Social Responsibility

Management Mechanisms

We have adopted a company-with-committees system in order to increase management speed and transparency.

Approach to Corporate Governance

The Konica Minolta Group is committed to treating corporate governance as a critical management issue.

Since its establishment, the Group has taken a progressive approach to oversight by its Board of Directors. In order to ensure the proper supervisory function of the Board of Directors, we clearly defined the respective duties of the executive officers performing company management and the directors overseeing the management activities. In 2002, Konica Minolta also began appointing outside directors to its board. By emphasizing the independence of external directors from the outset, we have focused on the transparency, soundness, and efficiency of our management activities. This has not only resulted in faster management execution, but also more objective supervision of executive action.

At the time of the management integration in 2003, the Group adopted a holding company framework based on a company-with-committees system. This enabled the creation of an organization capable of agile decision making on matters such as restructuring and measures to meet rapid changes in the market and business environment. At the same time, Konica Minolta has promoted initiatives for improving shareholder value and corporate value by strengthening its business and responding to the diverse expectations of society, in order to increase the value of the company's social presence, which has become a matter of vital concern today.

In the future, the entire Konica Minolta Group will continue to strengthen group governance in order to ensure the proper functioning of its holding company system, while promoting corporate governance to increase its presence as a member of society and to satisfy stakeholders and especially shareholders. These are all important elements of Konica Minolta's management policy.

Company-with-Committees System

We ensure the proper oversight function of the Board of Directors.

In addition to the holding company system, we have adopted a company-with-committees system in order to increase the speed and transparency of management for the entire Group. This has enabled the management supervisory function of the Board of Directors to be separated from the business-execution function of the executive officers.

The executive officers are entrusted with the task of business execution by the Board of Directors. The content of this business execution is subject to the oversight of the Board of Directors and to audits by the Auditing Committee, thus enhancing the transparency of management and compliance.

Holding Company System for Efficient Group Management

This structure is designed to accelerate decision making and increase competitiveness.

The Konica Minolta Group has adopted a holding company system, comprised of a holding company and individual business and common function companies. By establishing each business area as an individual company, we aimed to accelerate the speed of decision making and ultimately enhance the Group's competitive edge. Some of the executive officers also serve as the presidents of individual business and common function companies. They have the authority and responsibilities necessary for directly executing the management activities in their respective business areas, which enables rapid, responsive business execution and management. Moreover, the common function companies enable the centralization of basic research and administrative functions within the Group, to help achieve greater efficiency and stronger functionality. Based on this system, the holding company is able to focus on Group management and governance with greater leadership ability.

Dynamic Board of Directors

We recognize the importance of providing information to outside directors.

During fiscal 2007, the Board of Directors met nearly once a month. Overall attendance by outside directors at meetings of the Board of Directors and of its three committees exceeded 90%. Outside directors receive advance briefings on agenda items from secretariat staff, along with explanations of important management decisions from relevant executive officers. These preparations enabled lively discussions at meetings of the Board of Directors, as well as sufficient understanding of agenda items, facilitating smooth administration.

We are constantly striving to improve corporate governance.

Every year, each board member provides an evaluation of the Board of Directors, which serves as a general review of the composition and administration of the board, as well as other matters. This evaluation is summarized and discussed by the outside directors, chairman, and president in an effort to enhance corporate governance.

Nomination of Directors

The Nomination Committee decides the candidates for election to the Board of Directors.

The Nomination Committee determines the Board of Directors candidates to be put before the General Meeting of Shareholders, according to the following selection criteria.

1. Good physical and mental health
2. A person that is well liked, dignified, and ethical
3. Completely law-abiding
4. In addition to having objective decision-making abilities for management, the person must have good foresight and insight
5. Someone with no possible conflict of interest or outside business relations that may affect management decisions in the company's main business areas, and who has organizational management experience in the business, academic, or governmental sectors. Otherwise, someone with specialized knowledge in technology, accounting, law or other fields (the independence of outside auditors is outlined separately)
6. For outside directors, a candidate with a history of performance and insight in that person's field, someone with sufficient time to fulfill the duties of a director, and who has the ability to execute required duties as a member of the three relevant committees
7. In addition, the candidate must have the abilities necessary for a director running and building a public corporation that is transparent, sound and efficient

For the selection of internal director candidates, the Nomination Committee can obtain the opinion of a president that is thoroughly familiar with the careers and track records of the candidates.

In selecting outside directors, we place the highest priority on their independence from the company, as well as their experience in corporate management.

To enhance the supervisory functions of the Board of Directors, in selecting outside directors, we place the highest priority on their independence, as well as their experience in corporate management. We maintain written criteria* on the independence of outside directors, stipulating, among others, that eligible candidates shall have no significant business relations with the Group or personal relationships with its executive officers. At the same time, we regard it preferable that outside directors have a broad range of experience in corporate management, since their roles include decision-making regarding management issues, as well as supervision of corporate management. To strictly maintain the independence of outside directors, we generally restrict their reappointment, thus limiting their term of office to four years as a general rule.

In June 2008, Mr. Toru Tsuji was appointed as a new outside director.

*

Criteria on the Independence of Outside Directors

The process for determination of executive officer candidates is thoroughly overseen.

The president makes the initial proposals for the appointment of executive officers by the Board of Directors. The Nomination Committee receives information on the executive officer candidates ahead of the Board of Directors, and supervises the validity of the process by which the president determines the executive officer candidates through a candidate evaluation meeting, based on executive officer selection standards.

The chairman of the Nomination Committee also receives information each year from the president relating to successor candidates, which is discussed by the Nomination Committee and reported to the Board of Directors as necessary.

Compensation for Directors/Executive Officers

Konica Minolta has a role-based compensation system, and the executive officers receive incentives for improving business results.

In June 2005, we abolished the conventional retirement benefit system for directors/executive officers, and revised the policies on their compensation (see table below) to make it a better fit for their roles in the company.

Since we regard it as important to indicate the company's policy on compensation for directors and executive officers, together with the ratio of incentive compensation, we have stipulated in the compensation policies that the executive officers' compensation shall comprise base salary, a performance-based cash bonus as short-term incentive, and stock compensation as long-term incentive, with the ratio of the three basically being 60:20:20.

In the Business Report for the year ended March 2008, we disclosed the amount of compensation to directors and executive officers as shown in the table below.

Note:

Figures for "Executive Officers" in the table above include base salary and performance-based cash bonus given to 14 executive officers who are primarily responsible for the company's subsidiaries which are partially paid by the subsidiaries concerned.

We have established guidelines on ownership of Konica Minolta shares by officers.

Konica Minolta has established guidelines on ownership of Konica Minolta shares by directors and executive officers, along with stock options as part of the compensation system for directors (excluding outside directors) and executive officers. This is in order to provide incentives for the boosting of earnings results and the company's share price, while further strengthening the awareness of directors and executive officers of the need to improve corporate value and shareholder value, from the perspective of shareholders.

Electronic Voting for the General Shareholders' Meeting

Konica Minolta has optimized the voting process for the General Meeting of Shareholders by adopting an electronic voting system.

Starting with the General Meeting of Shareholders in June 2007, shareholders have been given the means to exercise their voting rights via the Internet. Konica Minolta joined an electronic voting system that is being used by 2,400 financial institutions worldwide (mainly in the U.S. and U.K.), and thus enabled its institutional investors outside Japan to vote online. In the past, the institutional investors outside Japan were notified of the agenda for the General Meeting of Shareholders through related institutions including financial agencies, which did not give the investors much time to review the details of the agenda. With the introduction of the electronic voting system, overseas shareholders are able to review the information on the same day that the invitations to the General Meeting of Shareholders are sent out. As a result, the voting environment has been optimized, and the voting rate for institutional investors outside Japan has increased from the previous year.

Group Auditing System

In fiscal 2007, continuing from the previous fiscal year, points for maintaining and improving the soundness and efficiency of the entire Group have been addressed.

Konica Minolta Holdings, Inc., which has adopted the company-with-committees system, has established an Auditing Committee, whereas its business companies, common function companies, and other subsidiaries have their respective auditors. In addition, Konica Minolta Holdings has a Corporate Audit Division, which conducts an internal audit of the entire Group.

The Auditing Committee is comprised of five directors (who do not hold positions as executive officers), three of whom are outside directors. The chairperson of the Auditing Committee is selected from among the outside directors. To ensure effective operation of the committee, it has established its own office (Auditing Committee Office) with two staff members who are independent from any sections committed to actual business operations.

The Auditing Committee members evaluate the legality and validity of the management decisions made by directors/executive officers, review internal control systems, evaluate and select the accounting auditor. In principle, a committee meeting is held before the meeting of the Board of Directors, so that the committee members can present their opinions to the meeting of the Board of Directors, if deemed appropriate. During fiscal year 2007 a total of 12 meetings were held by the Auditing Committee.

To reinforce the Group-wide audit system, the members of the Auditing Committee and the Corporate Audit Division as well as auditors of individual Group companies strengthened their partnerships by holding Audit Council meetings every three months, where participants shared related information and coordinated audit activities across the Group. In addition, the same parties held regular meetings with the accounting auditors in order to review auditing systems and policies, and to examine whether or not the existing system sufficiently enables accounting auditors to fulfill their tasks.

The Corporate Audit Division, which directly reports to the CEO, is responsible for the Group-wide internal audit and performs internal audits of business and common function companies, as well as major overseas affiliated companies. Using the risk approach, the division evaluates these companies in terms of the reliability of their financial statements, efficiency, and validity of their businesses and the level of their legal compliance. The division also conducts follow-up audits, in which it examines improvement measures taken by respective companies in response to suggestions provided by the internal auditors.

In 2007, Konica Minolta Business Technologies, Inc., the largest business company in the Group, established an internal audit office. Through cooperation with the Corporate Audit Division at Konica Minolta Holdings, the Group's internal audit functions have been improved.