Corporate Governance

CONTENTS

68 Corporate Governance 75 Board of Directors, Statutory Auditors and Corporate Officers

66 Corporate Governance 6767 DNPDNP Annual Annual Report Report 2011 2011 Corporate Governance “DNP” refers to Co., Ltd. in this section.

1. Corporate Governance established a Management Committee consisting of directors at the senior managing director level and above. ■Fundamental Philosophy The committee meets once a month, in principle, to review and discuss management policies, strategies, and important DNP has established a management concept of contributing to business matters. the emergently evolving society of the 21st century, and DNP has in place a Board of Statutory Auditors that recognizes that fulfilling its corporate responsibilities to society consists of five auditors, including one auditor with as a Group and being trusted by its shareholders, customers, considerable knowledge of finance and accounting and consumers, employees and other stakeholders is critical to three outside auditors. In accordance with auditors’ improving the competitiveness of the Group. Toward this end, prescribed audit criteria and responsibilities, the statutory we regard corporate governance as a top management priority. auditors conduct audits of the directors’ management of We have strived to establish and manage an organizational day-to-day operations and, as necessary, seek information structure that allows for precise managerial decision-making, from the directors and employees regarding business prompt and appropriate execution based on the decisions operations. made, and proper supervision and surveillance; strengthen With such a corporate governance structure, the Board of education and training to improve each employee’s awareness Directors can make appropriate decisions efficiently. of compliance issues; and enhance our overall corporate governance. (2) Internal controls and auditor’s auditing In order to maintain a structure that allows for precise ■Progress on Corporate Governance Measures management decision-making, appropriate and prompt (1) Corporate governance structure execution of business, and inspection and monitoring of DNP’s organization is designed to allow the directors with these functions, the Corporate Ethics Committee, as the specialized expertise and experience in a wide range of body in charge of internal control, inspects and guides business fields to participate in management decisions, to DNP’s operating units according to the DNP Group’s Basic take responsibility and authority as they execute their work, Compliance Management Regulations, and regularly reports and to supervise the work of other directors. Also, so as to to auditors on management conditions. promptly make precise management decisions, smoothly In addition, the Auditing Department (consisting of 17 act based on the decisions, and further strengthen proper employees) ensures the propriety of operations by supervisory functions, independent directors participate in conducting accounting and operational audits based on decision making, and corporate officers named by the Board internal audit regulations and by providing progress reports of Directors execute the decisions made by the Board of to the statutory auditors and the accounting auditor. Directors, and have the responsibility and authority to decide The statutory auditors hold regular meetings of the Board upon and carry out those matters delegated by the Board. of Statutory Auditors, work with other statutory auditors to Working in close communication with the directors and in perform their audit duties, and closely cooperate with the close proximity to the workplace, their function is to ensure accounting auditors by receiving from them an explanation that the views of those on the front lines are reflected in of the audit plan at the start of the fiscal year, assessing management. audit operations during the fiscal year as appropriate, and The term of office for the directors is one year, in order to receiving a report of audit results at the end of the fiscal year. have more flexibility to construct a management system best suited to responding to the business environment; and to The names of the certified public accountants who further clarify management responsibility for each fiscal year. performed the accounting audits, the audit firms they are The Board of Directors consists of 20 directors (as of June employed by, and their assistants in the audit work are as 29, 2011), including one independent outside director. In follows: principle, the Board meets once a month. Based on the Company’s Board of Directors Regulations, the directors ensure that operations are appropriately run and mutually supervise day-to-day operations. The directors and corporate officers hold executive committee meetings three times a month to exchange information that is helpful for efficient decision making. To speed up the Company’s activities and make them more efficient, DNP has also

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e Board of Statutory Auditors t a r o p r Audit unit Audit Audit o Assistance Reporting C ▶ DNP Annual Report 2011 Auditing Department Audit Audit Guidance Guidance Reporting Corporate GovernanceCorporate Open Door Room Environmental Committee Environmental Product Safety Committee Legal and other main divisions Complaint Handling Committee Information Security Committee Management Committee Management (Environmental Safety Division, Labor Division, Division, IP Division, Legal Affairs Division, etc.) InformationCommitteeDisclosure Central Disaster Prevention Council Corporate Ethics Committee Insider Trading Prevention Committee Technology Division, Accounting Division, Management Progress on other corporate governance measures DNP set down the DNP Group Code of Conduct for employees so follow, as contribute to to the to prosperity and solid development of society, promote fair and appropriate corporate activity, protect the environment, contribute society, to and establish free a and lively corporate culture. Among the stipulations as an is that DNP, emergently evolving company that does not do business with antisocial elements, fulfill its corporate responsibilitiesto society, respectits shareholders, customers, consumers, employees and other stakeholders, and act in that a way earns trust. Corporate Social Responsibility Committee (4)

Oversight of internal controls Reporting Coordination

Head office Board of Directors Audit RepresentativeDirectors Training Guidance Reporting General Meeting of Shareholders of Meeting General Divisions Group companies Group Directors in charge review, improvement) review, Corporateofficers (Autonomous implementation, inspection, (Autonomousimplementation,

Operating units Meiji Audit Corporation Audit Meiji certified10 public accountants,others10 Hirofumi Nikaido (2 years), Kazuhiko (4 years), Terada Tsuguhiro Tsukakoshi(2 years), Junko Shima (4 years) Audit Audit Audit firm Number of accounting audit assistants Certified public accountants who performed the accounting audits (continuous audit years) Senior partners and managing partners

Development of a risk management structure A diagram of the corporate governance structure illustrating points (1)- (4) above is shown below. To manage risksTo related compliance, to information security, the environment, disasters, product safety, insider trading and export management, the Corporate Ethics Committee, other special committees, and other head office divisions develop rules and conduct training as part of risk-related preemptive efforts, and respond promptly avert to or minimize losses the to DNP Group. Certain divisions and directors are promptly established and appointed for responding risks to that have newly developed. ● ● ● Accounting Auditors (3) (5) (6) Interests between DNP and its outside director and flexible capital structure policy in response to changes in outside statutory auditors business conditions. DNP has one outside director and three outside statutory auditors. Neither the outside director nor the outside 2) Exemption of directors from liability statutory auditors have personal, financial, business, or other DNP’s Articles of Incorporation specify that directors interests with DNP, and they conduct neutral supervision (including former directors) may, by a resolution of the Board and auditing of DNP’s management from a standpoint of Directors, in accordance with Article 426, Paragraph 1 of independent from DNP’s operations. The role of the outside ’s Companies Act, be exempted from liabilities in director is to supervise inside directors and to contribute to Article 423, Paragraph 1 of Japan’s Companies Act so that improving the transparency and accountability of the board the directors can sufficiently carry out their expected of directors by providing management advice based on their responsibilities. judgment. The role of outside statutory auditors is to enhance the propriety of accounting and operational audits 3) Exemption of auditors from liability and to supervise management. Outside director Tadao DNP’s Articles of Incorporation specify that statutory Tsukada and outside auditor Shin-ichi Ikeda and Makoto auditors (including former statutory auditors) may, by a Matsuura have been designated as independent directors resolution of the Board of Directors, in accordance with because they do not fall under requirements set forth in “a” Article 426, Paragraph 1 of Japan’s Companies Act, be through “e” of Article 211, Paragraph 4, Item 5 of the exempted from liabilities in Article 423, Paragraph 1 of Enforcement Rules for Securities Listing Regulations, and Japan’s Companies Act so that the statutory auditors can they have no conflicts of interest with general shareholders in sufficiently carry out their expected responsibilities. fulfilling their roles. Outside director Tadao Tsukada and outside statutory 4) Interim dividend auditor Shin-ichi Ikeda each own 2,000 shares in DNP. DNP’s Articles of Incorporation specify that the Company DNP and its outside director and outside statutory may, by a resolution of the Board of Directors, pay a auditors have concluded agreements that limit the director monetary dividend stipulated in Article 454, Paragraph 5 of and auditors’ liability for damages within the parameters set Japan’s Companies Act to shareholders of record as of forth in Article 423, Paragraph 1 of Japan’s Companies Act, September 30 of each year and shareholders with actual so long as they execute their duties in good faith and without stock certificates, so that profits can be flexibly passed on to serious negligence. shareholders.

(7) Number of directors (10) Requirements for shareholder approval of special DNP’s Articles of Incorporation specify that the number of resolutions regular members on the Board of Directors shall be no more DNP’s Articles of Incorporation specify that the approval of than 20. special resolutions stipulated in Article 309, Paragraph 2 of Japan’s Companies Act requires the attendance of at least (8) Requirements for shareholder approval of director one third of shareholders with voting rights and at least two nominees thirds of the votes of these shareholders, so that the DNP’s Articles of Incorporation specify that the approval of shareholders’ meetings can run smoothly. director nominees requires the attendance of at least one third of shareholders with voting rights and a majority of the votes of these shareholders, and does not depend on cumulative votes.

(9) Matters to be resolved at the meeting of shareholders that can be resolved by the Board of Directors 1) Share buybacks DNP’s Articles of Incorporation specify that the Company may buy back its shares in the open market, in accordance with Article 165, Paragraph 1 of Japan’s Companies Act, upon approval by the Board of Directors, in accordance with Article 165, Paragraph 2 of Japan’s Companies Act, to allow the Company to use capital more efficiently and implement a

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e t a r o p r o C ▶ DNP Annual Report 2011

(¥ million) Corporate GovernanceCorporate – 25 12 12 12 2 4

Bonus 24

and statutory auditorscovered Numberdirectors of 289 113 109 113 38 – – Total compensationTotal by type Base compensation Base 185 (¥ million) Bonus 82 94 1,356 Company Total compensationTotal by type Base compensation Dai Nippon Printing Ltd. Co., Dai Nippon Printing Ltd. Co., Dai Nippon Printing Ltd. Co., Dai Nippon Printing Ltd. Co., Hokkaido Coca-Cola Bottling Ltd. Co., 82 94 1,541 (¥ million) 126 121 126 353 Total Total (¥ million) compensation Total compensationTotal Name (Director) (Director) (Director) (Director) to bonuses, as the company combines bonuses into annual compensation. to bonuses, as the company combines bonuses into annual directors and auditors as of the end of the fiscal year. directors Directors and auditors 1. Total compensation is shown only for those with compensation of at least 100 million yen. compensation is shown only for those with 1. Total Hokkaido Coca-Cola Bottling Co., Ltd. includes a portion corresponding 2. The portion of base compensation accounted for by fiscal year. the amounts expected to be paid as bonuses for the current 3. Bonuses of Dai Nippon Printing Co., Ltd. are 1. Bonuses are provisions for bonuses for directors and statutory auditors for the fiscal year. for bonuses for directors provisions 1. Bonuses are 2. There were 23 directors (excluding outside directors), two statutory auditors (excluding outside auditors), and four outside (director type) Compensation for statutory auditors is calculated within the limits on statutory auditors‘ The compensation of each of the directors is determined based on a broad range of factors, including Koichi Takanami statutory auditor Outside directors Statutory auditors Yoshitoshi Kitajima Satoshi Saruwatari Masayoshi Yamada Policies regarding the determination of compensation for directors and statutory auditors Company directors and total compensation Total compensationTotal category by paid DNP, by of director/statutory auditor, total compensation type,by and the number of directors and statutory auditors covered compensation, and the compensation of each of the statutory auditors is determined based on discussions with the statutory auditors. the operations they are in charge their of, responsibilities, achievements, and contributions. Compensation for directors is calculated within the limits on directors‘ compensation approved by shareholders at a general meeting, reviewed and discussed the by Management Committee, and deliberated and decided on the by Board of Directors. Category of director/ Compensation Paid to Directors and Statutory Auditors (excluding outside auditors) (excluding outside directors) (3) Notes:

(2) Notes: ■ (1) ■Stockholdings (1) Stocks held for reasons other than for pure investment purposes No. of stocks 433 Total on the balance sheet 110,943 million yen

(2) Holding category, company name, number of shares, amount recorded on the balance sheet, and holding purpose of stocks held for reasons other than for pure investment purposes

(Previous fiscal year) Stocks held for reasons other than pure investment purposes

Amount recorded Number of Company name on balance sheet Holding purpose shares (¥ million) Corporation 1,081,000 5,383 Enhance business relationship Taisho Pharmaceutical Co., Ltd. 2,309,000 3,925 Enhance business relationship Ezaki Glico Co., Ltd. 3,215,751 3,508 Enhance business relationship , Ltd. 1,860,029 3,260 Enhance business relationship , Inc. 15,501,000 2,867 Enhance business relationship Nissin Foods Holdings Co., Ltd. 898,711 2,826 Enhance business relationship Fujifilm Holdings Corporation 685,965 2,208 Enhance business relationship Corporation 4,547,000 2,196 Strengthen business alliance Yamato Holdings Co., Ltd. 1,660,600 2,182 Enhance business relationship Toyo Suisan Kaisha, Ltd. 794,980 1,922 Enhance business relationship Co., Ltd. 265,101 1,850 Enhance business relationship Mitsubishi Chemical Holdings Corporation 3,598,790 1,720 Strengthen business alliance Corporation 4,594,768 1,686 Strengthen business alliance SMK Corporation 3,200,000 1,536 Enhance business relationship Lion Corporation 3,140,665 1,479 Enhance business relationship Co., Ltd. 677,619 1,375 Enhance business relationship Aica Kogyo Co., Ltd. 1,293,743 1,348 Enhance business relationship NSK Ltd. 1,814,000 1,338 Strengthen business alliance NuFlare Technology, Inc. 10,000 1,232 Strengthen business alliance Sharp Corporation 1,011,140 1,182 Enhance business relationship Mitsubishi UFJ Financial Group, Inc. 2,399,760 1,175 Enhance business relationship Industries, Ltd. 300,000 1,147 Enhance business relationship

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e t a r o p r o C ▶ DNP Annual Report 2011 Corporate GovernanceCorporate Holding purpose Holding purpose Strengthen business alliance Enhancebusiness relationship Enhancebusiness relationship Enhancebusiness relationship Enhancebusiness relationship Strengthen business alliance Enhancebusiness relationship Strengthen business alliance Enhancebusiness relationship Enhancebusiness relationship Strengthen business alliance Enhancebusiness relationship Enhancebusiness relationship Strengthen business alliance Enhancebusiness relationship Strengthen business alliance Strengthen business alliance Enhancebusiness relationship Enhancebusiness relationship Enhancebusiness relationship Enhancebusiness relationship Enhancebusiness relationship Enhancebusiness relationship Enhancebusiness relationship Enhancebusiness relationship Strengthen business alliance Hold voting instruction rights for Hold voting instruction rights for Hold voting instruction rights for Hold voting instruction rights for sharesretirement in benefit trust sharesretirement in benefit trust sharesretirement in benefit trust sharesretirement in benefit trust 975 951 943 932 923 2,814 1,502 1,850 1,767 1,435 1,410 1,384 1,355 1,328 1,300 1,276 1,235 1,222 1,176 8,465 5,234 8,291 4,740 4,156 3,503 3,108 2,635 2,572 2,142 1,882

(¥ million) (¥ million) on balance sheet Amount recorded on balance sheet Amount recorded 5,000 40,300 10,000 66,066 913,770 677,619 387,000 282,200 572,957 898,711 685,965 794,980 265,706 shares shares 1,930,500 3,140,665 1,814,000 1,300,000 3,200,000 4,594,768 3,796,388 3,664,000 3,218,348 1,860,029 1,660,600 3,598,790 4,547,000 1,293,743 1,081,000 2,309,000 Number of Number of 25,385,680 NSK Ltd. Ushio Inc. Company name Companyname ROHM Co., Ltd. Lion Corporation SMK Corporation Shiseido Co., Ltd. Inc. Japan Tobacco Terumo Corporation Terumo Terumo Corporation Terumo Toshiba Corporation Toshiba Inc. Ezaki Glico Co., Ltd. Aica Kogyo Co., Ltd. Asahi Breweries, Ltd. Asahi Breweries, TV Asahi Corporation Co., Ltd. NuFlare Technology, Inc. Technology, NuFlare Toyo Suisan Kaisha, Ltd. Toyo Nippon Steel Corporation Sapporo Holdings Limited Sapporo Yamato Holdings Co., Ltd. Yamato Kurita Water Industries Ltd. Kurita Water Mizuho Financial Group, Inc. Mizuho Financial Group, Fujifilm Holdings Corporation Sinfonia Technology Co., Ltd. Sinfonia Technology Corporation Specified stocks and stocks held in trust with voting rights are not added together when selecting stocks with the largest Specified stocks and stocks held in trust with voting rights are in the balance sheet. amounts as recorded Nissin Foods Holdings Co., Ltd. Taisho Pharmaceutical Co., Ltd. Taisho The Dai-ichi Life Insurance Ltd. Co., Stocks held for pure investment purposes None Mitsubishi Chemical Holdings Corporation (3) Note: Stocks held in trust or other legal entity while retaining voting rights or voting instruction rights (Current fiscalyear) Stocks held for reasons other than pure investment purposes 2. Compensation Paid to Accounting Auditor

(1) Compensation paid to accounting auditor

Previous fiscal year Current fiscal year Compensation for Compensation for Compensation for Compensation for audit certification other services audit certification other services (¥ million) (¥ million) (¥ million) (¥ million) Dai Nippon Printing Co., Ltd. 91 – 83 – Consolidated subsidiaries 106 – 130 – Total 197 – 213 –

(2) Other material compensation details None

(3) Compensation paid to accounting auditor for services other than audit work provided to DNP None

(4) Determination of compensation for audit services The Company’s compensation for audit services is determined based on a variety of factors, including the number of expected days for the audit and the size of the Company.

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c d n fi a f

s r o O t DNP Annual Report 2011 i

d u e a A t

m i j y Corporate Officers Jun-ichi Tsuchiya KandaTokuji Wada Takashi Minemura Ryuji Masato Koike Yamaguchi Masato Takeda Yasuo Morihiro Muramoto Kenji Miya Ogawa Yoshio Sugimoto Toshiki r a a t i o t r i K u r t a o a n i t h S s

o , Y rp s r o o t c e C r i

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h s B o t s ▶ a r S o t *Outside director or auditors Standing Statutory Auditors Kenji Noguchi Yoneda Minoru Shin-ichi Ikeda* Statutory Auditors Matsuura*Makoto Nomura* Kuniaki Senior Corporate Officers NishimuraTatsuya Komaki Tatsuo Kitayuguchi Tatsuro Fujio Yamazaki Saito Takashi Shigemi Furuya i d a m i u j a t i A i K

h s o y t i Corporate GovernanceCorporate h r s o Y o t u t i a m t a n a k S a

i T , h c i s Director Tsukada* Tadao Managing Directors Kazumasa Hiroki Morino Tetsuji Kunikazu Akishige NaganoYoshiaki Kitajima Motoharu Shimizu Takao NozakaYoshiki Tsukada Masaki Sakae Hikita Ko r o t c a d e a r m i a i Y h D s

o y f a s a o M

rd a o Senior Managing Directors Hakii Mitsuhiko Tsuchida Osamu Yoshino Teruomi Kuroda Yujiro Masahiko Wada Koichi Takanami Koichi Satoshi Saruwatari Yamada Masayoshi Kitajima Yoshinari Yoshitoshi Kitajima Yoshitoshi Executive Vice Presidents President B 2011) (As of June 29,