(きかんせっけい / Kikan-sekkei)
Corporate Governance Structure
This term refers to the type of governance framework, as permitted by the Company Law, which the company’s shareholders have chosen to use. There are three types of governance structure that are normally permitted for publicly-traded companies in Japan: (a) a Company with a Board of Company Auditors (“statutory auditors”) (監査役会設置会社); (b) a Company with Nominating Committee, etc. (指名委員会等設置会社); and (c) a Company with Audit and Supervisory Committee (監査等委員会設置会社).
(とりしまりやくかい / Torishimari-yaku-kai)
Board of Directors
The board of directors “manages” the corporation principally by guiding its strategy and risk management; by selecting, terminating, monitoring, and overseeing the executives who manage it, and by nominating board members, etc. The board is required by law to make certain decisions about matters deemed to be of special importance, the range and type of which depend on the type of governance structure that the company has chosen in its Articles of Incorporation.
(とりしまりやく / Torishimari-yaku)
Directors of a corporation are elected by shareholders and vote as members of its board of directors. They bear a fiduciary duty to act in the best interests of the company, and a duty of loyalty requiring them to: (a) ensure the company is compliant with laws and regulations and (b) not put their own interest ahead of the interests of the company.
(しゃがいとりしまりやく / Shagai-torishimari-yaku)
Outside Director (or External Director)
An outside directors is one who has not worked as an employee at the company or one of its subsidiaries during the previous ten years, and who fulfills other conditions set forth in the Company Law which ensure a minimal level of independence from management. Notably, however, trade partners or professional advisors, or persons who previously worked at the parent company, qualify as outside directors.
(だいひょうとりしまりやく / Daihyou-torishimari-yaku)
In the case of a Company with a Board of Company Auditors, or a Company with Audit and Supervisory Committee, “Representative Director” is the legal term for persons who usually carry the title of “President” or “CEO”, which are not legal terms defined in the Company Law but rather are hierarchical titles used in everyday practice. Representative directors have the authority to sign everyday contracts and (in most cases) thereby bind the company. A company’s board can appoint more than one Representative Director. The Representative director(s) are selected by a majority vote of directors at a valid board meeting, and can be terminated by a vote of directors at any time.
(とりしまりかいのぎちょう / Torishimarikai-no-gichou)
Chairperson (of the Board)
The director who is chosen pursuant to the company’s Articles of Incorporation or board rules to “chair” (lead) each meeting of the board of directors, by clarifying resolutions up for consideration, facilitating discussion and debate, and calling for a vote on each matter. The board could elect a different chairperson for each board meeting if it chose to do so; the role does not have a “term”.
(かいちょう / Kaichou)
Chairman (or Chairperson; but not a legal term)
This word is translated as “Chairman”, but such person may not necessarily be the actual chairperson of board meetings, because it is not a legal term in the Company Law. In most cases he or she does in fact serve as the chairperson, but will not if directors choose a different person, for instance to vote on matters with respect to which the he or she has a conflict of interest. Also, a person can be a 名誉会長, an “Honorary Chairman”, in which case normally he or she does not serve the legal or actual chairperson, and in fact is no longer a director of the board.
(しゃちょう / Shachou)
President (not a legal term)
This is the word used in common parlance to describe the most senior person in the company, who is selected as a Representative Director or Representative Executive Officer by a vote of the board. However, the term does not appear as a legal title in the Company Law. “CEO” is another word often used to mean the same thing, but it also is not a legal title.
(ふくしゃちょう / Fuku-shachou)
Another non-legal title, usually used to describe an executive who is a director and may or may not be a Representative director, but who is not as senior as the “President” or “CEO”. Usually this person is more senior than a “Senior Managing Director”, described below. This word does not appear in the Company Law as a legal title.
(せんむとりしまりやく / Senmu-torishimari-yaku)
Senior Managing Director
A non-legal title usually used to describe an executive who usually is not a Representative Director, and is less senior than a Vice President, but more senior than a Managing Director, described below.
(じょうむとりしまりやく / Joumu-torishimari-yaku)
A non-legal title usually used to describe an executive who usually is not a Representative Director, and is not as senior as a Senior Managing Director, but is more senior than those directors who have no additional title denoting special status.
(しっこうやく / shikkou-yaku)
Executive Officer (shikkou-yaku, as defined in the Company Law)
A legal term that applies only in the case of a Company with Nominating Committee, etc. (指名委員会等設置会社), and which refers to executives who are appointed by the board of directors to execute (carry out) company policy and strategy. The role and legal title of such executive officers is described in the Company law, and as such they bear fiduciary duties to the company and can be sued by shareholders.
(だいひょうしっこうやく / Daihyou-shikkou-yaku)
Representative Executive Officer
In the case of a Company with Nominating Committee, etc.(指名委員会等設置会社) only, this is the legal title of the executive officer whom the board has appointed to represent the company and lead the execution of company policy as set by the board. In everyday practice he or she is often referred to as the CEO or the President, although technically those are not legal titles.
(しっこうやくいん / Shikkou-yakuin)
In the case of a Company with a Board of Company Auditors, or a Company with Audit and Supervisory Committee, this is a non-legal title given to executives who are just below the rank of “director” in the corporate hierarchy, and who assist directors with the execution (carrying out) of company policy and board decisions. Different from “executive officers” in the case of Company with Nominating Committee, etc., these executive officers bear no fiduciary duties under the company Law, and cannot be sued by shareholders.
(かんさやく / Kansa-yaku)
Corporate Auditor; Statutory Auditor; or Audit and Supervisory Board Member
In the case of a Company with a Board of Company Auditors, there must be at least three corporate auditors, half or more of whom are “outside” and have not worked for the company during the previous ten years and who fulfill other conditions set forth in the Company Law which ensure a minimal level of independence from management. With rare exceptions, the corporate auditors must conduct both “legal audits” to ensure that the directors are properly fulfilling their duties (including ensuring compliance), and “accounting audits”. They monitor the activities of the external audit firm, and cooperate with it. Corporate auditors have a duty to attend board meetings and can make comments, but they may not vote. They can also investigate any matter they like, or even sue directors and take other actions, on a completely individual basis.
(しゃがいかんさやく / Shagai-kansa-yaku)
Outside Corporate Auditor
Outside corporate auditors are corporate auditors who have not worked as an employee etc. at the company, or a subsidiary for the past ten years, and who fulfill other conditions set forth in the Company Law which ensure a minimal level of independence from management. Notably, however, trade partners or professional advisors, or former employees of the parent company, qualify as outside corporate auditors.
(かんさやくかい / Kansa-yakukai)
Board of Corporate Auditors
All corporate auditors as a group make up the “Board of Corporate Auditors”, which is a separate “board” from the board of directors. Notably, however, corporate auditors can often act on an individual basis (dokuninsei), and are not always bound by the decision-making principle that applies for the board of directors (gougisei, or group decision-making that requires a majority vote).
(かいけいかんさやく / Kaikei-kansa-yaku)
The external audit firm or CPA that large companies, and certain others, are required by the Company Law to hire to conduct audits of the accounting statements. Only CPAs or CPA firms may serve as external auditors.
(かいけいさんよ / Kaikei-sanyo)
A third-party person (or firm) that companies can choose to appoint. In most cases, smaller unlisted companies appoint them instead of having a statutory auditor to ensure the accuracy of the financial statements. Only CPAs, CPA firms, tax advisors (zeirishi) or tax advisory firms can serve as accounting advisors.
(そうだんやく・こもん / Soudan-yaku・komon)
Titles not set forth in the law, which often come with compensation in return for general advice, which are normally given only to senior executives (managers) after they have retired from the board, as a sort of a “perk” or retirement benefit. The number and names of such persons is not disclosed publicly, nor is the number of years they have received compensation.
These are rough definitions only, intended for general reference. They do not constitute legal advice, and are not intended to be comprehensive. In particular, non-legal titles may be used differently at different companies.