Honda 2015 Annual Report Download - page 20

Corporate Governance Practices Followed
by NYSE-listed U.S. Companies
Corporate Governance Practices Followed by Honda
A NYSE-listed U.S. company must have a majority of
directors meeting the independence requirements
under Section 303A of the NYSE Listed Company
Manual.
For certain large-scale Japanese companies, which employ a corporate governance system based on a Board of Corporate Auditors (the “Board of
Corporate Auditors system”), including Honda, Japan’s Company Law (to which amendments were effected as of May 1, 2015) requires that, if a
company does not have any outside director at the end of a fiscal year, the company shall explain and disclose the reason why it is not appropriate to
have an outside director at the annual general meeting of shareholders as well as in its convocation documents and business report.
Outside director is defined as a director who meets all of the following independence requirements: (1) a person who is not an executive director,
executive officer, manager or any other employee of the company or its subsidiaries and has not been in such position for ten years prior to the
assumption of office; (2) if the relevant person assumed an office of a non-executive director, accounting councilor or corporate auditor of the
company or any of its subsidiaries during the ten years mentioned in (1) above, a person who had not been an executive director, executive officer,
manager or any other employee of the company or any of its subsidiaries for further ten years prior to the assumption of such office; (3) a person who
is not a director, corporate auditor, executive officer, manager or any other employee of the parent company or who is not a natural person controlling
the company; (4) a person who is not an executive director, executive officer, manager or any other employee of a company which is controlled by the
parent company or by the natural person controlling the company; and (5) a person who is not a spouse or a certain relative of (a) a director, executive
officer, manager or any other important employee of the company or (b) the natural person controlling the company.
The responsibility of overseeing management and outside directors is assigned to the corporate auditors who also work with the accounting audit firm
to oversee accounting. Corporate auditors are separate from the company’s management and meet certain independence requirements under
Japan’s Company Law.
In the case of Japanese companies which employ the Board of Corporate Auditors system, including Honda, at least half of the corporate auditors
must be “outside” corporate auditors who must meet additional independence requirements under Japan’s Company Law.
Outside corporate auditor is defined as a corporate auditor who meets all of the following independence requirements: (1) a person who has not been
a director, accounting councilor, executive officer, manager or any other employee of the company or any of its subsidiaries for ten years prior to the
assumption of office; (2) if the relevant person assumed an office of corporate auditor of the company or any of its subsidiaries during the ten years
mentioned in (1) above, a person who had not been a director, accounting councilor, executive officer, manager or any other employee of the company
or any of its subsidiaries for further ten years prior to the assumption of such office; (3) a person who is not a director, corporate auditor, executive
officer, manager or any other employee of the parent company or who is not a natural person controlling the company; (4) a person who is not an
executive director, executive officer, manager or any other employee of a company which is controlled by the parent company or by the natural person
controlling the company; and (5) a person who is not a spouse or a certain relative of (a) a director, manager or any other important employee of the
company or (b) the natural person controlling the company.
In addition, the listing rules of the Tokyo Stock Exchange, which Honda is subject to, require listed companies to have at least one “independent”
director or corporate auditor, and to make efforts to have at least one “independent” director. Requirements for an independent director/corporate
auditor are more stringent than those for outside directors or outside corporate auditors. Unlike an outside director/corporate auditor, an independent
director/corporate auditor may not be (a) a person who is, or has been until recently, a major business counterparty or an executive director, executive
officer, manager or employee of the major business counterparties, (b) a person who is, or has been until recently, a professional advisor receiving
significant remuneration from the company, (c) a person who has been until recently a director, executive officer, corporate auditor, manager or
employee of the parent company or a director, executive officer, manager or employee of the parent company’s subsidiaries, or (d) a relative of persons
mentioned in (a), (b) and (c) or a relative of certain scope of persons such as directors of the parent company or its subsidiaries. Now Honda has one
independent Director out of two outside Directors and three independent Corporate Auditors out of three outside Corporate Auditors.
Corporate Governance
Companies listed on the New York Stock Exchange (the “NYSE”) must comply with certain standards regarding corporate governance under Section 303A of the NYSE Listed Company Manual.
However, listed companies that are foreign private issuers, such as Honda, are permitted to follow home country practice in lieu of certain provisions of Section 303A.
The following table shows the significant differences between the corporate governance practices followed by U.S. listed companies under Section 303A of the NYSE Listed Company Manual
and those followed by Honda.
Honda Motor Co., Ltd. Annual Report 2015 19
5 Corporate Governance
1 The Power of Dreams
2 Financial Highlights
3 To Our Shareholders
4 Review of Operations
6 Financial Section
7
Investor Relations
Information
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