal treatment of shareholders
The Company shall effectively ensure the rights of all shareholders, including minority and foreign shareholders' rights. The Company shall also enhance its dialogue with shareholders and investors through IR activities by properly and timely disclosing information to them with respect to management strategy, financial position, business performance and other related matters.
3. Analyzing votes against company proposal
Every year, votes at the general meeting of shareholders are analyzed by the section in charge of general meetings of shareholders. The result thereof is shared by IR related sections, executive officers in charge of corporate matters and the management, and is also reported to the Board of Directors. With respect to any proposals against which many opposing votes were cast, the Board of Directors shall deliberate on matters such as how to obtain shareholders' support based on the reasons for the opposition.
4. Capital policy
The basic capital policy (concepts and measures for optimal capital structure), which aims to enhance intrinsic corporate value, and which is the Company's top priority for capital distribution that contributes to the Company's growth, shall be implemented on the basis of the policies stated below.
- (1) Profit growth by centering on proactive investments in growth areas across the globe
- (2) M&A transactions that realize scale (expansion of regional coverage), infill (expansion of national or regional service coverage) and innovation (acquiring new capabilities), and that contribute to the enhancement of corporate value
Further, in addition to the above, the Company shall provide returns to shareholders through a combination of stable dividend distribution and repurchasing of the Company's own shares, enhance capital efficiency and aim to increase the mid- to long-term ROE.
5. Shares owned by the Company on account of business relationships
In order to enhance mid- to long-term corporate value by maintaining and strengthening business relationships with its business partners and other similar parties, it is possible that, apart from pure investment, the Company will hold shares in listed companies that are the Company's business partners.
Of such shareholdings strategically held by the Company, with respect to important shareholdings, the Board of Directors shall examine the purpose and economic rationale for owning such shares every year, considering growth, profitability, business relationship and other relevant factors in light of restricting risks in owning the shares, capital efficiency and other issues. It is the Company's basic policy to sell such shares with the thorough understanding of the relevant business partners if the Board of Directors decides that there is no rationale for owning them. The Company may also sell such shares strategically owned by the Company considering the market environment, management and financial strategies and other relevant factors even if there is a rationale for owning them.
The Company shall exercise the voting rights of such shares at general meetings of shareholders of the relevant companies considering, on a proposal-by-proposal basis, the enhancement of corporate value of such companies and the mid- to long-term increase in economic profit of the Company and its group companies, taken as a whole, to ensure appropriate voting. With respect to important shareholdings strategically held by the Company, how the votes of such shares are exercised shall be reported to the Board of Directors.
6. Related party transactions
The rules of officers of the Company provide that directors who enter into business competition transactions or conflict of interest transactions stipulated in the Companies Act with the Company shall explain the transactions to the Board of Directors and obtain approval from the same. The rules also provide that such directors shall report the status of such transactions thereafter. The Board of Directors shall strictly implement the rules and appropriately monitor the relevant transactions.
In addition, apart from the transactions stipulated in the Companies Act, the Company shall submit a questionnaire to each director once a year to ascertain whether there is any transaction between the Company and any directors of the Company or consolidated subsidiaries or their close relatives. Other related party transactions, including those with major shareholders, shall be properly disclosed in accordance with applicable laws and regulations, such as the Companies Act or the Financial Instruments and Exchange Act, and applicable rules of the Tokyo Stock Exchange.
Chapter 3 Proper Cooperation with Stakeholders including Shareholders
1. Code of conduct and conflict of interest
The Company understands that it is its social responsibility to tackle social problems, taking into consideration every stakeholder as well as compliance, a safe and healthy working environment, respect for human rights, social contribution and environmental protection activities. In addition, the Dentsu Group Code of Conduct provides that the management and employees shall protect stakeholders' interests and work with high ethical standards. The Company shall ensure that the management and employees fully understand such provisions.
2. Dealing with problems concerning sustainability
The Company understands that it is its social role to create new social value by continuously discovering social issues and presenting solutions, and the Company aims to be a partner of its stakeholders that can contribute to sustainable growth of such stakeholders.
In addition, the Company has formulated its CSR basic policy, the "Dentsu Group Code of Conduct," as a code of conduct to be followed by employees of the Company group in order for each of such employees to fulfill their social responsibilities in the respective areas. Taking ISO 26000 as a guideline, the Company has set seven important fields (corporate governance, respect for human rights, ensuring a safe and civilized working environment, environmental protection, fair business practices, addressing consumer issues and contributing to the community) and is undertaking various actions in each field.
3. Whistleblowing system
The Company has established its "Compliance Line" as a whistleblowing system inside the Company group, which is available via telephone, e-mail, letters and other means. The special section inside the Company and outside counsel fulfill a liaison role with respect to such Compliance Line. Moreover, the Company has established a consultation section for sexual harassment and power harassment apart from the "Compliance Line."
Under these systems, whistleblowers' names and sections are kept confidential outside the secretariat, and the rules of the Company stipulate that such whistleblowers shall not be treated adversely in their working environment due to such whistleblowing. The Company continues to implement such systems effectively.
Chapter 4 Appropriate Information Disclosure
The Company shall appropriately disclose in a fair, detailed and plain manner its business performance, financial conditions and other financial information as well as management strategy, business information, risks, governance and other nonfinancial information in compliance with applicable laws and regulations, such as the Companies Act and the Financial Instruments and Exchange Act, and applicable rules of stock exchanges. The "Information Control Committee," chaired by the director in charge of information disclosure, fairly controls essential information, including insider information.
Chapter 5 Responsibilities of the Board of Directors and Related Matters
With respect to its corporate governance structure, the Company is a company with an Audit and Supervisory Committee.
1. The Board of Directors
The main role of the Board of Directors is to control the Company strategically along with its corporate philosophy. The Board of Directors delegates a large part of its decision-making authority regarding business execution to the management (including the representative director) and urges expeditious and resolute business judgment thereby. The Board of Directors also enhances corporate value by recognizing its fiduciary duties to shareholders and appropriately fulfilling its monitoring function under applicable laws and its Articles of Incorporation toward overall management, including its management strategy and Medium-term Management Plan.
2. Members of the Board of Directors and term of directors
The number of directors is nine (no more than 15 as the Articles of Incorporation stipulate) and three directors (one third of the total members of the Board of Directors) are independent outside directors. The term of directors who are not members of the Audit and Supervisory Committee is until the closing of the general meeting of shareholders concerning the last business year ending within one year after their assumption of office, while the term of directors who are members of the Audit and Supervisory Committee is until the closing of the general meeting of shareholders concerning the last business year ending within two years after their assumption of office.
Diversity in experience, insight and ability are among the factors that are considered in nominating members of the Board of Directors.
3. Standards in nominating director candidates and process of nomination
Standards in nominating director candidates who are not members of the Audit and Supervisory Committee are stipulated in the rules of officers of the Company, and mainly those who have the attributes stated below shall be nominated as such candidates.
- (1) A person who is able to make determinations from a company-wide viewpoint
- (2) A person who has expertise with respect to the Company's business
- (3) A person who has remarkable business judgment and ability in business execution
- (4) A person who has remarkable leadership, foresight and decision and planning ability
- (5) A person who has character and insight suitable for directors
Standards in nominating director candidates who are members of the Audit and Supervisory Committee are stipulated in the rules of officers of the Company, and mainly those who have the attributes stated below shall be nominated as such candidates.
- (1) A person who has the ability to legally and managerially understand the duties of directors who are members of the Audit and Supervisory Committee
- (2) A person who is able to make determinations from a company-wide viewpoint
- (3) A person who has remarkable problem-solving and leadership abilities
- (4) A person who fulfills other requirements deemed necessary as directors who are members of the Audit and Supervisory Committee
Standards in nominating outside director candidates shall be stipulated in the rules of officers of the Company, and those who have the attributes stated below shall be nominated as such candidates.
- (1) A person who has extensive experience in management or who is a professional in legal, accounting, finance and other such fields
- (2) A person who can be independent of the representative director of the Company
- (3) A person who has character and insight suitable for outside directors
In nominating directors who are not members of the Audit and Supervisory Committee, the representative director will submit his candidate plan and, in order to secure transparency, explain to the independent outside directors, who are Audit and Supervisory Committee members, the reason, suitability and other factors for such nomination. Considering the opinions of such independent outside directors, candidates shall be decided upon by the Board of Directors. In nominating directors who are members of the Audit and Supervisory Committee, the representative director will submit his candidate plan, and after receiving approval from the Audit and Supervisory Committee, candidates shall be decided upon by the Board of Directors.
Regarding the proposals for the appointment of each director, the reasons for the nomination of each director candidate shall be described in the reference materials for the general meeting of shareholders.
4. Scope delegated to the management
As a company with an Audit and Supervisory Committee, the Company transfers authority for important business execution in part from the Board of Directors to establish an expeditious and effective business execution system, and aims to enhance the supervisory functions of directors through the Board of Directors.
Specifically, the Company established the Executive Management Committee that consists of the representative director and executive officers, including executive directors under the Board of Directors which deliberates on important business matters and matters to be decided by the Board of Directors before deliberation by the Board of Directors.
In addition, committees to which the executive management has delegated its authority are regarded as principal committees. In this regard, the Business Supervision Committee was established in the Japan business sector and the Dentsu Aegis Network Board was established in the international business sector, and each has responsibility for profit and authority delegated by the Board of Directors.
5. Role of outside directors
Three of the Company's nine directors are outside directors who meet the independence standards of the Company.
In order to enhance corporate governance, the Company expects such outside directors to initiate discussion at Board of Directors meetings by raising questions and expressing opinions and to promote proper judgment by the Board of Directors by expressing opinions from their respective professional points of view. Outside directors will also have a role to verify and evaluate the business results and performance of the Company's management in light of the corporate strategy decided by the Board of Directors and to express their opinions in light of shareholders' interests as to whether delegation of authority to the management is appropriate.
The Independence Standards for Outside Directors decided by the Company are shown in the Schedule.
6. Members of the Audit and Supervisory Committee
The Company has nominated four directors (including the three outside directors) as members of its Audit and Supervisory Committee. The purpose of adopting an Audit and Supervisory Committee is to (i) make auditing and monitoring more effective through auditing and monitoring by members of the Audit and Supervisory Committee who may vote at Board of Directors meetings, and (ii) make internal control more effective through auditing by the internal audit section of the Company.
Of the four directors who are members of the Audit and Supervisory Committee, all three outside directors will satisfy the independence standards formulated by the Company and are expected to fulfill a monitoring role on the Board of Directors with respect to business execution by making good use of each director's extensive experience in his or her respective field.
Members of the Audit and Supervisory Committee will also request reporting from the Company's accounting auditor and the internal control section as necessary with respect to the process and results of their respective audits, and ensure communications among the relevant parties through exchanging necessary information. They may also request reporting from the internal control section concerning the status of establishment and operation of internal control.
Moreover, assistants of members of the Audit and Supervisory Committee and a secretariat for the same committee will be provided. The employees in charge of such offices will be ensured independence from directors (other than members of the Audit and Supervisory Committee).
7. Concurrent positions as officers at other listed companies
Directors may concurrently serve as directors, corporate auditors or officers of other listed companies only to the reasonable extent that they are able to devote their necessary time and effort to appropriately fulfill their roles and responsibilities as directors of the Company and after following necessary procedures and obtaining approval from the Board of Directors. Important concurrent positions will be disclosed in the reference materials for the relevant general meeting of shareholders, in business reports and on the Company's website under applicable laws and regulations.
8. Internal control
To promote expeditious business execution under proper control, the Board of Directors has provided a basic policy on the internal control system and established systems and other means for compliance, effective business execution, risk management, and securing the appropriateness of financial reports, and the Board of Directors monitors the status of operation of such systems.
9. Accounting auditor
In order to secure reliability of disclosure information and responsibility to shareholders and investors, the Company will ensure that the accounting auditor (i) will be given ample time to conduct a high-quality audit, (ii) may cooperate with the internal audit section and directors who are members of the Audit and Supervisory Committee, and (iii) may access the management, including the CEO and CFO.
10. Remuneration of directors
Concerning remuneration for directors (excluding directors who are members of the Audit and Supervisory Committee), a performance-linked framework is in place that takes into account encouragement of achieving goals set forth in the medium-term management plan in order to focus on the mid- to long-term profit of shareholders and to enhance motivation for maximizing the corporate value of the Company.
The portion of the performance-linked bonus under the model business results accounts for 40% of the total remuneration, the index for performance evaluation of business results is consolidated operating profit, and the total amount of bonus remuneration varies in accordance with the level of achievement of the budget. Each director's remuneration shall be determined by a resolution of the Board of Directors.
The total amount of fixed monthly salaries and performance-linked bonuses shall be within the remuneration limit (within 1.2 billion yen per year) approved at the 167th Ordinary General Meeting of Shareholders.
The amount of remuneration of each director who is not a member of the Audit and Supervisory Committee (including that for the role of executive officers) will be determined by a resolution of the Board of Directors within the above limit of remuneration to be approved at the same general meeting of shareholders; and from the view point of ensuring transparency, such decision will be made considering the opinions of the members of the Audit and Supervisory Committee who are independent directors after explaining to them the reasonableness of the amount of remuneration.
Remuneration to directors who are members of the Audit and Supervisory Committee will consist solely of a fixed monthly salary in exchange for the execution of their duties. The gross amount of this monthly salary will be determined within the remuneration limit (within 150 million yen per year) approved at the 167th Ordinary General Meeting of Shareholders. The amount of remuneration of each director who is a member of the Audit and Supervisory Committee will be determined through consultation by directors who are members of the Audit and Supervisory Committee within the above limit of remuneration to be approved at the same general meeting of shareholders.
11. Preparing and deciding the successor to the CEO
The CEO must be aware that preparing his successor is one of his important responsibilities. Thus, the CEO shall prepare his successor by (i) providing executive officers with a mission in accordance with their respective duties together with the business performance targets and (ii) letting the executive officers participate in the management of the Company through attending important meetings, including the Executive Management Committee and the Business Supervision Committee. After making the transition to a company with an Audit and Supervisory Committee, the successor candidate will be determined by the Board of Directors considering the opinions of the independent outside directors who are members of the audit and supervisory committee after explaining to them the appropriateness and other applicable matters regarding such candidate.
12. Training policy of directors and executive officers
Directors and executive officers shall be given opportunities for gaining indispensable knowledge for their offices and for continuous training so that they may perform their roles and responsibilities appropriately.
Currently, when they become directors (excluding outside directors) or executive officers, the Company provides them with lectures conducted by inside and outside experts with respect to the Company's strategies of management, business, finance and other applicable fields and important matters and laws and regulations related thereto, and enables them to acquire and update the knowledge required for their offices. They are also given opportunities through discussion to find issues to be addressed by the Company group and solutions thereto. Moreover, after becoming directors (excluding outside directors) or executive officers, they are given opportunities to hold study seminars every month to gain the latest information as to the best practices for various megatrend issues.
When new outside directors assume their offices, they are provided with an explanation of the business, organization structure and other related matters of the Company, and the necessary information related to issues to be addressed by the Company shall be provided to them periodically.
The contents of lectures and other training matters will be reviewed as necessary.
13. Evaluating the Board of Directors
Directors will conduct a self-evaluation every year with respect to the effectiveness and appropriateness of the Board of Directors' monitoring of the management of the Company and the performance of their own duties as directors. The results of such evaluation will be reported to the Board of Directors. The Board of Directors will analyze and evaluate the effectiveness of the Board of Directors as a whole based on the results of the self-evaluation conducted by each director. An overview of such analysis and evaluation will be disclosed.
Chapter 6 Dialogue with Shareholders
The Company is working on enhancing its mid- to long-term corporate value by disclosing various information, such as management strategy, financial information and non-financial information to shareholders and investors in a timely and proper manner and continuously engaging in constructive dialogue with shareholders and investors through IR activities.
More specifically, mainly the CEO, CFO and officers in charge of disclosure carry out various activities, such as regular meetings with analysts and institutional investors, roadshows both within and outside of Japan to visit investors individually, and sufficient information disclosure on the Company's website. The Company has established an IR section as a special section so that such activities may effectively function, and the IR section closely cooperates with the corporate strategy division, finance and accounting division, legal division and other relevant sections.
Opinions and requests obtained through IR and other activities are reported to the Executive Management Committee or the Board of Directors and utilized in the discussions for enhancement of corporate value. The Company has established the information control committee to appropriately control insider information and provides a "silent period" during which the Company must withhold dispatching information with respect to financial results.
The Company also conducts a survey of its beneficial shareholders periodically and attempts to grasp the share ownership structure.