Canon 2012 Annual Report Download - page 25

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established the Disclosure Committee, which makes deci-
sions 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 dis-
closure 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 activities aimed at
countering such parties while reinforcing cooperative ties
with applicable public authorities. In addition, Canon’s
Employment Regulations include a clause prohibiting
such relationships, and the Company continues to step up
efforts to ensure strict employee adherence.
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 dil-
igently 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.
The allotment of compensation for each director from the total
amount of compensation is determined by the Company’s board
of directors, and the allotment of compensation to each Audit
& Supervisory Board Member is determined by consultation
among the Company’s Audit & Supervisory Board Members.
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 the Audit & Supervisory
Board shall be exempt from the audit committee requirements,
subject to certain requirements which continue to be applica-
ble under Rule 10A-3.
Pursuant to the requirements of the Corporation Law, the
shareholders elect the Audit & Supervisory Board Members by
resolution of a general meeting of shareholders. The Company
currently has five Audit & Supervisory Board Members,
although the minimum number of Audit & Supervisory Board
Members 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 the Audit & Supervisory Board Members to be experts
in accounting or to have any other area of expertise. Under the
Corporation Law, the Audit & Supervisory Board may deter-
mine the auditing policies and methods for investigating the
business and assets of a Company, and may resolve other mat-
ters concerning the execution of the Audit & Supervisory Board
Member’s duties. The Audit & Supervisory Board prepares audi-
tors’ reports and may veto a proposal for the nomination of
the Audit & Supervisory Board Members, 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
Audit & Supervisory Board Members must be “outside” Audit &
Supervisory Board Members. These are individuals who are pro-
hibited to have ever been a director, executive officer, manager,
or employee of the Company or its subsidiaries. The Company’s
current Audit & Supervisory Board Member system meets these
requirements. In addition, pursuant to the regulations of the
Japanese stock exchanges, the Company is required to have one or
more “independent director(s) or independent Audit & Supervisory
Board Member(s)” which terms are defined under the relevant
regulations of the Japanese stock exchanges as “outside directors”
or “outside Audit & Supervisory Board Members” (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 auditors,
three are outside Audit & Supervisory Board Members. In addi-
tion, all such three outside Audit & Supervisory Board Members
are also qualified as independent Audit & Supervisory Board
Members under the regulations of the Japanese stock exchanges.
The qualifications for an “outside” or “independent” Audit
& Supervisory Board Member under the Corporation Law or the
regulations of the Japanese stock exchanges are different from
the audit committee independence requirement under the
NYSE Corporate 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 shareholder approval regarding the stock
options to be issued to directors and Audit & Supervisory Board
Members as part of remuneration of directors and Audit &
Supervisory Board Members.
CORPORATE GOVERNANCE