Corporate Governance Corporate Governance

Our Stance to Corporate Governance

We will continuously improve ourselves so that we can offer technology, products and services that will satisfy our customers worldwide, and contribute to development of society through development of the most advanced technology based on our corporate mission: “Enabling the Leading-Edge Technology”. Following this corporate mission, we have established The ADVANTEST Way & Code of Conduct as our action guidelines for executives and employees of the entire Group to understand and comply with the corporate mission. We will also answer the trust from our stakeholders and aim toward sustainable growth of the Group and mid- to long-term growth of corporate value. In realizing this, we set building a governance system that is fair, efficient, and highly transparent as the foundation of corporate governance. Our corporate governance framework and philosophy is formulated as a basic policy and made available on the website.

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 relevant 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.

We have been implementing Company with an Audit & Supervisory Committee system since June 2015. Advantest further strengthened its corporate governance and Board of Directors’ audit function under the company with an audit & supervisory committee which the audit and supervisory committee member uses their voting rights in Board of Director Meetings, and with the aim of further increasing our corporate value. Furthermore we have established a structure that can quickly respond to the rapidly changing business environment, and in order to strengthen our corporate governance, starting 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 for the management of the entire group, 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 had authority delegated to them are operating appropriately. In a Company with an Audit & Supervisory Committee, the term of the Non- Audit & Supervisory Committee Member is one year, and the term of the Audit & Supervisory Committee Member is two years. The Board of Directors (including members of the Audit & Supervisory Committee ) is made up of five in-house Directors and four outside Directors, making nine people in total*. Information regarding the background of directors, the reasons for their selection, etc., is given in the director appointment proposals section of the Notification of Convening of Regular Meetings of the Board of Directors and in the company’s business report.

• More information about the Shareholdersʼ Meeting

We have established a policy and procedure to assure objectivity and transparency of nomination and compensation of Directors and are made publicly available on the website.

• Policy and procedures for nominating Directors

In 2005, Advantest established a Nomination and Compensation Committee as a discretionary institution. Nomination and Compensation Committee members consist from three Directors including two outside Directors selected by the Board of Directors’ resolution. The Nomination and Compensation Committee, in consultation with the Board of Directors, discusses matters relating to nomination and compensation of Directors, and makes proposals to the Board of Directors.

* The number of people given is correct as of June 27, 2017

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 for 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, so as to achieve more explicit accountability.

There are a total of 22 Executive Officers*, ten of whom are not citizens of Japan (America: 2; Europe: 3; Asia: 5; Percent of non-Japanese: 43%), appointed to enhance integration of the company's global operations.

* The number of people given is correct as of June 27, 2017

• List of Directors

Executive Compensation

With regard to decisions relating to the compensation of members of the Board of Directors (excluding directors who are members of the Audit & Supervisory Committee) and executive officers, following consultation with the Board, the Nomination and Compensation Committee implements review, and then submits a proposal to the Board. The Board then reviews the proposal submitted by the Committee, and makes a final decision regarding compensation. The compensation of directors who are members of the Audit & Supervisory Committee is determined following consultation with those directors who are members of the Audit & Supervisory Committee.

Executive compensation for fiscal 2016 is as follows.

1. The amount of compensation includes the payment for stock options.
2. Of the above-mentioned compensation, for the two outside Directors (excluding Directors serving on the Audit and Supervisory Committee), two outside Directors (serving on the Audit and Supervisory Committee), and two outside Auditors, the amount of compensation was 36 million yen.

Internal Controls

Advantest has set up and maintains internal control systems that correspond to the requirements of the Companies Act and the Financial Instruments and Exchange Act. 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 that includes both Advantest and its affiliates.
Also, Advantest has 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.

Auditing System

Audit & Supervisory Committee

In accordance with the auditing policy formulated by the Audit & Supervisory Committee, the Committee members attend meetings of the Board of Directors and other important meetings; undertake surveys of the state of business operations and of the company’s assets, and audit the carrying out of their duties by directors, executive officers and other executive organs within the company. The Audit & Supervisory Committee has three members (including one standing member): one inside director, and two outside directors.* Those directors who serve as members of the Committee are appointed by the Shareholders Meeting separately from other directors who are not members of the Committee.
To facilitate the implementation of appropriate, effective auditing, the Audit & Supervisory Committee may request information from the Auditing Group and from the external auditors, and there are opportunities for the exchange of views with the Auditing Group and the external auditors.

∗ The number of persons is correct as of June28, 2016

Accounting Auditors

Accounting Auditors perform accounting audits of the consolidated financial statements, accounting documents etc., and produce an audit report. Advantest has appointed an auditing firm as independent auditor, and receives a set audit.

Internal Auditing

Advantest has established an internal auditing team that comprises the Auditing Group and the Singapore auditing team. To verify whether the company’s day-to-day operations are carried out appropriately and efficiently in accordance with the requirements of relevant domestic and overseas laws and ordinances, and whether operations are performed efficiently, the internal auditing team implements operational auditing, compliance auditing and internal controls auditing. Besides evaluating the efficacy of the internal controls system, when necessary the internal auditing team also provides support to assist in the making of improvements at individual business locations. The internal auditing team hold appropriate qualifications (such as Certified Public Accountant, Certified Internal Auditor, or Qualified Internal Auditor), and all team members are committed to enhancing auditing quality.