JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki and Kosuke Hamaguchi, Nagashima Ohno & Tsunematsu
supervisory committee is to audit and supervise the execution of the duties of the directors. Nominating and Other Committees Nominating and other committees means a set of a nominating committee, an audit com - mittee and a compensation committee. Each committee consists of three or more directors, and a majority of each committee’s members must be outside directors. The main roles of a nominating committee, an audit committee and a compensation committee are, respectively, to determine the candidates for directors, to audit and supervise the execution of the duties of the management, and to determine the compensa - tion of each management member. In a company with nominating and other com - mittees, an executive officer is supposed to have the broader authority to decide the execution of the company’s operation as compared to other types of companies. A representative execu - tive officer appointed from among the executive officers by a board of directors represents the company. Accounting Auditor In addition, a large-sized company must have an accounting auditor who is expected to audit the accuracy of the company’s financial statements. An accounting auditor must be appointed from among external accounting firms or licensed accountants. A company with an audit and supervisory committee or nominating and other committees is also required to have an account - ing auditor. 3.2 Decisions Made by Particular Bodies The roles of a shareholder meeting and direc - tors may differ depending on whether or not a company has a board of directors. In the case of a company without a board of directors, a
shareholder meeting may adopt any action on behalf of the company, and a director has the broad authority to decide and execute the com - pany’s operation. If a company has a board of directors, the authority of a shareholder meeting is more lim - ited. In this case, the shareholder meeting may adopt only such matters as provided under the Companies Act or the articles of incorporation. A board of directors typically delegates to the rep - resentative director and other executive direc - tors the authority to decide the execution of the company’s operation except for the matters spe - cifically prescribed under the Companies Act. Monitoring Model Approach However, in the case of a company with nomi - nating and other committees, a board of direc - tors may delegate to the executive officer the broader authority to decide the execution of the company’s operation, and the matters that the board of directors is required to decide are fairly limited as compared to other types of compa - nies. In this sense, the corporate governance of a company with nominating and other commit - tees is designed as a monitoring model. Like - wise, a company with an audit and supervisory committee may take a similar approach if: • a majority of its directors consist of outside directors; or • it is so provided in the articles of incorpora - tion. 3.3 Decision-Making Processes At the board level, unless otherwise provided in the articles of incorporation, a decision by a board of directors is made by a majority of the directors present at a board meeting, as long as a majority of the directors who are entitled to participate in the vote are present. Directors who
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