Hitachi 2004 Annual Report Download - page 19

(4) Group Management Committee
As a voluntarily established body that monitors and provides advice with
respect to management of the Hitachi Group as a whole, the Group
Management Committee complements the oversight functions of and
decision-making on basic management policy of the Board of Directors. The
Group Management Committee is made up of two divisions. Division 1
receives reports on various matters from the Hitachi Group’s publicly listed
companies for the purpose of improving the monitoring of Group compa-
nies. Division 2 deliberates on the medium-term direction of Group
management and offers its views to the Board of Directors.
Regarding risk management, each division implements countermea-
sures, such as the formulation of rules and guidelines. Furthermore, internal
audits are conducted to monitor and assess the status of business
operations, including efficiency in the execution of day-to-day operations
and legal compliance, so that improvements can be made. Moreover, to
ensure strict legal compliance, Hitachi has various committees and a
whistle-blower system.
The New York Stock Exchange Corporate Governance Listing Standards
Hitachi’s ADSs are listed on the New York Stock Exchange (the “NYSE”). Hitachi is therefore required to comply with the NYSE’s new
corporate governance listing standards (the “NYSE Standards”), which were approved by the SEC in November 2003. As a foreign private
issuer, Hitachi is not required to follow several of the NYSE Standards. Hitachi’s corporate governance practices differ in certain significant
respects from those that U.S. companies must adopt in order to maintain an NYSE listing and, in accordance with Section 303A.11 of
NYSE’s Listed Company Manual, a brief, general summary of those differences is provided as follows:
(a) Director independence
The NYSE Standards require a majority of the membership of NYSE-listed company boards to be composed of independent directors.
Hitachi’s Board of Directors consists of 14 members, four of whom are “outside directors,” as defined under the Commercial Code of Japan
(the “Commercial Code”). The Commercial Code defines an outside director as a director (i) who does not execute the company’s business,
(ii) has never been an executive director (a director who executes the company’s business), executive officer, manager or any other em-
ployee of the company or its subsidiaries, and (iii) who is not an executive director or executive officer of its subsidiaries or a manager or any
other employee of the company or its subsidiaries.
(b) Non-management directors’ executive sessions
The NYSE Standards require non-management directors of NYSE-listed companies to meet at regularly scheduled executive sessions without
management. Neither the Commercial Code, nor Hitachi’s Board of Directors Regulations require Hitachi non-management directors to hold
such meetings.
(c) Committee member composition
The NYSE Standards require NYSE-listed companies to have a nominating/corporate governance committee, audit committee and compen-
sation committee that are composed entirely of independent directors. Hitachi’s nominating committee, audit committee and compensation
committee are composed of a majority of outside directors in accordance with the Commercial Code.
(d) Miscellaneous
In addition to the above differences, Hitachi is not required to make its nominating, audit and compensation committees prepare a written
charter that addresses either purposes and responsibilities or performance evaluations in a manner that satisfies the NYSE’s requirements,
make publicly available one or more documents which purport to summarize all aspects of its corporate governance guidelines, or adopt
a code of business conduct and ethics for its directors, officers and employees that complies fully with the NYSE’s requirements.
15Hitachi, Ltd. Annual Report 2005