Canon 2008 Annual Report Download - page 21

1
9
(ii) have a board o
f
corporate auditors
.
The Compan
y
has elected to have a board o
f
corporate auditors,
w
h
ose
d
uties inc
l
u
d
e monitorin
g
an
d
reviewin
g
t
h
e mana
g
e
-
ment and reportin
g
the results of these activities to the share-
holders or board of directors of the Company. While the NYSE
Cor
p
orate Governance Ru
l
es
p
rovi
d
e t
h
at U.S.
l
iste
d
com
p
anies
must have an audit committee, nominating committee and
compensation committee, each composed entirely of indepen
-
dent directors, the Corporation Law does not require companies
to have speci
fi
ed committees, includin
g
those that are respon
-
sible
f
or director nomination, corporate
g
overnance and execu
-
tive compensation
.
The Compan
y
’s board of directors nominates candidates
for directorship and submits a proposal at the general meet
-
ing of shareholders for shareholder approval. Pursuant to the
Cor
p
oration Law, the shareholders then vote to elect directors
at the meeting. The Corporation Law requires that the total
amount or calculation method o
f
compensation
f
or directors
and corporate auditors be determined b
y
a resolution o
f
the
g
eneral meetin
g
o
f
shareholders respectivel
y
, unless the
amount or ca
l
cu
l
ation met
h
o
d
is provi
d
e
d
un
d
er t
h
e Artic
l
es
of Incor
p
oration. As the Articles of Incor
p
oration of the
Company
d
o not provi
d
e an amount or ca
l
cu
l
ation met
h
o
d
,
the amount of com
p
ensation for the directors and cor
p
orate
auditors of the Company is determined by a resolution of
the general meeting of shareholders. The allotment of
compensation
f
or each director
f
rom the total amount o
f
compensation is determined b
y
the Compan
y
’s board o
f
directors, and the allotment o
f
compensation to each
corporate au
d
itor is
d
etermine
d
by
consu
l
tation amon
g
t
h
e
Compan
y
’s corporate au
d
itors
.
3
. A
ud
i
t
Co
mmi
ttee
The Company plans to avail itself of paragraph (c)(3) of Rule
10A-3 of the Security Exchange Act, which provides that a
f
oreign private issuer which has established a board o
f
corpo
-
rate auditors shall be exempt
f
rom the audit committee require-
ments, sub
j
ect to certain requirements which continue to be
app
l
ica
bl
e un
d
er Ru
l
e 10A-3.
Pursuant to the re
q
uirements of the Cor
p
oration Law, the
shareholders elect the corporate auditors by resolution of a
g
eneral meetin
g
o
f
shareholders. The Compan
y
currentl
y
has
fi
ve corporate auditors, althou
g
h the minimum number o
f
corporate au
d
itors require
d
pursuant to t
h
e Corporation Law is
th
r
ee
.
Un
l
i
k
e t
h
e NYSE Cor
p
orate Governance Ru
l
es, Ja
p
anese
l
aws an
d
regu
l
ations, inc
l
u
d
ing t
h
e Corporation Law,
d
o not
require corporate auditors to be experts in accounting or to
have any other area of expertise. Under the Corporation Law, a
board o
f
corporate auditors may determine the auditing policies
and methods
f
or investi
g
atin
g
the business and assets o
f
a
Compan
y
, and ma
y
resolve other matters concernin
g
the
execution o
f
the corporate auditor’s duties. The board o
f
corpo-
rate au
d
itors prepares au
d
itors’ reports an
d
ma
y
veto a proposa
l
for the nomination of corporate auditors and accounting
auditors put forward by the board of directors.
Under the Corporation Law, more than half of a company’s
corporate auditors must be “outside” corporate auditors.
These are individuals who are prohibited to have ever been a
director, executive o
ffi
cer, mana
g
er, or emplo
y
ee o
f
the Com-
pan
y
or its subsidiaries. The Compan
y
’s current corporate
auditor s
y
stem meets these requirements. Amon
g
the
fi
ve
members on the Compan
y
’s board of auditors, three are
outside cor
p
orate auditors. The
q
ualifi cations for an “outside”
cor
p
orate auditor under the Cor
p
oration Law are different from
the audit committee inde
p
endence re
q
uirement under the
NYSE Corporate Governance Rules
.
4. Shareholder Approval o
f
Equit
y
Compensation Plan
s
The NYSE Corporate Governance Rules require that sharehold-
ers
b
e
g
iven t
h
e opportunit
y
to vote on a
ll
equit
y
compensation
plans and an
y
material revisions of such plans, with certain
l
imite
d
exceptions. Un
d
er t
h
e Corporation Law, a Company is
required to obtain shareholder approval regarding the details of
an equity-compensation plan. Stock acquisition rights to be
issued to directors and corporate auditors are recognized as
part o
f
remuneration o
f
directors and corporate auditors, and
the issuance o
f
stock acquisition ri
g
hts must be approved b
y
shareholders as part o
f
their approval re
g
ardin
g
remuneration
o
f
directors and corporate auditors
.