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Corporate Governance

Last updated:June 23, 2017

Basic Policy on Corporate Governance

Based on the corporate slogan "Integrity and Innovation - connecting cities and people," NTT Urban Development seeks to achieve sustainable development with business expansions in real estate services such as office, residential, and retail real estate. At the same time, we seek to obtain a high level of trust from stakeholders, including all shareholders and investors, customers, suppliers, and local communities.

Under this policy, we established "Medium-Term Vision 2018 - For Further Growth -" in fiscal year 2013. Based on this vision, we have been engaged in strengthening revenue base, expanding business domains, gaining full financial control, and establishing the management base through the pursuit of complete customer- and market-orientation and innovation. Furthermore, the Group revised "Medium-Term Vision 2018" based on these efforts to respond to environmental changes and other issues the Group faces, and established new business strategies to achieve the medium-term targets.

To achieve the above, securing soundness of management and transparency, reinforcing accountability by presenting appropriate information at appropriate times and having constructive dialogue with all shareholder and investors, and improving corporate value while thoroughly adhering to corporate ethics and compliance are considered the fundamentals of corporate governance.

NTT Urban Development is implementing all principles of corporate governance and code. For details, please view the report below on corporate governance.

Matters associated with the execution of business, audit and supervision, appointments, and the determination of remuneration, etc. (Overview of corporate governance structure of the current situation)

NTT Urban Development employs a system of Corporate Auditors. As stipulated in Japan's Companies Act, its internal organizations include the General Ordinary Meeting of Shareholders, the Board of Directors, the Board of Corporate Auditors and an independent accounting auditor. The Company has determined that audits by Corporate Auditors including Outside Corporate Auditors is effective for monitoring management and has employed a corporate auditor system.
The Company has also established the Management Council, consisting of full-time Directors, branch managers, operating department managers, and heads of staff departments, which advises the President on matters within his decision-making capacity. The Management Council deliberates matters of management importance, with the goal of ensuring the speedy execution of duties and decision making. Moreover, in an effort to further enhance transparency in the decision-making process, full-time Corporate Auditors attend Management Council Meetings. In addition, before the Management Council, investment risks and other matters associated with investment projects are considered by the Investment Deliberation Council, which consists of cross-functional members, they are closely examined at investment review meetings to ensure appropriate risk control.
The Board of Directors comprised 14 Directors (two members were Outside Director; all members were male). The Board decides important matters, sets basic policies regarding management and business execution, and supervises the execution of duties by Directors. In principle, the Board of Directors convenes once a month, with additional meetings as necessary for quick decision making. During the fiscal year ended March 31, 2017, the Board of Directors convened a meeting on 16 occasions.
The Board of Corporate Auditors had four members, (three members were Outside Corporate Auditors; three members were male, and one member was female). In principle, it meets regularly once a month and holds additional meetings as necessary. During the fiscal year ended March 31, 2017, the Board of Corporate Auditors met on 19 occasions. Corporate Auditors carry out their duties according to the audit plan established by the Board of Corporate Auditors. Corporate Auditors attend the Board of Directors and other important meetings, and audit the execution of duties of Directors, and examine the status of operations and assets.
As of the June 23, 2017, the Board of Directors consisted of 14 Directors, (two members were Outside Directors; all members were male), and the Board of Corporate Auditors consisted of four members, (three members were Outside Corporate Auditors; three members were male, and one member was female).
With respect to internal audit, NTT Urban Development has established the Internal Audit Office as the department in charge of internal audits. It consists of more than one member, and carries out internal audits, reporting directly to the President, independent of business operations. Based on internal audit plans, the Internal Audit Office verifies that the company's operating activities conform to laws and ordinances, the Articles of Association, relevant regulations, and management policies and plans. The office is responsible for uncovering any issues that may exist, and proposing solutions. Such activities are designed to raise management efficiency and profitability, and to contribute to maintain the overall health of the Group.
Audits by Corporate Auditors are conducted in accordance with the audit policies and audit plans determined by the Board of Corporate Auditors. These audits concern the status of operations and the conditions of assets managed by the headquarters and its major offices. If necessary, Auditors may request the submission of subsidiaries' business reports. In addition, NTT Urban Development has established a Corporate Auditors Office with assistants to the Corporate Auditors to facilitate the execution of their duties.
Corporate Auditor (full-time) Mitsuhiro Watanabe once worked for the finance and accounting department of NTT, and has considerable knowledge about finance and accounting. Corporate Auditor Hisako Kato has work experience as a certified public accountant and a certified tax accountant and considerable knowledge about finance and accounting. Corporate Auditor Harunobu Takeda has worked at the finance and accounting department of NTT, and has considerable knowledge about finance and accounting.
Because KPMG AZSA LLC has familiarity with the details of the Company's operations, reflecting the high quality audits it has conducted as the Company's independent accounting auditor based on its sound audits structure and a wide range of expertise, and taking into account audit continuity, KPMG AZSA LLC was reappointed the Company's independent accounting auditor for the consolidated fiscal year under review.
Certified public accountants who carried out accounting audit operations for the fiscal year ended March 31, 2017:
Designated limited liability partners and certified public accountants:
Masashi Oki (2 years), Koji Fukai (4 years), Yutaka Terada(2 years)
* Years in the brackets show the length of years when accounting audit operations were carried out.
Breakdown of assistants associated with audit operations were as follows:
8 certified public accountants and 17 other staff
The Internal Audit Office (department in charge of internal audits), the Corporate Auditors, and the independent accounting auditor exchange views and information quarterly and when necessary and carry out audits in collaboration with each other.
The department in charge of internal audits, the Corporate Auditors, and the independent accounting auditor audit the Internal Control Systems and internal control departments in cooperation with the departments relevant to the systems stipulated in the Internal Control System Basic Policy, receiving reports and explanations from the relevant departments from time to time.

Information of external officers

Reason for election as outside director and attendance of outside directors

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Name Reason for election Attendance to the board of directors meetings
(FY2016;
Number of attendance / Number of meetings held)
Akira Komatsu He has extensive knowledge in the fields of business structure, management finance and management philosophy as a business administration professor at universities and a graduate school. The Company elected him as an Outside Director, expecting his high degree of expertise and extensive and broad-based knowledge and experience will continue to strengthen the supervisory function over the execution of business from an independent standpoint. 16/16 (100.0%)
(appointment on June 18, 2013)
Shiro Tanikawa He has extensive experience in consulting for business strategies over a period of many years. The Company has determined that his high degree of expertise and broad-based expertise will strengthen the supervisory function over the execution of business from an independent standpoint, expecting advice from a senior management perspective. (appointment on June 22, 2017)

Reason for election as outside corporate auditor and attendance of outside corporate auditor(Fiscal year ended March 31, 2017)

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Name Reason for election Attendance to the board of directors meetings and audit & supervisory board
(FY2016;
Number of attendance / Number of meetings held)
Mitsuhiro Watanabe He made statements from the perspective of an experienced business manager, to ensure the adequacy and fairness of decisions made by the Board of Directors and establishment of a high quality corporate governance system that will enable the sound and sustainable growth of the Company. The Company elected him as an audit & supervisory board member, expecting him to make even greater use of his extensive experience and knowledge for the Company's auditing system. Board of Directors: 16/16 (100.0%)
Audit & supervisory board: 19/19 (100.0%)
(since his appointment on June 24, 2014)
Shunichi Okazaki He made statements, making the most of the broad insight that he developed mainly through his extensive experience in government administration, to ensure the adequacy and fairness of decisions made by the Board of Directors and for the establishment of a high quality corporate governance system that will enable the sound and sustainable growth of the Company. The Company elected him as an audit & supervisory board member, expecting him to make even greater use of his extensive experience and knowledge for the Company's auditing system. Board of Directors: 16/16 (100.0%)
Audit & supervisory board: 19/19 (100.0%)
(since his appointment on June 23, 2015)
Hisako Kato She made statements necessary, with viewpoints of a certified public accountant and a certified tax accountant, to ensure the adequacy and fairness of decisions made by the Board of Directors and for the establishment of a high quality corporate governance system that will enable the sound and sustainable growth of the Company.The Company elected her as an audit & supervisory board member, expecting her to make even greater use of her extensive experience and knowledge for the Company's auditing system. Board of Directors: 15/16 (93.8%)
Audit & supervisory board: 18/19 (94.7%)
(appointment on June 24, 2014)

Remuneration of Directors and Corporate Auditors(Fiscal year ended March 31, 2017)

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Title Number of people receiving remuneration Amount of remuneration
Directors 16 303 million yen
Corporate Auditors 3 48 million yen
Total 19 352 million yen
  • (Note 1)The Ordinary General Meeting of Shareholders for the 22nd term held on June 21, 2007 resolved that annual remuneration for Directors shall not exceed ¥480 million and annual remuneration for Corporate Auditors shall not exceed ¥80 million.
  • (Note 2)The number of officers includes three Directors who retired as at the conclusion of the Ordinary General Meeting of Shareholders for the 31st term held on June 21, 2016
  • (Note 3)The amount of Directors' remuneration includes bonuses of ¥41 million for the fiscal year under review.
  • (Note 4)Other than the above, executive bonuses in the amount of ¥22 million were paid to Directors who also hold executive management positions.

Remuneration of outside officers

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Title Number of people receiving remuneration Amount of remuneration
Remuneration of outside officers 5 66 million yen
  • (Note)The amount of remuneration of outside officers is included in above "Remuneration of Directors and Corporate Auditors".

Basic policy and the status of the development of internal control systems

(Basic Policy)

The President is charged with business execution involving the creation and development of an internal control system, under the supervision of the Board of Directors and the Board of Corporate Auditors. Resolution for a basic policy on the development of an internal control system passed by the Board of Directors is as follows.

Pursuant to the Companies Act and the Enforcement Regulations of the Companies Act, NTT Urban Development shall design internal systems to secure legal and ethical compliance in its Group business operations (hereinafter, the "Internal Control Systems"), as described below.

  1. A system to ensure that Directors and employees adhere to laws and regulations and the Company's Articles of Association in the execution of their duties. This system requires that:
    1. (a)Employees carry out their respective duties in a diligent and conscientious manner in accordance with laws, regulations and instructions in an effort to ensure appropriate and efficient business operations as stipulated in the Company's Rules of Employment and related documents;
    2. (b)All Directors and employees of NTT Urban Development Group companies engage in activities that promote the highest standards in corporate ethics and compliance in accordance with the NTT Group's Code of Corporate Ethics;
    3. (c)The Corporate Ethics Promotion Committee is established and preventive measures initiated with regard to illegalities and misconduct in accordance with compliance related regulations;
    4. (d)The Company establishes a corporate ethics and compliance helpline to provide the necessary support infrastructure for all Directors and employees of the Group to report corporate ethics and compliance matters, anonymously or by name, both inside and outside the Company using attorneys. The Company will ensure that any person who makes reports to the corporate ethics and compliance helpline is not treated unfairly;
    5. (e)NTT Urban Development establishes a framework to ensure information is concentrated in the relevant department and an appropriate response is formulated in the event of potential and actual non-compliance and unethical act;
    6. (f)Education and training with regard to corporate ethics and compliance is implemented on a continuous basis for all Directors and employees of the Group;
    7. (g)The Internal Audit Office is inaugurated as a means to evaluate the efficacy and management of the Internal Control Systems, and an audit review program is initiated for areas of particularly high risk to facilitate necessary and appropriate improvement;
    8. (h)A legal structure and framework, coordinated by the Legal Department, is maintained to ensure the appropriate checks and balances are in place. In addition, the Legal Department shall centrally coordinate the Company's legal consultation with lawyers;
    9. (i)With respect to the financial instruments business operated by the NTT Urban Development Group, NTT Urban Development ensures appropriate business management and human resources structures, and develops structures to enforce the compliance with laws and ordinances, and risk management structures, and manages appropriate customer protection and customer information control;
    10. (j)NTT Urban Development appropriately develops and manages internal control associated with financial reports to ensure the credibility of financial reports in accordance with the Financial Instruments and Exchange Act; and
    11. (k)NTT Urban Development is committed to not being associated, by any means, with antisocial forces or organizations that pose a threat to the order and safety of society, and to act decisively against these antisocial activities in cooperation with the appropriate authorities, such as the police.
  2. A structure for storing and managing information pertaining to the execution of duties by Directors. Under this structure:
    1. (a)Minutes of meetings, associated documents and other information relating to the execution of duties by Directors are stored and managed by the relevant department in accordance with internal rules and regulations; and
    2. (b)Directors and Corporate Auditors regularly review the aforementioned documentation and information.
  3. Provisions and other structures concerning administration of the danger of losses. In this context:
    1. (a)By establishing the Risk Management Committee and formulating regulations related to risk management, the Company shall regularly identify and assess the Group's risks as a whole and shall prevent and handle risks appropriately;
    2. (b)Careful consideration of investment risks and other factors by the Management Council in connection with investment projects is preceded by due diligence by the Investment Deliberation Council;
    3. (c)NTT Urban Development conducts risk management education and training in order to raise awareness among all Directors and employees of the Group; and
    4. (d)NTT Urban Development develops systems that enable it to take appropriate measures in the event of disaster by taking the necessary measures, such as establishing the Disaster Risk Management Promotion Committee and the Disaster Risk Management Promotion Office, developing a basic policy and a manual to respond to the occurrence of a major earthquake, and holding seminars and training in disaster management.
  4. A framework to ensure the efficient execution of duties by Directors. Under this framework, the Company:
    1. (a)Clarifies department responsibilities, authority and decision-making procedures, based on internal rules and regulations that define the structure and scope of internal organizations as well as the division of duties, responsibilities and authority;
    2. (b)Formulates rules and regulations for the Board of Directors. In principle, the Board of Directors meets once a month to decide on important matters relating to the management of the Company in accordance with related legal requirements, decision-making principles and recommendations based on due diligence. In addition, the Board of Directors periodically reports on the status of business execution. Moreover, the Company formulates rules and regulations for the Management Council, an organization that in principle meets once a week and reports to the Board of Directors; and
    3. (c)Strives to enhance efficiency in the execution of business. To this end, the Board of Directors formulates medium-term management policies and business plans of the Group and closely reviews performance on a monthly and quarterly basis.
  5. A statement concerning the establishment of a system to ensure that the corporate group conducts activities appropriately. This system ensures that:
    1. (a)Associated with the affiliate management regulations of the NTT Urban Development Group, etc., the Company requests that the Group companies deliberate with or report to the Company regarding important matters, including corporate ethics, compliance and risk management;
    2. (b)The internal control departments periodically call on the Group companies with the aim of monitoring and supervising the companies' operations;
    3. (c)Periodic meetings are convened for the Group companies to report to the Company the status of operations and their financial standing. This process enables the Company to maintain a comprehensive understanding of the Group companies activities and statuses and to ensure that the Group companies activities are conducted in an appropriate manner; and
    4. (d)Transactions between the parent company and the Group companies are conducted in an appropriate manner by examining contracts on the same terms and conditions as those with third parties.
  6. Items concerning the independence from Directors of employees who are appointed to assist Corporate Auditors in their duties and to secure the effectiveness of instructions to the employees. These items provide for:
    1. (a)The establishment of a Corporate Auditors Office that reports directly to the Corporate Auditors and the appointment of full-time, specialist employees to support Corporate Auditors in the conduct of their duties.
    2. (b)Employees appointed to support Corporate Auditors do not engage in concurrent activities.
    3. (c)Assistants to Corporate Auditors conduct their duties based on the directions and orders of Corporate Auditors.
    4. (d)The opinions of Corporate Auditors are respected in handling the personnel changes, evaluations, and so on of employees who belong to the Corporate Auditors' Office.
  7. A system for Directors and employees to report to Corporate Auditors and for other reporting to Corporate Auditors. Under this system:
    1. (a)A comprehensive reporting system is maintained in which Corporate Auditors attend not only Board of Directors meetings but also Management Council and other important meetings;
    2. (b)Directors and employees are required to report to Corporate Auditors on matters relating to the execution of their duties including the following; and
      • Matters that have led to significant damage or have the potential to lead to significant damage to the Company
      • Monthly business reports
      • The status of internal audits
      • Any risk of a breach of laws and regulations, the Company's Articles of Association and related rules and regulations
      • The status of reports made under the corporate ethics and compliance helpline
      • Important items reported by the Group companies
      • Important issues relating to corporate ethics and compliance other than those previously identified
    3. (c)Directors are required to report to the Board of Directors on the status of the establishment and management of the Internal Control Systems through the Internal Audit Office.
  8. Other structures to ensure that audits are performed effectively by Corporate Auditors. Based on this structure:
    1. (a)Corporate Auditors conduct meetings with representative Directors and related personnel on a quarterly basis to promote an exchange of opinions and ensure appropriate communication channels are maintained; and
    2. (b)The Company will provide every support to Corporate Auditors in connection with any request for the use of external advisors including attorneys and certified public accountants.
    3. (c)Corporate Auditors may charge expenses as necessary for the execution of their duties, and the Company shall make payments based on their expense claims.

(Development)

In accordance with the implementation of the Companies Act on May 1, 2006, the Board of Directors passed a resolution on the Company's Internal Control System Basic Policy on May 11, 2006.
This basic policy was revised by the Board of Directors on March 26, 2007 with the aim of enhancing its scope and content. The policy was further revised by the Board of Directors on March 28, 2008 to clearly state the Company's commitment in eradicating antisocial forces, and to comply with the Financial Instruments and Exchange Act.
Moreover, the Disaster Risk Management Promotion Committee and the Disaster Risk Management Promotion Office have been established as part of initiatives to develop and improve systems that enable the Company to take appropriate measures in the event of disaster. In addition, as a result, the Internal Control System Basic Policy was revised at the meeting of the Board of Directors held on March 30, 2009. As the Company stipulated in its risk management rules and regulations that risks shall be identified and evaluated regularly, taking into account changes in the environment surrounding the Company and its initiatives in new businesses, the Internal Control System Basic Policy was revised at the meeting of the Board of Directors held on March 26, 2012. With the establishment of the Risk Management Committee, the basic policy was revised at the meeting of the Board of Directors held on March 11, 2013. With the addition of the statement concerning the establishment of a system to ensure that the corporate group conducts activities appropriately and a system to support the audit of Corporate Auditors, the basic policy was revised at the meeting of the Board of Directors held on April 24, 2015 and November 4, 2015.
The Company is appropriately preparing and implementing internal control and other systems under the Financial Instruments and Exchange Act enacted from the fiscal year commencing on or after April 1, 2008 under the supervision of the Internal Control Office consisting of members of the Management Council.

With regard to corporate ethics and compliance, the Company has initiated a number of activities involving corporate ethics and compliance. The Company has created the Corporate Ethics Promotion Committee to deliberate corporate ethics and compliance policies and conduct corporate ethics and compliance training. A corporate ethics and compliance help line to respond to employee questions concerning corporate ethics and compliance has been thoroughly disseminated within the Company and properly managed.

Risk management is an essential part of the Internal Control Systems. NTT Urban Development's risk management initiatives aim to promote and increase corporate value by understanding the internal and external risks borne by the Company's operations, implementing pertinent countermeasures and ensuring appropriate and bold management decisions.
By establishing the Risk Management Committee and applying a set of the Risk Management rules and regulations appropriately, the Company strives to address and manage a wide variety of risks and to secure continuous and stable operations. For comprehensive risk management, when the Company makes investment decisions for development projects, it endeavors to identify a wide range of possible risks, including the risk of declines in rent, the risk of delays in construction, risk associated with dealing with the neighborhood, environmental risks, including soil contamination, and overseas risks, taking into account changes in the environment surrounding the Company and its initiatives in new businesses.

Basic policies and development to eradicate antisocial forces

The Internal Control System Basic Policy clearly describes basic policies to eradicate antisocial forces and describes the status of the development of the policies. NTT Urban Development carries out cross-company measures to respond to unreasonable demands from antisocial forces. The General Affairs Department is designated as the department that oversees the implementation of the above measures.
In addition, NTT Urban Development maintains cooperation with relevant authorities, including the police, to ensure a smooth information exchange during normal circumstances, and an urgent response in emergencies.
These basic policies and the Company's internal structure to deal with business issues are set out in the Corporate Ethics and Compliance Regulations, Risk Management rules and regulations, the Crisis Management Manual, and the Eradicate Antisocial Forces Manual. In this way, NTT Urban Development ensures that the basic policies and the internal structure are enforced across the company.

Matters relating to the Corporate Governance System, etc.

We are committed to providing timely, fair and impartial disclosure of information concerning the Company and its subsidiaries by setting forth the Disclosure Regulations, which prescribe the policies for disclosing the company information we possess and provide disclosure and control procedures for important management information.
In principle, for important management information, the President makes a decision on disclosure through deliberation at the Management Council, and the Senior Executive Manager of the Accounting and Finance Department then discloses it through the timely disclosure network (TDnet) system of the Tokyo Stock Exchange Inc., the press and other media, and the Company's web site, etc. In addition, the head of the organization that assists in the disclosure decision controls the management information of the organization as the Information Security Manager and consults with the Senior Executive Manager of the Accounting and Finance Department on facts that could constitute important management information of the organization and related subsidiaries. If the Senior Executive Manager of the Accounting and Finance Department has determined that facts constitute important management information, he or she then submits it to the Management Council for discussion concerning its disclosure.

Corporate Governance