Omron 2009 Annual Report Download - page 46

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Corporate Governance, Compliance, and Risk Management
Omron is committed to maintaining and exercising a proper governance system while increasing
management transparency. To firmly establish a high standard of corporate ethics, we will continue to
enhance our compliance system and strengthen a risk management framework that supports ongoing
improvement in corporate value.
Corporate Governance
Appointment of Outside Directors
To allow the Board of Directors to monitor business prac-
tices from a position that represents Omron’s shareholders
and other stakeholders, outside directors now represent
two out of seven board members. In addition, three out of
four corporate auditors are external.
Emphasizing the independence of outside directors
and external auditors, Omron has specified strict criteria
for qualification of candidates, which are even more exact-
ing than the regulations of Japanese Corporate Law. For
example, candidates for outside directors and the organi-
zations to which they belong must not have assumed the
role of representative or employee of the independent
accounting auditor for the Omron Group for five years prior
to the nomination, may not be a director of any principal
partner, and may not be a principal shareholder of the
Omron Group.
Director Compensation
The Compensation Advisory Committee under the Board
of Directors determines the compensation structure for
directors and corporate auditors. The committee comprises
four directors, excluding the chairman, vice chairman, and
president. The chairman of the committee, appointed by
resolution of the Board of Directors, is an outside director.
This is to ensure objectivity and to increase transparency.
Basic Policies
Omron is making an effort to enhance its corporate gov-
ernance based on the belief that the most crucial factor in
earning stakeholders’ support is to establish an optimal
management structure and execute fair and appropriate
business operations while ensuring the proper function-
ing of a verification system (monitoring system), and to
realize the aim for continuous corporate growth.
In line with this basic policy, Omron maintains an exec-
utive officer system with clearly segregated management
oversight and business execution functions to oversee
business activities. Directors other than the president do
not concurrently serve as executive officers. In addition,
the system of internal companies vests each department’s
top management with wide-ranging authority with the aim
of accelerating decision making and improving operating
efficiency. In June 2008, Omron established the Corporate
Governance Committee to further enhance management
fairness and transparency.
Management and Oversight Structure
Omron has decreased the number of members of its Board
of Directors to seven to improve efficiency and support
substantive discussion. In addition, the president is the
only director that is also directly involved in business exe-
cution. The other directors are distanced from day to day
business execution and serve to fulfill a management mon-
itoring function. To increase objectivity in management
and to strengthen management oversight, the Chairman
of the Board of Directors and the CEO are segregated. The
Chairman of the Board of Directors serves as a monitor
representing stakeholders and does not take part in the
execution of business.
Advisory committees (personnel, compensation and
president & CEO selection) have been established with
the two outside board members chairing the committees
to enhance objectivity and transparency for nomination,
promotion and compensation of directors/executive offi-
cers as well as nomination of the president.
Auditing Functions
The Board of Corporate Auditors, consisting of four audi-
tors (including three outside corporate auditors), monitors
governance practices, management conditions, and the
daily activities of management and directors. The Group
Audit Office, which functions directly under the President
& CEO, periodically conducts internal audits of account-
ing, administration, business risks, and compliance in each
headquarters division and in each business company as
part of its internal auditing function. The Audit Office also
offers specific advice for improving business functions.
• Director compensation consists of basic compensation (monthly salary), bonus, and
stock-based compensation*.
• Outside director compensation consists of basic compensation (monthly salary).
• Corporate auditor compensation consists of basic compensation (monthly salary).
* Stock-based compensation is administered following guidelines specifying set remuneration
amounts to be paid on a monthly basis and utilized to acquire Company stock (through a director
stock ownership plan), which is then held during the individual’s tenure.
Directors’ and Corporate Auditors’ Remuneration (FY2008)
No. of People Remuneration
(Retiring Officers) (Millions of Yen)
Directors 11（4）388
Corporate Auditors 5（1）80
Total 16（5）468
No. of Outside Directors and
External Corporate Auditors
included in Total 7（2）67