Corporate Governance

Corporate Governance System

The Mitsui Fudosan Group aims to create and maintain optimal corporate governance from the standpoint of improving the soundness, transparency and efficiency of management in order to gain the trust of its stakeholders.

Mitsui Fudosan has both a Board of Directors and a Board of Corporate Auditors. To ensure transparency with respect to director compensation and appointments of directors and auditors, we maintain a Compensation Advisory Committee and a Nomination Advisory Committee. In addition, we have adopted a corporate officer system to enhance the soundness and efficiency of management by separating and strengthening management and executive functions. Mitsui Fudosan also invites and appoints outside directors in order to strengthen the oversight functions of the directors and enhance management transparency.

In addition, auditors conduct audits in a bid to evaluate the status of business execution by directors while coordinating with the Corporate Auditor’s Department, which serves as the internal audit department of the Company, as well as certified public accountants. Moreover, steps have been taken to put in place the Mitsui Fudosan Group Compliance Policy as well as a structure that will ensure that Group directors and employees engage in business activities in an appropriate manner.

Corporate Governance Structure

Corporate Governance Structure

(1) Board of Directors

The Board of Directors is headed by Chairman of the Board and Chief Executive Officer (Representative) Hiromichi Iwasa, and consists of eight internal directors (Hiromichi Iwasa, Masanobu Komoda, Yoshikazu Kitahara, Kiyotaka Fujibayashi, Yasuo Onozawa, Hiroyuki Ishigami, Takashi Yamamoto, and Wataru Hamamoto) and four outside directors (Masako Egawa, Masafumi Nogimori, Tsunehiro Nakayama, and Shinichiro Ito) and makes decisions on material issues of Mitsui Fudosan and monitors the business execution status of directors. In addition,under Article 373 (1) of the Companies Act, Mitsui Fudosan has designated a special managing director who may pass judgment on the urgent acquisition of assets via bidding, etc., when so empowered by the Board of Directors under Article 362 (4) of the Companies Act. The corporate auditors also attend meetings of the Board of Directors and provide opinions as necessary.

Eleven Board of Directors meetings were held between June 28, 2018, and May 10, 2019, and each director achieved an attendance rate of over 90%.

Number of Directors and Auditors (as of June 30, 2019)
Directors
Independent outside directors
Female directors
12
4
1
Auditors
Independent outside auditors
5
3

(2) Compensation Advisory Committee

The Compensation Advisory Committee, headed by President and Chief Executive Officer Masanobu Komoda, comprises one internal director (Yasuo Onozawa) and four outside directors (Masako Egawa, Masafumi Nogimori, Tsunehiro Nakayama, and Shinichiro Ito), for a total of six directors, and meets on matters pertaining to the compensation of managing directors.

(3) Nomination Advisory Committee

The Nomination Advisory Committee, headed by President and Chief Executive Officer Masanobu Komoda, comprises one internal director (Yasuo Onozawa) and four outside directors (Masako Egawa, Masafumi Nogimori, Tsunehiro Nakayama, and Shinichiro Ito), for a total of six directors, and meets on matters pertaining to the nomination of managing directors and corporate auditors.

(4) Board of Corporate Auditors/Corporate Auditor's Department

The Board of Corporate Auditors, headed by full-time auditor Kenji Iino, comprises two internal auditors (Kenji Iino and Masatoshi Sato) and three outside auditors (Yoshitaka Kato, Yasushi Manago, and Yukimi Ozeki), for a total of five auditors, and formulates auditing policies and determines assignments. It also receives reports and discusses material items on audits conducted according to these policies and assignments. Note that the Corporate Auditor’s Department has been established specifically to assist the corporate auditors with their work, and each corporate auditor has been assigned two dedicated employees.

(5) Corporate Officer System

Mitsui Fudosan has introduced a corporate officer system with the aim of creating a business execution framework that best suits its operating environment and activities. By promoting the separation and reinforcement of the management and executive functions, a role that was previously undertaken by company directors, the system enhances management soundness and efficiency. In addition, seeking to further reinforce the management of the Mitsui Fudosan Group, we have expanded the range of managers across the Group and introduced a Group corporate officer system, under which executives at Group companies have been given a status and mission similar to those of the corporate officers.

(6) Executive Management Committee

The Executive Management Committee, consisting of executive corporate officers, has been formed to deliberate and report on important matters related to business execution and supervises internal control and risk management. Full-time corporate auditors also attend meetings to stay informed of important decision-making processes and the status of business execution, and provide opinions as necessary.

(7) Financial Auditing

Mitsui Fudosan has concluded an auditing contract with KPMG AZSA LLC as its certified public accountant, which conducts audits. There is no shared interest between the auditor and the Company, nor between employees conducting operations for the auditor and the Company.

Strategy Planning Special Committee

Formulates and deliberates Group strategy and management plans and supervises risk management, with the goal of discussing and managing the execution of those plans and other specific management issues.

Risk Management Special Committee

Manages business risk by formulating risk management policies and plans; tracking, evaluating and formulating responses to risk issues; issuing instructions, etc.

ESG Promotion Committee

Formulates ideas and policies, sets goals, creates activity plans, manages progress and evaluates results in order to promote action that contributes to ESG activities and the achievement of the SDGs.

Board of Director Decisions and Reports

The following matters shall be resolved by or reported to the Mitsui Fudosan Board of Directors as stipulated by laws and regulations, the Company’s Articles of Incorporation, and company rules such as those regarding the Board of Directors.

  • (1) Matters related to shareholders’ meetings
  • (2) Matters related to directors
    • Preliminary selection of director candidates
    • The appointment and dismissal of representative directors
    • The appointment and dismissal of executive directors
    • Compensation and bonuses for directors
    • Other important matters
  • (3) Matters related to the Company’s structure
  • (4) Important matters related to compliance, etc.
    • Formulating a compliance promotion plan for the fiscal year
    • Reporting on the results of compliance promotion activities implemented during the fiscal year
    • Formulating an audit plan for the fiscal year
    • Reporting on audit activities implemented during the fiscal year
    • Evaluating internal controls concerning financial reporting during the fiscal year and formulating audit-related policy (J-SOX activities)
  • (5) Important matters related to personnel
    • The appointment and dismissal of corporate officers and executive corporate officers
    • The appointment and dismissal of key employees
    • Compensation and bonuses for corporate officers, etc.
  • (6) Important matters related to finance and assets
  • (7) Other matters that are especially important in regard to managing the Company or executing duties

Internal control

The Mitsui Fudosan Group sets up and manages an internal control system that conforms to the Companies Act. We endeavor to put in place systems to ensure that the execution of business by directors and employees complies with laws and regulations and the Company’s Articles of Incorporation. With this in mind, the Board of Directors of Mitsui Fudosan formulated the following basic policy and maintains its proper operation.

Basic Policy to Put in Place an Internal Control System That Will Ensure the Proper Execution of Business Activities by a Company Limited by Shares

  • System to ensure that execution of business by directors conforms to laws and regulations and the Company’s Articles of Incorporation

    The Company is working to ensure compliance through formulation and implementation of a compliance promotion plan, based on its Compliance Rules and other internal rules. The Company has also established a Risk Management Special Committee and put in place a compliance structure to prevent violations of laws and regulations and its Articles of Incorporation.

  • System related to storage and management of information concerning the execution of business by directors

    All information is appropriately stored and managed according to internal rules, including the Document Rules, the Information Management Rules and the Information System Management Rules.

  • Regulations and other frameworks related to prevention of losses

    Based on Risk Management Regulations and other internal rules, the Executive Management Committee supervises and controls risk management items concerning the Company or the Mitsui Fudosan Group. It heads two committees charged with uncovering and comprehending risk issues and devising solutions for them—the Strategy Planning Special Committee, which handles business risk management, and the Risk Management Special Committee, which is responsible for management of administrative risk.

  • Framework for ensuring that the business of directors is executed efficiently

    To promote the separation and strengthening of the management and executive functions for which directors are responsible, the Company has adopted a corporate officer system, part of a framework intended to ensure that the business of directors is executed efficiently.

    Concerning the execution of business based on decisions of the Board of Directors, internal rules, including organizational rules and rules governing administrative authority, set forth who is in charge and their responsibilities and promote efficient business by also setting forth procedures for execution.

  • A system to ensure that the execution of business by employees conforms to laws and regulations and the Company’s Articles of Incorporation

    The Company is working to ensure compliance through formulation and implementation of a compliance promotion plan, based on its Compliance Rules and other internal rules. The Company also maintains a Risk Management Special Committee and a compliance structure to prevent violations of laws and regulations and its Articles of Incorporation.

    In addition, based on its Internal Control System Rules, the Company has established a point of contact for consultation regarding compliance problems inside and outside the Company.

    Further, based on Internal Audit Rules, the Internal Audit Department monitors the operation of the compliance framework as well as compliance with laws and regulations, and reports to the Board of Directors and the Board of Corporate Auditors.

  • Framework for ensuring appropriate business practices by the corporate group comprising the Company and its subsidiaries

    Through appropriate management of its Subsidiaries and Affiliates Administration Rules and Overseas Affiliates Administration Rules, the Company seeks to ensure the efficient execution of business by directors of its subsidiaries, while management is based on approval and monitoring by Mitsui Fudosan.

    Each Group company also has in place a compliance framework and Internal Control System based on the Mitsui Fudosan Group Compliance Policy. The Internal Audit Department conducts audits of the subsidiaries’ compliance frameworks and their compliance with laws and regulations, and reports to the Board of Directors and the Board of Corporate Auditors.

  • A system for employees to assist auditors with their duties and matters concerning the assurance of independence of these employees from directors and the effectiveness of instructions given to these employees

    The Corporate Auditor’s Department has been established specifically to assist the corporate auditors with their work, and each corporate auditor has been assigned a dedicated employee.

    Said employee shall be under the chain of command of the corporate auditor, who shall also evaluate the employee’s performance. Transfer of said employee shall take place only upon prior discussion with the corporate auditor.

  • Frameworks for enabling directors and employees to report to the corporate auditors, for other reporting to the corporate auditors, and for ensuring that audits by the corporate auditors are conducted effectively

    Corporate auditors attend meetings of the Board of Directors.

    Full-time corporate auditors also attend meetings of the Executive Management Committee, which oversees internal controls and risk management, receives reports when necessary, and shares these at meetings of the Board of Corporate Auditors.

    In addition, the corporate auditors receive regular audit reports from the Internal Audit Department and the Company’s certified public accountant, and exchange information to build cooperation.

    Matters that have become subject to internal consulting are reported to the corporate auditors as appropriate via the Risk Management Special Committee, and the Internal Control System Rules contain provisions stating that the act of consulting itself will not be reason for detrimental treatment of the person requesting consultation.

  • Framework for enabling directors, auditors and employees of subsidiaries, or individuals receiving reports from those listed, to report to corporate auditors, and for ensuring that individuals providing such reports will not, by reason of having made said report, be subject to detrimental treatment as a result

    Full-time corporate auditors attend meetings of the Executive Management Committee, which oversees internal controls and risk management, receives reports as necessary, and shares them with the Board of Corporate Auditors.

    They also work to exchange information as appropriate with the directors and auditors of the Company’s subsidiaries, either directly or through relevant departments, and receive progress reports on implementation of internal audits at subsidiaries.

    Matters subject to internal consulting under the Internal Control System, of each Group company are also reported to the Company’s corporate auditors as appropriate via the Risk Management Special Committee or the department concerned. Rules regarding each Group company’s Internal Control System contain provisions stating that the act of consulting itself will not be reason for detrimental treatment of the person requesting consultation.

  • Policies regarding procedures for prepayment or reimbursement of expenses arising in the execution of the corporate auditors’ duties or related to processing of other expenses and liabilities arising from execution of those duties

    Expenses required for the execution of the corporate auditors’ duties shall be borne by the Company at cost.

Internal Auditing System

The Audit Department verifies the effectiveness of risk management and internal control systems from the perspective of the entire Mitsui Fudosan Group. At the same time, the Department puts in place audit activity plans in order to evaluate and improve risk management and internal control systems, and undertakes internal audits following authorization by the Board of Directors.

Results of the internal audits are reported to the officers in charge with feedback directed to the appropriate departments. Thereafter, follow-up activities are undertaken to assess the status of improvement progress. Moreover, details of audit activities are reported every six months to the Executive Management Committee, Board of Directors, and Board of Corporate Auditors. Every effort is made to share information and coordinate with auditors.

Based on Japan’s Financial Instruments and Exchange Law, Mitsui Fudosan evaluates the status of internal control relating to the current Mitsui Fudosan Group financial report at the end of each period. An Internal Control Report is then submitted and disclosed publicly. Results of the most recent Internal Control Report have been audited by KPMG AZSA LLC and deemed as appropriate.

Reasons for Selecting Outside Directors and Their Attendance

Mitsui Fudosan appoints its outside directors with the expectation that they will contribute their extensive experience and broad knowledge to the Company’s management, and that they will play an appropriate role in strengthening the audit function of the Board of Directors and ensuring transparency.

The Company also appoints its outside auditors with the expectation that they will bring an objective stance to auditing the directors in the performance of their duties, based on their expert knowledge and extensive experience. Note that, in line with Tokyo Stock Exchange requirements for judging the independence of independent officers, the Company uses the following standards for judging said independence: whether there is a risk of conflicts of interest with any of the Company’s general shareholders; whether any special interests exist with the Company; and whether in working to enhance the soundness and transparency of the Company’s management, the individual is capable of making objective, fair and impartial judgments.

Reason for Selection as Outside Directors and Corporate Auditors

Name Reason for Appointment Fiscal 2018 Attendance at Board of Directors Meetings and Board of Corporate Auditors Meetings
Managing Director
Masako Egawa
As a current outside director of the Company, Masako Egawa has properly fulfilled her duty of strengthening supervisory functions and ensuring the transparency of the Board of Directors. The Company has reappointed her as an outside director and independent officer in the expectation that she will make further contributions in this role, in addition to the fact that there are no concerns regarding conflict of interest with general shareholders. 13/13
Managing Director
Masafumi Nogimori
As a current outside director of the Company, Masafumi Nogimori has properly fulfilled his duty of strengthening supervisory functions and ensuring the transparency of the Board of Directors. The Company has reappointed him as an outside director and independent officer in the expectation that he will make further contributions in this role, in addition to the fact that there are no concerns regarding conflict of interest with general shareholders. 13/13
Managing Director
Tsunehiro Nakayama
The Company has appointed Tsunehiro Nakayama as an outside director and independent officer in the expectation that he will use his wealth of experience as a manager and wide-ranging views to contribute various opinions that will strengthen supervisory functions and ensure transparency of the Board of Directors. There are also no concerns regarding conflict of interest with general shareholders. -
Managing Director
Shinichiro Ito
The Company has appointed Shinichiro Ito as an outside director and independent officer in the expectation that he will use his wealth of experience as a manager and wide-ranging views to contribute various opinions that will strengthen supervisory functions and ensure transparency of the Board of Directors. There are also no concerns regarding conflict of interest with general shareholders. -
Corporate Auditor
Yoshitaka Kato
As a current outside corporate auditor of the Company, Yoshitaka Kato has demonstrated sufficient ability to audit the directors’ execution of their duties. The Company has reappointed him as a corporate auditor and independent officer in the expectation that he will make further contributions in this role, in addition to the fact that there are no concerns regarding conflict of interest with general shareholders. Board of Director Meetings: 12/13 meetings
Board of Corporate Auditor Meetings: 11/12 meetings
Corporate Auditor
Yasushi Manago
As a current outside corporate auditor of the Company, Yasushi Manago has demonstrated sufficient ability to audit the directors’ execution of their duties. The Company has reappointed him as a corporate auditor and independent officer in the expectation that he will make further contributions in this role, in addition to the fact that there are no concerns regarding conflict of interest with general shareholders. Board of Director Meetings: 13/13 meetings
Board of Corporate Auditor Meetings: 11/12 meetings
Corporate Auditor
Yukimi Ozeki
As a current outside corporate auditor of the Company, Yukimi Ozeki has demonstrated sufficient ability to audit the directors’ execution of their duties. The Company has reappointed him as a corporate auditor and independent officer in the expectation that he will make further contributions in this role, in addition to the fact that there are no concerns regarding conflict of interest with general shareholders. Board of Director Meetings: 13/13 meetings
Board of Corporate Auditor Meetings: 12/12 meetings

Executive Compensation

Managing directors’ compensation consists of basic compensation in an amount within the scope set and approved by resolution of the 106th General Meeting of Shareholders, bonuses paid as short-term incentives that comprehensively take into consideration such things as business results achieved in each fiscal year which must be approved by resolution at the General Meeting of Shareholders, and stock options paid as medium- to long-term incentives in an amount within the scope set and approved by resolution of the 95th General Meeting of Shareholders. Compensation paid to managing directors (outside directors) is solely basic compensation.

Compensation paid to corporate auditors is solely basic compensation in an amount within the scope set and approved by resolution of the 106th General Meeting of Shareholders.

In addition, the Company has established the Compensation Advisory Committee, comprising two internal directors and four independent outside directors, which the Board of Directors consults on managing directors’ compensation prior to decisions made at the Board of Directors. Compensation for the Company’s directors and corporate auditors for fiscal 2018 was as shown below.

Compensation by Title, Amount of Compensation by Type and Number of Applicable Executives

Title Total Compensation (Millions of Yen) Amount of Compensation by Type (Millions of Yen) Number of Applicable Executives
Basic Compensation Bonus Stock Options
Internal directors 1,027 537 406 83 8
Internal corporate auditors 104 104 - - 2
Outside directors and corporate auditors 94 94 - - 7

Compensation of Executives Exceeding ¥100 million

Name Title Amount of Compensation by Type (Millions of Yen) Total Compensation (Millions of Yen)
Basic Compensation Bonus Stock Options
Hiromichi Iwasa Chairman of the Board and Chief Executive Officer (Representative) 117 93 17 228
Masanobu Komoda President and Chief Executive Officer (Representative) 117 93 17 228
Yoshikazu Kitahara Managing Director (Representative) 74 52 10 137
Kiyotaka Fujibayashi Managing Director 26 39 8 110
President and Chief Executive Officer (Representative) of Mitsui Fudosan Residential Co., Ltd. 34 - -
Yasuo Onozawa Managing Director 57 39 8 105

Analysis and Evaluation of Board of Director Effectiveness

Each year, the Company analyzes and evaluates the efficacy of the Board of Directors, aiming to further enhance its functions.

An overview and results of our evaluation of the Board of Directors’ efficacy are provided below.

  • (1) Evaluation method

    The Company conducted interviews with all directors and auditors and asked them to complete free-response questionnaires regarding Board of Directors' efficacy, conducting an analysis and evaluation at the Board of Directors meeting held on May 24, 2019.

  • (2) Evaluation items
    • Board of Directors structure (number of members, ratio of executive to non-executive members, diversity, etc.)
    • Status of operation of the Board of Directors (number of meetings held, attendance rates, time spent for deliberation, number of items deliberated, provision of information, questions and answers, etc.)
    • Other (issues raised in the previous evaluation of Board of Directors’ efficacy; Compensation Advisory Committee; Nomination Advisory Committee; meetings of outside directors and outside corporate auditors; etc.)
  • (3) Evaluation results and future response

    To achieve sustained increases in the Group’s corporate value, it was confirmed that the Board of Directors efficacy was properly maintained. The results of this evaluation will be used to further improve the functioning of the Board of Directors.

Shareholder Voting Rights

  • The principle of one vote per share of stock shall be applied to all corporate voting matters
  • Disclosure of voting results
  • Shareholder appointment and dismissal of directors