Corporate Governance

Basic Approach to Corporate Governance

Through a decision by the Board of Directors in December 2015, Fujitsu formulated a basic policy that sets out its approach to corporate governance (the "Corporate Governance Policy"). This Policy has been deliberated and established to best fit the present company conditions. However, considering the objective of corporate governance—that is, to conduct a better management—the company is working to continuously review the Policy so that it does not become too rigid or lose substance, as well as holding periodic discussions on the Policy in the Board of Directors Meeting to maintain the best corporate governance structure.

The latest version, revised in December 2021, can be downloaded from the URL below.

• Corporate Governance Policy
  https://www.fujitsu.com/global/about/ir/library/governance/governancereport-b-en-20211223.pdf

In accordance with its Corporate Governance Policy, the company outlines the following rules to ensure effective oversight and advice, given from the diverse perspectives of Non-Executive Directors (hereinafter, the term used for a combination of Independent Directors and Non-Executive Directors appointed from within the company), to Executive Directors on their business execution as part of the Board of Directors function while taking advantage of the company through the Audit & Supervisory Board system.

＜Board of Directors＞
The Company has a Board of Directors to serve as a body for making important decisions and overseeing management. The Board of Directors delegates the decision-making authority over business execution to the Representative Directors and subordinate Corporate Executive Officers to the broadest extent that is permitted by law and the Articles of Incorporation of the company and is considered to be reasonable and will mainly perform as oversight and advisory function. Moreover, the Board of Directors has been formed with Non-Executive Directors at its core so as to enable correction and remediation of errors, insufficiencies, and recklessness in business execution. And by ensuring that External Directors, who are highly independent and hold diverse perspectives, constitute the majority of the members of the Board of Directors, the oversight and advisory function of the Board of Directors is strengthened. Furthermore, in order to better define the management responsibility of the Directors, their terms were reduced from two years to one year in accordance with a resolution at the June 23, 2006 Annual Shareholders’ Meeting.

As of June 27, 2022, the Board of Directors consists of nine members in total, comprising three Executive Directors and six Non-Executive Directors (including five External Directors).

The Company held 14 Board of Directors meetings in FY2021 (including two extraordinary Board of Directors meetings) to discuss matters including formulation of the Management Direction and measures for implementing them, as well as to decide a new management system based on the recommendation of the Executive Nomination Committee.

＜Audit & Supervisory Board＞
The Company has an Audit & Supervisory Board that performs the auditing and oversight functions. The auditing and oversight functions are carried out by Audit & Supervisory Board Members, who review the Board of Directors as well as business execution functions and attend important meetings, including meetings of the Board of Directors. As of June 27, 2022, the Audit & Supervisory Board has five members, comprising two full-time Audit & Supervisory Board Members and three External Audit & Supervisory Board Members. The Company held nine Audit & Supervisory Board meetings in FY2021, mainly to discuss audit policy and plans, the audit method of Accounting Auditors and the properness of the audit results, and the Key Audit Matters. Internal Audit Departments made reports and full-time members of the Audit & Supervisory Board reported matters of importance to External Audit & Supervisory Board Members, which were discussed at Audit & Supervisory Board meetings.

＜Independent Directors & Auditors Council＞
In response to the requirements of Japan’s Corporate Governance Code, which facilitates the activities of Independent Directors and Auditors, and in order to invigorate discussions on the medium- to long-term direction of the Company at its Board of Directors Meetings, the Company believes it essential to establish a system that enables Independent Directors and Auditors, who maintain a certain degree of separation from the execution of business activities, to consistently gain a deeper understanding of the Company’s business. Based on this recognition, the Company established the Independent Directors and Auditors Council, which consists of all Independent Directors and Auditors (five Independent Directors and three Independent Auditors), and discusses the medium- to long-term direction of the Company, shares information, and exchanges viewpoints so that each can formulate their own opinions.

In FY2021, the Independent Directors and Auditors Council met 12 times. The members shared information and exchanged views on important management matters including the Company’s management direction, the scope of business of the Company and of the Fujitsu Group, etc. Based on the knowledge gained through the Council, each Independent Director and Auditor provided advice to the Board of Directors.

＜Executive Nomination Committee & Compensation Committee＞
The Company has established the Executive Nomination Committee and the Compensation Committee as advisory bodies for its Board of Directors for the process of nominating Directors and Audit & Supervisory Board Members, for ensuring the transparency and objectivity of its process for determining executive compensation, to enable efficient and substantial discussions, as well as to ensure the fairness in the structure and level of executive compensation.

The Executive Nomination Committee deliberates on the candidates for Director and Audit & Supervisory Board Member positions in accordance with the Framework of Corporate Governance Structure and the Procedures and Policy for the nomination and dismissal of Directors and Auditors stipulated in the Policy, and it provides its recommendations or proposal to the Board of Directors. In addition, the Compensation Committee provides its recommendations or proposal on the level of base compensation and the method for calculating performance-based compensation to the Board of Directors in accordance with the Procedures and Policy of Determining Directors and Auditors Compensation, as stipulated in the Policy.

In FY 2022, the Executive Nomination Committee consists of four Non-Executive Directors (including three Independent Directors) and the Compensation Committee consists of four Independent Directors. Members of the two committees are as follows. Additionally, the secretariats of both committees are operated by the Company’s HR and legal departments.

• Executive Nomination Committee
  Chairperson: Atsushi Abe (Independent Director and Chairman of Board of Directors)
  Members: Yoshiko Kojo, Scott Callon (Independent Directors), Masami Yamamoto (Director and Senior Advisor)
• Compensation Committee
  Chairperson: Chiaki Mukai (Independent Director)
  Members: Yoshiko Kojo, Scott Callon, Kenichiro Sasae (Independent Directors)

In FY2021, the Executive Nomination Committee met seven times to discuss the election of Representative Directors including the CEO, the nomination of candidates for Director, and the skill matrix of Directors and Auditors, etc. and provided its recommendations to the Board of Directors. The Compensation Committee met six times to discuss revision of executive compensation details and change in the process for determining individual compensation, and provided its recommendations to the Board of Directors.

• Corporate Governance Report
  Matters on Functions such as Business Execution, Auditing, Oversight, Nomination and Compensation Decisions (Overview of Current Corporate Governance System)
  https://www.fujitsu.com/global/about/ir/library/governance/governancereport-en20220713.pdf

The diagram below illustrates the Company's corporate governance structure.

We believe that both direct oversight to business execution by the Non-Executive Directors and the oversight by Audit & Supervisory Board Members that stays distant from the decision making and operation of business execution should work jointly to ensure highly effective oversight performance. The company adopts “the company with Audit & Supervisory Board system” that establishes the Audit & Supervisory Board, which is composed of the Audit & Supervisory Board Members appointed as an independent agent.

Moreover, the Board of Directors has been formed with Non-Executive Directors at its core so as to enable correction and remediation of errors, insufficiencies, and recklessness in business execution. And External Directors constitute the majority of the members of the Board of Directors. The core of Non-Executive Directors shall be External Directors with a high degree of independence and diverse perspectives. Moreover, at least one Non-Executive Director is appointed from within the Company to complement the External Directors’ knowledge in the business fields and the culture of the Company, so that the efficiency of oversight performance by the Non-Executive Directors is enhanced.

Compensation paid to Directors and members of the Audit & Supervisory Board is determined based on the policy on the determination of the details of compensation, etc. for individual Directors established by the Board of Directors, subject to approval by the Compensation Committee.

Based on the resolutions of the Board of Directors Meeting on April 28, 2022, and the Annual Shareholders’ Meeting on June 27, 2022, the Company revised the compensation for Directors and Audit & Supervisory Board Members for FY2022 and subsequent years.

• Corporate Governance Report
  Incentive Policies for Directors (page 17); Policy on Determining Remuneration Amounts and Calculation Methods (Page 20)
  https://www.fujitsu.com/global/about/ir/library/governance/governancereport-en20220713.pdf

Basic Approach to the Internal Control System

To continuously increase the corporate value of the Fujitsu Group, it is necessary to pursue management efficiency and control risks arising from business activities. Recognizing this, the Board of Directors have formulated the "Policy on the Internal Control System", which provides guidelines on: a) how to practice and promote the Fujitsu Way, the principles that underlie the Fujitsu Group’s conduct; and b) what systems and rules are used to pursue management efficiency and control the risks arising from the Company’s business activities.

See below for the full text of the Policy on the Internal Control System and an overview of the operating status of the systems tasked with ensuring appropriate business practices.

• Internet releases of selected business reports and financial documents
  https://www.fujitsu.com/global/imagesgig5/notice122b.pdf