Corporate Governance

We are working to perfect a governance framework that ensures highly fair,and neutral and transparent management.

We have built a system that facilitates the prompt implementation of policy initiatives by separating decision making by the Board of Directors from the actual execution of company policy by executive officers. In addition, highly independent outside directors provide oversight of the company’s management and execution of business, helping to raise the level of fairness, neutrality, and transparency in the company’s management. We are working to perfect a governance framework that ensures highly fair, neutral, and transparent management.

Our Approach to Corporate Governance

Our basic policy on corporate governance is to promote policies that fulfill our social responsibilities based on corporate ethics and that contribute to the welfare of the community based on sound legal and regulatory compliance. We work to consistently increase enterprise value for the benefit of our shareholders and all stakeholders by strengthening policies and structures aimed at realizing highly efficient, fair, and transparent business practices.

Executive Officer System and Outside Directors

The Board of Directors makes decisions on basic operational policy, legal issues, and other important matters, and oversees the status of execution. Functional separation between the executive officers and the Board of Directors enables swift policy execution and strengthens the auditing of execution. The Board of Directors is convened monthly, and management meetings for executive officers, with representatives of the Board of Corporate Auditors also attending, are held twice a month as part of ongoing initiatives to strengthen business operations through prompt decision making and strict execution. As of June 25, 2015, Azbil’s Board of Directors consisted of nine members, including three outside directors. Six of the directors also serve as executive officers. All of the outside directors are highly independent and provide oversight of the company’s management and execution of business, thereby helping to raise the level of fairness, neutrality, and transparency in the company’s management.

Corporate Auditor System and Internal Audits

Azbil has a corporate auditor system in which five corporate auditors, including three outside auditors, are appointed, with two of these auditors serving on a full-time basis. The corporate auditors carry out rigorous audits of the administrative decisions and conduct of business by the directors and executive officers, primarily from the perspective of legal compliance. In order to strengthen the auditing function, the company has established the Corporate Auditors’ Staff Office under the direct control of the Board of Corporate Auditors, with full-time personnel who assist the corporate auditors in their duties. The corporate auditors maintain close ties with accounting auditors and the Internal Audit Office, exchanging information and opinions regularly in order to improve the effectiveness and efficiency of the audits. In addition, the Internal Audit Department, which reports directly to the President, regularly audits organizations and structures, the conduct of business, business risks, compliance, and internal control systems. It also provides specific advice and proposals for operational controls and business improvements.

Corporate Governance Framework (As of June 25, 2015)

Corporate Governance Framework

Executive Compensation

Policies on executive compensation have been established as part of our effort to strengthen corporate governance and achieve sustained improvements in corporate value by meeting the azbil Group’s management targets, policies have been established concerning executive compensation. The remuneration of officers clearly reflects business performance during the period in question, based on a system that takes into account each officer’s role, responsibilities, and accomplishments. The remuneration limit for the directors as a group (a maximum of ¥450 million annually) is set at the annual shareholders’ meeting. Azbil has established a Nomination and Remuneration Committee based on its Internal Rules for Director Remuneration to ensure transparency and objectivity in setting the amount of remuneration for individual directors. This committee, consisting of outside directors and representative directors, reviews and determines the remuneration of each director, including the representative directors. The remuneration limit for corporate auditors as a group (a maximum of ¥120 million annually) is also set at the annual shareholders’ meeting, while the remuneration of individual corporate auditors is determined on the basis of discussions among the corporate auditors.

Remuneration of Executives, etc.

Reasons for Appointing Outside Directors

Eugene H. Lee

Mr. Eugene H. Lee brings in-depth knowledge of international law and international business, as well as experience in the management of global companies. The company secured his services in order to benefit from his wealth of experience and wide-ranging insight as a company executive, and in order that corporate governance might be strengthened by virtue of Mr. Lee’s independent position.

Katsuhiko Tanabe

Mr. Katsuhiko Tanabe has been a lawyer for many years and is a legal expert who has held important positions of responsibility in the legal profession. The company secured his services in order to benefit from his specialist viewpoint and wide-ranging insight as a lawyer, and in order that corporate governance might be strengthened by virtue of Mr. Tanabe’s independent position.

Takeshi Ito

Mr. Takeshi Ito has held a succession of important posts in securities and investment management companies, and has abundant knowledge and experience in the financial field. He was appointed in order to provide advice and suggestions for the company’s management based on his perspectives on capital markets and other knowledge and experience. In addition, he was appointed to strengthen corporate governance by virtue of his independent position.

Reasons for Appointing the Outside Auditors

Kinya Fujimoto

As a certified public accountant, Mr. Kinya Fujimoto has a wealth of knowledge and experience concerning financial affairs and accounting. He was appointed to audit all aspects of the company’s business from his specialist viewpoint, based on his knowledge and experience, and to strengthen corporate governance by virtue of his independent position.

Mitsuhiro Nagahama

Mr. Mitsuhiro Nagahama has held a succession of important posts at financial institutions, and has wide-ranging knowledge and abundant global experience in the areas of finance and securities. He was appointed to audit all aspects of the company’s business from the perspective of capital markets, based on his wide-ranging insight into corporate management and the business world, and to strengthen corporate governance by virtue of his independent position.

Shigeru Morita

Mr. Shigeru Morita has held a succession of important posts at life insurance companies, as well as real estate and facility management companies, and has abundant knowledge and experience in these fields. He was appointed to audit all aspects of the company’s business from the perspective of reducing and managing risks arising from business operations, and to strengthen corporate governance by virtue of his independent position.

Outside Director Attendance at Meetings of the Board of Directors and Board of Corporate Auditors

Comment by an Outside Director

The Status and Direction of Azbil’s Corporate Governance

Azbil Corporation’s business results have grown, thanks to efforts by the management to put in place an environment in which they can fully exercise their abilities, appointing talented directors and auditors from both within the company and outside it, and engaging in lively and constructive discussion in good faith at meetings of the Board of Directors. I have a high opinion of the governance framework that has been established in this way and believe that it compares favorably with the governance systems of other leading companies, both in Japan and overseas. As described in the medium-term plan, the domestic market is maturing. Accordingly, in order for the azbil Group to achieve sustainable growth and improve corporate value going forward, it is necessary to steadily tap into overseas demand, particularly in emerging economies which, although entailing some risk, are expected to see substantial growth. Also, to ensure that members of the management team can continue to exercise their abilities in the same way, there is undoubtedly a greater need than ever to enhance Azbil’s “aggressive governance” framework, which is predicated on healthy risk-taking. I am certain that its corporate culture will enable it to successfully address these kinds of challenges.

Outside Director
Katsuhiko Tanabe