Corporate Governance

Hitachi and its listed subsidiaries are companies with
Nominating Committee, etc., under the Companies Act ofJapan. By demarcating responsibilities for management
oversight and those for the execution of business operations, Hitachi is working to create a framework for quick
business operation, while making management highly
transparent.
In addition, Hitachi is executing business strategies
formulated to enable the Group to demonstrate its collective strengths. Moreover, some of Hitachi’s Directors andExecutive Officers serve concurrently as Directors andExecutive Officers at Group companies, thereby strengthening integrated management of the Group and improving

management oversight of Group companies. In theseways, Hitachi is working to increase corporate value.
Starting in June 2015, the Japan’s Corporate Governance
Code applies to companies listed on domestic stock
exchanges in Japan. Hitachi agrees with the basic approachof the Code, which is that the Code’s appropriate implementation will contribute to the development and success ofcompanies, investors and the Japanese economy as a wholethrough individual companies’ self-motivated actions so as
to achieve sustainable growth and increase corporate value
over the medium-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(currently a Company with Nominating Committee, etc.)

Increased number of outside directors including
non-Japanese directors; outside directors became majority(June 2003~)(June 2012~)

Major Aims

Major Aims

•	Make management highly transparent by demarcating responsi-•	Reflect global, diverse viewpoints in management, further

bilities for management oversight and those for the execution ofbusiness operations

strengthen oversight function
Composition of Board of Directors

Composition of Each Committee (June 2016)

June 2011 (13 elected)

June 2016 (13 elected)

Nominating Committee: Determines director candidates

Audit Committee: Audits execution of Directors and Executive Officers

Compensation Committee: Determines remuneration for Directors and Executive Officers

Outside directors

49Inside directors(non-executive)

7

2

Inside directors(serving concurrently as
executive officers)22

Non-Japanese directors

Chairman (Outside Director)

Outside Director

Female directors

Inside Director

3. Appropriate implementation of the Corporate Governance Code

Implementing all of the principles of the Corporate Governance CodeAnalysis and Evaluation of the Effectiveness of the Board of Directors•	The Board of Directors analyzed and evaluated its effectiveness in fiscal year ended March 31, 2016, based on each director’s evaluations in regard
to such matters as the composition of the Board of Directors, the decision-making process, contributions, and operational and support systems.
•	The results of the evaluation were that the Board of Directors has diversity in its composition and, targeting growth in corporate value over the
medium-to-long term, conducts active discussions, centered on matters related to management strategies, such as mid-term management plans.
The evaluation concluded that the Board of Directors is functioning effectively overall.

32

Hitachi, Ltd. | Integrated Report 2016

Corporate Government Framework
Accounting Auditors

Report

Audit

General Meeting of
Shareholders
Appointment

Senior Executive Committee
Appointment /Oversight

ReportPresident & CEO

Board of Directors
Executive Vice Presidents andExecutive Officers / Senior Vice
Presidents and Executive Officers

Nominating Committee
Audit

Compensation Committee
Internal
Auditing
OfficeAudit Committee

Executive
Department
in charge

Executive
Department
in charge

Department
in charge

Department
in charge

ReportAudit

Board of Directors
The Board of Directors approves basic management policy for the

March 31, 2016, and the attendance rate of Directors at these

Hitachi Group and supervises the execution of the duties ofmeetings was 100%. To assist with the duties of the Board of

executive officers and directors in order to sustainably enhance

Directors and each committee, staffs who are not subject tocorporate value and shareholders’ common interests. The basic

orders and instructions of Executive Officers are assigned.

management policy includes the medium-term management plan
and annual budget compilation. The Board of Directors focuses

Attendance at meetings of the Board of Directors by eachon strategic issues related to the basic management policy as

outside director in the fiscal year ended March 31, 2016

well as other items to be resolved that are provided in laws,

Name

Attendance

Nobuo Katsumata

8 out of 8 days

Cynthia Carroll

8 out of 8 days

Sadayuki Sakakibara

8 out of 8 days

George Buckley

8 out of 8 days

Louise Pentland

7 out of 7 days

mittees—the Nominating Committee, the Audit Committee, andHarufumi Mochizuki

8 out of 8 days

the Compensation Committee—with outside Directors account-

Philip Yeo

8 out of 8 days

Hiroaki Yoshihara

8 out of 8 days

regulations, the Articles of Incorporation, and Board of Directors
Regulations. As of June 22, 2016, the Board of Directors wasmade up of 13 Directors, and two of them concurrently serve as
Executive Officers. Hitachi aims to reinforce the oversight function of the Board of Directors, of which nine outside Directors,
including non-Japanese, account for the majority, reflecting theirglobal and diverse viewpoints.
Within the Board of Directors, there are three statutory com-

ing for the majority of members of each committee. The Board of
Directors meetings were held 8 days during the fiscal year ended33

Corporate GovernanceFurthermore, Hitachi formulated and published Corporate• His or her immediate family member is, or has been within the

Governance Guidelines outlining the framework of corporate

last three years, an executive director or an executive officer, ofgovernance, such as the function and composition of the Boardof Directors, qualifications for Directors, and criteria for assessing
the independence of outside Directors.

the Company or any of its subsidiaries;• He or she is currently an executive director, an executive officer or an employee of a company that has made payments to,or received payments from, the Company for property or ser-

Corporate Governance Guidelines of Hitachi, Ltd.

vices in an amount which, in any of the last three fiscal years,

http://www.hitachi.com/IR-e/corporate/governance/guidelines.html

exceeds 2% of any of the companies’ consolidated grossrevenues;

Qualification for the outside Directors and• He or she has received during any of the last three fiscal years

criteria for the independency

more than ¥10 million in direct compensation for his or her ser-In regard to the election of an outside Director, the Company’s

vice as a specialist in law, accounting or tax, or as a consultant

Nominating Committee considers the following criteria for inde-from the Company, other than director compensations; orpendence. In addition, the Committee also considers whether the• He or she serves as an executive officer or director of a not-for-outside Director has outstanding character and insight andprofit organization, and the Company’s discretionary

whether the Outside Director has worked in a leadership position

charitable contributions to the organization in any of the lastin such fields as business, law, administration, accounting or edu-

three fiscal years are more than ¥10 million and 2% of thatcation or has experience at policy-making levels.

organization’s annual gross revenues.

In regard to the independence of an outside Director, theCompany considers an outside director to be independent if
none of the following items are applicable.

34

Name

Reasons for appointment

Baba Kalyani

Mr. Kalyani was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors by supervising theexecution of duties by Executive Officers and others from an independent perspective as well as reflecting his global viewpoint to the Company’s Board of
Directors based on his rich experience and insight as the top executive of a major global company.

Cynthia Carroll

Ms. Carroll was selected as an outside director, since she was expected to reinforce the functional aspects of the Company’s Board of Directors by supervising theexecution of duties by Executive Officers and others from an independent perspective as well as reflecting her global viewpoint to the Company’s Board of
Directors based on her rich experience and insight as the top executive of major global companies.

Sadayuki Sakakibara

Mr. Sakakibara was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors by supervising
the execution of duties by Executive Officers and others from an independent perspective based on his rich experience and insight as the top executive of a major
global company.

George Buckley

Mr. Buckley was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors by supervising theexecution of duties by Executive Officers and others from an independent perspective as well as reflecting his global viewpoint to the Company’s Board of
Directors based on his rich experience and insight as the top executive of major global companies.

Louise Pentland

Ms. Pentland was selected as an outside director, since she was expected to reinforce the functional aspects of the Company’s Board of Directors by supervising
the execution of duties by Executive Officers and others from an independent perspective as well as reflecting her global viewpoint to the Company’s Board of
Directors based on deep insight into corporate legal matters and corporate governance gained through her rich experience as the chief legal officer of major
global companies.

Harufumi Mochizuki

Mr. Mochizuki was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors by supervising
the execution of duties by Executive Officers and others from an independent perspective based on his rich experience and insight in the area of public administration, etc.

Takatoshi Yamamoto

Mr. Yamamoto was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors by supervising
the execution of duties by Executive Officers and others from an independent perspective based on a broad range of insight in business and management gained
through his experience in the area of corporate analysis and global corporate management.

Philip Yeo

Mr. Yeo was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors by supervising the execution of duties by Executive Officers and others from an independent perspective as well as reflecting his global viewpoint to the Company’s Board of Directors
based on his broad experience and insight in such areas as public administration.

Hiroaki Yoshihara

Mr. Yoshihara was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors by supervising
the execution of duties by Executive Officers and others from an independent perspective as well as reflecting his global viewpoint to the Company’s Board of
Directors based on his rich experience and insight in the area of global corporate management and accounting.

Hitachi, Ltd. | Integrated Report 2016

(1) Nominating Committee

Director and Executive Officer Compensation

The Nominating Committee has the authority to determine par-The Company’s Compensation Committee sets forth the policy

ticular proposals submitted to the general meeting of sharehold-on the determination of the amount of compensation, etc. ofers for the election and dismissal of Directors. The Nominatingeach Director and Executive Officer pursuant to applicable provi-

Committee consists of four Directors, three of whom are outside

sions of the Companies Act. Compensation will be commensu-

Directors.

rate with the ability required of, and the responsibilities to be

The Nominating Committee meetings were held 6 days during

borne by, the Company’s Directors and Executive Officers,

the fiscal year ended March 31, 2016.

taking into consideration compensation packages at other(2) Audit Committee

companies.

The Audit Committee has the authority to audit the execution ofCompensation for Directors will consist of a monthly remuner-

duties of Directors and Executive Officers and to determine on

ation and a year-end allowance. Monthly remuneration will be

proposals submitted to the general meeting of shareholders for

decided by adjusting basic remuneration that reflect full-time or

the election and dismissal of accounting auditors. The Audit

part-time status, committee membership and position, travel

Committee consists of five Directors, including three outsidefrom place of residence, etc. Year-end allowance will be a pre-Directors and one standing Audit Committee members.

determined amount equivalent to about 20% of the Director’s

The Audit Committee meetings were held 16 days during theannual income based on monthly remuneration, although thisfiscal year ended March 31, 2016.

amount may be reduced depending on financial results. A(3) Compensation Committee

Director concurrently serving as an Executive Officer will not be

The Compensation Committee has the authority to determine

paid compensation as a Director.

remuneration policies for Directors and Executive Officers andCompensation for Executive Officers will consist of a monthly

remuneration for individuals based on them. The Compensation

remuneration, a performance-linked component and a medium

Committee consists of four Directors, three of whom are outside

and long-term incentive compensation. The higher position

Directors.

Executive Officers hold, the higher proportion of variable pay

The Compensation Committee meetings were held 9 days
during the fiscal year ended March 31, 2016.

(the sum of performance-linked component and medium andlong-term incentive compensation, except monthly remuneration as fixed pay) will be set to the total annual compensation.

Composition of the Board of Directors and Each Committee
NumberOutsideof persons Directors Directors Chairman

Monthly remuneration will be decided by adjusting a basic
amount to reflect the results of an assessment. The basic
amount is set in accordance with the relevant position.

Board of Directors

13

9*

4 Inside Director

Nominating Committee

43

1 Outside Director

basic amount to reflect financial results and individual perfor-

Audit Committee

5

3

2 Outside Director

mance. The basic amount is set within the range of about 25 toCompensation Committee

43

1 Outside Director

35% of the total annual compensation of each Executive Officer* 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.

Executive Officers

Performance-linked component will be decided by adjusting a

in accordance with the relevant position. Medium and long-term
incentive compensation* will be stock options as stock-based
compensation with share price conditions (stock acquisitionrights with the strike price of ¥1), the number of which to be

Executive Officers decide on matters delegated to them by the

granted will be determined within the range of about 10 to 40%

Board of Directors and execute Hitachi’s business affairs withinof the total annual compensation of each Executive Officer inthe scope of assignments determined by the Board of Directors.

accordance with the relevant position. As for expatriates, cash

As of August 1, 2016, Hitachi had 34 Executive Officers.

award based on the value of the Company’s share price with the

Senior Executive Committee
The Senior Executive Committee is a council to ensure thatPresident deliberately decides on important managerial matters,
which may affect the business of Hitachi or the Hitachi Group,
through discussing from diverse viewpoints. This committee consists of eight members as of June 22, 2016: President & CEO, four
Executive Vice President and Executive Officers and three SeniorVice President and Executive Officers.

similar conditions will be substituted for the stock options.
* It was decided at the Compensation Committee meeting held on May 13, 2016 thatmedium and long-term incentive compensation will be introduced as a component of
the compensation from the fiscal year commencing on April 1, 2016.

The compensation structure for Directors and Executive
Officers was re-examined starting with compensation for the
fiscal year ended March 31, 2009, and the retirement allowance
was abolished.
35

Corporate GovernanceCompensation for Directors and Executive Officers for the fiscal year ended March 31, 2016, is as follows:
Amount of compensation
Total amount of each type (Millions of yen)
Total amount of compensation,etc. (Millions of yen)

CategoryMonthly
remuneration

Year-end allowance andperformance-linked component

Number of persons

Directors (excluding outside Directors)

117*1

105*1

12

3*2

Outside Directors

280

265

14

8

Executive Officers

1,763

1,275

487

28

Total

2,161

1,647

514

39

*1 T he amount of compensation to Directors (excluding outside Directors) includes the monthly remuneration for one Director, who retired due to expiration of his term of office at theclose of the 146th Annual General Meeting of Shareholders held on June 25, 2015.
*2 The number of Directors indicated excludes two Directors who concurrently serve as Executive Officers.

In addition, Directors or Executive Officers whose compensation from Hitachi and its subsidiaries is not less than ¥100 million andthe amount of their compensation are as follows:
Total amount of each type (Millions of yen)
Total amount ofcompensation, etc.
(Millions of yen)Monthly
remuneration

Performance-linked
component

Basicremuneration

Incentive

Name

Company

Category

Short-termLong-term

Hiroaki Nakanishi

Hitachi, Ltd. (The Company)

Executive Officer*3

161

115

46

—

—

—

—

Toshiaki Higashihara

Hitachi, Ltd. (The Company)

Executive Officer*

136

97

39

—

—

—

—

Alistair Dormer*4

Hitachi Rail Europe Ltd.
(Consolidated subsidiary)*5

Executive Chairman
and CEO

161

—

—

70

61

28

—

John Domme*

Hitachi Information &Telecommunication Systems
Global Holding Corporation(Consolidated subsidiary)*5

Chairman of
the Board and CEO

900

—

—

144

185

558

12

4

3

Others*6*3 Although concurrently serving as Director, Messrs. Hiroaki Nakanishi and Toshiaki Higashihara do not receive compensation as Director.
*4 A lthough concurrently served as Executive Officer of the Company for the fiscal year ended March 31, 2016, Messrs. Alistair Dormer and John Domme did not receive compensation as
Executive Officer of the Company.
*5 T he basic remuneration paid in Sterling pounds and US dollars is converted into yen using average exchange rate for each quarter of the fiscal year ended March 31, 2016. The othercompensations paid in Sterling pounds and US dollars are converted into yen using average exchange rate for the fiscal year ended March 31, 2016.
*6 The “Others” column represents the amount of fringe benefits.

Internal Control over Financial Reporting36

To ensure the reliability of the financial reporting for the Group

reporting, Hitachi is advancing the establishment of systems for

as a whole, the Hitachi Group has documented control proce-objective assessment at each business unit and major Groupdures, from company-level controls to process-level controls, incompany. The J-SOX Committee’s office summarizes the assess-accordance with policies determined by the J-SOX Committee. In

ment results of each company to confirm the effectiveness ofregard to assessment of the internal control over financial

internal control on a Group-wide, consolidated basis.

Hitachi, Ltd. | Integrated Report 2016

Hitachi Group Internal Control Assessment Framework (As of April 1, 2016)
Financial Services
AgencyHitachi, Ltd. President and CFO
Internal
ControlReportReportReportReportJ-SOX Committee
J-SOX Committee’s Office

Audit Committee
Collaboration

Independent
Auditors

ReportBusiness Units andMajor Group Companies

Internal Auditing
OfficeReportExternal
Audit

Subsidiary Companies

Accountability
In accordance with its disclosure policy, Hitachi is implementing

Information for shareholders and investors

the fair and appropriate disclosure of such information as man-

http://www.hitachi.com/IR-e/agement strategies and financial information. In addition, Hitachi
is aggressively conducting dialogues through such means as
meetings with shareholders and investors, investor relations (IR)events, and the general meeting of shareholders.

Major information disclosure publications

Financial results / Quarterly financial results

In the fiscal year ended March 31, 2016, we held quarterly

Annual securities reports / Quarterly reports

financial results briefings and corporate strategy meetings on our

Business reports / Interim business reports

progress with the 2015 Mid-term Management Plan. Following on
from the fiscal year ended March 31, 2015, we hosted Hitachi IR
Day 2015, where senior management explained their businessAnnual report
Hitachi Group sustainability reports

strategies and management policies under the Plan. Feedback frominstitutional investors and analysts was positive. Their comments
included, “I was struck by the Company-wide efforts to generatecash flows,” and “This was a valuable once-a-year opportunity to
update our understanding of the Company’s various businesses—
one that I very much hope will continue.”
We also conducted tours of the Nakajo Division of Hitachi
Industrial Equipment Systems and Hitachi Consumer Products(Thailand), a consumer electronics production site, to deepen
understanding of our product businesses, in addition to conducting about 740 one-on-one meetings with institutional investors
and analysts worldwide. Members of senior management visit
institutional investors in North America, Europe, and Asia twicea year to explain corporate management policies and businessdirections. We are doing our best to share IR feedback in-houseand reflect this in management and operations.
We also post briefing materials and business performance aswell as stock price trend charts in a timely manner on our IR
website. We aim to continuously enhance our information disclosure. In the fiscal year ended March 31, 2016, we introduced a
new responsive design on our website for improved browsing
convenience from smartphones and tablets.
37