TSE, as Japan's central market, strives to strike a balance between its public responsibility in providing financial infrastructure and its own profitability. TSE's basic corporate governance philosophy seeks to reflect a wide variety of opinions in its management and market operations; to increase the transparency of its management by clarifying the authorities and responsibilities of its corporate divisions, and increase their accountability; and to ensure reliable operations as a self-regulatory organization, thereby gaining investor and shareholder confidence.
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Board of Directors
TSE introduced an executive officer system to streamline the decision making process and to clarify the authority and responsibility of its operational and administrative functions. The Board of Directors is responsible for the actual management of the TSE, and the number of directors is set at 12 or less to allow for efficient decision making. In order to increase the transparency and accountability of management, to raise the legitimacy of operations, and to fortify the board's supervisory function, seven of the directors are external board members. Of the seven external board members, threeare from companies listed on the TSE, two directors are from TSE trading participant, one is from a securities investment company, and one is a lawyer. Each has a high degree of expertise in his respective field and allows TSE's management to assimilate various external opinions. The Board of Directors decides the basic policies of management and other important issues, and supervises business operations in accordance with corporate policies.
Advisory Committees
To represent a wide range of opinions in the operations of TSE, and to advise the Board of Directors, TSE has established the Market Structure Committee, the Self-Regulation Committee, and the Discipline Committee. These advisory committees are composed of market participants and third parties. The Market Structure Committee, which deliberates issues associated with transactions, settlements, and listings, met three times during FY 2004. The Self-Regulation Committee, which discusses transaction investigations and assessment issues, met four times during the same year. The Discipline Committee, which deliberates issues associated with disciplinary actions and penalties on market violations, met five times during the same year.
Nomination and Compensation Committee
The Board of Directors has established a sub-committee called the "Nomination and Compensation Committee," which is comprised of six directors, of which four are external board members. This committee is responsible for determining nominations and compensation of the directors, and submits proposals to the Board of Directors after extensive discussions.
Audit Committee
TSE currently employs several types of corporate auditors. The Audit Committee consists of four individuals (including two standing statutory corporate auditors), of which three are external corporate auditors. Of the three external corporate auditors, one is a director of a TSE trading participant, another is a lawyer, and the last - who is also a standing statutory corporate auditor - was previously employed at the Bank of Japan (Japan's Central Bank.) The Audit Committee meeting is held once a month. Furthermore, TSE has a number of staff engaged in its auditor's office to assist the corporate auditors. The corporate auditors conduct audits in line with the compliance aspects of TSE's operations through activities that include, but are not limited to, attending important meetings, such as the Board of Directors meetings and the Executive Officers meetings. They also coordinate their efforts with the independent statutory auditors, the internal auditing team and the corporate auditors of TSE subsidiaries to improve the overall efficacy of TSE's auditing functions.
Internal Auditing Office
In an effort to prevent violations of statutory laws, the Constitution and Business Regulations of TSE and its by-laws, and TSE's employee code of conduct, a system of checks and controls was constructed within each respective division. Additionally, to reinforce internal controls, an internal auditing office was established under the direct control of the President. The internal auditing office performs internal audits of various divisions and reports the results of those audits directly to the President.
President's Advisory Committee
To exchange a wide range of opinions regarding TSE and the stock market in general, the "President's Advisory Committee" was established as the President's private discussion panel. This committee is comprised of representatives from listed companies, institutional investors, and persons from academic circles. The committee met twice during FY 2004.
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Corporate Governance |
