SYSMEX CORPORATION

Corporate Information

Corporate Governance

Corporate Governance System

Overview of the Corporate Governance System

Sysmex has adopted the corporate auditor system since April, 2005. The current management organization consists of nine members of the Managing Board (one of whom is an outside member of the Managing Board), four corporate auditors (including two outside auditors), and 20 executive officers (seven of whom are also members of the Managing Board), and the Company has adopted the executive officer system to increase the speed of decision making in the conduct of business and respond quickly to changes in the business environment.

Corporate Governance Structure

Corporate Governance Structure

The Managing Board consists of nine members. The board meets regularly once a month to deliberate on important management issues and convenes extraordinary meetings as necessary.

The Global Strategy Committee consists of the chairman and CEO and senior executive officers. As a rule, this committee meets once a month to deliberate on the Group’s management direction and important strategic issues.

The Steering Committee consists of the chairman and CEO and senior executive officers. The committee meets once a month, in principle, serving as a consultative body to the chairman and CEO to deliberate on important matters concerning the Group’s business.

In addition, the Group Management Reporting Committee consists of the chairman and CEO and senior executive officers, directors of overseas regional headquarters, people in charge of domestic affiliated companies and division managers. The committee meets once a quarter, in principle, reporting important matters concerning the Group’s operations.

Furthermore, the Operating Committee consists of managers of divisions. The committee meets once a month to find solutions to cross-functional problems.

Reason for Adopting a Corporate Governance System

Sysmex positions reinforcing corporate governance as an important management issue. We have adopted the current system in the aim of enhancing corporate soundness and transparency and boosting management speed and efficiency.

Development Status of the Internal Control System

On April 22, 2015, the Managing Board resolved to have systems in place to ensure that the execution of duties by directors is compliant with the law and the Articles of Incorporation and systems required to be in accordance with Ministry of Justice ordinances for ensuring the appropriateness of operations for joint-stock companies. The content of this resolution is provided below.

  • System for Ensuring the Execution of Duties by Members of the Managing Board and Employees Is Compliant with the Law and the Articles of Incorporation
    Sysmex and its subsidiaries (the "Sysmex Group") defines compliance as "the conduct of open and aboveboard business activities on the basis of observance of laws and regulations and high ethical standards" and maintains a system to ensure compliance as described below.
    Recognizing that compliance countermeasures are the first and most important way to maintain society’s trust and counter risk, the Sysmex Group operates a groupwide risk management system, under which the Compliance Committee is established as the umbrella organization for compliance. The Sysmex Group has formulated a Global Compliance Code that applies to employees and members of the Managing Board and rigorously ensures compliance through education and training. The Sysmex Group promotes the rapid detection and correction of violations of the law or the Articles of Incorporation by means of an internal compliance-related reporting system, and conducts audits of the compliance structure by means of the Internal Audit Office.
  • System for the Retention and Management of Information Related to the Execution of Duties by Members of the Managing Board
    The Sysmex Group has formulated Global Document Management Regulations. In accordance with these regulations, the Group appropriately retains and manages minutes of Managing Board and other important meetings, as well as other information relating to the execution of duties by members of the Managing Board, and maintains the information in a state available for inspection as necessary.
  • Regulations Concerning the Management of Risk and Other Systems
    To maintain a structure concerning risk management, the entire Sysmex Group complies with risk management regulations established by the Risk Management Committee for the integrated management of risk throughout the Group and strives to mitigate risk. The Risk Management Committee endeavors to discover foreseeable risks, select the most important of these risks, clarify the sections responsible for coping with risks, establish countermeasures and confirm the implementation status of these countermeasures.
  • Systems to Ensure That Members of the Managing Board Execute Their Duties Efficiently
    The Sysmex Group has positioned the Managing Board as the institution to make important management decisions and supervise the execution of duties. The Company has introduced the executive officer system to be capable of making swifter operating decisions and reinforce management functions in order to respond quickly to changes in the business environment.
    The Sysmex Group clarifies decision-making procedures and ensures efficient business operations based on organization regulations, scope of authority regulations, regulations concerning the management of affiliated companies, and others. In addition, the Group formulates mid-term plans and annual management plans, periodically confirms the progress made with those plans and takes any necessary measures.
  • Systems to Ensure the Appropriateness of Business Activities in the Corporate Group, Comprising the Company and Its Subsidiaries
    Sysmex ensures compliance throughout the Sysmex Group in accordance with its Global Compliance Code, which applies to members of the Managing Board and employees throughout the Sysmex Group. In conformance with regulations established with respect to risk management, Sysmex maintains a groupwide risk management system. Internal audit offices are in place at subsidiaries, and Sysmex’s Internal Audit Office conducts audits of the Sysmex Group as a whole from a regional and companywide perspective.
    Based on its regulations relating to the management of affiliated companies, Sysmex respects the autonomy of the management of subsidiaries and other affiliated companies and ensures the appropriateness of business activities throughout the Sysmex Group by such means as periodic reporting on the details of their business activities and advance discussion concerning important matters.
  • Assignment of Employees to Assist Corporate Auditors
    Employees in the Internal Audit Office assist Sysmex’s corporate auditors with their auditing activities, as necessary.
    At the request of the corporate auditors, Sysmex provides full-time staff to assist the Board of Auditors. To ensure that these assistants report exclusively to the corporate auditors, members of the Managing Board discuss with the Board of Auditors in advance personnel matters related to these assistants (such as appointments, transfers and disciplinary actions).
  • Policy on Handling Audit Expenses
    Sysmex has in place a budget corresponding to the annual audit plan in order to defray the expenses required for the execution of duties by the corporate auditors. Procedures are handled appropriately in the event additional expenses are required for the execution of duties by the corporate auditors.
  • Systems Related to Reporting to the Corporate Auditors and Other Systems for Ensuring Effective and Efficient Auditing by the Corporate Auditors
    If a member of the Managing Board or employee of the Group discovers a violation of the law or the Articles of Incorporation or a material fact that poses risk of causing significant damage to the Sysmex Group, that fact is promptly reported to the corporate auditor according to the prescribed regulations and procedures. The corporate auditors also attend Managing Board and other important meetings, read important documents such as approval requests, and request explanations from members of the Managing Board and employees of the Sysmex Group as necessary.
    Sysmex prohibits dismissal or any other disadvantageous treatment to members of the Managing Board and employees of the Sysmex Group who report information as outlined above.

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Status of Internal Audits and Audits by Corporate Auditors

The Internal Audit Office, composed of 10 members, confirms and evaluates internal controls and the status of management and execution from the perspective of sound Group development. The office submits reports based on these results and promotes operational appropriateness through its improvements, advice and proposals. In these ways, the office also performs internal audits to contribute to the sound management of the Group.

The Board of Auditors consists of four corporate auditors, two of whom are outside auditors. The corporate auditors attend the Managing Board and Steering Committee meetings and maintain systems for appropriately supervising the conduct of business on the part of the members of the Managing Board. The corporate auditors also maintain close communications with the Internal Audit Office, exchanging information and opinions as necessary, and confirm and evaluate the appropriateness of business execution. The Board of Auditors will continue to enhance management soundness by engaging in appropriate supervision of the execution of business as stipulated by law.

The Board of Auditors works closely with the accounting auditors on the audit plans report (annual) and the audit results reports (annual), exchanging information and opinions as necessary, such as when conducting internal control audits related to financial reporting. The Company has contracted with Deloitte Touche Tohmatsu LLC to perform a certified public accountants audit. In addition to conducting an audit of the entire Sysmex Group, the Company maintains an environment that makes it possible to rapidly cope with changes in the accounting system. The Company has contracts in place with several law offices and maintains a structure to solicit and obtain advice on important matters as necessary.

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Outside Members of the Managing Board and Outside Corporate Auditors

The Company has one outside member of the Managing Board and two outside corporate auditors.

Susumu Nishiura was appointed as an outside director in the hope that he would execute his duties as an outside director adequately utilizing his abundant experiences and deep insight in corporate management. Mr. Nishiura is formerly of TOA Corporation, a Sysmex business partner. He stepped down as director of TOA in June 2010. TOA has no special relationship with Sysmex. As we judge there to be no concern about any conflict interest with Mr. Nishiura and the general shareholders, we have notified the Tokyo Stock Exchange that he is an independent executive. No transactional or other interest-based relationships exist between Mr. Nishiura and Sysmex.

Kuniaki Maenaka was appointed as an outside corporate auditor in the hope that he would make use of his accounting and financial expertise as a certified public accountant to contribute to management soundness and transparency. Mr. Maenaka is formerly of Deloitte Touche Tohmatsu Limited, with which Sysmex has in place an agreement regarding public accountancy audits. However, he stepped down from Deloitte Touche Tohmatsu in September 2010, and during his employment there he had no connection with accounting audits of Sysmex. As of March 31, 2015, Mr. Maenaka owned 4,000 shares of Sysmex stock, which we do not judge to be material.

Koichi Onishi was appointed as an outside corporate auditor in the hope that he would audit the Company adequately utilizing his abundant experience and deep insight as a corporate manager. Mr. Onishi is formerly of Nippon Koshuha Steel Co., Ltd., and no special relationship exists between that company and Sysmex.

As we judge there to be no concern about any conflict interest between the two outside corporate auditors and the general shareholders, we have notified the Tokyo Stock Exchange that they are independent executives. Furthermore, no transactional or other interest-based relationships exist between these outside corporate auditors and Sysmex.

The outside members of the Managing Board and outside corporate auditors attend meetings of the Managing Board and the Board of Auditors, and they are provided with access to various internal databases that enable them to obtain necessary information. In addition to exchanging opinions at meetings of the Board of Auditors, systems are in place to exchange information with the outside corporate auditors as necessary, providing them with adequate information for conducting effective audits.

Although we have not established clear standards and policies with regard to independence in selecting outside members of the Managing Board and outside corporate auditors, during the selection process we refer to the Tokyo Stock Exchange’s "Standards for Determining the Independence of Independent Executives." We also consider each candidate’s work history and relationship with Sysmex to determine that they are sufficiently independent to discharge the duties of independent executives from a standpoint of independence from Sysmex’s management team.

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Messages from an Outside Members of the Managing Board and Outside Corporate Auditors

社外Susumu Nishiura   Member of the Managing Board (Outside)

Susumu Nishiura

Member of the Managing Board (Outside)

Steering Committee meetings are a time of lively, forward-looking discussion, and the Managing Board takes due account of the results of Steering Committee considerations in making its decisions. During discussions, I consider it import to ensure that my viewpoint incorporates increasing sales, securing profits and ensuring the appropriateness of investments in growth for enhancing corporate value.

The positioning of our long-term management targets and the content of the mid-term management plan that went into effect in the fiscal year ending March 31, 2016, are aimed at additional business expansion. Achieving these goals may require large-scale investments in growth, but confirming the effects of these investments and their profitability are also an important part of my assignment. Also, in recent years Sysmex has globalized and rapidly expanded its fields of operation. Internal rules need to be renewed and structures reset to take these developments into account. As an outside member of the Managing Board, I intend to concentrate specifically on the internal control system, particularly compliance, as well as the risk management system.

社外Kuniaki Maenaka   Corporate Auditor (Outside)

Kuniaki Maenaka

Corporate Auditor (Outside)

My role as an outside corporate auditor is to look objectively at the conclusions handed down through the management decision-making process from a third-party, shareholder-oriented perspective. At the same time, in filling the role I believe I invigorate the internal corporate culture and management sentiment in a novel way.

I aim to speak and act in ways that reflect my work experience, which is entirely as an accountant working in the overseas business arena, by concentrating in particular on how overseas markets and overseas stakeholders view our management, whether our actions match their expectations and whether we are properly fulfilling our social responsibilities worldwide.

I intend to continue conducting my tasks from the viewpoint of whether management is operating in an accountable manner in the scrutinizing eyes of overseas and domestic stakeholders and whether management is contributing to increases in corporate value. Also, I will work to ensure that the risk that tends to occur at quantitative and qualitative development stages is being appropriately understood and preemptively addressed and remain alert to any sign of problems relating to internal control.

社外Koichi Onishi    Corporate Auditor (Outside)

Koichi Onishi

Corporate Auditor (Outside)

This was the first year of my appointment, and I spent a significant amount of time getting the lay of the land. I visited the Company’s domestic branches, sales offices and Group companies, making a real effort to put aside any opinions I might have formed and consider the true state of things where they occur and look at conditions in an objective light.

At meetings of the Steering Committee and Managing Board, I make it a point to ask questions from a proactive governance- and compliance-oriented perspective; this may simply be a matter of course for people within the Company.

As one might expect in a rapidly growing company, there is a pervading and palpable sense of energy among the employees. I believe it may be necessary for the front line of business to ensure that various regulations and further measures are in place. Going forward, I intend to continue viewing the Company from an outsider’s perspective, while doing my utmost to enhance corporate value via thorough corporate governance and compliance.

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Compensation Paid to the Members of the Board and Corporate Auditors

Total Executive Compensation by Executive Category, Breakdown of Total Compensation by Category, and Number of Executives Receiving Compensation

Executive category Total executive compensation (Millions of yen) Compensation breakdown, by category (Millions of yen) Number of executives
Basic compensation Stock options Bonuses Retirement benefits
Members of the Managing Board
(excluding outside members)
799 236 125 437 - 8
Corporate auditors
(excluding outside corporate auditors)
36 36 - - - 2
Outside executives 11 11 - - - 4

Total Compensation, including People Awarded Compensation in Excess of ¥100 Million

Name Executive category Company category Compensation breakdown, by category (Millions of yen) Total executive compen-sation (Millions of yen)
Basic compen-sation Stock options Bonuses Retirement benefits
Hisashi Ietsugu Members of the Managing Board Sysmex Corporation 59 43 191 - 293
Policies and Methods of Determining Executive Compensation Amounts and Calculation Methods

Sysmex determines executive compensation amounts and calculation methods by making a clear link between operating performance and responsibility for achievement. Compensation for members of the Managing Board divides broadly into fixed and variable portions. Fixed compensation is determined on the basis of a member’s position, while variable compensation varies depending on performance. Compensation for corporate auditors comprises only a fixed portion. Compensation amounts are discussed and determined by the Managing Board following deliberation by the Compensation Committee.

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