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Basic Policy

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Basic Approach to Corporate Governance

The Rakuten Group's goal is to be the world's leading Internet services company. We have made rigorous corporate governance our highest priority and are implementing a range of measures in order to maximize the corporate value by strengthening competitiveness through Group-level internal control and advanced risk management.

Corporate Organization

1.Basic Structure of Corporate Organization

Rakuten, Inc. supervises management by using a Company Auditor System. In March 2003, the Company adopted an Executive Officer System to separate the supervisory and executive roles of management. Under that system, functions previously performed by the Board of Directors were separated, with directors retaining responsibility for management decision-making and supervision, while executive functions were transferred to the Executive Officers.
With the dual aims of speeding up executive processes and strengthening the supervisory functions of the Board of Directors and Company Auditors. In addition, Rakuten, Inc. created a group-wide risk management structure by establishing functional teams to manage risk comprehensively across all Rakuten Group businesses.

2.Corporate Organization Structure

(Directors, Board of Directors, Executive Officers, etc.) The Board of Directors consists of 16 members, including five Outside Directors. 16 Directors is the maximum allowed under the Articles of Incorporation. Resolutions to appoint Directors must be approved by a majority of voting rights at a General Meeting of Shareholders attended by shareholders holding at least one-third of voting rights.
In addition to regular monthly meetings, the Board of Directors holds extraordinary meetings as necessary. At these meetings, the Directors make decisions concerning important management matters and supervise Executive Officers' activities. To ensure appropriate decision-making by the Board of Directors, medium and long term management plans, basic policies, and other key strategies are first discussed at Corporate Strategic Meetings, which are held before the Board of Directors meetings and consists mainly of executives at Senior Executive Officer level and above.
Board decisions are delegated to the Executive Officers' Meeting, which consists of Executive Officers. Individual Executive Officers carry out their respective duties in accordance with these decisions. To ensure appropriate and efficient conduct of business operations, activities in individual segments are supervised by management councils convened within each segment, as well as by Functional Teams responsible for human resources, financial management, accounting, organizational management and other management aspects across the Rakuten Group.
(Company Auditors and the Board of Auditors) Rakuten, Inc. has four Company Auditors, includiong two full-time auditors. All four are outside auditors. A two-member Company Auditors' Office assists Company Auditors in the performance of their duties. In addition to its regular meetings, the Board of Auditors holds extraordinary meetings as required.
In accordance with audit policies and plans established by the Board of Auditors, the Company Auditors attend Board of Directors meetings and other important management meetings, and receive reports about the state of the Company's operations from Directors, the Internal Audit Department, and other sources. In addition, they conduct on-site inspections of the Company's head office and other important business sites, and check the operations of subsidiaries. In addition, the Company Auditors receive audit reports from the independent auditors and peruse financial statements and business reports. They also hold meetings with the CEO to discuss various matters.
  • 2.Corporate Organization Structure

3.Internal Control Systems

Basic internal control policies for Rakuten, Inc. are determined by the Board of Directors. The Company has declared its determination to comply with all regulatory requirements, and apply high ethical standards to all business activities.
The performance of business operations by Directors and employees is subject to regular operational audits by the Internal Audit Department, an independent unit reporting directly to the CEO. The Compliance Committee also helps to ensure that all operations are conducted appropriately by implementing group-wide compliance initiatives.
Compliance training is provided for all Directors and employees to enable them to develop the knowledge and ethical perceptions needed to perform their duties. In addition, Rakuten, Inc. is committed to the appropriate management of internal control systems through its internal communications whistle-blowing center, the 'Rakuten Hotline'.
Directors are closely supervised in the performance of their duties by the Outside Directors and Outside Company Auditors. Attorneys have been appointed to help each one of them verify compliance with the Articles of Incorporation and regulatory requirements from an objective perspective based on expert knowledge.
Rakuten Inc. is also expanding the Rakuten Group Regulations (RGR) as the basis for integrated group management, with the aim of strengthening corporate governance and paving the way for further growth.

4.The situation of the establishment of Risk Management System

In Rakuten, Inc. Group Risk Management Committee, governed by the president of the company, is set up in order to understand the situation of the risks which have the possibility of giving serious impact on the Rakuten Group comprehensively and to respond to them appropriately.
Principal organizational units in-charge-of risk for 10 categories such as compliance risk, information security risk, and market risk are set up.
The Risk Management Department as an organizational unit in-charge-of risk management oversight takes the initiative to regularly implement risk assessment methods. Based on the results of multiple risk management methods, the policy for the implementation of risk management is examined at the Risk Management Committee as needed.
Risk Managmenet Department and Principal organizations in-charge-of risk shall specify the countermeasures, and each organization in Rakuten, Inc. and domestic/overseas group companies shall implement the conunteremeasures.
Based on the "Rakuten Group Regulation(RGR)", each organization shall get approval from the Board of Directors for business investment that exceeds certain amount of capitals and is required to report the risk related to the achivement of business at the management meeting for each business.
By doing so, we seek to summerize the risks and manage them thoroughly.
In addition, individual organization obtains its own independant risk management system to solidify PDCA cycle in order to respond to each departmental unique risks.

Internal Audits and Audits by Company Auditors

The 20 member Internal Audit Department is an independent unit reporting directly to the CEO. It conducts internal control and compliance audits in accordance with internal audit plans to verify the legality, appropriateness and efficiency of operations in each organizational unit. It has also strengthened cooperation with the internal audit units of subsidiaries, and is continually implementing group-level internal audits to ensure that all operations are conducted appropriately.
Internal audit results are reported to the Board of Directors, the CEO, the Compliance Committee, responsible for the area covered by each audit. The Internal Audit Department also reports its findings to the Board of Auditors and works in cooperation with the corporate auditors.

Outside Directors and Outside Auditors

Rakuten, Inc. currently has 16 Directors, of whom five are Outside Directors, and four Company Auditors who are all Outside Company Auditors. Mr. Koichi Kusano, an Outside Director, is a senior partner at the law firm Nishimura & Asahi. Mr. Katsuyuki Yamaguchi, a Company Auditor, is a partner at the same firm. Rakuten, Inc has a business relationship with this firm that includes the provision of services. There are no other personal, capital or business relationships or significant interests.
As mentioned above, Rakuten, Inc. has highly independent Outside Directors and Outside Company Auditors. These specialists allow auditing functions through Board of Directors meetings to be strengthened. It also allows healthy discussion which contributes to high levels of corporate governance.
Appointment of the five Outside Directors was requested in anticipation of their advice and comments of the management on the Company, based on their expertise in various fields. Mr. Koichi Kusano is an expert on corporate legal affairs with extensive knowledge and experience in his profession. Mr. Ken Kutaragi has expertise mainly in the entertainment business and technologies along with his extensive experience in corporate management. Mr. Hiroshi Fukino has expertise as a management consultant along with his extensive experience in corporate management. Mr. Joshua G. James and Mr. Jun Murai were each appointed for their ability to provide management with advice and recommendations based on their experience and expert knowledge. Mr. James has specialized knowledge of Internet services and a wealth of experience in management of Internet service businesses in North America; Mr. Murai has a distinguished background as an academic expert in Internet technology.
Appointment of the four Outside Company Auditors was requested in anticipation of their initiatives in applying their extensive knowledge and experience in various fields for the purpose of further developing the Company's audit system. Mr. Tanekiyo Kunitake has extensive knowledge and expertise in business management and financial businesses. Mr. Yoshiaki Senoo has extensive knowledge and expertise primarily in the areas such as financial business, corporate management and compliance. Mr. Takeo Hirata has extensive knowledge and expertise primarily in the areas such as sports and education. Mr. Katsuyuki Yamaguchi has extensive knowledge and expertise in corporate law.
Outside Directors and Outside Company Auditors receive materials in advance of Board of Directors meetings, and where necessary discuss matters with each division. In addition, the Outside Company Auditors actively discuss matters with the Internal Audit Department and Independent Auditors.
Rakuten, Inc. has signed an agreement with each of its Outside Directors and Outside  Auditors under the provisions of Article 427, Paragraph 1 of the Companies Act. This agreement is summarized below:
Provided that duties have been carried out in good faith and without gross negligence, the total liability in situations as defined in Article 423, Paragraph 1 of the Companies Act will be limited to the sum of the amounts stipulated in the following items:
    • 1. Two times the greater of the sum of fees, bonuses and other payments received or asset benefits received in the year that includes the date on which the event that resulted in the liability occurred, and in the preceding year, or the value of asset benefits to be received (excluding benefits stipulated under Item ii below).
    • 2. Two times the smaller of the sum of retirement bonuses or asset benefits that are in the nature of retirement bonuses, or that amount divided by the number of years during which the office of outside director was held.
    • 3.The amounts stipulated below if stock options, as defined in Article 238, Paragraph 3 of the Corporate Law, were exercised or transferred after the person was appointed as an outside Director.
    • 1. If the options have been exercised - An amount calculated by subtracting the sum of the issue price of the stock options and the paid-in value per share on the exercise date from the market price per share on the exercise date and multiplying the result by the number of shares granted through the exercise of the stock options.
    • 2. If the options have been transferred - An amount calculated by subtracting the issue price of the options from the transfer price and multiplying the result by the number of stock options.

Basic Policy and Systems for Eradicating Antisocial Forces

1. Basic Policy on Eradicating Antisocial Forces

The Rakuten Group Code of Ethics calls for confronting antisocial forces with a resolute attitude and for standing staunchly on the side of social justice for the greater good if inappropriate demands are made. In addition, the Rakuten Group Regulations(RGR) for Handling Antisocial Forces establishes detailed methods for handling antisocial forces. We have fully communicated these methods internally and to Group companies and established related systems.

2. Systems for Eradicating Antisocial Forces

  • 1. Establishment of a Response Unit and Appointment of Managers Responsible for Preventing Inappropriate Demands
    The Organizational Management Department has been established as the unit in charge of responding to antisocial forces, and the department manager has been given responsibility for coordinating response. In addition, corresponding managers and staff have been assigned at the business and branch office levels as required to ensure that antisocial forces are dealt with appropriately.
  • 2. Coordination with Outside Specialists
    We keep in regular contact with the police, attorneys, the National Center for the Elimination of Boryokudan ("violent elements") and other outside specialists, and closely coordinate with them. We are also members of the Special Violence Prevention Council and receive guidance on handling antisocial forces.
  • 3. Collection and Management of Information on Antisocial Forces
    The response unit regularly collects and manages information to help in handling antisocial forces. The information is shared with managers and staff in charge of dealing with antisocial forces.
  • 4. Establishment of a Response Manual
    The Rakuten Group Regulations for Handling Antisocial Forces and response guidelines have been established. General principles and specific methods for handling antisocial forces are broadly communicated internally and to Group companies.
  • 5.Training Activities
    Along with sharing information on antisocial forces internally, managers and staff in charge of dealing with antisocial forces undergo regular training on response guidelines in order to improve their response capabilities.
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