Olympus 2015 Annual Report Download - page 27

Corporate Governance
Internal Controls
Framework to ensure the compliance by directors and
employees of the Company and its subsidiaries, in perfor-
mance of duties, to applicable laws and regulations as
well as the Articles of Incorporation:
Compliance Committee
The Company shall establish the Compliance Committee
chaired by an outside director as a body to oversee and
improve the compliance system.
CSR Committee
Olympus shall set up the CSR Committee with the presi-
dent responsible for CSR and chaired by the officer in
charge of CSR, and regularly hold meetings to plan CSR
activities for the Olympus Group and set objectives for
and evaluate these activities.
Internal Audit Ofce
Olympus shall establish the Internal Audit Office to directly
report to the president. The Internal Audit Office shall, pur-
suant to the provisions of the Internal Audit Regulations,
conduct internal audits of the Company and its domestic
subsidiaries with respect to compliance with laws and
regulations, the Articles of Incorporation, internal rules and
regulations, the appropriateness of business execution
procedures and details, and other matters.
Rules relating to the risk management of the Company and
its subsidiaries in the event of loss and other circumstances:
1 The Company shall manage its business risks of the
Olympus Group based on thorough discussions held
at meetings of the Board of Directors and the Executive
Management Committee, among other meetings, and
appropriate internal approval procedures.
2 The Company shall manage risks, such as those relating
to quality, product safety, export control, information secu-
rity, occupational health and safety, the environment, and
disasters, by defining responsible divisions, establishing
internal corporate regulations and standards, working for
preventive risk management as the Olympus Group, and
implementing related education and training.
3 The CSR Committee shall report and deliberate on plans
and measures in relation to risk management and make
efforts to establish and maintain a risk management system
at the Olympus Group.
Moreover, pursuant to the internal
Rules on Risk Management and Crisis Response, each
department in charge in the Company and the subsidiaries
shall be aware of risks and take preventative measures, and
the Company has a framework that enables prompt actions
in the event of an emergency. In the event of an earthquake,
fire, other natural disaster, accident, corporate ethics
violation, or occurrence of another high-risk incident, the
department in charge shall make immediate reports to the
president, other members of the Executive Management
Committee, and relevant people. Response measures will
then be decided by the president.
Framework to ensure the effective performance of duties
by directors of the Company and its subsidiaries:
1 The Board of Directors shall approve medium- and long-
term corporate strategic plans in which the business objec-
tives of the Olympus Group are set forth, and action plans
for these, which are called annual business plans. In addi-
tion, the Board of Directors shall receive a monthly report on
business performance in order to evaluate the status of the
Company’s annual business plan.
2 The Board of Directors shall determine the separation of
duties among the president and other operating directors
and approve the separation of duties of executive officers.
In addition, the Board of Directors shall receive reports on
their duties as performed.
3 Based on internal corporate regulations including the
internal rules on approval procedures and organizational
matters, the Board of Directors shall approve the man-
agement organization and the separation of duties as well
as the responsibility and authority of each representative
director, other operating director, executive officer, and
receive reports from major management organizations on
their duties as performed.
4 To ensure efficient execution of duties by directors of the
subsidiaries, the Company has established Group Finance
Control Rules and introduced a cash management system
for Japan, America, Europe, and Asia.
Corporate Officer Compensation
The upper limits for the monthly compensation of directors and
audit & supervisory board members as well as director bonuses
are decided at the general meeting of shareholders.
Director compensation is decided by the Board of Directors
in accordance with the Director Compensation Guidelines
based on the recommendations of the Compensation
Committee, which is comprised of a majority of highly inde-
pendent outside directors. Audit & supervisory board member
compensation is decided by the Audit & Supervisory Board
in the same manner. Bonuses and stock options are not paid
to audit & supervisory board members to maintain their
standing as independent from business execution.
Position Total value of remuneration
(¥ million)
Total compensation by type (¥ million) Number of directors /
audit & supervisory
board members
Base Bonuses Stock options Retirement benets
Directors (excluding outside directors) 369 273 50 47 — 5
Audit & supervisory board members
(excluding outside audit & supervisory
board members)
56 56 — — — 2
Outside officers 120 120 — — — 11
Policies for Determining Corporate Ofcer Compensation
Amount and Calculation Method
Compensation for directors, excluding outside directors,
includes monthly salaries, bonuses, and stock options.
Outside directors only receive monthly salaries and are
not eligible for bonuses or stock options. In fiscal 2015,
the Company will introduce income-linked bonuses for
directors to build a stronger link between the Company’s
performance and directors’ bonuses.
Calculation Method for Income-Linked Bonuses
The following formulas will be used for calculating the
compensation to be paid to directors in fiscal 2016.
1 Total value of remuneration
Total value of remuneration =
((Consolidated operating income in fiscal 2016 – ¥15.0
billion) × 0.0544% + (Consolidated net income in fiscal
2016 – ¥1.0 billion) × 0.0458%) × (Total sum of “officer
points” for all applicable directors ÷ 96)
(rounded to the nearest ¥10,000)
2 Individual compensation
Individual compensation =
Total value of remuneration ÷ Total sum of “officer points”
for all applicable directors × “Officer points” of individual
director
Each director receives individual compensation as
a portion of the total value of remuneration calculated in
1 above that is proportionate to the director’s individual
score of “officer points” as shown below (rounded to the
nearest ¥10,000).
Officer Points
Chairman President and
Representative Director Director, Vice President
Director, Senior
Executive
Managing Ofcer
Director, Executive
Managing Ofcer
Director, Managing
Ofcer
24 28 20 16 12 9
Strengthening of Audit and Supervisory Functions
Olympus is a company with the Audit & Supervisory Board
system. Two of the four audit & supervisory board members
are outside audit & supervisory board members. One of the
two standing audit & supervisory board members was re-
cruited from outside Olympus to guarantee the strength of
supervisory functions. Olympus has established the office of
Audit & Supervisory Board
to support audit & supervisory
board members
and assigned full-time employees to assist
with their work. In principle, the Audit & Supervisory Board,
like the Board of Directors, meets once per month.
In accordance with the Rules of the Audit & Supervisory
Board and the Audit & Supervisory Board Members’ Audit
Standard, the audit & supervisory board members attend im-
portant meetings, including Board of Directors’ meetings, and
periodically exchange opinions with directors and executive
officers. In principle, they exchange opinions with the repre-
sentative director four times per year.
Risk Management Structure
Olympus has identified one of the functions of the CSR Com-
mittee, which establishes the president as being responsible
for CSR and is chaired by the officer in charge of CSR, as
managing risks, and the committee thus works to reduce
exposure to risks and prevent their actualization as part of its
normal operations. The Company has also put into place sys-
tems for responding to serious risks should they be realized.
In addition, to further strengthen the Company’s risk manage-
ment structure, the Risk Management Bureau was revised and
renamed the Risk Management Department in October 2012.
Risk Management System
President:
Risk management leader
Task Force
(activated in the event of a crisis)
Risk Management
Department
Executive groups,
afliated companies, and
head ofce departments
CSR Committee
Chairperson: Ofcer in charge of CSR
Risk managers of
business units and
head ofce departments
Risk Management
Promotion Committee
51
OLYMPUS Annual Report 2015
50 OLYMPUS Annual Report 2015
Foundations Necessary for Growth