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Corporate Governance

Fundamental Approach

In accordance with its social responsibility as a company, Kyowa Hakko Kirin is taking measures to enhance its corporate governance to drive sustainable growth and raise medium- and long-term corporate value. These measures are based on the Company’s mid-term business plan and its corporate philosophy of “Contributing to the health and well-being of people worldwide by creating new value with the pursuit of advances in life sciences and technology.” They include the establishment of structures to ensure fair and transparent decision making, timely and decisive execution of management duties, and appropriate monitoring and supervisory functions.

Kyowa Hakko Kirin believes that cooperation with stakeholders is essential for achieving the goals of its medium-term business plan and is committed to proactive and constructive dialogue with shareholders and investors, and the timely and sustained publication of transparent and fair information. The Company respects the situation of each stakeholder and pledges to execute in good faith its obligation to clearly explain information to shareholders and investors.

As a consolidated subsidiary of Kirin Holdings Company, Limited, Kyowa Hakko Kirin will abide by the management policy of the parent company while continuing to pursue a management approach that ensures its independence.

Fundamental Structure

Kyowa Hakko Kirin's management structure is based on the Board of Directors and the Board of Auditors, which together carry out the functions stipulated under the Corporation Law of Japan. The following governance entities have been established to strengthen the management function and increase management efficiency.

Directors and Board of Directors

In principle, the Board of Directors meets once a month. The Board of Directors had eight members, including two outside directors (seven men and one woman).
The Board of Directors performs critical Group wide management functions, including strategic planning, decision making, and the monitoring of operational execution.

Company Auditors and the Board of Auditors

The Company has adopted the company auditor corporate governance system. The Board of Auditors comprised five members, including four outside auditors. Based on the audit policies established by the Board of Auditors, company auditors attend important meetings, including those of the Board of Directors, inspect operations and assets, and audit the work of directors.

Executive Committee and Executive Officer System

The Executive Committee has been established as a decision-making body to make accurate and effective management decisions from a strategic viewpoint.

In addition, an executive officer system has been introduced to facilitate rapid decision making and strengthen operational execution.

Account Auditing and Legal Compliance

The Company's financial statements are prepared in conformity with generally accepted accounting principles and practices prevailing in Japan. Audits are conducted by accounting auditors to ensure appropriate presentation, etc. The Company gives the highest priority to legal compliance with regard to problems that arise in the course of operational execution, and when necessary the Company receives appropriate advice from third parties, such as attorneys.

Risk Management System and Various In-House Committees

To address the variety of risks inherent in management issues, a number of in-house committees have been established to strengthen risk management and enhance corporate governance. These committees regularly report on their activities to the Board of Directors. An overview of each committee is provided below.

Group CSR Committee

The Group CSR Committee discusses and makes decisions related to group-wide strategy and policy for matters of CSR such as risk management (including compliance and information security), environmental conservation and corporate value creation.

Group Quality Assurance Committee

The Group Quality Assurance Committee discusses and makes decisions concerning quality assurance policies.

Group Information Disclosure Committee

The Group Information Disclosure Committee discusses and makes decisions on fundamental communications policies and key information-disclosure issues in a comprehensive manner.

Group Financial Management Committee

The Group Financial Management Committee discusses and makes decisions on efficient financial activities and their associated risks.

Internal Auditing

The Company has established the Audit Department, which audits and reports on the status of the Group's operational execution from the perspectives of compliance with laws, regulations, and the articles of incorporation and of efficient management. In addition, the department provides advice and proposals regarding improvements and increased efficiency.

Corporate Ethics

To clarify the Group's approach to compliance with corporate ethics in the conduct of business activities, the Company has formulated the Kyowa Hakko Kirin Group Compliance Guidelines, and is working to ensure awareness of these guidelines among Group companies and all Group employees.

Internal Control System

The Company's Board of Directors resolved the basic policy on the Internal Control Systems as described below.

Last update: July 9, 2015

Compensation to Directors and Company Auditors

Executive compensation to directors, company auditors, and outside directors and company auditors during the fiscal year ended December 31, 2015, totaled ¥386 million, of which ¥229 million was compensation for directors (excluding compensation paid to outside directors), ¥24 million for company auditors (excluding outside company auditors), and ¥85 million for outside directors and outside company auditors. The compensation for directors includes ¥47 million in stock options. For directors, the Company has introduced systems for performance-linked compensation and for stock options as stock-based compensation.
The system for performance-linked compensation is an annual salary system that reflects company performance and individual performance in the determination of annual compensation. The system for stock options as stock-based compensation has the objective of enhancing motivation to increase enterprise value through aligning the interests of directors with those of shareholders in regard to changes in the Company's stock price. To ensure the operation of the management supervision function, outside directors and outside company auditors receive only fixed compensation.

Please note that the following is an unofficial English translation of an excerpt from the Japanese original text of the Kyowa Hakko Kirin Co., Ltd. (“Kyowa”) Corporate Governance Report. This report is submitted to the Tokyo Stock Exchange. For the convenience of capital market participants, Kyowa provides English translations of information disclosed in Japanese. Please note that this translation is provided for reference purposes only and that in the event of any discrepancies that exist between the Japanese original and the English translation, the former will prevail.

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