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

OMRON's Corporate Governance Structure

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 2020 Advisory Committee

Fiscal 2020 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 ensures transparency and fairness in business management, speeds up management decisions and practices, and strives to boost the OMRON Group’s competitive edge. The ultimate objective is to achieve sustained enhancement of corporate value. To this end, the Company reinforces the supervisory functions of the Board of Directors through initiatives for improving its effectiveness.
Such initiatives are undertaken in a cycle of (1) evaluation of the Board of Directors’ effectiveness and (2) determination of the policy for the operation and focus themes of the Board of Directors and formulation and implementation of annual plans.

(1) Evaluation of the Board of Directors’ effectiveness

The Company’s evaluation of the Board of Directors’ effectiveness is conducted by the Corporate Governance Committee chaired by a Director (Independent) and comprising only Directors (Independent) and Audit & Supervisory Board Members (Independent) (hereinafter “Outside Executives”). Outside Executives act as members of the Board of Directors while having the perspectives of all stakeholders including the shareholders. The Corporate Governance Committee, which is composed only of Outside Executives, performs evaluations in order to ensure that evaluations are both objective and effective.

(2) Determination of the policy for the operation and focus themes of the Board of Directors and formulation and implementation of annual plans

Based on the evaluation results by the Corporate Governance Committee in (1) and the business environment, etc., the Board of Directors determines the policy for the operation and focus themes of the Board of Directors for the next fiscal year. The Board of Directors formulates and implements annual plans based on this operation policy.

The Company continues to improve the Board of Directors’ effectiveness by implementing (1) and (2) above on a yearly basis. The Corporate Governance Committee has evaluated these initiatives to be the Company’s unique, optimal activities that are both objective and effective. The Board of Directors recognizes the Company's initiatives as being more effective than evaluations by third parties.

Initiatives towards improving the Board of Directors' effectiveness

Initiatives towards improving the Board of Directors' effectiveness

2. Evaluation of the Board of Directors’ effectiveness for fiscal 2019

The methods of the evaluation of the Board of Directors’ effectiveness and the evaluation items in the self-evaluation for fiscal 2019 are as described below.

(1) Evaluation methods

1) Self-evaluations by Directors and Audit & Supervisory Board Members

  • Each Director and Audit & Supervisory Board Member performed self-evaluations of the contents of discussions at the meetings of the Board of Directors and the extent of oversight functions exercised, immediately following each meeting of the Board of Directors held in and after July 2019.
  • Each Director and Audit & Supervisory Board Member performed self-evaluations of the operation, etc. of the Board of Directors over the course of the year following the meeting of the Board of Directors held in March 2020.

2) Interviews by the Chairman of the Board of Directors

  • The Chairman of the Board of Directors conducted individual interviews to Directors and Audit & Supervisory Board Members between January and March 2020.

3) Evaluation by the Corporate Governance Committee

  • The Corporate Governance Committee conducted evaluations of the focus themes in (1) above in March 2020. In April, the effectiveness of the Board of Directors was scheduled to be evaluated based on the results of the self-evaluations for fiscal 2019 as a whole in (1) above and the results of the interviews in (2) above, and the results were to be reported to the Board of Directors in May 2020. However, because the meeting of the Corporate Governance Committee was postponed in response to COVID-19, the evaluation could not be performed in April.

(2) Self-evaluation items

Self-evaluation items are as follows. Evaluations were performed from the perspectives of whether or not the Board of Directors sufficiently exercised its oversight functions, and whether it contributed to the exercise of its oversight functions. Evaluations are performed by completing anonymous questionnaires. For each evaluation item, answers are provided using five-point scales and free comment fields.

● Self-evaluations performed immediately following meetings of the Board of Directors

  • Contents of discussions at the meeting of the Board of Directors
  • Extent of oversight functions exercised by the Board of Directors

● Self-evaluations for the entire year, performed at the end of the fiscal year

1. Operation of the Board of directors

  1. Policy for the operation of the Board of Directors for fiscal 2019
  2. Focus themes in the operation Policy
  3. Deliberations and reports regarding issues other than focus themes
  4. Policy for the operation and focus themes of the Board of Directors for fiscal 2020

2. Issues other than operation of the Board of Directors

  1. Individual meetings
  2. Provision of information such as site visits
  3. Self-evaluations performed immediately following the meetings of the Board of Directors

3. Advisory committees

4. Other overall issues regarding the Board of Directors

● Other self-evaluations (evaluations performed when new officers are appointed, when medium-term management plans are formulated, when changes are made to the corporate governance system, etc.)

  • Scale and composition of the Board of Directors
  • State of operations of the Board of Directors
  • Operation of advisory committees

3. Results of evaluation of the Board of Directors’ effectiveness for fiscal 2019

The Corporate Governance Committee initially planned to evaluate the effectiveness of the Board of Directors in April 2020 and report the results to the Board of Directors in May 2020. However, the meeting of the Corporate Governance Committee has been postponed in response to COVID-19. Accordingly, the results of the evaluation of the Board of Directors’ effectiveness for fiscal 2019 will be announced after the Corporate Governance Committee performs its evaluation.

4. Policy for the Operation of the Board of Directors for Fiscal 2016 to 2019

Since the introduction of the effectiveness evaluations of the Board of Directors, the Board of Directors has both determined the policy for the operation of the Board of Directors and exercised its oversight function focusing on operating policies and upon important topics defined therein. As a result of these initiatives, board operations now closely resemble those of a monitoring board, focused on deliberations of material medium- and long-term topics. Topics requiring continued monitoring have been classified as ongoing topics for the next fiscal year. In particular, sustainability initiatives have been categorized as three-year themes, subject to detailed discussions.
These discussions included the opinions of many outside directors. The Board of Directors considered these opinions and reflected these suggestions in initiatives.
OMRON continues to improve board effectiveness to ensure sustained enhancement of corporate value.

Policy for the Operation of the Board of Directors for Fiscal 2016 to 2019

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

Since establishing the Management Personnel Advisory Committee (now the Personnel Advisory Committee) in 1996, OMRON has spent more than 20 years enhancing its corporate governance system. To achieve sustainable enhancement of corporate value, the Company will continue improving its corporate governance.

Corporate Governance Initiatives