Canon 2009 Annual Report Download - page 13

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Governance Rules provide that U.S. listed companies must have an
audit committee, nominating committee and compensation com-
mittee, each composed entirely of independent directors, the
Corporation Law does not require companies to have specifi ed
committees, including those that are responsible for director nomi-
nation, corporate governance and executive compensation.
The Company’s board of directors nominates candidates for
directorships and submits a proposal at the general meeting of
shareholders for shareholder approval. Pursuant to the Corpora-
tion Law, the shareholders then vote to elect directors at the
meeting. The Corporation Law requires that the total amount or
calculation method of compensation for directors and corporate
auditors be determined by a resolution of the general meeting of
shareholders respectively, unless the amount or calculation
method is provided under the Articles of Incorporation. As the
Articles of Incorporation of the Company do not provide an
amount or calculation method, the amount of compensation
for the directors and corporate auditors of the Company is
determined by a resolution of the general meeting of share-
holders. The allotment of compensation for each director from
the total amount of compensation is determined by the Com-
pany’s board of directors, and the allotment of compensation to
each corporate auditor is determined by consultation among
the Company’s corporate auditors.
3. Audit Committee
The Company avails itself of paragraph (c)(3) of Rule 10A-3 of the
Security Exchange Act, which provides that a foreign private issuer
which has established a board of corporate auditors shall be
exempt from the audit committee requirements, subject to certain
requirements which continue to be applicable under Rule 10A-3.
Pursuant to the requirements of the Corporation Law, the
shareholders elect the corporate auditors by resolution of a general
meeting of shareholders. The Company currently has fi ve corporate
auditors, although the minimum number of corporate auditors
required pursuant to the Corporation Law is three.
Unlike the NYSE Corporate Governance Rules, Japanese laws
and regulations, including the Corporation Law, do not require
corporate auditors to be experts in accounting or to have any other
area of expertise. Under the Corporation Law, a board of corporate
auditors may determine the auditing policies and methods for
investigating the business and assets of a Company, and may
resolve other matters concerning the execution of the corporate
auditor’s duties. The board of corporate auditors prepares auditors’
reports and may veto a proposal for the nomination of corporate
auditors, accounting auditors and the determination of the amount
of compensation for the accounting auditors put forward by the
board of directors.
Under the Corporation Law, the half or more of a company’s
corporate auditors must be “outside” corporate auditors. These
are individuals who are prohibited to have ever been a director,
executive offi cer, manager, or employee of the Company or its
subsidiaries. The Company’s current corporate auditor system
meets these requirements. Among the fi ve members on the
Company’s board of auditors, three are outside corporate auditors.
The qualifi cations for an “outside” corporate auditor under the
Corporation Law are different from the audit committee indepen-
dence requirement under the NYSE Corporate Governance Rules.
4. Shareholder Approval of Equity Compensation Plans
The NYSE Corporate Governance Rules require that shareholders
be given the opportunity to vote on all equity compensation plans
and any material revisions of such plans, with certain limited
exceptions. Under the Corporation Law, a Company is required to
obtain shareholder approval regarding the stock options to be
issued to directors and corporate auditors as part of remuneration
of directors and corporate auditors.
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