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    Governance

    Corporate Governance

    We strongly believe that responsible global citizenship calls for a corporate culture that embraces a sense of mission to meet the expectations of diverse stakeholders – a culture that is committed to operating under the highest ethical standards in line with the expectations of society as a whole.

    Based on this belief, we advance the operations of the entire Group under The RICOH Way, strengthening our governance and ceaselessly promoting a culture of integrity while working toward sustainable corporate growth.

    The Ricoh Group has also introduced a corporate audit system, in which audit and supervisory board members strengthen the effectiveness of audits and the monitoring of top management, while the Board of Directors, including outside directors, maintains strict oversight over the decision-making process to make sure it is always transparent and fair. Furthermore, by expanding the executive officer system, the segregating of duties between oversight and business execution is clarified, resulting in speedier decision-making.

    The Group has also implemented an integrated risk management system for both business opportunities and business execution, and it follows internal control procedures to achieve the success of our corporate strategies and business targets.

    Governance structure

    Corporate Governance Structure

    Corporate Governance System

    • Board of DirectorsAs of June 22, 2018

    • Committees

    • The Ricoh Group has introduced a corporate audit system.
    • The Board of Directors is responsible for management oversight and important decision making concerning Group management. By appointing highly independent outside directors, the Group ensures greater transparency in its management and decision making.
    • Four of the Board's eight directors are outside directors – part of an effort to incorporate various views and opinions and to eliminate arbitrary decision making in management.
    • The Board of Directors Office is setup to support the Board of Directors, driving robust decision – making and ensuring transparent managemtnt oversight.
    • Audit and Supervisory Board members hold discussions to determine audit and supervising policies and the assignment of duties, and monitor corporate management.
    • Audit and Supervisory Board members attend all important meetings, including but not limited to Board meetings, and exchange information regularly with the representative directors.
    • The Audit and Supervisory Board Members Office, with designated support staff, has been established to ensure that the Audit and Supervisory Board members can work effectively.
    • Under the executive officer system, the authority to carry out business has been assigned to respective functional departments so as to expedite decision-making and clarify the roles of each department.
    Board of Directors and Audit and Supervisory Board
    • Board of Directors
      Maximum number of directors : 15
      Current number of executives : 8 (including 4 outside directors)
      Term : 1 years
    • Audit and Supervisory Board
      Maximum number of Audit and Supervisory Board members : 5
      Current number of executives : 5 (including 3 outside Audit and Supervisory Board members)
      Term : 4 years

    (As of June 22, 2018)

    Nomination Committee and Compensation Committee

    As part of the strengthening of management oversight functions by the Board of Directors, the “Nomination Committee”, which is chaired by a Non-executive Director, and the “Compensation Committee”, which is chaired by an Outside Director, with the majority of members on both committees being Non-Executive Directors and at least half of the members being Outside Directors, were established to ensure transparency and objectivity of nomination, dismissal and compensation of Directors and executive officers, etc. And the Board of Directors Office was set up to support the Board of Directors, driving robust decision-making and ensuring transparent management oversight.

    Group Management Committee

    The Group Management Committee (GMC) consists of executive officers and is a decision-making body empowered by the Board of Directors. The GMC facilitates deliberations and renders decisions on the Group's overall management from the perspective of total optimization.

    Internal Auditing

    The Internal Management and Control Division, which is in charge of internal auditing, objectively reviews and assesses the status of business execution by respective business divisions according to clearly defined rules to ensure legal compliance and adequacy of execution practices. It also provides advice and recommendations for improvement. The results are regularly reported to the GMC's Internal Control Committee.

    New window Auditing

    Ricoh has formulated a set of guidelines called the “Policy and Procedures for Prior Approvals for Audit and Non-audit Services.” In accordance with these guidelines, advance approval must be obtained from the Audit and Supervisory Board members concerning the details of and fees for auditing contracts.

    Results Summary of the Evaluation of Effectiveness of the Board of Directors

    On May 9, 2019, the Company carried out an evaluation the effectiveness of the Board of Directors held from April 2018 to March 2019 and disclose the results as outlined below.

    Ⅰ.
    Evaluation of the Effectiveness of the Board of Directors

    The year ending March 31, 2020 is an important year to achieve the goals of the 19th Mid-Term Management Plan (the “19th MTP”) and to formulate the upcoming 20th Mid-Term Management Plan (the “20th MTP”). The Board of Directors evaluated its effectiveness in order to further enhance its function and governance for the purpose of continuing to provide appropriate oversight and support for the management, and to further increase Ricoh's corporate value through the achievement of the 19th MTP and growth strategy.

    The effectiveness of the business execution was discussed along with that of the Board of Directors upon sharing written evaluations by the Directors and the Audit & Supervisory Board Members, similar to the previous year.

    Following the evaluation of effectiveness in the year ended March 31, 2018, the Board of Directors worked to improve its effectiveness by establishing a basic policy for the year ended March 31, 2019 and has set three improvement items outlined below in order to make steady improvements.

    <Basic policies for the year ended March 31, 2019>

    1)
    Conduct oversight and support to improve earning power and secure execution of our growth strategy.
    2)
    Promote environmental improvement to manage risk appropriately in global business development.

    <Items for Improvement>

    ⅰ) 
    Monitor the progress of our Growth Strategies #0, #1 and #2, and conduct appropriate discussions and support according to circumstances.
    ⅱ) 
    Inspect and improve governance and risk management to support global business activities.
    ⅲ)
    Promote prompt and accurate response to remaining major management issues such as optimization of our North American sales structure and cost reduction, through monitoring and encouragement of execution.
    Ⅱ.
    Results summary of the “evaluation of effectiveness of the Board of Directors” for the year ended March 31, 2019

    The following results summary outlines the contents of the evaluations and discussions by the Directors and the Audit & Supervisory Board Members.

    1.
    Evaluation of the effectiveness of oversight by the Board of Directors

    Evaluations concerning the effectiveness of the Board of Directors, the Nomination Committee, and the Compensation Committee are as follows.

    • The composition of the Board of Directors and its advisory bodies, the Nomination Committee, and the Compensation Committee is appropriate. The discussions are active, centered on Outside Directors with highly effective oversight function.
    • Important themes are well planned with sufficient timeframe and deliberations. The decisions are made from a shareholder perspective, securing effectiveness of management oversight.

    Meanwhile, there were remarks calling for improvement on enhanced and efficient reporting according to the business condition. There were also remarks on the necessity to increase discussions which relates to a medium- to long-term corporate value development.

    2.
    Evaluation of appropriate discussions and support in line with the progress of our growth strategies (Improvement Item i)

    Appreciated for the fact that the following points crucial in developing the growth strategies were identified and steadily determined/implemented through the deliberation of the Board of Directors.

    • Organizational reform and clarification of the person responsible for each business area to implement the growth strategies.
    • Continuous enhancement of governance and headquarter function to support the growth strategies.

    Meanwhile, there were remarks on needs to improve discussions of personnel strategies, technological strategies, and sustainable enhancements of corporate value based on a medium- to long-term stand point.

    3.
    Evaluations on the inspection and improvement of governance and risk management (Improvement Item ii)

    Appreciated for reviewing the appointment and dismissal process of the CEO and officers, and enforcing the governance system from a shareholder perspective by introducing the stock compensation system.

    There were also good feedback on risk management, being inspected and streamlined, and also on its prompt decision making and execution of system development, such as the establishment of its expert committee.

    Meanwhile, there were remarks on the importance of continuing defense measures such as the inspection and improvement of the governance and risk management systems as well as offense measures such as discussion to maximize corporate value for the Ricoh Group.

    4.
    Evaluation of monitoring and encouragement of business execution for important management issues (Improvement Item iii)

    Appreciated for the optimization and performance recovery of the North American sales structure as a result of appropriate monitoring based on detailed reporting from frontline managers, as well as the prompt decisions and implementation of important structural reform themes such as business reorganization of the Ricoh Group following the previous year.

    Meanwhile, there were remarks that the Board of Directors needs to continue monitoring cost reductions as an effort that can immediately address changes in business structure and earnings structure.

    5.
    Evaluation of execution

    Following evaluations were made concerning the response of executives confirmed at the Board of Directors

    • Management is shifting to a more Cost of Capital-oriented regime, and other ongoing measures such as setting the IR Day and strengthening SR to improve shareholder/investor relations.
    • Under our CEO's leadership, the oversight and executive functions continue to discuss important management issues even outside of the Board of Directors, making efforts to form prompt and appropriate consensus.
    • The system and corporate structure are transforming to enable key indicators conducive to decision-making and quantitative administration to be promptly shared with the management team.

    Meanwhile, there were remarks calling for ongoing improvement of the management system covering administrative accounting, investment and risks, which accommodates the changes in business and profit structures as the growth strategies unfold.

    Ⅲ.
    Initiatives for improving the effectiveness of the Board of Directors in the year ending March 31, 2020

    In response to the above evaluation, the Board of Directors works to improve its effectiveness by establishing a basic policy for the year ending March 31, 2020, and has set three improvement items outlined below in order to enhance the corporate value through execution of the 19th MTP and formulation of the 20th MTP.

    <Basic policies for the year ending March 31, 2020>

    1)
    Monitor and support the achievement of our mid-term goals as the final year of the 19th MTP.
    2)
    Formulate the 20th MTP with emphasis on discussion with a medium- to long-term perspective to enhance corporate value.

    <Improvement items for the year ending March 31, 2020>

    ⅰ) 
    Monitor the progress of the priority measures in the 19th MTP, the achievement level of financial and non-financial targets as well as key management indicators, and conduct appropriate discussions and support according to circumstances.
    ⅱ) 
    Continue discussions from a medium- to long-term perspective on important themes, such as growth, human resources and technological strategies, and reflect in the 20th MTP.
    ⅲ)
    Monitor the continuous improvement of the management system targeted towards the 20th MTP, creating an environment for the full-scale development of growth strategies.

    Training for Directors and Audit & Supervisory Board Members

    Training for the Company's Directors and Audit & Supervisory Board Members has the objective of enabling constructive discussion that contributes to improving corporate value and shareholder value via the oversight functions of the Board of Directors. It is conducted by acquiring and updating knowledge specific to the duties and environment for each of the Company's internal and external Directors and Audit & Supervisory Board Members. The goal of the training is to enable them to fulfill their roles and responsibilities fit for an executive that undertakes a position in the Company's important governing bodies.

    • Upon appointment of Internal Directors and Audit & Supervisory Board Members, training is provided to allow these persons to confirm their expected roles and duties, as well as acquire knowledge necessary to carry out duties, including knowledge regarding corporate governance, business compliance, risk management, insider trading, and Japan-Insider Registration & Identification Support System (J-IRISS). Even after appointment, training opportunities are provided via internal/external training and e-learning initiatives suited to each Director and Audit & Supervisory Board Member so they can update their knowledge.
    • Outside Directors and Audit & Supervisory Board Members are appointed from among those who have adequate insight and experience necessary to carry out duties. Upon appointment, to enable them to deepen their understanding of the Company's current status, they are briefed on topics such as business strategy, financial conditions, and organizational structure as well as make site visits to key locations as required. Even after appointment, by providing and sharing information on the Company's current status and management environment, etc., efforts are made to secure and improve the oversight functions of the Board of Directors and the effectiveness of audits by Audit & Supervisory Board Members.

    To confirm that the above measures are being conducted appropriately, their results are reported to the Board of Directors.

    Executive compensation

    In its pursuit of increased shareholder value, the Ricoh Group employs executive compensation as an effective incentive to achieve a sustainable increase in corporate earnings over the medium and long term.

    Basic compensation consists of compensation pertaining to management oversight and compensation reflecting the importance of individual roles and management responsibilities. In addition, compensation based on positions is additionally provided for the Representative Director, Chairman of the Board, Chairperson of the Nomination Committee and the Compensation Committee, etc.

    The amount of bonuses paid to Directors is determined based on the achievement of key performance indicators, which reflect the improvement in shareholder value and enhancement of the Company's competitiveness. Operating income was decided as the key performance indicator serving as the standard for bonuses at the Compensation Committee held on December 12, 2017. By setting operating income as the key performance indicator, which is strongly correlated with market capitalization, it further clarifies responsibilities of Directors for the business results of the entire Ricoh Group and the improvement of shareholder value. In addition, regardless of the results calculated through this framework, whether or not a bonus will be paid reflecting the status of governance and nonfinancial factors will be discussed and decided by the Compensation Committee.

    (Reference)
    The amount of bonuses is calculated by the following formula, which has been judged as appropriate and determined through deliberation by the Compensation Committee. Directors' bonuses = Base compensation for calculation (Basic monthly compensation) × Profit factor (Number of months determined in accordance with consolidated operating income*)
    *
    Number of months = consolidated operating income (millions of yen) ÷ ¥20,000

    Compensation of Audit & Supervisory Board Members is appropriately reflected by expected role of the Auditors only.

    Executive compensation for fiscal 2018
    Category Number of persons Total amount of compensation, etc. (Millions of Yen) Total amount of each type (Millions of Yen)
    Basic salary Bonus
    Directors (excluding Outside Directors) 6 341 341
    Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members) 3 57 57
    Outside Directors and Audit & Supervisory Board Members 8 86 86
    Outside Directors 4 57 57
    Outside Audit & Supervisory Board Members 4 29 29
    Total 17 485 485

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    [Compensation for newwindow accounting auditors]

    Ricoh verifies the appropriateness of time spent on auditing together with audit firms and certified public accountants (CPAs), taking into consideration the scale and characteristics of our businesses to determine final compensation for auditing services.

    Compensation for auditing by newwindow accounting auditors for fiscal 2018
    Category Fiscal year ended March 31, 2018
    Fees for audit services (Millions of Yen) Fees for non-audit services (Millions of Yen)
    Ricoh Company Ltd. 218
    Consolidated subsidiaries 135 4
    Total 354 4

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    other fees
    Fees for audit services and non-audit services paid the Company and its subsidiary to KPMG, which belongs to the same network as the Company's accounting auditor, were ¥1,324 milliion and ¥224 million respectively.
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