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Corporate Governance

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Basic Policy on Corporate Governance

The Group considers the enhancement of corporate governance to be one of its most important management focus points. The Group believes that working to increase management quality and enhance the transparency of decision-making is indispensable, and accordingly, continually strives to strengthen corporate governance. This ensures that the Group continues to fulfill its founding mission as stated in its corporate philosophy: “Serving Society with Superior Quality.”

Based on this approach, in accordance with the responsibility and authority delineated in the Administrative Authority Rules, and in line with the Policy Management Rules, the Company is committed to developing, communicating, and abiding by fair, transparent decision-making and management policies.

As one facet of initiatives to strengthen its corporate governance system, to achieve both further strengthening of its internal control system and heightened speed in execution, the Company transitioned to the “Company with Nominating Committee, etc.” model of corporate governance in March 2016. The Group will continue striving to further strengthen both the efficiency and the effectiveness of management and execution.

Corporate Governance Structure

In March 2016, the Company has transitioned to the “Company with Nominating Committee, etc.” model and has a system that enhances the separation of management and operational responsibilities and allows the directors and the Board of Directors to focus more effectively on overseeing the execution of business operations. At the Annual Shareholders’ Meeting held on March 23, 2018, 12 directors (10 male and two female) were elected, including eight outside directors (six male and two female). The Chairman of the Board, who is selected from among the directors in accordance with the Articles of Incorporation and the Board of Directors’ Rules, serves as the chairperson of both Board of Directors’ meetings and General Meeting of Shareholders.

In addition, items related to decisions on basic management policies, important business execution matters, and other matters that must be determined by the Board of Directors are stipulated in the Articles of Incorporation, the Board of Directors’ Rules, and Administrative Authority Rules. These matters are determined after careful deliberations by the Board of Directors.

The Company has established and maintains a corporate governance system that functions through appropriate, active performance of duties by the Nominating Committee, the Audit Committee, and the Compensation Committee, in conjunction with oversight of the executive officers and directors by the Board of Directors. The Nominating Committee has three members, all of whom are outside directors. This committee deliberates on such matters as standards and policies for the fair, transparent appointment and dismissal of directors. The Audit Committee has seven members, consisting of five outside directors and two internal directors. This committee conducts audits regarding the business execution of executive officers and directors. The two internal directors on the Audit Committee are full-time members of the Audit Committee. The Compensation Committee has three members, all of whom are outside directors. This committee deliberates on such matters as the details of compensation for directors and executive officers.

In addition, to further increase the transparency of corporate governance, the Governance Committee and the Compliance Committee have been established as advisory committees to the Board of Directors. These committees deliberate on the corporate governance system and related matters and on compliance activities as a whole and submit reports to the Board of Directors. Both of the committees are composed of eight outside directors, and one or more internal directors who are members of the Audit Committee participate as observers.

Regarding the management system, the CEO and Representative Executive Officer (CEO) and the COO and Representative Executive Officer (COO) are the leaders of the operating divisions. The CEO is principally in charge of overall management and strategy, and the COO is principally in charge of operations. At the same time, these two officers implement a system of mutual checks. The Company is further strengthening its corporate governance system by separating and clarifying the respective roles and authority of the CEO and the COO, advancing the sharing of information, and increasing the transparency of decision-making processes. Further, under the CEO and COO, respective executive officers are responsible for decision-making and business execution in relation to matters delegated to them by the Board of Directors. In addition, following deliberations by the Officer Nomination and Compensation Meeting, which is an advisory body to the CEO and COO, full-time corporate officers, who are elected by the CEO, are responsible for business execution under the direction of the executive officers.

In business execution, specific matters pursuant to Company policy as well as other important matters are deliberated and reported at the Global EXCO, which was established in 2013 as a body responsible for groupwide global business execution; the Executive Operational Committee; and other policy management meetings. In addition to key executive officers, such as the CEO and COO, full-time corporate officers also participate in the Global EXCO, the Executive Operational Committee, and other policy management meetings.

Corporate governance structure (as of March 23, 2018)

Advisory Committees to the Board of Directors

To further increase transparency of corporate governance, the Governance Committee and Compliance Committee have been established as advisory bodies to the Board of Directors. These advisory committees provide advice to the Board of Directors in regard to such matters, the governance system and related issues, and overall compliance activities. These committees are comprised of a total of outside directors and one or more internal directors, who are members of the Audit Committee participate as observers.

Executive Operational Committee

With regard to the execution of business operations, the Company has established the Global Executive Committee (Global EXCO) in 2013, which oversees business execution on a Group and Global basis, the Executive Operational Committee and other policy management meetings. These Committees deliberate and report on specific matters set forth in Company policy as well as other important matters. In addition to key executive officers such as the CEO and COO, full-time corporate officers also participate in the Global EXCO and the Executive Operational Committee meetings along with other policy management meetings.

Auditing Structure

The Company implements audits through cooperation among the Audit Committee, the Internal Auditing Office, and the independent auditors.

In accordance with audit policies determined by the Audit Committee, the Committee works in cooperation with the Internal Auditing Office and other bodies to audit the execution of business duties by executive officers and directors. These auditing activities include attendance at important meetings, such as the Global EXCO and the Executive Operational Committee; interviews to ascertain the status of operations; reviews of important business documents; and on-site audits of business offices. Moreover, information and opinions are exchanged with the representative executive officers, and meetings are held with such persons as the corporate auditors of major subsidiaries in Japan. In addition, the Company has assigned a corporate officer with full-time responsibility for auditing to assist the operations of the Audit Committee. Under the supervision of this corporate officer, dedicated staff have been assigned to assist with audits by the Committee. Decisions to select and replace this corporate officer require the agreement of the Audit Committee.

The Internal Auditing Office and internal auditing departments within the Company’s operating divisions and major subsidiaries conduct internal accounting and operational audits of the Company and Group companies. The Internal Auditing Office makes annual audit plans and conducts on-site audits of each function, operating division, and subsidiary.

In cooperation with the Audit Committee, Deloitte Touche Tohmatsu LLC performs the accounting audit of the Company’s financial statements.

The Audit Committee, the Internal Auditing Office, and the independent auditors exchange information and opinions as necessary and generally maintain close contact, thereby working to further increase audit efficiency and effectiveness.

Compensation system for directors and executive officers

Bridgestone, in deciding on executive compensation, will determine an appropriate amount of compensation in light of Bridgestone’s business performance and scale of business, based on the four “Principles of Compensation” of (1) retaining and cultivating superior human resources, (2) remaining competitive, (3) motivating the implementation of the global business strategy and (4) motivating an increase in shareholder value, in view of the standard of compensation for the main domestic businesses developing global business and the roles and responsibilities of directors and executive officers.

Compensation system for directors (for directors who are also executives)

Board of Director and Executive Officer Remuneration (January-December 2017)

Positions Members Amount of Compensation, Etc.
Directors 12 People
(of whom eight are outside directors)
¥201 million
(of which ¥109o million is for outside directors)
Executive
Officers
9 People ¥685 million
  1. Figures include one director and four executive officers who retired during the subject fiscal year.

Evaluation of the effectiveness of the board of directors’ meetings

In order to strengthen its corporate governance and promote the speed of business execution the Company has regularly reviewed its governance performance and continually implements reforms to its governance systems and processes (as a part of this process the Company introduced Independent Directors in 2010, introduced the dual executive roles of CEO and COO in 2012, and between 2013 and 2014 established Nominating, Compensation, Governance and Compliance committees as advisory committees to the board, established the global executive management committee “Global Executive Committee” in 2014 and adopted the Company with Nominating Committee, etc. Model of corporate governance in 2016).
Building upon these enhancements the scope for the evaluation of Board effectiveness has been taken to include not only the Board and the committees required under the Company with Nominating Committee, etc. Model (Nominating, Auditing and Compensation Committees) but also the advisory committees (Governance and Compliance Committees). With the objective of strengthening corporate governance, the entire scope of board functions (the Board and all five committees – both legally required and advisory) is subject to annual evaluation in a process which involves a review of all board deliberations and their outcomes and self-evaluations of all directors. The following diagram illustrates the structure and scope of this evaluation process.

The Board evaluation process requires the Board and each Committee to complete a formal self-evaluation process the results of which are then submitted to the Board where the overall effectiveness of the Board’s operation and governance performance level is evaluated. The following diagram illustrates the overall schedule and procedure of this evaluation process.

As a result of this Board evaluation it has been determined that decision-making ensures transparency and that the oversight functions of the Board are being carried out through timely reports to the Board for deliberation, productive discussions among members of the Board, active deliberations at Board meetings taking the various perspectives of external independent directors into account and the ongoing efforts of the legally- required and advisory committees to create an organization of global awareness. Also, in February 2018 the Board revised its authority, and put even greater focus on deliberations concerning management strategy. From now on the Board, in efforts to improve the Company ever further, is addressing the enhancement of governance and continuous improvement of all the functions of the Board of Directors.

Internal Control Systems: Basic Approach and Implementation

With regard to Bridgestone’s internal controls system for ensuring that the company carries out its business appropriately, decisions on improvement strategy are made by the Board of Directors, and the Representative Executive Officer is then entrusted with the carrying out of these decisions; the Representative Executive Officer receives reports on the status of the improvements and related operations, and monitors implementation, to realize further improvement.

Report on the Corporate Governance Code

Bridgestone Corporation submitted the report on the “Corporate Governance Code” to the Tokyo Stock Exchange, with verification concerning the state of correspondence to all principals. The “Corporate Governance Code” was added to the listing rules of the Tokyo Stock Exchange in 2015 to contribute to the realization of effective “Corporate Governance” as the KEY principals. The Company publishes “Corporate Governance Code Report” and published them on its website.

Through the explanation of the Company’s idea of the “Corporate Governance” and introducing efforts towards it, Bridgestone Corporation is aiming to promote greater understanding of its “Corporate Governance”.