In accordance with the Corporate Philosophy, the Employee Code of Conduct, Be Ethical (Reliability and sincerity, creativity and ingenuity, transparency and integrity) and the Declaration of the Group Code of Conduct, the Company is continuously strengthening corporate governance in response to the changing business environment by always concentrating on persistently pursuing compliance as people in the business world, focusing on shareholders returns, ensuring managerial transparency and making decisions more quickly. In accordance with these basic views mentioned above, the Company adopts a basic policy on corporate governance as stated below. Basic Policy 1. Ensuring shareholders’ rights and equality The Company will take the appropriate action to effectively ensure shareholders’ voting rights at the General Meetings of Shareholders and other rights. 2. Appropriate collaboration with non-shareholding stakeholders In accordance with the Corporate Philosophy, the Employee Code of Conduct and the Declaration of the Group Code of Conduct, the Company will aim to develop itself constantly for a long time and to continuously boost its corporate value as a company that is attractive to customers, business partners, employees, national and other public authorities, local communities and all other stakeholders that the Company regards as important. 3. Appropriate information disclosure and ensuring transparency In addition to proper disclosure in accordance with the statute, the Company will proactively undertake information disclosure as required in the principles of the Corporate Governance Code for the purposes of ensuring the transparency and fairness of the Company’s decision-making and of achieving effective corporate governance. 4. Duties of the Board of Directors and other bodies The Board of Directors has the duties of determining the basic management policy and supervising the management. It also makes decisions on business execution of great quantitative and qualitative significance in addition to prerogatives as specified in laws and ordinances. Meanwhile, in view of the importance of prompt decision-making, the authority to make decisions on ordinary business execution is increasingly delegated to Directors and Executive Officers, and the board will supervise their execution status. As personnel elected by shareholders to undertake business management, Directors have the obligation of loyalty and diligence in fulfilling their duties to contribute to the Company’s continuous growth and to medium- and long-term increases in corporate value. 5. Dialogues with shareholders The Company endeavors to facilitate dialogues with a view to building good relationships with investors, including shareholders, in accordance with its IR Basic Policy. Taking the requests and interests of shareholders into consideration, to the extent reasonable, the senior management, Directors, including Outside Directors, and Audit & Supervisory Board Members endeavor to engage in dialogue (management meetings) with shareholders.
The Company has a board of directors and a Supervisory Board Corporate Auditors. （As of June21, 2022）
- The Board of Directors consists of a total of 8 members(1 female Director, and the ratio of Outside Directors 37.5%), 5 of whom are Internal Directors and 3 of whom are Outside Directors. In accordance with laws and ordinances and the Company’s Articles of Incorporation, regulations for Directors and other internal rules, the board makes decisions on important matters and oversight the Directors’ business execution. - In FY2021, a total of 14meetings of the Board of Directors were held. Major matters discussed included the medium-term business plan, investment projects of high importance, internal control, and corporate governance. Each Director’s attendance at Board of Directors is disclosed in the Notice of the 62th Ordinary General Meeting of Shareholders (including the attached Business Report). - The Directors execute the duties assigned to them in accordance with the roles determined by the Board of Directors and with laws, ordinances, the Articles of Incorporation and internal rules.
- For strengthening the Board of Directors’ decision-making function and oversight function and for increasing efficiency in business execution, the Company adopts the Executive Officer system. Following decisions made by the board, Executive Officers perform their respective duties as delegated by the board and the Representative Director. As of June21, 2022, the Company had a total of 17 Executive Officers, including those additionally serving as Directors.
- For the purposes of strengthening the Board of Directors’ oversight function and increasing the transparency of the decision-making process, the Governance Committee was established as a voluntary consultative body of the Board of Directors. In addition, a Special Committee composed of independent persons including Independent Outside Directors was established on October 29, 2021 as a new voluntary consultative body of the Board of Directors. The functions and composition of each committee are as follows (as of June 21, 2022). - Special Committee (Functions) Deliberation and examination of material transactions or actions involving conflicts of interest with a controlling shareholder or a minority shareholder (Composition) A total of 5 members: 5 Independent Directors/Auditors (3 Outside Directors, 2 Outside Audit & Supervisory Board Members) - In FY2021, the Special Committee met once and confirmed the status of transactions and activities with the controlling shareholder, with the attendance of all the Committee members. - Governance Committee [Functions] Deliberation and examination of the nomination and remuneration of Directors and Executive Officers, material transactions or actions with a related party (excluding a controlling shareholder) and other matters relating to corporate governance. [Composition] A total of 5 members: 3 Independent Directors (3 Outside Directors), and 2 Internal Directors - In FY2021, the Governance Committee met 13 times to deliberate on and examine matters such as the nomination and remuneration of Directors and Executive Officers and the assessment of the effectiveness of the Board of Directors, with the attendance of all the Committee members.
The Company has established the Management Advisory Conference and several committees: the Risk Management Committee, the Internal Control Committee and the Disclosure Committee and the Sustainability Committee. They are aimed at helping the President and the Board of Directors to make appropriate and swift decisions on business execution. As an advisory body for the President, the Management Advisory Conference discusses significant matters related to the Company’s overall management policy and its business administration. Different internal committees carry out careful inspections and deliberations on managerial issues in their respective domains. These activities are helpful to the President and the Board of Directors in terms of decision-making. The principal internal committees and their roles are as follows: - Risk Management Committee: Deliberations on matters in connection with risk management, such as the identification and analysis of risks that could have a material impact on the management, measures against such risks, the prevention of their occurrence and actualization, and the announcement thereof. - Internal Control Committee: Deliberations on matters in connection with the construction and operation of the internal control system. - Disclosure Committee: Comprehensive and prompt collection of important company information in the Group, deliberations on whether to disclose information, accuracy, clarity, sufficiency, fairness, and positivity, and disclosure of necessary information. - Sustainability Committee: Deliberations on and monitoring of sustainability policy, issues, measures, etc. from a long-term perspective and implementation and direction of the sustainability management strategies across the entire Group.
- The Audit & Supervisory Board is composed of 4 Audit & Supervisory Board Members (3 Outside Audit & Supervisory Board Members), 2 of whom are Standing Audit & Supervisory Board Members and the other 2 are Non-Standing Audit & Supervisory Board Members. In accordance with the regulations for the Audit & Supervisory Board Members and the standards for audits by Audit & Supervisory Board Members, it performs audits to examine the appropriateness of the Directors’ business execution of duties. In addition, it provides support to the Audit & Supervisory Board Members in the execution of duties by appointing 2 employees assisting the Audit & Supervisory Board Members (concurrently serving at the Audit Department). (as of June 21, 2022) - In FY2021, a total of 14 meetings of the Audit & Supervisory Board were held, and each Audit & Supervisory Board Member’s attendance at the meetings of the Audit & Supervisory Board is disclosed in the Notice of the 62th Ordinary General Meeting of Shareholders (including the attached Business Report). - The Audit & Supervisory Board passes a resolution of, reports, deliberates and discusses the following matters as the main matters to be considered. Audit policies, audit plans, the allocation of duties, appointment and remuneration of Audit & Supervisory Board Members, annual review of activities of the Audit & Supervisory Board Members, report of audit results, reports of monthly activities of the Standing Audit & Supervisory Board Members, the exchange of opinions with the Representative Director, the evaluation, reappointment, and remuneration of Accounting Auditors, and communication with Accounting Auditors (audit plans, audit reports, and responses to major audit issues to discuss) - The Audit & Supervisory Board passes a resolution of, reports, deliberates and discusses the following matters as the main matters to be considered. Audit policies, audit plans, the allocation of duties, appointment and remuneration of Audit & Supervisory Board Members, annual review of activities of the Audit & Supervisory Board Members, report of audit results, reports of monthly activities of the Standing Audit & Supervisory Board Members, the exchange of opinions with the Representative Director, the evaluation, reappointment, and remuneration of Accounting Auditors, and communication with Accounting Auditors (audit plans, audit reports, and responses to major audit issues to discuss) - The Audit & Supervisory Board implements audits by setting the following key audit items for FY2021 and makes necessary suggestions to the management. (i) Appropriateness of the decision-making process of the Board of Directors and the rationality of its decisions (ii) Initiatives to strength consolidated group management (iii) Status of progress of investment plan (iv) Status and progress of sustainability initiatives (v) Status of promotion of IT-related development (next-generation core systems, information security) and digital transformation (vi) Status of promotion of human resources cultivation and diversification - Individual Audit & Supervisory Board Members conduct activities in accordance with the Audit & Supervisory Board Member auditing standards, the audit policy, and the allocation of duties determined by the Audit & Supervisory Board while also using means such as remote conferencing. The Audit & Supervisory Board Members worked on communication and information gathering by exchanging opinions with the Representative Director about management policies, audit plans and audit results three times a year, exchanging opinions also with all the Directors, the Executive Officers and the General Managers throughout the year, holding regular liaison meetings with the Audit Department and the Corporate Administration Division and cooperating with Outside Directors. The Audit & Supervisory Board Members attend important meetings such as the Board of Directors, the Management Advisory Conference, the Special Committee, the Governance Committee, the Risk Management Committee and the Internal Control Committee and receive reports from Directors and employees on the status of their execution of duties, ask them for explanations if necessary and express opinions. The Audit & Supervisory Board Members also inspect significant decision-making documents, investigate operational and asset conditions at the head office, other major branches and subsidiaries, and monitor and verify the state of the internal control systems to audit the execution of duties of the Directors. In addition, the Audit & Supervisory Board Members meet with the Accounting Auditor several times in each quarter to monitor and verify whether the Accounting Auditor conducts audits appropriately, and receive reports from the Accounting Auditor on the status of its execution of duties and request explanations if necessary. - The Standing Audit & Supervisory Board Members share information with the Non-Standing Audit & Supervisory Board Members through the Audit & Supervisory Board by monitoring and verifying the improvement of the audit environment, the collection of internal information, and the status of construction and operation of the internal control system on a routine basis. The Non-Standing Audit & Supervisory Board Members attend the Board of Directors, regular meetings with the Accounting Auditor and other important meetings after collecting necessary information at remote site inspection and a prior briefing for Outside Directors and Outside Audit & Supervisory Board Members and express necessary opinions, taking advantage of their expert knowledge and background.
The Company considers that the appropriate range of the number of Directors for effective deliberations of the Board of Directors is roughly eight to twelve. It nominates inside and outside human resources with distinguished character and knowledge as Director candidates. Particularly with regard to Outside Directors and Outside Audit & Supervisory Board Members, the Company nominates those with knowledge in specialized areas such as business administration, law and accounting. The Company aspires to have them involved in the supervision of its management and business execution from different perspectives so that it will result in the enhancement of the Company’s corporate value.
With regard to Outside Directors and Outside Audit & Supervisory Board Members, the Company nominates those with knowledge in specialized areas such as business administration, law and accounting. The Company aspires to have them involved in the supervision of its management and business execution from different perspectives so that it will result in the enhancement of the Company’s corporate value. In regard to criteria for determining the independence of Outside Directors, the Company determines such independence after confirming the absence of conditions (1) through (6) below in accordance with the Companies Act and the requirements for independence set forth by the Tokyo Stock Exchange, Inc. and other financial exchanges in Japan. (1)Is currently, or has ever been within the past ten (10) years, an Executive* of the Company or of a subsidiary of the Company (for Outside Audit & Supervisory Board Members, this includes Directors who are not Executives). However, for those who were Directors or Audit & Supervisory Board Members who did not execute business operations, the fact that they were Executives of the Company or its subsidiaries during the 10 years prior to assuming office shall be included. (2)Is currently, or has been within the past ten (10) years, an Executive or Non-executive Director (including Audit & Supervisory Board Member for Outside Audit & Supervisory Board Member) of the parent company of the Company or an Executive of another company owned by the Company’s parent company. (3)Is currently, or has been within the past year, a major shareholder owning a stake of 10% or more, either directly or indirectly, of the Company’s shares, or an Executive of such shareholder. (4)In the most recent financial reporting period, has been a major customer or an Executive of a major customer that accounted for more than 2% of the total transaction volume (sales or purchases) with the Company. (5)Within the past year, has served as a consultant, accounting specialist, legal profession, or tax practitioner receiving annual compensation of 10 million yen or more from the Company in addition to Director’s compensation (if the person receiving such compensation is an organization, such as a corporation or association, a person who belongs to such organization). (6)A person who was a spouse or a relative within the second degree of kinship of a person stated in either of the following (a) or (b) (excluding immaterial persons) (a)Currently or in the past year, a person who is an Executive of the Company or a subsidiary of the Company (including a Director who does not execute business for an Outside Audit & Supervisory Board Member). However, this includes Directors who are not Executives of the Company. (b)Any person who falls under (2) through (5) above. * “Executive” refers to Directors, Executive Officers, and other such employees.
The Company asked all Directors and Audit & Supervisory Board Members to give their opinions based on their own evaluation of the effectiveness of the Board of Directors as a whole in FY2021, including the composition, operation status and support structure of the board. By referring to these opinions as well as evaluation and analysis by third-party evaluation organizations and after deliberation and examination by the Governance Committee, the Board of Directors conducted the analysis and evaluation regarding the effectiveness of the Board of Directors. The evaluation of FY2021, as in the previous fiscal year, indicated that the Company has generally maintained a high level in each evaluation item, and that the operation of the Board of Directors of the Company was appropriate overall, securing its effectiveness. On the other hand, opinions and advice were provided on matters such as further enhancement of discussion on medium- to long-term strategy. The Company will draw on these evaluation results to seek to further improve the monitoring and decision-making functions of the Board of Directors.
The Company has a policy of holding shares of any customer or business partner solely on the condition that holding such shares is deemed to have commercial potential in the future and is strategic. The policy is limited to holdings in which the chances of achieving an investment return are high and the holdings contribute to increasing the Company’s corporate value. With regard to such shares we already hold, the Board of Directors examines the reasonability of the holding of individual shares every year and the continuation or reduction of cross-shareholdings will be properly determined from the perspective of the chances of achieving the expected investment purpose or whether or not they are creating economic added-value that may lead to enhancing the Company’s corporate value. Examination results as of the Board of Directors held on May 19, 2022 are as follows: The Company specifically examined the cross-holding shares the Company holds (all 6 issues), to determine whether or not the purpose of the crossholding is appropriate on an individual issue basis, and whether or not benefits or risks associated with the cross-shareholdings are commensurate with the Company’s capital cost. As a result, while it was confirmed that there were issues the holdings of which are appropriate, it was also confirmed that there were some issues the Company is to consider in reducing the holding after examining the significance of the holding them going forward.
Directors' remuneration is structured differently depending on whether Directors are executive or non-executive. The remuneration for Executive Directors is composed of base remuneration, which is fixed remuneration, and bonuses and stock remuneration, which are performance-linked remuneration. Remuneration for Non-Executive Directors comprises only base remuneration, with no bonuses or stock remuneration provided, from the perspective of their roles and independence. Please see the details below.
