Olympus 2014 Annual Report Download - page 27

Corporate Governance
We will help maximize shareholder value in our
capacity of fulfi lling the supervisory function for
business execution.
Olympus is constructing internal systems to contribute to the maximization of shareholder value, including the Board
of Directors, which is membered by a majority of outside directors, and various independent committees. The following
is a conversation between Takuya Goto and Shiro Hiruta, both outside directors who have also been appointed to the
independent Nominating Committee, about the Company’s current corporate governance system and the ideal form
forfuture systems.
Benefi ts of Committees
Unique “Hybrid” Corporate Governance System
Goto Olympus Corporation is a Company with Auditors,
as described by the Companies Act of Japan, but it also has
independent committees: namely, the Nominating Committee,
the Compensation Committee, and the Compliance Committee.
However, Olympus differs from a Company with Committees
based on the Companies Act in that decision-making authority
with regard to business execution lies with the Board of Directors
and that the committees exist for the purpose of making proposals
to the board.
Hiruta In the past, the president of Olympus would choose
the successor to the position, with the involvement of the Board of
Directors in the decision being limited to approving the selection post-
fact. This system resulted in an overconcentration of authority on the
president. The other extreme would be a Company with Committees,
which is highly transparent as the authority for appointment decisions
lies with outside committees. However, this system can be
problematic when people inside the company are not involved in
making appointment decisions. I think that such situations, when
offi cers are selected entirely by people from outside the company who
are not properly versed in its business, should be avoided. Taking into
consideration the advantages and disadvantages of these systems,
Olympus arrived at its current system of corporate governance. Under
this system, the appointment process begins with the president
recommending candidates to the Nominating Committee. The
committee then discusses the candidates to determine if there would
be any issues with their appointment. After such discussion, the
committee’s verdict is submitted to the Board of Directors, which
makes the fi nal decision. In this manner, the system adopted by
Olympus combines the benefi ts of both a Company with Auditors and
a Company with Committees to form what could be called a “hybrid”
corporate governance system.
Goto Today, the Nominating Committee is actively conversing
and swapping opinions with the individuals who we anticipate will
fi nd positions on the next senior management team. Moreover,
when inviting an employee from Sony Corporation to serve as an
outside director at Olympus, we met in advance to determine
whether or not this individual would be appropriate for the position
in terms of career and disposition. I therefore believe that the
Nominating Committee is effectively serving its desired purpose
as part of the Company’s governance system.
The Company’s Board of Directors as Viewed
by Outside Directors
Evaluation of the Governance System and Issues
to Resolve
Hiruta Outside directors represent a majority in the Board of
Directors at Olympus. Generally, the role of a board of directors
is to supervise business execution and make major decisions
regarding the directions a company will take. In the case of
Olympus, this responsibility rests fi rmly in the hands of outside
directors. For this reason, outside directors must be incredibly
knowledgeable about the Company in order to ensure that
decisions about business execution are appropriate. Based on this
recognition, the outside directors, myself included, make extra
efforts to deepen their understanding of Olympus. For example,
we toured every Olympus plant in Japan immediately after our
appointment, and we all attend internal presentations announcing
research fi ndings. With this understanding of Olympus as the
base, the outside directors call upon their past experience when
formulating opinions, and these opinions are made clear. Management
actively refl ects these opinions in business execution, which
I feel is a key characteristic of the Board of Directors at Olympus.
Compared with other companies, I believe that the outside
directors at Olympus take their participation in management
one step further.
Goto The outside directors at Olympus all come from
different backgrounds, including accounting and fi nance, law,
manufacturing, and fund-raising. As such, exchanges at
Goto Briefi ngs are held before each meeting of the Board of
Directors. If a director raises issue with any of the matters brought
up during these briefi ngs, they are revised and re-discussed by
the board. Proposals to be brought before the Board of Directors
are decided at the Executive Management Committee, which
convenes prior to board meetings and consists of representatives
from the business execution side of the Company. As we fi nd
ourselves unable to approve certain proposals, we sometimes ask
the Executive Management Committee about the reasoning
behind certain proposals.
Hiruta It is diffi cult to determine the ideal degree of involvement
for outside directors to have in management. It is possible that we
are a bit too involved at the moment, a situation that likely arose
from concern created by the past scandal. However, I am sure
the appropriate level will be found with time, and I believe that
the current system is incredibly effective from a governance
standpoint. Were I to rate the corporate governance system at
Olympus on a scale from 1 to 100, its score would exceed 90.
I do not, however, mean to say that the Company’s corporate
governance system is without issue. For example, I think that
management needs to be more selective with the matters it brings
before the board. In Japan, it is rare for a company that is not a
Company with Committees to have a majority of outside directors
on its board of directors. A more conventional system would
entail a board of directors being given responsibility for business
execution. If the unique system at Olympus is utilized in the same
manner as a conventional system, it will result in matters that could
have been entrusted entirely to the business execution side being
brought before the Board of Directors for discussion. This situation
could cause delays in management decision making, and I
therefore believe that this situation needs to be rectifi ed.
Expectations for the Future of Olympus
Construction of a New Governance System
to Further Business Growth
Goto In recent years, Olympus has been receiving a number
of suggestions for its corporate governance system from
individuals claiming that their proposals are necessary from a
“globalization” standpoint. These critics often make overarching
statements about governance systems, like how many outside
directors is required, all based on the belief that there is one “right”
answer when it comes to governance. Quite the contrary, the best
governance system is different for every company. Olympus will
need to fi nd its own ideal corporate governance system going
forward, and this search should include big-picture discussions
on such factors as future business plans.
Hiruta Olympus is currently in the process of restructuring
itsbusiness centered on the Medical Business. This process is
advancing smoothly, and the next steps will be to clarify the
direction for future growth strategies and then consider what
typeof governance system will be ideal for implementing these
strategies and realizing their goals. The Medical Business is a fi eld
that is demonstrating high growth potential. For this reason,
I believe that Olympus will continue to grow if it can fi nd a
governance system that suits those future strategies.
meetings of the Board of Directors are lively with suggestions
coming from various perspectives. Sometimes an outside
director will offer an opinion with relation to a large guiding policy,
future business strategies, or organizational structures for
example. Other times, suggestions will be more precise, such as
a recommendation regarding a specifi c aspect of the documents
accompanying a proposal.
Hiruta I believe that the supervisory function of the Board
of Directors is effective in accomplishing its task. Proposals
from the business execution side of the Company are
discussed by the Board of Directors, and we have rejected
several proposals to date. Basically, what I mean to say is this:
the Board of Directors is active in management; we are not
simply around to put our signature on proposals that have
already been instituted.
Conversation between Outside Directors
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OLYMPUS Annual Report 2014
50 OLYMPUS Annual Report 2014
Shiro Hiruta
Outside Director
(Member of Nominating Committee)
Takuya Goto
Outside Director
(Chairman of Nominating Committee)