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No.1-7628
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF MARCH 2016
COMMISSION FILE NUMBER: 1-07628
HONDA GIKEN KOGYO KABUSHIKI KAISHA
(Name of registrant)
HONDA MOTOR CO., LTD.
(Translation of registrant’s name into English)
1-1, Minami-Aoyama 2-chome, Minato-ku, Tokyo 107-8556, Japan
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
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On March 23, 2016, the Company filed its Documents on Corporate Governance with the Tokyo Stock Exchange.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HONDA GIKEN KOGYO KABUSHIKI KAISHA (HONDA MOTOR CO., LTD.) |
| /s/ Shinji Suzuki |
| Shinji Suzuki |
| General Manager |
| Finance Division |
| Honda Motor Co., Ltd. |
Date: April 15, 2016
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HONDA MOTOR CO., LTD.
Last updated: March 23, 2016
Honda Motor Co., Ltd.
Takahiro Hachigo
Contact and telephone number: Legal Division
Telephone: 03-3423-1111 (main number)
Securities code number: 7267
http://www.honda.co.jp
The status of corporate governance at Honda Motor Co., Ltd. (hereinafter, “Honda”, the “Company”) is as follows.
| I. | Basic Approach to Corporate Governance, and Capital Composition, Corporate Attributes and Other Basic Information |
| 1. | Basic Approach |
Honda strives to enhance corporate governance as one of the most important tasks for its management, based on the Company’s basic principle, in order to strengthen the trust of our shareholders/investors, customers and society; encourage timely, decisive and risk-considered decision-making; seek sustainable growth and the enhancement of corporate value over the mid- to long-term; and become “a company that society wants to exist”.
Reasons for non-compliance
-Supplementary Principle 4.1.2 stating that recognizing that a mid-term business plan is a commitment to shareholders, the board should do their best to achieve the plan.
In order to make the optimum business judgment promptly and flexibly in today’s constantly changing business environment and at the same time to disclose information in an ideal way for shareholders and investors to help them understand the Company’s business strategies and financial performance correctly, the Company announces the long-term business strategy, its visions and business outlook for the single fiscal year.
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The Company’s midterm targets are not announced currently: however, the Executive Council decides on a company-wide midterm policy including the midterm targets, checks the progress, conducts analysis, and revises the midterm targets and policies as necessary. The Board of Directors passes the resolution on a company-wide midterm policy planned by the Executive Council, receives reports on the progress and analysis, and monitors/supervises the conditions.
-Principle 4.8 stating that Companies should appoint at least two independent directors that sufficiently have such qualities.
At present, the Company has appointed two outside directors to seek advice on the business activities from objective, broad and highly sophisticated perspectives. However, as for one of the outside directors, a notification stating that he is an independent director has not been sent because he had been executing business of the bank which had business connections with the Company, including deposits, foreign and domestic exchange, etc.
Although not stated that he is an independent director, the director concerned has no special conflicts of interest with the Company, thus the Company judges that no conflicts of interest will arise with the Company’s shareholders in general. Based on his abundant experience and considerable knowledge regarding corporate management, he is playing a contributory role in sustainable growth of the company and medium- and long-term enhancement of the corporate value by giving useful advices at the Board of Directors, to a sufficient degree.
The Company aims to have two independent directors fulfilling the independence standards set forth by the company’s Board of Directors.
- Supplementary Principle 4.10.1 stating that Companies should strengthen the independence, objectivity and accountability of board functions on the matters of nomination and remuneration, by, for example, establishing optional advisory committees under the board to which independent directors make significant contributions.
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As for the nomination of candidates for directors and corporate auditors, and appointment of the executive officers, based on the policy for appointment of candidates set forth by the Board of Directors including the outside directors, the Board of Directors deliberates and decides the person who agrees with the policy. In addition, remuneration are determined appropriately within the remuneration budgets which resolution is passed at the shareholders’ meeting and in accordance with the remuneration policy set forth by the Board of Directors including the outside directors and the remuneration standards. Thus, the company believes optional advisory committees are not necessary and existing structure is appropriately functioning.
Disclosure based on each Corporate Governance Code
Based on the Board of Directors resolutions, “Honda Corporate Governance Basic Policies” showing the company’s basic concept, framework and implementation policy are determined and posted on our website.
URL of “Honda Corporate Governance Basic Policies”: http://world.honda.com/investors/policy/pdf/governance_basic_policies150731.pdf
[Principle 1.4] Basic policy about cross-shareholdings and the voting rights as to the cross-shareholdings
Refer to the Article 15 (Basic Policies for Cross-Shareholdings and Exercise of Voting Rights as to Cross-Shareholdings) of the “Honda Corporate Governance Basic Policies.”
[Principle 1.7] Related Party Transactions
Refer to the Article 7 (Conflicting Interest Transactions) of the “Honda Corporate Governance Basic Policies.”
[Principle 3.1]
(1) Business principles, business strategies and business plans
| Basic principles: | Honda Philosophy is posted on our website. | |
| Business strategies: | “Direction for the next 10 years” is planned in 2010 and announced. | |
| Business plans: | Business forecast for each fiscal year is announced. | |
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(2) Basic views and guidelines on corporate governance
Refer to the “Honda Corporate Governance Basic Policies.”
(3) Basic policies and procedures in determining the remuneration of the directors, executive officers and corporate auditors
Refer to the Article 12 (Remuneration Policies) of the “Honda Corporate Governance Basic Policies.”
(4) Policies and procedures in the nomination of the candidates for directors and corporate auditors and the appointment of the operating officers
Refer to the Article 4 (Policy for Selection of Candidates for Directors), Article 9 (Appointment Policies and Terms of Office of Executive Officers), and Article 11 (Policy for Selection of Candidates for Corporate auditors) of the “Honda Corporate Governance Basic Policies.”
(5) Explanations with respect to the individual nominations of candidates for directors and corporate auditors
Refer to the “convening notices for general shareholder meetings” posted on our website.
[Supplementary Principles 4.1.1] Matters to be decided by the Board of Directors and the scope of the matters delegated to the management
Refer to the Article 2 (Roles and Responsibilities of the Board of Directors) of the “Honda Corporate Governance Basic Policies.”
[Principle 4.9] Independence Standards and Qualification for Independent Directors
Refer to the Annex 1 (Criteria for Independence of Outside Directors) of the “Honda Corporate Governance Basic Policies” and II-1 of this report (Matters Relating to Independent Directors and Auditors).
[Supplementary Principles 4.11.1] View on the appropriate balance between knowledge, experience and skills of the board as a whole, and also on diversity and appropriate board size
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Refer to the Article 3 (Constitution of the Board of Directors) of the “Honda Corporate Governance Basic Policies.”
[Supplementary Principles 4.11.2] Conditions of the directors and corporate auditors also serving as directors at other companies
Refer to the “convening notices for general shareholder meetings” posted on our website.
[Supplementary Principles 4.11.3] Self-evaluations of the Board of Directors
Refer to the Article 6 (Approaches for Improving Board Effectiveness – Self-Evaluations) of the “Honda Corporate Governance Basic Policies.”
[Supplementary Principles 4.14.2] Training policy for directors and corporate auditors
Refer to the Article 6 (Approaches for Improving Board Effectiveness – Director and Corporate Auditors Training) of the “Honda Corporate Governance Basic Policies.”
[Principle 5.1] Policy for Constructive Dialogue with Shareholders
Refer to the Article 16 (Policies for Dialogue with Shareholders) and the Annex 2 (Policies for Promoting Dialogue with Shareholders) of the “Honda Corporate Governance Basic Policies.”
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| 2. | Capital Composition |
Percentage of shares held by foreign investors: 30% or more
Principal Shareholders
| Name or Designation |
Number of Shares Held (thousands) |
Percentage of Total Shares Issued (%) |
||||||
| Japan Trustee Services Bank, Ltd. (Trust Account) |
104,755 | 5.8 | ||||||
| Moxley & Co. LLC |
83,945 | 4.7 | ||||||
| The Master Trust Bank of Japan, Ltd. (Trust Account) |
70,922 | 3.9 | ||||||
| State Street Bank and Trust Company 505223 |
52,503 | 2.9 | ||||||
| Meiji Yasuda Life Insurance Company |
51,199 | 2.8 | ||||||
| State Street Bank and Trust Company |
43,820 | 2.4 | ||||||
| Tokio Marine & Nichido Fire Insurance Co., Ltd. |
42,553 | 2.4 | ||||||
| The Bank of Tokyo-Mitsubishi UFJ, Ltd. |
36,686 | 2.0 | ||||||
| Nippon Life Insurance Company |
27,066 | 1.5 | ||||||
| Mitsui Sumitomo Insurance Company, Limited |
25,739 | 1.4 | ||||||
Existence of controlling shareholders (excluding the parent company): —
Existence of a parent company: None
Supplementary explanation: —
| 3. | Corporate Attributes |
Stock Exchange Listings and market classification: Tokyo Stock Exchange, First Section
Annual closing of accounts: March
Industry classification: Transportation equipment
Number of employees (on a consolidated basis) on the closing date of previous fiscal year: 1,000 or more
Net sales (consolidated) in the previous fiscal year: ¥1 trillion (1,000,000,000,000) or more
Number of consolidated subsidiaries on the closing date of the previous fiscal year: 300 or more
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| 4. | Guidelines for Measures for Protection of Minority Shareholders when Conducting Transactions, Etc., with Controlling Shareholders |
—
| 5. | Other Special Situations That Might Have a Major Influence on Corporate Governance |
The Company has two subsidiaries that are listed companies. The Company respects the independence of these listed companies and other subsidiaries.
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| II. | Overview of Management Supervisory Organization Related to Decision Making, Execution and Supervision and Other Corporate Governance Systems |
| 1. | Matters Related to Governance Units and Their Operation, Etc. |
Form of governance organization: Company with corporate auditors
Information on Directors
Number of directors specified in the Articles of Incorporation: 15
Term of directors specified in the Articles of Incorporation: 1 year
Chairperson of the Board of Directors: Chairman
Current number of directors: 14
Appointment of outside directors: Appointed
Number of outside directors: 2
Number of directors specified as independent directors: 1
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Relationship with the Company (1)
| Name |
Affiliation |
Relationship with the Company | ||||||||||||||||||||||
| a | b | c | d | e | f | g | h | i | j | k | ||||||||||||||
| Nobuo Kuroyanagi |
From another company | No | No | No | No | No | No | No | D | No | No | No | ||||||||||||
| Hideko Kunii |
Scholar | No | No | No | No | No | No | No | No | No | No | No | ||||||||||||
* Options for Categories of Relationship with the Company
* If any of the items above apply to the outside directors himself/herself “now or recently”, please mark with a “¡” and, if any of the items above applied to the outside directors himself/herself in the “past”, please mark with a “D”.
* If any of the items above apply to a family member or a close relative “now or recently”, please mark with a “l” and, if any of the items above applied to any of them in the “past”, please mark with a “▲”.
a. person who executes business of the listed company or its subsidiary;
b. directors who are executive personnel or non-executive personnel of a parent company of the listed company;
c. person who executes business of a fellow subsidiary of the listed company;
d. party for which the listed company is a major customer or a person who executes its business;
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e. listed company’s major customer or a person who executes its business;
f. consultant, accounting professional, or legal professional who receives a large amount of money or other financial asset other than remuneration for directorship/auditorship from the listed company;
g. listed company’s major shareholder (where the said major shareholder is a company, a person who executed its business);
h: person who executes the business of a customer of the listed company (where any of items d, e and f do not apply to such customer) (this item only applies to the outside director himself/herself)
i: person who executes the business of an entity whose outside director/outside corporate auditor is also a person who executes the business of the listed company (this item only applies to the outside director himself/herself)
j: person who executes the business of an entity to whom the listed company makes donations (this item only applies to the outside director himself/herself)
k. Other
Relationship with the Company (2)
Name : Nobuo Kuroyanagi
Status as independent director : No
Supplementary explanation of applicable items :
Outside director Nobuo Kuroyanagi held the position of director and chairman of The Bank of Tokyo-Mitsubishi UFJ, Ltd. until March 2012. The Company has transactions with The Bank of Tokyo-Mitsubishi UFJ, including deposits, foreign and domestic exchange, etc.
Reasons for the selection of this outside director (In the case a director is specified as an independent director, include information on the reasons for selection as an independent director ) :
Based on his abundant experience and considerable knowledge regarding corporate management, the Company wishes to receive his advice regarding the Company’s operations from an objective and highly sophisticated perspective.
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There are no special conflicts of interest between the Company and Nobuo Kuroyanagi, and the Company’s judgment is that no conflicts of interest will arise with the Company’s shareholders in general.
Name : Hideko Kunii
Status as independent director : Yes
Supplementary explanation of applicable items : —
Reasons for the selection of this outside director (In the case a director is specified as an independent director, include information on the reasons for selection as an independent director) :
Based on her abundant experience and considerable knowledge regarding corporate activities and the software field in Japan as well as overseas and her active involvement in the area of gender equality, the Company wishes to receive her advice regarding the Company’s operations from an objective and highly sophisticated perspective.
In addition, she is specified as an independent director, because there are not any personal relationship, business relationship and etc. which applies to the matters described in the Criteria for Independence of Outside Directors/Outside Corporate Auditors, and there are no special conflicts of interest between the Company and Hideko Kunii.
Existense of any optional committee corresponding to a nominating committee or a compensation committee: None
Information on Corporate Auditors
Existence of a Board of Corporate Auditors: Established
Number of corporate auditors specified in the Articles of Incorporation: 7
Current number of corporate auditors: 5
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Collaboration among the Corporate Auditors, Accounting Auditors and the Audit Office
During fiscal year 2014, the Corporate Auditors and Accounting Auditors held 13 meetings. The Accounting Auditors explained and reported to the Corporate Auditors their auditing plans, results of their auditing activities, etc., and exchanged opinions.
The Corporate Auditors receive periodic reports from the Audit Office (with 39 staff members), which is the internal auditing department of the Company, regarding auditing policies, auditing plans and the results of audits. In addition, the Corporate Auditors and the Audit Office implement internal audits independently and in collaboration with one another.
Appointment of outside corporate auditors: Appointed
Number of outside corporate auditors: 3
Number of outside corporate auditors specified as independent outside corporate auditors: 3
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Relationship with the Company (1)
| Name |
Affiliation |
Relationship with the Company | ||||||||||||||||||||||||||
| a | b | c | d | e | f | g | h | i | j | k | l | m | ||||||||||||||||
| Toshiaki Hiwatari |
Attorney at law | No | No | No | No | No | No | No | No | No | No | No | No | No | ||||||||||||||
| Hideo Takaura |
Certified public accountant | No | No | No | No | No | No | No | No | No | No | No | No | No | ||||||||||||||
| Mayumi Tamura |
From another company | No | No | No | No | No | No | No | No | No | No | No | No | No | ||||||||||||||
* Options for Categories of Relationship with the Company
* If any of the items above apply to the outside directors himself/herself “now or recently”, please mark with a “¡” and, if any of the items above applied to the outside directors himself/herself in the “past”, please mark with a “D”.
* If any of the items above apply to a family member or a close relative “now or recently”, please mark with a “l” and, if any of the items above applied to any of them in the “past”, please mark with a “▲”.
a. person who executes business of the listed company or its subsidiary;
b. directors who are not executive personnel or accounting advisors of the listed company or its subsidiary;
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c. directors who are executive personnel or non-executive personnel of a parent company of the listed company;
d. corporate auditors of a parent company of the listed company;
e. person who executes business of a fellow subsidiary of the listed company;
f. party for which the listed company is a major customer or a person who executes its business;
g. listed company’s major customer or a person who executes its business;
h. consultant, accounting professional, or legal professional who receives a large amount of money or other financial asset other than remuneration for directorship/auditorship from the listed company;
i. listed company’s major shareholder (where the said major shareholder is a company, a person who executed its business);
j: person who executes the business of a customer of the listed company (where any of items f, g and h do not apply to such customer) (this item only applies to the outside corporate auditor himself/herself)
k: person who executes the business of an entity whose outside director/outside corporate auditor is also a person who executes the business of the listed company (this item only applies to the outside corporate auditor himself/herself)
l: person who executes the business of an entity to whom the listed company makes donations (this item only applies to the outside corporate auditor himself/herself)
m. Other
Relationship with the Company (2)
Name : Toshiaki Hiwatari
Status as independent Auditor : Yes
Supplementary explanation of applicable items : —
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Reasons for the selection of this Outside Corporate Auditor (In the case a Corporate Auditor is specified as an independent Auditor, include information on the reasons for selection as an independent Auditor.) :
Based on abundant experience and considerable knowledge as a legal affairs specialist, he conducts auditing activities from a broad and sophisticated perspective.
In addition, he is specified as an independent auditor, because there are not any personal relationship, business relationship and etc. which applies to the matters described in the Criteria for Independence of Outside Directors/Outside Corporate Auditors, and there are no special conflicts of interest between the Company and Toshiaki Hiwatari.
Name : Hideo Takaura
Status as independent Auditor : Yes
Supplementary explanation of applicable items : —
Reasons for the selection of this Outside Corporate Auditor (In the case a Corporate Auditor is specified as an independent Auditor, include information on the reasons for selection as an independent Auditor.) :
Based on abundant experience and considerable knowledge as a certified public accountant, he conducts auditing activities from a broad and sophisticated perspective.
In addition, he is specified as an independent auditor, because there are not any personal relationship, business relationship and etc. which applies to the matters described in the Criteria for Independence of Outside Directors/Outside Corporate Auditors, and there are no special conflicts of interest between the Company and Hideo Takaura.
Name : Mayumi Tamura
Status as independent Auditor : Yes
Supplementary explanation of applicable items : —
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Reasons for the selection of this Outside Corporate Auditor (In the case a Corporate Auditor is specified as an independent Auditor, include information on the reasons for selection as an independent Auditor.) :
Based on abundant experience and considerable knowledge regarding corporate management, she conducts auditing activities from a broad and sophisticated perspective.
In addition, she is specified as an independent auditor, because there are not any personal relationship, business relationship and etc. which applies to the matters described in the Criteria for Independence of Outside Directors/Outside Corporate Auditors, and there are no special conflicts of interest between the Company and Mayumi Tamura.
Matters Relating to Independent Directors and Auditors
Number of independent directors and auditors: 4
Other Matters Related to Independent Directors and Auditors
Criteria for Independence of Outside Directors/Outside Corporate Auditors
The Company’s board of directors will determine that an outside director/outside corporate auditor is sufficiently independent from the Company if it determines that the said outside director/outside corporate auditor satisfies the requirements set forth below:
1. He/She is not a person who executes the business of the Company group or a person from the Company group. Also, no family member, close relative, etc. (*1) of him/her has ever been a person who executes the business of the Company group during the last five years.
2. He/She is not, and has never been, any of the following during the last five years:
1) a person who executes the business of a large shareholder (*2) of the Company;
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2) a person who executes the business of (i) a major customer (*3) of the Company, or (ii) a company of which the Company is a major customer;
3) a person who executes the business of a major lender of the Company (*4);
4) a person who belongs to an audit corporation which conducts statutory audits for the Company;
5) a person who receives a large amount (*5) of money, etc. from the Company, other than remuneration paid to directors and outside corporate auditors of the Company;
6) a person who executes the business of an entity whose outside director/outside corporate auditor is also a person who executes the business of the Company; or
7) a person who executes the business of an organization which is receiving a large amount of donation or grant from the Company (*6).
3. No family member, close relative, etc. of the outside director/outside corporate auditor currently falls under any of items 1) through 7) in paragraph 2 above.
4. The total number of years of office of the outside director/outside corporate auditor does not exceed 8 years.
*1 A “family member, close relative, etc.” means a spouse of an outside director/outside corporate auditor, a first or second degree relative, or any other relative who lives in the same place as the outside director/outside corporate auditor.
*2 A “large shareholder” means a person who is one of the top 10 shareholders in terms of shareholding as of the end of a fiscal year.
*3 A “major customer” means a customer of the Company where the annual amount of transactions between the customer and the Company exceeds 2% of the consolidated net sales of the Company or the said customer.
*4 A “major lender” means a financial institution from which the Company borrows, where the aggregate amount of such borrowings exceeds 2% of the amount of consolidated total assets of the Company or the financial institution as at the end of a fiscal year.
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*5 A person receives a “large amount” if he/she receives consideration from the Company in excess of 10 million yen per year.
*6 An “organization which is receiving a large amount of donation or grant from the Company” means an organization which receives a donation or grant from the Company in excess of 10 million yen per year.
Provision of Incentives
Status of measures to provide incentives to directors: Introduction of a performance-linked remuneration system.
Supplementary Explanation of Matters Related to This Item
The Company pays bonuses to Directors that reflect performance in each fiscal year.
Persons Eligible for Stock Options : —
Supplementary Explanation of Matters Related to This Item : —
Matters Related to the Remuneration of Directors
Status of Disclosure of Remuneration of Individual Directors: Disclosed only for certain individuals
Supplementary Explanation of Matters Related to this Item
The total Directors’ remuneration paid to the 15 Directors in fiscal year 2014 was ¥594 million. Of this amount, the three Outside Directors received a total of ¥23 million. The five Corporate Auditors received ¥181 million in total, and the three Outside Corporate Auditors were paid ¥47 million. Thus, the total remuneration for all Directors and Corporate Auditors was ¥775 million. Also, regarding Directors’ bonuses, the 13 Directors were paid a total of ¥252 million. Of this amount, the two Outside Directors received a total of ¥7 million.
Additionally, in fiscal year 2014, Director and Chairman Fumihiko Ike received Director’s remuneration of ¥72 million and a Director’s bonus of ¥30 million, a total of ¥102 million, and Director Takanobu Ito received Director’s remuneration of ¥96 million and a Director’s bonus of ¥43 million, a total of ¥140 million.
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Existence of Policies Determining the Amount of Remuneration or Method of Calculating Remuneration: Exists
Disclosure of Policies Determining the Amount of Remuneration or Method of Calculating Remuneration
-The Company’s remuneration structure for the officers shall be designed with the aim of motivating them to contribute not only to short-term, but also to mid- to long-term business results, to enable the sustainable enhancement of the corporate value of the Company.
-Remuneration of the directors shall consist of a fixed monthly remuneration, which shall be paid as compensation for the performance of their duties, and an executive bonus, which is linked to the business results for the relevant business year.
-Remuneration of the directors shall be paid based on the remuneration standards approved by the board of directors. The remuneration standards shall be approved by taking into consideration the standards of other companies, so that they will be attractive to diverse and exceptional human resources. Bonuses of the directors shall be determined and paid by taking into consideration the business results of each business year, dividends to shareholders, the standards of bonuses of employees and other matters.
-In order to advance the Company’s sustainable growth and enhance its corporate value over the mid- to long-term by sharing common interests with the shareholders through having a shareholding in the Company, directors, executive officers and corporate auditors shall acquire the Company’s stock by contributing a certain portion of their fixed remuneration to the Officers Shareholding Association, and such stock shall be held continuously throughout their term of office and for 1 year after their retirement.
Support Systems for Outside Directors (Outside Corporate Auditors)
The Corporate Auditors’ Office has been formed as a staff organization directly under the Board of Corporate Auditors to provide support, and it reports directly to the Board of Corporate Auditors. In addition, minutes of the meetings of the Board of Directors and other information are provided to the Outside Directors and Outside Corporate Auditors if necessary.
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| 2. | Matters Related to Governance Functions, Including Execution of Management, Auditing and Internal Supervision, Nominations and Decisions on Remuneration Etc. (Current Corporate Governance System) |
Board of Directors
The Board of Directors comprises 14 members (comprising of 12 Inside Directors and 2 Outside Directors, or 13 men and 1 woman). The Board of Directors is responsible for making decisions with respect to important management matters, including the conduct of important business activities and other matters as prescribed by law. Board decisions are made after deliberating such matters according to established criteria, assessing risks and giving such matters due consideration. The Board of Directors is also responsible for supervising and monitoring the conduct of duties. In fiscal year 2014, the Board of Directors met 11 times.
Outside Directors
The Company appoints outside Directors who can offer advice on its corporate activities from an objective and broad perspective based on their abundant experience and considerable knowledge. In selecting Outside Directors, in principle, the Company seeks to identify persons whose interests are not in conflict with those of its shareholders and persons who have a high degree of independence.
Board of Corporate Auditors
The Board of Corporate Auditors comprises five members (including three outside Corporate Auditors). Each Corporate Auditor, through attendance at meetings of the Board of Directors, examination of status of Company assets and other activities, undertakes to audit the Directors in the conduct of their duties in accordance with the auditing criteria for Corporate Auditors, auditing policies and division of duties etc. determined by the Board of Corporate Auditors.
To provide timely and accurate reports to the Corporate Auditors, Standards for Corporate Auditor Reports has been established. Based on these standards, reports are made periodically to the Corporate Auditors on the status of the business operations of the Company and its subsidiaries etc., the design and operation of internal control systems and other matters. Also, when events occur that have a major impact on the Company, reports are prepared for the Corporate Auditors. Moreover, the Corporate Auditors attend the meetings of the Executive Council and other important meetings. In fiscal year 2014, the Board of Corporate Auditors met 10 times.
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Status of Activities to Strengthen the Functions of the Corporate Auditors
The Company has formed the Corporate Auditors’ Office as a staff organization directly under the Board of Corporate Auditors to provide support to the Board of Corporate Auditors. Corporate Auditor Kunio Endo has had sufficient operating experience in the finance and accounting departments of the Company and its subsidiaries, and Corporate Auditor Hideo Takaura has abundant experience and considerable knowledge as a certified public accountant. Both of these Corporate Auditors qualify as “persons with considerable knowledge of finance and accounting,” as specified under Article 121-9 of the Implementation Regulations of Japan’s Company Law. In addition, the Company’s Board of Corporate Auditors has recognized Corporate Auditors Kunio Endo and Hideo Takaura as “specialists in finance in the Board of Corporate Auditors” as specified in the regulations of the U.S. Securities and Exchange Commission, based on Article 407 of U.S. Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley Act of 2002).
Outside Corporate Auditors
The Company has appointed Outside Corporate Auditors who can conduct auditing activities from a broad and sophisticated perspective based on their abundant experience and considerable knowledge. In selecting these Outside Corporate Auditors, in principle, the Company seeks to identify persons whose interests are not in conflict with those of its shareholders and persons who have a high degree of independence.
Decisions on Candidates for Director and Corporate Auditor
Candidates for Director are determined by the decisions of the Board of Directors. Candidates for Corporate Auditor are selected by decisions of the Board of Directors with the approval of the Board of Corporate Auditors.
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Organizational Operating System
Under the Company’s operating systems, to further develop its business operations with strong ties to regions around the world, based on its basic philosophy and from a long-term perspective, headquarters have been established in six regions. The Motorcycle Business, Automobile Business, Power Products and Other Businesses have developed medium- to long-term plans by product and are making adjustments to pursue optimal business operations globally. In addition, each of the Company’s functional headquarters, including Business Management Operations, Business Support Operations, IT Operations, Purchasing Operations and Customer Service Operations, is providing support and making appropriate adjustments etc. to increase the effectiveness and efficiency of the Honda Group as a whole.
R&D activities are conducted mainly by independent subsidiaries. These activities are carried out on a free and competitive basis, centering around Honda R&D Co., Ltd., for products, and Honda Engineering Co., Ltd., for production technologies, with the goal of creating distinctive and internationally competitive product groups through the application of advanced technology.
Operating Officer System
The Company appoints Operating Officers to regional, business and functional headquarters, R&D subsidiaries and other major organizational units. This management system facilitates the making of rapid and appropriate management judgments at the regional and working level.
Executive Council
The Company has formed an Executive Council, which is composed of Operating Officers of senior managing officer level and above. This council conducts prior discussions of items that will be decided by the Board of Directors, and, within the limits of authority delegated to it by the Board of Directors, deliberates important management matters.
Regional Operating Boards
To give greater autonomy to the regional level and make rapid management decisions, the Company has formed regional operating boards within each regional headquarters. Within the limits of authority delegated to them by the Executive Council, these regional operating boards deliberate important management matters within their respective regions.
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Accounting Audit
The Company has been audited from an accounting perspective by KPMG AZSA LLC as required under Japan’s Company Law, Japan’s Financial Instruments and Exchange Law and the Securities and Exchange Law of the United States.
Within KPMG AZSA LLC, a total of 108 staff conducted the audit. These accounting firm staff members comprised three certified public accountants (Sawaharu Kanai, Hiroyuki Yamada and Tsutomu Ogawa) who were in overall charge of the accounting audit, and 105 professional staff (including 39 certified public accountants, 6 accountants with U.S. certified public accountant status and 60 other staff members).
The total remuneration paid to KPMG AZSA LLC and its affiliated accounting firm, KPMG, in fiscal year 2014 for the preparation of the auditor’s report, based on Japan’s Company Law, Japan’s Financial Instruments and Exchange Law, and the Securities and Exchange Law of the United States, which covered the Company and its consolidated subsidiaries, was ¥4,180 million. In addition, remuneration paid by the Company and its consolidated subsidiaries in fiscal year 2014 for services other than auditing services received from KPMG AZSA LLC and its affiliated accounting firm, KPMG, amounted to ¥158 million.
Method of Determining Accounting Auditor Remuneration
In deciding the amount of remuneration for services provided by the Company’s Accounting Auditor, various factors are taken into consideration in discussions with the accounting firm, including the Company’s size, special features, the time schedule for the audit and other matters. In addition, to preserve the independence of the Accounting Auditor, remuneration to be paid is decided by the Board of Directors, with the prior approval of the Board of Corporate Auditors.
Summary of Content of Liability Limitation Contracts
The Company has entered into liability limitation contracts with all Outside Directors and Outside Corporate Auditors based on the provisions of Article 427, Paragraph 1 of the Company Law, to the effect of limiting the liability for damages provided for in Article 423, Paragraph 1 of the Company Law to the minimum liability amount provided for in Article 425, Paragraph 1 of the Company Law.
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| 3. | Reasons for the Selection of the Company’s Current Corporate Governance System |
As a company adopting the “board of corporate auditors system” of corporate governance, the Company has elected internal members of its Board of Directors who have an in-depth understanding of the Company’s business activities, and two outside directors who have objective, broad and highly sophisticated perspectives. In addition, the Company’s Board of Corporate Auditors, which is independent of the Board of Directors, has more than a majority of outside Corporate Auditors. The Board of Directors and Board of Corporate Auditors are responsible for supervising and monitoring the conduct of management.
Management’s judgment is that the current corporate governance system is functioning appropriately in supervising and monitoring the conduct of management.
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| III. | Status of Implementation of Measures Related to Shareholders and Other Interested Parties |
| 1. | Initiatives to Reactivate the General Meeting of Shareholders and Facilitate the Smooth Execution of Voting Rights |
Scheduling of the General Meeting on days to avoid conflicts with other companies’ shareholder meetings
Supplementary Explanation
Holding the Regular General Meeting of Shareholders as early as possible, after considering preparation of schedules, etc.
Electronic exercise of voting rights
Supplementary Explanation
The Company is working to make it possible for shareholders to execute their voting rights via the Internet using PCs and mobile communication devices.
Participation in an electronic voting platform and taking initiatives to improve the voting environment for institutional investors
Supplementary Explanation
Participating in voting platform.
Offer an English-language version of the General Meeting notice (summary)
Supplementary Explanation
Offering an English-language translation of the notice of the General Meeting for foreign investors.
Other
Supplementary Explanation
Preparing an easy-to-understand business report using slides and holding events adjacent to the auditorium where the General Meeting is held to display Honda products and others. Also, following the directives of Japan’s Cabinet Office, concerning disclosing corporate information etc. announcing the results of the voting during the General Meeting.
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| 2. | Status of Investor Relations (IR) Activities |
Hold periodic information meetings for analysts and institutional investors
Supplementary Explanation
Holding information meetings to announce quarterly results (four times a year), and, as necessary, holding press conferences with the CEO presenting.
Explanation by Company Representatives
Yes
Hold periodic information meetings for foreign investors
Supplementary Explanation
For key foreign institutional investors at appropriate times conducting to explain the Honda Group’s business strategies etc..
Explanation by Company Representatives
Yes
Post IR materials on the Company website
Supplementary Explanation
Posting various types of Company information for investors on the Company website (Japanese: http://www.honda.co.jp/investors/ English: http://world.honda.com/investors/). Making timely disclosure of materials simultaneously in Japanese and English.
Appoint an IR Representative and create an IR department
Supplementary Explanation
The Company has appointed IR Representative in Japan and North America and is working to expand and enhance IR activities.
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Other initiatives
Supplementary Explanation
Issuing a periodic publication for shareholders (Kabunushi Tsushin) that contains information on Honda’s business, products, financial performance and other topics. In addition, holding on-site tours of Honda factories and other facilities in Japan and overseas for shareholders and investors.
| 3. | Initiatives Related to Respecting the Viewpoints of Stakeholders |
Require respect for the viewpoints of stakeholders through issuance of internal guidelines.
Supplementary Explanation
To solidify trust in Honda among customers and in society, a code of conduct has been issued to be shared by all personnel working in the Honda Group: “Honda Conduct Guidelines.”
Implement environmental preservation and other CSR activities, etc.
Supplementary Explanation
Honda CSR activities, also including our efforts in environment, are covered in the “Sustainability Report” in addition to the “Driving Safety Promotion Report” which covers driver safety programs. These reports are available on our website.
Establish policies, etc., for offering information to stakeholders.
Supplementary Explanation
To gain substantially increased trust and mutual understanding of all stakeholders, Honda emphasizes transparency to offer information proactively. For disclosure of corporate information through earnings and financial reports, a Disclosure Committee has been formed comprising the Operating Officer in charge and other personnel, which is in charge of deliberating the accuracy and appropriateness of disclosure content.
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| IV. | Matters concerning Internal Control Systems |
| 1. | Basic Views on Internal Control Systems and Development Status Thereof |
| 1. | The Company’s basic policy on development of internal control systems resolved upon by the Board of Directors is as follows. |
| (1) | Systems for ensuring that the execution of duties by Directors and employees complies with laws, ordinances, and the Company’s Articles of Incorporation |
The Company will establish a code of conduct to be observed by its management and employees, such as conformity with applicable laws, ordinances, and internal rules and regulations, and it will endeavor to ensure that all management personnel and employees are made aware of and observe this code.
The Company will further develop its internal whistle-blowing systems to facilitate compliance.
The Company will install an officer to coordinate all compliance matters and will further develop its compliance systems.
| (2) | Systems related to retention and management of information on execution of duties by the Directors |
The Company will establish a management policy for information related to the execution of duties by the Directors and appropriately store and manage such information.
| (3) | Rules and other systems related to risk management |
The Company will further develop systems for relevant boards and councils to make decisions regarding material matters of management after assessing and considering associated risks.
The Company will install an officer to coordinate all matters related to risk management, and it will establish rules on risk management and further develop its risk management systems.
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| (4) | Systems for ensuring that the duties of the Directors are being executed efficiently |
The Company will endeavor to facilitate the delegation of authority by implementing an Operating Officer System and will further develop systems that enable prompt and appropriate decision making by clearly defining the scope of authorities delegated to Operating Officers and the decision-making process.
To conduct management efficiently and effectively, the Company will establish annual and medium-term business plans, endeavor to share these plans, and monitor and supervise their progress.
| (5) | Systems for ensuring that the corporate group, comprised of the Company and its subsidiaries, conducts business activities appropriately |
In addition to sharing the Company’s code of conduct for its management and employees as well as its basic policy on development of internal control systems with its subsidiaries, the Company will further develop systems for supervising its subsidiaries and endeavor to enhance the corporate governance of the Group.
The Company will further develop systems for reporting material matters of the management of subsidiaries to the Company.
The Company will share the risk management policy established by the Company with its subsidiaries and will further develop the risk management systems of the Group through such methods as establishing rules regarding reports from subsidiaries on material risks.
The Company will further develop the internal whistle-blowing systems of the Group in order to discover at an early stage and respond to issues such as violations of laws or ordinances within the Group.
The Company will enhance the internal auditing systems of the Group.
Note: In the above section, “Group” means the corporate group comprised of the Company and its subsidiaries.
| (6) | Provision of employees when assistance is requested by Corporate Auditors, independence of such employees from the Directors, and ensuring effectiveness of instructions to such employees |
The Company will establish a staff organization directly under the Board of Corporate Auditors to provide support to the Corporate Auditors.
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| (7) | Systems for Directors and employees to report to Corporate Auditors and other systems related to reporting to Corporate Auditors |
The Company will further develop systems for the management and employees of the Company and its subsidiaries to report to the Corporate Auditors. No one making such a report will receive any disadvantageous treatment for doing so.
| (8) | Other systems for ensuring the effectiveness of audits by Corporate Auditors |
In accordance with laws and ordinances, the Company will bear the necessary expenses for the Corporate Auditors to execute their duties.
The Company will further develop other necessary systems for audits by the Corporate Auditors to be conducted effectively.
| 2. | An overview of the development and operating status of Internal Control Systems based on the above basic policy is as follows. |
| (1) | Systems for ensuring that the execution of duties by Directors and employees complies with laws, ordinances, and the Company’s Articles of Incorporation |
The Company has established the Honda Conduct Guideline to clearly define the Company’s policy on legal compliance and the conduct to be taken by its management and employees, and the Company endeavors to ensure that all management personnel and employees are made aware of and follow the Guidelines.
The Company has established the Business Ethics Improvement Proposal Line as a point of contact for internal whistle-blowing. In addition to internal points of contact, the Company has also established an external point of contact in a law firm. These points of contact are operated under rules that include the protection of anyone making use of the Proposal Line.
The Director and Chief Operating Officer for Business Support Operations has been appointed as Compliance Officer.
The Company has established a Compliance Committee chaired by the Compliance Officer, and the Committee deliberates on material matters related to compliance.
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| (2) | Systems related to retention and management of information on execution of duties by the Directors |
The Company’s policy on information management is prescribed in the Document Management Policy, which also stipulates the management policy for information related to the execution of duties by the Directors.
In accordance with this Policy, minutes are prepared for each Board of Directors meeting and Executive Council meeting and stored for a long period of time by the department in charge.
| (3) | Rules and other systems related to risk management |
The relevant boards and councils such as the Board of Directors, Executive Council, and Regional Operating Boards deliberate upon material matters of management in accordance with each body’s rules of procedure and then make decisions regarding such matters after assessing and considering associated risks.
The Executive Vice President, Executive Officer and Representative Director has been appointed as Risk Management Officer.
The Company has established the Honda Global Risk Management Policy, which prescribes the Company’s basic policy on risk management (such as business risks and disaster risks) as well as systems for collecting risk information and responding to risks when they arise.
Each department regularly conducts risk assessments in accordance with the Policy.
The Risk Management Officer monitors and supervises the status of responses to material risks.
| (4) | Systems for ensuring that the duties of the Directors are being executed efficiently |
Operating Officers are assigned to the headquarters of each region, business, and function and to other main divisions to handle business execution in the fields of which they are in charge. In addition to the Board of Directors, the Executive Council and the Regional Operating Boards have been established as bodies to make decisions on material matters of management, and each body’s rules of procedure clearly define the scope of authorities delegated to Operating Officers and the decision-making process.
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The Board of Directors resolves upon the company-wide midterm policy and receives reports to monitor and supervise the progress thereof.
| (5) | Systems for ensuring that the corporate group, comprised of the Company and its subsidiaries, conducts business activities appropriately |
The Company endeavors to ensure that its subsidiaries are made aware of the Honda Conduct Guideline and the basic policy on development of internal control systems.
Each subsidiary has developed internal control systems appropriate to the laws and ordinances of the country in which it operates and to the business conditions of the subsidiary and regularly reports to the Company regarding the development and operating status of those systems.
The Company appoints officers responsible for the supervision of each subsidiary. These officers regularly receive reports regarding business plans and management conditions from the subsidiaries for which they are responsible and supervise those subsidiaries in cooperation with business management departments and other related departments.
The Company requires subsidiaries to obtain prior approval from or make reports to the Company regarding material matters of the management of the subsidiary in accordance with the Company’s rules of procedure, and each subsidiary has developed its own approval rules that include the requirements of the Company.
Based on the Honda Global Risk Management Policy, the Company receives reports on material risks from its subsidiaries, requires them to build risk management systems appropriate to their sizes and business conditions, and verifies the development and operating status of those systems.
The Business Ethics Improvement Proposal Line of the Company accepts whistle-blowing reports from management and employees of subsidiaries, in addition to which each major subsidiary has established its own internal whistle-blowing point of contact.
The Audit Office, which directly reports to the president, conducts internal auditing of each department of the Company, provides supervision and guidance to internal audit departments in major subsidiaries, and conducts audits of subsidiaries directly when necessary.
Note: In the above section, “Group” means the corporate group comprised of the Company and its subsidiaries.
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| (6) | Provision of employees when assistance is requested by Corporate Auditors, independence of such employees from the Directors, and ensuring effectiveness of instructions to such employees |
The Company has established the Corporate Auditors Office, which supports the Corporate Auditors, as an organization directly under the Board of Corporate Auditors.
| (7) | Systems for Directors and employees to report to Corporate Auditors and other systems related to reporting to Corporate Auditors |
The relevant departments of the Company regularly report to the Corporate Auditors regarding the business conditions and the development and operation status of internal control systems, such as those for compliance and risk management, of the Company and its subsidiaries. Additionally, if there are any matters that may significantly affect the Company, those are reported as well.
No one who has made a report to the Corporate Auditors is treated disadvantageously for having done so.
| (8) | Other systems for ensuring the effectiveness of audits by Corporate Auditors |
In order for the Company to bear the necessary expenses for the Corporate Auditors to execute their duties, the Company secures the necessary budget every business year based on proposals from the Corporate Auditors.
The Corporate Auditors work closely with the Audit Office, which serves as the Company’s internal audit department, to conduct business audits of the Company and its subsidiaries. Additionally, the Corporate Auditors attend meetings of the Board of Directors and other important meetings.
| 2. | Basic Approach to and Current Status of Activities to Exclude Anti-Social Elements |
Honda’s basic policy is to maintain a resolute attitude at all times toward anti-social elements that threaten social order and safety. An organizational unit has been formed to respond to these elements, and the Company works closely with the police and other outside organizations.
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| V. | Other Information |
| 1. | Adoption of anti-takeover measures |
Existence of anti-takeover provisions: None
Supplementary Explanation of Matters Related to this Item
| 2. | Other matters related to corporate governance, etc. |
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Basic policy for timely disclosure
The Company regards the following as material information that should be disclosed and works to make such information available promptly, appropriately and fairly to shareholders, investors and other stakeholders.
Material information
| (1) | Corporate information that must be disclosed under Japan’s Financial Instruments and Exchange Law and the regulations of stock exchanges (as set forth in regulations regarding listed securities) and that will have a material impact on investment judgments. |
| (2) | Other corporate information that may have a material impact on investment judgments. |
Internal systems for timely disclosure of corporate information
The Company has established systems for the management of corporate information under which, under the supervision of the officer in charge of handling information , the General Affairs, Legal, Finance and Accounting divisions collect corporate information which is expected to constitute information that is subject to timely disclosure from the Company’s decision-making body, units that have principal responsibility (units with principal responsibility) for businesses relating to the relevant information and subsidiaries and manages such information..
Decisions on whether the information is material and should be disclosed and the manner in which it should be disclosed are made, in accord with the basic policy previously mentioned, through joint discussions led by the officer in charge of handling information together with the General Affairs, Legal, Finance and Accounting divisions; the representative directors; units with principal responsibility; and the officers who manage and supervise such units (officers in charge).
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