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Investor Relations

Corporate Governance

Basic philosophy
Matters relating to internal control systems
Basic approach to and improvement in exclusion of antisocial forces
Executive team
Remuneration of directors
Reasons for appointing external directors and external auditors
Attendance of external executives in the meetings of the Board of Directors, the Board of Auditors, and the Audit and Supervisory Committee
“Takeover defense measures”

Basic Philosophy

Artner’s No.1 business challenge is steadily improving shareholder value over the long term. So in addition to expanding our business and ensuring profitability, we want to grow as a “technical partner” together with our client companies in various industries, as a collective of engineers focused on developing more and more advanced levels of technical expertise. At the same time, with a constant awareness of what society needs most, and a desire to create a demand for it, we strive for business efficiency and soundness to help in the sustainable development of the company.

At Artner, we are highly conscious of our social responsibility as a company, so in addition to strictly observing all applicable laws and regulations, we strive to sustain and develop favorable relationships with shareholders, with our local community, with all of our client companies, and with all employees.

We are committed to further strengthening our internal control and risk management efforts through the application of business management systems (including internal control systems) to enable flexible adaptation to changes in the business environment. In this way, we will constantly improve our business management. Artner also will promptly disclose relevant information both inside and outside the company and enhance business transparency.

Company organization and internal control system

Matters relating to internal control systems

1. System to ensure that directors and employees execute their duties in compliance with applicable laws and regulations and the Articles of Incorporation

(1) At Artner, we have implemented Compliance and Risk Management Meetings chaired by the President & CEO as part of a system aimed at thoroughly educating employees regarding all applicable laws and regulations and the Articles of Incorporation, and also ensuring such compliance.

(2) We have set up an internal whistleblowing system, under which directors, employees, and other people engaged in work for the company can make whistleblower reports to a Whistleblowing Committee that has a duty of confidentiality. It is prohibited to subject persons who submit whistleblower reports using the system to any disadvantageous treatment as a result of such reporting. The system is designed to ensure the effectiveness of whistleblowing to prevent or quickly detect violations of applicable laws and regulations.

(3) The Internal Audit Office, operating independently of other divisions that execute business practices, conducts internal audits. Through such audits, it verifies the appropriateness and effectiveness of the internal management systems of each division, and by promoting the improvement of the systems, it ensures that all employees lawfully execute their duties.

2. System to ensure the appropriateness of financial reporting

(1) Directors and employees ensure the appropriateness of financial reporting by executing their duties in compliance with the “Basic framework of internal control related to financial reporting.”

(2) Directors and employees smoothly operate the system to ensure the appropriateness of financial reporting.

(3) The Internal Audit Office audits the operation of the system to ensure the appropriateness of financial reporting.

3. System to store and manage information relating to the execution of duties by directors

(1) Information and documents relating to the execution of duties by directors are appropriately stored and managed in accordance with the “Document Management Rules,” other applicable rules and regulations, and related information management system manuals.

(2) The Internal Audit Office conducts internal audits to confirm that this information and related documents are appropriately stored and managed.

4. Rules and system to manage risk of loss

(1) We have formulated guidelines, “Structure to Conduct Risk Management,” to define a clear system for managing different risks.

(2) We have classified and defined management risks in accordance with these policies, and each responsible division identifies and analyzes the risk situation for each type of risk. We have set up a system in which the various kinds of risks are managed through the Compliance and Risk Management Meetings. Management and countermeasures for each type of risk are clarified and managed in the meetings.

(3) The Internal Audit Office, which is directly overseen by the President & CEO, is responsible for audits in accordance with an internal audit plan. The office examines the method and details of audit implementation and revises the audit method as and when needed.

5. System to ensure that directors execute their duties efficiently

(1) Board of Directors meetings are held twice a month, as the basis of a system to ensure that directors execute their duties efficiently. The first board meeting of the month is a performance board meeting and the second is a regular board meeting. Special board meetings are also held as and when needed. The scope of authority of the Board of Directors is clearly defined in the “Board of Directors Rules.”

(2) To ensure efficient business management by the directors, we have formulated “Organizational Rules,” “Administrative Authority Rules,” “Division of Duties Rules,” “Division of Duties (Administrative Authority) Statement,” and other internal rules.

6. System to ensure appropriate business practices in a corporate group consisting of companies, parent companies and subsidiaries

The company does not currently have any parent companies or subsidiaries.

7. Matters relating to employees who assist with the duties of the Audit and Supervisory Committee, independence of such employees from other directors (who are not members of the committee), and ensuring the effectiveness of the committee’s instructions to such employees

(1) If requested by the Audit and Supervisory Committee, an employee can be appointed to assist with the duties of the committee.

(2) The appointment or dismissal, reassignment, and performance evaluation of such employees require the approval of the Audit and Supervisory Committee.

(3) If the Audit and Supervisory Committee requests the appointment of an employee to assist with its work, the appointment of a suitable employee to assist with the work needed by the committee is made in consultation with the committee. The appointment is made with the prior approval of the committee, and with an assurance of independence. To ensure the effectiveness of the instructions of the Audit and Supervisory Committee to the applicable employee, the employee works exclusively for the committee, without being assigned any other work.

8. System to enable directors (who are not members of the Audit and Supervisory Committee) and employees to report to the Audit and Supervisory Committee

(1) Directors who are members of the Audit and Supervisory Committee attend meetings of the Board of Directors and other important meetings and receive reports on the state of business practice execution from other directors (who are not members of the committee).

(2) Directors who are members of the Audit and Supervisory Committee are able to view important internal decision request circulars, written decisions, and reports that are not discussed at the important meetings mentioned above, and they also receive explanation of the contents of such documents as and when needed.

(3) Directors or employees should report to the Audit and Supervisory Committee any of the following: a risk that may significantly harm the company; misconduct relating to execution of duties by directors (who are not members of the Audit and Supervisory Committee); significant violation of an applicable law, regulation, or the Articles of Incorporation; reports relating to the state of internal audits; facts reported based on the internal whistleblowing system; and any other matter requested for the purposes of the Audit and Supervisory Committee.

9. System to ensure that persons who make whistleblower reports to the Audit and Supervisory Committee are not subjected to any disadvantageous treatment as a result of such reporting

The operational status of the internal whistleblowing system is reported to the Audit and Supervisory Committee as circumstances demand, and, in accordance with internal rules, it is prohibited to subject persons who submit whistleblower reports using the system to disadvantageous treatment in retaliation for whistleblowing.

10. Matters relating to policies concerning procedures for prepayment or reimbursement of expenses arising from the execution of duties by the Audit and Supervisory Committee members or other processing of expenses or monetary obligations arising from the execution of such duties

The procedures for prepayment or reimbursement of expenses arising from the execution of duties by members of the Audit and Supervisory Committee or other processing of expenses or monetary obligations arising from the execution of such duties are carried out appropriately through applications made by members of the Audit and Supervisory Committee.

11. Other systems to ensure that audits of the Audit and Supervisory Committee are effectively conducted

(1) The President & CEO and Head of the Internal Audit Office strive to enable sufficient opportunities for consultation with the Audit and Supervisory Committee members to examine the establishment of a suitable working environment for the committee, in order to ensure the effectiveness of audits.

(2) To ensure the effectiveness of audits by the Audit and Supervisory Committee, the committee members demand that the President & CEO and the Board of Directors strive to make continuous improvements to the auditing system.

(3) The Internal Audit Office, which is the internal auditing division of the company, and the division responsible for oversight of compliance and risk management meet regularly with the Audit and Supervisory Committee to exchange opinions regarding issues to be addressed.

(4) If the Audit and Supervisory Committee deems it necessary to appoint legal advisors or other external advisors when conducting an audit, such advisors can be appointed.

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Basic approach to and improvements to the exclusion of antisocial forces

1. Basic approach to the exclusion of antisocial forces

(1) To fulfill its obligations of corporate social responsibility and to protect the company, any relations with antisocial forces are cut off.

(2) In the event that the company is subjected to any unreasonable demands by antisocial forces, we respond resolutely by legal means.

(3) We set up a “System for Cutting off Relations with Antisocial Forces” based on the manual for dealing with antisocial forces.

(4) In preparation for unreasonable demands by antisocial forces, we are building close partnerships with an external specialized agency, and in the event that we are subjected to an unreasonable demand by antisocial forces, we will consult with the agency regarding how to respond, or request a response from the agency.

(5) Under no circumstances do we, for the sake of convenience, respond by engaging in behind-the-scenes dealing with or providing money to antisocial forces.

(6) We regularly inform directors and employees of our “System for Cutting off Relations with Antisocial Forces” and promote awareness of it.

2. Internal system for exclusion of antisocial forces

(1) Under the Head of the Management Division, the General Affairs Group, as division responsible for exclusion of antisocial forces, strives to prevent the company from being subjected to any unreasonable demands from antisocial forces.

(2) We have concluded advisory agreements with a legal advisor and retired police officers, and collaborate with a specialized agency.

(3) In collaboration with the Head of the Management Division, the General Affairs Group receives guidance and advice from the legal advisor as circumstances demand, and maintains a database of information on antisocial forces. As and when needed the group also reports the details of such information to the Board of Directors. Based on the information, each division and the Compliance and Risk Management Meetings examine approaches to the exclusion of antisocial forces.

(4) We distribute a manual for dealing with antisocial forces to all employees and promote awareness of it.

(5) The General Affairs Group raises awareness of issues relating to the exclusion of antisocial forces regularly at internal training sessions.

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Executive team

Here is a photo and brief bio of the company’s executive team. 》 Executive team

Remuneration of directors

Total remuneration by executive category, total amounts by type of remuneration, and total numbers of corresponding executives for FY01/19

Executive
category
Total
remuneration
(Unit:
¥ thousand)
Total amounts by type of remuneration
(Unit: ¥ thousand)
Total numbers
of
corresponding
executives
Basic
remuneration
Stock
options
Bonus Retirement
allowance
Directors
(excl.
external
directors)
101,695 91,547 10,147 5
Auditors
(excl.
xternal
auditors)
External
executives
24,302 23,400 902 3

Policies for determining the remuneration of executives
The remuneration of executives is determined in accordance with internal rules, within remuneration limits decided at the general meeting of shareholders. The maximum annual remuneration of directors who are not members of the Audit and Supervisory Committee is 200 million yen; the maximum annual remuneration of directors who are members of the Audit and Supervisory Committee is 30 million yen.

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Reasons for appointing external directors and external auditors

The company has three external directors. The three external directors hold shares of the company as stated in the financial statement (Section 4 Status of Submitting Company and Section 5 Status of Directors), but apart from this they have no other vested interests, including personal relationships, capital relationships, or business relationships.

Each external director plays a role in ensuring that highly effective audits are conducted, from an objective and neutral view point, and we believe that the current system satisfactorily fulfills its management monitoring and advisory functions. The three external directors are designated as independent directors as defined by the Tokyo Stock Exchange and they are registered with the exchange.

Although the company does not have any specific standards or policies regarding independence for the appointment of external executives, when making such appointments we not only meet the requirements for “externality” as defined by the Companies Act, but also take into account the Tokyo Stock Exchange’s criteria for the independence of independent directors.

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Attendance of external executives in the meetings of the Board of Directors, the Board of Auditors, and the Audit and Supervisory Committee

Attendance for FY01/19

Attendance
Takaaki Mitani — Director
(Audit and Supervisory
Committee member)
Attended 30 of the 31 meetings of the Board of Directors and all 25 Audit and Supervisory Committee meetings.
Hiroki Kanai — Director
(Audit and Supervisory
Committee member)
Attended all 31 meetings of the Board of Directors and all 25 Audit and Supervisory Committee meetings.
Kozaburo Fukumuro — Director
(Audit and Supervisory
Committee member)
Attended all 31 meetings of the Board of Directors and all 25 Audit and Supervisory Committee meetings.

“Takeover defense measures”

In order to respond to the mandate of its shareholders, the company recognizes that its most important challenges are to continue the company’s sustained growth and to increase corporate value. We presently have no plans to introduce “takeover defense measures.”

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