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Corporate Governance

Basic Stance on Corporate Governance

The main emphasis of Fujitsu's corporate governance is on having the non-executive directors provide oversight and advice to executive directors in their management execution role within the Board of Directors, while adopting the Audit & Supervisory Board system.

Specifically, while assuming mutual supervision between directors and oversight of directors by the Board of Directors, Fujitsu makes a clear distinction between the management execution role and the management oversight role on the Board of Directors and, moreover, makes sure that there are at least as many non-executive directors responsible for management oversight as there are executive directors responsible for management execution.

In addition, in selecting candidates for non-executive directors, consideration is given to the candidate's backgrounds and insight into Fujitsu's business so that effective advice that reflects a diversity of viewpoints can be obtained.

Furthermore, Audit & Supervisory Board members provide audits and oversight from the outside of the Board of Directors, and Fujitsu has established the Executive Nomination Committee and Compensation Committee of its own accord, thereby augmenting the Board of Directors. The overall approach is designed to raise shareholder value through effective corporate governance.

Overview of Corporate Governance Structure

[Overview of the Board of Directors]

Fujitsu makes active use of External Directors. The Board of Directors comprises 11 members in total: 5 executive directors and 6 non-executive directors (including 4 external directors).

In order to better define the management responsibility of the directors, Fujitsu has set the term of office of the directors to 1 year, and has registered all 4 External Directors (including one woman) with the Tokyo Stock Exchange as independent officers having no major stakeholder interest in the company.

[Overview of the Audit & Supervisory Board]

Fujitsu has an Audit & Supervisory Board that performs the auditing function. The Audit & Supervisory Board has five members, comprising two internal Audit & Supervisory Board members and three external Audit & Supervisory Board members.

Fujitsu has registered all three external members with the Tokyo Stock Exchange as independent officers having no major stakeholder interest in the company.

The auditing function is carried out by Audit & Supervisory Board members, who review the Board of Directors as well as business execution functions and attend important meetings, including meetings of the Board of Directors.

[Executive Nomination Committee and Compensation Committee]

Fujitsu established an Executive Nomination Committee and Executive Compensation Committee as advisory bodies to the Board of Directors in order to ensure the transparency and objectivity of the process for choosing candidates for executives, determining their compensation and ensuring that the compensation system and levels are appropriate.

The Executive Nomination Committee and the Compensation Committee are composed of three Non-Executive Officers (including two Non-Executive Directors and an external member of the Supervisory & Audit Board).

Fujitsu's officer compensation is determined on the basis of the Executive Compensation Policy that was revised by the Board of Directors in April 2011 in accordance with a report by the Compensation Committee.

[Reference] Executive Compensation Policy

To retain exceptional human resources required to manage the Fujitsu Group as a global ICT company, and to further strengthen the link between its compensation structure and business performance as well as shareholder value, while at the same time improving its transparency, the Group has established its Executive Compensation Policy as follows.

Executive compensation is composed of the following: "Basic Compensation," specifically a fixed monthly salary in accordance with position and responsibilities; "Stock-based Compensation," which is a long-term incentive that emphasizes a connection to shareholder value; and "Bonuses" that are compensation linked to short-term business performance.

Basic Compensation

  • Basic compensation is provided to all directors and auditors based on position and responsibilities as compensation for duties involving business administration and the execution of corporate operations.

Stock-based Compensation

  • Stock-based compensation, intended for directors responsible for executing business is a long-term performance incentive, with the amount to be paid determined based on a qualitative evaluation of medium- to long-term initiatives.
  • Is provided for the purchase of Fujitsu shares, to be acquired through the Director Stock Ownership Plan. Also such acquired stock is to be held for the duration of the individual's employment.

Bonuses

  • Bonuses are short-term performance incentives to be paid to directors responsible for executing business. Amounts are set based on business performance in the respective fiscal year.
  • As a specific method to calculate a bonus, Fujitsu will adopt a profit-sharing model which uses consolidated operating profit and consolidated net profit as indices. However, bonuses will not be paid in the event of negative net profit recorded under non-consolidated accounting for the term under review.

In accordance with the resolution of the Annual Shareholders' Meeting, the total amount of basic compensation, stock-based compensation, and bonuses shall not exceed 600 million yen per year for directors and 150 million yen per year for auditors.

Areas of Executive Compensation and Recipients

Basic Stance on Internal Control Framework

To continuously increase the corporate value of the Fujitsu Group, it is necessary to pursue management efficiency and control risks arising from business activities.

Recognizing this, Fujitsu is working toward the practice and penetration of the FUJITSU Way, the basic principles behind the Fujitsu Group's conduct. At the same time, the Board of Directors has articulated the Basic Stance on Internal Control Framework.

Overview of the Basic Stance on Internal Control Framework

The Basic Stance on Internal Control Framework sets forth internal structures including the following.

  • Management Execution Decision Making and Management Execution Structure
    Through the framework, executive officers share management execution authority with the President and Representative Director as the chief executive. The framework establishes a Management Council to assist the decision-making of the President and Representative Director, to enhance the efficacy of management.
    Moreover, the framework makes clear that the President and Representative Director bears responsibility for the construction and operation of an internal control framework , and establishes that the Board of Directors fulfills oversight responsibility by appropriately investigating the said operation.
  • Risk Management System
    The framework establishes a Risk Management & Compliance Committee and has management systems for controlling overall loss risks, as well as risk control systems or organizations pertaining to defects and failures in products and services, contracted development projects, information security, and financial risk.
  • Compliance System
    With the Risk & Management Compliance Committee at the center, the framework promotes the preparation of the internal rules, education, and oversight systems required for compliance with the Code of Conduct set forth by the FUJITSU Way, and also with laws and regulations concerning the business activities of the Fujitsu Group.

The framework also has management systems to ensure the appropriateness of financial reporting, as well as a system for information disclosure and internal auditing systems.

Corporate Governance Structure
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