2. BUSINESS OPERATION POLICY |
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(1) Basic Business Operation Policy |
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The accelerated growth of the information and communications market has spurred greater diversity and complexity in customer demands. In order to meet such customer needs, NTT will undertake to achieve the following three management objectives. a) Use the combined strengths of NTT to actively build the ubiquitous broadband market and help achieve the e-Japan Strategy and the u-Japan Initiative. b) Build a safe, secure, and convenient communications network environment and broadband access infrastructure, while achieving a seamless migration from fixed line to IP telephony services and from metal wire systems to optical fiber. c) Strive to increase corporate value and achieve sustained growth. |
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(2) Basic Principle concerning Profit Allocation |
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NTT believes it is critically important to reinforce its financial standing and to serve the best interests of its shareholders over the long run. As such, NTT has adopted as its basic principle the payment of stable dividends with due regard to overall operating trends and financial situation while acting to secure necessary levels of internal reserves. While utilizing its internal reserves for strengthening its financial standing, NTT intends to repurchase its own shares in order to implement a capital policy that takes into account the supply and demand conditions of NTT's shares. |
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(3) Basic Principle and Policies concerning Reduction of Minimum Trading Lots for Shares |
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The reduction of minimum trading lots for shares is believed to expand the scope of investors. NTT will decide on this matter while taking into account such factors as shareholder composition, liquidity, and the cost of such measures. |
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(4) Basic Approach to Corporate Governance and Status of Corporate Governance Policy Implementation |
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NTT recognizes corporate governance as an important management issue in its practical implementation of shareholder-oriented management. NTT is striving to enhance its corporate governance, centered around its Board of Directors and Board of Auditors system. a) Description of corporate organization |
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NTT has formed a Board of Directors with 12 members, including two outside directors. In principle, this Board of Directors meets once per month to make decisions and report on important management issues. The inclusion of outside directors with independent status as members of the Board of Directors acts to bolster capabilities for overseeing the fairness of business transactions. With regard to matters concerning the appointment and compensation of directors, in order to improve objectiveness and transparency, NTT has established the Appointment and Compensation Council, a group of four directors, including two outside directors. The Appointment and Compensation Council deliberates on matters concerning the appointment and compensation of directors before the board of directors' meetings in which final determinations of such matters are made. NTT applies the corporate auditor scheme and has a Board of Auditors with five members, including two outside auditors. Members of the Board of Auditors attend meetings of the Board of Directors and other important management meetings, implement appropriate auditing of NTT's business transactions, and have a full-time organization and staff for these purposes. They also conduct audits in coordination with the corporate auditors of NTT subsidiaries. In addiction, NTT institutes various meetings and forms committees as necessary for the promotion of effective group-level management in keeping with its status as a holding company with general control and coordination responsibilities for the NTT Group. To this end, these meetings and committees engage in ad-hoc discussion of key issues concerning management on both the corporate and group levels, and thereby assist appropriate decision-making. |
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b) Preparation of the internal control system and risk management scheme |
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In accordance with the Internal Control-Integrated Framework advocated by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), NTT assesses the preparation and operation of internal controls for the NTT Group as a whole, executes audit reviews to assure the correctness of these controls, and performs a supervisory function with respect to high-risk items common to all Group companies. Given the huge influence of the NTT Group on Japanese society at large, NTT recognizes that it must not only strictly observe all laws and regulations, but also conduct its business with the highest sense of ethics. Accordingly, NTT adheres to rigorous corporate ethics standards. More specifically, it drafted an "NTT Group Corporate Ethics Charter" and instituted not only an internal system for related reporting and consultation but also an external reporting system utilizing the services of attorneys. While working to create a corporate climate marked by a high degree of transparency and openness through such steps, NTT is also making continuous efforts to expand and strengthen educational activities and internal checks. In addition, NTT is developing appropriate management of business risks in a rapidly changing business climate. To this end, NTT is establishing schemes for provision against natural disasters, accidents, and other large-scale risks that may adversely affect the entire Group, as well as for risk prevention, advance preparations for occurrence of risks, and sure and prompt response in the event that risks materialize. |
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c) Status of internal audit and corporate auditors' audit |
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The Board of Auditors of NTT has four staff members. They audit the execution of the directors' duties as the need arises, under the instruction of corporate auditors. The audit staff also strives to enhance NTT's auditing system by constantly sharing information on audit plans and results with independent auditors. For the internal auditing process, NTT has implemented the internal control system and risk management scheme as mentioned above. In addition, in order to respond to requirements both from Japan and overseas to further strengthen corporate governance, on May 12, 2005 NTT revised its organization structure including through the establishment of an "Internal Audit Office" with a full-time internal audit staff. |
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d) Status of independent auditor's audit |
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NTT has contracted with ChuoAoyama PricewaterhouseCoopers and KPMG AZSA & Co. as independent auditors. The names of the certified public accountants (CPAs) who conduct the audit services are as follows: |
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| *Each of the above CPAs' length of audit services has not exceeded 5 years |
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| The numbers of staff members who support the audit activities are as follows: | ||||||||||||
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(5) Matters concerning the parent company NTT has no parent company. |
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