At Murata, we position corporate governance as one of our most important management focuses. Seeking to realize sound corporate growth and development while also considering all our stakeholders, we work constantly to establish and ensure the efficient functioning of optimal management systems.
Recognizing the importance of incorporating perspectives from outside the company, we first appointed Outside Statutory Auditors in 1971. In 2001, we appointed Outside Directors for the first time. More recently, we have made efforts to increase the diversity of our Outside Directors and boost the ratio of Outside Directors on our Board of Directors. Since we became a company with an audit and supervisory committee structure in 2016, Outside Directors now represent more than one-third of our Board of Directors. In addition to appointing Outside Officers, we have also worked to enhance corporate governance by progressively implementing the measures shown in the table below in order to strengthen our execution and oversight functions and increase management transparency.
History of corporate governance enhancement
Changes in number of Directors
Overview of Murata’s Corporate Governance System
Corporate governance system
●Board of Directors
Murata’s Board of Directors decides on our basic direction and particularly important matters for execution and oversees the execution of duties by corporate Officers.
At present, we have 13 directors, of whom five are Independent Outside Directors. Independent Outside Directors therefore represent more than one-third of the Board of Directors.
In fiscal 2019, we convened our Board of Directors 11 times and the average attendance rate of all directors was 99.3%.
●Audit and Supervisory Committee
The Audit and Supervisory Committee audits our executives’ performance of their duties. Members also have the right to offer opinions regarding the appointment and remuneration of directors at General Shareholders’ Meetings.
At present, our Audit and Supervisory Committee is made up of four members, of whom three are Independent Outside Directors. Three of the members of the committee possess extensive knowledge in the areas of finance and accounting. We have one full-time Audit and Supervisory Committee member who shares information regarding the company’s business and financial status with the non-full-time members.
In fiscal 2019, we convened ten meetings of our Audit and Supervisory Committee with an average attendance rate for all members of 97.5%.
●Nomination Advisory Committee and Remuneration Advisory Committee
We have established advisory bodies for our Board of Directors to enhance the independence, objectivity, and accountability of the board’s functions in relation to the appointment and remuneration of corporate officers.
Members of these committees are directors who have been selected by the Board of Directors and must include multiple Independent Outside Directors.
In fiscal 2019, we convened the Nomination Advisory Committee five times and the Remuneration Advisory Committee twice. The attendance rate of members of both committees was 100%.
Composition of the Board of Directors(as of June 26, 2020)
|No. of members||Internal Directors||Outside Directors||Chairperson|
|Board of Directors||13||8||5||Internal director|
|Audit and Supervisory Committee||4||1||3||Internal director|
|Nomination Advisory Committee||5||2||3||Internal director|
|Remuneration Advisory Committee||4||2||2||Outside director|
●Management Executive Committee
The Management Executive Committee has been established as a deliberative body to assist decision making by the Board of Directors and the Representative Directors. It is made up of directors with special titles and members of the Board of Directors who concurrently serve as vice presidents, and is establishing a systemic framework for deliberation regarding management matters stipulated in the company’s internal regulations.
●CSR Management Committee
The CSR Management Committee has been established to promote CSR management at Murata continuously and systematically and works to ensure the entrenchment of CSR within the company and the implementation of unified CSR responses outside the company.
●Internal Control Management Committee
The Internal Control Management Committee has been established to maintain and continuously improve the systems that ensure Murata’s business procedures are conducted appropriately. It evaluates the status of establishment and operation of Murata’s internal control systems.
To enable us to make management decisions more rapidly and execute them more flexibly, we have established a system under which vice presidents are granted responsibility and authority to execute management tasks.
Selecting “Company with an Audit and Supervisory Committee Structure” as Our Form of Governance
Murata Manufacturing has selected “Company with an Audit and Supervisory Committee Structure” as its form of corporate governance.
In a company with an audit and supervisory committee structure, the Board of Directors is able to delegate decisions regarding important matters for execution to the company’s Executive Directors. By delegating decisions on individual matters for execution, we can realize more rapid management decisions and more flexible execution. At the same time, because the Board of Directors is able to adopt a greater focus on discussion and monitoring in relation to management policy and business strategy, we believe that this organizational form also enhances the functions of our board.
In addition, Murata’s Directors who serve as Auditors have voting rights on the Board of Directors, and, asmembers of our Audit and Supervisory Committee, have the right to offer opinions regarding executive appointments and remuneration at General Shareholders’ Meetings. Given this, we believe that we have every expectation of realizing strong oversight functions, including in relation to our Executive Directors.
Analyzing and Evaluating the Effectiveness of Our Board of Directors
Once a year, we analyze and evaluate the effectiveness of our entire Board of Directors as a measure to boost its effectiveness and release an outline of the processes and results.
Analysis and Evaluation Process
We had all our directors fill in a questionnaire, and we conducted interviews with our Outside Directors. Our Board of Directors held repeated discussions based on the results of these questionnaires and interviews to analyze and evaluate efficiency.
The questionnaires and interviews confirm matters relating to the composition of the Board of Directors, matters for discussion, status of deliberations, participation of directors, and other matters relating to operation in general. Furthermore, we appointed a third party to administer, process, and analyze the questionnaires.
Analysis and Evaluation Results and Future Issues
We evaluated the effectiveness of the Board of Directors based on the results of questionnaires and analysis of and reports on interviews, considering the roles and responsibilities of the Board.
We have determined that an atmosphere enabling the free expression of opinions has been created, leading to open and constructive deliberation and exchanges of opinion.
We are also aware, however, that the following points will require additional effort in the future.
- Comprehensive monitoring of the execution of duties in relation to management policies and business strategies
- Increased and deeper discussion of management of business risks
- Increased and deeper discussion of responses to ESG issues and measures addressing the SDGs
- Enhanced supervision of the internal control systems of Group companies outside of Japan
With regard to the issues observed in the assessment results, we will continue to make efforts to enhance the effectiveness of the Board of Directors.
Nomination of Candidates for Director
Taking into consideration factors including the nature of Murata’s business and the company’s scale and management environment, we nominate candidates for board positions possessing the requisite knowledge, experience, and attributes to contribute to the realization of the functions of the Board of Directors (decision on basic management policy and important matters for execution and supervision of the execution of duties by company officers), while also considering the balance and diversity of knowledge, experience, and ability in the board as a whole.
With regard to our nomination of candidates for Outside Director, we search from a wide range of diverse fields, working to identify candidates from among individuals satisfying criteria for the judgment of independence set by the Tokyo Stock Exchange and Murata Manufacturing itself.
In particular,Regarding candidates for membership of the Audit and Supervisory Committee, in addition to the above, we nominate candidates possessing attributes that will enable them to audit the status of execution of management tasks by Executive Officers from a fair and objective standpoint and contribute to improving the soundness and transparency of management, in addition to enriching knowledge and experience in the areas of management oversight and business operation. It should also be noted that we nominate the majority of our candidates for director, who sit on the Audit and Supervisory Committee, from outside the company.
The Nomination Advisory Committee deliberates and makes recommendations to the Board of Directors with regard to the standards for nomination of candidates for director, standards for evaluating the independence of Independent Outside Directors, nomination of candidates for director, nomination of candidates for representative director and directors with special titles, and the president succession plan.
The Board of Directors makes decisions with regard to the nomination of candidates for director based on the recommendations of the Nomination Advisory Committee. Approval must be obtained from the Audit and Supervisory Committee regarding candidates for director who are also Audit and Supervisory Committee members.
※For more information regarding criteria for judgment of the independence of Independent Outside Directors, see “I. Basic Views on Corporate Governance, Capital Structure, Corporate Attributes and Other Basic Information,” “1. Basic Views” in the Murata Manufacturing Corporate Governance Report; for more information regarding reasons for appointments, see “II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management,” “1. Organizational Composition and Operation” in the same report.
Murata Manufacturing’s basic policy with regard to executive remuneration is to provide remuneration that is appropriate for the top management cadre of a globally competitive manufacturer of electronic devices and components, to maintain a system and a level of remuneration that enables us to secure personnel with a comparable level of excellence to other companies in the same industry, and to boost morale and motivation in relation to improving business results, contributing to increased corporate value.
Remuneration for Internal Directors who are not members of the Audit and Supervisory Committee is made up of ① Monthly remuneration; ② Bonuses to provide short-term incentives; and ③ Share-based remuneration to provide medium- to long-term incentives and to promote a greater sharing of values between directors and shareholders.
Outside Directors who are not members of the Audit and Supervisory Committee and directors who are members of the committee receive monthly remuneration only. The remuneration for directors who are members of the Audit and Supervisory Committee is fixed remuneration, decided on the basis of consultation with the members of the Board of Directors who are Audit and Supervisory Committee members.
Remuneration Determination Procedures
Systems and standards for the remuneration of directors are deliberated by the Remuneration Advisory Committee, which makes recommendations to the Board of Directors. The Board of Directors makes decisions with regard to the directors’ remuneration standards based on the recommendations of the Remuneration Advisory Committee.
Specifically, the amount of remuneration is calculated in accordance with the remuneration standards, and individual remuneration of directors who are not Audit and Supervisory Committee members is determined having received advice from the Remuneration Advisory Committee.
1. Specifically, the amount of remuneration is calculated in accordance with the remuneration standards, and individual remuneration of directors who are not Audit and Supervisory Committee members is determined having received advice from the Remuneration Advisory Committee.
2. The total amount of remuneration, etc. paid to the six Outside Directors mentioned above is 86 million yen.
Internal Control System
Murata Manufacturing’s Board of Directors has formulated a basic policy regarding the establishment of a system to ensure that the company’s business is conducted appropriately (an internal control system)*.We are working on this basis to establish and operate a suitable internal control system
The Murata Manufacturing Group shares the Murata Philosophy as a fundamental management philosophy and, looking toward its realization, has established a basic philosophy of compliance and a Code of Conduct, which are being shared throughout the Group as a whole. In addition, we have established regulations and procedures in relation to decision making, and based on these we are consulting with our affiliates regarding their business operation, in addition to sharing a range of information related to business operation within the Group. In addition, Key Functional Staff Departments (General Administration, Personnel, Accounting, etc.) establish frameworks, procedures, and criteria for judgment in relation to each of these functions to ensure that operations are conducted appropriately and efficiently within the Murata Manufacturing Group. They also provide guidance to subsidiaries as necessary. Our internal audit department, the Office of Internal Audit, which functions as an independent body, conducts evaluations and engages in monitoring in order to ensure that procedures within the Group are conducted appropriately and efficiently, in accordance with laws and regulations, company regulations, etc.
∗For more details regarding Murata’s basic policy in relation to the establishment of an internal control system, please refer to “IV. Matters Related to Internal Control System” “1. Basic Views on Internal Control System and Progress of System Development” in the Murata Manufacturing Corporate Governance Report.