Canon 2011 Annual Report Download - page 29

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pensation for the directors and corporate auditors of the Com-
pany is determined by a resolution of the General Meeting of
Shareholders. The allotment of compensation for each director
from the total amount of compensation is determined by the
Companyǯs Board of Directors, and the allotment of compensa-
tion to each corporate auditor is determined by consultation
among the Companyǯs 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 pri-
vate issuer which has established a board of corporate
auditors shall be exempt from the audit committee require-
ments, subject to certain requirements which continue to be
applicable under Rule 10A-3.
Pursuant to the requirements of the Corporation Law, the
stockholders elect the corporate auditors by resolution of a gen-
eral meeting of shareholders. The Company currently has five
corporate auditors, although the minimum number of corpo-
rate 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 com-
pany, and may resolve other matters concerning the execution
of the corporate auditorǯs duties. The Board of Corporate Audi-
tors prepares auditorsǯreports and may veto a proposal for the
nomination of corporate auditors, accounting auditors and the
determination of the amount of compensation for the account-
ing auditors put forward by the Board of Directors.
Under the Corporation Law, the half or more of a companyǯs
corporate auditors must be Dzoutsidedzcorporate auditors. These
are individuals who are prohibited to have ever been a director,
executive officer, manager, or employee of the Company or its
subsidiaries. The Companyǯs current corporate auditor system
meets these requirements. In addition, pursuant to the regula-
tions of the Japanese stock exchanges, the Company is required
to have one or more Dzindependent director(s) or independent
corporate auditor(s)dzwhich terms are defined under the rele-
vant regulations of the Japanese stock exchanges as Dzoutside
directorsdzor Dzoutside corporate auditorsdz(each of which terms
is defined under the Corporation Law) who are unlikely to have
any conflict of interests with shareholders of the Company.
Among the five members on the Company’s board of audi-
tors, three are outside corporate auditors. In addition, all
such three outside corporate auditors are also qualified as
independent corporate auditors under the regulations of the
Japanese stock exchanges.
The qualifications for an Dzoutsidedzor Dzindependentdzcorpo-
rate auditor under the Corporation Law or the regulations of
the Japanese stock exchanges are different from the audit
committee independence requirement under the NYSE Cor-
porate Governance Rules.
4. Shareholder Approval of Equity Compensation Plans
The NYSE Corporate Governance Rules require that sharehold-
ers 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 stockholder approval regarding the stock
options to be issued to directors and corporate auditors as part
of remuneration of directors and corporate auditors.
Strategy Business Units MANAGEMENT SYSTEM Financial Section
24 36
MANAGEMENT SYSTEM
RISK MANAGEMENT
As Canon pursues business expansion in various fields
on a global scale, the business and other risks to which
it may be exposed continue to diversify. With the goal
of eliminating such risks altogether, while honoring
the trust placed in it by its stakeholders, Canon works
diligently to avoid or minimize its exposure, to this end
assigning specifically designated management commit-
tees to address key issues.
In particular, the Executive Committee and various
management committees engage in careful discussions
regarding significant risk factors. The Corporate Audit
Center preemptively identifies risk factors through
audit activities. Also, Canon formulates in-house rules
to guard against those risks and, in accordance with
the policies formulated by the Internal Control
Committee, strives to identify and assess relevant risks
associated with individual business processes.
makes decisions regarding information disclosure,
including necessity, content and timing. The Disclosure
Committee makes such decisions after receiving reports
on information that might need to be disclosed from
the person in charge of the disclosure working group at
each headquarters.
COUNTERING ANTISOCIAL FORCES
Canon has formulated a basic policy stipulating that no
Canon Group company shall maintain relationships of
any kind with antisocial forces that represent a threat
to social order and security. To uphold this basic policy,
Canon has established a department dedicated to activi-
ties aimed at countering such parties while reinforcing
cooperative ties with applicable public authorities. In
addition, Canonǯs Employment Regulations include a
clause prohibiting such relationships, and the
Company continues to step up efforts to ensure strict
employee adherence.