Dentsu
Integrated Report
2019

Response to Implementation of the Corporate Governance Code

Appointment of Senior Management; Nomination of Director Candidates

When nominating directors who are not members of the Audit and Supervisory Committee, the representative director—the individual in a Japanese company who has the company seal and represents it in transactions—will submit the proposed names and, to ensure transparency, explain to the independent outside director members of the Audit and Supervisory Committee the reasons for having selected, and suitability of, nominees. Directors shall be nominated by the Board of Directors, which will take into consideration the opinions of outside directors. When nominating directors who are members of the Audit and Supervisory Committee, the representative director will submit a list of proposed names and, after they have been approved by the Audit and Supervisory Committee, the Board of Directors shall decide the new board members. For the policies and procedures involved in nominating director candidates, please refer to the Corporate Governance Report.

Formulation of the Independence Standards for Outside Directors

In order to ensure transparency of the Group’s corporate governance structure, in November 2015, the Company formulated its Standards for the Independence of Outside Directors, as stated in part below.
The Company deems that any directors who fall into any of the following categories do not meet the standards required of independent outside directors.

  1. Persons who have certain relationships with the Company or its subsidiaries

    a. Persons who perform executive roles (which means executive directors, statutory officers, executive officers, managers, employees, including advisors (the same applies hereafter), or such other persons as stipulated in Item 6 of Article 2, Section 3 of the Ministerial Order of Enforcement of the Companies Act; the same applies hereafter) in the Company or its subsidiaries

    b. Persons who were directors, executive officers, managers or employees of the Company or its subsidiaries during any period in the past 10 years

  2. Persons who hold the position of director or other executive of a corporation and who also perform an executive role in the Company

    Persons who perform an executive role such as that of director, officer, or corporate auditor in a corporation and who also perform an executive role in the Company

  3. Principal business partners

    Entities whose principal client is the Company*1 or persons who perform executive roles therein, or principal clients of the Company*2 or persons who perform executive roles therein

  4. Employees of an accounting firm of the Company

    Those who belong to an accounting firm that conducts audits of the Company under the Companies Act or the Financial Instruments and Exchange Act

  5. Outside experts of the Company

    Experts (including attorneys-at-law, accountants, tax accountants, patent attorneys, judicial scriveners and consultants) who receive a large amount*3 of money or other property (except for remuneration as a director, officer, corporate auditor and the like) from the Company (or if the entity receiving such property is an organization, such as a corporation and association, persons belonging to such entity)

  6. Persons who received donations from the Company

    Persons who received a large amount*4 of donations from the Company (or if the entity receiving such donations is an organization, such as a corporation and association, persons who perform an executive role in such entity)

  7. Major shareholders

    Entities that own 5% or more of the voting rights of the Company, or persons who perform an executive role therein

  8. Persons who have fallen under items 2 through 6 in the past

    Those who have fallen under any of items 2 through 6 during any period in the past five years

  9. Close relatives

    Close relatives of those who fall under any of items 1 through 8, except for persons who are deemed to be unimportant for the purpose hereof

*1 “Entities whose principal client is the Company” are those who received payments from the Company equivalent to more than 2% of their annual sales in the latest business year.

*2 “Principal clients of the Company” are those who made payments to the Company equivalent to more than 2% of the Company’s annual sales in the latest business year or those who provided loans to the Company the outstanding amount of which was more than 2% of the total assets of the Company in the latest business year.

*3 “Large amount” means, with respect to the amount of the property acquired by the relevant party in the latest business year, more than 10 million yen (in the case of a natural person) or more than 2% of its annual consolidated sales or gross revenue (in the case of an organization, such as a corporation or association).

*4 “Large amount” means, with respect to the amount of the donations received by the relevant party in the latest business year, more than 10 million yen or more than 2% of its annual gross revenue.

Effectiveness, Self-evaluation of Board of Directors

To ensure the maximum effectiveness of the Board of Directors, a questionnaire was submitted to all Board members pertaining to the efficacy and appropriateness of the Board’s supervision of management. Based on results of analysis and evaluation by a third party, Overall efficacy were analyzed and evaluated. The analysis and evaluation for FY2017 indicated that the composition, operation, and items deliberated by the Board of Directors were generally appropriate. It was noted that sufficient deliberation had been conducted through the exchange of opinions, and confirming that the Board remained effective and appropriate in its supervision of operations. In the future, the Company will strive to make improvements on the issues* identified in these areas, in order to further improve the effectiveness and appropriateness of management oversight by the Board of Directors.

Questionnaire items

  1. Board of Directors composition and operation
  2. Management strategy and business strategy
  3. Corporate ethics and risk management
  4. Operating performance monitoring and evaluation; remuneration of the management team
  5. Organizational and business restructuring
  6. Dialogue and collaboration with shareholders and other stakeholders
  7. Self-evaluation of individual directors

*Issues identified

  • Involvement of independent outside directors in nomination and remuneration
  • Group company management and supervision
  • Opinions and other feedback from investors

Training for Directors and Executive Officers

Directors and executive officers are provided with trainings and continuous opportunities to acquire essential knowledges for executing duties in order to properly fulfill given roles.

Specific Examples of Training

Position When appointed After appointment
Directors and Executive Officers
  • Training on Dentsu management, business and fnancial strategies, related important matters and laws
  • Discussion related to identifying and formulating solutions to Dentsu Group issues
  • Monthly study seminars as opportunity to acquire the latest information regarding best practices and megatrend-related issues
Outside Directors
  • Explanation of Dentsu’s business, organizational structure, etc.
  • Regular provision of information related to business issues, etc.

Compensation for Directors, Audit and Supervisory Board Members

Each fiscal year, Dentsu determines the appropriate compensation for Directors as well as Audit and Supervisory Board members based on corporate value, scale, and compensation levels, referencing compensation market survey data from external specialized institutions.
The Company introduced a new policy stipulating a performance-based stock compensation plan as a medium- to long-term bonus that was approved at the 170th Ordinary General Meeting of Shareholders, held in March 2019.
The plan clarifies the relationship between compensation for Audit and Supervisory Board members and Directors on one hand, and Dentsu’s performance and corporate value on the other.
The plan is designed to promote shared interests with stakeholders, while raising awareness among Audit and Supervisory Board members and Directors. The latter Company members contribute to the sustainable growth, and enhance the medium- to long-term corporate value, of the Dentsu Group.
For details, please refer to the following news release:

Total Amount of Remuneration for Directors and Audit & Supervisory Board Members

  Directors (excluding Audit and Supervisory Committee Members) (Of which are Outside Directors) Directors (Audit and Supervisory Committee Members) (Of which are Outside Directors) All Directors (of which are Outside Directors)
Monthly Remuneration 291 million yen: (15 million yen)
10 persons (1 persons)
81 million yen: (45 million yen)
5 persons (3 persons)
372 million yen: (60 million yen)
14 persons (4 persons)
Bonuses 155 million yen: (- yen)
7 persons (- persons)
- yen: (- yen)
- persons (- persons)
155 million yen: (- yen)
7 persons (- persons)
Total 446  illion yen: (15 million yen)
10 persons (1 persons)
81 million yen: (45 million yen)
5 persons (3 persons)
527 million yen: (60 million yen)
14 persons (4 persons)

Notes:

1. The annual remuneration amounts for Directors who are not Audit and Supervisory Committee Members and Directors who are Audit and Supervisory Committee Members were approved by shareholders at the Ordinary General Meeting of Shareholders held on March 30, 2016. The resolution limits the amounts to 1,200 million yenper year and 150 million yen per year, respectively.

2. Bonuses in the table above shows the amount approved at the meeting of the Board of Directors held in February2018 within the limit of remuneration for Directors stated in Note 1. above. The Company does not pay bonuses toDirectors who are Audit and Supervisory Committee Members.

3. The Audit and Supervisory Committee considered the above, and did not find any particular points of note. 4. With regard to the above, decision-making policies, concepts and processes were confirmed and examined by the Audit and Supervisory Committee, but it found no problems.

Nomination and Compensation Committee

In July 2019, Dentsu set up a Nomination and Compensation Committee. It advises the Board of Directors and reinforces its functional independence, objectivity, and accountability in connection with the nomination, compensation, and other matters related to directors as well as Audit and Supervisory Board members. It also serves to enhance corporate governance.
For details, please refer to the following news release:

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