Distinguish the basic company matters decided at the shareholders' meeting from the day-to-day execution of business entrusted to the board of directors and others.
Tell settlement of accounts, in which the company compiles its own figures, apart from an audit, which checks those figures from an independent position, by who carries each out.
Explain how making information public through disclosure connects to the corporate brand, which is trust in the company itself.
A shareholders' meeting (株主総会) is the highest decision-making body among a company's organs, where the shareholders who invested in a stock company gather, exercise their voting rights and decide the company's basic matters.
Shareholders' meeting (shareholders decide by voting)
Elects directors
The board of directors decides business execution and the representative director carries it out
Elects corporate auditors
Audits how directors perform their duties
Shareholders hold voting rights in proportion to the number of shares they own, and the company's will is decided by majority vote. Besides the annual general meeting (定時株主総会) held every year after the accounts are closed, an extraordinary general meeting (臨時株主総会) is called when something must be decided urgently. The shareholders' meeting is where the people who run the company are chosen, and the elected directors then carry out day-to-day management.
AnalogyIt resembles the general meeting of a condominium owners' association. Unit owners gather to elect the board members who will manage the building, and weighty matters such as major repairs are decided at that meeting.
How to rememberIts other name, the general meeting of shareholders, gives the clue: "general" means open to all. Because the meeting is open to every owner of the company, it sits at the top.
Exam points
ExamThe shareholders' meeting (株主総会) ranks highest among the organs of a stock company and resolves matters at the company's foundation, such as amending the articles of incorporation (定款) and electing officers.
Mix-upThe shareholders' meeting decides the company's basic policies and the appointment of officers, while day-to-day execution of business along those policies is handled by the board of directors (取締役会) and the representative director (代表取締役).
Settlement of accounts (決算) is the procedure of closing out the records of transactions for one accounting period and summarizing that period's operating results and the end-of-period financial position in documents.
Record transactions during the period
Close the books at period end
Prepare financial statements
Submit to the shareholders' meeting after audit
The prepared documents are audited and then reported to or approved by the shareholders' meeting.
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The day that marks the end of an accounting period is the closing date (決算日), and most companies treat one year as one period. The balance sheet (貸借対照表) prepared at settlement shows the financial position at period end, while the income statement (損益計算書) shows how much profit was made during the period. The results of settlement form the basis for dividends to shareholders and for the next period's plans.
AnalogyIt is like closing a household account book at year end. You total a full year of income and spending and pin down how much is left and how much you have saved.
How to rememberThink of settlement as settling the numbers. The figures that kept moving during the period are fixed and finalized here.
Exam points
ExamJapan's Companies Act (会社法) calls the documents prepared at settlement (決算), including the balance sheet and income statement, statutory financial statements (計算書類), and these are subject to audit (監査) by the accounting auditor and others.
Mix-upSettlement is the work of a company compiling its own figures, whereas an audit, which checks whether those figures are correct, is carried out by a different party.
Disclosure (ディスクロージャー), also called information disclosure, means a company making corporate information such as its financial condition and business status known to outside stakeholders such as shareholders and investors.
Examples of disclosure
Disclosure required by law (e.g., the annual securities report filed by a listed company)
Voluntary disclosure by the company (e.g., materials for investor briefings)
Investors use the published information to decide whether to buy a company's shares or keep holding them. That is why the information must be accurate and must be released to everyone at the same time, not only to particular people. Some disclosure is required by law, and some is done voluntarily by the company.
AnalogyIt is like a club treasurer handing every member an income-and-expense report at the end of the school year. Showing where the money went satisfies the members who paid dues, and they can trust the treasurer again next year.
How to rememberDisclose is dis (reverse) + close (shut). Undoing the shutting means opening things up, which leads straight to opening up information.
Exam points
ExamA company making its own financial and business condition known to investors and other outsiders is called disclosure (ディスクロージャー).
Mix-upDisclosure means releasing corporate information, whereas going public (株式公開) means making the shares of a not-yet-listed company available for anyone to trade on a stock exchange.
An audit (監査) is an activity in which someone in an independent position from the subject examines whether accounting or operations follow laws and standards and then expresses an opinion on the results.
Examples of audits
Audit by the accounting auditor: checks whether the financial statements are proper
Audit by corporate auditors: checks how directors perform their duties
Internal audit: the in-house audit department checks how work is carried out
System audit: checks the reliability and security of information systems
Because the check is made by someone with no stake in the party being examined, the disclosed information becomes trustworthy. Depending on what is examined, there are, for example, audits of accounting, audits of directors' duties and audits of information systems. When auditors find a problem, they point it out or recommend improvements.
AnalogyIt is like a scorekeeper in a sports match who belongs to neither team. Because the record comes from someone who is not involved, both teams and the spectators can trust the result.
How to rememberTo audit is to look over someone else's work. Whoever does the looking must not be on the side being looked at.
Exam points
ExamThe party that audits (監査) the statutory financial statements (計算書類) prepared at settlement (決算) as an accounting expert is the accounting auditor (会計監査人), a role filled by a certified public accountant or an audit firm.
ExamCorporate auditors (監査役) are elected at the shareholders' meeting (株主総会) and are responsible for auditing how directors perform their duties.
A corporate brand (コーポレートブランド) is the trust and image that customers and society hold toward the company itself rather than toward individual products.
A company with a strong corporate brand can lead people to expect good quality from its name alone, even for a product it is releasing for the first time. Such a reputation builds up little by little through honest disclosure and law-abiding management sustained over many years. Conversely, when a scandal occurs, the reputation of all the company's products tends to fall.
AnalogyIt is like seeing an unfamiliar new product, noticing the maker's name on the package and dropping it into your basket without worry. What reassures you is not the product but the company's name.
How to rememberCorporate means belonging to the company. The first word tells you the brand belongs to the company, not to a product.
Exam points
ExamRaising the corporate brand (コーポレートブランド) leads people to associate good quality in products and services with the company name alone, giving the company an edge over competitors.
Mix-upA product brand (商品ブランド) is the evaluation of a specific product, whereas the corporate brand is the evaluation of the company itself, which stands behind every product and service it offers.
The shareholders' meeting is the highest organ, where shareholders exercise voting rights to decide the company's basic matters, and directors and corporate auditors are also elected there.
Settlement of accounts is the procedure that closes out one accounting period's transactions and summarizes operating results and financial position in documents such as the balance sheet and income statement.
An audit is an activity in which an independent party examines a subject and gives an opinion, and the party that audits the statutory financial statements as an accounting expert is the accounting auditor.
Accurate information released through disclosure, backed by audits built up over time, supports the corporate brand, which is trust in the company itself.