Corporate Governance

dummy

Basic Views

As a bank that owns and operates an ATM network that manages deposits from a large number of customers and has a nature similar to that of public infrastructure, the Bank recognizes that ensuring disciplined corporate management is vital in responding to social trust and seeks to ensure effective corporate governance. This is achieved by maintaining and improving corporate governance and compliance systems to ensure transparent, fair and swift managerial decision making; clarifying the roles and responsibilities of executives and employees; strengthening management oversight functions; and ensuring equitable operations.

The Bank adopts the organizational form of a Company with Audit & Supervisory Board Members. At the Board of Directors, the Bank ensures effective corporate governance through decision making by Directors with executive authority over operations who are well versed in the Bank’s operations and Outside Directors who have considerable experience and insight in their areas of expertise as well as through the audits by the Audit & Supervisory Board Members.

  • Corporate Governance Guidelines

    In order to put the Basic Policy on Corporate Governance into practice, we have established the Corporate Governance Guidelines to clarify what we should do specifically and to fulfill our accountability to shareholders.

    Corporate Governance Guidelines(PDF/678KB)
  • Corporate Governance Report

    We submit a Report on Corporate Governance describing our corporate governance system to the Tokyo Stock Exchange and post it on our website.

    Corporate Governance Report(PDF/587KB)

Corporate Governance System Overview

Numbers and Proportions of Outside officers

  • * Applies only to attendance at meetings of the Audit & Supervisory Board after being appointed (June 17, 2019)

Main Items and Descriptions

Toward Further Enhancement of Our Governance System

At the 19th Ordinary General Meeting of Shareholders, held on June 22, 2020, the Bank changed the Articles of Incorporation as indicated below

Reduction of number of Directors The maximum number of Directors was reduced from 11 to nine, enabling the Board of Directors to make decisions more quickly and thereby accommodate the rapidly changing business environment and strengthen management oversight functions.
Enabling the separation of the positions of the chairperson of the Board of Directors and the President As a result of recent discussions during the evaluation of the effectiveness of the Bank’s Board of Directors and to refl ect the opinions of shareholders and investors, it was decided that the Bank would consider the chairperson of the Board of Directors from a medium- to long-term perspective, including the possibility of selecting the chairperson from non-executive Directors, including Outside Directors. Accordingly, the Articles of Incorporation were modifi ed to enable the separation of the positions of the chairperson of the Board of Directors and the President to secure more fl exible operation of the Board of Directors.

Board of Directors

As of June 23, 2020, the Bank’s Board of Directors consisted of seven Directors, including four Outside Directors. The Board of Directors meets, in principle, once a month to decide the Bank’s basic management policies and important operational issues and to supervise the execution of duties by Directors with executive authority over operations and Executive Officers.
The Board of Directors has established the Executive Committee as a decision-making body concerned with operational implementation within the scope delegated by the Board of Directors. In principle, the Executive Committee meets on a weekly basis to deliberate the implementation of important operations, including the formulation or amendment of business plans; the acquisition and disposal of assets; credit provision-related issues; the payment of debts and expenses; credit management issues; rewards and sanctions for employees; issues related to employees’ working conditions and benefits; the establishment, change and abolition of elements of the organization; and the formation, revision and elimination of rules and policies, in addition to conferring on issues to be deliberated by the Board of Directors prior to its meetings.
Since June 2006, the Bank has adopted an executive officer system, and the Executive Committee comprises Executive officers

Nomination & Compensation Committee

As an advisory organization to the Board of Directors, the Bank has established the Nomination & Compensation Committee, chaired by an independent Outside Director. The committee is delegated by the Board of Directors to recommend candidates for Director to be put on the agenda at a General Meeting of Shareholders, to recommend candidates for Executive Officer to be put on the agenda at a Board of Directors meeting and to supervise a plan on successors to the position of Director, etc.
The Nomination & Compensation Committee shall deliberate the following matters regarding the Bank’s Directors and Executive Officers:

Nomination & Compensation Committee

Members

  • Koichi Fukuo (Independent Outside Director)
  • Toshihiko Itami (Independent Outside Director)
  • Kensuke Futagoishi (Representative Director)
  • Yasuaki Funatake (Representative Director)

Audit & Supervisory Board

As of June 23, 2020, the Bank’s Audit & Supervisory Board consisted of four Audit & Supervisory Board Members, including two Outside Audit & Supervisory Board Members. The Audit & Supervisory Board meets, in principle, at least once a month to receive reports regarding important auditing-related issues and deliberate and make decisions thereof. The Audit & Supervisory Board convenes with Representative Directors, the Internal Audit Division and the Accounting Auditor on a regular basis to exchange opinions and make requests as necessary on issues to be addressed by the Bank, the status of improvements to the Audit & Supervisory Board Members’ auditing environment and important auditing-related issues.
In addition, the Audit & Supervisory Board Members oversee and verify from the following perspectives the status of fulfillment of legal obligations, including the duty of diligence of a good manager and the duty of loyalty, with regard to resolutions of the Board of Directors and other decision making by Directors.

  1. There shall be no material and careless errors in recognizing the facts on which a decision is made.
  2. The decision-making process shall be reasonable.
  3. The content of a decision shall not violate laws and/or the Articles of Incorporation.
  4. The content of a decision shall not be apparently unreasonable from an ordinary corporate manager’s perspective.
  5. The interest of the Bank shall be considered first, not the interest of Directors or a third party, in making a decision.

To assist the Audit & Supervisory Board Members and facilitate the operation of the Audit & Supervisory Board, the Audit & Supervisory Board Members’ office has been established and employees have been positioned in place.

Independence Standards for Outside officers

The Bank’s Independence Standards for Outside officers are as follows:

  1. Is not a person with executive authority over operations of the Bank’s parent company or fellow subsidiary (or has been in such position in the past; hereinafter, the same applies to each item);
  2. Is not a person for which the Bank is a major business partner or a person with executive authority over such entity’s operations, or a major business partner of the Bank or a person with executive authority over such entity’s operations;
  3. Is not a consultant, an accounting professional, a legal professional or a person belonging to an organization that receives a significant amount of monetary compensation from the Bank, other than officers’ compensation;
  4. Is not a major shareholder of the Bank or a person with executive authority over operations of such shareholder; or
  5. Is not a close relative of a person that falls under any of the above or a relative by blood or marriage within the second degree to a person with executive authority over operations of the Bank.

Corporate Governance Structure

Reasons for Appointment of Outside Officers

Name Reasons for Appointment
Outside Directors Makoto Kigawa Mr. Makoto Kigawa’s experience and insight in corporate management at YAMATO HOLDINGS CO., LTD., etc., have genuinely contributed to the Bank’s management.
Toshihiko Itami Mr. Toshihiko Itami’s insight in corporate legal affairs, nurtured for many years in his career as a prosecutor, has genuinely contributed to the Bank’s management.
Koichi Fukuo Mr. Koichi Fukuo’s experience and insight as a manager at Honda Motor Co., Ltd., etc., have genuinely contributed to the Bank’s management.
Yukiko Kuroda Ms. Yukiko Kuroda’s experience as a corporate manager and insight related to developing human resources who can handle global business have genuinely contributed to the Bank’s management.
Outside Audit & Supervisory Board Members Hideaki Terashima The Bank can expect Mr. Hideaki Terashima’s broad insight into corporate legal affairs, nurtured in his career as an attorney-at-law, to contribute to audits of the Bank’s management.
Yukie Toge The Bank can expect Ms. Yukie Toge’s expertise as a certifi ed public accountant, deep insight as an accounting and systems-related consultant, and experience as a corporate manager to contribute to audits of the Bank’s management.

Guidelines on Measures to Protect Minority Shareholders in Conducting Transactions with a Controlling Shareholder

Seven & i Holdings Co., Ltd. is the Bank’s parent company, indirectly holding 46.27% of its voting rights, and therefore falls under the category of controlling shareholder stipulated in the Timely Disclosure Rules. When conducting transactions, etc., with the parent company, the Bank will comply with the arm’s-length rule under the Banking Law, which is a rule established to prevent the soundness of the Bank’s management from being compromised through confl ict-of-interest transactions. The Bank fully confi rms the necessity for such transactions and that the conditions of such transactions do not differ signifi cantly from conditions of usual transactions with third parties.

Other Special Circumstances that Could Have a Material Impact on Corporate Governance

The Bank believes that in order to achieve sound and sustainable growth, it is essential to engage in business development (innovation) by integrating collaboration with various partners to an advanced degree based on our credibility and transparency of management as a corporate entity. Furthermore, we recognize that listing on the market is one of the most effective means to ensure the Bank’s credibility and transparency of management. As an independently listed company, the Bank independently and autonomously deliberates and determines our own business strategies, personnel policies, capital policies, etc., as we engage in our own operating activities. In addition, in order to ensure the necessary independence from our parent company, we have appointed Independent Outside Directors and Outside Audit & Supervisory Board Members (six Independent Offi cers as of June 23, 2020) so that there is no risk of confl ict of interest with general shareholders.
The parent company’s approach and policy regarding group management are as follows: “Although the Company owns the listed subsidiary, Seven Bank, Ltd., from the standpoint of respecting the independence of Seven Bank, Ltd., we value the management decisions of the said listed subsidiary, and respect the independent and autonomous deliberation and determination of its business strategies, personnel policies, capital policies, etc., as it engages in its own operating activities. Moreover, the Company also considers it to be preferable, from the standpoint of group management, for Seven Bank to enhance its corporate value through its own growth strategies, etc.”
(Excerpt from “Seven & i Management Report” issued by Seven & i Holdings Co., Ltd.) In addition, we have not entered into any agreements pertaining to group management with our parent company.

Policy on Compensation of officers and Compensation System for officers

In light of the review of the structure of officers to strengthen corporate governance, the Bank has decided to review its policy on compensation of officers and the compensation system for officers for the purpose of further enhancing the motivation of Directors with executive authority over operations to contribute to the improvement of the Bank’s corporate value, and in order to properly refl ect their accountability for such outcome in the evaluation of their performance from fiscal 2020. The policy will further strengthen the link between the Bank’s business performance and the compensation of officers.
As part of efforts to review its policy on the compensation of officers and the compensation system for officers, the Bank has decided to newly introduce bonuses to strengthen the link between the Bank’s business performance and the compensation of officers. Accordingly, the compensation of officers consists of “basic compensation” as fixed compensation, and “bonuses (short-term incentives)” and “performance-based stock compensation (medium- to long-term incentives)” as variable compensation.

In addition, the Bank has revised the compensation levels for each job rank, after improving the objectivity and transparency of the compensation decision process, to secure highly capable human resources to lead and appropriately take responsibility for the supervision and execution of operations, and to provide a fair compensation system and levels commensurate with their responsibilities.
This review of the policy on the compensation of officers and the compensation system for officers was decided after deliberation by the Nomination & Compensation Committee chaired by an independent Outside Director.

Furthermore, as is the case with Directors with executive authority over operations, compensation for Executive Officers will also be revised to be consistent with the compensation system and compensation decision process of Directors with executive authority over operations, to further increase their motivation to contribute to the improvement of the Bank’s corporate value and to properly refl ect their accountability for such outcomes in the evaluation of their performance.

1. Basic Policy on Compensation of Officers

The Bank decides compensation of officers based on the following points.

  • Ensuring a compensation system to promote sustainable improvement of corporate value with emphasis placed on the link to business performance
  • Ensuring compensation systems and compensation levels with their responsibilities to secure highly capable human resources who lead and take responsibility for, in an appropriate manner, the supervision and execution of operations
  • Ensuring a compensation system based on an objective and transparent process, and that is fair and equitable

2. Compensation Structure

The Bank’s compensation structure for officers comprises “basic compensation” as fixed compensation and “bonuses” and “performance-based stock compensation” as variable compensation, which are applied as follows.

The ratio of each plan has been decided as described on the following page after deliberation by the Nomination & Compensation Committee chaired by an independent Outside Director. Factors taken into account included a balance between fixed compensation and variable compensation, a balance between cash remuneration and stock compensation, and a balance between bonuses and stock compensation, which are incentives to execute management with a well-balanced perspective in both the short term and the medium to long term.
In addition, non-executive Directors and Audit & Supervisory Board Members receive only fixed compensation, as their role is to supervise the Bank’s management from an objective and independent standpoint

3. Compensation Level

To provide a competitive compensation level and thereby secure highly capable human resources, the Bank’s compensation level for officers was determined after deliberation by the Nomination & Compensation Committee chaired by an independent Outside Director. The deliberation was based on the analysis and comparison of data on the compensation levels of a group of companies of the same size and operating in the same industry as the Bank, which was drawn from a larger body of objective data on compensation levels provided by an outside professional organization.

4. Details of Variable Compensation

Bonuse

Bonuses, which are provided as short-term incentives, will be determined by multiplying the standard amount of compensation for each job rank by performance-linked factors corresponding to the achievement of consolidated performance targets for the previous fiscal year.

Performance-Based Stock Compensation

Performance-based stock compensation, which is provided as a medium- to long-term incentive, is composed of a “fixed portion,” which grants fixed points for each job rank, and a “performance-based portion,” which grants a varying number of points determined by job rank and performance. For each portion, points are granted and accumulate every year of the term of office of the relevant officer, and a number of the Bank’s shares corresponding to the amount of accumulated points will be delivered to the officer upon retirement. The number of points (i.e., the number of shares to be delivered) to be provided in the performance-based portion will be determined by multiplying the number of points for each rank by performance-linked factors according to the achievement level of consolidated performance targets.

5. Compensation Decision Process

Individual compensation amounts for Directors are decided by the Board of Directors after deliberation by the Nomination & Compensation Committee chaired by an independent Outside Director, within the range of the total amount approved at the General Meeting of Shareholders.
In addition, the Nomination & Compensation Committee deliberates the compensation system and compensation level, etc., of officers and also verifies compensation amounts on the basis of the Bank’s basic policy on compensation of officers, thereby ensuring the objectivity and transparency of the compensation decision process. The main topics discussed and deliberated by the Nomination & Compensation Committee in fiscal 2019 were as follows.

  • Recommendation of candidates for Directors and candidates for Executive Officers to the Board of Directors
  • Supervision and execution, structure of Directors, and roles of Executive Officers
  • Proposal of compensation for Directors and Executive Officers to the Board of Directors
  • Compensation system and compensation level for Directors and Executive Officers

Compensation, etc., for Audit & Supervisory Board Members are determined through discussion at the Audit & Supervisory Board Members within compensation system limits approved by the General Meeting of Shareholders.Typhoon No. 15

Internal Audit and Audit by Audit & Supervisory Board Members

The Bank has in place the Internal Audit Division, which is independent of the Bank’s other divisions engaging in business operations and directly reports to the President and Representative Director.
The Internal Audit Division annually sets a basic policy for internal auditing plans and priority issues to be addressed, which are to be approved by the Board of Directors. Individual internal auditing plans are formulated by the General Manager of the Internal Audit Division, and approval of these plans is obtained from the President and Representative Director, who is the officer in charge of the Internal Audit Division.
Individual internal audits are conducted by investigating and evaluating the appropriateness and effectiveness of internal management systems as a whole based on the following items to discover problems, if any, and suggest how to address them. The results of these audits are reported to the President and Representative Director, the Executive Committee and the Audit & Supervisory Board Members.

  1. Status of business plans
  2. Compliance system and compliance status
  3. Appropriateness and effectiveness of internal controls over financial reporting
  4. Systems for and the current status of customer management, including customer protection
  5. Systems for and the current status of risk management
  6. Internal management systems at each operational department and appropriateness and effectiveness thereof

Internal audits are conducted on all the Bank’s divisions and systems, including those of its subsidiaries. Audits are also conducted on the operations of the Bank’s major outsourcing contractors regarding the status of management by its relevant internal divisions, as well as on the outsourcing contractors themselves, within the scope agreed with them.
Audit & Supervisory Board Members receive periodic reports from the Internal Audit Division on its audit plans and results, and request investigations as necessary to ensure that the audit results of the Internal Audit Division are effectively utilized for internal control system audits by Audit & Supervisory Board Members. In addition, Audit & Supervisory Board Members receive reports on the status of improvement of internal control systems regularly or as necessary from the divisions in charge of internal control functions, and ask for detailed explanations as necessary.

Names of the certified public accountants who performed accounting audit duties
Yukihisa Tatsumi, Designated Limited Liability Partner, Engagement Partner
Tomoaki Takeuchi, Designated Limited Liability Partner, Engagement Partner
Composition of the supplementary personnel who were involved in accounting audit duties
Five certified public accountants, two people who passed the accountant examination and nine other persons

Status of Improvement and Operation of the Internal Control Systems

Concerning the system upgrades stipulated in Article 362, Paragraph 4, Item 6 of the Companies Act, the Board of Directors made a resolution on May 8, 2006, on matters to be implemented by the Bank. Progress of the details of this resolution is reviewed each fiscal year. In line with this resolution, Seven Bank strives for good corporate governance and internal control, while ensuring appropriateness in the Seven Bank Group’s operations.

Seven Bank Management Team

Details can be found on the following links.