Fujitsu 2010 Annual Report Download - page 79

2. Issues Relating to Functions for Business Execution, Auditing, Oversight, Nominating, and Compensation Decisions
Overview of Current Structure
The Board of Directors is responsible for management oversight, supervising the business execution functions of the President and Representative
Director and the Management Council, an executive organ under its authority. Outside members of the board are actively recruited for positions in
the Board of Directors in order to strengthen its oversight function. The Management Council deliberates upon fundamental policies and strategy
regarding business management, as well as makes decisions on important matters regarding business execution. Issues discussed by the Manage-
ment Council and a summary of its discussions are reported to the Board of Directors, which makes decisions on items of particular importance. In
principle, the Management Council meets three times a month, but meetings may be convened whenever necessary.
The auditing function is carried out by auditors, who review the Board of Directors as well as business execution functions and attend important
meetings, including meetings of the Board of Directors as well as the Management Council. The Auditing Support Division provides support for the
audits by the auditors, and in order to promote the independence and effectiveness of the auditing, the company holds discussions with auditors
prior to selecting candidates for positions in the division. Personnel with the appropriate qualifications are selected as division staff candidates, and as
a general rule, as full-time staff (two full-time staff and one part-time staff ).
The Board of Directors has ten members, comprising seven internal directors and three outside directors, and the Board of Auditors has five
members, comprising two internal auditors and three outside auditors. In order to better define the management responsibility of the directors, their
terms were reduced from two years to one year in accordance with a resolution at the June 23, 2006 Annual Shareholders’ Meeting.
In addition, the Corporate Internal Audit Unit (with 66 members) serves as an internal audit group. This unit audits the internal affairs of the entire
Fujitsu Group in cooperation with the internal audit groups of each Group company. The Corporate Internal Audit Unit reports once a month as a rule
to the statutory auditors on the audit plans and results of internal audits, including matters relating to group companies, and makes regular reports
(once every quarter as a rule) to the Board of Auditors and the accounting auditors. The Corporate Internal Audit Unit includes a significant number of
employees with specialist internal auditing knowledge, including Certified Internal Auditors (CIA), Certified Information Systems Auditors (CISA), and
Certified Fraud Examiners (CFE).
The accounting auditor, Ernst & Young ShinNihon LLC, reports to the Board of Auditors concerning the audit plan and results. The accounting
auditor also conducts exchange of opinions when needed and carries out coordinated audits of business operations. The four certified public
accountants associated with Ernst & Young ShinNihon LLC who performed the accounting audit were Michiko Tomonaga, Yuichi Mochinaga, Hideaki
Karaki, and Takao Kamitani. In addition, they were assisted by a further 29 certified public accountants, 21 accounting assistants and another 41
persons, all associated with Ernst & Young ShinNihon LLC.
The Fujitsu Way Promotion Council promotes internal control relating to the Fujitsu Way and financial reporting in the Fujitsu Group and forms
the core of operations to upgrade and evaluate internal control for the Group. During internal control audits by the accounting auditor and statutory
auditors, the Fujitsu Way Promotion Council holds regular meetings to provide and explain information as required. The council also provides and
explains information to assist the Corporate Internal Audit Unit in performing internal audits.
The company established an Executive Nomination Committee and Compensation Committee in order to ensure the transparency and objectiv-
ity of the process for choosing candidates for the Board of Directors, determining their compensation and ensuring that the compensation system
and levels are appropriate. The Executive Nomination Committee takes into consideration the current business climate and anticipated trends, and
makes recommendations on candidates (draft) for the Board of Directors, choosing candidates having objectivity in making management decisions,
foresight and perceptiveness, and a superior character. The Compensation Committee is tasked with making recommendations on executive salaries
and methods for calculating bonuses linked to financial performance, taking into consideration compensation levels at competitors and other factors.
The aim of this activity is to retain superior management talent, and provide effective incentives for improving the company’s financial performance.
Reasons for Adopting the Current Structure
The current structure clarifies the management responsibility of members of the board, who, after their election at the annual meeting of sharehold-
ers, become involved in making decisions about important matters concerning the management of the company. Furthermore, the current structure
maintains the robustness and efficiency of governance by having the dual features of (1) the mutual monitoring by the members of the board, and
(2) the audits by the auditors.
At the time of the introduction in Japan of the corporation-with-committees governance system, Fujitsu was using the corporation-with-auditors
system, and since the auditors were performing the auditing function effectively, we have continued to use the system.
The company maintains the robustness of its governance system by having an effective auditing function in which auditors who are indepen-
dent of the management perform objective audits, by actively appointing outside directors, and by having established the Executive Nomination
Committee and Compensation Committee and an internal audit organization.
Finally, to further improve efficiency, we have established a Management Council, which has accelerated decision-making and management execution.
Policy for Deciding Compensation for Directors and Auditors
Fujitsu’s policy on deciding executive compensation is to tie compensation closely with business performance and to ensure the system is highly
flexible and transparent. In line with this policy, the Board of Directors decided in April 2007 to terminate the retirement allowance system for direc-
tors and auditors and to divide the funds for retirement allowances into a fixed component and a performance-linked component to be paid out in
addition to monthly compensation. The remuneration for fiscal 2009 was paid in conformity with this policy.
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FUJITSU LIMITED Annual Report 2010
Corporate Governance