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Corporate Governance

Corporate Governance

1.Basic Policy

At Star Micronics, our basic approach to corporate governance is based on fulfilling our social responsibilities as a company. To this end, we strive for management that is both appropriate and efficient at sustainably raising corporate value, while distributing an appropriate amount of the resulting profits to our shareholders and other stakeholders.

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2. Corporate Governance System

(1)Summary of Corporate Governance System and Reasons for Its Adoption

Based on a resolution at the Company’s 91st General Meeting held on May 26, 2016, Star Micronics transitioned to a company with an audit and supervisory committee in order to further strengthen the supervisory function of its Board of Directors and to enhance its corporate governance capabilities. The Company has decided to set the number of internal directors including the president at three and to appoint four outside directors including directors who serve as Audit and Supervisory Committee members. In this manner, outside directors make up a majority of the Board of Directors. Based on each of the aforementioned, the Company has taken steps to further clarify the supervisory and executive roles of management. This initiative is aimed at increasing the speed at which business strategies are implemented.
Furthermore, an executive officer system was introduced to Star Micronics to speed up and raise the efficiency of business execution even further, and ensure that management as an organization is flexible and capable of prompt, rational decisions for executing business. The Board of Directors is comprised of seven directors, four of whom are appointed from outside the Company. This ensures the independence, efficacy, and efficiency of the decision-making process while fortifying the supervisory function with respect to the execution of directors’ duties. The Audit and Supervisory Committee is comprised of three outside directors. In addition to auditing the activities of directors in the general conduct of their duties, the Audit and Supervisory Committee is responsible for auditing the Company’s accounting statements and related documentation and preparing audit reports in accordance with audit policies and plans determined by the Audit and Supervisory Committee. Moreover, the Committee undertakes audits in conjunction with accounting auditors as well as internal audit and related departments.

(2)Overview of Limitation of Liability Agreements

The Company and its outside director have entered into agreements on the limitation of liability for damages pursuant to Article 423-1 of the Companies Act of Japan, as stipulated by Article 29 of the Company’s Articles of Incorporation, in accordance with Article 427-1 of said Act. Based on these agreements, the maximum amount of liability for damages shall be the minimum amount stipulated in Article 425-1 of the Companies Act of Japan.

(3)Internal Control System

Star Micronics strives to maintain an internal control system that will enable proper and efficient management to drive a continuous increase in corporate value.
To strengthen internal control, the Star Micronics Global Code of Conduct was drawn up for employees to follow, and we have been working to establish rules and organizational structures to ensure compliance at every level of our activities. In addition, a department dedicated to promoting corporate social responsibility (CSR) spearheads our compliance activities. This department plays a central role in providing reminders and education on compliance to the Group’s directors, executives and employees, and is charged with holding periodic committee meetings and monitoring the status in regard to the Group’s adherence with all relevant laws and regulations.
Star Micronics also has an appropriate internal control and whistleblower system for ensuring the reliability of its financial reporting, as stipulated in the Financial Instruments and Exchange Law of Japan.

(4)Status of the Risk Management System

Star Micronics approaches the management of material risks such as legal issues, natural disasters, environmental considerations and export management in an organized and systematic manner. Departments and individuals are assigned as needed to manage a specific risk, and take responsibility for establishing rules and manuals, etc., for managing the risks. They also implement programs to alert, educate and prepare the Group’s directors, executives and employees against the risks. There is also a committee which meets periodically to monitor and manage risks for the Group.

(5)Status of Systems Designed to Ensure That Subsidiaries Conduct Their Operations in an Appropriate Manner

The director or executive officer that heads the division in charge of each subsidiary obtains the Company’s approval and/or submits to the Company all essential reports of in connection with important decisions made and facts pertaining to the subsidiary in accordance with the Company’s internal rules and regulations.

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3. Number of Directors

The Articles of Incorporation stipulate that the Company shall have no more than 10 directors.

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4. Requirements for Resolution on Selection of Directors

The Articles of Incorporation stipulate that resolutions on the selection of directors shall be adopted by a majority of votes of the shareholders present at a meeting, where such shareholders hold at least one-third of the aggregate number of voting rights held by the shareholders who are entitled to exercise voting rights. The Articles of Incorporation also stipulate that resolutions on the selection of directors shall not be adopted by cumulative voting.

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5. Resolutions of General Meetings of Shareholders that can be Resolved by the Board of Directors

The Articles of Association stipulate that the Company may decide a resolution about Article 459-1 of the Companies Act of Japan in accordance with resolution of the Board of Directors unless otherwise provided for in the laws and regulations. This is to enable agile execution of capital structure policies and dividends polices.

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6. Requirements for Special Resolutions by the General Meeting of Shareholders

In regard to requirements for special resolutions by the General Meeting of Shareholders in accordance with Article 309-2 of the Companies Act of Japan, the Articles of Incorporation stipulate that resolutions at the General Meeting of Shareholders shall be adopted by at least two-thirds of the voting rights of the shareholders present at the meeting, where such shareholders have at least one-third of the aggregate number of voting rights held by the shareholders who are entitled to exercise voting rights. This is to reduce the quorum for special resolutions by the General Meeting of Shareholders for the purpose of facilitating the efficient operation of the General Meeting of Shareholders.

The Company’s corporate governance system is outlined as follows:

corporate governance system

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