Brother Group Basic Policies on Corporate Governance
Brother Industries, Ltd. has established its basic policies concerning its corporate governance (hereafter referred to as the Basic Policies) in accordance with the resolution adopted by its board of directors.
Section 1: General Provision
- Article 1: The Fundamental Ideas of Corporate Governance
- The Brother Group has established the Brother Group Global Charter (hereafter referred to as the Global Charter) as the basis of all of its activities conducted worldwide, and sets enhancement of its corporate value over the long term by optimizing management resources and creating customer value, development of long-term trustful relationships with its shareholders by enhancement of corporate transparency through active provision of corporate information to shareholders, etc. as the fundamental ideas of the group's corporate governance.
Section 2: Securing the Rights and Equal Treatment of Shareholders
- Article 2: The Basic Policies concerning Cross-shareholdings and Execution of Voting Rights regarding Cross-shareholdings
- Brother Industries, Ltd. holds shares of other listed companies when building good business relationships with such companies is discernible to contribute to improvement of its corporate value over a mid- to long-term (hereafter referred to as cross-shareholdings).
- The board of directors examines the economic rationale of its cross-shareholdings on a regular basis.
- Brother Industries, Ltd. exercises its voting rights related to its cross-shareholdings in principle. Brother Industries, Ltd. approves an agenda except when it potentially harms Brother's mid- to long-term economic interest.
- Article 3: Related Party Transactions
- In the case in which a director is processing a transaction that could potentially create business competition against Brother Industries, Ltd. or result in conflict of interest for Brother Industries, Ltd., he/she must receive approval from the board of directors in accordance with the procedure stipulated by the company rules.
Section 3: Appropriate Cooperation with Stakeholders
- Article 4: The Business Principles, Code of Practice, and Relationships with the Stakeholders
- The Global Charter consists of the basic policies and code of practice concerning daily decision making and actions of Brother Industries, Ltd. and the Brother Group's directors, executive officers, employees, etc., and sets forth their relationships with the stakeholders.
Section 4: The Responsibilities of the Board of Directors, etc.
- Article 5: The Roles of the Board of Directors
- Brother Industries, Ltd. introduces an executive officer system, whereby executive operations by executive officers and supervision by the board of directors are separated in an effort to ensure swift decision-making and strengthen its corporate governance.
- The board of directors holds responsibilities to deliberate and make a decision on important executive operations stipulated by laws, the articles of incorporation and company rules, and to supervise directors and executive officers as to their execution of duties.
- The board of directors shall delegate items other than the ones that require a decision making on an executive operation by the board of directors as defined in the previous clause to the representative directors, executive directors or executive officers.
- Article 6: The Composition of the Board of Directors
- The board of directors must not exceed 11 members as stipulated in the articles of incorporation, and include an adequate number of outside directors needed to supervise important administrative decision makings and execution of executive operations at the board of directors.
- The board of directors shall consist of diverse members with dissimilar backgrounds, such as knowledge and experience, whereby it can contribute to global business operations of the Brother Group.
- Article 7: The Qualifications and the Appointment Procedures of Directors and Executive Officers
- A director must possess a superior personality and perception, and an ability to execute his/her duties as a director appropriately.
- An outside director must possesses considerable experience in corporate management, and be in compliance with the standards stipulated in Appendix 1 (hereafter referred to as the Independence Standards), in addition to meeting the qualifications indicated in the previous clause.
- A candidate for a director is decided by the board of directors in accordance with Clause 1 and 2 of this article and through the procedure taken by the Nomination Committee as stipulated in Article 13.
- Brother Industries, Ltd. must disclose the reasons for its selection of candidates for outside directors in the notice of convocation of general meeting of shareholders.
- An executive officer must possess a superior personality and perception, be acquainted with the business and operation of which he/she takes charge of, and must retain the ability to pursue his/her duties as an executive officer properly.
- An executive officer is appointed by the board of directors based on the qualifications indicated in the previous clause, and through the procedure taken by the Nomination Committee as stipulated in Article 13.
- Article 8: The Composition of the Board of Auditors
- The board of auditors must not exceed five members as stipulated in the articles of incorporation, and outside statutory auditors must comprise 50 percent or more of the members.
- The board of auditors must consist of at least one statutory auditor with appropriate expertise on finance and accounting.
- Article 9: The Qualifications and Appointment Procedure of Statutory Auditors
- A statutory auditor must possess a superior personality and perception, and ability to pursue his/her duties as a statutory auditor properly.
- An outside statutory auditor must be in compliance with the Independence Standards, in addition to meeting the qualifications indicated in the previous clause.
- A candidate for a statutory auditor is decided by the board of directors in accordance with Clause 1 and 2 of this article, with approval of the board of auditors.
- Brother Industries, Ltd. must disclose the reasons for its selection of candidates for outside statutory auditors in the notice of convocation of general meeting of shareholders.
- Article 10: The Roles of Outside Directors
- Brother Industries, Ltd. requests its outside directors to fulfill roles to provide advice on its business management, make decisions on important items and supervise business executions from independent perspectives from Brother's top management based on their respective and extensive experience, achievements and knowledge.
- Article 11: Outside Officers Holding Concurrent Posts
- Brother Industries, Ltd. discloses the status as to holding of concurrent posts of outside directors and outside statutory auditors (hereafter collectively refer to outside officers) annually in the notice of convocation general meeting of shareholders and the company's annual securities report.
- Article 12: Establishment of the Nomination Committee and the Compensation Committee
- Brother Industries, Ltd. has established the Nomination Committee and the Compensation Committee as arbitrary advisory committees of the board of directors.
- The Nomination Committee and the Compensation Committee must include outside directors as their majority members, and must appoint outside directors as the committees' chairpersons.
- Article 13: The Nomination Committee
- The Nomination Committee must deliberate the agendas of the general shareholder meeting concerning appointment of directors and the agendas of the board of directors concerning appointment of executive officers in a fair, transparent and strict manner before the agendas concerned are finalized, and report the outcome to the board of directors. The Nomination Committee must also report on the contents of the Independence Standards and succession planning of the CEO and other top management to the board of directors.
- Article 14: The Compensation Committee
- The Compensation Committee must discuss the contents of the company rules concerning the standard for calculating remunerations of directors and executive officers, and the contents of respective remunerations of respective individuals, and report the outcome to the board of directors.
- The basic policies concerning remunerations of Brother Industries, Ltd.'s directors and executive officers are as stipulated in Article 15.
- Article 15: Remunerations of Directors and other Top Management
- Remunerations of the directors and executive officers must be appropriate, fair and balanced in a way that they contribute to further enhancement of the motivation of the directors and executive officers concerned to maximize the corporate value of Brother.
- In addition to the basic remunerations provided to all, the remunerations of directors also consist of performance-based remunerations reflecting their responsibilities for achievement in the group's year-on-year business performance, and stock options for a stock-linked compensation plan for directors offered as an incentive for long-term improvement of corporate value, which are given as the remunerations provided to directors excluding outside directors.
- The remunerations of executive officers consist of basic remunerations, performance-based remunerations, and stock options for a stock-linked compensation plan for directors and executive officers.
- The remunerations of directors must be calculated in accordance to the company rules, discussed and reported by the Compensation Committee, and approved by the board of directors. The remuneration of executive officers must be calculated in accordance with the company rules, discussed and reported by the Compensation Committee, and approved by the board of directors or president.
- In the case in which the Compensation Committee reports on the amount of remunerations of directors and executive officers, it must refer to the standards for remunerations, etc. of other companies that can be proper subjects for comparison, and review the appropriateness of the amount of the remunerations.
- Brother Industries, Ltd. shall disclose the sum of remunerations paid to its directors in an appropriate manner.
- Article 16: The Policies concerning Trainings for Directors and Statutory Auditors
- Directors and statutory auditors must collect information related to the Brother Group's business outlines, legal compliance, corporate governance and other issues actively, and continue to acquire knowledge and skills in order to fulfill their roles.
- A newly appointed outside officer must be briefed on the Brother Group's management strategies, business outlines and other important matters by the president or those who are appointed by the president.
- Brother Industries, Ltd. shall provide its directors and statutory auditors with opportunities for trainings by reference to the evaluation, etc. stipulated in Article 17 (outside officers are also given opportunities to obtain knowledge about the Brother Group's business outlines).
- Article 17: Evaluation
- Respective directors and statutory auditors shall conduct evaluations of the board of directors' effectiveness, etc. annually, and submit the outcome to the board of directors. Based on the evaluations submitted, the board of directors shall analyze and evaluate the effectiveness of the entire board of directors, and disclose the summary of its results in a timely and appropriate manner.
Section 5: Dialogues with Shareholders
- Article 18: Dialogues with Shareholders
- The basic policies concerning establishment of organizational structures and measures aimed at promoting constructive dialogues between Brother Industries, Ltd. and its shareholders are as stipulated in Appendix 2 .
End of Document
Date of Establishment: November 2nd, 2015
Appendix 1: The Brother Industries, Ltd. Independence Standards for Outside Officers
- Brother Industries, Ltd. determines that an individual who applies to one of the followings does not hold independence from the company.
- 1.1 An incumbent or past director, executive officer, manager or employee (including an executive officer) of Brother Industries, Ltd. and its subsidiaries (hereafter collectively referred to as Brother Industries, Ltd. etc.).
- 1.2 An individual who is currently serving or served within the past five years as a business executor*1 of a corporation or any other organization (hereafter referred to as a corporation, etc.) that applies to one of the followings.
- A corporation, etc. which is the major shareholder*2 of Brother Industries, Ltd.
- A corporation, etc. of which Brother Industries, Ltd. etc. is the major shareholder
- A corporation, etc., which paid Brother Industries, Ltd., etc. the amount of money that is more than two percent of the consolidated net sales of Brother Industries, Ltd. during the business year concerned
- A corporation, etc. which received either ten million yen of annual payment or a payment equals to two percent of the consolidated net sales of the said corporation, etc., whichever is larger, from Brother Industries, Ltd. etc. during the relevant business year
- A corporation/organization, etc. which obtained more than ten million yen of annual payment, or a payment more than two percent of the gross income or recurring revenue of the said corporation/organization, etc., whichever is larger, from Brother Industries, Ltd. as a donation or grant during the relevant business year
- 1.3 An individual who currently serves or served within the past five years as a business executor of a company, at which an individual from Brother Industries, Ltd., etc. serves as its director.
- 1.4 A certified public accountant who currently serves or served within the past five years as an accounting auditor of Brother Industries, Ltd., etc., or currently belongs or belonged within the past five years to an auditing firm, which serves as the accounting auditor of Brother Industries, Ltd., etc.
- 1.5 A consultant, accounting specialist, or a legal expert who currently receives or received within the past five years either a payment of more than two percent of the net sales of the business year or ten million yen, whichever is higher, from Brother Industries, Ltd., etc. (excluding the remuneration of officers).
(In the case of which the recipient of the said compensation is an organization, such as a corporation or guild, this applies to a consultant, accounting specialist or legal expert who belongs to the organization concerned.)
- 1.6 An individual who is currently a close relative*3 or was a close relative within the past five years of the individuals mentioned in 1.1 through 1.5 above respectively (excluding individuals who are not considered as important individuals*4).
- In selecting nominees for outside officers, the Nomination Committee and board of directors must confirm their independence.
- *1: A business executor is a director in charge of executing a business operation or executive officer of a corporation or any other organization, an officer or employee in charge of executing a business operation of any other corporation, etc., those who fulfill the duty stipulated in the Article 598 (1) of the Japanese Companies Act or any other individual that has a similar responsibility, employee, director (excluding an outside director), a manager who has a similar responsibility, or those who execute tasks of employees, etc.
- *2: Refers to a shareholder who holds more than ten percent of voting rights.
- *3: Refers to relatives within the second degree of kinship.
- *4: As to 1.1 through 1.3 above, an important individual means a director, executive officer, or an employee who is a department manager or at a higher position (including an executive officer). As to 1.4 above, it refers to certified public accountants belonging to respective auditing firms. As for 1.5 above, it means a director, executive officer, an employee who is a department manager or at a higher position (including an executive officer), certified public accountants belonging to respective auditing firms, or attorneys belonging to respective law firms.
Appendix 2: The Policies concerning Constructive Dialogues with Shareholders
- Fundamental Ideas
By increasing the opportunities to provide information to shareholders and investors and conveying the latest information in a clearly understandable manner, strive to enhance the corporate transparency and build long-term relationships of trust.
- An Individual in Charge of Presiding over Dialogues with Shareholders
Assign an executive officer in charge of holding constructive dialogues with shareholders and investors, and allow him/her to collaborate with the relevant in-house departments supporting the convening of dialogues on a daily basis.
- The Ways to Hold Dialogues and the System to Utilize Feedback
- a) In addition to organizing a briefing, telephone conference, etc. for analysts and institutional investors after the announcements of year-end and quarterly consolidated results, provide information via the Brother Group's official website and various other documents,.
- b) Brother Industries, Ltd. shall strive to share opinions from shareholders obtained through dialogues with them with its directors properly.
- Administration of Insider Information in Dialogues with Shareholders
In compliance with the company rules concerning information management, establish a proactive system to prevent divulging of insider information.