Corporate Governance

Basic Policy

ITOCHU commits itself to the global good. To realize this mission, ITOCHU strives to respect each individual and to make meaningful contribution towards creating a bright future for all human beings and the environment. In addition, “I am One with Infinite Missions” was adopted as a corporate message to express the ITOCHU Mission in plain terms. Underlying the message is the exceptional ability of each employee, the core strength of ITOCHU.

A strong leadership and a transparent decision-making system are pillars of good corporate governance. ITOCHU adopts an organizational structure with the presence of a Board of Corporate Auditors (kansayaku secchi kaisha). In recent years, ITOCHU has gradually shifted to a governance model where executive officers decide and carry out the day to day business under the direction and supervision of the Board of Directors, as itself monitored and audited by the Board of Corporate Auditors.

In order for the Board of Directors to further exercise effective control and management over the corporation, independent outside directors have already joined the Board and, as another measure to strengthen its corporate governance, ITOCHU has also established a Governance and Remuneration Committee and a Nomination Committee as advisory committees to the Board of Directors. Each committee is chaired by an independent outside director and is composed of half or more outside members. Furthermore, in order to separate execution by and monitoring over management, the number of outside directors has been increased to one-third or more from April 2017. In appointing outside directors and corporate auditors, ITOCHU places great importance on their independence, and in this connection, ITOCHU has adopted its own independence criteria, augmenting the independence criteria established by the Tokyo Stock Exchange.

This highly independent Board of Directors monitors execution by management as well as deliberates the execution of business that is of high quantitative or qualitative importance. The Company believes this arrangement facilitates not only appropriate monitoring over execution by management but also the consideration of important business execution from an external perspective.

It is also vital that ITOCHU timely and adequately discloses its financial and non-financial information to the stakeholders as part of good governance. In May 2015, in line with the ITOCHU Mission and the Corporate Governance Code of the Tokyo Stock Exchange, ITOCHU adopted a “Basic IR Policy” to further promote a multi-party stakeholder dialogue. Through the communication with its stakeholders, ITOCHU aims to enhance its corporate value on a long-term basis.

We believe that our current corporate governance structure accords with good and effective corporate governance called for by the Tokyo Stock Exchange, in its Corporate Governance Code. ITOCHU will continue to evaluate and improve its corporate governance structure so that it always best suits ITOCHU in any given moment and time in its corporate history.

Compliance with the Corporate Governance Code

ITOCHU complies with all principles set forth in the Corporate Governance Code with the exception of Supplementary Principle 4.11.3, Evaluation of the Board of Directors.
For details, please refer to Corporate Governance Report(342KB)[PDF]

  • The Company’s reasons for not implementing this supplemental principle are as follows.
  • The Company established the Nomination Committee and the Governance and Remuneration Committee as advisory committees to the Board of Directors.
    (Please refer to "Overview of ITOCHU's Corporate Governance and Internal Control System" below)
  • We have established the policy on holding listed shares for purposes other than pure investment and standards for the exercise of voting rights thereon. (Please refer to below)
  • In regard to judgements regarding the independence of outside directors and outside audit & supervisory board members, the Company has adopted its own independence criteria, in response to the Corporate Governance Code. (Please refer to below)
  • ITOCHU has formulated Basic IR Policy. (Please refer to Basic IR Policy)

Results of Board Evaluation

ITOCHU conducted an evaluation of the Board of Directors’ effectiveness, targeting directors and corporate auditors as of March 31, 2016. We reported an overview of these evaluation results in May 2016. Please refer to the following URL for an overview of the results.

Through this Board of Directors evaluation, the Board of Directors of ITOCHU confirmed that it needs to continue discussing whether the Board of Directors should shift to a governance model where it focuses more on “monitoring (supervision)” of business execution in the future.
Based on the abovementioned Board of Directors evaluation results, ITOCHU’s Governance and Remuneration Committee (chaired by Ichiro Fujisaki, outside director) discussed several times the Board of Directors structure from fiscal 2017. As a result of these discussion, a report was submitted to the Board of Directors suggesting increasing the ratio of outside directors to one-third or higher by substantially reducing the number of executive directors, thereby promoting the separation of execution by and monitoring over management, and also proposing measures to prevent the Board of Directors from losing the sense of business on the ground. Changes in members of the Board from fiscal 2017 were discussed by Nomination Committee and finally decided in line with this report.
We decided that no Board of Directors evaluation was conducted for directors and corporate auditors as of March 31 2017, given that we have just implemented the decision resulting from the abovementioned Board of Directors evaluation to substantially change the composition of the Board of Directors from fiscal 2017. The Company expects to conduct the next Board of Directors evaluation at an appropriate timing in fiscal 2017, based on the status of operations of the Board of Directors under the new structure.

Steps taken to strengthen Corporate Governance

1997

Introduced the Division Company System

To accelerate decision making, increase efficiency of business management, and clarify responsibilities

1999

Introduced Executive Officer System

To strengthen decision-making and supervisory functions of the Board of Directors

2007

Shortened the terms of office of directors and executive officers to one year

To clarify management responsibility during terms of office

2011

Introduced an Outside Directors System

To increase the effectiveness of the supervision of management and improve the transparency of decision making

2015

Responded to the TSE’s Corporate Governance Code

Established the Nomination Committee and the Governance and Remuneration Committee, etc.

Corporate Governance System (As of June 23, 2017)

Type of system

Company with the Board of Directors and audit & supervisory board members (the Board of Audit & Supervisory Board Members)

Number of directors (Of which, number of outside directors)

9 (4)

Number of audit & supervisory board members (Of which, number of outside audit & supervisory board members)

5 (3)

Term of office for directors

1 year (the same for outside directors)

Adoption of an Executive Officer System

Yes

Organization to support CEO decision-making

Headquarters Management Committee (HMC) deliberates on companywide management policy and important issues

Advisory committees to the Board of Directors

Governance and Remuneration Committee, Nomination Committee

Corporate Officer Compensation System
Details
  • (1) Monthly compensation
    Monthly compensation determined by the contribution to ITOCHU of each director according to a base amount set by position
  • (2) Performance-linked bonuses
  • (3) Performance-linked stock remuneration
    Total payment amount determined on the basis of consolidated net income attributable to ITOCHU
  • Outside directors paid monthly compensation only
Independent external auditor

Deloitte Touche Tohmatsu LLC

Overview of ITOCHU's Corporate Governance and Internal Control System(As of April 1, 2017)

[Fig.]

Advisory Committees to the Board of Directors

Name Function
Nomination Committee

Deliberates on proposed appointments of executive officers, directors, and audit & supervisory board members

Governance and Remuneration Committee

Deliberates on proposals related to the compensation system for executive officers and directors and to other governance-related matters

Principal Internal Committees

Name Objectives
Internal Control Committee

Deliberates on issues related to the development of internal control systems

Disclosure Committee

Deliberates on issues related to business activity disclosure and on issues related to the development and operation of internal control systems in the area of financial reporting

ALM Committee

Deliberates on issues related to risk management systems and balance sheet management

Compliance Committee

Deliberates on issues related to compliance

Sustainability Committee

Deliberates on issues related to corporate social responsibility, environmental problems, and social contribution initiatives

Investment Consultative Committee

Deliberates on issues related to investment and financing

Composition of the Nomination Committee and the Governance and Remuneration Committee (As of June 23, 2017)

Name Title Nomination Committee Governance and Remuneration Committee
Masahiro Okafuji

President & Chief Executive Officer

Hitoshi Okamoto

Director

 

Fumihiko Kobayashi

Director

 
Ichiro Fujisaki

Outside Director

 

◎(Chair)

Chikara Kawakita

Outside Director

◎(Chair)

 
Atsuko Muraki

Outside Director

 

Harufumi Mochizuki

Outside Director

 
Yoshio Akamatsu

Audit & Supervisory Board Member

 
Kiyoshi Yamaguchi

Audit & Supervisory Board Member

 

Shingo Majima

Outside Audit & Supervisory Board Member

 

Kentaro Uryu

Outside Audit & Supervisory Board Member

 
Kotaro Ohno

Outside Audit & Supervisory Board Member

 

 

(6members)

(7members)

Policies on Holding Listed Shares for Purposes Other than Pure Investment and Standards for the Exercise of Voting Rights

ITOCHU classifies investments other than for pure investment purposes and to consolidated companies as “Investments to Non-Affiliated Companies,” and the “Cross-Shareholdings” as set forth in Corporate Governance Code is included in this classification. ITOCHU engages in investments to non-affiliated companies in order to create business relationships. In principle, it is the Company’s policy to limit investments to non-affiliated companies to those that have a high likelihood of generating investment returns or those with a high strategic significance including affiliation in future. This policy remains the same, regardless of whether investments are in or outside Japan, or listed or unlisted. When making new investments, we employ investment criteria that consider the cost of shareholders’ capital.
Based on our internal rule, through annual review of all investments to non-affiliated companies, we examine economic (quantitative) rationale based on returns on our investment, and review strategic objectives to hold such investments taking into consideration the likelihood that our investment purpose is realized in the future. Investments that do not generate economic added value over a specified period of time or investments that lack strategic objective based on such annual review will be, in principle, sold in accordance with our internal criteria. Results of such annual review with respect to main listed stocks are subject to further scrutiny at our Board of Directors from the perspective of economic rationale.
ITOCHU places great importance on communication with each investee of our non-affiliated investments with the view to building, strengthening and maintaining business relationship as well as to improving corporate value of both ITOCHU and each investee. In May, 2015, ITOCHU adopted the following internal voting guideline with respect to our non-affiliated investments to listed entities in Japan to ensure that ITOCHU’s voting rights on all of such investments are exercised in a timely and adequate manner.

[Voting Guideline]

  1. In principle, not to abstain from voting or to grant full authority to exercise voting rights on our behalf.
  2. To decide for or against a proposal taking into consideration our investment purpose and holding policy.

ITOCHU’s final position on voting is determined through internal decision making process based on an initial plan prepared by a department in question through which an investment is made.

Independence Criteria for Outside Directors and Outside Audit & Supervisory Board Members

ITOCHU has adopted its own independence criteria (augmenting the independence criterial established by the Tokyo Stock Exchange).

Reason for Appointment as Outside Directors

Name Reason for appointment
Ichiro Fujisaki
appointed in
June 2013

Mr. Fujisaki is appointed as an outside director in the anticipation that he will use his high level of insight and knowledge on the international situation, economy and cultures, and other matters, nurtured through his many years of experience as a diplomat and also monitor and supervise the corporate management of ITOCHU from an independent perspective. According to the criteria for the independence of directors/auditors prescribed by the Tokyo Stock Exchange, as well as our own independence criteria, Mr. Fujisaki qualifies as an independent director. Accordingly, ITOCHU believes that he is unlikely to have conflicts of interest with general investors, and he has been designated as an independent director.

Chikara Kawakita
appointed in
June 2013

Mr. Kawakita is appointed as an outside director in the anticipation that he will use his high level of insight and knowledge on public finance, financial transaction and tax affairs, and other matters, nurtured through his many years of experience at the Ministry of Finance and National Tax Agency and also monitor and supervise the corporate management of ITOCHU from an independent perspective. According to the criteria for the independence of directors/auditors prescribed by the Tokyo Stock Exchange, as well as our own independence criteria, Mr. Kawakita qualifies as an independent director. Accordingly, ITOCHU believes that he is unlikely to have conflicts of interest with general investors, and he has been designated as an independent director.

Atsuko Muraki
appointed in
June 2016

Ms. Muraki is appointed as an outside director in the anticipation that she will use her high level of insight into such matters as improving working environments, developing human resource, and social security and more, cultivated through many years of experience at the Ministry of Health, Labour and Welfare (and the former Ministry of Labour) and also monitor and supervise the corporate management of ITOCHU from an independent perspective. According to the criteria for the independence of directors/auditors prescribed by the Tokyo Stock Exchange, as well as our own independence criteria, Ms. Muraki qualifies as an independent director. Accordingly, ITOCHU believes that she is unlikely to have conflicts of interest with general investors, and she has been designated as an independent director.

Harufumi Mochizuki
appointed in
June 2017

Mr. Mochizuki is appointed as an outside director in the anticipation that, based on a wealth of experience and high-level knowledge he accumulated as a government official at the Ministry of Economy, Trade and Industry (and the former Ministry of International Trade and Industry), his experience as a corporate auditor of ITOCHU Corporation as well as a corporate executive at other entities where he concurrently serves, he will monitor and supervise the corporate management of ITOCHU from an independent perspective. According to the criteria for the independence of directors/auditors prescribed by the Tokyo Stock Exchange, as well as our own independence criteria, Mr. Mochizuki qualifies as an independent director. Accordingly, ITOCHU believes that he is unlikely to have conflicts of interest with general investors, and he has been designated as an independent director.

Reason for Appointment as Outside Audit & Supervisory Board Members

Name Reason for appointment
Shingo Majima
appointed in
June 2013

Mr. Majima is appointed as an outside corporate auditor in the anticipation that he will monitor management and provide auditing from an independent perspective by utilizing his wealth of experience and expertise on finance and accounting as a certified public accountant. According to the criteria for the independence of directors/auditors prescribed by the Tokyo Stock Exchange, as well as our own independence criteria, Mr. Majima qualifies as an independent corporate auditor. Accordingly, ITOCHU believes that he is unlikely to have conflicts of interest with general investors, and he has been designated as an independent auditor.

Kentaro Uryu
appointed in
June 2015

Mr. Uryu is appointed as an outside corporate auditor in the anticipation that he will monitor management and provide auditing from an independent perspective by utilizing his wealth of experience and expertise as a lawyer in the field of corporate legal practice and international business law. According to the criteria for the independence of directors/ auditors prescribed by the Tokyo Stock Exchange, as well as our own independence criteria, Mr. Uryu qualifies as an independent corporate auditor. Accordingly, ITOCHU believes that he is unlikely to have conflicts of interest with general investors, and he has been designated as an independent auditor.

Kotaro Ohno
appointed in
June 2017

Mr. Ohno is appointed as an outside corporate auditor in the anticipation that he will monitor management and provide auditing from an independent perspective by utilizing his advanced specialized knowledge in law and the extensive experience he accumulated while serving in important positions at the Ministry of Justice, including Vice-Minister of Justice, Superintending Prosecutor of Tokyo High Public Prosecutors Office and Prosecutor-General. According to the criteria for the independence of directors/ auditors prescribed by the Tokyo Stock Exchange, as well as our own independence criteria, Mr. Ohno qualifies as an independent corporate auditor. Accordingly, ITOCHU believes that he is unlikely to have conflicts of interest with general investors, and he has been designated as an independent auditor.