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IR

Corporate Governance

Chapter 5 Directors, Board of Directors and Audit Committee

Article 26 (Number of Directors)
  • ① The number of directors of the Company shall consist of five or more persons.
  • ② The number of outside directors shall be three or more persons; it shall be organizedto make the number 1/2 or more of the total number of directors. However, in case thenumber of outside directors does not meet the requirements for composition of theBoard of Directors due to vacancy, it shall be made to meet the requirements in thefirst general meeting of shareholders convened subsequent to the occurrence of thevacancy.
Article 27 (Appointment of Directors)
  • ① The Directors shall be elected at a general meeting of shareholders. The Company shallappoint outside directors under Article 26 among candidates recommended by theoutside director nomination committee, and directors to be appointed to be a memberof the audit committee under Article 42-3, shall be separately appointed from theoutside directors.
  • ② The Directors shall be appointed by affirmative votes of the majority of the votingrights of shareholders present and such majority also represents at least one-fourth (1/4)of the total number of shares issued and outstanding.
  • ③ When appointing two (2) or more directors, shareholders may exercise only votingright to one share owned, and the cumulative vote stipulated in Article 382-2 of theCommercial Act shall not apply.
Article 28 (Term of office of Directors)
  • ① The term of office for directors shall be one (1) to three (3) years, and the term of eachindividual director shall be determined at the time of appointment. However, the termof office may be extended until the close of the regular general meeting of shareholdersif the term expires after the end of the last period for the settlement of accounts butbefore the close of the general meeting of shareholders on the settlement of accountsfor that year.
  • ② Directors may be reelected.
Article 29 (Vacancies)
  • ① If there is a vacancy in the office of a director, a director shall be elected at the generalmeeting of shareholders. However, the foregoing shall not apply if the number ofdirectors does not fall short of the statutory number of directors and no hinderance iscaused in carrying out the Company’s business.
  • ② The director elected as a result of the vacancy shall serve the remaining term of thepredecessor.
Article 30 (Responsibilities of Directors)

The Company shall indemnify directors of legal costs as well as other losses, damages andliabilities either paid or assumed in the pursuit of the director’s given duties; provided that, ifthe losses, damages and liabilities occurred as a result of the breach of duty by his/her act inbad faith or gross negligence, the foregoing shall not apply.

Article 31 (Dismissal and Vacancy of Directors)
  • ① Dismissal of directors shall comply with Article 385 of the Commercial Act.
  • ② If a director is found to fall under each of the following subparagraphs, he/she shallipso facto lose his/her position as a director.
    • (1) When the person submits a letter of resignation to the Company.
    • (2) When the person is declared bankrupt.
    • (3) When the person receives a judgment of being subjected to thecommencement of adult guardianship or limited guardianship.
    • (4) When the person has died.
Article 32 (Election of Representative Director)

The Company shall appoint one or more representative directors from the Board of Directors.

Article 33 (Duties of Directors)
  • ① Representative director shall represent the Company and oversee the overall businessmatters.
  • ② Directors shall assist the representative director and conducts the Company’s businessmatters in their respective areas of responsibilities. If the representative director isunable to perform his/her duties, the director designated by the representative directorshall act on his/her behalf shall perform the duties. If there is no such designation inplace, the duties shall be performed in the descending order of president, executivevice president (EVP), senior vice president (SVP) and vice president (VP).
  • ③ Directors shall perform their duties faithfully for the Company in accordance withrelevant laws and decrees and the Articles of Incorporation.
Article 34 (Duty of Report by Directors)
  • ① Each director shall report to the Board of Directors on the execution of his/her dutiesat least once every three (3) months.
  • ② Directors shall immediately report to the audit committee when such Director findsmatters which could materially cause harm to the Company.
Article 35 (Duty of Auditor)

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Article 36 (Audit Record of Auditor)

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Article 37 (Composition and Authority of the Board of Directors)
  • ① The Board of Directors shall consist of directors and shall decide, through resolutions,important business matters of the Company.
  • ② For stipulating matters necessary for operating the Board of Directors such asdelegation of authority and other matters, a separate regulation may be establishedregarding the Board of Directors.
Article 38 (Method of Convocation and Resolution of Board of Directors)
  • ① A meeting of the Board of Directors (BOD) shall be convened by the chairperson ofthe Board of Directors or a director separately designated by the Board of Directors.When convening a meeting of the Board of Directors, it shall be notified in writing ororally to each director one day prior to the date. However, the foregoing step may beskipped and such a BOD meeting may be held at any time, when the directorsunanimously agree.
  • ② A resolution of the Board of Directors shall be made by the presence of the majorityof directors and the affirmative votes of the majority of directors present at the meeting.However, resolution of matters set forth in Article 397-2 (Prohibition ofMisappropriation of Company’s Opportunities and Assets) and Article 398(Prohibition of Self-Transaction) shall require the affirmative votes of two thirds ormore of the [total] members of the Board of Directors.
  • ③ A director who has a special interest in the resolution of the Board of Directors maynot exercise his/her voting rights thereupon.
  • ④ The Board of Directors may allow all or some of its directors not to be attend a meeting,and instead participate in resolutions by means of a communication system wherebyall directors simultaneously transmit and receive voices. In this case, the applicabledirector or directors shall be deemed to have attended the meeting in person.
Article 39 (Chairperson)
  • ① The Board of Directors shall appoint a Chairperson of the Board of Directors with one(1) year term of office at the first Board of Directors' meeting following annual regulargeneral meeting of shareholders.
  • ② In preparation for an occasion where the Chairperson is absent without designating anacting Chairperson, the Chairperson shall determine the order of directors who shallact as an acting Chairperson on his/her behalf.
  • ③ When a Chairperson is unable to attend the Board of Directors' meeting, theChairperson shall designate a director to act as an acting Chairperson; and when thedesignation above is not made by the Chairperson, an acting Chairperson shall beappointed according to the order determined by Paragraph 2 of this Article.
Article 40 (Minutes of Board of Directors' Meeting)

Minutes shall be prepared with regard to the Board of Directors’ meetings. The minutes shallinclude agenda of the meeting, summary of the proceedings and the outcomes thereof, and theobjection and grounds for their objection shall be entered in the minutes, which shall be sealedor signed by the directors present at the meeting.

Article 41 (Remuneration and Severance Pay for Directors)
  • ① Remuneration for directors shall be determined by resolution of the general meetingof shareholders.
  • ② Severance pay for directors shall be paid in accordance with the regulations onseverance pay of executives and others adopted by resolution by a general meeting ofshareholders.
Article 42 (Committees within Board of Directors)
  • ① The Board of Directors shall establish a committee for recommending candidates foroutsidedirectors and audit committee as committees within the board. In addition, theBoard of Directors may establish a committee which deliberates and determinescorporate strategies and other matters delegated by the board.
  • ② A committee within the board shall be composed of two (2) or more directors, and itsorganization and operation shall be determined by the resolution of the board.
  • ③ The Board of Directors shall not delegate to the committees its power on the followingmatters:
    • (1) Proposal of matters subject to approval by a general meeting of shareholders;
    • (2) Appointment or dismissal of the representative director;
    • (3) Establishment of committees and appointment or dismissal of their members;
    • (4) Other matters as determined by the Board of Directors.
  • ④ The committee shall notify each director of the resolutions it has adopted. Upon suchnotification, any of the directors may, request convocation of a meeting of the Boardof Directors, and the Board of Directors may resolve, once again, the resolution of thecommittee.
Article 42-2 (Committee for Recommending Candidates of Outside Directors)

A majority of members of the committee for recommending candidates for outside directorsshall be composed of outside directors, and the committee shall perform a function ofrecommending candidates for outside directors appointed by a general meeting of shareholders.

Article 42-3 (Composition of Audit Committees)
  • ① The Company shall, in lieu of a statutory auditor, have an audit committee as set forthin Paragraph 1 of Article 42.
  • ② The audit committee shall consist of three (3) or more directors.
  • ③ Two-thirds (2/3) or more of its members shall be outside directors, and members whoare not outside directors shall meet the requirements under Paragraph 2 of Article 542-10 of the Commercial Act.
  • ④ In electing an audit committee member who is not an outside director, if the totalnumber of voting shares held by the largest shareholder, its specially related person, aperson who holds shares for account of the largest shareholder or the specially relatedperson, and a person who has authorized his/her voting right to the largest shareholderor the specially related person exceeds three (3) percent of the total issued andoutstanding voting shares, said shareholder shall not exercise his/her voting right overthe shares in excess of the three (3) percent of the total number of the Company'svoting shares.
  • ⑤ In electing an audit committee member who is an outside director, a shareholderholding more than three (3) per cent of the total number of the Company's voting sharesshall not exercise his/her voting right over the shares in excess of the three (3) per centof the total number of the Company's voting shares.
  • ⑥ The audit committee shall appoint a person to represent the committee by its ownresolution. In such case, the Chairperson shall be an outside director.
  • ⑦ If the number of outside directors fails to meet requirements for constituting the auditcommittee due to vacancies, the Company shall appoint outside directors at the firstgeneral meeting of shareholders convened after such cause has occurred, to satisfy therequirements.
Article 42-4 (Duties of the Audit Committee)
  • ① The audit committee shall examine the accounts and businesses of the Company.
  • ② The audit committee may request the Board of Directors to convene a Board ofDirectors' meeting by submitting a document which states the objective and groundsfor convening such meeting to a director (referring to a director with the power toconvene a Board of Directors' meeting).
  • ③ If the director fails to immediately convene a Board of Directors' meeting despite therequest in Paragraph 2 above, the audit committee may convene a Board of Directors'meeting.
  • ④ The audit committee may request to convene an extraordinary general meeting ofshareholders by submitting a document which states the objective and grounds forconvening such meeting to the Board of Directors.
  • ⑤ The audit committee may request the Company’s subsidiary company to report thedetails of its operations, if deemed necessary to fulfill its duty. In such a case, if thesubsidiary company fails to immediately report the details or if deemed necessary toverify the contents of the report, the committee may investigate the subsidiary’sbusiness operations and financial status.
  • ⑥ The Company’s external auditors shall be appointed by the audit committee.
  • ⑦ The audit committee shall take care of matters delegated by the Board of Directorsother than as set forth in Paragraph 1 through Paragraph 6 above.
  • ⑧ Board of Directors shall not overthrow a resolution adopted by the audit committee.
Article 42-5 (Audit Records)

The audit committee shall maintain a record of its audit activities in an audit report. The auditreport shall contain the summary of audit procedures and results of the audit, and the name andseal or signature of the audit committee member(s) who have performed the audit shall beaffixed to the audit report.

Article 42-6 (Appointment of External Auditor)

The Company shall appoint an external auditor selected by the audit committee in accordancewith the Act on External Audit of Stock Companies and the appointment above shall be reportedto the regular general meeting of shareholders convened after the appointment concerned ismade. Otherwise, the Company shall notify in writing or by an electronic document toshareholders as of date of closing of the latest register of shareholders or announce the fact onthe Company’s webpage.

Article 43 (Management)
  • ① The Company may have corporate management in place for executing the resolutionsof the Board of Directors.
  • ② Matters related to management shall be decided by means of a separate regulation ofthe Board of Directors.
Article 44 (Adviser, etc.)
  • ① The representative director may appoint advisers and consultants if necessary for thebusinesses based on the recommendation made by the chief executive officer.
  • ② The chief executive officer may determine and pay advisers and consultants theremunerations and expenses required for given duties, to the same or similar level ofmanagerial executives.
Article 45 (Qualification of Outside Directors)

An outside director shall be appointed from among those who have professional knowledge orexperience in management, economics, law or relevant technologies, and have good socialreputation, and also must be qualified under the relevant laws such as the Commercial Act; andif the outside director loses the qualification above after being appointed as an outside director,the outside director shall lose his/her office as outside director.

Article 46 (Preparation and Maintenance of Financial Statements and BusinessReports)
  • ① The representative director of the Company shall prepare the following documents,supplementary documents thereto and the business report for obtaining the audit of theaudit committee six (6) weeks prior to the date set for the regular general meeting ofshareholders, for audit by the audit committee, and the representative director shallsubmit the following documents and the business report to the regular general meetingof shareholders:
    • (1) Balance sheet;
    • (2) Profit and loss statement; and
    • (3) Any other documents indicating the financial status and management resultsof the Company as prescribed by the Enforcement Decree of the CommercialAct.
  • ② A consolidated financial statement shall be included in the documents as specified inParagraph 1 above if the Company falls within the scope of the company which isrequired to prepare the consolidated financial statement as prescribed by theEnforcement Decree of the Commercial Act.
  • ③ The audit committee shall submit the audit report to the representative director one (1)week prior to the date of the regular general meeting of shareholders.
  • ④ Notwithstanding the provisions of Paragraph 1 above, the Company may approve byresolution of the Board of Directors if all of the following requirements are satisfied:
    • (1) An external auditor presents an opinion that each of the documents listed inParagraph 1 above appropriately represents the company's financialconditions and performance of management in accordance with laws and theArticles of Incorporation; and
    • (2) All members of the audit committee give consent thereto.
  • ⑤ In a case where the Board of Directors gives approval pursuant to Paragraph 4 above,the representative director shall report the contents of each of the documents listed inParagraph 1 above to the general meeting of shareholders.
  • ⑥ The representative director shall keep the documents listed in Paragraph 1 above, andthe audit report at the head office of the Company for five (5) years and certified copiesof all of such documents at the branches of the Company for three (3) years beginningfrom one (1) week prior to the date of the regular general meeting of shareholders.
  • ⑦ The representative director shall give public notice of the balance sheet and theexternal auditor's opinion immediately after the documents listed in Paragraph 1 abovehave been approved by the general meeting of shareholders or by the Board ofDirectors pursuant to Paragraph 4 above.
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