Corporate Governance

The Nomination and Remuneration Committee reviewed the validity of the compensation systems for Directors and Executive Officers in the positions of Vice Presidents or higher including the standards for calculation of basic remuneration and bonuses and the standards for granting stock compensation-type stock options and reported to the Board of the Directors to the effect that the systems are valid. The amount of individual remuneration is determined in line with the remuneration structure, of which basic calculation approaches were resolved at meetings of the Board of Directors and have been verified by the Nomination and Remuneration Committee. The total of basic remuneration and stock compensation-type stock options for directors must be less than the maximum total remuneration approved at general meetings of shareholders. Bonuses, however, are determined when proposals for them are approved at ordinary general meetings of shareholders.

Remuneration for the representative director and directors consists of basic remuneration, which is a fixed basic monthly fee for executing their roles and duties; a bonus linked to performance in the fiscal year; and stock compensation-type stock options as incentives to promote improvements in medium- to long-term business performance and corporate value. The same applies to remuneration for executive officers who are vice presidents or above. Outside directors only receive basic remuneration. With regard to the proportion of basic remuneration, bonuses, and stock compensation-type stock options, because we believe that it is important to engage with management from a medium- to long-term perspective, our basic approach is to emphasize the level and stability of basic remuneration. At the same time, with the aim of enhancing performance over the course of a single fiscal year, bonuses and stock compensation-type stock options for directors can account for up to approximately 30% and approximately 20% of basic remuneration, respectively.

In principle, director and Audit & Supervisory Board member candidates, vice presidents, and higher-ranking executive officers are elected from among those who are deemed capable of fulfilling the duties fairly and appropriately, have a high level of insight, and fulfill the following requirements, regardless of their gender, nationality, ages, and other individual attributes.
<Representative director and director>
Having a true understanding of the corporate philosophy and code of conduct of the Company, as well as a broad familiarity with the Company's businesses and operations, both of which are gained through the experience of serving as an executive officer, for example, and the ability to make effective decisions from a higher perspective, looking at multiple businesses and headquarters functions
<Independent outside director>
Having a high level of expertise and extensive experience in fields such as business management, risk management, law, and economics, in addition to meeting the independence criteria that are separately determined by the Board of Directors
<Audit & Supervisory Board member>
Having a high level of expertise and extensive experience in fields such as business management, finance, accounting, and internal control. At least two outside Audit & Supervisory Board member shall fulfill the independence criteria that are separately determined by the Board of Directors.
<Vice president or higher-ranked executive officer>
Having been highly evaluated in terms of performance, ability, and personality in managerial assessment, having sufficient knowledge, experience, and judgment to bear the responsibility for execution in specific fields, and truly understanding the corporate philosophy and code of conduct of the Company.

The Company maintains a voluntary five-person Nomination and Remuneration Committee comprising the president, one director, and three independent outside directors.
To nominate director or Audit & Supervisory Board member candidates and appoint vice presidents (including successors and candidates for president and representative director), the president and representative director first nominates candidates from among those fulfilling requirements. The nomination is submitted at a meeting of the Board of Directors after the Nomination and Remuneration Committee confirms that it is fair and appropriate.
The Audit & Supervisory Board discusses and consents to nominees before deliberations by the Board of Directors.

Directors and Audit & Supervisory Board members can ask the Nomination and Remuneration Committee for deliberations at any time to decide whether the dismissal of a representative director, executive director, or executive officer who is a vice president or above (collectively, "management team executives") is necessary in the event of illegal, unfair, or treasonous behavior among such individuals, if they have failed to fulfill their roles, or for other reasons that make such people unsuited to retain their posts as management team executives.
All results of Nomination and Remuneration Committee deliberations shall be submitted to the Board of Directors, regardless of the outcome of Board of Directors' deliberations on the necessity of dismissal. The management team executives subject to deliberations cannot join in discussions.

Canon Inc., the parent company of the Company, believes that the Canon Group can achieve sustainable growth and increase its corporate value in the medium to long term if the Canon Group’s companies, including the Company, fulfill their social responsibilities through their corporate activities based on Canon’s corporate philosophy, Kyosei, and continue to strive to realize Kyosei.
Canon Inc. shares its management strategies with its listed subsidiaries, including the Company, to ensure that the Canon Group will efficiently achieve the targets of its medium- to long-term management plan, Excellent Global Corporation Plan Phase VI (2021-2025), through comprehensive optimization. The policy of Canon Inc. states that its listed subsidiaries, including the Company, will seek to post consistent earnings and maximize consolidated earnings to increase the corporate value of the entire Canon Group.
On the risk management front, all of the Canon Group companies, including the Company, are working to share policies and information and develop systems to work as one team on sustainability matters, such as compliance, internal control, risk management, economic security, decarbonization, global warming mitigation and respect for human rights.
One of the Canon Group’s important management policies is to protect the interests of the minority shareholders of Canon Inc. and its listed subsidiaries. This policy involves allowing the listed subsidiaries to maintain a high degree of independence and flexible management systems. Due to this policy, Canon Inc. does not participate in the Company’s decision-making process regarding individual issues.

In addition to the sale of Canon's products and services, the Company sells other companies' products and provides services and IT solutions in response to the needs of customers and its own businesses. As described above, the Company operates independently. As a listed company that is independent of the parent company, the Company has a process that enables it to make decisions promptly and flexible financing methods. This allows the Company to broaden its non-Canon businesses. In addition, the Company can leverage its creditworthiness as a listed company to increase the number of customers and business partners, hire excellent human resources and keep its employees highly motivated. For these reasons, Canon Inc. has decided that the Company as a listed company will contribute to maximizing the value of the Canon Group.

The management of the Company is independent of the parent company. No officers of the parent company concurrently serve as officers of the Company. To enhance its governance, the Company has established a Nomination and Remuneration Committee, and a majority of the committee's members are Independent Outside Directors. The committee’s decisions are duly considered in the Company's appointment and dismissal of Directors, etc. and in determining their remuneration.
The Company applies the arm’s length rule to the transactions between the Company and the parent company to ensure that the transactions are proper. We are committed to avoiding unduly harming the interests of the minority shareholders of both the Company and the parent company.
The Company has established a Special Committee which deliberates and considers the risk of a conflict of interest occurring between the controlling shareholder and minority shareholders to mitigate these risks. The Special Committee is explained in the aforementioned Protection of Minority Shareholders in Transactions with the Controlling Shareholder.

The Company and Group companies maintain a resolute approach to antisocial forces that threaten the order and safety of civic society, and the basic policy is to eliminate all relationships with antisocial forces.

The Canon Marketing Japan Group only holds shares of other listed companies when these shareholdings help to improve the corporate value and the mid- and long-term development of the Group, taking into consideration things such as our management strategies, business alliances, the maintenance and strengthening of transactions, the development of collaborative businesses, and the creation of new forms of synergy.

The Company reviews the reasonableness of individual reciprocal cross-shareholdings at meetings of its Board of Directors in a comprehensive assessment that considers the significance of shareholdings and other results of a qualitative evaluation as well as a quantitative evaluation of the transaction value with investment targets, dividends, and whether unrealized gains are commensurate with capital costs, on a regular basis each year. As a result of the review, when it is judged that holding certain shares is no longer reasonable, the holding will be reduced through the sale of said shares. The number of the shares we hold decreased from 59 (as of end December 2021) to 48 (as of end December 2024).

While respecting the management philosophy, business strategies, etc. of each investment target, the Company establishes specific standards based on judgment criterion of whether they contribute to the interests of shareholders in general, and according to that standard, the Company exercises its voting rights of cross-held shares.
If a shareholder of the Company is holding shares of the Company in a cross shareholding and offers to sell its shares of the Company, the Company shall take no action seeking to interfere with the intended sale of the shares, such as indicating the possibility of reducing transactions with the shareholder.