NYSE Standards |
Sony's Corporate Governance Practices |
| Board Independence. A majority of board directors must be independent. |
Sony has adopted the “Company with Committees”
system under the Japanese Companies Act and its
related regulations (collectively the “Companies
Act”). Japanese law does not require Sony to have
a majority of “independent” (in the meaning given by
the NYSE Corporate Governance Standard) directors
on its board; rather, it requires Sony to have a majority
of “outside” directors (the definition of the term
“outside” director is summarized below) on each of
three statutory committees (the Nominating
Committee, the Audit Committee and the
Compensation Committee).
Sony's Charter of the Board of Directors (attached as an
exhibit 1.3 to this report) requires its board to consist of
between 10 to 20 directors.
As of June 19, 2009, 12 of the 15 members of Sony's
Board of Directors qualified as “outside” directors.
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Director Independence. A director is not independent if such director is
(i) a person who the board determines has a material direct or indirect relationship with the company, its parent or a consolidated subsidiary;
(ii) a person who, within the last three years, has been an employee of the company or has an immediate family
member of an executive officer of the company, its
parent or a consolidated subsidiary;
(iii) a person who had received, or whose immediate
family member had received, during any 12 month
period within the last three years, more than
US$120,000 per year in direct compensation from
the company, its parent or a consolidated subsidiary,
other than director and committee fees or deferred
compensation for prior services (provided such
compensation is not contingent in any way on
continued service);
(iv) (A) a person who is, or whose immediate family
member is, a current partner or employee of a firm that
is the company's internal or external auditor; (B) a
person whose immediate family member is a partner of such a firm; (C) a person who has an immediate
family member who is a current employee of such a
firm and who personally participates in the firm's audit,
assurance or tax compliance (but not tax planning)
practice; or (D) a person who was, or has an
immediate family member who was, within the last
three years, a partner or employee of such a firm and
personally worked on the listed company's audit within
that time;
(v) a person who is, or whose immediate family
member is, or has been within the last three years,
employed as an executive officer of another company
where any of the listed company's present executive
officers at the same time serves or served on that
company's compensation committee; or
(vi) an executive officer or employee of a company, or
has an immediate family member of an executive
officer of a company, that makes payments to, or
receives payments from, the listed company, its
parent or a consolidated subsidiary for property or
services in an amount which, in any of the last three
fiscal years, exceeds the greater of US$1 million or
2 percent of such other company's consolidated gross
revenues.
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“Outside” director is defined in the Japanese Company Act as:
A director(i) who is not a director of the company or any
of its subsidiaries engaged in the business operations of
the company or such subsidiary, as the case may be, or a
corporate executive officer or a general manager or
other employee of the company or any of its
subsidiaries, and (ii) who has never been a director
of the company or any of its subsidiaries engaged in the
business operations of the company or such subsidiary,
as the case may be, or a corporate executive officer or a
general manager or other employee of the company or
any of its subsidiaries.
Under Japanese law, a director's status as an “outside”
director is unaffected by the director's compensation,
his or her affiliation with business partners, or the
board's affirmative determination of independence.
On the other hand, under Japanese law, a director
who has had a career as a management director,
corporate executive officer, or other employee of the
company or its subsidiaries is by definition not an
“outside” director.
Sony's Charter of the Board of Directors includes a provision requiring that each “outside” director:
(i) Shall not have received directly from Sony Group,
during any 12 month period within the last three years,
more than an amount equivalent to US$100,000, other
than director and committee fees and pension or other
forms of deferred compensation for prior service
(provided such compensation is not contingent in any
way on continued service);
(ii) Shall not be a director, statutory auditor, corporate
executive officer, general manager or an employee of
any company whose aggregate amount of transactions
with Sony Group, in any of the last three fiscal years,
exceeds the greater of an amount equivalent to
US$1,000,000, or 2 percent of the annual
consolidated sales of such company; and
(iii) Shall not be, or shall not have been, a director
engaged in the business operation, corporate executive
officer, accounting counselor, general manager or an
employee of Sony or its subsidiaries*.
(* This provision of the Charter is based on the
definition of “outside” director under the Japanese
Companies Act.) |
| Executive Sessions. Non-management directors
must meet in regularly scheduled executive sessions
without management. Independent directors should
meet alone in an executive session at least once a year. |
An “outside” director, as defined under Japanese law, is
equivalent to a “non-management director” under the
NYSE rules because an “outside” director does not
engage in the execution of business operations of the
company. Neither Japanese law nor Sony's Charter of
the Board of Directors requires non-management
directors to meet regularly without management and
nothing requires outside directors to meet alone in an
executive session at least once a year. |
| Nominating/Corporate Governance Committee. A
nominating/corporate governance committee of
independent directors is required. The committee
must have a charter that addresses the purpose,
responsibilities (including development of corporate
governance guidelines) and annual performance
evaluation of the committee. |
Sony's Nominating Committee consists of at least five
directors. Under Japanese law, the Committee is
responsible for determining the contents of proposals
regarding the appointment and dismissal of directors to
be submitted for approval to the shareholders' meeting.
Unlike listed U.S. companies under NYSE rules, it is
not responsible for developing governance guidelines
or overseeing the evaluation of the board and
management. Under Japanese law, a majority of its
members must be “outside” directors, as defined under
Japanese law. Sony's Charter of the Board of
Directors requires at least two of the directors on the
Committee to be corporate executive officers. |
| Compensation Committee. A compensation
committee of independent directors is required. The
committee must have a charter that addresses the purpose, responsibilities and annual performance
evaluation of the committee. |
Sony's Compensation Committee consists of at least
three directors. Under Japanese law, a majority of its
members must be “outside” directors, as defined under Japanese law. Sony's Charter of the Board of
Directors recommends that at least one of the
directors on the Committee be a corporate executive
officer. The Charter prohibits the CEO and/or the
COO (or a person at any equivalent position) from
serving on the Compensation Committee. Under
Japanese law, the Committee is responsible for,
among others, determining the compensation of each
director and corporate executive officer. |
| Audit Committee. An audit committee satisfying the
independence and other requirements of Rule 10A-3
under the Exchange Act. The committee must have at
least three members. All members must be
independent. The committee must have a charter
addressing the committee's purpose, an annual
performance evaluation of the committee and the
duties and responsibilities of the committee. |
Sony's Audit Committee consists of at least three
directors. Under Japanese law, a majority of its
members must be “outside” directors, as defined
under Japanese law. In addition, pursuant to
Japanese law, no member of the Committee shall be
a director of the company or any of its subsidiaries who
is engaged in the business operations of the company or
such subsidiary, as the case may be, or a corporate
executive officer of the company or any of its
subsidiaries, or an accounting counselor, general
manager or other employee of any of such subsidiaries.
Sony's Charter of the Board of Directors also requires
each member of the Audit Committee to meet the
independence requirements of the applicable U.S.
securities laws and regulations, and requires at least
one member to meet the audit committee financial
expert requirements. Currently, all the members of
Sony's Audit Committee are also “independent” as
defined in Rule 10A-3 under the Exchange Act, and
two members of the Committee are audit committee
financial experts.
Sony's Charter of the Board of Directors discourages
any Audit Committee member from concurrently being
a member of other Committees. |
| Equity Compensation Plans. Equity compensation plans require shareholder approval, subject to limited exemptions. |
Under Japanese law, if Sony wishes to adopt an equity
compensation plan under which stock acquisition rights
are granted on specially favorable conditions, except
where all of its shareholders are granted rights to
subscribe for such stock acquisition rights or such
stock acquisition rights are gratuitously allocated to
all of its shareholders, each on a pro rata basis, then
Sony must obtain shareholder approval by a “special
resolution” of a general meeting of shareholders, where
the quorum is one-third of the total number of voting
rights of all of its shareholders and the approval by at
least two-thirds of the number of voting rights of all the
shareholders represented at the meeting is required
under Sony's Articles of Incorporation. |
| Corporate Governance Guidelines. Corporate governance guidelines must be adopted and disclosed. |
Sony is required to disclose the status of its corporate
governance under Japanese laws and regulations; however, Sony does not have corporate governance
guidelines that cover all the requirements described
in the NYSE Corporate Governance Standard, as
many of the provisions do not apply to Sony.
Details of the status are posted on the following
website:
http://www.sony.net/SonyInfo/IR/library/control.html |
| Code of Ethics. A code of business conduct and
ethics for directors, officers and employees must be
adopted and disclosed, along with any waivers of the
code for directors or executive officers. |
Although this provision of the NYSE Corporate
Governance Standard does not apply to Sony, Sony
has adopted a code of conduct to be observed by all its
directors, officers and other employees. The code of
conduct is available at
http://www.sony.net/SonyInfo/csr/management/
compliance/code_of_conduct.pdf
The code's content covers principal items described in
the NYSE Corporate Governance Standard.
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