Square Enix 2014 Annual Report Download - page 24

1. Status of Corporate Governance
(1) Overview of corporate governance system and
objectives
The Company has adopted the audit & supervisory board
member system for its corporate governance. To strengthen
monitoring functions and ensure the maintenance of sound
management, at least half of the audit & supervisory board
members are drawn from outside the Company.
Furthermore, in accordance with the objective standards
provided under the Company’s internal decision-making
authority rules, the Board of Directors, which sets
management policy, is clearly separated from the decision-
making bodies responsible for the execution of operations.
This system aims to enhance the efficiency and balance of
management decision-making and operational execution.
The Board of Directors comprises six directors, including
two outside directors. The Company has three audit &
supervisory board members, including one standing audit &
supervisory board member, who are drawn from outside the
Company. The directors are appointed for a term of one year,
the same as for companies adopting the committee system.
In principle, the Board of Directors convenes monthly,
and each of the directors, including the outside directors,
engages in vigorous discussion and exchange of opinions
aimed at enhancing their mutual oversight functions. With
regard to matters concerning basic policy on the system of
compensation for directors and audit & supervisory board
members, the Company has voluntarily established the
Compensation Committee as an advisory body that submits
reports to the Board of Directors. This system is designed to
ensure management objectivity and transparency.
In principle, the Audit & Supervisory Board convenes
monthly, and conducts accounting and operational audits
based on the audit plan. The audit & supervisory board
members attend meetings of the Board of Directors to audit
the execution of duties of the directors.
The Board of Directors has passed a resolution establishing
the Company’s Basic Policy on Building an Internal Control
System. The Company is building such systems to ensure
auditing and supervisory functions are strictly maintained
and to confirm that all business activities comply with all
relevant laws and regulations and the Company’s Articles of
Incorporation, as well as to enhance the efficiency of the
directors’ exercise of duties.
To ensure a rigorous compliance system, the Company
clearly specifies the importance of compliance in its
Management Guidelines and The Group Code of Conduct.
The Company has established the Internal Control Committee
and an internal compliance reporting (whistleblower) system,
through which Company-wide compliance measures are
integrated across organizational reporting lines. With regard
to the management and operation of the Company’s
information systems, which form the foundation of efficient
operational functions, the Company has established the
Information System Management Committee to oversee
information systems on a Company-wide basis.
To ensure the maintenance of a robust risk management
system, Company-wide risk management measures are
integrated laterally across organizational reporting lines. This
is achieved through the reinforcement of relevant internal
organizational divisions, and the establishment of the Internal
Control Committee and an internal compliance reporting
(whistleblower) system.
(2) Organization, personnel and procedures for internal
audits and audits by audit & supervisory board
members; and coordination between internal
audits, audits by audit & supervisory board
members and statutory audit firm
Internal audits are carried out by the Auditing Division, which
currently comprises one person who reports directly to the
president. The Auditing Division performs regular monitoring,
reviews and evaluations (internal evaluations) of internal control
systems, including those of Group companies—taking into
account the relative importance of and risk inherent in
each part of the organization—and provides reports and
recommendations to the president. The Auditing Division’s
functions are carried out while sharing information with the
Audit & Supervisory Board and the statutory audit firm.
Audits by the audit & supervisory board members are
carried out by three audit & supervisory board members,
who are drawn from outside the Company.
Corporate Governance
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