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Corporate Governance

Overview of 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, which was put forth by the Tokyo Stock Exchange. Based on the “Towards the Next Stage 2.0” strategy established in May 2015, NTT seeks to accelerate the process of self-transformation to a “Value Partner” and place the entire Group on a profit growth track. To this end, NTT will work to realize its basic policies of ensuring sound management, executing appropriate decision-making and business activities, clarifying accountability, and 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 has established 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 four members, including two outside independent Members of the Board, to further increase the objectivity and transparency of decisions relating to appointments 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.

Business execution at NTT is conducted in accordance with the organizational regulations governing the functions and operations of each organization. Important decisions are made under the supervision of the Board of Directors and based on the responsibility regulations that define the responsibilities and authorities for the president, senior executive vice presidents, and the head of each organization.
In addition, NTT has established various meetings and committees as has been deemed necessary to discuss important matters related to corporate management and Group management in order to ensure that appropriate decisions are made for facilitating Group management.

Major Committees

Committee name Overview
CSR Committee Formulates basic CSR strategy and CSR goals for the Group, formulates basic policy for CSR-related reports
Corporate Ethics Committee Establishes corporate ethics, takes thorough steps to maintain discipline
Human Rights Education Committee Establishes human rights education systems and responds to discrimination incidents, etc.
Technology Strategy Committee Formulates R&D vision, technology development strategy, and R&D alliance strategy
Investment Strategy Committee Formulates investment strategy related to large investment projects, etc.
Finance Strategy Committee Formulates basic strategies related to finance and policies for addressing financial issues
Business Risk Management Committee Undertakes crisis management for the handling of business risks related to corporate management
Disclosure Committee Establishes policies for compiling yearly reports
U.S. Sarbanes-Oxley Act Internal Control Committee Tracks status of internal control in accordance with the Sarbanes-Oxley Act on a Groupwide basis, verifies and monitors measures to improve deficiencies
Group CISO Committee Formulates of the Group’s information security management strategies

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 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 supervising business execution.

Activities of the Board of Directors

In principle, ordinary meetings of the Board of Directors are held 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.

Evaluation of the Effectiveness of the Board of Directors

The Board of Directors of NTT, which is a pure holding company, plays the role of monitoring the specific business operations of Group companies based on the medium- to long-term business strategy of the entire Group.

The Board of Directors of NTT decides on important items related to the Group’s management that have passed the review of the Executive Officers Meeting, made up of the president, senior executive vice presidents, full-time directors, and the heads of staff organizations, as well as the review of the various committees chaired by the president or a senior executive vice president and attended by the relevant directors, while also monitoring the status of the execution of the duties of individual Members of the Board.

At the meetings of the Board of Directors, based on the authority of the individual Members of the Board, current issues regarding Group management and the initiatives being taken to resolve them are reported and reviewed. In the fiscal year ended March 31, 2017, the Board of Directors met 12 times, and discussions were held on initiatives to expand profits in the near term for global cloud services, the status of business recovery and new policies aimed at sustained growth in network services, and measures for improving returns to shareholders in relation to “Toward the Next Stage 2.0.”

Additionally, ideas and opinions on issues concerning Group management were exchanged among outside independent Members of the Board and Audit & Supervisory Board Members, among outside independent Members of the Board and Representative Members of the Board, among outside independent Members of the Board and executives of major Group companies in and outside Japan, and among outside independent Members of the Board of NTT and outside independent Members of the Board of major Group companies and other members.

In these meetings, we received opinions on NTT’s Board of Directors from outside independent Members of the Board and Audit & Supervisory Board Members stating that adequate information is provided and that Members of the Board engage in active discussion, thereby ensuring the Board’s effectiveness.

Taking into account these initiatives, through evaluation, we have determined that the effectiveness of the Board of Directors is being 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. NTT has established the policy of positioning human resources who share these ideals in the upper ranks of NTT Group’s management, and NTT is electing these human resources from both inside and outside the Group.

In regard to Member of the Board candidates, individuals are elected based on their having the broad-ranging perspective and experience, superior management skills and leadership, strong business intuition, and motivation necessary to contribute to the overall development of NTT Group in order to facilitate the increasing 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 elects 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 Member of the Board candidates 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

NTT Group works to cultivate candidates suitable for positions in top management who are able to respond to the rapidly changing management environment by creating a range of training opportunities in such areas as domestic and overseas economic and social issues, compliance, and risk management, and by allowing employees to accumulate new job experience. Additionally, outside independent Members of the Board can gain a deeper understanding of NTT Group’s businesses through opportunities to deepen their understanding of the business trends of Group companies and of the latest R&D results at the research facilities of NTT.

Audit & Supervisory Board

Composition of the Audit & Supervisory Board

The Audit & Supervisory Board comprises three outside independent Audit & Supervisory Board Members (one of whom is female), who have experience and knowledge in a range of fields—as a certified public accountant, university professor, and lawyer—and two full-time Audit & Supervisory Board Members (one of whom is female). We conduct effective audits by combining the independence of outside Audit & Supervisory Board Members with the superior information collection capabilities of full-time Audit & Supervisory Board Members. Among the board members, full-time Audit & Supervisory Board Member Takao Maezawa has experience in the accounting division of NTT and its affiliated companies, while outside independent Audit & Supervisory Board Member Michiko Tomonaga, a certified public accountant, has considerable knowledge in the areas of finance and accounting.

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 the fiscal year ended March 31, 2017, the Audit & Supervisory Board met 22 times. Moreover, separate from meetings of the Audit & Supervisory Board, the Audit & Supervisory Board Members Preliminary Deliberation Meeting convened 36 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 on matters to be discussed at the Executive Officers Meeting. In addition, Audit & Supervisory Board Members work closely with Independent Auditors and the Internal Control Office. Audit & Supervisory Board Members exchanged opinions with the Independent Auditor nine times and with the Internal Control Office 10 times. Audit & Supervisory Board Members also receive explanations concerning audit plans and reports on the status of internal control systems and provide advice as needed.

In initiatives related to Group companies, Audit & Supervisory Board Members received information from the Representative Members of the Board on 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 (26 bases), received information from local representatives, and conducted discussions. Furthermore, Audit & Supervisory Board Members received reports regarding audit results, etc., from Audit & Supervisory Board Members of major Group companies and exchanged opinions with them. In addition, the 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, Audit & Supervisory Board Members support the sound, steady growth of NTT and Group companies from an independent perspective that differs from that of individuals responsible for business execution. In addition, Audit & Supervisory Board Members contribute to the strengthening of corporate governance systems and the fostering of awareness of compliance matters.

Nomination Policy and Procedure for Audit & Supervisory Board Members

NTT has the policy of electing Audit & Supervisory Board Member candidates who 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 elects 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 policy. 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.

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 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 a broad spectrum of topics, including domestic and overseas economic and social issues, after being appointed.

Moreover, NTT is 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.

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 Tokyo Stock Exchange, Inc., and NTT’s own independence standards as outside independent Members of the Board or outside independent Audit & Supervisory Board Members.

Compensation of Members of the Board and Audit & Supervisory Board Members

For the purpose of improving objectivity and transparency in the compensation of Members of the Board, NTT has established the Appointment and Compensation Committee, which consists of four Members of the Board, including two outside independent Members of the Board. After discussion at this committee, compensation-related decisions are made by the Board of Directors.

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 defined amount or more 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.

For the same reason, compensation of Audit & Supervisory Board Members consists of a base salary only. The amount of this salary is determined by resolution of the Audit & Supervisory Board.

Total Compensation of Members of the Board and Audit & Supervisory Board Members
(Fiscal Year Ended March 31, 2017)

Position Number of payees Total compensation
Members of the Board 13 ¥539 million
Audit & Supervisory Board Members 6 ¥117 million
Total 19 ¥656 million

Notes:

  • 1 The above amounts include compensation paid to one Member of the Board and one Audit & Supervisory Board Member who resigned from their positions following the conclusion of the 31st Ordinary General Meeting of Shareholders held on June 24, 2016.
  • 2 At the 21st Ordinary General Meeting of Shareholders held on June 28, 2006, the maximum limit on total annual compensation of Members of the Board was set at an aggregate of ¥750 million and the maximum limit on total annual compensation of Audit & Supervisory Board Members was set at an aggregate of ¥200 million.
  • 3 Total compensation of Members of the Board includes ¥98 million in bonuses for the fiscal year ended March 31, 2017.
  • 4 In addition to the above, an aggregate of ¥13 million is to be paid to Members of the Board who are also employees as bonuses for their service as employees.

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 by 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. For the fiscal year ended March 31, 2017, the Independent Auditors who carried out the audit were Takuji Kanai, Kensuke Sodekawa, and Masashi Oki, whose years of experience as Independent Auditors are within the statutory guidelines.

In addition, 20 certified public accountants and 34 other staff members assisted in conducting the audits.

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 who 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.

Internal Control

Overview of Internal Control Systems

NTT maintains internal control systems related to financial reporting based on the U.S. Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley Act), Section 404, and the Financial Instruments and Exchange Act of Japan. Based on tests and evaluations of the design and operational effectiveness of these systems, we have been able to confirm the effectiveness of these systems without any particular issues.

The Internal Control Office, with its staff of 22 people, verifies the internal control systems in place throughout the Group and the status of their implementation. Internal audits are conducted by the internal auditing divisions of each Group company, and the results of these auditing activities are reviewed by NTT. In addition, standardized audits are performed with regard to major risk factors that are common issues throughout the Group, and we are continuously enhancing and verifying their effectiveness. At the same time, NTT is continuously accelerating its efforts to develop and implement IT and other Groupwide internal control systems and to improve their operational procedures and efficiency.

NTT has established the Basic Policies Concerning the Maintenance of Internal Control Systems for NTT Group, which was approved via resolution by the Board of Directors. The basic concepts of these policies are as follows.

Major Reports

  • NTT Group CSR
You can watch introduction videos here.
  • NTT Group Environmental Activities
  • NTT Annual Report 2017

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