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Corporate Governance

Last Updated: 2020.02.14
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Our Approach to Corporate Governance

Fast Retailing aims to expand its business operations according to the principles expressed in its corporate statement: "Changing clothes. Changing conventional wisdom. Change the world" and the Group's aim to become the world's No.1 digital consumer retailing company. At the same time, Fast Retailing seeks to help improve society by promoting sustainability activities in tandem with its business activities.

To achieve these aims, Fast Retailing is working hard to establish an effective corporate governance structure. The company has adopted a corporate auditor governance model. To enhance the Board's independence and strengthen its surveillance ability, the majority of the directors on the Board are external directors. The company has introduced a corporate officer system designed to split management decision-making and business-execution functions, and facilitate fast management decisions and business implementation. In addition, Fast Retailing has established a variety of committees to complement the effective functioning of the Board, including the Human Resources, Sustainability, Disclosure, IT Investment, Code of Conduct, Business Ethics, Risk Management, Nomination and Remuneration Advisory, and Human Rights committees. Each committee encourages effective, open debate and decision-making to fulfill its designated purpose and responsibilities. This system is our way of responding to the needs and demands of our customers, business partners, shareholders and all other stakeholders.
Fast Retailing is committed to strengthening its corporate governance by encouraging all employees to adhere to the Fast Retailing Group Code of Conduct governing employee conduct and the Group's broader corporate culture, and by ensuring the consistent and proper implementation of the Group's internal control systems.

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Outline of Corporate Governance (Year ended November 29, 2019)

Form of OrganizationCorporate auditor governance model
Chairman of the BoardTadashi Yanai
Number of Directors9, including 5 external directors
Number of Auditors6, including 3 statutory auditors
Details of Board
of Directors
Meetings in
Fiscal 2019
Number of Meetings13
Director Attendance*199.1%
Auditor Attendance*2100%
Sample AgendaFiscal year budget, Approval of corporate results, Approval of group officers appointments, UNIQLO USA business, Ariake project etc.
Details of Board
of Auditors
Meetings in
Fiscal 2019
Number of Meetings12
Auditor Attendance*2100%
Sample AgendaAuditing policy, Auditing planning, Discussion with Board of Directors, Human resources-related risk and current issues, GU brand update and current issues, New stores update and current issues, Auditing of UNIQLO Japan and UNIQLO International stores
Main Meetings Requiring Auditor AttendanceBoard of Directors Meetings, Human Resources Committee, Sustainability Committee, Disclosure Committee, IT Investment Committee, Code of Conduct Committee, Business Ethics Committee, Risk Management Committee, Nomination and Remuneration Advisory Committee, Human Rights Committee
Election of Independent Directors5 external directors and 3 statutory auditors elected
Determination of Individual Director RemunerationThe basic portion of internal director remuneration is calculated using the table of fixed compensation for individual internal directors according to his/her grade. Each director's grade is determined by the Board of Directors following discussion in the Nomination and Remuneration Advisory Committee. Performance-related remuneration (both short and long-term) is based on an evaluation of each director's performance and calculated within the upper limit approved at the general shareholders' meeting. Evaluations are conducted by the company president and representative director on behalf of the Board following discussion in the Nomination and Remuneration Advisory Committee.
External director remuneration is determined by the company president and representative director on behalf of the Board and capped within the total amount of external director remuneration approved at the general shareholders' meeting.
Fiscal 2019 compensation to the 10 directors totaled 592 million yen, including 51 million yen to external directors.
Determination of Individual Auditor RemunerationOverall limit determined at the general shareholders meeting.
Individual compensation decided through mutual consultation between auditors. Fiscal 2019 compensation to the six auditors totaled 66 million yen, including 31 million yen to statutory auditors.
Independent AuditorDeloitte Touche Tohmatsu LLC

*1. Average attendance of each director.
*2. Average attendance of each auditor.

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Corporate Governance at Fast Retailing (As of November 29, 2019)

Corporate Governance at Fast Retailing

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Messages from External Directors and Auditors

Grow through Transparent Management and Healthy Frameworks

Understand Market Perceptions of FR Corporate Value

Digital Transformation, Talented Personnel Investment Drive Dynamic Growth

Improve Corporate Value as a Champion of Sustainability

Develop Broader Management Perspective through a Pan-industry Lens

Offering Multifaceted Advice

Offer Candid Opinions on Diverse Issues

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Composition of Committees (As of January 31, 2020)

Composition of Committees

Note: The head of the Sustainability Department chairs the Sustainability and the Business Ethics Committees, the head of the Legal Department chairs the Code of Conduct Committee, and an external expert chairs the Human Rights Committee.
Directors and auditors of each company offer opinions based on their individual areas of expertise.

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Committees and Their Responsibilities

Human Resources Committee

The Human Resources Committee, chaired by an external director, discusses important organizational changes and adjustments to human resource systems across the Group, and offers views and suggestions to the Board. The committee met four times in FY2019.

Sustainability Committee

Discusses and determines Fast Retailing's overall sustainability strategy, the compilation and publication of the annual sustainability report, environmental protection, social responsibility activities, compliance, and diversity. The committee is chaired by the head of the Sustainability Department, and includes influential external experts, auditors, and executive officers among its members. The committee met four times in FY2019.

Disclosure Committee

The Disclosure committee, chaired by the individual in charge of disclosing information to the Tokyo Stock Exchange (TSE), boosts management transparency by "disclosing information that is timely, accurate, fair and easy to understand." The committee is responsible for timely disclosure to the TSE and the Stock Exchange of Hong Kong and voluntary disclosure of information that may materially impact investor and shareholder investment decisions. The committee met 15 times in FY2019.

IT Investment Committee

This committee debates and advises on the IT investments that will best achieve the Group's digital innovation targets, deliberating on the efficacy of individual investments, and checking whether IT investment budgets submitted by external specialist organizations are reasonable and appropriate. The committee is chaired by the company president, and includes influential external experts, external directors, and executive officers as members and advisors. The committee met 10 times in FY2019.

Code of Conduct Committee

The Code of Conduct Committee considers how best to resolve any violations of the Fast Retailing Group Code of Conduct (CoC), and make improvements. It advices on educating executives and employees about the CoC, and on operating the internal reporting system (hotline). The committee is chaired by the head of the Legal and Compliance Department and committee members include a lawyer serving in the capacity of an external auditor. The committee met 11 times in FY2019.

Business Ethics Committee

This committee ensures the Group does not use an advantageous position to exert undue pressure on business counterparts such as partner factories and suppliers. The committee provides advice and counsel to departments based on external field inspections and partner company surveys. The committee is chaired by the head of the Sustainability Department. Statutory auditors (including external statutory auditors), executive officers and others participate as committee members. The committee met 12 times in FY2019.

Risk Management Committee

To identify risks latent in business activities on a regular basis and to strengthen systems for detecting and managing material risks, this committee analyzes and assesses the extent of impact and frequency of risks on business, and discusses countermeasures for business areas high in risk to contain risk before it occurs. The committee is chaired by the Group CFO, and committee members include outside directors and executive officers. The committee met nine times in FY2019.

Nomination and Remuneration Advisory Committee

This discretionary committee discusses important items relating to Fast Retailing corporate governance, such as the requirements and nomination policy regarding candidates for director and auditor positions, the policy for determining director remuneration, requirements relating to the company's chief executive officer, and smooth management succession planning, and advises the Board of Directors based on these discussions. The committee is chaired by the director nominated by the Board, and the majority of committee members are independent external directors or auditors. The committee commenced its activities in August 2019, and consequently met only once in FY2019.

Human Rights Committee

Chaired by an external professional, this committee debates and advises on the execution of human rights due diligence. The committee is responsible for ensuring human rights are upheld according to the 2018 Fast Retailing Group human rights policy. It provides various educational activities and advises business administration sections to ensure all business is conducted appropriately. As part of its counselling and supervisory responsibilities, the committee also investigates human rights violations and implements relief measures. The committee met eight time in FY2019.

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General Meeting of Shareholders

Fast Retailing views the annual general meeting of shareholders as a precious opportunity to talk directly with shareholders. We try to make the most of the meeting to fully explain the proposals on the agenda, the company's current operations, any issues that need to be addressed, and to respond to questions.
Our general meeting of shareholders is held towards the end of November each year at our corporate headquarters in Yamaguchi, Japan.
We send out a convocation notice for the general shareholders' meeting to our shareholders, and we also disclose the content of this notice in advance on the Fast Retailing website to ensure shareholders have time to consider the agenda. An English and Chinese translation of the convocation notice is also published on the website at least three weeks prior to the general shareholders' meeting.
Once concluded, we then disclose the minutes of the general shareholders' meeting on our website for the benefit of any shareholders who were unable to attend.
We pay close attention to any company proposal that was voted against by a considerable number of shareholders, even if the proposal was passed at the shareholders' meeting. The Board of Directors analyzes the cause and extent of any shareholder opposition and considers what action to take.

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Shareholder Engagement

Fast Retailing has established a framework for constructive dialogue with shareholders outside the annual general shareholders meeting that enables shareholders and a broad range of other stakeholders to fully understand and appropriately evaluate our company.

  1. 1)

    The two departments responsible for communicating with shareholders, our Investor Relations and Public Relations departments, hold regular discussions with our CEO and the officer in charge of information disclosure regarding the best means of communication, and any action required to facilitate that communication.

  2. 2)

    Our Disclosure Committee regularly investigates whether there is any significant company-related information that should be disclosed, in terms of both timely and voluntary disclosure. If so, that information is disclosed swiftly to the Tokyo Stock Exchange, the Hong Kong Stock Exchange, and via our corporate website.

  3. 3)

    Fast Retailing employs a range of different media to encourage a deeper understanding among shareholders of our management strategy and business environment, such as publishing news releases on our website, transmitting live footage of our quarterly results announcement, and disclosing written information about our corporate results performance.

  4. 4)

    We strive to ensure our shareholders can gain a clear understanding of our operations by sending them publication such as our business review and a copy of our annual report in Japanese or English. We also disclose all these documents on our website.

  5. 5)

    We proactively share opinions offered by our shareholders by reporting them to senior management meeting, relevant departments, and other feedback forums.

  6. 6)

    As part of our investor relations activities, we determine a strict IR policy that strives to disclose appropriate information accurately, fairly and swiftly, and ensure proper management of insider information. Furthermore, each quarter, we impose a voluntary quiet period for a specific term prior to the announcement of that quarter's business results, during which we do not conduct any IR activities.

We disclose details of our IR policy on our website: https://www.fastretailing.com/eng/ir/policy/.

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The Board of Directors

(1) The Role of the Board of Directors

The Board of Directors (the "Board") adheres to the company's rules governing the Board, and any other appropriate internal regulation, when making decisions in its board meetings on items that require Board approval by law or by the articles of incorporation, and also when making decisions on important management-related items. In order to strengthen its corporate governance system, Fast Retailing operates a delegated authority, in which the representative director and the Board delegates discretion over the execution of business administration to corporate officers. The authority to determine and -implement individual executive matters or matters that do not require Board approval is delegated to the appointed corporate officer in accordance with internal stipulations. Fast Retailing also has separate governance committees which support the decision-making duties of the Board.

(2) The Structure of the Board of Directors

To ensure substantive and lively discussion in Board meetings, as well as appropriate and swift decision-making, Fast Retailing believes it is best to have between three and ten directors on its Board. Our Board consists of a good balance of both internal and external experts with specialist expertise and knowledge in various areas that are vital to Fast Retailing's corporate strategy. We disclose details about Fast Retailing directors and auditors who also serve on the boards of other listed companies, both on our website and in the reference materials accompanying convocation notices for annual general shareholders' meetings.
Our directors and auditors ensure they have the necessary information to fulfill their duties effectively by regularly obtaining information from lawyers and external specialists about the latest laws, rules and regulations. In addition, the relevant officer in charge provides information to directors and auditors on important operational issues, finance matters and organizational management. To promote a better understanding among board members of Fast Retailing's Group operations and management principles, Fast Retailing provides opportunities for directors and auditors to visit stores and factories both inside and outside of Japan and to participate in the semi-annual FR convention.

(3) Meetings of the Board of Directors

In principle, the Board of Directors meets once a month. The annual meeting schedule is determined in advance to ensure that the greatest number of directors and auditors can attend. The agenda and any relevant material are sent to directors and auditors two working days prior to the Board meeting to encourage a lively discussion in the meeting.
Every year, Fast Retailing surveys each Board member and statutory auditor about the effectiveness of the Board. The FY2019 survey about the Board recognized key issues for consideration to be the timing of notification and distribution of Board meeting agendas and related materials, the content and means of conveying materials and verbal explanations, communication between the Board and frontline operations, and the range and depth of debate themes. The survey responses and suggestions were shared and discussed among all Board members and statutory auditors in a Board meeting. As a result of this process, the Board investigated various changes, including ways to improve the issuance date and content of Board meeting agendas and documentation and requiring the executives responsible for managing each individual business segment to be present at Board meetings to ensure an even more lively and in-depth debate of management issues. Members continue to discuss ways to ensure the Board always comprises the diversity and expertise required to guide company operations as they develop and evolve.

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The Board of Auditors

The Board of Auditors discusses reports presented by the accounting auditor around the time of Fast Retailing's quarterly business results. These reports outline the company's auditing processes and how well they are being implemented. The Board of Auditors maintains strong communication links with Fast Retailing's Internal Auditing Department at all times. The Internal Auditing Department submits regular and ad hoc reports to the Board of Auditors on auditing plans and frameworks, and auditing at Group companies.
Fast Retailing's Board of Auditors consists of six members; three external statutory auditors and three internal corporate auditors. This balance of external and internal members helps ensure effective auditing, guaranteeing both independence and strong information gathering capability.

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The Nomination and Remuneration of Directors, Auditors and Executive Officers

At Fast Retailing, the Board of Directors nominates new director candidates following deep discussion in the Nomination and Remuneration Committee, which is made up primarily of external directors and auditors. The Board of Directors also nominates all new auditor candidates following debate in the Nomination and Remuneration Committee and with the agreement of the Board of Auditors. Candidates for the Board of Directors and the Board of Auditors are selected according to whether they have sufficient specialist expertise and experience in finance, accounting, legal affairs or other areas to fulfill their duties. The Board makes decisions regarding the appointment or reappointment of the CEO or other executive officers after considering candidates' appropriateness, knowledge, experience, and specialist skills, and consulting with the Human Resources Committee, which is chaired by an external director. The Board of Directors is made up of a good balance of members with international experience or with specialist knowledge, expertise or aptitude in the areas most required to fulfill our management strategy, without reference to members' age, gender, or origin from inside or outside the company. The Board of Directors proposes candidates for director and auditor positions at the general meeting of shareholders and list its reasons for selecting specific candidates in both the governance report and the convocation notice.

The general meeting of shareholders has approved an overall annual limit for directors' remuneration of 2 billion yen, which includes annual remuneration for external directors up to 60 million yen but does not include the salaries of any employees who also serve as directors). Remuneration for internal directors is made up of a fixed basic compensation and a performance-related element. The level of basic compensation is calculated using the company's internal remuneration tables for specific grades within the company, and is based on an individual's job description, level of responsibility, past achievements, and contribution to the company, etc. Each internal director's grade is decided by the Board of Directors following a discussion in the Nomination and Remuneration Advisory Committee. The performance-related portion of internal director remuneration comprises a short-term and a long-term performance element, which is based on an evaluation of a specific director's achievements over a said period. Performance-related remuneration is ultimately decided by the company president and representative director on behalf of the Board, with reference to specific internal remuneration tables, prior discussion in the Nomination and Remuneration Advisory Committee, and the upper remuneration limit approved at the general meeting of shareholders. External director remuneration is fixed at an annual sum of 10 million yen per director. The company president and representative director decides that fixed sum within the overall limit approved by the shareholders meeting, having earned the confidence of the Board of Directors to decide individual remuneration amounts for directors.

The general meeting of shareholders has also approved an overall annual limit for auditors' remuneration of 100 million yen. The Board of Auditors apportions that total among auditors by mutual consultation.

Executive officers are evaluated based on their duties, responsibilities, performance and contribution, and are remunerated according to internal criteria for the Fast Retailing Group determined by the Board of Directors.

Fast Retailing views the Group's human resource strategy and planning, including CEO succession planning, as an important management issue, and consistently discusses human resource topics in its Board of Directors' meetings.

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Independent External Directors

Five of the nine members of the Fast Retailing Board are external directors, and all the external directors are recognized as independent directors in accordance with the rules of the Tokyo Stock Exchange. The majority of the directors on the Board are external in order to heighten the Board's independence and strengthen its supervisory function.

In addition to the independence criteria set by the Tokyo Stock Exchange, Fast Retailing has set the following independence standards and qualifications for external directors and auditors:
A person shall not qualify as an independent director or auditor of Fast Retailing, if:

(1) he/she is, or has been within the past three years, a Business Partner*1 or an Executive Officer*2 of a Business Partner*2 of the Fast Retailing Group, whose annual business dealings with Fast Retailing Group during the most recent business year constituted 2% or more of the Fast Retailing Group's consolidated revenue;

(2) he/she is, or has been within the past three years, a Business Partner*1 of the Fast Retailing Group or an Executive Officer of a Business Partner*2 of Fast Retailing, whose annual business dealings with the Fast Retailing Group during the most recent business year constituted 2% or more of the Business Partner's consolidated revenue;

(3) he/she is a consultant, an accountant or an attorney who receives, or has received over the past three years, any monies or property equivalent to 10 million yen or more from the Fast Retailing Group, except for remuneration for a director or an auditor; or

(4) he/she is, or has been over the past three years, a partner, an associate or an employee of an accounting auditor of Fast Retailing or its subsidiaries.

*1
"Business Partner" includes law firms, auditing firms, tax accounting firms, consultants and any other organizations.
*2
"Executive Officer" means (i) for corporations, Executive Directors (as defined in the Companies Act of Japan), Executive Officers (shikko-yaku, as defined in the Companies Act of Japan), corporate officers and employees, and (ii) for non-corporate entities (including general incorporated associations (shadan-hojin), general incorporated foundations (zaidan-hojin), and partnerships), directors with executive functions, officers, partners, associates, staff and other employees.

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Shareholder Dividends

Returning a portion of our profits to shareholders is a top priority for Fast Retailing. Our policy is to pay an appropriate and consistent dividend. We aim to offer high dividends, after considering the funds required to expand Group operations, increase profits and maintain financial soundness.

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Strategic Shareholdings

As a general policy, the Fast Retailing Group does not maintain strategic shareholdings, but in certain cases may own the smallest shareholding required.

In regard to strategic shareholdings, every year the Fast Retailing Board of Directors verifies the economic rationale of holding each individual stock, including medium- to long-term business relations, and makes a comprehensive judgement on the significance of any specific holdings. We are not able to disclose the content of our verifications owing to our business relationship with the companies in which we hold a stake.

As for exercising voting rights linked to strategic shareholdings, Fast Retailing would first evaluate a specific proposal by considering whether it is likely to boost shareholder value or not, and would not approve the proposal if it was likely to adversely affect shareholder value.

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FR Policy on Transactions between Related Parties

If Fast Retailing wants to conduct business transactions with directors or major shareholders of related businesses, it would apply to the Board of Directors. The Board, which includes a majority of external directors, would then discuss the business and operational rationale behind the intended transaction, and consider whether the business conditions were reasonable before making a decision.

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