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Corporate Governance Framework

Organizational Structure

OMRON has chosen to adopt the organizational structure of a "Company with Audit & Supervisory Board."
The Board of Directors strives for sustainable enhancement of the OMRON Group's corporate value by exercising oversight over overall management through the election of directors, Audit & Supervisory Board members, and executive officers; the determination of compensation for directors and executive officers; and making important operational decisions.
The Audit & Supervisory Board and the Audit & Supervisory Board members work to secure the integrity of the OMRON Group and achieve the sustainable enhancement of corporate value by conducting audits on legality and appropriateness of directors' duties, and the fulfillment of the Board of Directors' oversight obligations. In addition, each Audit & Supervisory Board member can exercise his/her authority on his/her own as a single-person organ in which the power over final decision-making is given to one person. This allows them to play a crucial role in strengthening internal controls.
Furthermore, to enhance the oversight functions of the Board of Directors, four voluntary advisory committees are attached to the Board of Directors. The President & CEO does not belong to any of these committees. The Personnel Advisory Committee, the CEO Selection Advisory Committee, and the Compensation Advisory Committee are chaired by an independent outside director, and a majority of each committee's members shall be composed of independent outside directors. The CEO Selection Advisory Committee is dedicated to the deliberation and nomination of candidates for CEO, which is the top-priority matter in management oversight. In addition, the Corporate Governance Committee, established for the purpose of enhancing corporate governance, is also chaired by an independent outside director, and exclusively comprises independent outside directors and independent outside Audit & Supervisory Board members. Through these unique initiatives, OMRON has established and adopted a system that enhances the transparency and objectivity of management's decision-making process.
By incorporating the best aspects of the corporate governance system of a "Company with Committees (Nomination, etc.)," OMRON has created the kind of hybrid corporate governance structure that we feel is most appropriate for OMRON as a "Company with Audit & Supervisory Board."

OMRON's Corporate Governance Structure

Organizational Chart

Board of Director

Roles and Responsibilities

The Board recognizes its fiduciary responsibility to shareholders and assumes the responsibility of sustainably improving the OMRON Group's corporate value through appropriate exercise of its authority. To fulfill the above responsibilities, the Board exercises oversight functions over the overall management in order to ensure fairness and transparency of management practices. The Board does so through election of directors, Audit & Supervisory Board members, and executive officers. It also determines compensation for directors and executive officers, and makes important operational decisions. The Board is also responsible for establishing a system to respond to cases when Audit & Supervisory Board members or external auditors have discovered fraud within the OMRON Group and demanded appropriate remedies or pointed out deficiencies or problems.

Composition

To effectively fulfill its duties and responsibilities, the Board of Directors is composed of members with experience, specialized knowledge, and deep insight in a well-balanced manner. Management oversight and business execution are kept separate and a majority of the Board shall consist of directors who are not involved with business execution. At least one-third of the Board shall consist of independent outside directors.

Audit & Supervisory Board

Roles and Responsibilities

The Audit & Supervisory Board bears in mind its fiduciary responsibility to shareholders and works to secure the integrity of the OMRON Group toward sustainable enhancement of corporate value, and acts for the common interests of the shareholders. To fulfill the above-mentioned responsibility, the Audit & Supervisory Board strives to develop a system to ensure effectiveness of audits conducted by each of its members. The Audit & Supervisory Board works in collaboration with independent outside directors and the internal auditing department. The Audit & Supervisory Board also exchanges views with independent outside directors and provides them with information acquired through auditing.

Composition

To effectively fulfill its duties and responsibilities, the Audit & Supervisory Board is composed of members with experience, specialized knowledge, and deep insight in a well-balanced manner.

The Personnel Advisory Committee

Roles

The Personnel Advisory Committee has been set up for the purpose of bolstering the management oversight function of the Board of Directors by enhancing the transparency, objectivity, and timeliness of the decision-making process regarding nomination of candidates for directors, Audit & Supervisory Board members, and executive officers. The Personnel Advisory Committee sets criteria and policies relating to the selection of Directors, Audit & Supervisory Board Members and Executive Officers. The committee also deliberates about candidates.

Composition

The Personnel Advisory Committee is chaired by an independent outside director, and a majority of committee members shall consist of independent outside directors. The committee comprises directors excluding Chairman and CEO.

The CEO Selection Advisory Committee

Roles

The CEO Selection Advisory Committee has been established for the purpose of bolstering the management oversight function of the Board of Directors by enhancing the transparency, objectivity, and timeliness of the decision-making process regarding nomination of candidates for CEO. The CEO Selection Advisory Committee that specializes in selection of the President and appoints a candidate for the President and CEO for the next fiscal year, and deliberates about CEO succession planning and contingent succession planning to take over the position in emergency situations.

Composition

The CEO Selection Committee is chaired by an independent outside director, and a majority of committee members shall consist of independent outside directors. The committee comprises Directors who are not engaged in business execution.

The Compensation Advisory Committee

Roles

The Compensation Advisory Committee has been established for the purpose of bolstering the management oversight function of the Board of Directors by enhancing transparency and objectivity in determining compensation amounts for each director and executive officer. The Compensation Advisory Committee deliberates about compensation levels and amounts for Directors and Executive Officers, as well as setting compensation policies and carrying out compensation assessments.

Composition

The Personnel Advisory Committee is chaired by an independent outside director, and a majority of committee members shall consist of independent outside directors. The committee comprises directors excluding Chairman and CEO.

Corporate Governance Committee

Roles

The Corporate Governance Committee has been established for the purpose of enhancing the transparency and fairness of management practices from the standpoint of all stakeholders and to continuously take steps to enhance corporate governance. The Corporate Governance Committee discusses policies to continuously enhance corporate governance and to increase management transparency and fairness.

Composition

The Corporate Governance Committee is chaired by an independent outside director, and its members comprise independent outside directors and independent outside Audit & Supervisory Board members.

Fiscal 2019 Advisory Committee

Evaluating the Effectiveness of the Board of Directors

Status of initiatives towards improving the Board of Directors' effectiveness

1. Overview of initiatives towards improving the Board of Directors' effectiveness

The Company works to improve the Board's effectiveness to realize the sustained enhancement of corporate value. Such initiatives are undertaken in a cycle of (1) evaluation of the Board's effectiveness and (2) determination and implementation of the policy for the operation of the Board of Directors based on (1).

(1) Evaluation of the Board's effectiveness

Evaluation of the Board's effectiveness is conducted by the Corporate Governance Committee chaired by a Director (Independent) and comprising Directors (Independent) and Audit & Supervisory Board Members (Independent).
Methods of evaluation are as described below:
1) Directors and Audit & Supervisory Board Members conduct self-evaluation by completing an anonymous self-evaluation questionnaire.
2) Individual interviews to Directors and Audit & Supervisory Board Members are also conducted by Chairman of the Board of Directors Meeting, who asks about improving the effectiveness of the Board.
3) The Corporate Governance Committee analyzes the results of the self-evaluations in 1) and the interviews by the Chairman of the Board of Directors in 2) and conducts evaluation of the Board's effectiveness.

(2) Determination and implementation of the policy for the operation of the Board

Based on the evaluation results by the Corporate Governance Committee in (1), the Board of Directors formulates and determines the policy for the operation of the Board of Directors for the next fiscal year and operates the Board of Directors based on the policy.
The Company continues to improve the Board's effectiveness by implementing the above (1) and (2) on a yearly basis.

Initiatives towards improving the Board of Directors' effectiveness

2. Overview of the results of evaluation of the Board of Directors' effectiveness for fiscal 2018

(1) Policy for the operation of the Board of Directors for fiscal 2018

The Board of Directors shall demonstrate its oversight function to ensure the achievement of the medium-term management plan "VG2.0," based on the results of evaluation of the Board’s effectiveness for fiscal 2017, with emphasis on the following three areas.

  • Strategies regarding information systems and quality in the medium-term management strategies
  • Ongoing initiatives for human resources strategies and technical strategies
  • Initiatives to address material sustainability issues (materiality)

(2) Results of evaluation of the Board's effectiveness for fiscal 2018

Based on the favorable results of self-evaluations by Directors and Audit & Supervisory Board Members and interviews conducted by Chairman of the Board of Directors in terms of evaluation of theme selection, the details of discussions, the status of operation and other matters, the Corporate Governance Committee confirmed that the Board of Directors is sustainably improving the effectiveness of the Board of Directors for sustained enhancement in corporate value and demonstrating its oversight function.

The Corporate Governance Committee evaluated each theme in the policy for the operation of the Board of Directors as follows.

As for strategies regarding information systems and quality in medium-term management strategies selected as a theme for the first time in the fiscal year under review, consensus on the future direction was fostered after the Board of Directors understood the current situation and received useful suggestions from Directors (Independent) and Audit & Supervisory Board Members (Independent) based on their experience and insights. Regarding human resources strategies and technical strategies, which are ongoing themes from fiscal 2017, the Board of Directors held in-depth discussions through multifaceted question and answer sessions with the understanding that executive organization advances strategy-based initiatives and steadily facilitates their progress and penetration. Regarding initiatives to address material sustainability issues (materiality), an ongoing theme in the third year, the Board of Directors confirmed that such initiatives and engagement activities evolve together and the system to promote the initiatives is functioning properly.

The Corporate Governance Committee recognized that themes raised as the policy for the operation of the Board of Directors for fiscal 2018 were organically associated with the keywords “human resources” and “technology,” through discussions about such themes from the standpoint of enhancing medium- to long-term corporate value at the Board of Directors meetings.

In addition, Directors and Audit & Supervisory Board Members actively make comments at the Board of Directors meetings. In particular, Directors (Independent) and Audit & Supervisory Board Members (Independent) make comments and proposals based on their experience and insights. Executive organization takes the opinions and proposals of the Board of Directors seriously and leverages them to further strengthen strategies and initiatives.

<Overview of discussions of each theme>

  • Strategies regarding information systems

Recognized the issues of the current IT systems and discussed a direction of a company-wide IT system with an eye to next long-term vision, assuming that technological innovation mainly through
AI will transform business systems drastically.

  • Strategies regarding quality

Recognized the issues of the current Quality Management System (QMS), and discussed a direction of improvement for the ideal QMS and the policy for human resource development that is the key to improvement.

  • Human resources strategies

Confirmed the whole picture of human resources strategies and progress of the main themes, and discussed a theme of future strategies (initiatives mainly to develop human resources for leadership role in charge of management, diverse human resources and self-dependent human resources).

  • Technical strategies

Discussed strategies for value creation and technology creation to achieve management of technology, and initiatives to identify and develop transformative human resources to support such strategies.

  • Initiatives to address material sustainability issues (materiality)

Confirmed the progress of initiatives to achieve targets for material sustainability issues, and also discussed target-setting and initiatives to solve new social issues.

3. Policy for the operation of the Board of Directors for fiscal 2019

Based on the evaluation results of the board’s effectiveness for fiscal 2018, the board of directors discussed and determined the policy for the operation of the board of directors for the fiscal 2019.
Fiscal 2019 is the third year of OMRON’s “VG2.0” medium-term management plan. In this fiscal year, the Board of Directors will fully put its oversight and supervision functions to use, in order to ensure the achievement of VG2.0 goals, while also looking ahead to the next long-term vision set to start in fiscal 2021.

<Key Initiatives Set in Operational Policies>

  • Confirmation of the direction for long-term strategies with the upcoming long-term vision in mind
  • Continuous execution of strategies concerning information systems and quality
  • Implementation of measures to deal with changes anticipated to occur in the internal and external business environments in fiscal 2019 and 2020 

The Company will make efforts in enhancing the Board's effectiveness for sustained improvement in corporate value.

Training for Directors and Audit & Supervisory Board Members

OMRON offers training and information necessary for directors and Audit & Supervisory Board members to fulfill their roles and responsibilities, as required.
Specifically, when directors and Audit & Supervisory Board members newly assume office, they will be offered lectures by experts and training regarding laws and corporate governance. Training regarding amendments to law and management issues will continuously be offered after they assume office. In addition to the above, when independent outside directors and independent outside Audit & Supervisory Board members newly assume office, an explanatory session about the OMRON Group's business and a tour to observe OMRON Group's main business sites are organized.
Furthermore, the Board of Directors annually makes opportunities available for explanation of each business's strategy.

[ Examples of Training Opportunities ]

  • For newly appointed internal directors and internal Audit & Supervisory Board members:Offering lectures on laws; participation in corporate governance seminars
  • For newly appointed outside directors and outside Audit & Supervisory Board members: Briefing on the OMRON Group's medium-term management plan, as well as business strategies, corporate governance initiatives, etc. in accordance with the plan; participation in factory tours
  • For outside directors: Participation in factory tours in and out of Japan, exhibitions (System Control Fair, etc.), company events (TOGA Global conference), etc.

Corporate Governance Initiatives

Over the past 20 years OMRON has strived to enhance its corporate governance system. As part of this drive, OMRON set up the Management Personnel Advisory Committee (now the Personnel Advisory Committee) in 1996. To achieve sustainable enhancement of corporate value, the Company will continue improving its corporate governance.

About OMRON

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