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Basic Policy of Corporate Governance

pdf_icon.pngCorporate Governance ReportApril 27, 2017

Basic Approach to Corporate Governance, Capital Structure, Company Attributes and Other Basic Information

Basic Views on Corporate Governance

The CyberAgent Group (the “Group”) makes efforts to improve its corporate value under our vision of “create the 21st century's leading company.”
While recognizing that thoroughgoing corporate governance is essential for expanding business, the Group takes measures so that its corporate activities comply with laws, regulations, social norms, ethics, etc.
In order to respect the positions of stakeholders and fulfill corporate social responsibility, the Group produced the “CyberAgent Mission Statement” for the purposes of not only following laws and regulations, but also establishing corporate ethics, and strives to improve the morals of executives and employees.

Reasons for Non-compliance with the Principles of the Corporate Governance Code

<Mid-term management plan>
Principle 4-1-2: Since the business environment and technologies of the Internet industry, in which we operates business, are changing rapidly, we explain our mid to long-term managerial strategies continuously through IR activities, etc. instead of producing mid to long-term management plans, to promote the understanding of shareholders and investors.
<External directors>

Principles 4-8: One independent outside director who meets the qualification of an independent officer as stipulated by the Tokyo Stock Exchange is appointed. This enabled discussions based on the opinions from independent standpoint at the Board of Directors. In addition, in order to strengthen corporate governance, we consider appointing more than one independent outside director is important. We strive to select and secure an appropriate candidate who understand our management and corporate value, and is independent from our company management.

Disclosure Based on the Principles of the Corporate Governance Code

Principle 1-4: If business tie-ups are expected to be cemented, our company may hold the Cross-Shareholdings. As for the exercise of voting rights of such strategically held shares, we will examine the content of each bill and deal with it properly.
<Related Party Transactions>
Principle 1-7: With regard to all transactions, including the ones between related parties, our “regulations for the board of directors,” “rules for authority,” etc. set forth appropriate systems and procedures according to the scale and importance of each transaction. Each conflicting interest transaction of directors requires the approval of the board of directors pursuant to law, and the results of the transaction are reported at a meeting of the board of directors.
<Full Disclosure>
Principle 3-1:
1. Our vision, management strategies, etc. are disclosed in the financial reports and the website of the Company.
2. Our basic policy for corporate governance is written in our website, corporate governance reports, and securities reports.
3. With regard to compensation, etc. of Directors, it is determined based on the evaluation by their superiors, while comprehensively considering the performance of our corporate group, the situation of the business of which they are in charge, market environments, etc. so that the total amount compensation will not exceed the upper limit specified at a general meeting of shareholders.
4. With regard to the policy and procedures for nominating candidates for Directors, we adopted our original system for replacing executives called “CA8,” in which the number of operating officers is basically set at 8 for the constructive operation of the board of directors and two of them are replaced every two years. As for candidate auditors, we select those who understand the corporate ethos of our company and possess adequate expertise, experience, knowledge, and independence for appropriately auditing the performance of directors and operating officers, etc. while receiving the consent of the board of auditors.
5. The reasons for selecting each candidate external auditor are disclosed through the convocation notice of a general meeting of shareholders.
<Roles and duties of directors>
Principle 4-1-1: The board of directors decides the execution of each business specified as items to be decided by the board of directors in the “regulations for the board of directors,” “rules for authority,” etc. For the execution of other businesses, the management is entrusted with decision making for them in accordance with the “rules for authority.”

<Independence Standards and Qualification for Independent Directors>
Principle 4-9: Our company selects independent external directors in accordance with the independence criteria specified by Tokyo Stock Exchange. The board of directors select those who understand the business administration and corporate value of our company, are independent of the management of our company, and are expected to contribute to constructive discussions in the board of directors, as candidate external directors.
<View on the Appropriate Balance Between Knowledge, Experience and Skills of the Board as a Whole, and also on Diversity and Appropriate Board Size>
Principle 4-11-1: The number of members of the board of directors of our company shall be up to 10, as set forth in the articles of incorporation. We select candidate members while putting sufficient consideration to the balance and diversity of knowledge, experience, ability, etc. regarding each business of our company.
<Concurrent positions of Directors and Company Auditors>
Principle 4-11-2: Concurrent positions of Directors and Company Auditors are disclosed in the notice of annual general shareholders’ meetings, securities reports, and corporate governance reports.
<Summary of Analysis and Evaluation concerning Effectiveness of the Board of Directors>
Principle 4-11-3:
We conducted a questionnaire survey about the effectiveness of the board of directors targeted at directors and auditors on Octorber 6, 2016. In the result, regarding the number of times the Board of Directors has been implemented, the scope of the proposal being submitted, the quantity and the contents of the materials, there is no problem and deliberations are made with sufficient time secured. Directors are responsible for not only duties but also management supervision of the entire company, discuss about budget, performance forecast, business and management risk, etc. and then making decisions that contributes to the companywide business expansion, concentration and selection, corporate value improvement appropriately.
<Training policy for Directors and Company Auditors>
Principle 4-14-2: We hold training sessions for appointed directors and auditors while emphasizing compliance, to help them acquire necessary knowledge for fulfilling their roles and duties.
<Policy for dialogues with shareholders>
Principle 5-1: We recognize that in order to achieve sustainable growth and improve corporate value in the mid or long term, it is essential to have active dialogues with investors, including shareholders, and reflect their opinions and requests in our business administration. We developed an IR system, in which the representative director and managing director in charge of information handling take central roles and the PR/IR division serves as a contact point, for responding to inquiries from shareholders and other investors.

Independent Director-related

No. of Independent Directors 3
Koichi Nakamura Until June 2014, He was the executive officer of Recruit Holdings Co., Ltd., which is the Company's specified related business operator (major customer) He accumulated experience of business administration, understood the management and value of our company, and can give practical and objective advice and oversee the business operation of our company from an independent standpoint.
Masao Horiuchi Masao Horiuchi is the Director, Head of General Planning Office of U-NEXT Co.,LTD. In order to gain advice and proposals based on his abundant experience in and knowledge of finance, accounting, taxes and internal control. Masao Horiuchi is an Outside Auditor for whom there is no possibility of a conflict of interest arising with general shareholders. The Company believes that he is appropriate as an independent officer of the Company.
Isao Numata Isao Numata is the President of Five Eyes Network, Co., Ltd. and is the director of Security Business Laboratory Co., Ltd. In order to gain advice and proposals based on his abundant experience in and knowledge of finance, accounting, taxes and internal control. Isao Numata is an Outside Auditor for whom there is no possibility of a conflict of interest arising with general shareholders. The Company believes that he is appropriate as an independent officer of the Company.

Stock Options

Stock options are granted with the objective of further boosting the motivation and morale of the Company’s Directors and employees of the Company as well as Directors and employees of the Company’s subsidiaries towards raising business performance, etc. The total value of stock options as of March 31, 2017 was a balance of 922,800 (0.73% of issuing shares, including treasury stocks) issued shares and an assumed total paid-up value of 658,918,000yen.

Overview of the Current Corporate Governance System

Regarding matters related to the execution of duties, careful decision-making is carried out at the meeting of the Board of Directors, which is comprised of eight Directors and 1 Outside Director, 3 Auditors (include 2 Independent Outside Auditor) in attendance on particularly important matters, etc. that are established through law, the Company’s Articles of Incorporation and internal regulations as matters to be determined by the Board of Directors. Regularly scheduled meetings of the Board of Directors are held once a month, with extraordinary meetings held as needed. A total of 13 meetings of the Board of Directors were held in FY2016.

Regarding the matters other than what is regarded as a matter to be resolved by the Board of Directors, flexible decision-making is practiced
at a full-time board meeting consisting of eight full-time executive directors and one full-time corporate auditor on weekly basis.

Important investments are discussed by the Investment Committee carefully in advance, and the results of the discussion are reported to the Board of Executive Directors and the Board of Full-Time Directors, so as to make more appropriate decisions for investments. The Company has selected the company with the Board of Corporate Auditors as the institutional design under the Corporate Law, auditors attend the meetings of the Board of Directors and other important meetings, to check the legality of business execution. If necessary, they receive reports and explanations from the executives and employees of the Company, and investigate major subsidiaries and offices, etc. The Board of Auditors holds monthly and extraordinary meetings. In FY2016, a total of 13 meetings were held.

The Internal Audit Office, which is in charge of carrying out the internal audits of the Company’s divisions and subsidiaries in cooperation with Auditors, report the results of the audits to the Board of Directors once every quarter.

Reasons for the Adoption of the Current Corporate Governance Structure

The Company recognizes it as one of the important issues of management, that the company improves governance structure and carries out prompt measures. Auditing of the corporate group is conducted by two outside auditors of independent directors, which the Company considers sufficient to fulfill the function of external oversight and advice to management, and to ensure objectivity and independence. From the viewpoint of seeking to improve corporate value over the medium to long term, one Independent Outside Director provides advice on management policies, supervision of the execution of duties by Directors, oversee of such conflicts of interests between the Company and the Directors. In addition, as an independent measure for corporate governance, the Company has introduced the “CA8” system for replacing directors. The upper limit of the number of directors is 8 and 2 directors are replaced with new ones every two years, so that the board of directors functions in a constructive manner.

State of Efforts Made toward the Revitalization of the Annual General Meetings of Shareholders and Facilitation of the Execution of Voting Rights

Early dispatch of Convocation Notice of Shareholders’ Meeting

The Company makes efforts to send out proxy materials at an early date in order to allowshareholders sufficient time to consider resolutions. Proxy materials are dispatched more than oneweek prior to the statutory date (more than three weeks before the convening of the GeneralMeeting of Shareholders). Materials are also made available on the Company’s website, the Tokyo Stock Exchange’s website, and the electric platform of the voting exercise prior to the dispatch date.

Setting of the Annual General Meeting of Shareholders on dates that avoid peak general Shareholder meeting seasons

In order to more shareholders join Annual General Meeting,the date is decided avoiding concentrated days.The 19th Annual General Meeting of Shareholders was held on Friday, December 16, 2016.

Execution of voting rights through electromagnetic methods

Since the 10th Annual General Meeting of Shareholders (held on December 20, 2007), theCompany has accepted the execution of voting rights via the Internet from personal computers andmobile phones so that more shareholders can participate the meeting.

Measures to promote the use of the electronic voting platforms, and other improvements to the voting environment for institutional investors

The Company adopted electronic voting platforms from the 18th Annual General Meeting ofShareholders (held on December 11, 2015), in order to provide institutional investors with sufficienttime to consider the content of the resolutions.

Brief notice of convocation A brief notice of English convocation is published on the corporate website. in English

A brief notice of English convocation is published on the corporate website.

State of Efforts related to Respect of the Stakeholder Position

Stipulation in in-house regulations, etc. regarding respect of the stakeholder position

In order to respect the positions of stakeholders and fulfill corporate social responsibility, the Group produced the “CyberAgent Mission Statement” for the purposes of not only following laws and regulations, but also establishing corporate ethics, and strives to improve the morals of executives and employees.

Execution of environmental conservation and corporate social responsibility activities

We have placed more importance on the growing industry of the internet, and have equipped ourselves with the knowledge to use it effectively. We are making efforts in the various fields of “Education and Cultivation”, “Safety and Safe Online Use”, “Regional and Social Contribution”, “Sports and Cultural Support”. In addition, we have started placing efforts into “Creating Work Opportunities” as we have recognized the importance in continually creating employment to contribute society. In particular, in terms of “Education and Cultivation”, we see the social significance of cultivating adept young programmers and have founded CA Tech Kids Inc. a consolidated subsidiary, which provides programming lessons to elementary school students. Since 2017, in collaboration with an incorporated NPO EdoTec Global, we work in support of IT education in developing countries. Also, we operate the crowdfunding platform “Makuake” through our subsidiary, CyberAgent Crowd Funding, Inc. Crowdfunding service is one of the growth strategies the Japanese government sets and is effective in nurturing venture companies. We aim to contribute to the revitalization of the Japanese economy through "Makuake."

Formulation of policies, etc. related to the provision of information to stakeholders

The Company’s policy related to the provision of information to stakeholders is clearly stated inits Disclosure Policy. The Company executes information disclosure in accordance with the TokyoStock Exchange’s timely disclosure regulations. Regarding important information that may have animpact on investment decision-making, the Company strives to enable equal access by allstakeholders to such information.

Policy and actions to be a woman-friendly company

Female management ratio currently comprises 19.5% of employees on a non-consolidated basis. The Company, while remaining a venture firm with a vision to “create the 21st century’s leading company,” and based on a policy of offering employee's lifetime employment and providing “challenges and peace of mind as a set,” focuses on creating an environment in which “talented employees continue to actively participate over the long term.” Measures for the active participation of women, along with the systems and environment that support it, are as follows.

*Active participation of women
We support the women's social advancement promoted by the Japanese government, and we are promoting the employment of women. The Company encourages the participation of women, and at every career stage, including recruitment and promotion, conducts its evaluations based on ability and performance, without regard to gender. The Company supports an environment that makes it easy for women to continue working.

*Systems and environment to support women
The Company has previously provided childcare assistance to employees, including systems such as reduced working hours and maternity benefits. In May 2014 the Company introduced the new “macalon” system to support women. (The name is a combination of “mama” (ma), CyberAgent (ca), and “long” (lon), as in “work for a long time.”) The program comprises 1) “Pre-pregnancy Leave” that can be taken for such purposes as going to the hospital for fertility treatments; 2) “Pre-pregnancy Concierge” to receive individual counseling by a professional; 3) “Kids at Home” to allow employees to work from home when caring for children, such as due to a sudden illness or when children are unable to attend nursery school; and 4) “Kids Day Leave” to allow employees time off for school events, such as entrance/graduation ceremonies or parent participation days, or other anniversaries. Additionally, in 2016, we introduced 3 systems that 1) the company bears part of expensive non-approved nursing fees to promote the return of female employees who can not return to work because they can not enter certified nursery school, 2) "Lunch with your local" which provides a place and opportunity for information exchange among mom employees living in the same city/town/village, 3) a public information magazine for mom employees. These systems are aimed at improving the workplace environment where women can continue working even after childbirth and childcare, and we agree with promoting women's advancement of society promoted by the government. Through these efforts, we are carrying forward to build a company that allows employees to work for long periods while enriching their work and life.

*This is an excerpt of the Corporate Governance Report.
Please refer to the PDF for all information.