Corporate Governance

Basic Approach

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 shareholder returns, ensuring managerial transparency and making decisions more quickly.

Corporate Governance System

The Company has a Board of Directors and an Audit & Supervisory Board. The Board of Directors decides on important managerial matters and supervises the Directors’ execution of their duties in accordance with laws and regulations, the Articles of Incorporation, resolutions of General Meetings of Shareholders, the Regulations on Decision-Making Authority, the CSR and compliance program, the Declaration of the Group Code of Conduct, the Employee Code of Conduct, and the Regulations for the Board of Directors.

About Committees

①Board of Directors(Meetings in FY2020: 10)

The Board of Directors, consisting of eight Directors in total—five Inside Directors and three Outside Directors—determines the fundamental management policies of the Company and is responsible for management oversight. In addition to the exclusive rights defined in laws and regulations, the Board makes decisions on business execution matters that are of high quantitative or qualitative significance. However, given the importance of prompt decision-making, the Board delegates decision-making on ordinary business execution to the Directors and Executive Officers wherever possible and oversees the status of that execution. The Directors, as trustees appointed by shareholders to manage the Company, have the obligation to exercise due care and loyal fulfillment of their duties and to contribute to the sustained growth of the Company, as well as medium-to-long-term improvement in corporate value.

②Audit & Supervisory Board(Meetings in FY2020: 12)

The Audit & Supervisory Board consists of four members in total (including four outside members), of whom two are full-time and two are part-time members. In accordance with the regulations of the Audit & Supervisory Board, the standards for audits by Audit & Supervisory Board Members, the audit policy established by the Audit & Supervisory Board, and the allocation of duties, Audit & Supervisory Board Members attend meetings of the Board of Directors and other important meetings, receive updates on the status of execution of duties from Directors and others, review key documents that support decision-making,examine the business and assets of the head office and major business sites,request sales reports from subsidiaries when necessary, and strictly audit the execution of duties of Directors and Executive Officers. In addition, the Audit & Supervisory Board conducts activities focused on cooperation with corporate auditors of consolidated Group companies, including establishing and holding meetings of the Group Corporate Auditors Conference, which consists of audit and supervisory board members of major Group companies.

③Management Advisory Conference(Meetings in FY2020: 20)

For proper and agile decision-making on execution of duties, the Management Advisory Conference has been set up as an advisory body to the CEO. At meetings of the Management Advisory Conference, deliberations are held on the Group’s overall management policies, business plans and other important matters concerning execution of duties, and consolidated management indicators and management plans are formulated.

④Governance Committee(Meetings in FY2020: 12)

The Governance Committee consists of seven members, of whom five are independent officers (three Outside Directors and two Outside Audit & Supervisory Board Members) and two are an Inside Director. As a voluntary advisory committee to the Board of Directors, the Governance Committee was set up to strengthen and enhance the effectiveness of management oversight and the transparency of decision-making by the Board of Directors. It examines the methods of selecting Directors and Audit & Supervisory Board Members and individual appointment and dismissal proposals, analyzes and evaluates the most appropriate form for the Director remuneration system (the appropriateness of compensation-setting policies and level of compensation) and the effectiveness of the Board of Directors as a whole, and discusses governance-related proposals.

⑤Risk Management Committee(Meetings in FY2020: 6)

The Risk Management Committee leads ongoing management enhancement and risk mitigation by identifying and analyzing risks that could have a material impact on management, implementing countermeasures, preventing the occurrence and materialization of risks and promoting risk awareness (including investment reviews for cross-shareholdings and verification of the necessity of holding such shares, etc.).

⑥Internal Control Committee(Meetings in FY2020: 6)

To ensure that the internal control system is operating appropriately, the Company reviews the development and implementation status of the internal control system at the Internal Control Committee meeting every six months for each item in the Basic Policy. The results of discussions in the Internal Control Committee are reported to the Board of Directors, and a final assessment is made on the development and implementation status of the internal control system at a Board of Directors meeting. At the meeting held on April 30, 2021,the Board of Directors evaluated the development and implementation status of each item enumerated in the Basic Policy for FY2020, and confirmed that there were no significant deficiencies or flaws.

⑦Disclosure Committee(Meetings in FY2020: 4)

The Disclosure Committee consists of persons in charge of departments, and was established for the purpose of raising the accuracy of decision-making on disclosure. The Disclosure Committee deliberates matters concerning the development and implementation of internal controls over disclosure of corporate information and financial reporting.

⑧Outside Consultant

The Group has established inside and outside whistleblowing contact points.These contact points offer a prompt response to employees with concerns that they may have violated or be about to violate the Declaration of the Group Code of Conduct or laws, or when they know of a violation committed by an officer or another employee and cannot point out the violation to that person, or when they have determined that a violation is likely to occur.

Response to Japan’s Corporate Governance Code

The Company endorses the goal of “growth-oriented governance” called for in Japan’s Corporate Governance Code, issued by Tokyo Stock Exchange, Inc. (TSE). The Company is taking measures aimed at ensuring sound leadership by senior managers and transparent and fair decision-making, and is addressing all items in the Corporate Governance Code.

Outside Officers

In selecting outside offi cer candidates, the Company seeks to enhance its corporate value by selecting individuals who have knowledge in specialized fi elds such as management, law, accounting and energy, and who can be expected to contribute to oversight of the Company’s management and business execution from various perspectives. The Company sets its own criteria for determining the independence of outside offi cers, in addition to the requirements for independent offi cers set forth by the TSE and other securities exchanges in Japan. Please see the Company’s Corporate Governance Report for details.

Remuneration Plan for Directors

The remuneration for each Director, except Outside Directors and Non-Executive Directors, comprises monthly remuneration, bonus, and performance-linked stock remuneration. The monthly remuneration and the bonus are appropriately determined based on standard amounts for each position within predetermined payment criteria and in consideration of short-term results, levels of contribution to the Company, and other factors, whereas amounts of stock-based remuneration to be paid are determined based on consolidated net profit attributable to the Company’s shareholders for the predetermined period subject to performance evaluation. Please see the details below.