Canon 2004 Annual Report Download - page 10

8
Significant Differences in Corporate
Governance Practices between Canon
and U.S. Companies Listed on the
NYSE
Section 303A of the NYSE listed
Company Manual (the “Manual”)
provides that companies listed on the
New York Stock Exchange (the “NYSE”)
must comply with certain corporate
governance standards. However, foreign
private issuers whose shares have been
listed on the NYSE, such as CANON INC.
(the “Company”), are permitted, with
certain exceptions, to follow the laws
and practice of their home country in
place of the corporate governance
practices stipulated under the Manual. In
such circumstances, the foreign private
issuer is required to disclose the signifi-
cant differences between the corporate
governance practices under Section
303A of the Manual and those required
in Japan. A summary of these differ-
ences as they apply to the Company is
provided below.
1. Directors
Currently, the Company’s board of
directors does not have any director who
could be regarded as an “independent
director” under the NYSE Corporate
Governance Rules for U.S. listed compa-
nies. Unlike the NYSE Corporate
Governance Rules, the Commercial
Code of Japan (the “Code”) and the
Law for Special Exceptions to the
Commercial Code concerning Audit, etc.
of Kabushiki-Kaisya (the “Special
Exception Law”) do not require Japanese
companies with a board of corporate
auditors such as the Company, to
CORPORATE MANAGEMENT
appoint independent directors as
members of the board of directors. The
NYSE Corporate Governance Rules
require non-management directors of
U.S. listed companies to meet at
regularly scheduled executive sessions
without the presence of management.
However, unlike the NYSE Corporate
Governance Rules, the Code and the
Special Exception Law do not require
companies to implement an internal
corporate organ or committee
comprised solely of independent direc-
tors. Thus, the Company’s board of
directors currently does not include any
non-management directors.
2. Committees
Under the Code and the Special Exception
Law, the Company may choose to:
(i) establish an audit committee, nomina-
tion committee and compensation
committee and abolish the post of
corporate auditors; or
(ii) continue to retain a board of
corporate auditors.
The Company has elected, to retain a
board of corporate auditors, whose duties
include monitoring and reviewing the
management and reporting the results
of these activities to the shareholders or
board of directors of the Company.
While the NYSE Corporate Governance
Rules provide that U.S. listed companies
must have an audit committee, nominat-
ing committee and compensation
committee, each composed entirely of
independent directors, the Code and the
Special Exception Law do not require the
Company to have specified committees,
including those that are responsible for
director nomination, corporate governance
Information Disclosure
Disclosing accurate, fair, and timely infor-
mation on management, business strat-
egy, and financial results to capital
markets is a top priority at Canon. The
objective of these IR activities is to gain
the trust of capital markets and improve
the corporate value of Canon. IR functions
are carried out based on Disclosure
Guidelines, which are rules for informa-
tion disclosure to capital markets intended
to help the Group achieve these goals.
Some of the regularly conducted IR tasks
of the Group include briefings to securities
analysts and institutional investors on
quarterly financial results, briefings on
management policies given by the
President and CEO and updates on
business strategies. IR operations have also
been established in Europe and the United
States to respond quickly to the needs of
foreign investors (51.7% of all shareholders
at the end of 2004) in all regions. On the
Canon website, corporate information is
made available not only in Japanese, but also
in English to the extent possible, including
audio and video information as needed.
We carefully observe rules relating to
information disclosure, strictly controlling
undisclosed information and preventing
the possibility of insider trading. Further,
outside evaluations of Canon from the
capital markets are reported within the
Group whenever useful to management
and operations. The Security Analysts
Association of Japan selected Canon as
the top company in the Japanese electric
and precision machinery industry category
in its 2004 ranking of company disclosure.