Overview of the Corporate Governance Structure and Reasons for Adoption
As a holding company, Benesse Holdings, Inc. and the Benesse Group operate under the corporate philosophy, Benesse = "Well-Being," through the following management structure, aiming to create a legal and appropriate structure required for sound and continuous development.
Chaired by the director and chairman, the Board of Directors meets once a month, in principle, to make important management decisions and to supervise the business execution of the operating companies.
The Company has established the Nomination and Compensation Committee to serve as an advisory body to the Board of Directors. The Nomination and Compensation Committee comprises directors, with a majority of outside directors. The committee examines the candidate selection and dismissal of directors and the director and president and submits its opinion to the Board of Directors. The committee also resolves the individual compensation amounts for directors based on their assigned responsibilities within the Board of Directors, as well as examining the compensation system for directors and submitting its opinion to the Board of Directors. To conduct impartial activities, members of the Nomination and Compensation Committee are not permitted to participate when they themselves are the subject of discussion or proposal.
The Management Council is chaired by the president and attended by the vice chairman, executive vice presidents, directors in charge, heads of companies, vice heads of companies, those responsible for administrative divisions, as well as people designated by the president. The council shares important Group issues and information and discusses key matters.
The Benesse Group's Oversight of business execution
Based on the holding company structure, Benesse has created mechanisms for collecting, sharing and controlling information related to management of the Group as a whole, using the following methods in accordance with the regulations for supervision of Group company management. In doing so, Benesse aims to realize the management policy, long-term vision and management targets for the entire Group.
The Company has set up in-house companies for each of its strategic business domains, and a company head is appointed to take responsibility for each company, which supervises the subsidiaries for its respective business domain. The company head formulates growth strategies for the entire in-house company and executes them, strengthening the coordination between the Company and its subsidiaries. Moreover, the Company regularly checks on each in-house company's business performance and progress on key matters. In the case of a business domain for which a company has not been set up, the director in charge of the respective business domain presides over the affiliated subsidiary.
Moreover, the Company appoints people in charge of administrative divisions to assist the directors in supervision of the Group's business execution. They are appointed for each field, including Group growth strategies; business planning and budgeting; personnel; Group governance; public relations; branding; finance and accounting; IT; personal information protection; information security; risk management; and compliance, among others. The people in charge of administrative divisions, help to advance the Group's management and administration as well as identify and solve management issues.
Subsidiaries must consult with the Company before making any administrative decisions on important matters that could impact the Group's management. The in-house company heads discusses these matters with people in charge of each administrative division from the perspective of ensuring the Group's growth and legal compliance. Then decisions are made through a process such approval from the representative director, or a resolution of the Company's Board of Directors.
Implementation of Internal Control System
The Benesse Group established the basic policies of its Internal Control System and other necessary systems stipulated by the Ordinance for Enforcement of the Companies Act, by a resolution of the Board of Directors' meeting held in May 2006, in accordance with Article 362, Paragraph 5 of the Companies Act. Subsequently, a decision was taken to review this resolution at the Board of Directors' meeting held on March 30, 2018.
A project team has also been established in Benesse Holdings with the purpose of creating internal controls and other measures relating to financial reporting, based on Japan's Financial Instruments and Exchange Act. The team's activities cover the entire Group.
Implementation of Risk Management System
In October 2010, we established the Benesse Group Principles. Rooted in the Group's corporate philosophy, the principles lay down the correct behavior for each executive officer and employee, to ensure that they perform their duties appropriately and ethically. Following the Benesse Group Principles, each operating company will observe societal rules, corporate ethical principles and laws and regulations, while continuing to create value for society. In this way, we are building a management structure to facilitate continuous growth and development.
Benesse Holdings has formulated the Benesse Group Risk Management and Compliance Rules for responding to a crisis. Covering the entire Group, the rules create a simple, clear response structure for transmitting information to the Company quickly in times of crisis.
In the event of a crisis, we consider it important to respond swiftly and appropriately through this structure.
Since 1999, the Benesse Group has operated an internal whistleblower system, that was set up to give employees a means of reporting violations of standards and principles, and has made such reporting an obligation of all our employees. To avoid any potential disadvantage to whistleblowers, reports can be made anonymously and confidentially. Since 2005, we have also operated a Group Ethics Compliance line via a third party organization, to provide a contact point for employees at Group companies in Japan. The mechanism was extended to include overseas companies in March 2009.
Liability Limitation Agreements with Directors (Excluding Directors Serving Concurrently as Executive Directors) and Audit & Supervisory Board Members
Benesse signed agreements with Outside Directors Shinjiro Iwata, Kiyoyuki Tsujimura, and Hideaki Fukutake, in June 2014, and Ryuji Yasuda, in June 2015, and Nobuo Kuwayama, in June 2016, and with Audit & Supervisory Board Members Yoshinori Matsumoto, Kimie Sakuragi and Eiichi Izumo, in June 2015, and Miyuki Ishiguro, in June 2017, limiting their liability for damages. Based on these agreements, in cases where the officers act in good faith and there is no gross negligence of duty, liability for damages is limited to the higher of either ¥10 million or the minimum amount prescribed by Article 425, Paragraph 1 of the Companies Act. Furthermore, in regard to exemption of liability of Directors and Audit & Supervisory Board Members, the Company's Articles of Incorporation provide that the liability for damages of Directors and Audit & Supervisory Board Members (including former Directors and Audit & Supervisory Board Members) resulting from negligence of duty may be exempted up to the statutory limit by a resolution of the Board of Directors in accordance with Article 426 Paragraph 1 of the Companies Act of Japan. This is to ensure that Directors and Audit & Supervisory Board Members can perform their expected roles to the fullest.