Aim of reform

CSK is undertaking this reform to allow more rapid decision making on strategic matters, and to further improve the execution and overseeing of Group operations. Key initiatives of the reform include the introduction of an executive officer system and a reduction in the number of directors.

Outline of reform

1. Reform of board of directors

1. Under this reform the functions of decision making, overseeing, and execution will be separated, and authorities and responsibilities will be clarified. The board of directors, formed around the chairman of the board, will be responsible for decision making and overseeing of implementation with regard to Group management strategy, while executive officers, led by the president, will be responsible for the execution of operations. 
2. The number of directors as specified by the articles of incorporation will be reduced from 'up to 30' to 'up to 10', with the aim of streamlining and invigorating board activity. 
3. The appointment term for directors will be reduced to one year from the current two years, with the aim of forming a management structure that can more flexibly respond to changes in the operating environment.
4. Directors will be assigned with responsibility for the management and overseeing of core Group campanies. 
5. In the interests of stronger corporate governance, the number of outside directors will be increased from one person to two.

2. Introduction of executive officer system

1. An executive officer system is being introduced in order to strengthen the system of execution of decisions taken by the board.
2. The contract between the Company and executive officers will take the form of a delegated authority for a period of one year.
3. The official executive officer positions will be President, Executive Vice President, Senior Managing Executive Officer, Managing Executive Officer, and Executive Officer.
4. Decisions regarding the appointment and discharge of executive officers will be made by the board of directors.
5. The duties and responsibilities of executive officers will be decided by the board of directors and defined by contract. 
6. Remuneration for executive officers will be based on a separate Executive Officer Remuneration Scheme and will be defined by contract. A retirement benefits system for executive officers will not be introduced. 
7. All other matters relating to the responsibilities and obligations of executive officers will be defined according to the Executive Officer Regulations.

3. Strengthening of audit system

Auditing at both the parent and Group level will be strengthened, with two statutory auditors including one outside auditor.

4. Revision of retirement benefits systems for directors (effective abolishment)

The retirement benefits system for directors will be revised and effectively abolished from the close of this year's general meeting of shareholders (AGM). Specifically, directors and auditors retiring as of this year's AGM will, subject to approval at the AGM, receive payments according to existing internal regulations. Directors subject to reelection and mid-term auditors will, on future retirement and subject to approval at that year's AGM, receive retirement benefits for the period from the day of their initial appointment through to the day of the AGM in 2003. Directors or auditors appointed at this year's AGM or at subsequent shareholder meetings will not be eligible for retirement benefits payments. Also, as noted in 2, VI above, no retirement benefits will be payable to executive officers.

Implementation schedule

The above measures will be implemented on June 26, 2003, except that the introduction of the executive officer system will be effective as of June 1, 2003.