J. Front Retailing (the “Company”) is committed to reinforcing corporate governance to ensure sustainable growth of J. Front Retailing Group (the “Group”) and medium- to long-term enhancement of corporate value. The establishment of a corporate governance structure that is optimal for the Company is one of its important tasks, and as part of further strengthening of systems, the Company transitioned from a company with Audit & Supervisory Board to a company with three committees with approval at the Company’s Annual Shareholders Meeting held on May 25, 2017.
The purposes of transition to a company with three committees are as follows:
1） Strengthening of the management oversight function by separating oversight from execution
The Company will strengthen the oversight function for business execution of the Board of Directors by separating oversight from execution.
In addition, the Company aims to promote sophistication of strategy by having the Board of Directors actively include the insights of external persons in order to hold rigorous discourse on important issues relating to the Group management.
2）Greater clarity of authority and responsibility in business execution and promotion of agile management
The Company will enable decisions of business execution to be delegated to Executive Officers, clarify the authority and responsibility between the Board of Directors and Executive Officers and between the holding company and the operating subsidiaries, and carry out speedy management decision making.
3）Improvement of transparency and objectivity of management
The Company will improve the transparency and objectivity of management by transitioning to a company with three statutory committees including Nomination, Audit and Remuneration Committees. The majority of the members of each of these committees are Outside Directors.
4） Building of an organizational structure compatible with global perspectives
The Company will build a governance structure that is easy to understand from global perspectives, such as those of overseas investors.
The Company is a pure holding company and delegates the authority of business execution matters of its operating subsidiaries, excluding important ones concerning the Group management, to each operating subsidiary in an effort to expedite management decision making and clarify management responsibility.
The roles and responsibilities of the Company as a pure holding company are as follows:
The Company’s management organization has four supervisory units (Management Strategy Unit, Affiliated Business Unit, Financial Strategy Unit and Administration Unit) and clarifies their respective roles, responsibilities and authorities to strengthen the oversight function and improve the internal control system across the Group.
Directors elected and entrusted with management of the Company by shareholders will fulfill the following roles and responsibilities at the Board of Directors in light of fiduciary responsibility and accountability to shareholders in order to realize the basic mission statement, the Group Vision, etc.:
The Board of Directors of the Company is comprised of the appropriate number of 15 or less Directors as set forth in the Articles of Incorporation. Currently the Company has 13 Directors (five of whom are independent Outside Directors including one female Director) and their term of office is one year. From the perspective of separating oversight from execution and enhancing the effectiveness of discussions at the Board of Directors meetings, independent Outside Directors account for one third or more of the Board of Directors and the majority of the Board of Directors are independent Outside Directors and non-executive Inside Directors. And from the viewpoint of separation between oversight and execution and smooth operation of the Board of Directors, Chairperson of Board of Directors is a non-executive Inside Director.
When nominating Director candidates, the Company ensures diversity in consideration of the balance of knowledge, experience and ability on the Board of Directors as a whole.
The Nomination Committee is comprised of three Outside Directors, non-executive Chairperson of Board of Directors and President and Representative Executive Officer. From the viewpoint of ensuring transparency and objectivity, its chairperson is appointed from independent Outside Directors. The Nomination Committee determines the content of the proposals relating to the election and dismissal of Directors to be submitted to the Shareholders Meeting as well as the content of the reports relating to the election and dismissal of the members of the management teams of the Company and Daimaru Matsuzakaya Department Stores and the appointment and removal of the chairpersons and members of the three committees to be submitted to the Board of Directors.
The Audit Committee is comprised of three Outside Directors and two full-time non-executive Inside Directors who are familiar with the Company’s internal information to maintain and improve the accuracy of audit. The Audit Committee audits the performance of duties by Directors and Executive Officers in line with the overall policy and plan determined by the Board of Directors and audits important matters to be discussed at the Board of Directors meetings and other individual matters deemed necessary by Chairperson of Audit Committee as well as building and operation of internal control and prepares audit reports.
In addition, the Audit Committee oversees accounting auditors to ensure the reliability of accounting information and determines the content of proposals relating to the election and dismissal of accounting auditors to be presented to the Shareholders Meeting.
In fiscal year 2017, a non-executive Inside Director chairs the Committee from the viewpoint of smooth transition from the current structure of Audit & Supervisory Board. However, we will study and review that to create an optimal structure in the future.
The Remuneration Committee consists of three Outside Directors, non-executive Chairperson of Board of Directors and President and Representative Executive Officer. From the viewpoint of transparency and objectivity, its chairperson is appointed from independent Outside Directors. The Remuneration Committee determines policies concerning the decision of remuneration for each member of the management teams of the Company and Daimaru Matsuzakaya Department Stores and the details of remuneration for each member.
The Company has a “Governance Committee,” which consists of President and Representative Executive Officer, Chairperson of Board of Directors, Representative Directors and all Outside Directors. The Committee has free, vigorous and constructive discussions and exchange of views on the issues relating to corporate governance and overall corporate management including the reform of the Board of Directors based on assessment by the Board of Directors and shares information and develops cooperation with Outside Directors.
The “Risk Management Committee” systematically manages and deals with overall risks mainly including strategy risk from a company-wide perspective and makes decisions from a perspective focused on risk management. The Committee is chaired by President and Representative Executive Officer and consists of senior executive general managers of supervisory units, presidents of major subsidiaries and other members. Using extensive expertise of the members elected from supervisory units, the Committee assesses various risks, develops measures against them and manages its progress.
In addition, the Company has established a “Compliance Committee” (whose membership includes a legal advisor) to properly address the issues on the Group’s compliance management. The Committee draws up policies for addressing serious compliance-related violations, and in close cooperation with departments in charge of compliance promotion, builds a base for compliance structure (development of promotion system and promotion plan, etc.) and continuously oversees its operation to promote compliance with laws and regulations, business ethics and others.
The content of discussions at the meetings of the Risk Management and Compliance Committees is reported to the Audit Committee on a regular (twice or so a year) and timely basis.