AUTOBACS SEVEN has endeavored continuously to improve governance.
The Company focuses particularly on improving management transparency and objectivity and reinforcing its oversight function through its Corporate Governance Committee and its appointment of independent outside officers. We asked Tatsuya Tamura, an outside director and chairman of the Corporate Governance Committee, for his assessment of the Company's governance as an outside officer.

When you became a director of the Company, what did you think at the time about its corporate governance?

I was appointed right after AUTOBACS SEVEN submitted improvement status reports to the Tokyo Stock Exchange and the Osaka Securities Exchange for inappropriate disclosures relating to the issuance of convertible bonds. The Company regretted its actions and was accordingly trying to improve and reinforce governance.

The Company believed that it ought to deploy a framework to enable the Board of Directors to monitor management and check its actions if necessary. In particular, the Company thought it important for outside directors to play a role on the board of directors to ensure that deliberations included an awareness of the shareholder's perspective.

During your first year on the Board of Directors,the Company doubled the number of outside directors to four and established the Corporate Governance Committee as an advisory body. What was the thinking behind this action?

We could have opted to change the format to a company with committees, but instead of pushing in that direction, we concluded that we should adopt a format that better matched the Company's individual needs.

It was especially hard for the Board of Directors to make fair judgments on director appointments and remunerations given that most of the directors were internal. So, we decided to establish the Corporate Governance Committee, comprising mainly outside directors, to deliberate particularly on these two issues.

While it was acceptable to have only outside directors on the committee, we invited the representative director to become a member because we had to communicate with him in deliberations.

The committee is a voluntary advisory entity without decisionmaking authority. Still, we were confident that AUTOBACS SEVEN's Board of Directors would accept the verdicts and recommendations of the Corporate Governance Committee, and the representative director concurred with us. So, we positioned the committee as an advisory entity for the Board of Directors and started this new mechanism to match the needs of AUTOBACS SEVEN.

Is the Corporate Governance Committee performing well?

It ultimately became a hybrid mechanism in that it combines the frameworks of a Company with a Board of Corporate Auditors and a Company with Committees. I rate the mechanism highly as it is performing most effectively.

The committee deliberates mainly on the issues of remuneration and appointments, which was its initial purpose. We also discuss wide-ranging corporate governance issues, such as how best to run the Board of Directors and identifying areas that need improvement and reinforcement to manage the Company more from a shareholder's perspective.

What's your assessment of the remuneration system?

We review remuneration issues every year, such as how to link remuneration with business performance and what approach to take regarding the ratio between basic fixed remuneration and performance-based remuneration.

The system ensures objectivity by having the representative director and chief executive officer propose remuneration arrangements to the Board of Directors only after they have been discussed by the Corporate Governance Committee, rather than simply laying them on the table directly. I think the system has proven to be effective.

In terms of the direction we take in reviewing the remuneration system in future, we still need to examine what indicators we would link with remuneration. We also have to look at how to couple remuneration with short- and long-term business performance and results.

Another item for discussion is how the remunerations of top management and other officers should differ. A joint-stock company imposes huge responsibilities and pressures on top management, and I think we should reflect that factor sufficiently in remuneration.

The Company makes independence a key priority in choosing outside directors. What do you think about the selection process?

AUTOBACS SEVEN uses a third-party institution for selecting candidates instead of choosing from acquaintances of management or investors or from among business partners. I think this system is extremely fair.

Officers select candidates after assessing the backgrounds and expertise of those people. The Corporate Governance Committee reviews the selections. Still, I think that we can even improve this setup by involving the committee from the start of the candidate selection process.

As an outside director, what do you think of the Company's Board of Directors?

I have been an outside director at several companies, so I can say from experience that proceedings in AUTOBACS SEVEN's Board of Directors meetings are easy for outside directors to participate in.

What role do you think you should fulfill as an outside director?

I think my role is to monitor management from a shareholder's perspective.

Based on personal experience and knowledge, an outside director can view a company from a different stance than internal specialists and think from the standpoint of a shareholder.

For example, when an investment proposal is brought to the attention of the Board of Directors, it is important to avoid making decisions based solely on investment amounts. You have to also look at the proposal in the context of whether it is for an existing or new business. The perspectives of outside directors are especially valuable in reviewing such differences.

What corporate governance challenges do you think that the Company will face?

AUTOBACS SEVEN is extremely sincere in its corporate governance endeavors. On top of that, the representative director fully understands and faithfully adheres to his responsibilities and roles.

I think that the challenges down the track will be how we cultivate the next generation of management and work out rules for after inside directors retire.

As an outside director, I believe that we must fully discuss these issues.