Corporate Governance

Our basic approach to corporate governance

as of June 27, 2017

UNITED ARROWS LTD. has positioned efforts to create globally recognizable and accepted values that set new standards of Japanese lifestyle as its overarching Company Policy. In addition, we have identified the creation of value for five distinct stakeholders—customers, employees, business partners, society, and shareholders—as one element of our overall Policy Structure and a key feature of our promise to society. In this regard, the Company’s mission is to increase value for all stakeholders.

In order to maintain the proper mindset that will allow us to realize our Company Policy, we put in place the Code of Conduct. This code expresses how we should think and act to achieve our stated goals.

Recognizing the critical need to build a transparent and fair management framework, along with a structure under which we are capable of making timely and bold decisions, we are committed to continuously strengthening and expanding our corporate governance capabilities and functions in order to realize our Company Policy and fulfill our promise to society. Through these means, we are working to enhance our corporate value on a long-term and continuous basis.

Outline of the corporate governance framework

Organizational format Company with an Audit and Supervisory Committee*1
Chairman of the Board of Directors Representative Director, President and CEO
Directors (excluding directors who are Audit and Supervisory Committee members) Four (none of whom are outside directors)
Directors who are Audit and Supervisory Committee members Three (all of whom are outside directors)
Independent officers*2 Three outside directors
Average age 51.4 years
Number of Board of Directors’ meetings held during
the fiscal year ended March 31, 2017
17
Number of Audit and Supervisory Committee’s meetings held during the fiscal year ended March 31, 2017*1 10
Number of Nomination and Compensation Committee's meetings held during the fiscal year ended March 31, 2017*1 4

*1 UNITED ARROWS LTD. transitioned to a Company with an Audit and Supervisory Committee in accordance with a resolution at the Company’s 27th Ordinary General Meeting of Shareholders held on June 23, 2016.

*2 Yukari Sakai, Gaku Ishiwata, and Hidehiko Nishikawa satisfy the qualifications for independent officers stipulated by Tokyo Stock Exchange, Inc. as well as the “Independence Determination Standards for Independent Officers” of the Company. Although the Company registered Yukari Sakai and Hidehiko Nishikawa as independent officers with the Tokyo Stock Exchange, Gaku Ishiwata has not been registered as such due to the internal regulations of the law firm to which he belongs.
Please refer to the Company’s Corporate Governance Policy (Japanese only) for details regarding its “Independence Determination Standards for Independent Officers.”

Corporate governance framework
 

Message from an Outside Director

as of August, 2017

We will do our utmost to steadily pursue our Medium-Term Vision in spite of significantly changing market conditions.

Yukari Sakai
Outside Director
Standing Audit and Supervisory Committee member (Chairperson)
Nomination and Compensation Committee member (Chairperson)

Transitioning to a company with an Audit and Supervisory Committee structure and evaluating the effectiveness of the Board of Directors

In terms of corporate governance, the fiscal year ended March 31, 2017 was a year of significant progress for UNITED ARROWS LTD. This progress began in June 2016 with UNITED ARROWS LTD. transitioning from being a company with an Audit and Supervisory Board to one with an Audit and Supervisory Committee as well as establishing a Nomination and Compensation Committee. In addition, the Company began evaluating the effectiveness of the Board of Directors. Regarding the operations of the Board of Directors, the Company has taken steps to streamline resolutions by delegating authority to the president and executive officers in charge with the aim of ensuring sufficient time for deliberations, which is a key issue for evaluating the Board’s effectiveness. Moreover, the Company has provided sufficient time to deliberate important proposals by newly establishing mechanisms for reporting, resolutions, and deliberations as part of the Board’s agenda. As a result of these actions, I believe that the Board of Directors thoroughly deliberated numerous proposals during the previous fiscal year, including medium- to longterm strategies, whether to continue measures that prevent hostile takeovers, and M&A prospect considerations. On the other hand, the Board faced issues such as deliberation time for certain matters going well beyond their scheduled limits, which kept the process from moving forward. I think the Board of Directors can become more effective by taking appropriate measures to address this issue, which includes trying to further clarify key deliberation points presented at Board meetings.

Enhancing outside director oversight functions

Having previously served as a member of the Audit and Supervisory Board and currently serving as an outside director and Audit and Supervisory Committee member after the Company adopted an Audit and Supervisory Committee structure, I believe that its oversight functions have been steadily improving since this change in organizational structure. Examples of this are the Company increasing the amount of information it provides for facilitating thorough deliberations, which in turn further deepens understanding of these issues. The Audit and Supervisory Committee (which is comprised of outside directors) is working to bring to light managerial and operational issues by regularly setting aside time for discussions with the president, executive directors, and presidents of important consolidated subsidiaries. In addition, with every outside director being a member of the Nomination and Compensation Committee, they are provided with detailed information on the progress of operations in areas overseen by each executive director in order to make decisions about nominations and compensation. These actions help consolidate sufficient information provided to outside directors and, in turn, invigorate deliberations on these issues as well as improve the transparency and fairness of director nominations and compensation, which has led to a steady enhancement of the Company’s oversight functions.

Introducing a restricted stock compensation plan

Serving as the chair, I oversee the operations of the Nomination and Compensation Committee, which was established in June 2016. In fiscal 2017, Nomination and Compensation Committee meetings were held four times following its establishment, during which discussions were held about what type of executive officer compensation and succession plan should be instituted. Against this backdrop, ongoing discussions were held about the necessity of building an executive officer compensation structure that contributes to further increasing corporate value over the medium to long term, which resulted in the introduction of a restricted stock compensation plan in the fiscal year ending March 31, 2018. Based on this plan, the Company’s executive director compensation will be composed of a ⑴ fixed monthly salary as basic compensation, ⑵ bonus linked to performance in a single fiscal year, and ⑶ stock-based compensation linked to the progress of the Medium-Term Business Plan. I think this has created a more balanced compensation structure for achieving sustainable growth and improving corporate value over the medium to long term.

The driving force behind the Company’s corporate governance improvements

A year has passed since UNITED ARROWS LTD. became a company with an Audit and Supervisory Committee structure, and I can actually see the improvement in the Company’s organizational structure in my managerial role as an outside director and member of the Audit and Supervisory as well as Nomination and Compensation committees. This has been a year in which reforms have moved forward, including enhancing the effectiveness of the Board of Directors, improving outside director oversight functions, and increasing the transparency and fairness of director nominations and compensation. I believe the driving force behind these corporate governance improvements is undertaking corporate management with the strong conviction that the Company’s top executives should always aim to keep UNITED ARROWS LTD.’s doors open to the public and value all stakeholders. Going forward, I will work in my role as outside director to steadily realize the Company’s Medium-Term Vision based on a highly transparent corporate governance framework.