Corporate Governance

Our basic approach to corporate governance

as of December 28, 2018

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
Chairman of the Board of Directors Representative Director, President and CEO
Directors (excluding directors who are Audit and Supervisory Committee members) Six (none of whom are outside directors)
Directors who are Audit and Supervisory Committee members Three (all of whom are outside directors)
Independent officers* Three outside directors
Average age 50.1 years
Number of Board of Directors’ meetings held during
the fiscal year ended March 31, 2018
18
Number of Audit and Supervisory Board meetings held during the fiscal year ended March 31, 2018 14
Number of Nomination and Compensation Committee's meetings held during the fiscal year ended March 31, 2018 5

* 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

We will promote reciprocal communication with both internal and outside stakeholders to improve corporate value over the medium to long term.

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

Efforts as an Audit and Supervisory Committee Member

The fiscal year ended March 31, 2018 was the second year since UNITED ARROWS LTD. transitioned to the Company with Audit and Supervisory Committee described in Japan’s Companies Act. In the fiscal year under review, we sought to enhance oversight functions to allow for more accurate auditing, oversight, and suggestions. The Company continued to hold regular forums for discussing individual proposals together with the president of the Company, executive directors, executive officers, and the presidents of major consolidated subsidiaries, as was also done in the previous fiscal year. These forums serve as an opportunity to deepen understanding of management, business operations, issues faced by the Company, and other topics, which helps me make more effective suggestions. In addition, we also held regular meetings with internal audit divisions, which have been positioned as an important activity for strengthening internal control. These meetings help me better stay abreast of the circumstances at the Company while facilitating strong oversight by allowing me to make suggestions based on the issues faced by executive directors and to propose solutions to these issues.

Activities of the Nomination and Compensation Committee

The fiscal year ended March 31, 2017 was the first year during which the Nomination and Compensation Committee was in place. At that time, we introduced a restricted stock compensation plan to build a compensation structure that contributes to further improvements in corporate value over the medium to long term. In the fiscal year ended March 31, 2018, a major theme was succession plans for the chief executive officer. We therefore devoted discussions to examining the process and conditions for selecting individuals that would be suited to becoming president in the future and deciding the training methods to be used for cultivating these individuals. Particularly vigorous discussions on the ideal president for the Company and the aptitudes and character of such an individual are being held at forums arranged with executive directors and outside directors. We are still in the process of examining this matter, but I feel that this discussion process will no doubt contribute to the transparency and impartiality of the final decision made.

Appointment of Two Additional Directors

At the shareholders’ meeting held in June 2018, two new directors were appointed. The first was Yoshinori Matsuzaki of Business Unit I, which primarily oversees business targeting trend-conscious markets, and the second was Tatsuya Kimura of Business Unit II, which mainly develops businesses catering to basic trend-conscious markets. In the wake of three consecutive years of lower profit leading up to the fiscal year ended March 31, 2017, the executive directors became aware of a gap between the frontlines and management. This recognition led them to appoint two individuals that were closely linked to frontline operations to positions with responsibility for management decision making. This move increased the diversity of the Board of Directors and contributed to livelier discussions while also incorporating new sensibilities into the Board. I suspect that these changes will be most beneficial when it comes to making decisions related to medium- to long-term growth.

Corporate Governance Briefings and Shareholder Relations Activities

In the fiscal year ended March 31, 2018, I personally held a corporate governance briefing for institutional investors. This event, which was a first for the Company, was arranged out of my desire for more engagement with shareholders and other investors. The Q&A session as well as the survey conducted on the day of the briefing indicated a much greater degree of interest in the corporate governance of UNITED ARROWS LTD. than I had expected. The Company is also conducting shareholder relations activities aimed at those major shareholders that are inclined to exercise their voting rights based on environmental, social, and governance (ESG) concerns. These activities have proven to be prime opportunities to clarify the expectations that shareholders have for the UNITED ARROWS Group and for me to reaffirm my ideal role as an outside director. I look forward to increasing my opportunities for dialogue with shareholders and other investors so that I can discuss how best to improve the Company’s corporate value with both internal and external stakeholders.

Future Challenges

As indicated by the evaluation of the Board of Directors’ effectiveness carried out in the fiscal year ended March 31, 2018, there is a rising need for discussions to be held regarding the directives and strategies that will be instituted in pursuit of long-term growth after we have solidified foundations for future growth under the current Medium-Term Vision. When looking at long-term growth strategies, it is important to consider factors such as the distinctive character of the UNITED ARROWS Group, its principles, and its culture. That being said, I also hope to make suggestion that balance this perspective with options such as undertaking aggressive strategies that allow for preemptive action and transformation when necessary. Another area that will need to be considered going forward is the stance that the Company will adopt toward ESG investment. One aspect of the Policy Structure of the UNITED ARROWS Group is its five core values, which are indicative of its commitment to continuous, long-term improvement in the value its provides to customers, employees, business partners, society, and shareholders. I plan to engage in ESG-minded discussions to help guide the Group in creating such value.

Going forward, I will continue to fulfill my role in contributing to the medium- to long-term growth of the Company as an outside director.