Status of Corporate Governance, Etc.
Overview of Corporate Governance, Etc.
(I) Basic Views
Fully embracing its responsibility to contribute to society as an exemplar corporate citizen, the Company established the Corporate Principles. The Company recognizes that, in working on achieving growth and enhancing corporate value over the medium to long term in a constantly changing business environment, its important managemental task will be to create a fully autonomous and highly ethical corporate governance system that is closely monitored and routinely reviewed. Such a system shall prove invaluable in the ongoing building of trust and confidence with all its stakeholders, including shareholders, clients and suppliers, local communities and employees.
Towards this end, the Company has disclosed the framework of its corporate governance system in its Corporate Governance Guidelines and will continue to enhance and fortify this system through various initiatives.
In order to further strengthen the Company’s corporate governance, having been granted approval at the ordinary general meeting of shareholders held on March 28, 2023, the Company has transitioned from a company with an Audit and Supervisory Committee to a company with a Nominating Committee, etc., which has three committees (Nominating, Compensation and Audit), each composed of a majority of external directors, creating a system which enables significant delegation of authority from the Board of Directors to executive officers, in order to further clarify the separation of management supervisory and execution functions and to ensure prompt and decisive decision making while strengthening management supervisory functions.
With the transition to a company with a Nominating Committee, etc., the Company aims to further strengthen the supervisory function of the Board of Directors, secure impartiality, and transparency of management, and raise overall efficiency.
As of March 29, 2024, the Company’s Board of Directors consists of 11 directors, including ten external directors, who convene once a month to examine, evaluate and decide on matters stipulated under the laws and regulations of Japan, as well as important management issues. Board directors are also responsible for examining the policies and plans, as well as the status of the policies and plans being executed, with regards to management and corporate operations. The Board may also meet at any time it deems necessary.
Out of external directors who carry out objective and neutral oversight functions from an independent perspective, all ten external directors who meet the requirements for independent director as defined by the Tokyo Stock Exchange are registered as independent external directors.
Board of Directors composition and skills matrix
| Position | Name | Independence | Gender (female: YES) |
International experience | Corporate management | Staffing industry | Sales and marketing | Finance and accounting | Corporate governance / Legal / Risk management |
| Director | Anne Heraty |
YES | YES | YES | YES | YES | |||
|
Director |
Hideo Shiwa |
YES | YES | YES | YES | ||||
|
Director |
Masaru Namatame | YES | YES | YES | YES | ||||
|
Director |
Atsuko Sakiyama | YES | YES | YES | YES | YES | |||
|
Director |
Hirotomo |
YES | YES | YES | |||||
|
Director |
Makiko Ujiie |
YES | YES | YES | |||||
|
Director |
Toshio Mukai |
YES | YES | YES | YES | ||||
|
Director |
Azuma Inoue |
YES | YES | YES | |||||
|
Director |
Hiroshi Kizaki |
YES | YES | YES | YES | ||||
|
Director |
Kenichi Fujita |
YES | YES | YES |
YES |
||||
|
Director |
Hiroko Ozawa | YES | YES |
YES | YES |
The Committee consists of five directors (of which five are external directors) as of March 29, 2024, including full-time Audit Committee members. In accordance with the laws and regulations, the Articles of Incorporation and the Audit Committee Rules, the Committee oversees and prepares reports for the execution of duties by the directors and executive officers and determines agendas regarding elections, dismissals and refusals of reappointment of the accounting auditor that will be proposed to the General Meeting of Shareholders. It also determines the Committee’s audit policies, annual audit schedule and other related matters. By convening Audit Committee Meetings both routinely and as necessary, the Committee shares information among its members and confirms the progress of its audit plan by examining the important issues which have been submitted for discussion, reporting on audit contents, exchanging opinions and so forth. To enhance overall coordination, the Audit Committee exchanges information in a timely manner with the Internal Audit Office as well as the accounting auditor. The Committee works closely with the Corporate Management Division, which is also the internal control division, as well as with the General Affairs, Legal and Accounting Departments, to improve the efficacy of the auditing process.
(Nominating Committee)
As of March 29, 2024, the Committee consists of five directors, of which three including the chairperson are external directors. The Committee makes decisions on proposals for the election and dismissal of directors to be made at the General Meeting of Shareholders and decisions on matters related to the standards and processes of director appointment and dismissal. It also deliberates on the appointment and dismissal of executive officers and operating officers and on the development of candidates for the next Chief Executive Officer and other positions as part of the successor planning.
(Compensation Committee)
As of March 29, 2024, the Committee consists of five directors, of which four including the chairperson are external directors. The Committee makes decisions on the policy and content of the compensation for individual directors and executive officers.
For the composition of the Audit Committee, the Nominating Committee and the Compensation Committee, please see to the reference materials.
(Executive Committee Meeting)
The Executive Committee Meeting is a discretionary body, consisting of six executive officers as of March 29, 2024. The Meeting is held once a month and the Extraordinary Executive Committee Meeting is also held when necessary. In accordance with the directions and basic policies set by the Board of Directors, it makes decisions on the management of the Company or the Company’s group based on matters delegated by the Board of Directors. It also deliberates on matters including measures to respond to changes in the business environment, matters on approval and reporting stipulated in the Authority Rules, matters on approval and reporting as stipulated in the Management Rules for Group Companies and Affiliates, agenda items to be discussed at the Board of Directors Meeting and matters that require the CEO’s approval and must be deliberated beforehand.
(Sustainability Committee)
The Sustainability Committee is a voluntary body which was established on March 25, 2021. As of March 29, 2024, the Committee consists of eight members and its chairperson is the Executive Officer and Head of the Corporate Management Division. The purpose of the Sustainability Committee is to promote management with an awareness of sustainability across all companies of the Group, including initiatives to achieve the SDGs and establishing a more sophisticated ESG approach in management. The Committee’s duties include the deliberation of the Group’s sustainability policies/strategies as well as medium/long-term themes and directions including the priority issues. It also monitors the progress of the KPIs and submits the relevant matters to the Board of Directors Meetings.
(Compliance Committee)
The Compliance Committee is a voluntary body consisting of 11 members as of March 29, 2024. The Representative Executive Officer and President is the Chief Compliance Officer (CCO) having the highest authority in the Company’s compliance activities. The Committee is chaired by the Executive Officer and Head of the Corporate Management Division, who is responsible for overseeing the actual operations in conducting specific compliance activities. The Compliance Committee is a company-wide meeting body for compliance activities. Its purpose is to ensure that the Company is deeply aware of its social responsibilities as a company, complies with relevant laws and regulations in the daily execution of businesses and conducts activities in accordance with the social ethics. The Committee defines the matters that are relevant to company-wide compliance, informs each group company on compliance matters, examines the necessary matters and submits agenda items to the Board of Directors.
(OS Group Governance Committee)
The OS Group Governance Committee is a voluntary body consisting of six members as of March 29, 2024, and is chaired by an external director appointed by the Board of Directors. The OS Group Governance Committee is a company-wide meeting body for the Group’s corporate governance activities. Its purpose is for the Company and the Group to strengthen corporate governance, achieve sustainable growth as a company and increase corporate value. The Committee determines important issues, medium- and long-term themes and directions concerning group-wide corporate governance, as well as monitoring their progress and informing and educating each group company on corporate governance. It also examines the necessary matters, based on which it will submit agenda items and reports to the Board of Directors.
| Nominating Committee | Compensation Committee |
Audit Committee | |
|
Chairperson |
Hirotomo Abe | Atsuko Sakiyama |
Masaru Namatame |
|
Member |
Atsuko Sakiyama | Hirotomo Abe | Hideo Shiwa |
|
Member |
Hideo Shiwa | Masaru Namatame |
Azuma Inoue |
|
Member |
Anne Heraty | Makiko Ujiie |
Hiroshi Kizaki |
|
Member |
Kenichi Fujita | Hiroko Ozawa |
Toshio Mukai |
External directors are underlined.
* Masaru Namatame, chairperson of the Audit Committee, is a full-time committee member
The chart below visualizes the above-mentioned system:
A. Status of Internal Control System
During the Board of Directors meetings, the Company resolves and enforces its “Basic Policy on Establishment of Internal Control Systems,” which is based on the laws and regulations. Based on this basic policy, executive officers are responsible for the overall management of internal control, and the various department heads are tasked with the management and promotion of internal control in their respective departments on an operational level. Internal control is reinforced on a Group-wide basis through the routinely held Management Meeting, which executive officers attend whenever a Group issue concerning management is placed on the meeting agenda. In addition, at the meeting, the Group’s management policies are communicated, progress reports on business activities are given, and important matters pertaining to corporate operations and issues requiring discussion are reported.
The Company also established the Internal Audit Office, which is independent of the Group’s business units and reports directly to the CEO. Based on the Company’s internal audit program, the Internal Audit Office not only audits the operations of each department and subsidiary, but also monitors the internal administrative system. Furthermore, the Office conducts inspections to ensure that the Group remains in compliance with the various laws and internal regulations, as well as examining the status of the Group’s risk management program. Findings from the audited departments are reported to the CEO, and the directors. Such findings form the basis of a written recommendation that features specific solutions for the audited department, thus delivering a more efficient and effective means for business operations improvements.
Also, the Group takes the material misstatement due to inappropriate accounting or error that was carried out at the Group in prior years with utmost seriousness, and will pursue the strengthening of the corporate governance system.
B. Status of Risk Management Program
The Corporate Management Division is tasked with the overall authority over the risk management of the Company and Group companies and takes on the direct administration, operations, while the General Affairs Department handles regulations relevant to the program and advances effective management. Meanwhile, the Legal Department oversees the legal dimensions, not only developing legal responses but also communicating the latest government regulations to the entire Group, coordinating risk management with internal control.
C. Status of Institutional Enhancement to Secure Proper Operations at Subsidiaries
The Company oversees and monitors the status of director and employee work execution at its Group companies in order to ensure that subsidiaries and affiliates are operating properly. It defines the “OUTSOURCING Group Code of Corporate Ethics and Conduct” as the guideline and action plan to govern all Group companies and requires directors, auditors, and employees at the said companies to strictly adhere to the guideline. In compliance with the “Management Rules for Subsidiaries and Affiliates,” which define the requirements relevant to and inclusive of chain of command, authorities, decision-making, and other organization-related matters, the Group also requires the entirety of a stipulated item that affects management to be subject to approval by the Boards of Directors, Management Meeting or the officers in charge, as appropriate.
Furthermore, by receiving business status reports from every Group company at least once a month, such as from the officers in charge upon their attending the board of directors meetings of each subsidiary, the Company’s Board of Directors can examine and review the status and details of the collected information. At the Management Meeting, issues defined by the “Management Rules for Subsidiaries and Affiliates” are discussed, and the Group Management Meeting consisting of executive officers and each Group company’s representative director is convened as necessary in cases in which further details on business conditions need to be examined. As such, the Group engages in intra-Group information sharing and communication facilitation as well as standardization of management policies.
D. Summary of Agreements Exempting or Limiting Liability of Directors and Executive Officers
The Company’s Articles of Incorporation stipulate that directors and executive officers (including former directors and executive officers) can be exempted from liability related to actions stipulated in Article 423 of the Companies Act to the extent stipulated in Article 425 and Article 426 of the same act by Board of Directors’ resolution in accordance with Article 426 of the same act so that directors can fully execute their expected duties.
Furthermore, the Company and its directors (excluding directors responsible for executing operations) have concluded agreements that limit compensation for damages stipulated in Article 423, Paragraph 1, of the Companies Act in line with the provisions of the Article 427, Paragraph 1, of the same act. The amount of compensation for damages based on this agreement is limited to the minimum amount stipulated in Article 425, Paragraph 1, of the same act. The limited liability is only in situations when the director’s execution of his/her duties that resulted in liability was done in good faith and without negligence.
E. Summary of Liability Insurance Policy for Directors and Officers
The Company has entered into a directors and officers liability insurance policy with an insurance company, as stipulated in Article 430-3, Paragraph 1 of the Companies Act with directors and executive officers (including officers of some domestic consolidated subsidiaries) as the insured.
a. Summary of insurance accidents to be covered
The policy covers damages and legal expenses incurred by the insured due to claims for damages made against the insured during the insurance period as a result of acts (including omissions) committed by the insured in relation to his/her duties as an officer of the Company. However, there is an exclusion of liability for claims for damages arising from certain acts, such as acts committed by the insured while in full knowledge that they violate laws and regulations.
b. Insurance premiums
Insurance premiums, including for the special contract portion, are fully paid by the Company.
F. Requirements of Resolutions for Number of Directors and Elections
a. The Articles of Incorporation stipulate that the Company shall have not more than 15 directors.
b. The Articles of Incorporation stipulate that a resolution for the election of directors requires the presence of shareholders holding one-third or more of the voting rights of shareholders who can exercise voting rights, the resolution passes with a majority of votes, and cumulative voting is prohibited.
G. Items to be Resolved at the General Meeting of Shareholders That Can Be Resolved at the Board of Directors
a. Interim dividend
In order to enable flexible return of profits to shareholders, pursuant to the provisions of Article 454, Paragraph 5, of the Companies Act, the Articles of Incorporation stipulate that the Company may pay an interim dividend with a reference of June 30 of each year by a resolution of Board of Directors.
b. Treasury shares
The Articles of Incorporation stipulate that the Company can purchase its own shares through market transactions, etc., based on a resolution of the Board of Directors and in accordance with Article 165, Paragraph 2, of the Companies Act, in order to flexibly execute the capital policy to meet changes in the business environment.
c. Accounting auditors can be exempt from liability by Board of Directors’ resolution
The Articles of Incorporation stipulate that accounting auditors can be exempted from the liability of accounting auditors (including former accounting auditors) stipulated in Article 423, Paragraph 1, of the Companies Act by Board of Directors’ resolution to the extent permitted by laws, ordinances, etc., so that accounting auditors can sufficiently fulfill their expected role.
H. Conditions on Special Resolutions at General Meeting of Shareholders
The Articles of Incorporation stipulated that special resolution of shareholders’ general meeting resolutions prescribed in Article 309, Paragraph 2, of the Companies Act require the presence of shareholders holding one-third or more of the voting rights of shareholders who can exercise voting rights, and the resolution passes with a two-thirds majority of votes. This was done to facilitate general meeting of shareholders by loosening the quorum requirements for special resolutions to that legally permitted.
A.The status of activities of each organization prior to transitioning to a company with a Nominating Committee, etc. in fiscal 2023 was as follows.
a.The Board of Directors met a total of six times, at least once a month and when necessary, monitored business decision making and the execution of operations, and handled important matters and other issues in line with the Companies Act.
b.The Audit and Supervisory Committee met a total of four times for regular and irregular meetings, decided on the audit policy and division of duties through deliberations, and conducted audits.
c.The Nomination and Compensation Advisory Committee met one time and deliberated on matters including compensation for Directors (excluding Directors who are Audit and Supervisory Committee Members). These matters were then reported to the Board of Directors.
d.The Internal Audit Office conducted internal audits of the headquarters, offices, and group companies as stipulated in the internal audit plan and made reports to the President, Board of Directors, and Audit and Supervisory Committee.
a.The Board of Directors met a total of 19 times, at least once a month and when necessary, monitored business decision making and the execution of operations, and handled important matters and other issues in line with the Companies Act.
bThe Audit Committee met a total of 16 times for regular and irregular meetings, decided on the audit policy and division of duties through deliberations, and conducted audits.
c.The Internal Audit Office conducted internal audits of the headquarters, offices, and group companies as stipulated in the internal audit plan and made reports to the President, Board of Directors, and Audit Committee.
Directors’ Compensation, Etc.
(I) Matters Concerning the Policy for Determination of Amounts or Methods of Calculation of Compensation, Etc. to Directors
Compensation for directors and executive officers of the Company (Article 361, Paragraph 1, of the Companies Act, “Compensation, etc.”) is decided by the Compensation Committee based on the below policies decided by the committee.
A. Policy Regarding Compensation for Directors and Executive Officers
Compensation for directors of the Company is aimed at ensuring that the Board of Directors sufficiently exercises its management supervisory function to realize the corporate principles, the medium-term management plan and other management strategies, and compensation is paid based on the roles and responsibilities required of each director.
Furthermore, because executive officers are responsible for realizing the management strategy through business execution, so that compensation functions as a sound incentive for the sustainable growth of the Group, while maintaining compensation levels that are appropriate based on job responsibilities, we also reflect corporate results and appropriately include stock compensation.
Specifically, so that directors sufficiently exercise their management supervisory function, director compensation is composed of basic compensation as fixed compensation and stock compensation to encourage enhancing corporate value by sharing value with shareholders and investors and maintaining and enhancing the oversight system. However, directors who concurrently service as executive officers are not paid compensation as directors.
Compensation for executive officers is composed of basic compensation as fixed compensation and stock compensation as an incentive to enhance corporate value over the medium and long term. The Company’s corporate results are considered in deciding the amount of basic compensation.
In terms of stock compensation, in principle restricted share-based compensation is used, and as it is difficult for the Company to grant restricted shares to those who do not live in Japan, the Company grants monetary compensation linked to the Company’s share price (phantom stock) to those individuals as a substitute for the restricted shares.
However, in regard to compensation for directors and executive officers in the 28th fiscal year, in consideration of the tender offer for the Company’s ordinary shares offered as part of the management buyout (MBO), compensation shall comprise basic compensation in cash only and no restricted share-based compensation or monetary compensation linked to the Company’s share price (phantom stock) shall be granted.
B. Policy to Decide the Amount of Individual Basic Compensation (Including Policy to Decide the Timing and Conditions to Distribute Compensation)
Basic compensation for directors is paid in a set amount monthly as monthly fixed compensation based on the roles and responsibilities of the director’s position. Furthermore, so that the management supervisory functions required of the Board of Directors is sufficiently exercised, corporate results, etc. are not considered in basic compensation for directors.
The total amount of basic compensation for executive officers is decided in line with performance based on corporate results and the economic added value produced from business activities established in the corporate governance guidelines. Basic compensation is paid to executive officers in a set amount monthly amount decided for each executive officer based on their position, job duties, and the results of individual interviews.
C. Policy to Decide the Details, Amounts, and Calculation Methods for Performance-linked Compensation and Non-monetary Compensation (Including Policy to Decide the Timing and Conditions to Distribute Compensation)
Although the Company does not adopt performance-linked Compensation, non-monetary Compensation (“Non-monetary Compensation, etc.” set forth in Article 98-5, Item 3 of the Regulations for Enforcement of the Companies Act. Same hereinafter.) is provided as an incentive to enhance medium- to long-term corporate value and to share value with shareholders. In principle, restricted share-based compensation is granted, and restrictions are lifted when the director or executive officer retires on the condition that they remained in their position until the period to which the grant date belongs has been completed.
Identical to basic compensation, restricted shares are granted during a set period annually in a number corresponding to a monetary amount set according to the position and job duties of the director or executive officer based on corporate results and the economic added value produced from business activities established in the corporate governance guidelines.
For directors and executive officers who do not live in Japan and to whom it is difficult for the Company to grant restricted shares, phantom stock is granted. The date of right allotment and other conditions are established according to the details of the restricted shares granted to other directors and executive officers, and phantom stock is granted during a set period annually in a unit number corresponding to a monetary amount set according to the position and job duties of the eligible director or executive officer.
D. Policy to Decide the Ratio of the Amounts of Basic Compensation, Performance-linked Compensation, and Non-monetary Compensation in the Amount of Individual Compensation for Each Director and Executive Officer
The ratio of basic compensation to restricted shares or phantom stock will be generally determined within 9:1 to 7:3, after taking into consideration the director’s position and the details of duties.
E. Items Related to Deciding the Details of Individual Compensation for Each Director and Executive Officer
Individual compensation for each director and executive officer, including the details of the policy, is decided by a resolution at the Compensation Committee, chaired by an independent external director.
F. Activities of the Compensation Committee During the Fiscal Year Ended December 31, 2023
Details regarding the activities of the Compensation Committee in fiscal 2023 are as follows.
During the fiscal year ended December 31, 2023, the Compensation Committee met four times for deliberation on compensation. The meetings mainly involved setting goals for directors and checking their progress with regards to their goals, reviewing the compensation structure, reviewing and deliberating on compensation for individual directors, reviewing and deliberating on phantom stock as a substitute for restricted shares, and reviewing and deliberating on the total amount of compensation.
A.Prior to transitioning to a company with a Nominating Committee, etc. (January 2023 to March 2023)
|
Category of officers |
Total amount of Compensation, etc.
|
Total amount of compensation, etc. by type |
Number of officers to be paid |
|
|
Basic compensation |
Restricted share-based compensation |
|||
|
Directors (excluding Audit and Supervisory Committee Members) |
125 |
116 |
9 |
11 |
|
[of which external directors] |
[12] |
[12] |
[–] |
[5] |
|
Directors (Audit and Supervisory Committee Members) |
22 |
22 |
– |
4 |
|
[of which external directors] |
[22] |
[22] |
[–] |
[4] |
|
Total |
148 |
138 |
9 |
15 |
|
[of which external directors] |
[34] |
[34] |
[–] |
[9] |
(Note 1)Following approval at the 26th Ordinary General Meeting of Shareholders held on March 28, 2023, the Company transitioned from a company with an Audit and Supervisory Committee to a company with a Nominating Committee, etc. However, the above figures for the total amount of compensation, etc. and the number of officers are the figures for the Company’s directors (excluding Audit and Supervisory Committee Members) and directors (Audit and Supervisory Committee Members) in the period prior to transitioning to a company with a Nominating Committee, etc.
(Note 2) Material notes on employee salaries for officers who also serve as employees
Not applicable.
(Note 3)For restricted share-based compensation, the amount of restricted share-based compensation (including phantom stocks that were granted to directors who are non–residents of Japan) to be recorded as expenses for the fiscal year ended December 31, 2023 is shown.
(Note 4)Restricted share-based compensation falls under the category of “non-monetary compensation, etc.” set forth in Article 98-5, Item 3 of the Regulations for Enforcement of the Companies Act.
B.After transitioning to a company with a Nominating Committee, etc. (April 2023 to December 2023)
|
Category of officers |
Total amount of Compensation, etc.
|
Total amount of compensation, etc. by type |
Number of officers to be paid |
|
|
Basic compensation |
Restricted share-based compensation |
|||
|
Directors |
156 |
141 |
15 |
11 |
|
[of which external directors] |
[111] |
[101] |
[10] |
[10] |
|
Executive officers |
348 |
277 |
71 |
6 |
|
Total |
505 |
418 |
86 |
17 |
|
[of which external directors] |
[111] |
[101] |
[10] |
[10] |
(Note 1) Material notes on employee salaries for officers who also serve as employees
Not applicable.
(Note 2) For restricted share-based compensation, the amount of restricted share-based compensation (including phantom stocks that were granted to directors who are non-residents of Japan) to be recorded as expenses for the fiscal year ended December 31, 2023 is shown.
(Note 3)Restricted share-based compensation falls under the category of “non-monetary compensation, etc.” set forth in Article 98-5, Item 3 of the Regulations for Enforcement of the Companies Act.
(Note 4)Directors as mentioned above does not include one director who concurrently serves as an executive officer. Directors who concurrently serve as executive officers are not paid compensation as directors.
(IV) Total Amount of Compensation, Etc. of Persons Whose Total Compensation, Etc. Is ¥100 Million or More
|
Name |
Total amount of Compensation, etc. |
Category of officers |
Category of company |
Amount of compensation, etc. by type |
|
|
Basic compensation |
Restricted share-based compensation |
||||
| Haruhiko Doi |
141 |
Representative Executive Officer,Chairman and CEO |
Reporting company |
112 | 29 |
|
Kazuhiko Suzuki |
113 |
Senior Executive Director |
Reporting company |
92 |
21 |
(Note 1) For restricted share-based compensation, the amount of restricted share-based compensation to be recorded as expenses for the fiscal year ended December 31, 2023 is shown.
(Note 2) Restricted share-based compensation falls under the category of “non-monetary compensation, etc.” set forth in Article 98-5, Item 3 of the Regulations for Enforcement of the Companies Act.