Basic Position
Based on its fundamental corporate philosophy, the
Company is working to enhance corporate governance as one of its most important management
issues. Our aim is to have our customers and society,
as well as our shareholders and investors, place even
greater trust in us and to ensure that Honda is “a
company that society wants to exist.”
To ensure objective control of the Company’s management, outside directors and corporate auditors
are appointed to the Board of Directors and the
Board of Auditors, which are responsible
for the supervision and auditing of the Company.
Honda has also introduced an operating officer system, aimed at strengthening both the execution of
business operations at the regional and local levels
and the supervision by the Board of Directors. The
term of office of each director is limited to one year,
and the amount of remuneration payable to them is
determined according to a standard that reflects their
performance in the Company. Our goal in doing this
is to maximize the flexibility with which our directors
respond to changes in the operating environment.
With respect to business execution, Honda has
established a system for operating its organizational
units that reflects its fundamental corporate philosophy. For example, separate headquarters have been
set up for each region, business and function, and a
general manager from the Board of Directors or an
operating officer has been assigned to each headquarters and main division. In addition, the Executive Council deliberates important matters
concerning management, and regional operating
councils deliberate important matters concerning
management of their respective regions. The result is
a system that functions effectively and efficiently, and
addresses the needs of customers and societies
around the world in a swift and appropriate manner.
With respect to internal control, each division within
the Company is working autonomously to strengthen
legal and ethical compliance and risk management.
The task of the Audit Office is to carry out effective
audits of the performance of each division’s business.
To enhance even further the trust and understanding shareholders and investors have in it, Honda’s
basic policy emphasizes the appropriate disclosure of
company information, such as by disclosing financial
results on a quarterly basis and timely and accurately
giving public notice of and disclosing its management
strategies. Honda will continue raising its level of
transparency in the future.
Management Organization of the Company's Corporate Governance for Decision-Making, Execution, Supervision and Others
(1) Management Organization
Board of Directors
The Board of Directors consists of 20 directors,
including two outside directors, and determines
important items that are related to business execution
or that are designated by law and supervises
business execution.
In the year under review, the Board of Directors
met eight times.
Outside Directors
The Company has appointed outside director Satoru
Kishi to receive advice on its corporate activities from
an objective, broad-ranging and advanced viewpoint
based on extensive experience and a high level of
insight in corporate management.
The Company has appointed outside director
Kensaku Hogen to receive advice on its corporate
activities from an objective, broad-ranging and
advanced viewpoint based on extensive experience
and a high level of insight in diplomacy.
Outside director Satoru Kishi attended nearly all of
the Board of Directors’ meetings held during the fiscal
year and commented as necessary during the
deliberation of proposals.
Outside director Kensaku Hogen attended nearly
all of the Board of Directors’ meetings held during the
fiscal year and commented as necessary during the
deliberation of proposals.
There is no particular relationship between the
Company and outside director Satoru Kishi.
There is no particular relationship between the
Company and outside director Kensaku Hogen.
The Board of Directors also provides information
on items of business and other topics as necessary
to outside directors.
Board of Auditors
The Board of Auditors consists of six corporate auditors, including three outside corporate
auditors. In accordance with the Company’s auditing
standards, auditing policies, apportionment of
responsibilities and other such matters as determined
by the Board of Auditors, each corporate
auditor audits the directors’ execution of duties.
Corporate Auditors accomplish these audits through
various means, including attending meetings of the
Board of Directors and inspecting the state of the
Company’s assets and liabilities. In addition, a Corporate Auditors’ Office was established to provide direct
support to the Board of Auditors.
The Company maintains Standards for Reporting
to Corporate Auditors to ensure that relevant matters
are reported to corporate auditors in a timely and
accurate manner. The standards require regular
reports to be submitted to corporate auditors on the
business conditions of the Company and its subsidiaries, the maintenance and operation of internal control systems and any other matters that would have a
substantial impact on the Company or its subsidiaries. In addition, corporate auditors are required to
attend Executive Council and other important
meetings.
In the year under review, the Board of Corporate
Auditors met 13 times.
The Board of Corporate Auditors has certified
Shinichi Sakamoto, a corporate auditor of the Company, as an “audit committee financial expert,” as set
out in the rules of the Securities and Exchange
Commission pursuant to Section 407 of the U.S.
Sarbanes-Oxley Act of 2002. As stipulated in Item 8,
Article 121, of the Company Law Enforcement Regulations, Shinichi Sakamoto has substantial knowledge
related to finance and accounting.
In the year under review, meetings between the
Company’s corporate auditors and its independent
auditor were held on five occasions. At those meetings, the independent auditor provided the corporate
auditors with explanations and reports on accounting
audit plans and results, and opinions were exchanged.
The corporate auditors coordinate closely with the
Audit Office, which is responsible for internal audits,
with respect to audit policies and schedules. In the
year under review, corporate auditors and the Audit
Office, either independently or in collaboration,
conducted business audits of a total of 130
companies among Honda’s domestic and overseas
subsidiaries and affiliates.
Outside Corporate Auditors
The Company has appointed outside corporate auditor Koukei Higuchi to receive audits of its corporate
activities from a broad-ranging and advanced view-point based on extensive experience and a high level
of insight in corporate management.
The Company has appointed outside corporate
auditor Fumihiko Saito to receive audits of its corporate activities from a broad-ranging and advanced
viewpoint based on extensive experience and a high
level of insight in legal affairs.
The Company has appointed outside corporate
auditor Yuji Matsuda to receive audits of its corporate
activities from a broad-ranging and advanced view-point based on extensive experience and a high level
of insight in corporate management.
Outside corporate auditor Koukei Higuchi attended
nearly all of the Board of Directors’ meetings held
during the fiscal year and commented as necessary
during the deliberation of proposals.
Outside corporate auditor Kuniyasu Yamada (who
stepped down in June 2007) attended nearly all of
the Board of Directors’ meetings held during the fiscal
year and commented as necessary during the deliberation of proposals.
Outside corporate auditor Fumihiko Saito attended
nearly all of the Board of Directors’ meetings held
during the fiscal year and commented as necessary
during the deliberation of proposals.
There is no particular relationship between
theCompany and outside corporate auditor
Koukei Higuchi.
There is no particular relationship between
theCompany and outside corporate auditor
Fumihiko Saito.
Fumihiko Saito serves as a partner of Saito Law
Office. There is no particular relationship between
Saito Law Office and the Company.
There is no particular relationship between
theCompany and outside corporate auditor
Yuji Matsuda.
Yuji Matsuda serves as president and director of Mitsubishi UFJ Trust and Banking
Corp. There is no particular relationship between
thisorganization and the Company.
The Board of Directors also provides information
on items of business and other topics as necessary
to outside directors.
Directors' Remuneration
The total amount of remuneration and bonuses
of directors and corporate auditors is determined
according to criteria that reflect their performance
inthe Company.
Remuneration for directors and corporate auditors
is paid based on criteria approved by the Board of
Directors, and it is paid within the extent of the
maximum amount resolved by the Ordinary General
Meeting of Shareholders.
Bonuses for directors and corporate auditors are
paid based on a decision of the Ordinary General
Meeting of Shareholders, taking into consideration
the Company’s profits during the fiscal year, past
bonuses paid and various other factors.
The total remuneration paid to directors and corporate auditors during fiscal 2007 was ¥879 million:
¥772 million to the 21 directors (including one director
who retired during the year) and ¥106 million to the
six corporate auditors. The remuneration paid to
directors includes remuneration paid by subsidiaries
of the Company to directors who had business
execution responsibilities for the subsidiaries. The
remuneration paid to corporate auditors includes
amounts paid by subsidiaries of the Company to
corporate auditors who also served as corporate
auditors for those subsidiaries.
Executive bonuses paid during fiscal 2007 totaled
¥590 million: ¥513 million to the 21 directors who
were directors at the end of fiscal 2006 and ¥77 million to the six corporate auditors who were corporate
auditors as at the end of fiscal 2006.
In the fiscal year under review, retirement allowances paid to three directors (including two
operating officers who previously served as directors)
totaled ¥330 million, in accordance with a resolution
of the General Meeting of Shareholders.
The total remuneration and other compensation paid to outside directors and outside corporate auditors during the fiscal
year under review was ¥67 million to the two outside
directors and three outside corporate auditors.
Decisions Regarding Director Candidates
Candidates for directors are decided at meetings of
the Board of Directors. Candidates for corporate
auditors are decided by resolution of the Board of
Directors, subject to agreement of the Board of Auditors.
Accounting Audits
To ensure proper auditing of the Company’s
accounts, the Board of Corporate Auditors and the
Board of Directors receive auditing reports based on
the Company Law, the Securities and Exchange Law
and the U.S. Securities Exchange Act. In addition,
they supervise the election of independent auditors,
their remuneration and their non-audit services.
In the fiscal year under review, the Company
elected KPMG AZSA & Co. as its independent auditor under
the Company Law, the Securities and Exchange Law
and the U.S. Securities Exchange Act.
A total of 48 people from KPMG AZSA & Co. provided
auditing services for Honda: three Japanese certified
public accountants (Masanori Sato, Kensuke
Sodegawa and Shuji Ohtsu ) and 45 assistants (eight
certified public accountants, 16 assistant accountants, three U.S. certified public accountants and
18others).
In fiscal 2007, the Company and its consolidated
subsidiaries paid a total of ¥2,708 million in fees to
KPMG AZSA & Co. and its affiliated accounting firm, KPMG,
for audit certification services under the Company Law, the Securities
and Exchange Law and the U.S. Securities
Exchange Act. In fiscal 2007, the Company’s overseas consolidated subsidiaries paid a total of ¥214
million in fees to KPMG AZSA & Co. and its affiliated
accounting firm, KPMG, for non-auditing services.
Policy and Procedures for Obtaining Board of Auditors' Prior Consent
To ensure that the independent auditor and its affiliate
involved in audit certification services under the U.S.
Securities Exchange Act behave in accordance with
all applicable laws and regulations and maintain complete independence from the Company, they must
obtain the prior consent of the Company’s Board of
Corporate Auditors before they carry out auditing services, auditing related services, tax services and other
services for Honda.
The Company’s initial policy required that each
contractual agreement have a separate prior consent
from the Board of Auditors. In order to
make the decision-making process more efficient,
however, we are enhancing procedural efficiency by
establishing categories of matters requiring comprehensive prior consent. These categories are reviewed
regularly by the Board of Auditors.
Any matter that does not fall under one of these
categories still requires separate consent of the Board
of Auditors.
(2) Business Execution System
Organization
As for execution of business, the Company has six
regional operations around the world to develop business based on its fundamental corporate philosophy.
These operations adopt long-term perspectives and
maintain close ties with local communities.
The Company’s four business operations—motorcycles, automobiles, power products and service
parts—formulate the medium- and long-term plans
for their business development, and each operation
aims to maximize its business performance on a
global basis. Each functional operation—such as
Customer Service Operations, Production Operations, Purchasing Operations, Business Management
Operations and Business Support Operations—supports the other functional operations, with the aim
of increasing Honda’s effectiveness and efficiencies.
Research and development activities are conducted principally at the independent subsidiaries
of the Company.
Honda R&D Co., Ltd., is responsible for
researchand development on products, while Honda
Engineering Co., Ltd., handles research and development in the area of production technology. The
Company actively carries out research and development in advanced technologies with the aim of creating products that are distinctive and internationally
competitive.
Business Execution Officer System
The Company has assigned a general manager from
the Board of Directors or an operating officer to each
regional, business and functional division, as well as
toeach research and development subsidiary. By
ensuring swift, optimal decision-making in each region
and workplace, the Company is building ahighly
effective and efficient business execution system.
Executive Council
The Company has established the Executive Council, consisting of the Company's 10 Representative Directors (nine from June 22, 2007), including the President, the Vice President and the Senior Managing Directors. Along with discussing in
advance the items to be resolved at meetings of the
Board of Directors, the Executive Council discusses important management issues within the
scope of authority conferred upon it by the Board
of Directors.
In the year under review, the Executive Council
met 27 times.
Regional Operating Councils
To enhance the independence of each regional
operation and ensure swift decision-making, regional
operating boards have been established at each
regional operation to discuss important management
issues in the region within the scope of authority
conferred upon it by the Executive Council.
Status of Measures Related to Shareholders and Others with Vested Interests
(1) The Measures to Invigorate Ordinary General Meetings of Shareholders and Ensure Smooth Exercise of Voting Rights
To invigorate the annual Ordinary General Meeting of
Shareholders, the Company holds the meeting as
early as possible. The Company also presents easy-to-understand reports using video and slides, and
displays its products at the conference room.
The Company sends convocation notices before
the date required by law, and also allows shareholders to exercise their voting rights via the Internet,
using personal computers or mobile phones. Convocation notices are sent in English to overseas investors. In these and other ways, the Company strives
tomake the exercise of rights as smooth as possible.
(2) IR Activities
For analysts and institutional investors, the Company
holds meetings to present its results four times a year
and meetings with the president twice a year. Company representatives visit and hold information meetings as needed for major Japanese and overseas
institutional investors to explain the Honda Group’s
future business strategies. Representatives based
inNorth America and Europe also hold information
meetings for institutional investors as appropriate. In
addition, the Company holds information meetings for
investors at motor shows and other major events,
where presentations on such topics as Honda Group
strategies are made by the president or relevant
director. Moreover, the Company conducts regular
tours of facilities in Japan and overseas for shareholders and other investors.
The latest information for investors is available on
the Company’s website (http://www.honda.co.jp/
investors/ in Japanese; http://world.honda.com/
investors/ in English). All new information is uploaded
to the site simultaneously in Japanese and English.
The Company issues a regular publication for
shareholders, containing information about its businesses, products, financial status and other matters.
(3) Respecting the Perspective of Stakeholders
Seeking to earn the unwavering trust of customers
and society, the Honda Group has formulated a set
of behavioral guidelines, which is observed by all
individual associates (employees).
In addition to supplying products incorporating the
most advanced safety and environmental technologies, the Company pursues environmental protection
activities, safe driving campaigns and social contribution activities covering all aspects of its operations,
including production, logistics and sales. These initiatives reflect the Company’s effort to earn the trust and
understanding of society via its corporate activities.
The Company provides information about its corporate activities via financial reports and other disclosures according to law. We also publish yearly reports
on environmental protection activities, safe driving
campaigns and social contribution activities, which
are posted on our website. In addition, we publish a
corporate social responsibility (CSR) report that comprehensively explains our activities related to the
environment, safety and society.
Internal Control System: Fundamental Position and Implementation Status
Basic Position
To earn the trust of customers and society, the
Company’s divisions, under the guidance of their
respective corporate officers, have systems in
place to ensure a systematic approach to compliance
and risk management, in accordance with the Basic
Policy concerning the Maintenance of Internal Control
Systems adopted by the Board of Directors. These
systems include the formulation of behavioral
guidelines and procedures for self-assessment. The
Company also has a system to support initiatives of
each division.
Moreover, effective audits are carried out to
monitor the execution status of each division.
Group Governance System
Behavioral Guidelines
The “Honda Conduct Guideline,” formulated to
guide the behavior of all associates, is posted on
the Company’s website (http://www.honda.co.jp/
conductguideline/ in Japanese; http://
world.honda.com/conductguideline/ in English).
Inaddition, each division produces more
detailedbehavioral guidelines according to
itsspecific attributes.
Self-Assessment Checklist
Each division of the Company approaches compliance and risk management in a systematic way.
For example, each division has a checklist that
clarifies specific laws and risks to consider related
to its particular business, and conducts regular
self-assessments. The results of the self-assessments are reported to the corporate officer
in charge of each division, and the overall status
of compliance and risk management is evaluated
regularly by the Executive Council.
Compliance System
The Company has appointed a Compliance Officer,
who is a director in charge of compliance-related
initiatives. Other key elements of our compliance
system include the Business Ethics Committee and
the Business Ethics Improvement Proposal Line.
Business Ethics Committee
Honda’s Business Ethics Committee is chaired
bythe Compliance Officer and consists of
directors and operating officers. The Committee
deliberates matters related to corporate ethics
andcompliance.
It met two times in the year under review.
Business Ethics Improvement Proposal Line
Honda places high priority on open communications in its divisions. It has also set up the Business
Ethics Improvement Proposal Line to receive suggestions related to corporate ethics issues. By
devising appropriate responses to suggestions
received, Honda is constantly working to enhance
corporate ethics. The system is designed to
ensure to protect informants, who can either reveal their identity or remain anonymous.
The Business Ethics Committee supervises the
operation of the Business Ethics Improvement
Proposal Line and submits status reports to the
Board of Auditors.
Risk Management System
Each division works to prevent and address its particular set of risks. In addition, the Honda Crisis
Response Rules are designed to address Company-wide crises, such as major natural disasters.
The Company has appointed a Risk Management
Officer, who is a director in charge of risk management related initiatives. It also established the
Company-wide Response Headquarters to address
crisis situations.
Retention and Management of Information on Execution of Business by Directors Execution of Business by Directors
Documents and other information related to the
execution of business by directors are retained and
managed appropriately, according to the document
management policies of Honda and its major
regional subsidiaries.
Business Audits
The Audit Office is an independent supervisory
department under the direct control of the president.
This office audits the performance of each department and works to improve the internal auditing of
subsidiaries and affiliates in each region.
Disclosure Committee
The Disclosure Committee, which consists of relevant
directors, deliberates matters related to the accuracy
and appropriateness of corporate information to be
disclosed in business results announcements and
financial reports.
Code of Ethics
The Company has also established a “Code of
Ethics” as set forth in the rules of the U.S. Securities
and Exchange Commission regulations pursuant to
Section 406 of the Sarbanes-Oxley Act of 2002.
Companies listed on the NYSE must comply with certain standards regarding corporate governance under
Section 303A of the NYSE Listed Company Manual.
However, listed companies that are foreign private
issuers, such as Honda, are permitted to follow
homecountry practice in lieu of certain provisions of
Section 303A.
The following table shows the significant differences between the corporate governance practices
followed by U.S. listed companies under Section
303A of the NYSE-listed Company Manual and those
followed by Honda. |
