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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 speedy 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.
Advantest utilizes the Audit & Supervisory Board Member system built around the Board of Directors and the Audit & Supervisory Board. Since 2003, we have also introduced an executive officer system in order to improve our response times and enhance corporate governance.
Corporate governance structure
Board of Directors
The Board of Directors makes decisions on management policy, strategy, and other critical matters for the Group, and also monitors and supervises the company’s executive officers to ensure business is conducted swiftly and efficiently. Effective June 2006, we shortened the term of office of directors from two years to one in an effort toward better clarifying their management responsibilities while building a management structure capable of rapidly addressing prevailing issues in our business environment. The Board of Directors currently consists of nine directors*, of whom six are internal directors and three are external directors.
In 2005, we also established the Nomination and Compensation Committee to discuss matters concerning the nomination and compensation of officers in consultation with the Board of Directors, and propose the results to the Board of Directors.
∗ As of June 26, 2013
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 22 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.
∗ As of June 26, 2013
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. Director compensation is determined by the Board of Directors based on such proposals, while compensation of the Audit & Supervisory Board Members is determined with the cooperation of its Board Members after such proposals have been presented to the Audit & Supervisory Board by the Board of Directors.
Executive compensation at Advantest for fiscal 2012 was as follows.
| Classification | Number of employees | Compensation amount |
|---|---|---|
| Directors | 10 | 478 million yen |
| Corporate Auditors | 4 | 64 million yen |
| Total | 14 | 542 million yen |
- Notes
- The amounts of compensation set forth above include compensation paid in relation to stock option rights and fixed compensation paid to one director who retired from his position and two directors appointed as of the closing of the 71st ordinary general meeting of shareholders, which was held on June 26, 2013.
- The amount of compensation set forth above includes the aggregate amount of compensation for four outside directors and two outside audit & supervisory board members in the amount of ¥48 million.
Internal controls
We created an internal controls system compliant with the US Sarbanes Oxley (SOX) Act, enacted in July 2002. The system has since been upgraded to meet the compliance requirements of Japan’s Companies Act, which came into effect in May 2006, as well as the Financial Instruments and Exchange Act (April 2008). In June 2011, our Internal Controls Committee assessed the efficacy of our fiscal 2010 internal controls, and met again in February 2012 to confirm the progress of assessment in fiscal 2011.
As part of an internal system of control, we carefully identify and classify risk factors in our key business processes that may be latent in our management environment, business activities, and company properties. We analyze the seriousness and probability of these risks, and formulate policies and procedures to properly manage them.
Furthermore, in the interests of consolidated group management where focus is placed more on consolidated financial performance than on separate aspects of financial performance, we ensure that the same high quality internal control systems are maintained and operated throughout Advantest Corporation and its affiliates. The internal control systems employed within Advantest's worldwide affiliate companies are operated regionally in accordance with the group wide, uniform policy formulated by the Internal Control Committee. Important matters concerning internal controls that occur within the Group are reported to the Board of Directors by the Internal Control Committee.
Audit system
The Audit & Supervisory Board Members audit the Directors, Executive Officers and other executive bodies of the company in accordance with the audit policy and audit plan created by the Audit & Supervisory Board. They carry out their duties by attending the meetings of the Board of Directors and other important meetings, and conducting detailed reviews of Advantest's operations and assets. The Audit & Supervisory Board has four Audit & Supervisory Board Members, two of them full-time. Two are internal auditors and two external*. We have also established an Auditing Group as an internal audit organization. The Auditing Group monitors the status of Advantest's internal controls on a daily basis, and identifies problems and recommends improvements wherever needed.
∗ As of June 26, 2013
Internal auditing
Advantest's Auditing Group annually conducts an internal audit of risk and operational control of each Group company to ensure compliance with relevant laws and regulations.
As a listed company on the New York Stock Exchange, Advantest is required to comply with the US Sarbanes Oxley (SOX) Act. We therefore utilize the COSO framework* and the control self-assessment (CSA)** technique to ensure that the operational processes of each division exceed the standards required. In recognition of the indispensability of these efforts in boosting the transparency of our business activities and building a positive corporate culture, we work hard to address each and every problem discovered during an internal audit.∗ COSO framework:
A framework for internal control proposed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992. In order to ensure—largely for the benefit of shareholders — that internal control is performed systematically over the activities of the manager and all other personnel, internal control is defined as having three objectives: (1) effectiveness and efficiency of operations, (2) reliability of financial reporting, (3) compliance with applicable laws and regulations, and consisting of five components: (1) control environment, (2) risk assessment, (3) control activities, (4) information and communication, (5) monitoring. These components are considered to be the standard elements by which to measure the effectiveness of internal control.
∗∗ 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.
