Regarding Inappropriate Accounting of Overseas Sales Subsidiaries of Fuji Xerox Co., Ltd.

Transcription

1 Regarding Inappropriate Accounting of Overseas Sales Subsidiaries of Fuji Xerox Co., Ltd. With respect to inappropriate accounting conducted in the past by overseas sales subsidiaries of Fuji Xerox Co., Ltd. ( FX ), a consolidated subsidiary of FUJIFILM Holdings ( FH ), we deeply apologize to our shareholders, investors, customers and other stakeholders for any inconvenience and concerns caused. This section explains the revealed facts and recurrence-prevention measures to be taken by the Fujifilm Group. Outline It was identified as being necessary to review certain accounting practices related to certain sales leasing transactions in and prior to FY2016/3 at Fuji Xerox New Zealand Ltd ( FXNZ ), an overseas sales subsidiary of FX. As an initial step, FH established an internal investigation committee to conduct investigations. Furthermore, to enhance the objectivity of the investigations, we established the Independent Investigation Committee, consisting of outside experts that do not have any financial or other interests in the Fujifilm Group in April 2017, to clarify all the facts. In June 2017 the report from the Independent Investigation Committee showed that in addition to FXNZ, Fuji Xerox Australia Pty. Ltd. ( FXA ) also conduced inappropriate accounting. The accumulated impact of the inappropriate accounting on the net income attributable to FUJIFILM Holdings through FY2011/3 to FY2016/3 is a loss of 28.1 billion. The results of the investigation by the Independent Investigation committee also raised an issue with regard to FX s internal controls. Currently, FH is engaged in initiatives to prevent recurrence and strengthen governance. About the Inappropriate Accounting Practice FXNZ had been selling equipment, by introducing Managed Services Agreements (MSAs) that bundled together equipment sales and maintenance services. Under MSAs, sales equivalent to the price of the copying machines are recorded as a single sale as a capital lease upon installation of equipment during the first fiscal year, and following that, the sales price is recovered as a copy service fee determined by multiplying the actual number of copies by the copy unit price, which is set according to the monthly target volume. In order to treat contracts as capital leases, they must satisfy certain conditions including possibility of the recovery of a minimum payment of lease fees. In the case of FXNZ, however, all transactions, including those with conditions that did not satisfy the capital lease conditions, were recorded as capital leases. Consequently, there were many transactions in which receivables could not be recovered, and this became common practice. A similar accounting practice was also conducted at FXA. Background and Managerial Issues As the background to the inappropriate accounting and managerial issues, the Independent Investigation Committee indicated the following points: Background to Inappropriate Accounting The system of incentives including bonus payments for the managing director and employees at FXNZ, based on the sales target achievement, led to continue the inappropriate accounting practice, recording sales early. At FXNZ, there was a concentration of authority with the managing director of FXNZ, and supervision by the board of directors did not function effectively, resulting in the lack of transparency in the business management process. There were problems including an insufficient subsidiary management system at Fuji Xerox Asia Pacific Pte Ltd and the lack of control over the audit system and administration department at FX. (Accordingly, information was blocked in the process of reporting within FX and appropriate information on the actual situation did not reach the Chairman and President of FX.) There were systemic deficiencies in FH monitoring of FX and its subsidiaries, the audit system of the audit department and the information sharing system. (Accordingly, appropriate information on the situation was not reported by FX to FH.) Managerial Issues Issues to be addressed at FXNZ Review of incentives emphasized on sales achievement Improve the internal system to correct the reporting line centralization Issues to be addressed at FX Strengthen the system of managing subsidiaries and affiliates Strengthen information sharing within FX and improve transparency of the business management process Strengthen the supervisory function of the board of directors and the audit function of the audit & supervisory board members and the audit department Strengthen the checking function of the accounting department Improve awareness of compliance with laws and regulations Issues to be addressed at FH Strengthen the function of managing FX 24

2 Main Measures Taken by FH in Response FH has implemented personnel actions in response to the problem. Three directors, one senior vice president and one full-time corporate auditor at FX were subject to mandatory retirement, and one corporate vice president was demoted. Ten officers, namely the president, the other fulltime corporate auditor, two corporate auditors at FX and the aforementioned six officers, had their compensation and bonuses reduced by 10-50% for three months. The chairman and president of FH also returned 10% of their compensation over the three-month period. FH makes progress in strengthening of governance as following. Strengthening of governance structure of FH June 2017 Changes to governance structure of FH Reducing the number of directors from 12 to nine for greater operational flexibility, promoting active deliberation by the board of directors and making quicker management decisions Appointing a total of three outside directors to raise the ratio of outside directors on the board to 1/3 to ensure the appropriateness of decision-making by incorporating opinions from multiple perspectives Strengthening of governance and the business management process of group companies June 2017 Dispatching of management personnel from FH to FX Dispatch seven officers including the chairman, deputy president, executive vice president, and senior vice president from FH to FX July and August 2017 Strengthening and thorough reinforcement of compliance education Conducted compliance re-education to directors of all divisions of FH, Fujifilm ( FF ), and FX, and presidents of all subsidiaries Provide compliance re-education to all employees August 2017 Establishment of the Subsidiaries Establish the Administration Division to develop a mechanism to ensure appropriate information provision within the Fujifilm Group September 2017 Integration of the financial accounting function Integrate the accounting function of FF and FX with the Accounting and Finance Division of FH to strengthen the business management process Establishment of the Global Audit Division Establish the Global Audit Division to strengthen the audit function through out the group November 2017 Establishment of the whistleblowing system at FH Set up the common whistleblowing system so that all domestic and overseas employees of Fujifilm Group can report incidents directly to FH, to detect early and respond promptly to signs that lead to misconduct or violation of law at the companies and organizations July 2017 Establishment of the FH Committee for Strengthening Governance The committee, which is chaired by FH President, has set up a comprehensive project system to implement through and continuous governance enhancement. Five projects are underway to address different themes. FH Committee for Strengthening Governance Projects for enhancing management of group companies Projects for enhancing accounting Projects for enhancing auditing Projects for enhancing compliance Projects for enhancing IT governance We express our deepest regrets regarding inappropriate accounting by overseas sales subsidiaries of FX. Taking these findings seriously, we will make every possible effort to restore the trust of stakeholders under the new management structure with a stronger governance system. 25

3 Status of Corporate Governance Basic Policy of Corporate Governance The Company aims to achieve sustainable growth and increase the corporate value of the Group while contributing to the sustainable development of society by conducting sincere and fair business activities. The Company has positioned corporate governance as an important management priority to achieve this aim. Activities for Strengthening Corporate Governance The Company has implemented such measures as appointment and addition of outside Directors, revision of the payment of remuneration to Directors and Audit & Supervisory Board Members, formulation of Corporate Governance Guidelines, and evaluation on the effectiveness of the Board of Directors. In addition, it will promote group-wide measures to strengthen governance in response to the inappropriate accounting in overseas subsidiaries of Fuji Xerox Co., Ltd. to further strengthen the corporate governance system. Past Activities Year/month Activities for strengthening governance Purpose Transitioned to a holdings company structure To strengthen consolidated management of the Fujifilm Group FY2007/3 First appointment of outside Director To properly supervise and audit performance of duties to ensure transparency of the management, while promoting active discussion by asking for appropriate advice and necessary explanation at the Board of Directors meetings from an objective viewpoint FY2008/3 Introduction of stock option system To make the Company s Directors (excluding outside Directors) share the stockholders interest in the fluctuation of the stock FY2010/3 Abolition of retirement benefit program for Directors and Audit & Supervisory Board Members price of shares of the Company and enhance their motivation and morale to contribute towards increasing the corporate value of the Company FY2015/3 Increase in the number of outside Directors to two persons To further strengthen proper supervision and audit of performance of duties, while promoting active discussion by asking for appropriate advice and necessary explanation at the Board of Directors meetings from an objective viewpoint FY2016/3 Formulation of Corporate Governance Guidelines Commencement of the evaluation of the effectiveness of the Board of Directors To present the Company s basic policy on corporate governance from a wide range of perspectives to ensure accountability to all stakeholders To ensure the effectiveness of the Board of Directors FY2018/3 Increase in the number of outside Directors to three persons, thereby raising the ratio of outside Directors on the Board of Directors to one-third To further incorporate stakeholders perspectives and sense of value into the management To enhance transparency of decision-making of the Board of Directors with advice given based on their expertise and experience 26

4 Corporate governance structure (As of June 29, 2016) Corporate organization Company with an Audit & Supervisory Board Number of Directors (number of outside Directors) 9 (3) Number of outside Directors deemed to be independent* 1 3 Directors term of office One year (the same term of office applies to outside Directors) Incentive compensation to Directors Introduction of a stock option system geared toward in-house Directors Number of Audit & Supervisory Board members (number of outside Audit & Supervisory Board members) 4 (2) Number of independent officers* 2 5 Adoption of an executive officer system Yes Independent auditors KPMG AZSA LLC Introduction of Countermeasures (Takeover Defense Measures) for Large-Scale Purchases of Company Shares None* 3 *1 Compliance with the Company s Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members *2 Independent officers as stipulated by Tokyo Stock Exchange, Inc. *3 If the Company receives a proposal seeking to acquire a controlling interest, it will strive to help shareholders make a decision by proactively gathering information and disclosing it in a timely manner, while taking appropriate measures within the scope permitted by relevant laws and regulations, such as the Companies Act and the Financial Instruments and Exchange Act, to increase corporate value and secure the common interests of shareholders. Details of the Company s Organizational Structure Directors and the Board of Directors The Company has positioned the Board of Directors as the organization for determining basic Group management policies and strategies and other important matters relating to business execution as well as supervising the implementation of business affairs. The Company s Articles of Incorporation stipulate that the Board can consist of up to 12 Directors. Currently, the Board has nine Directors, including three outside Directors. The Board s regular meetings are held in principle once a month, with extraordinary Board meetings held on an as-required basis. In addition, certain matters are determined on a flexible decision-making basis at the Board of Directors meetings by Directors with special authority. To better clarify their missions and responsibilities, the Company s Directors are given a one-year term of office. Number of Board of Directors meetings held (in FY2017/3) 13 Average attendance rate of Directors 95 % (including outside Directors)* 1 Average attendance rate of Audit & Supervisory Board members 95 % (including outside Directors)* 2 *1 Average attendance rate of each Director *2 Average attendance rate of each Audit & Supervisory Board member Raise the ratio of outside Directors on the Board of Directors to one-third to strengthen governance Previously From June 29, 2017 onward Outside Director Outside Director 27

5 Executive Officer System The Company has adopted an executive officer system to facilitate agile business execution. Executive officers carry out business affairs in accordance with the basic policies and strategies formulated by the Board of Directors. The Company currently has 13 executive officers, including six concurrently serving as Board members. The executive officers have a one-year term of office, the same as the Company s Directors. Management Council The Management Council makes decisions on the submission of matters to be exclusively deliberated by the Board of Directors. At the same time, the Council deliberates on the measures adopted by executive officers to implement particularly important initiatives in accordance with the basic policies, plans, and strategies formulated by the Board of Directors. Internal Audits The Company established a Global Internal Audit Division in September 2017, which currently comprises 56 personnel, as an internal auditing unit that is independent from business operations. Integrating the internal auditing function of the Group companies, the Company has established a global auditing system to strengthen the auditing function of the entire group through enhancing the auditing capability and efficiency by using IT. In addition, the division is in charge of assessing internal control over financial reporting by the Company and its Group companies in response to the April 2008 application of the internal control reporting system in Japan. The Company compiles the outcome of the assessment in a Management s Report on Internal Control over Financial Reporting. Moreover, designated staff are appointed to operating companies and audits are conducted across a wide range of areas, including the environment, quality control, security, labor, export control, and issues relating to the Pharmaceutical Affairs Law of Japan. Audit & Supervisory Board and Audit & Supervisory Board Members The Company has adopted an audit and supervisory board system with an audit and supervisory board, which consists of four members, including two outside Audit & Supervisory Board members. Both of Outside Audit & Supervisory Board members, Hisayoshi Kobayakawa and Shiro Uchida are registered Certified Public Accountants and possess considerable knowledge about finance and accounting. As an independent organization with key roles and responsibilities in the Company s corporate governance system to ensure transparent and fair decision making in the business as a whole, Audit & Supervisory Board members audit the entire scope of Directors performance of their duties following audit policies and an audit plan in conformity with the Audit & Supervisory Board members audit standards determined by the Audit & Supervisory Board. At meetings of the Audit & Supervisory Board, which are held in principle once a month, information on audit results is shared among Board members. In addition, all Audit & Supervisory Board members attend meetings of the Board of Directors, while the full-time Audit & Supervisory Board members attend every Management Council meeting, regularly exchange opinions with the representative Directors, and audit the entire range of business execution. With the aim of strengthening the audit functions of the Audit & Supervisory Board, the Company has established the Audit & Supervisory Board Office and currently appointed six personnel. Accounting Audits The Company engages KPMG AZSA LLC as its independent auditors. KPMG AZSA LLC expresses an audit opinion on the Company s financial statements from an independent standpoint. Number of Audit & Supervisory Board meetings held (in FY2017/3) 13 Average attendance rate of Audit & Supervisory Board members 98 % (including outside Directors)* * Average attendance rate of each Audit & Supervisory Board member 28

6 Corporate governance structure of FUJIFILM Holdings and Internal Control System Shareholders Meeting Board of Directors Determination of Group management policies and strategies Decisions on important matters relating to business execution Supervision of business execution Audit & Supervisory Board Independent Auditors Chairman, Representative Director and CEO Staff of Audit & Supervisory Board Members Business Execution Management Council President, Representative Director and COO CSR Committee M&A Investment Committee Executive Officers Internal Audit Committee for Strengthening Governance PR / IR Corporate Planning Subsidiaries Administration Accounting and Finance HR General Administration Legal CSR IT FUJIFILM Fuji Xerox Co., Ltd. Toyama Chemical Co., Ltd. 29

7 Approach to Compliance, Risk Management, and Internal Control System The Company ensures that the activities and behavior of its officers, and employees are in compliance with laws and regulations and social ethics. Specifically, the Company has formulated the Fujifilm Group Charter for Corporate Behavior and the Fujifilm Group Code of Conduct, and established the CSR Committee and dedicated compliance divisions to maintain and improve compliance. In its approach to risk management, the Company builds appropriate risk management systems at all Group companies. Complementing these systems, in the case of important risk matters, the CSR Committee conducts reviews and promotes basic policy development and appropriate measures from a group-wide perspective. Moreover, the Company has established an internal control system based on the Basic Policy on Establishing a Structure for an Internal Control System decided by resolution of the Board of Directors. Each year, the Company checks the implementation status of the internal control system and reports the result to the Board of Directors. Remuneration to Directors and Audit & Supervisory Board Members The Company discloses the number of individuals to whom remuneration is paid and the total amount of remuneration by Directors as well as Audit & Supervisory Board members. Remuneration and other important matters relating to Directors as well as Audit & Supervisory Board members are determined by way of resolution at the Company s annual general meeting of shareholders. In this manner, steps are taken to determine the total maximum amounts of compensation payable to Directors as well as Audit & Supervisory Board members. Remuneration (including bonuses) paid to each Director is determined by a resolution of the Board of Directors. Remuneration (including bonuses) paid to each Audit & Supervisory Board member is determined based on deliberations between Audit & Supervisory Board members. The basic remuneration of Directors as well as Audit & Supervisory Board members is paid as a fixed remuneration amount in accordance with individual duties and status, whether full or part time. Directors bonuses are determined in accordance with the Company s business results and individual Director s responsibilities and performance. The Company has introduced a stock option system in connection with the payment of remuneration to Directors (excluding outside Directors). The stock option system was introduced as an incentive to further motivate Directors to enhance corporate value. In determining the number of stock options allocated, consideration is given to each Director s position, responsibilities, authority, and other factors and determined by the Board of Directors in accordance with established rule. Amount of remuneration paid to Directors and Audit & Supervisory Board members* (For FY2017/3) Subject of Remuneration Number of People Remuneration Amount Directors million (Outside Directors) (2) ( 19 million) Audit & Supervisory Board members 5 55 million (Outside Audit & Supervisory Board members) (2) ( 11 million) Total million (Outside Directors, Audit & Supervisory Board members) (4) ( 31 million) * The following items are also included in the aforementioned amounts of remuneration. 1. Bonuses paid for FY2017/3 Directors: 100 million paid to 11 Directors ( 3 million paid to two outside Directors) Audit & Supervisory Board members: 4 million paid to three Audit & Supervisory Board members ( 1 million paid to one outside Audit & Supervisory Board member) 2. Amount of remuneration paid by way of stock options Directors: 371 million paid to 10 Directors 3. Number of Directors receiving compensation Includes two Directors who resigned during FY2017/3 4. Number of Audit & Supervisory Board members receiving compensation Includes two Audit & Supervisory Board members who resigned during FY2017/3, excluding one Audit & Supervisory Board member with no compensation. Other Overview of IR Activities At Fujifilm, top management is actively involved in IR activities and works to strengthen the relationship of trust with shareholders and enhance IR activities. In addition, we are working to reduce the gap between intrinsic corporate value and market ratings by continuously expounding the Company s management policy and utilizing management to assist the capital markets in forming their opinions. Specifically, in addition to the quarterly results briefings attended by senior management and executive officers, we actively provide points of contact, by joining IR conferences for the benefit of institutional investors in Japan and overseas, holding business briefings, and individual meetings. We are thereby working to further enhance communications with our shareholders. For the sake of overseas investors, we post English-language information in a timely manner on our website and are enhancing our global IR activities, such as through closer communication by establishing our IR bases in North America and Europe. For individual investors, we post content on the website that explains the Group s businesses in an easily understood manner and hold Company briefings in major cities in Japan. Main IR activities (FY2017/3) Activity Number of times For institutional investors / analysts Results briefings 4 Conferences hosted by securities companies 8 Business briefings and factory tours 7 Overseas IR road shows 5 For individual investors Company briefings 25 The Company conducts IR activities in accordance with the IR Information Disclosure Policy can be viewed at the following URL. policies_and_systems/ir_policy/ 30

8 Reasons for selecting outside Directors and outside Audit & Supervisory Board members Outside Directors* 1 Outside Audit & Supervisory Board Members* 1 Tatsuo Kawada Newly elected Reasons for Selection Mr. Kawada has served as representative director of a general textile manufacturer for many years. With his strong leadership, he has achieved transformation of the company s business model, creation of innovation, and organizational reform. The Company deems that he is capable of executing the duties expected of an outside director in an appropriate and sufficient manner by utilizing his ample experience and wide range of knowledge as a corporate executive to give suggestions and advice on many aspects of the Company s management. Hisayoshi Kobayakawa Reasons for Selection Mr. Kobayakawa has ample experience and a wide range of knowledge as a certified public accountant. The Company deems he appropriately executes his duties as an outside Audit & Supervisory Board member from an objective viewpoint based on such experience and knowledge. Attendance Meetings of Board of Directors 13 / 13 Meetings of Audit & Supervisory Board 13 / 13 Makoto Kaiami Reasons for Selection Mr. Kaiami has served in important positions such as Presiding Justice of the Division of Tokyo High Court and President of Tokyo District Court, and has ample experience and wide range of knowledge accumulated over his many years as a judge. The Company deems that he is capable of executing the duties expected of an outside director in an appropriate and sufficient manner by utilizing this experience and knowledge to give suggestions and advice on many aspects of the Company s management, including from the perspective of compliance and internal control. Kunitaro Kitamura Newly elected Newly elected Reasons for Selection Mr. Kitamura has served as representative director of financial institutions for many years, demonstrating strong leadership. He has ample experience and wide range of knowledge in the fields of loans, finance, and capital markets. The Company deems that he is capable of executing the duties expected of an outside director in an appropriate and sufficient manner by utilizing this experience and knowledge to give suggestions and advice on many aspects of the Company s management. Shiro Uchida Reasons for Selection Mr. Uchida has ample experience and a wide range of knowledge as both a certified public accountant and as a corporate manager. The Company deems he appropriately executes his duties as an outside Audit & Supervisory Board member from an objective viewpoint based on such experience and knowledge. Attendance Meetings of Board of Directors 2 Meetings of Audit & 8 / 10* Supervisory Board 9 / 10* 2 *1 For a brief history of each outside Director and outside Audit & Supervisory Board member, please see page 32 (Management Structure). *2 Applicable to the Board of Directors meetings and Audit & Supervisory Board meetings held after the election on June 29,

9 Management Structure * Fuji Photo Film Co., Ltd., was renamed FUJIFILM Holdings in October The operating company FUJIFILM took over the businesses of Fuji Photo Film Co., Ltd. Board of Directors (As of September 30, 2017) Chairman, Representative Director & CEO Shigetaka Komori 1963 Joined the Company 2000 President, Representative Director of the Company 2006 CEO of the Company (to 2012 Chairman, Representative Director & CEO of the Company (to Chairman, Representative Director & CEO of FUJIFILM (to Chairman, Representative Director & CEO of FUJIFILM Chairman, Representative Director of Fuji Xerox Co., Ltd. Director Masaru Yoshizawa 1980 Joined the Company 2014 of the Company (to 2016 Director of the Company (to Director of FUJIFILM Director & Executive Vice President of Fuji Xerox Co., Ltd. President, Representative Director & COO Kenji Sukeno 1977 Joined the Company 2012 of the Company Director of FUJIFILM 2013 Director of the Company 2015 Director & Senior Vice President of FUJIFILM 2016 President, Representative Director & COO of the Company (to President, Representative Director & COO of FUJIFILM (to President, Representative Director & COO of FUJIFILM Director of Fuji Xerox Co., Ltd. Chairman, Director of Toyama Chemical Co., Ltd. Director (Outside) Tatsuo Kawada 1987 President of SEIREN CO., LTD Chairman and President of SEIREN CO., LTD Chairman and CEO of SEIREN CO., LTD. (to 2017 Director of the Company (to Chairman and CEO of SEIREN CO., LTD. Outside Director of Hokuriku Electric Power Company Member of the Board (external) of Daikin Industries, Ltd. Director serving as Audit and Supervisory Committee member of Hokuhoku Financial Group, Inc. Director & Chief Innovation Officer (CIO) Kouichi Tamai 2003 Joined the Company 2006 of the Company (to 2008 Director of FUJIFILM 2010 Director of the Company (to 2013 Executive Vice President of FUJIFILM 2016 Director & Vice President, CIO of FUJIFILM (to Director & Vice President, CIO of FUJIFILM Deputy President, Representative Director of Fuji Xerox Co., Ltd. Director (Outside) Makoto Kaiami 1978 Assistant Judge of Tokyo District Court 2000 Presiding Justice of the Division of Tokyo District Court 2007 Associate Vice-Minister of Justice in charge of Litigation Affairs, Minister s Secretariat of Ministry of Justice 2009 Judge of Tokyo High Court President of Wakayama District and Family Court 2011 President of Nagano District and Family Court 2012 Presiding Justice of the Division of Tokyo High Court 2014 President of Tokyo Family Court 2015 President of Tokyo District Court 2016 Retired office at mandatory retirement age 2017 Registered as Attorney at Law (to Joined Sophiacity Law Office as Of counsel (to Director of the Company (to Of counsel of Sophiacity Law Office Director & Chief Technical Officer (CTO) Yuzo Toda 1973 Joined the Company 2008 Director of FUJIFILM 2009 Director of the Company (to 2015 Executive Vice President of FUJIFILM 2016 of the Company (to Director & Vice President, CTO of FUJIFILM (to 2017 Director of Anicom Holdings, Inc. (to Director & Vice President, CTO of FUJIFILM Director of Anicom Holdings, Inc Joined the Company 2014 Director of FUJIFILM (to 2016 of the Company (to Director & Senior Vice President of FUJIFILM (to Director (Outside) Kunitaro Kitamura 2011 Representative Director and Deputy President of Sumitomo Mitsui Trust Holdings, Inc. Representative Director and Deputy President of The Chuo Mitsui Trust and Banking Company, Limited (current Sumitomo Mitsui Trust Bank, Limited) 2012 Representative Director and President of Sumitomo Mitsui Trust Holdings, Inc. Chairman (Representative Director) of Sumitomo Mitsui Trust Bank, Limited 2017 Representative Director of Sumitomo Mitsui Trust Holdings, Inc. (to Chairman (Director) of Sumitomo Mitsui Trust Bank, Limited (to Director of the Company (to Representative Director of Sumitomo Mitsui Trust Holdings, Inc. Chairman (Director) of Sumitomo Mitsui Trust Bank, Limited Director & Senior Vice President of FUJIFILM 32 Director Norio Shibata

10 Audit & Supervisory Board Members Executive Officers Audit & Supervisory Board Member Mamoru Matsushita Audit & Supervisory Board Member Kazuya Mishima 1980 Joined the Company 2008 Managing Director of FUJIFILM UK Ltd General Manager of Secretary Office of the Company General Manager of Secretary Office of FUJIFILM 2013 President of FUJIFILM Italia S.p.A Audit & Supervisory Board Member of the Company (to Audit & Supervisory Board Member of FUJIFILM (to Audit & Supervisory Board Member of FUJIFILM 1978 Joined the Company 2009 General Manager of Legal Group of Corporate Planning Division of the Company General Manager of Legal Department of FUJIFILM 2012 of the Company of FUJIFILM 2014 Director & Senior Executive Officer of FUJIFILM Business Expert 2015 President & Representative Director of FUJIFILM Business Expert 2017 Audit & Supervisory Board Member of the Company (to Audit & Supervisory Board Member of FUJIFILM (to Audit & Supervisory Board Member of FUJIFILM Audit & Supervisory Board Member of Toyama Chemical Co., Ltd. Chairman and CEO President and COO and CIO and CTO and CDO* *Chief Digital Officer Shigetaka Komori Kenji Sukeno Kouichi Tamai Yuzo Toda Norio Shibata Masaru Yoshizawa Hiroshi Kurihara Shigenobu Inenaga Masato Yamamoto Shigeru Sano Masahiro Fukuoka Akira Yoda Chisato Yoshizawa Audit & Supervisory Board Member (Outside) Hisayoshi Kobayakawa 1968 Registered as Certified Public Accountant (to 1996 Senior Partner of Price Waterhouse (currently PricewaterhouseCoopers Co., Ltd.) Executive Representative Partner of Aoyama Audit 2000 Audit & Supervisory Board Member of General Sekiyu K.K. (currently TonenGeneral Sekiyu K.K.) Full-time Audit & Supervisory Board Member of TonenGeneral Sekiyu K.K Audit& Supervisory Board Member of TonenGeneral Sekiyu K.K. Full-time Audit & Supervisory Board Member of TonenGeneral Sekiyu K.K Substitute Audit & Supervisory Board Member of the Company 2015 Audit & Supervisory Board Member of the Company (to 1986 Registered as Certified Public Accountant (to 2010 CEO of PricewaterhouseCoopers Co., Ltd Chairman of PricewaterhouseCoopers Co., Ltd Chairman, Representative Director of SAP Japan Co., Ltd. (to 2016 Audit& Supervisory Board Member of the Company (to Audit & Supervisory Board Member (Outside) Shiro Uchida Chairman, Representative Director of SAP Japan Co., Ltd. Outside Director of Nihon Trim Co., Ltd. 33

11 Message from Outside Directors Three outside Directors, who have been newly elected for FY2018/3, express their resolutions on the appointment as the Company s Directors. Contribute to growing the business and strengthening governance from the perspective of corporate manager SEIREN CO., LTD., where I currently serve as Chairman and CEO, has supplied Fujifilm with shielding components for photographic film, what it calls teremp (shielding cloth) for film cartridges, which was developed about 30 years ago. With the declining demand for photographic film, the Company s business with SEIREN is shrinking substantially. However, this appointment as the Company s outside Director makes me keenly aware of my 30-year relationship with the Fujifilm Group. The Fujifilm Group, a creator of innovative products and services in a wide variety of fields, continues to create value with the use of leading-edge, original technologies, which are undoubtedly its core competence, generating strength that is not seen in other companies. Moreover, strong leadership of the management has been a driving force to build togetherness and forward momentum with the Group s employees, and achieve innovation in acting on their own to reform the Company. The Fujifilm Group presently has 93 domestic companies and 184 overseas companies as a global company group. As the Fujifilm Group continues to grow up, how Fujifilm will strengthen governance, while drawing on the strength of each company this will become a more important issue in the future management. Outside directors play a role in supervising the Tatsuo Kawada Director (Outside) Chairman and CEO of SEIREN CO., LTD. Outside Director of Hokuriku Electric Power Company Member of the Board (external) of Daikin Industries, Ltd. Director serving as Audit and Supervisory Committee member of Hokuhoku Financial Group, Inc. management from a different viewpoint from inside directors and contribute to enhancing the corporate value of the Fujifilm Group by raising issues and giving advice. Effective this fiscal year, the Board is comprised of three outside Directors, which, I believe, raises expectation for active exchange of opinions based on broader knowledge. By utilizing my experience in corporate management I will also contribute to achieving growth of the Fujifilm Group, where every employee has a dream, thereby which can provide society with dreams. Seeing my role as a member of the Group by utilizing my experience as a legal expert I worked as a judge for 38 and a half years until I retired from the post of Director General of the Tokyo District Court in October I have been working as a lawyer since February Although I have never been involved with corporate management, I am committed to fulfilling my roles and the expectations placed on outside Directors by drawing on my experience as a legal expert. Today, corporations are facing the big challenge of not only improving corporate value in pursuit of a greater business scale and larger profit, but creating social value that contributes to the world. The Fujifilm Group has been creating new value through innovation in various lives and industrial fields, thereby contributing to society. The Fujifilm Group s achievement in the medical field to support people s health is one of the major accomplishments. Makoto Kaiami Director (Outside) Of counsel of Sophiacity Law Office 34

12 In terms of compliance that is to be observed as a public institution of society, such issues as inappropriate accounting at overseas sales subsidiaries of Fuji Xerox and deficiencies in internal control were found. This finding creates the need to review group-wide operations to improve and strengthen the governance system and fully ensure our members are aware about compliance. I feel that Board of Directors of FUJIFILM Holdings discusses matters in an open and active manner, showing the Company s willingness to positively receive opinions from outside parties. I see it as my role to raise issues and give proper advice to the Board of Directors based on my knowledge and experience relating to law, from a position where I can check the management with outside viewpoints, especially as a legal professional. In order for corporations to achieve sound growth, the important point is that each and every employee works passionately and enthusiastically, being aware that their work has been useful for society. The Fujifilm Group possesses such positive corporate culture, enriching soil for value creation. I am committed to fulfilling my role as a member of the Fujifilm Group with the aim of building a company that will achieve sustainable development with society. Providing support in corporate management through supervision and advice given based on the experience and knowledge accumulated in a financial institution My 40-year service in Sumitomo Mitsui Trust Bank gave me opportunities to meet various corporations from the position of a financial institution. Among them, I have never found a case like that of the Fujifilm Group. Although the Company once faced the situation where its mainstay products were at risk, it overcame the difficult period and later developed businesses even greater than before. I believe that this is because Fujifilm Group tackled the challenge of restructuring and reform through concerted efforts with the management and employees, realizing its vision through actions full of esprit and vitality. It could not have been achieved without the management s leadership and strong will that each employee had developed voluntarily and independently, with ideas such as we will do it and we want to change like this. This is very proof of the open, fair, and clear corporate culture of the Fujifilm Group, which has been a source of creation of value from innovation. management is prone to peer pressure even though discussions are made freely and audaciously. This unconscious vulnerability should be mitigated through proper supervision and advice from the viewpoint of external parties such as outside directors to ensure management transparency, thereby leading to stronger governance. Every business of the Fujifilm Group supports the industrial community by providing cutting-edge, proprietary Kunitaro Kitamura Director (Outside) Representative Director of Sumitomo Mitsui Trust Holdings, Inc. Chairman of Sumitomo Mitsui Trust Bank, Limited technologies and enriches people s lives. When employees truly feel that business growth and development are directly linked with contributions to society, they will find their efforts very rewarding, thereby generating higher motivation. Recently, financial institutions have been expected to fulfill responsibilities to meet consumer needs with a high sense of ethics under the concept of fiduciary duty. I believe that such truly customer-oriented viewpoint is also applied to non-financial institutions. I will give my support in corporate management with the consciousness of such viewpoint. 35