Corporate Governance Report [1.37 MB : PDF]
Fundamental Policies of Corporate Governance [131 KB : PDF]
We maintain an awareness that our corporate group is a member of society at large with the duty to fulfill our corporate social responsibility and contribute to society as we develop our business, in addition to fulfilling our financial responsibility of earning adequate profits by providing high quality products through fair competition while maintaining flight safety as the leading company of safety in the transport sector and providing the finest service to our customers.
Taking this into account, we have established JAL Philosophy in accordance with the JAL Group Corporate Policy, "JAL Group will pursue the material and intellectual growth of all our employees, deliver unparalleled service to our customers, and increase corporate value and contribute to the betterment of society." We will strive to enhance corporate value and achieve accountability by establishing a corporate governance system that results in high management transparency and strong management monitoring, while at the same time engaging in speedy and appropriate management decision making.
The Board of Directors has established corporate governance by adopting the Fundamental Policies of Corporate Governance as a key set of rules subsequent to the Companies Act, relevant laws and regulations and the Articles of Incorporation, and reviews it at least once a year.
Evolution of Improvement of JAL’s Corporate Governance System
- FY2012 JAL formulates Fundamental Policies of Corporate Governance
- FY2015 Corporate Governance Committee established
- FY2015 New Management Committee established to clarify separation of oversight and executive functions
- FY2015 Authority over matters subject to resolution of the Board of Directors delegated to executive function.
- FY2015 Board effectiveness evaluated (questionnaire format)
- FY2015 Discussions begin on succession planning for senior management positions
- FY2016 Number of External Directors increased from 2 to 3
- FY2017 New remuneration system introduced for officers, including performance-linked remuneration and share-based remuneration
- FY2017 JAL formulates Training Policy for Directors and Audit & Supervisory Board members
- FY2017 Board effectiveness evaluated (independent organization engaged to conduct 3rd assessment using a questionnaire and interview format)
- FY2017 Succession plans formulated for the President and other company leaders (compliance with the Corporate Governance Code)
- FY2018 Compliance with the revised Corporate Governance Code
- FY2018 Conducted a Board Effectiveness Assessment (4th time through a questionnaire while maintaining anonymity and confidentiality, using the knowledge and experience acquired through a third party organization)
- FY2019 Strengthened the management council for risk management (strengthened board oversight)
- FY2019 Conducted a Board Effectiveness Assessment (5th time through a questionnaire while maintaining anonymity and confidentiality, using the knowledge and experience acquired through a third party organization)
Relationship with Shareholders
1. Ensuring shareholder rights
We conduct business for the joint benefit of the Company and shareholders, comply with provisions stipulated in the Companies Act and Civil Aeronautics Law, and give sufficient consideration to ensure that shareholders can exercise their rights smoothly. Especially, we are aware that the general meeting of shareholders is a venue for constructive dialogue with shareholders, and have developed an environment in which they can exercise their rights appropriately from their perspective.
Furthermore, we emphasize fairness, accuracy and continuity, actively engage in IR (Investor Relations) activities to maintain interactive communication, and promote constructive dialogue with shareholders.
2. Social responsibilities as a corporate citizen
JAL Group has established the Basic CSR Policy "The JAL Group will strive to meet the expectations of society, address social issues, and pass on a better society to future generations through its core air transport business as the 'Wings of Japan'." We aim to realize our Corporate Policy by collaborating with shareholders and practicing JAL Philosophy.
Board of Directors and Directors
1. Board of Directors
The Board of Directors ensures high management transparency and strong management monitoring through the election of candidates for the positions of Directors, Corporate Auditors, and Executive Officers, decides their remuneration, and makes important decisions.
In order to separate the management monitoring function and business execution function, the Board of Directors appoints a Director who does not concurrently serve as Executive Officer as Chairman, and an appropriate number of three or more External Directors who qualify as highly independent. External Directors perform the function of providing appropriate advice.
In order to carry out efficient decision-making, the Board may delegate decision-making of matters set forth in the Administrative Authority Criteria Table to the President pursuant to Regulations for Kessai and Administrate Authority approved by the Board. The Management Committee has been established for the purpose of contributing to appropriate and flexible decision-making on management issues by the Board of Directors and the President.
The Board of Directors has established the Corporate Governance Committee, which is comprised of the Chairman of the Board and External Directors, to evaluate the effectiveness of the Board of Directors while referring to self-evaluations by each Director once a year, review operation, etc. of the Board appropriately, and disclose an overview of findings.
Legal considerations are explained to Directors to ensure that they are aware of their responsibilities including the “fiduciary duty of loyalty” and the “duty of due care of prudent manager.” The term of office is one year and their accountability for management is clarified each fiscal year. We ensure board diversity and have in place an advanced corporate governance system which can demonstrate high management oversight capabilities based on appropriate management decision-making and high management transparency in order to further increase corporate value.
External Directors are selected from persons with extensive experience and expertise and deep knowledge in various business fields in order to ensure board diversity. Those who do not qualify as “highly independent” according to “Standards for Independence of External Directors” established by JAL are not appointed as External Directors. A Lead Independent External Director is selected from among External Directors to improve coordination with Audit & Supervisory Board members and internal departments. For criteria on determining independence of External Directors, please refer to the JAL Group Fundamental Policy of Corporate Governance.
A remuneration system that provides sound incentives for sustainable growth has been introduced for Directors (excluding External Directors).
Independent External Directors and Ratio of Female Directors (as of March 31, 2020)
- Ratio of Independent External Directors：30%（3 out of 10 Directors are External Directors）
- Ratio of female directors：10%（1 out of 10 Directors is a female director）
Average Term of Office of Audit & Supervisory Board Members (as of March 31, 2020)
- 3 years and 6 months
3. Key Topics of Discussion by the Board of Directors
- Reviews of corporate governance and establishment of response policies
- Decision of directors, including oversight of succession plans for the President and other company leaders
- Establishment and progress management of medium- to long-term strategies
- Establishment and review of capital policy, including shareholder returns
- Risk management system, including monitoring of responses to events
- Decision and oversight of other important execution of duties
Evaluation of the Effectiveness of Board of Directors Meetings
JAL conducts board effectiveness assessments and appropriately reviews board operations while referring to individual director evaluations, in accordance with Fundamental Policies of Corporate Governance.
- The Secretariat of the Board conducted the board effectiveness assessment in the form of a questionnaire containing questions on board composition, operations, corporate culture, oversight, and discussions on management strategy, etc. and a section to write individual comments, which Board members completed anonymously and independently.
- After the Secretariat of the Board reported the assessment results and individual comments to the Board, the Board held discussions on key issues and considered measures.
- The Corporate Governance Committee, composed mainly of Independent External Directors, then compiled recommendations, and the Board held further discussions and reached a decision on future initiatives as follows.
Assessment Results and Overall Future Measures
The Board of Directors holds free and open discussion, in which Internal Directors who are appointed to the Board from inside the company respect the opinions of External Directors while the Audit & Supervisory Board members conduct audits of the directors' execution of duty. Internal Directors are elected in a balanced manner and include directors representing the frontline, given the importance of flight safety for the company. External Directors are entitled to access high-level information pursuant to their requests and they fulfill their responsibilities appropriately. Through proactive efforts to shift to strategic discussion and active engagement in constructive dialogue with shareholders in fiscal 2019 based on the previous board effectiveness assessment, assessments have improved in general from the previous year. On the other hand, we have confirmed that further initiatives were needed to ①deepen discussions on long-term issues and the long-term vision to achieve sustainable corporate value enhancement, amid drastic changes in the business environment;② enhance the monitoring function of the Board to further strengthen management of investment risks in new businesses, etc. and④ hold more in-depth discussion on human resource diversity strategies including the promotion of women's success in the workplace. We will steadily implement these initiatives in the future.
Establishment of Various Committees
JAL has established the following committees under the Board of Directors to build a corporate governance system that demonstrates high management transparency and strong management oversight.
1. Corporate Governance Committee
The Corporate Governance Committee checks, at least once a year, whether activities comply with JAL Group Fundamental Policies of Corporate Governance, conducts analyses and evaluations to determine whether such activities contribute to sustainable growth and enhancement of medium- and long-term corporate value, and provides necessary findings and reports to the Board of Directors. The Corporate Governance Committee is comprised of the Chairman of the Board and External Directors, and is chaired by the Lead Independent External Director.
2. Nominating Committee
When submitting a proposal to the general meeting of shareholders concerning the appointment of candidates to the positions of Director and Corporate Auditor, the Nominating Committee comprehensively judges the personality, knowledge, ability, experience, performance and other attributes of each candidate based on an inquiry from the Board of Directors and reports back.
The Nominating Committee defines the President and other board members as persons with qualities to steadily get positive results toward realizing the Corporate Policy by working together with every staff based on a firm commitment to flight safety, which is the basis of existence of the JAL Group, and display of initiative in practicing the JAL Philosophy. The Nominating Committee assists candidates for President and other posts to quickly acquire grounding and discipline necessary for management through practical and diverse experiences.
Furthermore, in case the qualities of any member of top management is found questionable due to violation of the law, harassment, negligence of the Board of Directors or such, members of the Nominating Committee and other Directors excluding the person in question will immediately conduct investigations based on a motion made by a Director at a Board meeting or other meeting. The Nominating Committee or other Directors will report the result of investigations to the Board of Directors. Treatment of the person in questions shall be decided through a resolution by the Board.
The Nominating Committee is comprised of the President and no more than four Directors elected by a resolution by the Board of Directors, the majority of members being External Directors. The Chairman is elected from among External Directors.
Furthermore, the Committee continuously discusses various topics such as the election of successors to the President and other leaders to change and drive growth of the JAL Group in order to realize the JAL Group Corporate Policy and management strategies, and reports the result of their discussions to the Board.
3. Compensation Committee
The Compensation Committee discusses matters concerning the amount of compensation for Directors, Executive Officers and Corporate Auditors based on an inquiry from the Board of Directors and reports back. The Compensation Committee is comprised of the President and no more than four Directors elected by a resolution by the Board, the majority of members being External Directors. The Chairman is elected from among External Directors. As a result, transparency and fairness in the compensation determining process is secured.
4. Personnel Committee
When appointing or dismissing an Executive Officer, the Board of Directors consults the Personnel Committee and takes into account the Committee's report on such matters before passing any resolution. The Personnel Committee is comprised of the President and no more than four Directors elected by a resolution by the Board, the majority of members being External Directors. The President serves as Chairman
5. Officers Disciplinary Committee
When taking disciplinary action against Directors and Executive Officers, the Officers Disciplinary Committee makes decisions. The Officers Disciplinary Committee is comprised of the President and no more than four Directors elected by a resolution by the Board, the majority of members being External Directors. The Chairman is elected from among External Directors. Any submission of proposals to the general meeting of shareholders concerning the dismissal of a Director requires the approval of the Board of Directors.
|Nominating Committee||Compensation Committee||Personnel Committee||Officers
|Number of meetings
In addition to the above committees, opportunities are provided to exchange information and share views from an independent standpoint with Independent Directors, as necessary.
Audit & Supervisory Board and Audits
1. Audit & Supervisory Board
The Audit & Supervisory Board makes appropriate judgments from an independent, objective perspective, based on their fiduciary responsibilities to the shareholders, when fulfilling their roles and responsibilities, such as auditing the execution of Directors’ duties, appointing or dismissing accounting auditors and executing rights concerning auditors’ remuneration.
2. Audit & Supervisory Board Members
Audit & Supervisory Board members monitor important matters concerning corporate management, business operations and the execution of duties by reviewing important Kessai (written approval) documents, as well as participating in board meetings and other important meetings. Furthermore, Audit & Supervisory Board members and staff members conduct an annual audit of each business site, subsidiary and affiliated company and report the results to the Representative Directors. They also share information with internal audit departments and accounting auditors and hold regular meetings with corporate auditors of subsidiaries to improve and strengthen auditing within the JAL Group. Audit & Supervisory Board members are provided with company information, and opportunities to participate in external training and external associations, etc.
External Audit & Supervisory Board members are appointed from among persons with vast knowledge and experience in various fields, and those who do not qualify as highly independent as defined by the “Standards for Independence of External Directors” established by the Company are not appointed. External Audit & Supervisory Board members ensure sound management by conducting audits from a neutral and objective standpoint, with the cooperation of internal audit departments and accounting auditors.
Independent External Audit & Supervisory Board Members and Ratio of Female Audit & Supervisory Board Members（as of March 31, 2020）
- Ratio of Independent External Audit & Supervisory Board members：60%（3 out of 5 Directors are External Directors）
- There are no female Audit & Supervisory Board members.
Average Term of Office of Audit & Supervisory Board Members（as of March 31, 2020）
- 3 years and 6 months
Standards for Independence of External Directors
We have established the following standards to determine if an External Director qualifies as independent in order to establish a corporate governance system that results in high management transparency and strong management monitoring and to enhance corporate value. (Basically, persons who are not described as follows qualify as independent.)
- A person who executes or has executed business in the Company or a consolidated subsidiary in the past 10 years
- A person who is described by any of the items a - f in the past three years.
a. a business counterpart or a person executing business of such business counterpart, whose transactions with the Company for one business year exceeded 1% of consolidated revenue of the Company or the business counterpart
b. a major shareholder of the Company or a person executing business of such shareholder holding an equity ratio of 5% or more in the Company
c. a major lender for the Company or a person executing business of such lender.
d. a person who receives over JPY 10 million in donations annually from the Company or a person belonging to an entity receiving such donations
e. a person receiving remuneration of over 10 million yen excluding director remuneration from the Company or a person belonging to an organization receiving remuneration exceeding 1% of consolidated revenue of the Company
f. a person executing business of another company, where a person executing business of the Company is appointed as External Director
- The spouse or relative within the second degree of kinship of an individual described in 1 and 2.
(Note) A person executing business refers to an executive director or executive officer
Successors to the President and Other Leaders
The Company defines the President and other board members as persons with qualities to steadily get positive results toward realizing the Corporate Policy by working together with every staff based on a firm commitment to flight safety, which is the foundation of the JAL Group, and display of initiative in practicing the JAL Philosophy. The Company assists candidates for President and other posts to quickly acquire grounding and discipline necessary for management through practical and diverse experiences.
The Nominating Committee holds ongoing discussions on potential successors to the president and other company leaders responsible for reforming the Group and driving growth to ensure the Corporate Policy and management strategies are maintained, and reports on these discussions to Directors.
Support and Training Policy for Directors and Audit & Supervisory Board members
Legal considerations are explained to Directors to ensure that they are aware of their responsibilities including the fiduciary duty of loyalty and the duty of care as a prudent manager and opportunities are provided for continuous participation in external training, affiliated organizations and such. We provide opportunities to Audit & Supervisory Board members for continuous participation in external training, affiliated associations, etc., in addition to providing corporate information.
To deepen the understanding of the Company of Directors and Audit & Supervisory Board members, we provide safety education such as a memorial climb up Mt. Osutaka and visits to the Safety Promotion Center, in addition to visiting frontlines. We also provide advance explanations on agenda items to be submitted for deliberation, as necessary, and opportunities to explain other matters at their request.
In addition, the Forum of Independent External Officers, comprised of External Directors and Audit & Supervisory Board members, and sponsored by the Lead Independent External Director, is held several times a year.
Corporate Governance System
Remuneration of Directors
Remuneration Policy for Directors (excluding External Directors) and Executive Officers
1. Basic policy
- To support the sustainable and steady growth of the Company and the JAL Group and to increase corporate value over the medium and long term, the Company will encourage the performance of duties consistent with its Corporate Policy and management strategies and provide strong incentives for the achievement of specific management targets.
- To encourage a healthy entrepreneurial spirit, the Company will establish appropriate proportions for annual incentives (performance- linked bonuses) linked to fiscal year performance and for long-term incentives (performance-linked share-based remuneration) linked to corporate value in accordance with medium- to long-term performance, designed to promote alignment of interests with its shareholders
- The Company will reward the management team appropriately based on the Company’s business performance.
2. Remuneration levels and composition
- The Company will set appropriate remuneration levels based on the Company’s operating environment and with reference to objective data on remuneration in the marketplace.
- Considering factors including the nature of the Company’s business and the effectiveness of incentive remuneration, fixed remuneration and performance-linked remuneration are comprised as follows.
(Assuming 100% achievement against targets)
①Amount of fixed basic remuneration*:50%
②Amount of annual incentives (performance-linked bonuses) to be paid according to the degree of achievement against targets: 30%
③Amount of long-term incentives (performance-linked share-based remuneration) to be issued according to the degree of achievement against targets: 20%
The above ratio is for guidance only and adjustments can be made to reflect changes in the price of the Company’s shares or other factors.
* This amount excludes allowances in cases where an Executive Officer serves concurrently as a Director or where an Executive Officer has representative authority.
3. Framework for incentive remuneration
（1）Annual incentives (performance-linked bonuses)
The amount to be paid every fiscal year as an annual incentive will vary from approximately 0 to 200 depending on the degree of achievement, with 100 representing the amount to be paid when achievement is in line with performance targets.
■Performance Evaluation Indices
?Net profit attributable to owners of parent
?Indices related to safe flight operations
?Individual evaluation indices for each officer, etc.
Evaluation indices will be considered for review as necessary in accordance with changes in business conditions, the roles of each officer and other factors.
（2）Long-term incentives (performance-linked share-based remuneration)
The number of shares to be granted every fiscal year as a long-term incentive will vary from approximately 0 to 220 depending on the degree of achievement, with 100 representing the number to be granted when achievement is in line with performance targets. The performance evaluation period will be three years, with performance for three consecutive fiscal years evaluated every year.
■Performance Evaluation Indices
Indices prioritized in the Medium Term Management Plan
?Consolidated operating profit margin
?Customer satisfaction, etc.
Evaluation indices will be considered for review for each Medium Term Management Plan period.
With respect to common stock granted to eligible Directors and Executive Officers through the share-based remuneration plan, the Company will establish a target number of held shares for each position and impose limits on share sales to further promote the aligning of interests with shareholders.
4. Procedures for determining remuneration
Matters related to remuneration for Directors and Executive Officers will be decided by the Board of Directors following a deliberation and recommendation process by the Company’s voluntarily established Compensation Committee.
5. FY2018 Actual Remuneration Paid to Directors and Audit & Supervisory Board members
|Number of officers||Total amount of remuneration, etc.
(millions of yen)
|Total amount for each type of remuneration, etc.
(millions of yen)
|Basic remuneration||Bonus*1||Share-based remuneration, etc.*2|
(including External Directors)
|Audit & Supervisory Board members
(including External Audit & Supervisory Board members)
*1 Annual incentives (performance-linked bonuses)
*2 Long-term incentives (performance-linked remuneration)
To enable our stakeholders to easily access JAL Group's corporate stance, various information such as our Fundamental Policies of Corporate Governance, Corporate Policy, safety and flight information, sustainability information and IR information, is posted on our website. We also issue JAL REPORT, an integrated annual report providing financial information and non-financial information
For more information, click here
JAL Philosophy Education
The President conducts JAL Philosophy Education for JAL Group Directors including the President, and employees in order to penetrate JAL Philosophy into JAL Group.
Policy on Constructive Dialogue with Shareholders
We are aware that the general meeting of shareholders is a venue for constructive dialogue with shareholders, and secure and provide a period for them to sufficiently examine accurate information from their standpoint through the Convocation Notice of the General Shareholders' Meeting, etc. We provide easy-to-understand information at the general meeting of shareholders and have developed an environment in which shareholders can exercise their rights appropriately.
Furthermore, we conduct IR (Inventor Relations) activities to maintain positive interactive communication under the following policy, in which Representative Directors, the Finance and Accounting Director, etc. engage in active dialogue, and fairness, accuracy and continuity of management strategies, business strategies, financial information, and such are emphasized.
- We assign the Finance and Accounting Director and General Affairs Director as management to oversee dialogue with shareholders.
- We assign a supervisor to oversee information gathering, management and disclosure, and also staff to implement these duties in the Finance Department, and disclose information in a timely, fair and appropriate manner in coordination with related departments.
- We hold meetings to explain our financial results and management plan when announcing them, issue "JAL Report" and "To Our Shareholders," and arrange tours of facilities, etc. to promote investment opportunities and improve information disclosure.
- We feedback results of dialogue with shareholders to management, as necessary, so that management may share the shareholders' requests and opinions and an awareness of issues, and reflect their views in corporate management.
- We establish and disclose a "silent period," during which we do not provide any replies or comments to inquiries or information on corporate status to prevent information leaks and ensure fairness. We conduct information management and control insider information.
Internal Controls System
Development of the Internal Controls System (Fundamental Policies)
Operation of the Internal Controls System
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