Basic Policies on Corporate Governance, Capital Structure, Company Attributes, and Other Basic Information
Pursuant to our shareholder-oriented basic policies, the freee Group aims to develop appropriate corporate management systems and rationalize and accelerate our corporate management in order to expand revenues and increase our enterprise value as a going concern. At the same time, we recognize our corporate social responsibility and make efforts to bring harmonized benefits to our stakeholders.
Thus, we will promote a monitoring system on business execution and disclose information in a timely manner in order to ensure transparency and objectivity in our business activities for development of appropriate corporate management systems.
Corporate governance system
Schematic of the corporate governance system
The Board of Directors
The Board of Directors is composed of four Directors (including one Outside Director): Mr. Daisuke Sasaki (Chairman of the Board of Directors), Mr. Sumito Togo, Mr. Ryu Yokoji, and Ms. Yumi Hosaka Clark (Outside Director), and three Audit and Supervisory Committee Members (including three independent Outside Directors): Ms. Yoko Naito (full-time), Mr. Masao Hirano (part-time), and Mr. Shinji Asada (part-time).
The Board of Directors deliberates on and resolves legally required and important management matters at the regular meetings of the Board, which are held monthly in principle, and extraordinary meetings of the Board, which are held as necessary, with attendance of the Directors and Audit and Supervisory Committee Members. The Board of Directors makes an important decision on the execution of the business and supervises business execution based on the perspectives of Outside Directors.
The Audit and Supervisory Committee
We have an Audit and Supervisory Committee. The Audit and Supervisory Committee consists of three independent Outside Directors: Ms. Yoko Naito (full-time), Mr. Masao Hirano (part-time), and Mr. Shinji Asada (part-time).
The Audit and Supervisory Committee Members audits daily activities of the Directors including execution of their duties. The Audit and Supervisory Committee Members have provided objective opinions from an independent and disinterested standpoint based on their expertise in financing and accounting as well as the SaaS industry. The Audit and Supervisory Committee Members engage in viable monitoring activities including attendance at the General Meeting of Shareholders and Board of Directors meetings, exercise of their legal rights such as receiving reports from the Directors, employees, and auditing company. In addition, the full-time Audit and Supervisory Committee Member attends important management meetings and conducts visiting audits at the Company's sites.
Evaluation of the Effectiveness of the Board of Directors
Overview of the Evaluation
From June to July 2023, we conducted a questionnaire survey on the effectiveness of the Board of Directors, targeting Directors (including Directors who are Audit & Supervisory Committee Members), with the aim of evaluating whether or not the Board of Directors is effectively fulfilling its roles and then identifying areas for improvement.
For four themes, including the prioritized evaluation theme for this fiscal year (topics for discussion) and the fixed evaluation theme (operation of the Board of Directors), we collected responses from all Directors using a five-point rating scale and freeform comments. We presented the results, along with improvement measures planned for the current fiscal year, at the Board of Directors meeting held in August 2023.
Overview of Evaluation Results
The results of this questionnaire survey indicate that the overall effectiveness is generally satisfactory and the transition to a “company with an Audit & Supervisory Committee” has been effective in facilitating more strategic and comprehensive discussions. The evaluations by Inside and Outside Directors are largely in sync, demonstrating their shared awareness of issues. The Board of Directors has received reports on the identified issues and improvement measures, including their incorporation into the agenda for the current fiscal year's Board of Directors meetings. To further enhance the effectiveness of the Board of Directors, we will continue to strive for ongoing improvements.
Remuneration for Directors and Audit and Supervisory Committee Members
Process of the determination of remuneration
Remuneration for individual Directors (excluding Directors who are Audit and Supervisory Committee Members) are determined by a resolution of the Board of Directors within the limit on the amount of the remuneration resolved at the General Meeting of Shareholders. Remuneration for individual Directors is resolved, after the amount of the respective remuneration is presented at the Board of Directors meeting, and a draft of the proposal to the Board of Directors meeting is discussed by Outside Directors in advance.
Remuneration for individual Directors who are Audit and Supervisory Committee Members is determined by a discussion of Directors who are Audit and Supervisory Committee Members within the limit to the remuneration resolved at the General Meeting of Shareholders.
Basic policy on the determination of remuneration
For remuneration for Directors (excluding Directors who are Audit and Supervisory Committee Members), we make it our basic policy to evaluate our current remuneration system and the level of remuneration under it in comparison with Japanese and overseas companies that are comparable in terms of scale and category and type of business based on a survey by an external agency, to ensure that our remuneration system sufficiently serves as an incentive for striving to continuously enhance our corporate value, and to set remuneration for individual Directors at levels appropriate in view of their respective roles and responsibilities. Specifically, remuneration for Directors comprise basic compensation (cash compensation) and stock compensation (performance-linked stock compensation and restricted share compensation). Remuneration for Outside Directors (excluding Directors who are Audit and Supervisory Committee Members) are basic compensation (cash compensation) only.
Meanwhile, remuneration for Directors who are Audit and Supervisory Committee Members comprise basic compensation (cash compensation) and restricted share compensation only and are determined through a discussion among the Audit and Supervisory Committee Members in consideration of their roles and responsibilities and other circumstances such as an economic situation, within the limit to the remuneration resolved at the General Meeting of Shareholders.
|Number of persons|
|Total amount of remuneration, etc.|
|Total amount of remuneration, etc., by type|
|Performance-linked compensation||Non-monetary compensation|
|Performance-linked stock compensation|
|Restricted stock compensation|
|Directors（Excluding Directors Who Are Audit & Supervisory Committee Members）||4||persons||76,888||thousand yen||55,560||thousand yen||6,960||thousand yen||14,368||thousand yen|
|(who are Outside Directors)||1||persons||6,000||thousand yen||6,000||thousand yen||-||thousand yen||-||thousand yen|
|Directors Who Are Audit & Supervisory Committee Members||3||persons||23,229||thousand yen||16,200||thousand yen||-||thousand yen||7,029||thousand yen|
|(who are Outside Directors)||3||persons||23,229||thousand yen||16,200||thousand yen||-||thousand yen||7,029||thousand yen|
|Total||7||persons||100,118||thousand yen||71,760||thousand yen||6,960||thousand yen||21,398||thousand yen|
*Notes are only available in Japanese.
Accounting audit fee
|Category||Fiscal year ended June 30, 2021||Fiscal year ended June 30, 2022|
|Audit certification service fee (thousand yen)||Non-audit service fee (thousand yen)||Audit certification service fee (thousand yen)||Non-audit service fee (thousand yen)|
Scope of the Matters Delegated to Management Members
The Company has adopted a “company with an Audit & Supervisory Committee” system, which allows a significant delegation of the Board of Directors' executive authority to each Director. Pursuant to laws, regulations, the Articles of Incorporation, Board of Directors rules, and authority rules, the Board of Directors makes decisions on basic management policies, business plans, and significant business operations, supervises execution of duties of each Director, and actively discusses corporate strategies and others. To ensure agile decision-making, as defined in the Board of Directors rules, the Board of Directors determines the scope of executive authority to be delegated to each Director and management members based on the importance of decision-making and associated risks. Each director and management member executes duties within the delegated scope and reports important matters to the Board of Directors.
Under its rules on compliance, the freee Group makes every possible effort to prevent any form of bribery and corruption both at home and abroad and makes no compromises on this commitment.
Scope of application
This policy applies to all officers and employees of the freee Group (including officers, regular employees, and contract employees). The freee Group also expects our business partners and other stakeholders to support this policy, and expects suppliers to support and comply with this policy.
Prevention of corruption
We at the freee Group categorically avoid any act of abusing our or a third party's power or position related to duties, such as bribery, misappropriation, extortion of illegal profit, and illegal bids, any other act taken for personal benefit, or any act that could lead to a suspicion that we engage in any such act.
Prevention of bribery
In terms of prevention of bribery, we at the freee Group do not provide cash, gifts, entertainment, benefits, or other profit to third parties, including public officials and business partners in the private sector, whether directly or indirectly, for the purpose of exerting an inappropriate influence to win and maintain contracts or secure inappropriate advantage in businesses. In addition, we do not receive cash, gifts, entertainment, benefits, or other profit that could affect the freee Group's decision making.
We at the freee Group comply with fundamental rules of Japan and other countries concerning fair dealing, including competition law, and are committed to acting in accordance with laws and proper corporate ethics.
Competition laws, such as the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade, prohibit restricting fair and free dealing. Illegal transactions include the followings:
- Companies discuss and jointly determine selling prices, selling volumes, or production volumes for goods, which each company must independently determine, thereby restricting competition (cartel).
- In a bid for public works or public procurement of goods by the national government or a local government, bidding companies consult with one another in advance and collude to determine the winner of the bidding process, the amount of contract value, and others (bid rigging).
- A company, independently or jointly with other companies, attempts to exclude competitors from the market or obstruct the business of new entrants to monopolize the market by implementing unfair price undercutting, selling price discrimination, and other measures (private monopolization through exclusion).
- A company in the dominant position restricts other companies' business activities by acquiring shares in those companies, appointing their officers, or taking other measures in order to control the market (private monopolization through control).
All officers and employees of the freee Group (all employees including officers, regular employees, and contract employees) comply with these competition laws.
Related Party Transactions
As stipulated in the Board of Directors rules, transactions with conflicts of interest and competitive transactions are matters for resolution by the Board of Directors, and Directors with special interests are not allowed to participate in the deliberation and resolution on such matters.
Regarding transactions among related parties, the General Manager of the Corporate Division reviews the rationality (business necessity) and the appropriateness of the transaction terms, and then gives approval to related written requests for internal approval.
Protection of intellectual property
freee and the freee Group respect and properly protect intellectual property rights duly owned by third parties. We properly protect intellectual property rights that we own.
The freee Group has put a whistle-blowing system in place to collect information related to an act in the Group that violates or could violate laws, regulations, etc., in the early stage and correct such act and thereby advance its compliance management.
The whistle-blowing office has set out the rules on whistle blowing, established the three contact points, the in-house hotline, the Audit and Supervisory Committee hotline, and the external hotline (a law office), all of which employees and officers of the freee Group can use, and has also made it a rule that Audit and Supervisory Committee Members deal with cases where an executive officer or officer is involved in order to secure independence from executives.
If a report is received, a thorough investigation is conducted, and if it is confirmed, corrective actions are taken. Under the system, it is ensured that a whistle blower will not receive unfavorable treatment due to the reporting to the whistle-blowing office.
Mission as social infrastructure
The freee Group provides services that contribute to enhancing efficiency in small businesses. As we serve around 380 thousand customers as of the end of June 2022, we consider the freee Group's services as social infrastructure. We are striving to maintain stable operation of our services so that customers can always use our services with a sense of security.
The freee Group's services handle customers' important information assets. To protect these information assets, we have established a dedicated information security team, and ensure proper management and protection of information assets. Specifically, we have acquired the SOC1 Type 1 report and SOC1 Type 2 report, internationally recognized warranty reports, and the TRUSTe certificate, an international certificate related to protection of personal information, with respect to freee Accounting, and implemented information protection measures in compliance with relevant laws and regulations. In addition, in the authorization process for electronic settlement service agents, we are assessed by the Financial Services Agency for the compliance with security standards based on the FISC Security Guidelines. Moreover, we have established our Basic Policy on Information Security, and have continuously provided training programs and security failure simulation programs for our employees.
We have disclosed the freee Group's information security policy and measures in the Security Whitepaper.
Strengthening our business continuity system
The freee Group has formulated its crisis management manual and made it a policy to prioritize the lives and safety of its employees and their families and strive to continue to deliver value to customers by sustaining the provision of services. We also deliberate on measures for material management risks and other important matters in terms of risk management at the Risk Management Committee and, as needed, report to the Board of Directors for deliberation.