Corporate Governance
In addition to building good relations with all stakeholders supporting the LAC Group's corporate activities and enabling it to achieve sustainable growth over the long term, the Group also recognizes that establishing the values to be shared by all Group executives and employees and fostering high ethical standards is essential to the realization of sound corporate governance.
- Basic
Philosophy - Governance
Structure - Outside
Officers - Results of
Board
Evaluation - Officer
Remuneration - Internal
Control - Risk
Management
and Compliance
Basic Philosophy
Our corporate philosophy is to aim to become indispensable to society through constantly evolving and continuously growing with management focused on sustainability. Based on this, we aim to be a company that serves as a beacon for surviving in the digital society, with the purpose of building a "credible society" through reliable technology.
In addition, we strive to maximize sustainable growth and corporate value in order to meet the expectations and trust of all stakeholders, including shareholders, business partners, employees, and the wider public, and to fulfill our social mission and social responsibilities.
In order to achieve this, we recognize that it is essential to ensure the effectiveness of our corporate governance. To strengthen governance throughout LAC Group, and ensure legal and regulatory compliance and appropriate business execution, we have established a basic policy on internal control systems and a corporate code of conduct, as well as employee conduct guidelines.
We are also working to boost our corporate sustainability and contribute to the solution of societal issues through our Security Solutions Services and System Integration Services businesses. These efforts include strengthening our focus on environmental, social, and governance considerations, and our contribution to achieving the Sustainable Development Goals.
Governance Structure
As of September 1, 2024
The Company has opted for a "Company with Audit & Supervisory Board" organizational structure. At the General Shareholders Meeting held in June 2020, the number of independent outside directors was increased from two to four (44% weighting) of the nine directors on the Board. The Company's first female director was also appointed.
The supervisory functions of the Board of Directors have been strengthened by requiring that four of the Board's nine directors be independent outside directors. We also ensure objectivity and transparency in the selection, dismissal, and compensation of directors by requiring that independent outside directors make up the majority of the members of the Nomination and Remuneration Advisory Committee, a voluntary advisory body to the Board of Directors.
To further strengthen corporate governance, in fiscal 2020 we changed our executive officer personnel system from an employment contract-based system to a mandate contract-based system. The Board of Directors appoints executive officers and delegates responsibility for each area of business execution to individual executive officers. By, in this way, enabling the Board of Directors to focus on supervising the executive officers' execution of their duties, we have created a flexible system that facilitates the enhancement of decision-making and supervisory functions and enables rapid responses to changes in the business environment.
Since the commencement of the Company's business and capital alliance with KDDI Corporation in 2013, the Group has appointed two directors from KDDI.
Board of Directors
The Board of Directors is chaired by the President and Representative Director, and is composed of nine directors, including three outside directors. In addition to determining basic management policies, and making decisions relating to matters stipulated by laws and regulations, and other matters relating to the execution of important business operations, the Board of Directors also monitors and supervises the status of business execution.
Audit & Supervisory Board
The Audit & Supervisory Board is composed of three members, including two outside members. The Board's chairperson is selected from among LAC's corporate auditors by resolution of the Audit & Supervisory Board. In accordance with Japan's Code of Kansayaku Auditing Standards, Audit & Supervisory Board members attend Board of Directors meetings and other important meetings, such as Management Committee meetings, and monitor the Group's management from an independent viewpoint. One substitute Audit & Supervisory Board member has been appointed in case the number of Audit & Supervisory Board members falls below the legally required number. Regular meetings of the Audit & Supervisory Board are held once each month, with extraordinary meetings convened as necessary.
Management Committee
The Management Committee is composed of fifteen executive officers. The Committee is chaired by the President Executive Officer and holds discussions on matters related to the execution of the Group's business. In principle, Committee meetings are held once a week, with extraordinary meetings convened as necessary.
Nomination and Remuneration Advisory Committee
The Nomination and Remuneration Advisory Committee comprises two independent outside directors, and the President and Representative Director. The Committee works to strengthen the independence, objectivity, and accountability of the Board of Directors in relation to the nomination and remuneration of directors, Audit & Supervisory Board members, and executive officers. The Committee meets once a quarter, in principle, and provides advice and recommendations to the Board of Directors.
Internal Control Committee
The Internal Control Committee consists of at least three members including outside directors, and it deliberates on important matters related to the internal control of the Group in order to strengthen the supervisory function of the Board of Directors and further improve internal control. In principle, the Internal Control Committee meets once a quarter.
Risk Management Committee
The Risk Management Committee is composed of nine executive officers and is chaired by the President Executive Officer. The Committee is, based on risk management systems and top-priority matters including basic policy determined by the Board of Directors, responsible for promoting and improving risk countermeasures through development and operation of frameworks to promote risk management systems and monitoring the status of risk management implemented by each business division and each Group Company.
In principle, the Risk Management Committee meets once a quarter, with extraordinary meetings convened as necessary.
Outside Officers
Appointment of Outside Officers
When appointing outside directors and outside Audit & Supervisory Board members, we make use of stock exchange evaluation criteria to determine the independence of independent officers. Although no in-house criteria have been established, the percentage of transactions between each outside officer-affiliated company and the Company must be less than 1% of the Company's consolidated sales or orders. As outside directors and outside Audit & Supervisory Board members have been evaluated to be independent and pose no risk of conflict of interest with general shareholders, they are deemed to be independent officers.
Reasons for Outside Officer Appointment and Remarks on Independence
Outside Directors
| Name | Years of tenure | Attendance in FY2023 | Independent | Reason for Appointment |
|---|---|---|---|---|
| Jun Murai | 6 | 12/16 | Yes | The Company has appointed Mr. Murai considering his exceptional expertise as a leading authority on matters relating to the Internet in Japan will enable him to support the Group's efforts to enhance corporate value from a medium- to long-term perspective based on factors such as the competitive environment, from a position independent of the management team. |
| Michihiro Sasaki | 3 | 16/16 | Yes | The Company has appointed Mr. Sasaki considering his wealth of experience and expertise in all aspects of corporate matters will enable him to support the Group's efforts to improve management transparency and strengthen corporate governance from a position independent of the management team. |
| Kazutaka Muraguchi | 3 | 16/16 | Yes | The Company has appointed Mr. Muraguchi considering his knowledge and expertise in fostering entrepreneurs, in addition to his extensive experience as a businessperson, will enable him to provide appropriate guidance to the Group regarding its growth strategies and next-generation human resources development from a position independent of the management team. |
| Name | Years of tenure | Attendance in FY2023 | Independent |
|---|---|---|---|
| Jun Murai | 6 | 12/16 | Yes |
| Reason for Appointment | |||
| The Company has appointed Mr. Murai considering his exceptional expertise as a leading authority on matters relating to the Internet in Japan will enable him to support the Group's efforts to enhance corporate value from a medium- to long-term perspective based on factors such as the competitive environment, from a position independent of the management team. | |||
| Name | Years of tenure | Attendance in FY2023 | Independent |
| Michihiro Sasaki | 3 | 16/16 | Yes |
| Reason for Appointment | |||
| The Company has appointed Mr. Sasaki considering his wealth of experience and expertise in all aspects of corporate matters will enable him to support the Group's efforts to improve management transparency and strengthen corporate governance from a position independent of the management team. | |||
| Name | Years of tenure | Attendance in FY2023 | Independent |
| Kazutaka Muraguchi | 3 | 16/16 | Yes |
| Reason for Appointment | |||
| The Company has appointed Mr. Muraguchi considering his knowledge and expertise in fostering entrepreneurs, in addition to his extensive experience as a businessperson, will enable him to provide appropriate guidance to the Group regarding its growth strategies and next-generation human resources development from a position independent of the management team. | |||
Outside Audit & Supervisory Board Members
| Name | Years of tenure | Attendance in FY2023 | Independent | Reason for Appointment |
|---|---|---|---|---|
| Koichi Hachiya | 5 | Board of Directors meetings 16/16 Audit & Supervisory Board meetings 18/18 |
Yes | The Company has appointed Mr. Hachiya because it judged that he based on his extensive experience and professional knowledge as a certified public accountant and tax accountant, will be able to monitor and supervise the management of the Company from a neutral and objective standpoint. |
| Ryota Sekine | 1 | Board of Directors meetings 12/16 Audit & Supervisory Board meetings 12/18 |
Yes | The Company has appointed Mr. Sekine because it judged that he has extensive knowledge of corporate legal affairs, corporate governance and risk management gained through his years of legal practice as a lawyer, as well as his experience as an Audit Committee Member of several corporations. |
| Name | Years of tenure | Attendance in FY2023 | Independent |
|---|---|---|---|
| Koichi Hachiya | 5 | Board of Directors meetings 16/16 Audit & Supervisory Board meetings 18/18 |
Yes |
| Reason for Appointment | |||
| The Company has appointed Mr. Hachiya because it judged that he based on his extensive experience and professional knowledge as a certified public accountant and tax accountant, will be able to monitor and supervise the management of the Company from a neutral and objective standpoint. | |||
| Name | Years of tenure | Attendance in FY2023 | Independent |
| Ryota Sekine | 1 | Board of Directors meetings 12/16 Audit & Supervisory Board meetings 12/18 |
Yes |
| Reason for Appointment | |||
| The Company has appointed Mr. Sekine because it judged that he has extensive knowledge of corporate legal affairs, corporate governance and risk management gained through his years of legal practice as a lawyer, as well as his experience as an Audit Committee Member of several corporations. | |||
Support System for Outside Officers
The secretariat distributes explanatory materials, etc. to outside directors and outside Audit & Supervisory Board members in advance of meetings so they can review the agenda, support discussions at meetings of the Board of Directors and the Audit & Supervisory Board and provide important information pertaining to business as appropriate.
Dedicated staff members are also assigned to facilitate the work of the Audit & Supervisory Board and are on hand to perform tasks such as gathering information and conducting investigations under the direction of auditors.
Results of Board Evaluation
In January 2024, the Company implemented a self-assessment questionnaire for all directors and auditors to evaluate the effectiveness of the Board of Directors in fiscal 2023. The results of the evaluation are as follows.
Evaluation Results
The comprehensive evaluation of the results recognized the Company's efforts to achieve its goal of effective supervision.
- Strategic and big-picture discussions were conducted by the Board of Directors, including intensive discussion of the new mid-term management plan.
Based on the evaluation results above, the Company will continue taking initiatives, such as monitoring of the mid-term management plan and stimulating discussion of ESG management, to further enhance the deliberations of the Board of Directors and improve its effectiveness.
Officer Remuneration
Remuneration policy
Remuneration for officers consists of a fixed remuneration element that is determined by individual contribution and company performance based on a table broken down by position, a profit-linked remuneration element in the form of Company shares that is directly related to Group income for the fiscal year, and profit-linked cash-based remuneration. This policy ensures that a larger fiscal year income is reflected in the level of profit-linked remuneration.
Method for Determining Remuneration Amounts
- The Board of Directors has the authority to determine policy regarding officer remuneration calculation methods and remuneration amounts. These decisions are made after consultation with the Nomination and Remuneration Advisory Committee.
- The fixed remuneration element is based on the graded table of remuneration by position that uses the president and representative director of the company as a standard. Calculations take a variety of factors into consideration, such as company performance, individual contributions, individual capabilities, remuneration levels of other companies, and employee wage revisions. Amounts are determined in accordance with officer remuneration rules and executive officer rules.
- Profit-linked stock remuneration was introduced to further clarify the relationship between director remuneration and the Company's stock value, and to strengthen awareness of the need to contribute to medium- to long-term improvements in company performance and increase in corporate value. Profit-linked performance bonuses were discontinued from the fiscal year ended March 31, 2016 and profit-linked stock remuneration was introduced alongside a new profit-linked salary following a resolution at the 171st Board of Directors meeting held on May 11, 2016.
- For the above reasons, the consolidated operating income and growth rate are used as primary indicators for profit-linked stock remuneration and profit-linked salary.
- At the meeting of the Board of Directors held on May 13, 2024, the Company adopted a post-delivery type performance-linked share remuneration plan (performance share-based unit plan) for share remuneration calculated based on the achievement status of the mid-term management plan. Directors (excluding Non-Executive Directors and including the Chairman) and executive officers not serving as directors are eligible for payment.
Remuneration for Directors and Audit & Supervisory Board Members (fiscal year ended March 31, 2024)
| Category | Amount paid |
Total amount by type of remuneration, etc. | Number of persons to be paid | ||
|---|---|---|---|---|---|
| Fixed remuneration | profit-linked stock remuneration | Profit-linked salary | |||
| Directors | 115 million yen | 106 million yen | 6 million yen | 2 million yen | 10 |
| Audit & Supervisory Board members | 36 million yen |
36 million yen |
4 | ||
| Total (of which are outside officers) |
151 million yen (43 million yen) |
142 million yen (43 million yen) |
6 million yen | 2 million yen | 14 (7) |
| Category | Amount paid |
Total amount by type of remuneration, etc. | Number of persons to be paid | ||
|---|---|---|---|---|---|
| Fixed remuneration | profit-linked stock remuneration | Profit-linked salary | |||
| Directors | 115 million yen | 106 million yen | 6 million yen | 2 million yen | 10 |
| Audit & Supervisory Board members | 36 million yen |
36 million yen |
4 | ||
| Total (of which are outside officers) |
151 million yen (43 million yen) |
142 million yen (43 million yen) |
6 million yen | 2 million yen | 14 (7) |
(Note)
1. The amount paid to directors does not include employee salaries that are paid to employees who serve concurrently as directors.
2. At the 1st General Shareholders Meeting held on June 24, 2008, a resolution was passed that the amount paid to directors would not exceed 400 million yen per year (excluding employee salaries).
3. At the 1st General Shareholders Meeting held on June 24, 2008, a resolution was passed that the amount paid to Audit & Supervisory Board members would not exceed 50 million yen per year.
4. The number of directors at the end of the current fiscal year stands at nine (of which four are outside directors), while the number of Audit & Supervisory Board members stands at three (of which two are outside Audit & Supervisory Board members).
Internal Control
The Company has established an internal control evaluation function within the Internal Audit Department, which reports directly to the representative director. We have also established an Internal Control Committee, which serves as an advisory body to the Board of Directors. In addition we have established a Risk Management Committee which functions as a body overseeing risk management across the entire Group. In this way, we have created an internal control system that covers the whole Group, and ensures the appropriate operations of the Company and its subsidiaries as a corporate entity.
To ensure compliance with laws and regulations and the appropriate conduct of business operations, the Board of Directors has instituted a "Basic Internal Control System Policy" (revised April 1, 2023).
Basic Internal Control System Policy and Implementation of Said Policy
1. System to ensure the duties of directors, executive officers, and employees are executed in compliance with laws, regulations, and the articles of incorporation
- (1) The Company shall establish a LAC Group Compliance Policy to make it known to all LAC Group directors, executive officers, and employees that duties must be executed in compliance with laws, regulations, the articles of incorporation, and internal rules, as well as in accordance with corporate and social ethics. The Company shall raise awareness of compliance by making continuous efforts through ascertaining and analyzing the status of execution.
- (2) The Company shall implement and maintain a whistleblowing system for the Company to respond appropriately to cases where any Director, Executive Officer or employe has found any legal violation or a legally dubious act. The Company shall establish an internal reporting system for the purposes of consultation and reporting of issues relating to compliance. The Company shall also stipulate that the content of reports shall be kept confidential and that whistleblowers should not be treated disadvantageously.
- (3) The internal audit section shall audit, based on the internal audit codes, whether employees are properly conducting their duties, and report the audit result to the President, Representative Director, CTO, the Board of Directors, and the Audit & Supervisory Board.
- (4) The Company shall have no connections to antisocial organizations, including business connections. The Company as a whole shall assume a firm attitude toward demands from an antisocial organization.
2. System for storage and management of information relating to the execution of duties by directors and executive officers
Information relating to the key decisions made at Shareholders Meetings, Board of Directors meetings, Management Committee meetings, etc. shall be appropriately recorded, stored, and managed in accordance with established management regulations that shall be amended when necessary to maintain a system that can be accessed by authorized persons, including shareholders, and other necessary parties.
3. Regulations and any other framework for the management of the risk of loss
- (1) With regard to important management matters, the Board of Directors or other important decision-making bodies shall establish and operate systems in which necessary risk assessments are conducted before final evaluations and decisions are made.
- (2) The Company shall institute systems to minimize risk and maintain and promote risk management and risk control activities by establishing regulations covering the identification, evaluation, and analysis of risk-related information, countermeasures, and systems, with regard to risks that arise across all business activities of LAC Group.
- (3) The Company shall establish regulations relating to crisis management and develop an emergency response system to enable prompt response to unforeseen circumstances and the steadfast execution of business continuity and crisis-recovery activities. Also the Company shall manage the record of any incident, accident etc. to prevent their recurrence.
4. System to ensure the efficient execution of duties by directors and executive officers
- (1) The Board of Directors shall hold regular meetings, as well as extraordinary meetings when necessary, to enable the appropriate and efficient execution of duties in accordance with the Board of Directors regulations that outline the basic rules concerning the responsibilities and authority of directors.
- (2) With regard to the execution of duties based on decisions made by the Board of Directors, the Company shall provide the details of the persons responsible, their responsibilities and the execution procedures in the regulations concerning the organization and division of administrative responsibilities.
- (3) The Company shall introduce an executive officer system, delegate authority to executive officers and pursue the streamlining and acceleration of business execution to position the Board of Directors as a body that determines management policies and supervision of business execution.
5. System to ensure the appropriateness of business operations across LAC Group
- (1) The Company shall share this basic policy with its subsidiaries and ensure that employees throughout the Group are familiar with it.
- (2) With regard to the management of subsidiaries, the Company shall establish essential points in the regulations concerning affiliated company management, and establish a system to report important management matters at each subsidiary to the Company and obtain prior approval when necessary.
- (3) The Company shall share its risk management policies with its subsidiaries and establish a system to receive regular reports about risk assessments and countermeasures from each subsidiary.
- (4) The Company shall ensure each subsidiary establishes a management system that is appropriate for each subsidiary in terms of its size, industry, and so on. The Company shall dispatch its directors and auditors to each subsidiary to manage and supervise business administration and the execution of duties.
- (5) The Company shall ensure widespread familiarization with LAC Group compliance policy across all subsidiaries. In addition, the Internal Audit Section shall conduct audits on the status of the creation and operation of subsidiaries' internal controls.
- (6) The Company's internal reporting system shall be made available to each subsidiary, and all relevant persons shall be made aware of this fact, to facilitate the early detection of and response to legal violations within LAC Group and other issues.
6. System to ensure the appropriateness of financial reporting in LAC Group
- (1) The Company shall establish an internal control system based on the Financial Instruments and Exchange Act to ensure the reliability of financial reporting in LAC Group.
- (2) The Company shall establish, as a system for internal control of financial reporting, a framework for making evaluations and improvements through ascertaining and inspecting Group-wide internal control, key business processes, etc.
7. Matters concerning employees who are requested to assist Audit & Supervisory Board members in their duties
The Company shall assign appropriate employees to assist Audit & Supervisory Board members in their duties when requested.
8. Matters concerning the need for employees mentioned in the previous paragraph to be independent from directors
Matters concerning the authority over personnel management (including appointment and transfer) of employees requested to assist Audit & Supervisory Board members in their duties shall be decided after consultation with the Audit & Supervisory Board. The Group shall ensure that the relevant employees are independent from the instruction of directors and strive to ensure the effectiveness of Audit & Supervisory Board members' instructions.
9. System to enable directors, executive officers, and employees to report to Audit & Supervisory Board members and other systems relating to reporting to Audit & Supervisory Board members
- (1) Directors, executive officers, and employees of LAC Group shall respond to requests made by Audit & Supervisory Board members to file reports on the status of the execution of their assigned duties.
- (2) The Company shall establish a system to allow directors, executive officers and employees of LAC Group to report to Audit & Supervisory Board members any information that may cause significant damage to the Group such as serious compliance violations or reputational damage and ensure that persons who make such reports will not be treated disadvantageously.
- (3) Expenses required by Audit & Supervisory Board members for the execution of their duties shall be covered by the Company in accordance with laws and regulations.
10. Other systems to ensure the effectiveness of audits conducted by Audit & Supervisory Board members
- (1) The Company shall establish a system whereby Audit & Supervisory Board members can hold regular meetings with the president and representative director to engage in dialogue.
- (2) The Company shall establish necessary systems to allow Audit & Supervisory Board members to attend Board of Directors meetings, Management Committee meetings, and other such meetings where important decisions are made, to inspect approval documents and other documents related to business execution and to request explanations from directors and employees when necessary.
- (3) The Company shall establish a necessary system to obtain the prior consent of Audit & Supervisory Board members when appointing or dismissing the division chief of the Internal Audit Section to strength coordination between Audit & Supervisory Board members and the Internal Audit Section.
- (4)The Company shall establish an environment wherein Audit & Supervisory Board members can execute their duties in collaboration with outside professional experts, such as lawyers and certified public accountants, when this is deemed necessary by Audit & Supervisory Board members.
- (5) The Company shall establish other necessary systems to facilitate the effective execution of audits by Audit & Supervisory Board members.
Risk Management System
In the ever-changing business environment, companies are challenged by an increasingly diverse and complex range of risks. We consider any form of uncertainty that may affect our ability to achieve our management objectives to be a risk, and regard the enhancement of risk management to be one of the most important aspects of business management. We prioritize risk management activities throughout the Group to enable us to fulfill our responsibilities to society and continue the operations of our business.
Alongside establishing a set of risk management regulations, we have instituted a system to promote the integrated execution of risk management activities with the Risk Management Committee at its center. Under the supervision of this committee, we formulate annual policies and activity plans, conduct reviews of risk countermeasure implementation and develop and operate a framework advancing risk management.
In addition, to achieve sustained Group-wide growth, we promote risk management activities not only at LAC but at all subsidiaries across the whole Group. Each section manager and subsidiary president is designated as a "risk management manager" to encourage and facilitate risk management activities.
Compliance System
The Company recognizes that the implementation of compliance initiatives is a crucial business management issue. To that end, we have instituted the LAC Group Compliance Policy, a corporate code of conduct, and employee conduct guidelines, and made all members of staff at each company within the Group fully aware of these policies and guidelines to prevent violations of social ethics or laws.
In addition to the formulation and revision of compliance regulations and guidelines, the Company is also engaged in creating action plans and strengthening our system to advance compliance, and planning and implementing internal education and training programs as well as responding to and conducting investigations into issues raised through internal reporting.
The Company has also established compliance rules relating to different aspects of work environments, relationships with business partners and other companies, information handling and private activities, to ensure all Group employees act ethically and with awareness of compliance requirements.