Corporate Governance
Basic Position on Corporate Governance and Compliance
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". In addition, our fundamental management philosophy is to maintain a shareholder-driven approach to management and sound relationships with all stakeholders, while fulfilling our obligations as a responsible corporate citizen. Open and transparent management practices are essential to operating in line with this philosophy. For this purpose, we have been making revisions to our board of directors at an early stage. In May 1992, the first external director joined the board, making this body more active and effective. To speed up decision-making regarding management and business operations, the executive officer system was adopted in June 1999. In June 2001, the number of directors was reduced from 15 to 9. Currently, we have a structure in which three of the company's seven directors are external directors, realizing a much stronger management supervisory system.
We have adopted the system of "Board of Statutory Auditors" and heighten management transparency by making all four statutory auditors external. The major role of each statutory auditor is to audit the execution of business by directors in accordance with the audit policy and plan that the Board of Statutory Auditors established. In terms of internal audit, the Internal Audit Group and the Internal Control group which are independent from management perform audits of the execution of duties and activities in each department and verify the effectiveness of internal control. The statutory auditors promote sharing information regularly and as necessary with the Internal Audit Group, the Internal Control Group and the Independent Auditors to heighten the effectiveness of audit.
To support compliance, we have formulated and set forth basic principles in the KONAMI Group Conduct Charter and KONAMI Group Code of Business and Ethics. Compliance principles are made known to each and every employee to establish a shared understanding of this subject. To prevent problems from occurring, we have also established a system for employees to report ethical issues and other matters without fear of recrimination. Our compliance structure consists of three internal committees: the Risk Management Committee, Compliance Committee and Disclosure Committee. These units take the lead in preventing problems from occurring and educating employees throughout the company.
On March 31, 2006, KONAMI transferred to a holding company system to clearly separate decision-making and oversight functions from implementation functions. At the same time, we will redouble efforts to boost management speed and maximize corporate value and deployments of management resources.
Corporate Governance and Compliance at KONAMI
We began reporting consolidated financial results based on U.S. GAAP upon listing on the New York Stock Exchange in September 2002. The listing made us subject to the U.S. Sarbanes-Oxley Act. In the process of implementing the provisions of this law, our disclosure system has become much stronger. By exposing ourselves to challenging circumstances, we have reinforced our system for internal control. As our businesses become increasingly global in scale, we would like to build an even more powerful group management structure. In January 2000, we became the first Japanese company to obtain a license from the State of Nevada for the manufacture and sale of casino gaming machines. As of March 2010, we had obtained licenses in 36 states and provinces in North America. We must remain in strict compliance with laws and regulations at all times to maintain these licenses. To maintain our listing on the New York Stock Exchange and licenses to manufacture and to sell casino gaming machines, it is essential that we work to educate all group employees on the importance of compliance issues. This process will help to earn the trust of all stakeholder groups. Our organization will continue to be managed to the highest global standard.
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. |