Corporate Governance
- Corporate Governance System
- Corporate Governance
Corporate Governance System
| Board structure | Company with board of directors and corporate auditors |
|---|---|
| Number of directors | 5 |
| Number of Audit & Supervisory Board members | 2 |
| Tenure (directors) | 1 year |
| Number of subsidiaries | 39 (as of March 31, 2024) |
| Accounting auditor | Deloitte Touche Tohmatsu LLC |
Ⅰ. Overview of the Corporate Governance Structure
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1. Benesse’s Corporate Governance Structure
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Overview of the corporate governance structure and reasons for adoption
Guided by our corporate philosophy of “Benesse = Well-Being,” since our founding, Benesse Holdings, Inc. (the “Company”) and the Benesse Group have been tackling various social issues and providing support for customers to improve themselves and help solve problems throughout their lives, primarily in the areas of education, nursing care, lifestyle, and parenting. In February 2023, we announced our Group Purpose as the basis for implementing this corporate philosophy through specific activities at our business sites. In May of the same year, we formulated a “Transformation Business Plan” to realize this plan and ensure sustainable profitable growth for our Group. To achieve the plan, we have been working on transforming our portfolio structure, investing in new growth areas, reallocating human resources, and overhauling our management system and corporate functions to enable speedier decision making, thereby strongly driving the plan forward.
Furthermore, in May 2023, the Company received an MBO proposal from the founding family and EQT, a private equity investment company headquartered in Sweden. After review by the Acquisition Review Committee, the Board of Directors of the Company expressed its opinion in favor of the tender offer for the Company’s shares and recommended that shareholders participate in the offer. The public tender offer was conducted from January 30 to March 4, 2024, and following its successful completion, an extraordinary shareholders’ meeting was held on April 29 of the same year, where the consolidation of shares and partial amendments to the Articles of Incorporation were resolved. Following the delisting of the Company’s shares from the Tokyo Stock Exchange’s Prime Market on May 17, 2024, the share consolidation took effect on May 21, 2024, leaving the Company with two shareholders: Bloom 1 K.K., in which EQT has a stake, and Minamigata Holdings Ltd., in which the founding family has a stake. As a result, we are now able to implement flexible and bold management measures, leveraging EQT’s know-how and network to create business synergies. In order to achieve the goals of the Transformation Business Plan, we are operating under the following management structure.
With regard to the organizational design, the shareholders’ agreement stipulates that the total number of directors will be a maximum of seven. Initially, Mr. Hitoshi Kobayashi (CEO and President) and Mr. Hideaki Fukutake (Chairman of the Board of Directors) were appointed. In addition to the CEO and President, EQT has the right to nominate three directors, while the founding family has the right to nominate two directors (one of whom is Mr. Hideaki Fukutake), with one director to be jointly nominated by both EQT and the founding family. In addition, the Company will transition from a company with a board of corporate auditors to a company with corporate auditors, and will appoint two corporate auditors, with EQT and the founding family each having the right to nominate one auditor. Accordingly, following the resolution to amend the Articles of Incorporation at the Ordinary General Meeting of Shareholders held on June 3, 2024, the Company transitioned from a company with a board of corporate auditors to a company with corporate auditors as of the same date.
The Board of Directors consists of one executive director (Mr. Hitoshi Kobayashi) and four non-executive directors (Mr. Hideaki Fukutake, Mr. Daisuke Iwase, Mr. Masahiro Shimizu, and Mr. Tetsuro Onizuka), and selects the President (Mr. Hitoshi Kobayashi) as the representative director, the Chairman (Mr. Hideaki Fukutake), and Vice Chairman (Mr. Daisuke Iwase) from among the directors without representative rights. The Board of Directors, chaired by the Chairman of the Board, convenes in principle once a month to make important decisions regarding the Company’s management. In addition to overseeing the execution of operations at the Company and its group companies, the Board also serves as a forum for discussing strategic matters necessary for the growth of the Benesse Group. Furthermore, two new corporate auditors have been appointed: a corporate auditor (Mr. Naoto Saito), who is familiar with internal affairs and has considerable knowledge in finance and accounting, and a corporate auditor (Mr. Yoji Kudo), who is qualified as a lawyer. These two appointees conduct effective audits in accordance with the Corporate Auditor Auditing Standards, setting the policies and responsibilities of their duties, and other relevant matters.
Our directors and corporate auditors concurrently serve as directors and corporate auditors of Benesse Corporation and Benesse Style Care, our main subsidiaries, to ensure prompt decision-making and appropriate supervision as a group.
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The Benesse Group’s oversight of business execution
Under our holding company structure, the Company collects and shares information related to the business execution of the entire Group through the following methods, based on our operating company management and administration rules. This process aims to realize the Group’s management policy and long-term vision, achieve all our numerical performance targets, and serves as a monitoring function.
Our executive structure is as follows: the CEO is established as the Chief Executive Officer of the Group, and the President and CEO serves as the CEO of the company. Strategic oversight of the Group’s business domains is managed by major subsidiaries, with the President of Benesse Corporation overseeing the education and lifestyle business domains (including business segments such as “Domestic Education Business,” “University and Adult Business,” and part of “Other”), while the President of Benesse Style Care oversees the nursing care and childcare business domain (the “Nursing Care and Childcare Business” segment).
CXOs (Chief X Officers) have been appointed for each specialized area, including corporate strategy, finance, human resources, legal and risk management, DX, and corporate communication. CXOs oversee the administrative divisions in their respective departments, promote Group-wide business management, and identify and resolve management issues. They also assist the President and CEO by facilitating collaboration among CXOs and promoting the resolution of management issues from a Group-wide perspective using their expertise and knowledge. In the area of operational transformation, it is directly overseen by the President and CEO, with the head of the administrative division overseeing this specialized area. These CXOs, along with the heads of administrative divisions under the direct control of the President and CEO (“CXOs, etc.”) request necessary reports from subsidiaries and provide instructions as needed.
When subsidiaries make institutional decisions on important matters that may affect the management of the Group, those subsidiaries under the oversight of the President of Benesse Corporation or the President of Benesse Style Care shall consult with the Company in advance through the president of the company that controls the relevant business domain. From the perspective of ensuring the growth and legality of the Benesse Group, the Company shall consider such matters to be discussed between the president of the company overseeing the relevant business domain and the CXOs, etc., and then follow procedures such as CEO approval and resolution by the Board of Directors of the Company.
The Company has established a Management Committee, chaired by the President and CEO and attended by CXOs, etc., the President of Benesse Corporation, the President of Benesse Style Care, and the heads of the business units from these companies and their designated CEOs, to share important Group matters and discuss cross-sectional issues between each strategic business area, as well as Group-wide management challenges. In addition, to report and discuss the progress of business plans, KPIs, and other important matters between the Company and each strategic business area, as well as to address important cross-sectional issues within those areas, we have established the Company Management Committee (CMC). This committee is chaired by the person responsible for the business area in question, and includes the CEO, the president of the company responsible for that strategic business area, the business unit managers of those companies, CXOs, etc., and designated CEOs.
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Implementation of the Internal Control System
In our Group, in accordance with the basic policies of the Benesse Group’s Internal Control System and the Ordinance for Enforcement of the Companies Act, a resolution was passed at a Board of Directors meeting held in May 2006 to establish the broad outline necessary for the establishment of the system. The latest revision of the resolution was adopted on March 8, 2024.
In addition, the Company’s Internal Auditing Department promotes a Group-wide integrated approach to establishing internal controls pertaining to financial reporting based on Japan’s Financial Instruments and Exchange Act and other such measures.
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Implementation of the Risk Management System
In October 2010, the Company established the Benesse Group Principles. Rooted in the Group’s corporate philosophy, the principles outline the behavioral guidelines for each executive officer and employee to ensure that they perform their duties appropriately and ethically. This ensures that each subsidiary within the Group implements the actions outlined in the Benesse Group Principles, thereby upholding societal norms, corporate ethical principles, and laws and regulations. Furthermore, in February 2023, the Group announced its purpose statement, aiming to realize our corporate philosophy and continue being a company that creates value for society. This commitment is integral to building a management system that supports sustainable growth and development.
The Company has established the Benesse Group Risk Management and Compliance Rules for the Group as a whole. These rules ensure that each subsidiary complies with laws and regulations. Each subsidiary is also required to set more detailed codes of conduct and rules specific to its industry, business characteristics, scale of business, and work environment. Through these rules, the Company ensures that business is conducted in an appropriate manner and that compliance is carried out thoroughly.
To promote risk management and compliance for the Benesse Group as a whole, the Company has established a Risk and Compliance Committee. Committee members include the CEO, CXOs, etc., the presidents of Benesse Corporation and Benesse Style Care, and the heads of their in-house business companies. The Committee is chaired by the Chief Legal and Risk Officer (CLRO), who oversees risk management and compliance. By monitoring the progress of key risk countermeasures included in the business plans of the Company and its subsidiaries, the Committee visualizes the status of significant risks within the Group. It also determines the key risks and corresponding countermeasures for the Group every fiscal year. The Committee regularly reports the results to the Company’s Board of Directors, after which they are disseminated within the Company and to its subsidiaries. This leads to the promotion of improvement activities (including corrective measures and preventive measures, education and training, etc.) and other important risk countermeasures. By applying the PDCA cycle in this way, the Company shares negative information and advances routine risk management and compliance activities.
With regard to crisis measures, the Benesse Group Risk Management and Compliance Rules establish a clear and straightforward system to ensure that information is immediately reported to the Company in the event of a crisis. We believe that it is crucial to respond in a timely and appropriate manner in accordance with this system when a crisis occurs.
Since 1999, the Benesse Group has operated an internal whistleblowing system, clearly ensuring anonymity and confidentiality to protect whistleblowers from any potential disadvantage. Reporting violations of standards and principles is an obligation of all our employees.
Since 2005, the system has been expanded to include domestic Group companies, with an external third-party organization providing a point of contact. In 2009, the internal reporting system was further expanded to include overseas Group companies. In November 2019, the global whistleblowing system was restructured, and in response to the amendments to the Whistleblower Protection Act which took effect in June 2022, the company established a whistleblower contact point.
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Outline of the Terms of Liability Limitation Agreements and Directors and Officers Liability Insurance Agreements
The Company has signed agreements with all directors (excluding executive directors, etc.) and Audit & Supervisory Board members to limit their liability for damages in accordance with Article 423, Paragraph 1 of the Companies Act. Based on these agreements, if the directors (excluding executive directors, etc.) and auditors perform their duties in good faith and without gross negligence, the minimum liability limit prescribed in Article 425, Paragraph 1 of the Companies Act will serve as the maximum amount of damages they can be held liable for.
Furthermore, the Company has entered into a directors and officers liability insurance agreement with an insurance company, in accordance with Article 430-3, Paragraph 1 of the Companies Act. The agreement covers all the Company’s directors and auditors as insured parties, and the Company pays all premiums. The insurance agreement covers compensation for damages and legal fees in the event that the insured parties are held liable for damages arising from the execution of their duties. However, to ensure the propriety of their duties, the agreement does not cover damages arising from violations of laws and regulations knowingly committed by the insured parties.
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Ⅱ. Management
Ⅲ. Implementation of Auditing
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1. Implementation of corporate auditing
As of the resolution of the Ordinary General Meeting of Shareholders held on June 3, 2024, the Company transitioned from a company with a board of corporate auditors to a company with corporate auditors. Following this transition, one full-time corporate auditor and one part-time corporate auditor have been appointed. The full-time corporate auditor has a considerable number of years of experience in areas related to finance and accounting, and the part-time corporate auditor is an attorney at law. In addition, the Company has established the Corporate Auditors’ Office, which is staffed by one full-time staff member, to assist the corporate auditors in the performance of their duties and to enhance the auditing function.
In accordance with the Corporate Auditors’ Auditing Standards, the corporate auditors have established an auditing policy that places emphasis on preventive audits, with the responsibility to establish a high-quality corporate governance system that meets social trust.
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2. Implementation of internal audits
Internal audits are conducted by a dedicated internal auditing department under the direct supervision of the President, with a team of 23 members. This department monitors the establishment and operation of internal controls and risk management across the Company and its business divisions, and performs operational audits based on risk assessments. In addition, the Company utilizes a Control Self-Assessment (CSA) system to enhance cooperation and verification functions with business division managers. The results of these audits are reported to the Board of Directors and Audit & Supervisory Board as appropriate. The departments also respond in accordance with the “Internal Control and Reporting System,” assessing the Company and its operating companies on their internal controls and creating assessment reports to present to the Board of Directors and Audit & Supervisory Board.