Corporate Governance
Last updated: March 26, 2012
Basic Policy on Corporate Governance
NTT Urban Development recognizes that strong corporate governance is a key management issue and views the introduction of governance initiatives as one of the most important methods of maximizing corporate value. NTT Urban Development believes that strong corporate governance deepens its trust-based relationships with stakeholders, including shareholders and other investors, as well as customers, business partners and society as a whole. As a result, forming the key components of NTT Urban Development's basic corporate governance policy are efforts to ensure management transparency, to strengthen accountability, to strictly adhere to appropriate risk management, corporate ethics, and compliance and the highest standards of corporate ethics and compliance and to enhance management efficiency.
Matters associated with the execution of business, audit and supervision, appointments, and the determination of remuneration, etc. (Overview of corporate governance structure of the current situation)
NTT Urban Development employs a system of corporate auditors. As stipulated in Japan's Corporate Law, its internal organizations include the General Ordinary Meeting of Shareholders, the Board of Directors, the Board of Corporate Auditors and an independent accounting auditor. The Company has determined that audits by corporate auditors including outside corporate auditors is effective for monitoring management and has employed a corporate auditor system.
The Company has also established the Management Council, consisting of full-time Directors, branch managers, operating department managers, and heads of staff departments, which advises the President on matters within his decision-making capacity. The Management Council deliberates matters of management importance, with the goal of ensuring the speedy execution of duties and decision making. Moreover, in an effort to further enhance transparency in the decision-making process, full-time corporate auditors attend Management Council Meetings. In addition, before the Management Council, investment risks and other matters associated with investment projects are considered by the Investment Deliberation Council, which consists of cross-functional members, they are closely examined at investment review meetings to ensure appropriate risk control.
The Board of Directors comprised 14 Directors, one of whom was an outside Director. The Board decides important matters, sets basic policies regarding management and business execution, and supervises the execution of duties by Directors. In principle, the Board of Directors convenes once a month, with additional meetings as necessary for quick decision making. During the fiscal year ended March 31, 2011, the Board of Directors convened a meeting on 25 occasions.
The Board of Corporate Auditors has four members, all of whom are outside auditors. In principle, it meets regularly once a month and holds additional meetings as necessary. During the fiscal year ended March 31, 2011, the Board of Corporate Auditors met on 27 occasions. Corporate auditors carry out their duties according to the audit plan established by the Board of Corporate Auditors. Corporate auditors attend meetings of the Board of Directors and other important meetings, and audit the execution of duties of Directors, and examine the status of operations and assets.
As of June 21, 2011, the Board of Directors comprised 14 Directors, one of whom was an outside Director and the Board of Corporate Auditors comprised four members, all of whom are outside auditors.
With respect to internal audit, NTT Urban Development has established the Internal Audit Office as the department in charge of internal audits. It consists of six staff members, and carries out internal audits, reporting directly to the President, independent of business operations. Based on internal audit plans, the Internal Audit Office verifies that the company's operating activities conform to laws and ordinances, the Articles of Association, relevant regulations, and management policies and plans. The office is responsible for uncovering any issues that may exist, and proposing solutions. Such activities are designed to raise management efficiency and profitability, and to contribute to maintain the overall health of the Group.
Audits by corporate auditors are conducted in accordance with the audit policies and audit plans determined by the Board of Corporate Auditors. These audits concern the status of operations and the conditions of assets managed by the headquarters and its major offices. If necessary, auditors may request the submission of subsidiaries' business reports. In addition, the Company has established a Corporate Auditors Office with four assistants to the Corporate Auditors to facilitate the execution of their duties.
Corporate Auditor Akira Sakashita once worked for the finance and accounting department of Nippon Telegraph and Telephone Public Corporation and has considerable knowledge about finance and accounting.
Because KPMG AZSA LLC has familiarity with the details of the Company's operations, reflecting the high quality audits it has conducted as the Company's independent accounting auditor based on its sound audits structure and a wide range of expertise, and taking into account audit continuity, KPMG AZSA LLC was reappointed the Company's independent accounting auditor for the consolidated fiscal year under review.
Certified public accountants who carried out accounting audit operations for fiscal 2010 were as follows:
Designated limited liability partners and certified public accountants:
Takuji Kanai (5 years) and Hideki Yoshida (4 years)
* Years in the brackets show the length of years when accounting audit operations were carried out.
Breakdown of assistants associated with audit operations were as follows:
Six certified public accountants and nine other staff
The compensation that the Company and its subsidiaries paid to KPMG AZSA LLC for the services prescribed in Article 2, Paragraph 1 of the Certified Public Accountants Act (Law No. 103 of 1948) was 80 million yen. The compensation for other services was 26 million yen.
The Internal Audit Office (department in charge of internal audits), the Corporate Auditors, and the independent accounting auditor exchange views and information quarterly and when necessary and carry out audits in collaboration with each other.
The department in charge of internal audits, the Corporate Auditors, and the independent accounting auditor audit the
development and management of the Internal Control Systems and internal control departments in cooperation with the departments relevant to the systems stipulated in the Internal Control System Basic Policy, receiving reports and explanations from the relevant departments from time to time.
Basic policy and the status of the development of internal control systems
(Basic Policy)
The President is charged with business execution involving the creation and development of an internal control system, under the supervision of the Board of Directors and the Board of Corporate Auditors. Resolution for a basic policy on the development of an internal control system passed by the Board of Directors is as follows.
Pursuant to the Corporate Law and the Enforcement Regulations of the Corporate Law, NTT Urban Development shall design internal systems to secure legal and ethical compliance in its business operations (hereinafter, the "Internal Control Systems"), as described below.
a. A system to ensure that Directors and employees adhere to laws and regulations and the Company's Articles of Association in the execution of their duties. This system requires that:
(a) Employees carry out their respective duties in a diligent and conscientious manner in accordance with laws, regulations and instructions in an effort to ensure appropriate and efficient business operations as stipulated in the Company's Rules of Employment and related documents;
(b) All Directors and employees of NTT Urban Development Group companies engage in activities that promote the highest standards in corporate ethics and compliance in accordance with the NTT Group's Code of Corporate Ethics;
(c) A Corporate Ethics Promotion Committee is established and preventive measures initiated with regard to illegalities and misconduct in accordance with compliance related regulations;
(d) The Company provides the necessary support infrastructure to its Directors and employees both within and outside the Company, including a corporate ethics and compliance helpline to facilitate corporate ethics and compliance;
(e) NTT Urban Development establish a framework to ensure information is concentrated in the relevant department and an appropriate response is formulated in the event of potential and actual non-compliance and unethical act;
(f) Education and training with regard to corporate ethics and compliance is implemented on a continuous basis for
Directors and employees;
(g) The Internal Audit Office is inaugurated as a means to evaluate the efficacy and management of the Internal Control Systems, and an audit review program is initiated for areas of particularly high risk to facilitate necessary and appropriate improvement;
(h) A legal structure and framework, coordinated by the Legal Department, is maintained to ensure the appropriate checks and balances are in place. In addition, the Legal Department shall centrally coordinate the Company's legal consultation with lawyers;
(i) As an operator of financial instruments, NTT Urban Development ensures appropriate business management and human resources structures, and develops structures to enforce the compliance with laws and ordinances, and risk management structures, and manages appropriate customer protection and customer information control.
(j) NTT Urban Development appropriately develops and manages internal control associated with financial reports to ensure the credibility of financial reports in accordance with the Financial Instruments and Exchange Act.
(k) NTT Urban Development is committed to not being associated, by any means, with antisocial forces or organizations that pose a threat to the order and safety of society, and to act decisively against these antisocial activities in cooperation with the appropriate authorities, such as the police.
b. A structure for storing and managing information pertaining to the execution of duties by Directors. Under this structure:
(a) Minutes of meetings, associated documents and other information relating to the execution of duties by Directors are stored and managed by the relevant department in accordance with internal rules and regulations; and
(b) Directors and corporate auditors regularly review the aforementioned documentation and information.
c. Provisions and other structures concerning administration of the danger of losses. In this context:
(a) Careful consideration of investment risks and other factors by the Management Council in connection with investment projects is preceded by due diligence by the Investment Deliberation Council;
(b) Risks are investigated and valuated regularly, and preventive measures are formulated and implemented based on identified risks in accordance with established risk management rules and regulations.
(c) NTT Urban Development conducts risk management education and training in order to raise awareness among Directors and employees.
(d) NTT Urban Development develops systems that enable it to take appropriate measures in the event of disaster by taking the necessary measures, such as establishing a Disaster Risk Management Promotion Committee and a Disaster Risk Management Promotion Office, developing a basic policy and a manual to respond to the occurrence of a major earthquake, and holding seminars and training in disaster management.
d. A framework to ensure the efficient execution of duties by Directors. Under this framework, the Company:
(a) Clarifies department responsibilities, authority and decision-making procedures, based on internal rules and regulations that define the structure and scope of internal organizations as well as the division of duties, responsibilities and authority;
(b) Formulates rules and regulations for the Board of Directors. In principle, the Board of Directors meets once a month to decide on important matters relating to the management of the Company in accordance with related legal requirements, decision-making principles and recommendations based on due diligence. In addition, the Board of Directors periodically reports on the status of business execution. Moreover, the Company formulates rules and regulations for the Management Council, an organization that in principle meets once a week and reports to the Board of Directors, and;
(c) Strives to enhance efficiency in the execution of business. To this end, the Board of Directors formulates medium-term management policies and business plans and closely reviews performance on a monthly and quarterly basis.
e. A system for ensuring the appropriateness of operations of the Company and the entire corporate group, including its parent company and subsidiaries. This system ensures that:
(a) Subsidiaries deliberate with and report to the Company in connection with important matters;
(b) The internal control departments periodically call on subsidiaries with the aim of monitoring and supervising subsidiary operations;
(c) Periodic meetings are convened at which subsidiaries report to the Company on the status of operations and financial standing. This process enables the Company to maintain a comprehensive grasp of subsidiary activities and status and to ensure that subsidiary activities are conducted in an appropriate manner, and;
(d) Transactions between the parent company and subsidiaries are conducted in an appropriate manner and contracts executed on the same terms and conditions as those with third parties.
f. Items pertaining to employees who are appointed to assist corporate auditors in their duties. These items provide for:
- The establishment of a Corporate Auditors Office that reports directly to the corporate auditors and the appointment of full-time, specialist employees to support corporate auditors in the conduct of their duties.
g. Items concerning the independence from Directors of employees who are appointed to assist corporate auditors in their duties. These items ensure that:
(a) The opinions of corporate auditors are sought in determining personnel matters relating to employees appointed to support corporate auditors, and;
(b) Employees appointed to support corporate auditors do not engage in concurrent activities.
h. A system for Directors and employees to report to corporate auditors and for other reporting to corporate auditors. Under this system:
(a) A comprehensive reporting system is maintained in which corporate auditors attend not only Board of Directors meetings but also Management Council and other important meetings.
(b) Directors and employees are required to report to corporate auditors on matters relating to the execution of their duties including the following:
- Matters that have led to significant damage or have the potential to lead to significant damage to the Company
- Monthly business reports
- The status of internal audits
- Any risk of a breach of laws and regulations, the Company's Articles of Association and related rules and regulations
- The status of reports made under the corporate ethics and compliance helpline
- Important issues relating to corporate ethics and compliance other than those previously identified
(c) Directors are required to report to the Board of Directors on the status of the establishment and management of the Internal Control Systems through the Internal Audit Office.
i. Other structures to ensure that audits are performed effectively by corporate auditors. Based on this structure:
(a) Corporate auditors conduct meetings with representative directors and related personnel on a quarterly basis to promote an exchange of opinions and ensure appropriate communication channels are maintained, and;
(b) The Company will provide every support to corporate auditors in connection with any request for the use of external advisors including attorneys and certified public accountants.
(Development)
In accordance with the implementation of the Corporate Law on May 1, 2006, the Board of Directors passed a resolution on the Company's Internal Control System Basic Policy on May 11, 2006.
This basic policy was revised by the Board of Directors on March 26, 2007 with the aim of enhancing its scope and content. The policy was further revised by the Board of Directors on March 28, 2008 to clearly state the Company's commitment in eradicating antisocial forces, and to comply with the Financial Instruments and Exchange Act. Moreover, a Disaster Risk Management Promotion Committee and a Disaster Risk Management Promotion Office have been established as part of initiatives to develop and improve systems that enable the Company to take appropriate measures in the event of disaster. As a result, the Internal Control System Basic Policy was revised at the meeting of the Board of Directors held on March 30, 2009.
Furthermore, the policy was revised by the Board of Directors on March 26, 2012 in accordance with the risk management rules and regulations which was revised to stipulates that risks are investigated and valuated regularly considering changes in circumstances surrounding the company and initiatives for new business and other factors.
The Company is appropriately preparing and implementing internal control and other systems under the Financial Instruments and Exchange Act enacted from the fiscal year commencing on or after April 1, 2008 under the supervision of the Internal Control Office consisting of members of the Management Council.
With regard to corporate ethics and compliance, the Company has initiated a number of activities involving corporate ethics and compliance. The Company has created the Corporate Ethics Promotion Committee consisting of heads of staff department, service promotion department, management department and other departments to deliberate corporate ethics and compliance policies and conduct corporate ethics and compliance training. A corporate ethics and compliance help line to respond to employee questions concerning corporate ethics and compliance has been thoroughly disseminated within the Company and properly managed.
Risk management is an essential part of the Internal Control Systems. NTT Urban Development's risk management initiatives aim to promote and increase corporate value by understanding the internal and external risks borne by the Company's operations, implementing pertinent countermeasures and ensuring appropriate and bold management decisions.
Applying a set of risk management rules and regulations appropriately, the Company strives to address and manage a wide variety of risks and to secure continuous and stable operations. As a part of the Company's efforts to implement thorough risk management, for example, NTT Urban Development seeks to determine all potential risks, such as the risk of rent decreases, the risk of construction delays, the risk of neighborhood backlash against construction, the risk of ground pollution or other environmental issues.
Basic policies and development to eradicate antisocial forces
The Internal Control System Basic Policy clearly describes basic policies to eradicate antisocial forces and describes the status of the development of the policies. NTT Urban Development carries out cross-company measures to respond to unreasonable demands from antisocial forces. The General Affairs Department is designated as the department that oversees the implementation of the above measures.
In addition, NTT Urban Development maintains cooperation with relevant authorities, including the police, to ensure a smooth information exchange during normal circumstances, and an urgent response in emergencies.
These basic policies and the Company's internal structure to deal with business issues are set out in the Corporate Ethics and Compliance Regulations and the Business Risk Management Manual. In this way, NTT Urban Development ensures that the basic policies and the internal structure are enforced across the company.
Matters relating to the Corporate Governance System, etc.
We are committed to providing timely, fair and impartial disclosure of information concerning the Company and its subsidiaries by setting forth the Disclosure Regulations, which prescribe the policies for disclosing the company information we possess and provide disclosure and control procedures for important management information.
In principle, for important management information, the President makes a decision on disclosure through deliberation at the Management Council, and the Senior Executive Manager of the Accounting and Finance Department then discloses it through the timely disclosure network (TDnet) system of the Tokyo Stock Exchange, the press and other media, and the Company's web site, etc. In addition, the head of the organization that assists in the disclosure decision controls the management information of the organization as the Information Security Manager and consults with the Senior Executive Manager of the Accounting and Finance Department on facts that could constitute important management information of the organization and related subsidiaries. If the Senior Executive Manager of the Accounting and Finance Department has determined that facts constitute important management information, he or she then submits it to the Management Council for discussion concerning its disclosure.
