Hitachi, Ltd. | Annual Report 2015

Corporate Governance

Hitachi and eight of its listed subsidiaries are companies with Nominating

management oversight of Group companies. In these ways, Hitachi isCommittee, etc. under the Companies Act of Japan. By demarcating

working to increase corporate value.

responsibilities for management oversight and those for the execution

Starting in June 2015, the Japan’s “Corporate Governance Code”

of business operations, Hitachi is working to create a framework forapplies to companies listed on domestic stock exchanges in Japan.

quick business operation, while making management highly transparent.

Hitachi agrees with the basic approach of the Code, which is that theIn addition, Hitachi is executing business strategies formulated toCode’s appropriate implementation will contribute to the development

enable the Group to demonstrate its collective strengths. Moreover,and success of companies, investors and the Japanese economy as asome of Hitachi’s Directors and Executive Officers serve concurrently

whole through individual companies’ self-motivated actions so as toas Directors and Executive Officers at Group companies, thereby

achieve sustainable growth and increase corporate value over thestrengthening integrated management of the Group and improving

mid- to long-term. Moving forward, Hitachi will work to further
strengthen corporate governance.

Initiatives to Strengthen Corporate Governance
1. Realizing quick, highly transparent management

2. Accelerating global management, strengthening oversight function

Transition to a company with Committee System

Increased number of outside directors including
non-Japanese directors; outside directors became
majority (June 2012~)(currently a company with Nominating Committee, etc.)(June 2003~)
Major Points of Change•	Establishment of three committees in the Board of Directors(Nominating, Audit, and Compensation Committees), and appointment
of Executive Officers (separation of oversight and execution).
•	The Board of Directors approves basic management policy for theGroup and implements oversight of the execution of the duties of
Executive Officers and Directors.
•	Appointment of outside directors is required (with outside directors
as a majority of each committee).

Generalmeetingof
shareholders

Appointment /dismissal

Oversight

Appointment /dismissal

Board ofDirectors

Execution

ExecutiveOfficers

Nominating Committee:
Determines director candidates
Audit Committee: Audits execution ofDirectors and Executive Officers

Major Aims
•	Reflect global, diverse viewpoints in management, further
strengthen oversight function
Composition of Board of Directors
June 2011 (13 elected)

June 2015 (12 elected)

Outside directors

48

Inside directors(non-executive)

72

Inside directors(serving concurrently
as executive officers)

22

Non-Japanese directors

Female directors

Compensation Committee:
Determines remuneration for Directors
and Executive Officers

3. Clarification of responsibility / authority

Introduced in-house company system (October 2009~) and in-house rating system (April 2010~)Major Aims
•	Clarify responsibility and authority for total of 40 in-house companies and Group companies, take thorough approach to rapid management throughindependent profitability•	Determine scope of delegation of investment authority to each in-house company in accordance with in-house rating, increase management speed•	Hold Hitachi IR Day, an IR event at which the leaders of each in-house company explain principal business strategies and management initiatives that
support the achievement of the goals of the Mid-term Management Plan19

Corporate Government Framework

Appointment

Accounting AuditorsReport

General Meeting ofShareholders

Audit

Senior Executive Committee

Appointment / Oversight

Board of Directors

Chairman & CEO

ReportPresident & COO

Nominating Committee

Executive Vice President andExecutive Officers /Senior Vice President andExecutive Officers

Audit

Compensation Committee

Audit Committee
ReportInternal
Auditing
OfficeExecutive
Officers
Department
in charge

Executive
Department
in charge

Officers
Department
in charge

Department
in charge

Audit

Board of Directors
The Board of Directors approves basic management policy for theAttendance at meetings of the Board of Directors by each

Hitachi Group and supervises the execution of the duties of Executive

outside director in the fiscal year ended March 31, 2015

Officers and Directors to sustainably enhance corporate value andNameAttendance

Nobuo Katsumata

9 out of 9 days

compilation. The Board of Directors focuses on strategic issues related

Cynthia Carroll

9 out of 9 days

to the basic management policy as well as other items to be resolved

Sadayuki Sakakibara

8 out of 9 days

that are provided in laws, regulations, the Articles of Incorporation,

George Buckley

9 out of 9 daysand Board of Directors Regulations. As of June 30, 2015, the Board ofHarufumi Mochizuki

9 out of 9 days

Directors was made up of 12 Directors, and two of them concurrently

Philip Yeo

9 out of 9 days

Hiroaki Yoshihara

8 out of 8 days

shareholders’ common interests. The basic management policy
includes the medium-term management plan and annual budget

serve as Executive Officers. Hitachi aims to reinforce the supervisory
function of the Board of Directors, of which eight outside Directors,
including non-Japanese, account for the majority, reflecting theirglobal and diverse viewpoints.
Within the Board of Directors, there are three statutory committees—
the Nominating Committee, the Audit Committee, and the Compensation Committee—with outside Directors accounting for the majorityof members of each committee. The Board of Directors meetings
were held 9 days during the fiscal year ended March 31, 2015, andthe attendance rate of Directors at these meetings was 99%. To assist
with the duties of the Board of Directors and each committee, staffs
who are not subject to orders and instructions of Executive Officers
are assigned.

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Hitachi, Ltd. | Annual Report 2015

Furthermore, Hitachi formulated and published Corporate(1) Nominating Committee

Governance Guidelines outlining the framework of corporate

The Nominating Committee has the authority to determine particulargovernance, such as the function and composition of the Board

proposals submitted to the general meeting of shareholders for theof Directors, qualifications for Directors, and criteria for assessing theelection and dismissal of Directors. The Nominating Committee

independence of outside Directors.

consists of four Directors, three of whom are outside Directors.

Corporate Governance Guidelines of Hitachi, Ltd.

the fiscal year ended March 31, 2015.

The Nominating Committee meetings were held seven days during
http://www.hitachi.com/IR-e/corporate/governance/guidelines.html(2) Audit Committee
Qualification for the outside Directors and criteria for theThe Audit Committee has the authority to audit the execution ofindependency

duties of Directors and Executive Officers and to determine on

In regard to the election of an outside Director, the Company’s

proposals submitted to the general meeting of shareholders for theNominating Committee considers the following criteria for indepen-election and dismissal of accounting auditors. The Audit Committee

dence. In addition, the Committee also considers whether the outsideconsists of five Directors, including three outside Directors and two

Director has outstanding character and insight and whether thestanding Audit Committee members.

Outside Director has worked in a leadership position in such fields as
business, law, administration, accounting or education or has experi-

The Audit Committee meetings were held 14 days during the fiscal
year ended March 31, 2015.

ence at policy-making levels.
In regard to the independence of an outside Director, the Company(3) Compensation Committee

considers an outside director to be independent if none of theThe Compensation Committee has the authority to determinefollowing items are applicable.

remuneration policies for Directors and Executive Officers and remuneration for individuals based on these policies. The Compensation• His or her immediate family member is, or has been within the last
three years, a director or an executive officer, of the Company or
any of its subsidiaries;• He or she is currently an executive director, an executive officer orCommittee consists of four Directors, three of whom are outside
Directors.
The Compensation Committee meetings were held seven days
during the fiscal year ended March 31, 2015.

an employee of a company that has made payments to, or received
payments from, the Company for property or services in an amountComposition of the Board of Directors and Each Committee

which, in any of the last three fiscal years, exceeds 2% of any of theNumberof persons

OutsideDirectors

Directors

Board of Directors

128*1

4

Director

than ¥10 million in direct compensation for his or her service as aNominating Committee

431

Outside Director

specialist in law, accounting or tax, or as a consultant from theAudit Committee

532Director

Company, other than director compensations; orCompensation Committee

431

Outside Director

companies’ consolidated gross revenues;• He or she has received during any of the last three fiscal years more• He or she serves as an executive officer or director of a not-for-profit
organization, and the Company’s discretionary charitable contributions

Chairman*1. In regard to the outside directors, Hitachi has notified all outside Directors as independent
directors to each of the stock exchanges in Japan where the Company is listed.

to the organization in any of the last three fiscal years are more than
¥10 million and 2% of that organization’s annual gross revenues.

Executive Officers
Executive Officers decide on matters delegated to them by the Boardof Directors and execute Hitachi’s business affairs within the scope ofassignments determined by the Board of Directors. As of June 30,
2015, Hitachi had 31 Executive Officers.

Senior Executive Committee
The Senior Executive Committee is a council to ensure that thePresident deliberately decides on important managerial matters, which
may affect the business of Hitachi or the Hitachi Group, throughdiscussing these matters from diverse viewpoints. This committee
consists of nine members as of June 30, 2015: Chairman & CEO,President & COO, six Executive Vice President and ExecutiveOfficers, and one Senior Vice President and Executive Officer.

21Director and Executive Officer Compensation
Compensation for Directors and Executive Officers is commensurate

The compensation for Executive Officers consists of a monthly

with the ability required of them as well as their responsibilities, whilesalary and a performance-linked component. The monthly salary iscompensation packages at other companies are also taken into

decided by adjusting a basic amount set in accordance with theconsideration.

relevant position to reflect the results of an assessment. The perfor-The compensation for Directors consists of a monthly salary andmance-linked component is set within a range equivalent to abouta year-end allowance. The monthly salary is decided by making adjust-

40% of the Executive Officer’s annual income, adjusted based onments to the basic salary that reflects full-time or part-time status,Hitachi and individual performance.

committee membership and position, and travel from place of residence,

The compensation structure for Directors and Executive Officers

among other factors. The year-end allowance is a pre-determined amount

was re-examined starting with compensation for the fiscal year ended

equivalent to about 20% of the Director’s annual income based onMarch 31, 2009, and the retirement allowance was abolished.

the monthly salary, although this amount may be reduced depending

Compensation for Directors and Executive Officers for the fiscal

on Hitachi’s performance. Directors concurrently serving as Executive

year ended March 31, 2015, is as follows:

Officers are not paid compensation as Directors.

Total amount of each type (Millions of yen)
Total amount of compensation,etc. (Millions of yen)

Category

Year-end allowance andNumber of persons
performance-linked component

Monthly salary

Directors (excluding outside Directors)

127*3

114*3

136*2

Outside Directors

247*3

234*3

139

Executive Officers

1,946

1,329616

29

Total

2,322

1,678644

44*2 The number of Directors excludes two Directors who concurrently serve as Executive Officers.
*3 The amount of compensation to Directors and outside Directors respectively includes the monthly salary for three Directors and two outside Directors who retired due to expiration of theirterm of office at the close of the 145th Annual General Meeting of Shareholders held on June 20, 2014.

In addition, Directors or Executive Officers for whom compensation from Hitachi and its subsidiaries is not less than ¥100 million and theamount of their compensation are as follows:
Total amount of each type (Millions of yen)
Total amount of compensation,etc. (Millions of yen)MonthlysalaryPerformance-linked
component

NameCompany

Category

Hiroaki Nakanishi

Hitachi, Ltd.

Executive Officer*4

192

132

60

Toshiaki Higashihara

Hitachi, Ltd.

Executive Officer

143

99

44

Junzo Nakajima*5

Hitachi East Asia Ltd. (Consolidated subsidiary)*6

Director1037528*4*4 Although concurrently serving as Director, Messrs. Hiroaki Nakanishi and Toshiaki Higashihara do not receive compensation as Director.
*5 Although concurrently served as Executive Officer of Hitachi for the fiscal year ended March 31, 2015, Mr. Junzo Nakajima did not receive compensation as Executive Officer of Hitachi.
*6 The compensation paid in Hongkong dollar is converted into yen by average exchange rate for each quarter of the fiscal year ended March 31, 2015.

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Hitachi, Ltd. | Annual Report 2015

Internal Control over Financial Reporting
To ensure the reliability of the financial reporting for the Group as aestablishment of systems for objective assessment at each in-housewhole, the Hitachi Group has documented control procedures, fromcompany and major Group company. The J-SOX Committee’s Officecompany-level controls to process-level controls, in accordance withsummarizes the assessment results of each company to confirm thepolicies determined by the J-SOX Committee. In regard to assessment

effectiveness of internal control on a Group-wide, consolidated basis.

of the internal control over financial reporting, Hitachi is advancing theHitachi Group Internal Control Assessment Framework (As of March 31, 2015)Financial Services
AgencyHitachi, Ltd. President and CFO
Internal
ControlReportReportReportReportJ-SOX Committee
J-SOX Committee’s Office

Audit Committee
Independent

Collaboration

Auditors

ReportInternal Auditing

In-house and major Group companies

OfficeReportExternal
Audit

Subsidiary companies

Accountability
In accordance with its disclosure policy, Hitachi is implementing the fair

Hitachi is working to utilize the opinions obtained through these IRand appropriate disclosure of such information as management strategies

activities as feedback within the Company and to reflect them inand financial information. In addition, Hitachi is aggressively conducting

management and business administration.

dialogues through such means as meetings with shareholders andinvestors, IR events, and the general meeting of shareholders.
In the fiscal year ended March 31, 2015, the Company held quarterly
results presentations, as well as a presentation on the progress of theHitachi is taking steps to implement aggressive information
disclosure, such as providing presentation materials, videos, andperformance and stock price graphs on our website for shareholders
and investors.

2015 Mid-term Management Plan. In addition, continuing on from thefiscal year ended March 31, 2014, the Company held Hitachi IR Day

Information for shareholders and investors

2014, an IR event at which leaders explained principal business

http://www.hitachi.com/IR-e/strategies and management initiatives in accordance with the Mid-termManagement Plan. Furthermore, to deepen understanding of the rail

Major information disclosure publications

systems business, Hitachi offered tours of the Kasado Works, and in

Financial results / Quarterly financial results

addition the Company held approximately 740 individual meetings
with institutional investors and analysts in Japan and overseas.
Moreover, twice per year management leaders visit institutional

Annual securities reports / Quarterly reports
Business reports / Interim business reports

investors in North America, Europe, and Asia to explain management

Annual reports

policies, business trends, and other matters.

Hitachi Group sustainability reports

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