Corporate Governance
Our approach to corporate governance
We aim to increase operational transparency, achieve sustainable growth and increase our corporate value in line with the basic principles of management set out in The ADVANTEST Way and Code of Conduct, a set of rules and standards of behavior that all executives and employees must observe. We clearly separate decision making and supervising functions from executive functions, enhancing management efficiency and transparency.
Management structure
The global business environment is changing more rapidly than ever before. To continuously increase our corporate value and competitiveness in today's world, we emphasize swift decision-making and execution. We also place an emphasis on sound, highly transparent business operations in compliance with laws and regulations. In order to meet these challenges, we draw clear lines of authority within our organization and set responsibilities in accordance with each management function, assigning each role to the best person for the job.
In line with the revised Companies Act, as from May 1, 2015, Advantest further strengthened its corporate governance and Board of Directors audit function under the institution of the newly introduced company with a committee governance structure, and with the aim of further increasing our company value, from the June 24, 2015 we changed to a company with a committee governance structure. As an organization we have a Board of Directors, an Audit Committee and an Accounting Auditor. Furthermore we established a structure that can quickly respond to the rapidly changing business environment, and in order to strengthen our corporate governance, from 2003 we introduced an executive officer system.
Corporate governance structure
Board of Directors
The Board of Directors, as a management decision-making body, makes decisions on the basic policy of the entire group management, as well as decisions on important matters such as management strategy, and in order to ensure quick and efficient business operations, monitors and supervises whether executive committees that have been delegated authority are operating the business appropriately. In companies with Audit Committees, the term of office of the Non-Audit Committee Directors is one year, and the term of office of Directors in the Audit Committee is two years. The Board of Directors (including members of the Audit Committee) is made up of in-house five Directors and four outside Directors making nine people*.
In addition, Advantest established a Nomination and Compensation Committee as a discretionary institution in 2005. The Nomination and Compensation Committee, in consultation with the Board of Directors, discusses matters relating to nomination and compensation of Directors, and makes a proposal to the Board of Directors.
∗ The number of people is as of June 24, 2015
Executive Officer System
Advantest has introduced an Executive Officer system that keeps decision-making functions separate from executive functions in order to boost management efficiency.
Executive Officers are selected by the Board of Directors as senior management dedicated to the execution of operations. They have the responsibility of swiftly and efficiently implementing management policies and strategies determined by the Board of Directors. The term of each Executive Officer is limited to one year to achieve more explicit accountability.
There are a total of 24 Executive Officers*, some of whom are based in Japan while others are assigned to locations in North America, Europe, and Asia to enhance integration of the company's global operations.
∗ The number of people is as of June24, 2015
Executive compensation
The Nomination and Compensation Committee discusses executive compensation in consultation with the Board of Directors and proposes the results to the Board of Directors. The compensation of the Board of Directors (except for Directors on the Audit Committee) is determined by the Board of Directors following the above-mentioned proposal. The compensation of Directors on the Audit Committee is determined through consultation of Directors on the Audit Committee.
Executive compensation for fiscal 2014 is as follows.
| Classification | Number of executive | Compensation amount |
|---|---|---|
| Directors | 9 | 411 million yen |
| Corporate Auditors | 4 | 75 million yen |
| Total | 13 | 486 million yen |
- * The compensation amount above is executive compensation for companies with Audit Boards before the transition to Companies with Audit Committees.
- * The amount of compensation includes the fixed payment for one Director who retired in August 2014.
- * Of the above-mentioned compensation, for the three outside Directors and two external Auditors, the amount of compensation was 40 million yen (rounded up to nearest million yen).
Internal control
Advantest has set up and maintains internal control systems that correspond to the United States Sarbanes-Oxley Act (SOX Act), the Companies Act and the Financial Instruments and Exchange Law. In order to manage the group with an emphasis on performance evaluation based on the consolidated balance sheet, these systems are built as a unified system of Advantest and its affiliates.
Also, Advantest established an Internal Control Committee with related Directors as members, and we operate the internal control systems in a unified manner on the basis of the policies set by the Committee. Based on the audit plan that the Committee defines every year, we evaluate the effectiveness of internal control and report to the Board of Directors.
Audit System
Audit Committee
The Audit Committee members audit the performance of Directors, Executive Officers and other executives based on the audit policies and plan established by the Audit Committee, through attendance at the Board of Directors and other important meetings, and investigations of the status of operations and assets. The Audit Committee consists of one internal Director and two outside Directors for a total of three members (one member is working internally full-time) *. Audit Committee Directors are appointed at the shareholder’s meeting separately from non-Audit Committee Directors.
For proper and efficient auditing, the Audit Committee will obtain information from the Audit Group and the Accounting Auditor as necessary and take opportunities to exchange opinions with the Audit Office and accounting auditors.
∗ The number of people is as of June 24, 2015
Accounting Auditors
Accounting Auditors perform accounting audits of the consolidated financial statements and the financial statements and produce an audit report. Advantest has appointed an auditing firm as independent auditor, and receives a set audit.
Internal audit
Advantest places audit teams at the headquarters and major overseas bases and has a global audit team in the headquarters Audit Office to oversee operations. Through the high quality audits by each audit team that is familiar with the circumstances of the region and close cooperation and information exchange between the teams, we have built an effective and uniform internal control system for the entire Group.
In order to ensure that the day-to-day business activities of Advantest comply with the relevant laws and regulations at home and abroad and have been carried out properly and effectively, the audit team conduct operational audits, compliance audits and internal control audits to evaluate the effectiveness of the internal control system, and if necessary to support making improvements at the local work sites.
In addition, because Advantest is listed on the New York Stock Exchange, we must operate internal control as defined in the US Sarbanes-Oxley Act (SOX Act) and take advantage of the COSO framework*1 and control self-assessment*2 to determine the validity of our internal control.
*1 COSO framework:
A framework for internal control proposed by the Committee of Sponsoring Organizations of the Tread way Commission (COSO) in 1992. In the case of internal control evaluation, we set the standard from the viewpoint of ensuring thorough internal control of organization members, including executives, basically from the standpoint of shareholders.
*2 Control self-assessment (CSA):
An internal control method that allows executives and managers directly involved in businesses of the entity to assess the effectiveness of the entity's control processes and risk management. With this technique, it is expected that risks can be identified, and control activities can be assessed and improved effectively and efficiently.
