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Governance

Maintaining Ricoh's corporate value on behalf of all stakeholders

The Ricoh Group established The RICOH Way as a set of guiding principles and values that serves as the foundation for all our business activities. Abiding by these principles in corporate ethics and compliance and maintaining transparency in management, we continuously strive to improve our governance, and in doing so ultimately enhance our corporate value.

Corporate Governance

We strongly believe that responsible global citizenship calls for a corporate culture that embraces a sense of mission to meet the expectations of diverse stakeholders – a culture that is committed to operating under the highest ethical standards in line with the expectations of society as a whole.

Based on this belief, we advance the operations of the entire Group under The RICOH Way, strengthening our governance and ceaselessly promoting a culture of integrity while working toward sustainable corporate growth.

The Ricoh Group has also introduced a corporate audit system, in which audit and supervisory board members strengthen the effectiveness of audits and the monitoring of top management, while the Board of Directors, including outside directors, maintains strict oversight over the decision-making process to make sure it is always transparent and fair. Furthermore, by expanding the executive officer system, the segregating of duties between oversight and business execution is clarified, resulting in speedier decision-making.

The Group has also implemented an integrated risk management system for both business opportunities and business execution, and it follows internal control procedures to achieve the success of our corporate strategies and business targets.

Governance structure

Governance structure

Corporate Governance Structure

Corporate Governance System

Board of Directors

Committees

  • The Ricoh Group has introduced a corporate audit system.
  • The Board of Directors is responsible for management oversight and important decision making concerning Group management. By appointing highly independent outside directors, the Group ensures greater transparency in its management and decision making.
  • Four of the Board's ten directors are outside directors – part of an effort to incorporate various views and opinions and to eliminate arbitrary decision making in management.
  • The Board of Directors Office is setup to support the Board of Directors, driving robust decision – making and ensuring transparent managemtnt oversight.
  • Audit and Supervisory Board members hold discussions to determine audit and supervising policies and the assignment of duties, and monitor corporate management.
  • Audit and Supervisory Board members attend all important meetings, including but not limited to Board meetings, and exchange information regularly with the representative directors.
  • The Audit and Supervisory Board Members Office, with designated support staff, has been established to ensure that the Audit and Supervisory Board members can work effectively.
  • Under the executive officer system, the authority to carry out business has been assigned to respective functional departments so as to expedite decision-making and clarify the roles of each department.
Board of Directors and Audit and Supervisory Board
  • Board of Directors
    Maximum number of directors : 15
    Current number of executives : 10 (including 4 outside directors)
    Term : 2 years
  • Audit and Supervisory Board
    Maximum number of Audit and Supervisory Board members : 5
    Current number of executives : 5 (including 3 outside Audit and Supervisory Board members)
    Term : 4 years

(As of June 22, 2017)

Nomination Commitee and Compensation Committee

As part of the strengthening of management oversight functions by the Board of Directors, the “Nomination Committee”, which is chaired by a Non-executive Director, and the “Compensation Committee”, which is chaired by an Outside Director, with the majority of members on both committees being Non-Executive Directors and at least half of the members being Outside Directors, were established to ensure transparency and objectivity of nomination, dismissal and compensation of Directors and executive officers, etc. And the Board of Directors Office was set up to support the Board of Directors, driving robust decision-making and ensuring transparent management oversight.

Group Management Committee

The Group Management Committee (GMC) consists of executive officers and is a decision-making body empowered by the Board of Directors. The GMC facilitates deliberations and renders decisions on the Group's overall management from the perspective of total optimization.

Internal auditing

The Internal Management and Control Division, which is in charge of internal auditing, objectively reviews and assesses the status of business execution by respective business divisions according to clearly defined rules to ensure legal compliance and adequacy of execution practices. It also provides advice and recommendations for improvement. The results are regularly reported to the GMC's Internal Control Committee.

External auditing

Ricoh has formulated a set of guidelines called the “Policy and Procedures for Prior Approvals for Audit and Non-audit Services.” In accordance with these guidelines, advance approval must be obtained from the Audit and Supervisory Board members concerning the details of and fees for auditing contracts.

Summary of the Results of Evaluation of Effectiveness of the Board of Directors

The Company carried out an evaluation of the effectiveness of the Board of Directors meetings held during the year ended March 31, 2017, specifically the year starting in April 2016 and ending in March 2017. The following summarizes the results of the evaluation.

I.
Evaluation Methods

For the purpose of the evaluation for the year ended March 31, 2017, all Directors and Audit & Supervisory Board Members evaluated the levels of the achievements of four items for improvement in management (see below), which were proposed last year, and the effectiveness in deliberations, decision making and supervision of the Board of Directors by writing evaluation comments in free form. Then, after sharing the evaluations, all of them made a round-up of the evaluation of the effectiveness of the Board of Directors for the year ended March 31, 2017, as follows.

II.
Summary of the results of evaluation of effectiveness of the Board of Directors for the year ended March 31, 2017

In response to the evaluation of the effectiveness for the previous year, the Company's Board of Directors set basic policies and four specific items for improvement with the aim of steadily achieving improvements to increase the level of effectiveness.

<Basic Policies for the year ended March 31, 2017>

1)
Enhance discussions on the Mid-Term Management Plan and on other important matters that will contribute to the increase in corporate value over the medium- and long-term.
2)
Enhance the provision and reporting of information to the Board of Directors to ensure timely and appropriate monitoring and thereby meet the expectations of all stakeholders.

<Items for improvement>

(i)
Agenda selection : Prioritize agendas in consideration of strategic importance and impacts on financial results.
(ii)
Information provision : Enhance the provision and sharing information to Non-executive Directors, mainly Outside Directors.
(iii)
Deliberations and decisions : Streamline the explanations of the proposals and allow sufficient time for deliberations.
(iv)
Reporting and follow-ups : Enhance and ensure reporting and follow-ups on the progress of business execution.

With respect to the actions mentioned above, key views presented in the evaluation meeting as follows.

1.
Evaluation of management of Board of Directors meetings
>
The four items for improvement set in the previous year were evaluated to have been improved on the whole.
>
Views were described below with respect to Basic Policy 1) for the year ended March 31, 2017.
The Board of Directors defined those proposals that should be intensively discussed and decided on during the year ended March 31, 2017 and those that should be continuously reported to and monitored by the Board of Directors to develop an annual schedule. Thus, it succeeded in prioritizing some proposals over others.
Prior explanations to and individual consultations with Outside Directors were enhanced and now function effectively.
As a result of those efforts, the Board of Directors spends sufficient time on deliberations on important proposals prior to the resolution process.
>
Meanwhile, with regard to Basic Policy 2) for the year ended March 31, 2017, there were some remarks on problems with supervision and execution.
For proposals concerning measures involving serious risks, the Board of Directors spends considerable time holding intensive discussions. However, there was variability in the quality and quantity of information offered.
As regards the deliberations, there were problems with the management side, such as time allocation and proceedings, and the response and action seemed to require further improvement.
With respect to reporting and follow-ups, some points that should be redressed were observed in both supervision and execution, such as appropriateness, swiftness and thoroughness.
2.
Evaluation of effectiveness in deliberations, decision-making and supervision
>
Many comments confirmed that active discussions were held on both the Board of Directors and the Advisory Committee to perform their governance functions. On the other hand, there were also some views on issues in the Board of Directors with the quality of its deliberations and with the effectiveness of its supervision.
There were some proposals with respect to which two-way discussions between Executive and Non-executive Directors were insufficient.
The supervision needs to be checked and improved from a perspective that includes not only the Board of Directors but the Audit & Supervisory Board and Internal Control.
>
The Advisory Committee was evaluated as having played significant roles in the governance function, whereas some views pointed out the necessity of improving the scope of evaluation and its management in the Nomination Committee and the revision including personnel policies and systems in the Compensation Committee.
III.
Initiatives for improving the effectiveness of the Board of Directors for the year ending March 31, 2018

In view of the evaluations presented above, the Board of Directors set new basic policies and items for improvement to achieve the goals in the 19th Mid-Term Management Plan started from April, 2017. It will endeavor to make autonomous improvements to further enhance its effectiveness.

<Basic policies for the year ending March 31, 2018>

1)
Create an environment in which the structural reform will be advanced through appropriate monitoring.
2)
Clarify the future direction of the Company through discussions on the growth strategy.
3)
Establish a supervisory structure that will promote sound management to contribute continuous growth and increasing corporate value.

<Items for improvement for the year ending March 31, 2018>

(i)
Carry out checks and improvements of the governance structure that cover the Board of Directors, the Audit & Supervisory Board and Internal Control for boosting the effectiveness of audit and supervision.
(ii)
Take action on execution and conduct monitoring toward the change of corporate structure contribute to continuous growth.

Initiatives targeting the four items for improvement proposed last year will be continued for enhancing the supervisory functions.

Executive compensation

In its pursuit of increased shareholder value, the Ricoh Group employs executive compensation as an effective incentive to achieve a sustainable increase in corporate earnings over the medium and long term.

The base salary of directors consists of remuneration related to management oversight, remuneration reflecting the importance of individual roles and responsibilities, remuneration for the purpose of purchasing treasury stocks (except for outside directors), and variable remuneration linked to stock price performance during the relevant fiscal year. The Ricoh Group has been strengthening incentives for executives to increase shareholder value over the long term by allocating a portion of remuneration for stock repurchase so that executives will have a common interest with shareholders.

The amount of bonuses paid to directors is based on the attainment of key performance indicators – such as sales, operating income and ROA – that pertain to shareholder value and the company's competitiveness. Proposed bonuses for directors are brought before the general shareholders meeting for approval.

Compensation paid to the Audit and Supervisory Board members is composed solely of remuneration for their auditing duties.

Executive compensation for fiscal 2017

Category Number of persons Total amount of compensation, etc. (Millions of Yen) Total amount of each type (Millions of Yen)
Basic salary Bonus
Directors (excluding Outside Directors) 7 416 378 38
Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members) 3 60 60
Outside Directors and Audit & Supervisory Board Members 9 79 79
Outside Directors 5 54 54
Outside Audit & Supervisory Board Members 4 25 25
Total 19 555 517 38

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[Compensation for external accounting auditors]

Ricoh verifies the appropriateness of time spent on auditing together with audit firms and certified public accountants (CPAs), taking into consideration the scale and characteristics of our businesses to determine final compensation for auditing services.

Compensation for auditing by external accounting auditors for fiscal 2017

Category Fiscal year ended March 31, 2017
Fees for audit services (Millions of Yen) Fees for non-audit services (Millions of Yen)
Ricoh Company Ltd. 217
Consolidated subsidiaries 138
Total 355

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other fees

Fees for audit services and non-audit services paid the Company and its subsidiary to KPMG, which belongs to the same network as the Company's accounting auditor, were ¥1,222 milliion and ¥247 million respectively.