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 an Audit & Supervisory Board. （As of June 19, 2024）
- The Board of Directors consists of a total of 7 members (1 female Director, and the ratio of Outside Directors 42.9%), 4 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 FY2023, a total of 14 meetings of the Board of Directors were held. Specifically, the discussions were about 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 64th 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. The Company had a total of 12 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 standing committee 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 standing committee as a new voluntary consultative body of the Board of Directors. The functions and composition of each committee are as follows. - 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 6 members: 6 Independent Directors/Auditors (3 Outside Directors, 3 Outside Audit & Supervisory Board Members) - In FY2023, the Special Committee met 7 times 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 4 members: 3 Independent Directors (3 Outside Directors), and 1 Internal Director - In FY2023, the Governance Committee met 12 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/CEO and the Board of Directors to make appropriate and swift decisions on business execution. As an advisory body for the President/CEO, 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/CEO and the Board of Directors in terms of decision-making. The principal internal committees and their roles are as follows: - Risk Management Committee: Deliberation and consideration 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 information within the Group and deliberation of whether to disclose information and of the accuracy, clarity, sufficiency, fairness and positivity of the 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 consists four members, including one standing auditor and three part-time auditors (including three outside auditors), In addition, two assistants to Audit & Supervisory Board Members (who also serve in the Audit Department) have been assigned to support the execution of duties by Audit & Supervisory Board Members - In FY2023, the Audit & Supervisory Board met 13 times to hold the following discussions and make the following resolutions and reports, with the attendance of all the Audit & Supervisory Board Members. [Twelve resolutions] Audit & Supervisory Board Member audit report, Audit & Supervisory Board Member audit plan, reappointment of Accounting Auditor, consent to remuneration for accounting auditor, Election of Audit & Supervisory Board Member Candidates, etc. [Three discussions] Remuneration for Audit & Supervisory Board Members, continuation of full-time Audit & Supervisory Board Members concurrently serving as officers of other companies, and concurrent positions of Outside Audit & Supervisory Board Members as officers of other companies [Twenty reports] Monthly reports by full-time Audit & Supervisory Board Members, audit results by Accounting Auditors, audit plans by Accounting Auditors, etc. - In addition to the above, the Audit & Supervisory Board also shares and discusses compliance issues and other issues identified through audit activities. - With regard to audit plans, we have established priority audit items for each year. In FY2023, the Audit & Supervisory Board engaged in auditing activities with the following items as priority audit items, and exchanged opinions with executive management as necessary. ① Appropriateness of the decision-making process of the Board of Directors and the rationality of its decisions, etc. (Audit perspective) - Sufficient information disclosure and discussions based on appropriate risk analysis and assessments - Discussion of the lawfulness and economic rationality of decisions that have been made and medium- and long-term management issues ② State of execution of duties by Directors (Audit perspective) - Legality and appropriateness of the execution of duties through direct dialogues - Appropriateness of decision-making procedures - Proactive and conservative governance of subsidiaries and equivalents and offering of information to outside officers ③ Establishment and operation of compliance systems (Audit Perspective) - Effectiveness and state of implementation of response action and recurrence prevention measures in the event of an incident - Involvement of the division compliance managers and division structures - 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. ① Interviews with Directors and Executive Officers: Audit & Supervisory Board Members meet with Representative Director, President and CEO six times a year, with Representative Director, Chairman three times a year and with other Directors and Executive Officers every six months to confirm the state of execution of duties and provide feedback on audit findings. ② Interviews with General Manager of business divisions: Audit & Supervisory Board Members conduct interviews with the General Managers of business division planning & administration departments and administration departments every six months. ③ Attendance at important meetings: In addition to the Audit & Supervisory Board, Audit & Supervisory Board Members attend meetings of the Board of Directors, the Management Advisory Conference, and Advisory Board (Special Committee, Governance Committee, Risk Management Committee, Internal Control Committee, Disclosure Committee, and Sustainability Committee), and other major internal meetings to express necessary opinions. ④ Monitoring of business matters: Full-time Audit & Supervisory Board Members attend project review meetings to review important matters submitted to the Board of Directors and Management Advisory Conference, and view all application documents for matters that Directors and Executive Officers can approve in accordance with job authority regulations. ⑤ On-site inspections: Full-time Audit & Supervisory Board Members actively conduct on-site inspections of major business sites and Group companies to understand local conditions. When selecting locations for on-site inspections, decisions are made based on risks, such as the state of compliance and small-scale and remote business sites. ⑥ Three-way audits: Full-time Audit & Supervisory Board Members receive monthly reports from the Internal Audit Section. They also attend audit meetings and share information through close cooperation to understand the Group's situation. They hold 17 meetings with the Accounting Auditor annually to explain the results of audits and audit plans and to discuss quarterly review reports, key audit matters (KAMs) and other matters to strengthen cooperation. ⑦ Strengthening Group governance: In addition to dialogues with the management teams at Group companies, full-time Audit & Supervisory Board Members aimed to collect and share information by participating in Group Company Audit & Supervisory Board Member liaison meetings and participating in ITOCHU Group Audit & Supervisory Board Member liaison meetings. Audit & Supervisory Board Members will continue working to strengthen Group governance. ⑧ Strengthening cooperation with Outside Directors: The Audit & Supervisory Board held four round-table meetings to promote communication and strengthen collaboration with Outside Directors.
The Company considers that the appropriate number of Directors for effective deliberations of the Board of Directors is no more than twelve as stipulated in the Article of Incorporation. 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 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 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 FY2023, 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 FY2023, 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 further enhancing discussions regarding medium- to long-term management strategies and improving the management system to encourage further discussions. The Company will draw on these evaluation results to seek to further improve the audit 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 16, 2024 are as follows: The Company specifically examined the cross-holding shares the Company holds (all 5 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, the examination has confirmed that the current cross-shareholdings are appropriate. 〈Standard for exercising voting rights as to cross-shareholdings〉 In exercising voting rights concerning the cross-shareholdings, the Company makes it a rule not to abstain from voting, so as not to give another party carte blanche in principle. Moreover, the Company makes a decision for and against each proposal tabled after examining individual proposals, not using uniform standards such as short-term operating results/share prices, but taking the perspective of whether or not it will help increase the medium- or long-term corporate value of the Company and the companies in which shares are held, in view of non-financial information such as the business policies, strategies and suchlike of the company in which shares are held.
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 link below for details.
