Corporate Governance
Fundamental Approach
We, Konami Group of Companies, are aiming to be a business group that is always highly-expected by all the people around the globe, through creating and providing them with "Valuable Time". Furthermore, our basic management policy is to "keep the basic attitude to value shareholders," "maintain sound relationships with all stakeholders, including our shareholders, and contribute to society as a good corporate citizen."
We believe that open and transparent management is fundamental to ensuring the integrity of this basic philosophy. That is why robust corporate governance has been a priority of our management.
Corporate Governance Overview
From early on, Konami Group has undertaken efforts to reform its board of directors, including welcoming our first external director in 1992, in order to ensure the openness and transparency of our management. At present, three of our seven directors are external directors, while all four of our statutory auditors are external auditors. Each of these external officers brings a wealth of experience and accomplishment, as well as broad knowledge and understanding. In our estimation, these are highly independent directors and auditors who are free from conflicts of interest with general shareholders and who actively express their views on the Board of Directors.
Konami Group divides the decision-making of our management from the execution of business operations through an executive officer system, introduced in 1999, that enables rapid execution of business operations and strengthens Board of Directors oversight. Because the heads of Konami Group businesses and administrative department management serve as executive officers, the Board of Directors is able to take decisions swiftly.
With respect to auditors and our system of auditing, our Board of Statutory Auditors consists of four external auditors, including one full-time auditor. In accordance with auditing standards and plans set forth by the Board of Statutory Auditors, each auditor coordinates with the Internal Control Group and Independent Auditor to ensure that audits are performed effectively.
NYSE Corporate Governance Standards
Companies listed on the New York Stock Exchange (hereinafter called the NYSE ) must comply with certain standards regarding corporate governance under Section 303A of the NYSE Listed Company Manual. However, listed companies that are foreign private issuers, such as KONAMI CORPORATION (hereinafter called the Company ), are permitted to follow home country practice in lieu of certain provisions of Section 303A
The following table shows the significant differences between the corporate governance practices followed by U.S. listed companies under Section 303A of the NYSE Listed Company Manual and those followed by the Company.
Corporate Governance Practices Followed by NYSE-listed U.S. Companies |
Corporate Governance Practices Followed by the Company |
A NYSE-listed U.S. company must have a majority of directors meeting the independence requirements under Section 303A of the NYSE Listed Company Manual. |
Under Japan's Corporate Law and relevant regulations (collectively, the "Corporate Law"), large listed companies may elect to structure their corporate governance system to be either that of a company with a Board of Statutory Auditors and an independent auditing firm (kaikei-kansanin), or that of a company with specified committees. The Company is currently a company with a Board of Statutory Auditors and an independent auditing firm (i.e. the "system of "Board of Statutory Auditors"" of corporate governance). For large listed companies under the system of "Board of Statutory Auditors", including the Company, the Corporate Law has no independence requirement with respect to directors. The task of overseeing management is assigned to the corporate auditors, who are separate from the company's management. Companies under the system of "Board of Statutory Auditors", including the Company, are required to have at lease three corporate auditors and the majority have to be "outside" corporate auditors who must meet independence requirements under the Corporate Law. An outside corporate auditor is defined as a corporate auditor who has not served as a director, accounting consultant (kaikei sanyo), executive officer (shikkoyaku), manager or any other employee of the company or any of its subsidiaries in previous years prior to the appointment. Currently, the Company has four corporate auditors and all of them are outside corporate auditors. |
A NYSE-listed U.S. company must have an audit committee composed entirely of independent directors, and the audit committee must have at least three members. |
The Company employs the system of "Board of Statutory Auditors" as described above. Under this system, the Board of Statutory Auditors is a legally separate and independent body from the board of directors. The function of the Board of Statutory Auditors is similar to that of independent directors, including those who are members of the audit committee, of a U.S. company: to monitor the performance of the directors, and review and express opinion on the method of auditing by the company's accounting firm and on such accounting firm's audit reports, for the protection of the company's shareholders. Under the Corporate Law, the Company is required to have at least three corporate auditors. Currently, the Company has four corporate auditors. Each corporate auditor elected before the date of the ordinary meeting of shareholders of the Company relating to the fiscal year ended March 31, 2003 has a three-year term, while each corporate auditor elected on or after that date has a four-year term. In contrast, the term of each director of the Company is one year. With respect to the requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934 relating to listed company audit committees, the Company relies on an exemption under that rule which is available to foreign private issuers with boards of corporate auditors meeting certain criteria. |
A NYSE-listed U.S. company must have a nominating/corporate governance committee composed entirely of independent directors. |
The Company's directors are elected at a meeting of shareholders. Its Board of Directors does not have the power to fill vacancies thereon. The Company's corporate auditors are also elected at a meeting of shareholders. A proposal by the Company's Board of Directors to elect a corporate auditor must be approved by a resolution of its Board of Statutory Auditors. The Board of Statutory Auditors is empowered to adopt a resolution requesting that the Company's directors submit a proposal for election of a corporate auditor to a meeting of shareholders. The corporate auditors have the right to state their opinion concerning election of a corporate auditor at the meeting of shareholders. |
A NYSE-listed U.S. company must have a compensation committee composed entirely of independent directors. |
Total amounts of compensation including remuneration, bonuses and other financial benefits, for the Company's directors and corporate auditors are proposed to, and voted on at, a meeting of shareholders. Once the proposals for such total amounts of compensation are approved at the meeting of shareholders, each of the Board of Directors and Board of Statutory Auditors allocate the respective total amounts among their respective members. |
A NYSE-listed U.S. company must generally obtain shareholder approval with respect to any equity compensation plan. |
Pursuant to the Corporate Law, if the Company desires to adopt an equity compensation plan under which stock acquisition rights are granted on specially favorable conditions (except where such rights are granted to all of its shareholders on a pro rata basis), the Company must approve the plan by a "special resolution" of a general meeting of shareholders, where the quorum is at least one-third of the total number of voting rights which are entitled to vote at such a general meeting of shareholders and the approval of at least two-thirds of the voting rights represented at the meeting is required. |