Top of page

NTTGroup

Font Size

Content Area

This is the text.

Corporate Governance

Overview Corporate Governance Systems

Basic Policy

NTT believes that raising the effectiveness of corporate governance is an important management issue for meeting the expectations of various stakeholders, including shareholders and other investors, as well as customers, business partners, and employees, and for maximizing corporate value.

Accordingly, NTT is working to strengthen corporate governance based on the purpose of the principles of Japan’s Corporate Governance Code.

To advance the Medium-Term Management Strategy “Towards the Next Stage 2.0,” and place the entire Group on a profit growth track, NTT will work to realize its basic policies of: (1) ensuring sound management; (2) executing appropriate decision-making and business activities; (3) clarifying accountability; and (4) maintaining thorough compliance.

Corporate Governance System

NTT, in order to strengthen functions for appropriately supervising business execution, appoints several outside independent Members of the Board and establishes the Audit & Supervisory Board, of which outside independent Audit & Supervisory Board Members make up a majority to strengthen its auditing system.

Additionally, NTT has voluntarily established the Appointment and Compensation Committee, which consists of two outside independent Members of the Board and two internal Members of the Board, to further increase the objectivity and transparency of decisions relating to appointment and compensation. NTT has determined that governance functions based on the Company with Board of Company Auditors model are sufficiently effective to achieve this purpose.

Corporate Governance System

Page Top

Board of Directors

Composition of the Board of Directors

The Board of Directors is of a size appropriate to the Group’s business, and the composition of the Board of Directors reflects consideration for a balance of experience and specialties and for diversity. The Board of Directors has 12 Members of the Board, including two outside independent Members of the Board who have been appointed in order to strengthen functions for appropriately supervising business execution.

Activities of the Board of Directors

In principle, the Board of Directors meets once per month. In addition, extraordinary meetings are held as needed. The Board of Directors makes decisions on matters stipulated by law and on important matters related to corporate management and Group management. Moreover, through such means as periodic reports from Members of the Board on the status of the execution of members’ duties, the Board of Directors supervises the execution of duties by Members of the Board.

In fiscal 2015, the Board of Directors met 12 times and made decisions on important matters relating to corporate management and Group management, such as the Medium-Term Management Strategy, “Towards the Next Stage 2.0,” and “the future of fixed phones,” which is a medium-to-long-term issue for local communications businesses. These decisions were made through a process of lively debate among Members of the Board.

Evaluation of the Effectiveness of the Board of Directors

To improve the effectiveness of the Board of Directors, and to strengthen corporate governance, meetings intended for the exchange of opinions among outside independent Members of the Board and Audit & Supervisory Board Members and among outside independent Members of the Board and Representative Members of the Board were held based on a variety of themes.

In these meetings, NTT received opinions on NTT’s Board of Directors that adequate information is provided and Members of the Board engage in active debate, thereby ensuring the Board’s effectiveness. As a result, these opinions constitute an assessment that the effectiveness of the Board of Directors has been ensured, and NTT will work to further improve the Board’s effectiveness going forward.

Nomination Policies and Procedure for Members of the Board

NTT Group strives to contribute to the resolution of social issues and the realization of a safer, more secure, and more affluent society. To accomplish this goal, the Group acts as a trusted “Value Partner” that customers continue to select in order to provide them with new value on a global basis. We have established the policy of positioning human resources that share these ideals in the upper ranks of NTT Group’s management, and we are selecting these human resources from both inside and outside the Group. In regard to Member of the Board candidates, individuals who are selected have the broad-ranging perspective and experience necessary to contribute to the overall development of NTT Group in order to facilitate the increase of NTT Group’s corporate value.

From the perspective of strengthening the function of supervising business execution, for outside independent Members of the Board, NTT selects individuals who present no risk of a conflict of interest with general shareholders. In principle, NTT appoints several outside independent Members of the Board.

The nomination procedure for candidates for Members of the Board involves the review of candidates by the Appointment and Compensation Committee. The candidates are then approved by the Board of Directors and presented for voting at the General Meeting of Shareholders.

Support System for Members of the Board

NTT has concluded contracts with the lawyers and other specialists who may be called upon as necessary to provide advice at the expense of NTT.

The secretariat of the Board of Directors is made available as a venue of contact for outside independent Members of the Board, which they can use to receive support with regard to their daily duties through explanations, responses to inquiries about business execution, and other means.

Training for Members of the Board

When Members of the Board are elected, they are trained with  respect to market trends, compliance, and other matters. After appointment, they continue to undergo training on broad spectrum of topics, including domestic and overseas economic and social issues. Their broad-ranging perspectives and management skills, which contribute to the overall development of NTT Group, are further enhanced. Additionally, outside Members of the Board can gain a deeper understanding of NTT and NTT Group businesses through opportunities to attend briefings on the business trends of Group companies, tour research facilities, and take part in other activities.

Compensation of Members of the Board

NTT Group has established the following NTT Group Personnel Policy, which defines policies for determining the amounts and calculation methods for compensation of Members of the Board. Based on this policy, for the purpose of improving objectivity and transparency in the decisions of compensation of Members of the Board, NTT has established on a non-statutory basis the Appointment and Compensation Committee, which consists of four Members of the Board, including two outside Members of the Board, as a preliminary review institution of the Board of Directors.

NTT Group Personnel Policy (extract)

Compensation of Members of the Board

Compensation of Members of the Board (excluding outside Members of the Board) consists of a base salary and a bonus. The base salary is paid monthly on the basis of the scope of each Member of the Board’s roles and responsibilities. The bonus is paid taking into account NTT’s business results for the respective fiscal year.

Also, Members of the Board make monthly contributions of a minimum defined amount from their base salary for the purchase of NTT shares through the Board Members Shareholding Association in order to reflect NTT’s medium- and long-term business results in compensation.
Purchased shares are to be held by the Members of the Board throughout their terms of office.

In order to maintain a high level of independence, compensation of outside Members of the Board consists of a base salary only, and is not linked to NTT’s business results.

Page Top

Audit & Supervisory Board

Composition of the Audit & Supervisory Board

The Audit & Supervisory Board comprises three outside independent Audit & Supervisory Board Members, who have experience and knowledge in a range of fields—as a Certified Public Accountant, university professor, and lawyer—and two internal Audit & Supervisory Board Members. We conduct effective audits by combining the independence of the outside Audit & Supervisory Board Members with the superior information collection capabilities of the internal Audit & Supervisory Board Members. Two of the Audit & Supervisory Board Members have extensive knowledge concerning finance and accounting matters.

Activities of the Audit & Supervisory Board

Audit & Supervisory Board Members attend meetings of the Board of Directors and other important meetings. In addition, Audit & Supervisory Board Members meet periodically with Representative Members of the Board and Members of the Board to exchange ideas and opinions and hold discussions on various topics. In this way, Audit & Supervisory Board Members maintain an understanding of the execution of duties by Members of the Board and provide their opinions as needed.

In fiscal 2015, the Audit & Supervisory Board met 25 times. Moreover, separate from meetings of the Audit & Supervisory Board, the Audit & Supervisory Board Members Preliminary Deliberation Meeting met approximately 40 times. These meetings provide a venue for the sharing of information. For example, at these meetings Audit & Supervisory Board Members receive explanations from corporate officers of matters to be discussed at the Executive Officers Meeting. Furthermore, the Audit & Supervisory Board Members exchanged opinions with the Independent Auditor and the Internal Control Office approximately 10 times. The Audit & Supervisory Board Members also receive explanations of audit plans and reports on the status of internal control systems and provide advice as needed.

In initiatives related to Group companies, the Audit & Supervisory Board Members received information from the Representative Members of the Board of approximately 20 major Group companies regarding the status of corporate governance and measures to maintain and enhance corporate governance, and discussions were conducted on those matters. In addition, Audit & Supervisory Board Members visited major bases in Japan and overseas (approximately 20 bases), received information from local representatives, and conducted discussions. Furthermore, Audit & Supervisory Board Members received reports regarding audit results, etc., from the Audit & Supervisory Board Members of major Group companies and exchanged opinions with them. In addition, Audit & Supervisory Board is implementing initiatives that contribute to enhancing the auditing activities of Audit & Supervisory Board Members of major Group companies, including regularly holding training sessions by outside experts for Audit & Supervisory Board Members of major Group companies.

Through these activities, the Audit & Supervisory Board Members support the sound, steady growth of NTT and Group companies from an independent perspective that differs from that of executives. In addition, the Audit & Supervisory Board Members contribute to the strengthening of corporate governance systems and the fostering of awareness of compliance matters.

Nomination Policies and Procedure for Audit & Supervisory Board Members

NTT has the policy of selecting candidates for Audit & Supervisory Board Members that have the capacity to provide audits based on specialized experience and insight. From the perspective of guaranteeing fair audits of the execution of duties by Members of the Board, for outside independent Audit & Supervisory Board Members NTT selects people who present no risk of a conflict of interest with general shareholders. In accordance with the Companies Act, NTT ensures that outside independent Audit & Supervisory Board Members make up half or more of the Audit & Supervisory Board.

The procedure for nomination involves Members of the Board proposing Audit & Supervisory Board Member candidates based on the aforementioned nomination policies. These proposals are then discussed by the Audit & Supervisory Board, which consists of half or more of outside independent Audit & Supervisory Board Members, and consent is granted if appropriate. The candidates are then approved by the Board of Directors and presented for voting at the General Meeting of Shareholders.

Compensation of Audit & Supervisory Board Members

Compensation of Audit & Supervisory Board Members is determined by resolution of the Audit & Supervisory Board.

Support Structures for Audit & Supervisory Board Members

The Office of Audit & Supervisory Board Members, which has four dedicated NTT employees, has been established as a structure to support audits by the Audit & Supervisory Board Members. In addition, NTT has concluded contracts with the lawyers and other specialists who may be called upon as necessary to provide advice at the expense of NTT.

In addition, when Audit & Supervisory Board Members are elected, they are trained with respect to market trends and compliance. They then continue to undergo training on broad spectrum of topics, including domestic and overseas economic and social issues, after appointment.

Moreover, we are creating opportunities for tours and implementing other initiatives so that outside Audit & Supervisory Board Members can further deepen their understanding of NTT and NTT Group.

Page Top

Independent Members of the Board and Audit & Supervisory Board Members

Nomination Procedure for Outside Members of the Board and Outside Audit & Supervisory Board Members

From the perspectives of strengthening supervising functions for execution and guaranteeing appropriate audits of the execution of duties by Members of the Board, NTT has the policy of selecting individuals to serve as outside Members of the Board and outside Audit & Supervisory Board Members who do not represent risks of conflicts of interest with general shareholders.

NTT designates outside Members of the Board and outside Audit & Supervisory Board Members who fulfill both the independence criteria stipulated by the Tokyo Stock Exchange and NTT’s own independence standards as independent Members of the Board or independent Audit & Supervisory Board Members.

Page Top

Independence Standards

In order to meet the independence standards, a person may not fall under any of the categories below in the last three fiscal years

  • (1) A person who executes business in a partner company that exceeds NTT’s standards*1
  • (2) A person who executes business in a lending company that exceeds NTT’s standards*2
  • (3) A consultant, accountant, lawyer, or any other person providing professional services, who received monetary payments or any other gain in assets equal to or more than ¥10 million, excluding the Board Members’ or Audit & Supervisory Board Members’ compensation, from NTT or its major subsidiaries*3 in any of the last three fiscal years
  • (4) A person who executes business in an organization that received donations exceeding NTT’s standards
    Even if any of (1) through (4) above applies to a person, where it has been decided that a person meets the independence standards, the reasons shall be explained and disclosed at the time of the person’s appointment as the Independent Member of the Board or Audit & Supervisory Board Member.
  • *1 “A company that exceeds NTT’s standards” is defined as a company that has had any business dealing with NTT and its major subsidiaries*3 in any of the last three fiscal years equal to or more than 2% of the total operating revenues of NTT and its major subsidiaries for the respective fiscal year.
  • *2 “A lending company that exceeds NTT’s borrowing standards” is defined as a company in which the total amount of borrowings on a consolidated basis in any of the last three fiscal years equals to or is more than 2% of the total operating revenues of NTT’s consolidated total assets for the respective fiscal year.
  • *3 The major subsidiaries are NIPPON TELEGRAPH AND TELEPHONE EAST CORPORATION, NIPPON TELEGRAPH AND TELEPHONE WEST CORPORATION, NTT COMMUNICATIONS CORPORATION, NTT DATA CORPORATION, and NTT DOCOMO, INC.
  • *4 An “organization that received donations exceeding NTT’s standards” is defined as an organization which received donations from NTT and its major subsidiaries*3 in any of the last three fiscal years exceeding ¥10 million or 2% of the total income of the organization, whichever is larger, during the respective fiscal year.

Page Top

Independent Auditor

Activities of the Independent Auditor

NTT has appointed KPMG AZSA LLC as its Independent Auditor.

The Independent Auditor maintains the level of coordination with the Audit & Supervisory Board and the Internal Control Office necessary to conduct appropriate audits. As part of this coordination, the Independent Auditor appropriately audits through reporting the audit plans and audit results to the Audit & Supervisory Board and working together with the Internal Control Office to establish systems for monitoring the status of oversight related to evaluating internal control systems for financial reports.

Nomination of the Independent Auditor

NTT believes that it is important to maintain and enhance audit quality while increasing audit efficiency. Based on this policy, the Audit & Supervisory Board evaluates Independent Auditor candidates from the perspectives of their independence and specialties and the appropriateness and adequateness of their auditing activities. The candidates that are approved by the Audit & Supervisory Board are then presented for voting at the Ordinary General Meeting of Shareholders.

The Audit & Supervisory Board may choose to dismiss or not reappoint the Independent Auditor in any of the cases described in Article 340 (1) of the Companies Act based on a unanimous vote by all Audit & Supervisory Board Members. In addition, if the Board of Directors determines that it would be difficult for the Independent Auditor to perform proper audits, the Audit & Supervisory Board may propose a resolution to the Ordinary General Meeting of Shareholders that the Independent Auditor be discharged or that the Independent Auditor not be reappointed.

Compensation of Independent Auditor

NTT and its major subsidiaries pay compensation to KPMG AZSA LLC, NTT’s Independent Auditor, and other member firms of the KPMG network for audit services and for non-audit services.

Page Top

Dialogue with Shareholders and Other Investors

NTT promotes management that prioritizes discussions with shareholders, which not only includes discussions at General Meeting of Shareholders but also involves senior management, including the president, actively promoting discussions with shareholders about medium-term management strategies, corporate governance, business performance trends, and other topics through one-on-one meetings with institutional investors and briefings targeting individual investors.

The opinions received from shareholders through such discussions are shared in the Company. NTT considered and formulated the medium-term management strategy that was announced in May 2015 in light of shareholder opinions.

During discussions with shareholders, insider information is strictly controlled, and information is proactively disclosed with due consideration to fair disclosure (timely, fair and impartial information disclosure). To increase convenience for overseas investors, we strive to release Japanese- and English-language disclosure materials at the same time. The Japanese- and English-language versions of the entire Notice of Convocation for the ordinary general meeting of shareholders, including the business report, were released at the same time, more than one month prior to the date of the ordinary general meeting of shareholders.

Page Top

This is the end of the text.

Footer Area

Copyright © 2017 Telegraph and Telephone Corporation