Corporate Governance Structure

Marubeni’s Corporate Governance Structure

Marubeni operates under a corporate audit governance system, adhering closely to the Companies Act, with a control structure designed to facilitate a clearly defined decision-making process, business execution system, and supervisory system. Marubeni has established the structure as shown in the diagram below.

Marubeni’s Corporate Governance Structure

Marubeni conducts a diverse range of businesses globally. Accordingly, Marubeni has established a corporate audit governance model with a Board of Directors mainly comprising internal directors (with appointment of Independent directors and collaboration with the Audit & Supervisory Board) in order to ensure rapid and efficient decision-making and appropriate supervisory functions in management. Marubeni has determined that this governance model is functioning effectively as set forth in items (a) and (b) below. Therefore, Marubeni will retain the current governance structure.
(a) Ensuring rapid and efficient decision-making
Marubeni ensures rapid and efficient decision-making by structuring the Board of Directors mainly around directors who serve concurrently as executive officers and are well-versed in the Company's diverse business activities.
(b) Ensuring appropriate supervisory functions
Marubeni ensures appropriate supervisory functions by implementing various measures, including appointing Independent directors; installing the Audit & Supervisory Board Member’s Office; fostering collaboration among the Audit & Supervisory Board Members, the Audit Department, and the Accounting Auditor; and implementing advance briefings on matters referred to the Board of Directors for both independent directors and Audit & Supervisory Board Members on the same occasions.

Board of Directors

Our Board of Directors comprises 10 directors (including four independent directors) who deliberate on overall corporate policy and major issues, while monitoring the performance of individual directors. Each director's term of office is one year. This is to flexibly put in place an optimal management structure in response to changes in the business environment, while clarifying management responsibility.

Audit & Supervisory Board

The Audit & Supervisory Board comprises five Audit & Supervisory Board Members (including three Independent Audit & Supervisory Board Members). Marubeni has adopted a corporate audit governance system. The Audit & Supervisory Board Members are responsible for overseeing directors in the execution of their duties by attending important meetings, such as the Board of Directors, and by monitoring business activities and financial conditions in accordance with the auditing policies and plans set by the Audit & Supervisory Board. The Audit & Supervisory Board Members have monthly meetings with the independent auditors to exchange information and opinions on auditing plans, progress of auditing activities at Marubeni and Group companies, audit results, key points and considerations on earnings results, and accounting audit trends.

The President also holds regular meetings with the Audit & Supervisory Board Members and reports to them on business performance. Other directors, division COOs, and the general managers from the Corporate Staff Group report to the Audit & Supervisory Board Members each year on business performance.

Corporate Management Committee

The Corporate Management Committee was established as an advisory committee for the President and comprises five members of the board, including the President, as well as three senior managing executive officers and one managing executive officer. The committee deliberate substantive matters related to management and operations.

Committee of Heads of Divisions

The members of the Committee of Heads of Divisions are the President, the representative directors, Chief executive officer (Group CEOs) the division COOs, and regional CEOs and COOs appointed by the President. They discuss matters pertaining to budgeting, account settlement, and financial planning, as well as other issues relating to the execution of business.

Committee of Executive Officers

The Committee of Executive Officers comprises 35 executive officers (five of whom are also directors) to announce management policies issued by the President and to discuss financial performance, the results of internal audits and other issues that affect business execution, and to facilitate the exchange of information between the oversight function and the implementation function. Keeping communication lines open between the directors and executive officers, independent directors also attend these meetings. Executive officers are selected by the Board of Directors and appointed to one-year terms of office.

Nomination Committee

The Nomination Committee serves as an advisory body to the Board of Directors, deliberating proposed candidates for appointment as directors and auditors, and reporting its findings to the Board of Directors. Independent executives are the majority of committee members.

Governance and Remuneration Committee

The Governance and Remuneration Committee serves as an advisory body to the Board of Directors, deliberating decision-making policies and the suitability of standards regarding remuneration for directors and auditors, and reporting its findings to the Board of Directors. Independent executives are the majority of committee members. The committee also assesses and reviews the Board of Directors as a whole, including the Board’s composition and operations, and reports its findings to the Board of Directors.

Overview of Corporate Governance Systemss

Organization Company with Auditors
Chairman of the Board Chairman
Directors (independent directors*) 10 (4)
Audit & supervisory board members (independent audit & supervisory board members*) 5 (3)

Year ended March 31, 2017

Major Board and Committee Meetings Board of Directors 19 times
Audit & Supervisory Board 10 times
Corporate Management Committee 31 times
Committee of Heads of Divisions 3 times
Committee of Executive Officers 4 times
  • *All independent directors and audit & supervisory board members are independent officers as defined by the Tokyo Stock Exchange.

Committee Roles and Functions

Marubeni has established various committees designed to enhance corporate governance. A brief description of the principal committees and their respective governance roles is given below.

Committee Role Meeting Frequency
Investment and Credit Committee Projects pending approval, such as investments, are discussed and approved by the Investment and Credit Committee prior to appearing on the Corporate Management Committee's agenda. Held three times a month in principle
Compliance Committee The Compliance Committee provides support and guidance with regard to practicing compliance and as such develops, maintains, and manages the Marubeni Group's compliance structure. Held four times a year and when necessary
CSR & Environment Committee The CSR & Environment Committee is responsible for discussing and reporting on the Marubeni Group's CSR and environmental protection activities as well as the policies for these activities. Held when necessary
Internal Control Committee The Internal Control Committee is responsible for developing and monitoring the enforcement of internal control policies based on the Companies Act as well as drafting revisions when necessary. It also establishes, operates, and verifies the effectiveness of internal control systems for financial reports in accordance with the Financial Instruments and Exchange Act, while also drafting internal control reports. Held when necessary
Disclosure Committee The Disclosure Committee creates disclosure policies, ensures that internal systems concerning legally mandated and timely disclosure are in place, and decides the importance and appropriateness of the information targeted for legally mandated or timely disclosure. Held when necessary
Customs Clearance
Supervising Committee
The Customs Clearance Supervising Committee establishes and maintains systems to ensure that the Marubeni Group follows appropriate procedures when importing and exporting and also conducts related internal inspections and training. Held once a year and when necessary
Security Trade Control
Committee
The Security Trade Control Committee establishes and maintains security trade control systems, inspects and approves transactions, and conducts internal audit and training concerning security trade controls. Held once a year and when necessary

Roles and Functions of Independent Directors and Independent Audit & Supervisory Board Members

Roles and Functions of Independent Directors

Independent directors offer opinions on business management drawn from their broad experience and high-level perspective, and give advice to better implement corporate governance.
Independent directors attend the meetings of the Board of Directors and the Committee of Executive Officers, including on an ad hoc basis, making active contributions from the perspective of internal control. Prior to meetings, Independent Directors are provided with agendas and fully briefed on management issues and project execution status. Two of the Independent Directors are members of the Governance and Remuneration Committee (one is the chairman) and two are members of the Nomination Committee (one is the chairman) . One of them is concurrently serving on both committees.

※Please refer to the Corporate Governance Report for Reasons of Appointment.

Roles and Functions of Independent Audit & Supervisory Board Members

Independent Audit & Supervisory Board Members monitor the directors' execution of duties and draw upon their wealth of professional expertise to offer various recommendations and advice to enhance the Audit & Supervisory Board.
Independent Audit & Supervisory Board Members attend meetings of the Audit & Supervisory Board and also the Board of Directors and Committee of Executive Officers. In addition, the Independent Audit & Supervisory Board Members meet with the President on a regular basis, as well as with members of the Audit Department, Corporate Accounting Department, and independent auditors, for an exchange of opinions. They receive audit-related information from Full-time Audit & Supervisory Board Member, which they use in the execution of their auditing duties. One of the Independent Audit & Supervisory Board Members is also a member of the Governance and Remuneration Committee and the other one is a member of the Nomination Committee.

※Please refer to the Corporate Governance Report for Reasons of Appointment.

Message from the Chief Independent Director

Marubeni Is Forging Ahead Through Smart Risk-Taking Under the Oversight of an Effective Board of Directors

Takao Kitabata Independent DirectorTakao Kitabata
Chief Independent Director

Over the two years since Japan adopted its Corporate Governance Code, Marubeni has taken the initiative to upgrade its governance as a dynamic global company, earning a reputation as a proactive leader among Japanese companies.
As a general trading company that pursues returns by embracing risks, Marubeni plays a special role in a heavily import-dependent Japanese economy that lacks selfsufficiency in food, energy and mineral resources. Japanese general trading companies have long fulfilled the critical societal mission of contributing to Japan’s economic development and maintenance of its national standard of living by not only importing goods but also actively making overseas investments that entail risk, enormous capital requirements and long payback periods. Marubeni has been fulfilling this important societal role to an even greater extent than its trading company peers.
Another of Marubeni’s missions is supporting the overseas operations of Japanese companies that have been internationalizing their growth strategies as their domestic growth prospects have dimmed in the face of population shrinkage.
I believe the key to successfully operating a diversified portfolio of risky businesses is to adequately assess the balance between risk and return, devise measures to maximally mitigate risks and forge ahead proactively. While the Investment and Credit Committee and Board of Directors thoroughly discuss such matters, independent directors play a valuable role in the form of additional scrutiny.
Given Marubeni’s extensive global network of operating companies, it is important to meet the same governance standards overseas as in Japan. Doing so, however, is complicated by cultural and language differences. While pervasively embedding Marubeni governance into overseas operations, I believe that deepening local corporate officers’ understanding of such governance is crucial. Marubeni practices highly transparent governance. Although not formally organized as a company with majorityindependent nominating, audit and compensation committees, Marubeni has established a Nominating Committee and Governance and Remuneration Committee as advisory bodies of its Board. Marubeni hired an outside expert to assess its Board of Directors’ effectiveness. The Board’s quantitative assessment results compare favorably with other companies’. We intend to continue striving to improve the Board’s effectiveness to better meet all stakeholders’ expectations.

Executive Compensation

Amounts of executive compensation, details of policies regarding calculation methods used to decide compensation, and methods for making compensation decisions are as follows.
Compensation for directors and Audit & Supervisory Board Members is decided based on limits to the amount of total compensation for directors and Audit & Supervisory Board Mmembers determined by the General Meeting of Shareholders. Compensation for directors is decided through a process involving discussion and formulation of proposals by the Compensation Consultative Committee, a body whose membership consists of a majority of independent executives, with the proposals then being approved by the Board of Directors. Compensation for individual Audit & Supervisory Board Members is decided through deliberation by the Audit & Supervisory Board Members. The Company shares the benefits and risks of stock price fluctuations with shareholders and issues stock options to all internal directors as a competition system for heightening their motivation to improve the Company’s stock price and corporate value. Remuneration for Directors other than Independent Directors consists of basic compensation, which is a fixed amount corresponding to each Director’s position, and variable compensation, which is linked to business performance in the previous business year. The amount of basic compensation is determined by reflecting quantitative and qualitative evaluation of each Director. And Audit & Supervisory Board Members, all of whom are completely independent from business execution, consists entirely of basic compensation.

Total Compensation Paid to Directors and Audit & Supervisory Board Members for the Year Ended March 31, 2017

Position Total Amount of Compensation Number of Recipients
Basic Compensation
Directors (excluding independent directors) ¥453 million ¥453 million 9
Audit & Supervisory Board Members (excluding Independent Audit & Supervisory Board Members) ¥63 million ¥63 million 2
Independent executives ¥78 million ¥78 million 7
Total ¥594 million ¥594 million 18

Notes:

  • 1.Rounded to the nearest million.
  • 2.Limits to the amount of executive compensation determined by a resolution of the General Meeting of Shareholders are as follows: “¥1,100 million to directors monthly (including ¥60 million for independent directors)” (at the 92nd General Meeting of Shareholders held on June 24, 2016) and “¥12 million to Audit & Supervisory Board Members monthly” (at the 88th General Meeting of Shareholders held on June 22, 2012) and stock options “within ¥220 million to directors monthly” (at the 92nd General Meeting of Shareholders held on June 24, 2016).
  • 3.The Company submitted a resolution to abolish its system of retirement bonuses for executives at the conclusion of the 83rd General Meeting of Shareholders held on June 22, 2007, with abolishment accompanied by the decision to close out and pay any remaining retirement bonuses associated with the system. The Company will make these payments to directors and Audit & Supervisory Board Members who are eligible under the resolution, paying directors when they have retired both from their directorship and any held post as executive officer, and paying Audit & Supervisory Board Members upon their retirement. In the year ended March 31, 2016, retirement bonuses were not paid to the directors and Audit & Supervisory Board Members, who are eligible to receive a final payment in relation to the abolition of the retirement bonuses plan.

Individuals to whom the Total Amount of Compensation Paid Exceeded ¥100 Million

Name Position Company Category Total Amount of Compensation
Basic Compensation
Fumiya Kokubu Director Issuing company ¥105 million
(including stock options ¥14 million)
¥105 million

Effectiveness Evaluation of the Board of Directors

The effectiveness evaluation of the Board of Directors conducted by Marubeni for the fiscal year ended March 31, 2017 is detailed below.

I Evaluation Framework and Methodology

  1. Subjects

    All Directors (10 persons) and Audit & Supervisory Board Members (5 persons)

    • For individuals in these roles as of December 2016
  2. Implementation Method

    Questionnaire (responses are anonymous)

    • Outside specialist utilized for implementation
  3. Items for Evaluation
    • (1) Role and accountability of the Board of Directors
    • (2) Relationship between the Board of Directors and managers/management team
    • (3) Institutional design/composition of the Board of Directors
    • (4) Qualifications and knowledge of (Board of) Directors
    • (5) Deliberations by the Board of Directors
    • (6) Relationship and communication with shareholders
    • (7) Responsive to stakeholders other than shareholders
  4. Evaluation Process

    Based on the specifics of questionnaire responses, deliberations were conducted by the Board of Directors in reference to evaluation and review of the entire Board by the Governance and Remuneration Committee regarding Board composition, operations and other matters.

Ⅱ Summary of Evaluation Results

The Board of Directors conducted deliberations in reference to evaluation and review by the Governance and Remuneration Committee, confirming the overall effectiveness of the operations of the Board of Directors as a whole. This evaluation and review will now serve as a point of reference for efforts by Marubeni to maintain and improve the effectiveness of the Board of Directors.

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