Basic Approach to Corporate Governance
Resona Holdings, Inc. (hereinafter the “Company”) has established the “Basic Corporate Governance Policy” to clarify its basic approach to and framework and operation policy for corporate governance, with the aim of facilitating the sustained growth and improvement of the corporate value of the Resona Group (hereinafter the “Group”) over the medium and long terms.
Basic Approach to Corporate Governance
The Company, as the holding company of the financial services group, including Resona Bank, Limited, Saitama Resona Bank, Limited and The Kinki Osaka Bank, Ltd. (hereinafter the “Group Banks”), shall maximize the corporate value of the Group.
The Company shall respect all stakeholders, including shareholders, and aim at achieving excellent corporate governance so that the Company can make decisions rapidly and decisively in response to environmental changes, including economic and social changes.
The Company shall establish the “Corporate Mission (Resona Group Management Philosophy),” a general philosophy of management of the Group, and the “Resona Way (Resona Group Code of Conduct),” a specific form of the philosophy, under which the Group shall implement business operations in a concerted manner.
The Company’s Corporate Governance System
Based on the above-mentioned basic approach to corporate governance, the Company shall clearly separate the management supervision function from the business execution function, and adopt the form of “company with a nominating committee, etc.” as a corporate governance system because the Company determines that this system can enhance the supervision and decision-making functions of the Board of Directors.
The Company shall fully utilize external views in its business management and secure transparency and fairness in management by making the Board of Directors, on which highly independent outside directors constitute a majority, and the three committees (the Nominating Committee, the Compensation Committee and the Audit Committee) fulfill their functions.
The Company shall ensure the autonomy of its subsidiaries and instruct the subsidiaries to manage their business activities based on the above-mentioned basic approach to corporate governance so that the Group will grow together with local communities.
Bacic Corporate Governance Policy
Group Corporate Governance Framework
Activities at Resona Holdings
Board of Directors
The Board of Directors fully ensures that management engages in substantial discussion in fulfilling its responsibilities of making decisions about important Group management issues and supervising the execution of business activities by executive officers and directors. The Board of Directors consists of ten directors, six of whom are outside directors, and the numbers of male and female directors are eight and two, respectively. One of the specific features of the Committees Governance Model as a company with a nominating committee, etc. is that while the Board of Directors makes decisions regarding important management issues and supervises the execution of operations, clearly defined roles give executive officers responsibility for the execution of operations, thus strengthening the Board of Directors’ supervisory and decision-making functions. In fiscal 2015, the Board of Directors met 17 times. In June 2005, the presidents of all Group Banks became executive officers of Resona Holdings in order to ensure enhanced supervisory functions of the holding company vis-a-vis Group Banks.
The Company’s Board of Directors conducts an annual analysis and evaluation of its effectiveness as a whole based on the opinions of each director with regard to their assessment of the operations and functionality of the Board as well as matters discussed at the Board of Directors meetings.The Board of Directors utilizes the results of the evaluation to make improvements in its operations and to enhance its supervisory and decision-making functions.
The overall results of the fiscal 2015 self-evaluation and measures to improve issues are as follows:
The evaluation concluded that the operations of the Board were deemed appropriate on the whole and the overall effectiveness of the Board of Directors was confirmed.
In addition, there was some improvement made regarding the selection of meeting agendas and the preparation of meeting materials both of which were identified as issues requiring improvement in the fiscal 2014 self-evaluation.
However, the Board recognizes the existence of room for further improvement.
The Board believes that it needs to draw up agendas in a more efficient and systematic manner, and enhance the content of meeting materials. Going forward, the Company’s Board of Directors will enhance the content of discussions through the improvement of its operations based on such input as the opinion of each director.
The Nominating Committee comprises three committee members, with one member serving as the committee chairman and all of the members being outside directors. The committee makes decisions regarding proposals for the selection and dismissal of directors that are submitted to the shareholders meeting, based on the specific qualities that the Group should seek in its directors as well as the "Standards for Electing Director Candidates" both of which have been discussed and decided at the committee's meetings. This committee met six times in fiscal 2015. In June 2007, The Nominating Committee decided to introduce a succession plan that serves as a mechanism to ensure that the most appropriate candidates fill top management roles and responsibilities with the aim of accelerating the Group’s management reform and realizing the enhancement of corporate value on a sustainable basis. The status of the implementation of the succession plan is examined by the Nominating Committee and reported to the Board of Directors.
The Audit Committee comprises three directors, including two outside directors, one of whom serves as the chairman, and another director who serves full time.
In addition to auditing the execution of duties by executive officers and directors, this committee makes decisions regarding proposals for the selection and dismissal of accounting auditors, which are submitted to the General Meeting of Shareholders.
The Company maintains an auditing structure that facilitates frequent and flexible collaboration between the Audit Committee and the Internal Audit Division. Furthermore, the committee works with the Compliance Division, the Risk Management Division, the Finance and Accounting Division, and other divisions to supervise and verify internal control systems and make the necessary responses, urging executive officers and other responsible personnel to make essential improvements. This committee met 13 times in fiscal 2015.
The Compensation Committee comprises three directors, including three outside directors, one of whom chairs the committee. The committee makes decisions regarding policies for compensation and other benefits for individual directors and executive officers as well as the compensation and other benefits for specific individuals. In addition, the committee considers the role a director compensation system should play in enhancing the Group's corporate value. In fiscal 2015, the committee met seven times. Please note that the committee chose to eliminate the directors’ retirement benefit system in fiscal 2004 and introduced a performance-based compensation system. In fiscal 2010, the committee introduced a stock purchase based compensation system. The members of the company’s Compensation Committee are not members of the compensation committees of other companies.
Resona Holdings has set up an Executive Committee as a body to deliberate and report on generally important management items and important matters in the execution of operations to support the decision-making process in the execution of operations. The Executive Committee consists of representative executive officers as well as executive officers and employs serious debate to ensure the transparency of decisions regarding significant management issues. In fiscal 2015, this committee met 42 times.
Internal Auditing Council
As a body to deliberate and report on important matters related to internal audits, Resona Holdings has established an Internal Auditing Council that is independent from the Executive Committee, which serves as a body for the execution of operations. The council is composed of all representative executive officers, the executive officer in charge of the Internal Audit Division, and a general manager of the Internal Audit Division. Contents of deliberations and reports are reported to the Board of Directors and the Audit Committee.
The council met 15 times in fiscal 2015 and, in addition to discussing the internal auditing plan, it reported on the results of internal audits.
Management Supervision of Group Companies
Resona Holdings, as the Group holding company, supervises the management of its Group Banks and other Group companies, with the objective of raising corporate value. The Company has established a system for managing and controlling Group companies, clearly identifying items for which prior discussion with Resona Holdings is necessary and items that require reporting.
Group Banks' Corporate Governance Systems
Group Banks, which are managed as Group members by Resona Holdings, work together to raise corporate value.
The Board of Directors, which includes outside directors, fully ensures that management employs thorough discussion in making decisions regarding the execution of operations and supervises the execution of operations by directors and executive officers.
The Audit & Supervisory Board, which comprises the Audit & Supervisory Board Members, was established to carry out solid auditing functions in the subsidiary banks' operations.
In addition to this are the Executive Committee, a body that deliberates generally important issues related to management as well as important issues related to the execution of operations; the Credit Committee, which deliberates important items related to credit operations; and the Audit Committee, which deliberates important themes related to internal auditing.
To enhance its corporate value, Resona Holdings’ Board of Directors formulated the Group’s Basic Policies for Group Internal Control Systems with the aim of structurally entrenching a system that ensures appropriate operations and simultaneously realizing the best possible internal control system.
In addition, a resolution to revise a portion of the aforementioned policies was made at the Board of Directors meeting held on March 29, 2016.
Status of Internal Control Systems
In accordance with its “Basic Policies for Group internal control systems,” the Resona Group is striving to ensure the efficacy of its internal control systems through appropriate development and operations of all internal control systems.
Summary of Resona Holdings’ “Basic Policies for Group Internal Control Systems”(Revised on 1 April, 2016)
The Company and other companies of the Group* seriously view the fact that the Group had to reinforce capital through injecting a massive amount of public funds.In order to prevent the recurrence of such a situation,the Group hereby formulates the Basic Policies on Group Internal Control.
In accordance with the Basic Policies, the Group aims to a establish an internal control system most befitting the Group and strives to manage and maintain control systems in optimal condition to ensure their efficacy, with a view to enhancing the Group's corporate value.
*Refer to companies set forth under Article 2, item 3 of the companies Act and Article 3 of the Ordinance for Enforcement of the Companies Act. Hereinafter the same.
(2) Purpose of Internal Control Systems (Basic Principles)
In accordance with generally accepted evaluation standards for internal control systems, the Resona Group shall adopt as the Group’s basic principles on internal controls the fulfillment of the following four goals.
- a.Improve efficacy and efficiency of operations
- b.Assure reliability of financial disclosure
- c.Comply with legislation
- d.Maintain the soundness of assets
(3) Constructing Internal Control Systems (Basic Guidelines)
Resona Holdings shall develop internal control systems composed of the basic elements required for the systems to fulfill their purposes, including a control framework, risk evaluation and response system, internal control activities, information and communication systems, monitoring standards, and IT systems. Upon establishment of the Corporate Mission shared throughout the Group and based on these policies, Resona Holdings shall determine the following basic guidelines in constructing systems to ensure that the Group’s operations are conducted in an appropriate manner.
- a.Guidelines to ensure that business operations of Resona Holdings’ Executive Officers and employees as well as Directors, Executive Officers and employees at each Group company are executed in compliance with legislation and Group regulations
- b.Guidelines to store and manage information related to the execution of operations by Executive Officers
- c.Guidelines to govern the management of loss risk that may arise at Resona Holdings or its Group companies and related systems
- d.Guidelines to ensure that the responsibilities of Resona Holdings’ Executive Officers and each Group company’s Directors and Executive Officers are carried out effectively
- e.Guidelines to ensure that operations of the corporate group, consisting of Resona Holdings and all Group companies, are conducted appropriately (including a system to ensure that the execution of operations by Directors and Executive Officers at each Group company is reported to Resona Holdings)
- f.Guidelines concerning assistants to the operations of the Audit Committee
- g.Guidelines to ensure the independence of the specialist personnel mentioned above in relation to Executive Officers and that instructions to said personnel are carried out effectively
- h.Guidelines concerning a reporting system for Resona Holdings’ Directors (excluding those concurrently serving as members of the Audit Committee), Executive Officers and employees and each Group company’s Directors, Corporate Auditors, Executive Officers and employees as well as persons who received report from the foregoing personnel to report to the Audit Committee
- i.Guidelines concerning a system to ensure that a person who made the abovementioned reporting is not treated disadvantageously
- j.Guidelines concerning the treatment of expenses occurred in connection with the execution of duties by the members of the Audit Committee
- k.Guidelines to ensure that audits by the Audit Committee are conducted effectively
Other Matters Related to Corporate Governance
Resona Succession Plan
Aiming for sustained improvements in corporate value, the Group introduced a succession plan in June 2007 that serves as a mechanism to ensure the successions of the top management roles and responsibilities at the Company and each Group bank and secure the transparency of the process of selecting and nurturing directors.
The scope of the succession plan covers various candidates, from those who are candidates for the next generation of top leadership to those who are new candidates for directorships. The process of selection and nurturing successors is carried out steadily according to a schedule, matching qualified candidates to the appropriate rank. The Group retains the objectivity of this process by drawing on the advice of external consultants. Evaluations of candidates undergoing the process are reported to the Nominating Committee. In addition to receiving reports on candidate evaluations, members of the Nominating Committee come into direct contact with candidates as part of the process, evaluating candidates’ characters from various aspects.
The activities of the Nominating Committee are reported to the Board of Directors, of which outside directors are the majority, and are discussed from diverse perspectives. Through the entire process, which is highly transparent, each potential director’s capabilities and competencies are closely studied and enhanced where appropriate.
In addition, Resona Holdings has set forth seven competencies that define the ideal candidate for the position of director. By ensuring that the directors in the Nominating Committee as well as the other directors share common ideals regarding candidates, the Company clarifies standards for the evaluation and nurturing of successors and thereby aims to realize impartiality during the entire process.