Canon Inc. recognizes that constantly improving management transparency and reinforcing management oversight functions are essential to establishing a sound corporate governance structure and to continually enhancing corporate value.
Governance Structure (As of April 1, 2015)
Representative Directors, Directors, and Board of Directors
At Canon, the Chief Executive Officer (CEO), who is a Representative Director, decides the Company's management strategies and policies while managing the overall execution of the operations of the Company. As of April 2015, the other Representative Director is the Chief Financial Officer (CFO), who controls financial matters.
Under the management of the CEO, each business segment takes responsibilities of its operational management on a consolidated basis in an integrated structure covering everything from product development to production and sales. In addition, the headquarters supports and controls finance and accounting, quality management, global environment, and global legal administration, undertaking administrative functions.
The Board of Directors, consisting of 17 Directors, makes decisions on items prescribed in the Companies Act, including policies for establishing an internal control system, and other important matters on execution of the operations of the Company. Furthermore, the Board receives reports on execution of the Company operations controlled by the CEO on a regular basis, and otherwise as necessary, and oversees such execution of the operations of the Company.
The Company believes that well-developed knowledge of conditions on the ground is the key to swift and effective decision-making and appropriate business monitoring. For this reason, most Directors are involved in execution of the operations of the Company as Group Executives or Chief Executives in charge of the Company's main operations. In addition to that, Canon also has two Outside Directors as independent directors who bring impartial perspectives to management that would differ from those of Canon career veterans.
To help directors focus more effectively on management and oversight, Canon has appointed Executive Officers who separately undertake execution of the operations of the Company. As of April 1, 2015, there are 22 Executive Officers.
Corporate Strategy Committee, Risk Management Committee, and Disclosure Committee
The Corporate Strategy Committee, consisting of Representative Directors, Executive Directors, and some Executive Officers, functions as an advisory body to the CEO, undertakes prior deliberations on important matters pertaining to Canon Group strategies among which items to be decided by the CEO. Outside directors and outside Audit & Supervisory Board members attend the Corporate Strategy Committee meetings and proffer their opinions.
Based on its policy on establishment of an internal control system, the Company set up the Risk Management Committee, which formulates policy and action proposals for improvement of the risk management system in the Canon Group under decisions of the Board of Directors. The Risk Management Committee consists of three entities: the Financial Risk Management Subcommittee, which improves systems on the credibility of financial reporting; the Compliance Subcommittee, which ensures thorough implementation of corporate ethics and improves legal compliance systems; the Business Risk Management Subcommittee, which improves systems prepared for overall business risks, including insufficient product quality and information leakage. The Risk Management Committee verifies the risk management system and reports the status to the CEO.
In addition, the Disclosure Committee undertakes deliberations on information disclosure, including content and timing, to ensure timely and accurate disclosure of important company information.
Audit & Supervisory Board
Canon is a “Company with an Audit & Supervisory Board.” The Board consists of five members, three of which are independent Outside Audit & Supervisory Board members. In accordance with auditing policies and plans decided at Audit & Supervisory Board meetings, members of the Audit & Supervisory Board attend Board of Directors meetings, Corporate Strategy Committee meetings, and other relevant meetings, while receiving verbal reports from directors, reviewing important approval documents, and examining the business and financial asset statuses of the Company and its subsidiaries. In these ways, the Audit & Supervisory Board strictly checks directors' and others' execution of the company operations, including establishment and operation of the internal control system, thus is fulfilling a management oversight function. The Board also works in close alliance with the Internal Audit Division and the accounting auditors to improve the efficacy of monitoring.
Internal Audit Division
The Corporate Audit Center, which is internal audit division with a staff of more than 70 members, conducts audits and evaluations and provides guidance on all operations and sectors without exception, including those of Group companies, from various perspectives, such as business efficacy and efficiency, compliance, and information security. Audits results are reported to the CEO and Audit & Supervisory Board and complement audits conducted by members of that board.
The Company has an auditing service contract with Ernst & Young ShinNihon LLC to conduct external audits of the company's financial statements in accordance with the Companies Act and the Financial Instruments and Exchange Act of Japan. An external audit of internal controls is also conducted in accordance with the Financial Instruments and Exchange Act of Japan and the Sarbanes-Oxley Act of the United States. To check the validity of the audits, the Company's Audit & Supervisory Board members receive detailed explanations from the accounting auditors about the quality management system regarding audits.
With the aim of monitoring the independence of the accounting auditors, the Company introduced a prior approval system by the Audit & Supervisory Board for contents of auditing and other service contracts and relevant fees. Under this system, rigorous pre-approvals are conducted for each individual contract in accordance with company regulations.
Remuneration for directors at Canon Inc. comprises basic compensation, which is based on fulfillment of duties, and an executive bonus, which is tied to company performance each year (outside directors are not eligible for the executive bonus).Additionally, directors may be presented with stock options as a medium- to long-term incentive. Remuneration for Audit & Supervisory Board members, however, consists only of basic compensation and is not tied to company performance.
The maximum limits of basic compensation for directors and Audit & Supervisory Board members are set by vote at the general meeting of shareholders. Remuneration for individual directors and Audit & Supervisory Board members is decided by a meeting of the Board of Directors or by a meeting of the Audit & Supervisory Board members, respectively.
Executive bonuses are calculated according to company performance, with the total amount presented to the general meeting of shareholders for approval. Once the total amount is determined, bonuses for individual directors are decided by the Board of Directors based on rank and individual achievement.
Stock options are issued without compensation in order to enhance motivation and morale to improve Canon's performance. Proposals are tendered to the general meeting of shareholders and, if approved, stock options are issued.
|Outside directors||Audit & Supervisory
(exc. outside Audit &
Supervisory Board members)
|Outside Audit &
|No. of officers*||23||2||3||4|
(Millions of yen)
(Millions of yen)
|Total (Millions of yen)||1,138||36||48||56|
- *No. of officers include those retiring midterm.