We intend to establish a system that enables quick and accurate management and executive decision-making so that we may fulfill our social responsibilities and increase our corporate value. At the same time, we strive to improve corporate governance by strengthening management oversight functions; specifically, enabling directors to more closely supervise business performance as well as encouraging directors on the audit and supervisory committees to perform legal audits.
Corporate Governance System
Corporate Governance System and Reasons for Adoption
The Company has adopted a system involving a board of directors and an audit and supervisory committee in the belief that corporate governance starts with informed judgments made by directors elected at the general meeting of shareholders who are familiar with the company’s business. The directors are engaged in mutual oversight and verification of the company’s business execution.
Institutions and Systems
The resolution adopted at the regular general meeting of shareholders held on March 25, 2016, called for a transition to an audit and supervisory committee. The company transitioned from a company with a board of auditors to a company with an audit and supervisory board. The intent of this transition was to further strengthen the corporate governance system and enhance management health and transparency.
1.Board of Directors
The Company’s Board of Directors is composed of seven directors, including three from outside the company. The Board of Directors decides those matters set forth in laws and ordinances and important management matters, and exercises oversight of the director’s performance. In order to pass informed judgment in a timely fashion on the course of business, the directors attend a liaison meeting with the division heads and above every morning to confirm that tasks are carried out, even if there are no agenda items for the board. Important matters are discussed at meetings of the board of directors and decisions are taken.
2.Audit and Supervisory Committee
The Company’s Audit and Supervisory Committee is composed of four audit and supervisory committee members who are directors, including three from outside the company.The directors who are audit and supervisory committee members attend meetings of the board of directors and other important meetings, review important documents, and monitor to ensure that there are no acts in violation of laws and ordinances or improprieties. They also monitor the independence of the auditors and review the auditors’ audit methodologies.
3.Executive Officer System
In order to speed up decision making and strengthen oversight functions, the company introduced an executive officer system in April 2002 that eliminated the conflict of the same individual being responsible for both executive and oversight functions. This was a means of strengthening the function of the director.
The company’s Nominating Committee is composed of three directors, including two outside directors. Decisions to appoint or release directors are submitted to the nominating committee. Following a process reflecting that proposal, the decision is made by the board of directors, thus, the governance function is enhanced.
5.Liaison Council and Management Meetings
The company has adopted a system in which the business situation and issues in each business unit are discussed and shared horizontally across the entire company at a liaison council meeting held each morning. It is attended by business unit heads and above. In addition, extra management meetings are held as necessary at which policies and plans for overall execution of management activities are proposed in addition to investigations, studies, management, notifications, and coordination.
|Number of Directors per Corporate Charter||15|
|Term of Directors per Corporate Charter||One year|
|Presiding Officer at Board of Directors Meetings||President|
|Number of Members of Board of Directors||Seven|
|Election of Directors||Elected|
|Number of Outside Directors||Three|
|Number of External Directors, Number of Directors Designated as Independent||Three|
Audit and Supervisory Committee
|Number of Members||Number of Standing Members||Number of Internal Directors||Number of External Directors||Committee Chair (presiding member)|
|Name of Committee||Number of Members||Number of Standing Members||Number of Internal Directors||Number of External Directors||Internal Employees||Other||Committee Chair (presiding)|
Optional Committee Corresponding to Nominating Committee
|Nominating Committee||Three||None||One||Two||None||None||Internal Directors|
Optional Committee Corresponding to Remuneration Committee
Assessment of Effectiveness of Board of Directors
In order to verify on a regular basis that the board of directors is playing its role effectively and functioning properly, and to develop suitable measures for addressing problems and reinforcing strengths, the company conducts surveys of the effectiveness of the entire board of directors for each director and reports the analysis and results of the assessment to the board of directors. As a result of this analysis, the company’s board of directors has confirmed the effectiveness of the oversight of business processes and recognition of important management matters.
At the same time, we identified issues such as more vigorous discussion concerning the response to stakeholders who are not shareholders and more vigorous discussion concerning the use of external directors. Moving forward, in addition to resolving these issues we will continue to enhance corporate governance to improve sustained corporate value by further improving the function of the board of directors and reinvigorating the board’s momentum.
Response to Corporate Governance Code
Disclosures based on Principles of the Corporate Governance Code
Basic Principle 1: Shareholder rights and ensuring fairness
＜Policy on Cross-Shareholdings＞
Our basic policy is to hold shares only in those cases where it is believed to accrue to the benefit of the company. This includes maintaining customer and partner relationships and the business and management strategy. Because shareholdings are to be reviewed on an annual basis by the board of directors for long-term economic rationale and future outlook, cases where the holdings are deemed not suitable will be reviewed depending on future changes in circumstances, such as by reducing the holdings.
＜Policy for Exercise of Voting Rights＞
In an issuing company, we make the determination of how to exercise our voting rights after careful analysis of each agenda item based on a comprehensive consideration of the management circumstances of the company and medium- and long-term enhancement of corporate value, in addition to aspects such as corporate governance and compliance and the contribution to enhancing corporate value.
【1-7．Related Party Transactions】
With regard to so-called related-party transactions in which the company transacts with its executives, the board of directors shall determine whether the transaction shall proceed following ex ante deliberations in accordance with the Regulations of the Board of Directors, and shall thereafter report on the resolution. The terms and conditions of such transactions shall be identical to those with third parties.
Basic Principle 2: Appropriate Collaboration with Stakeholders Other than Shareholders
【2-6．Exercise of Capacity as Asset Owner of Corporate Pension】
The Company has no corporate pension program.
Basic Principle 3: Ensuring Proper Disclosure and Transparency
（i）Corporate Mission, Corporate Strategy, and Corporate Plan
As described in Section 1.1 of this report, “Basic Concepts,” under its motto of increasing stakeholder satisfaction in a sustained fashion, the company philosophy is to provide society with products of true worth and thus contribute to humankind. Its social mission is to contribute to society by creating high-tech sords(soft and hard).
（ii）Basic Concepts of Corporate Governance and Basic Policies
As described in Section 1.1 of this report, “Basic Concepts,” we are bolstering our management verification function through oversight of the circumstances of management performance by the board of directors and through the auditing of propriety and suitability by the directors who are members of the Audit and Supervisory Committee.
（iii）Policies and Procedures for Determining Compensation of Executives and Directors
At the general meeting of the shareholders for the 41st Financial Reporting Period, held in March 2016, the maximum annual remuneration for directors (excluding directors who are members of the Audit and Supervisory Committee) was set at 160,000,000 yen (not including a portion of salary for employees). The remuneration,for directors who are members of the Audit and Supervisory Committee was set at 40,000,00 yen. The remuneration amount for directors of the company (excluding directors who are members of the Audit and Supervisory Committee) is adjusted up or down based on net profit for the current period, not to exceed the total amount approved by the general meeting of shareholders. Remuneration is allocated from the pool based on a proposal from the representative director. It is, based on each director’s degree of contribution to company performance, achievement of the plan, and compensation levels in the industry or for companies of similar size. The amount is approved by the board of directors. Remuneration for directors who are members of the Audit and Supervisory Committee is determined in consultation among them, not to exceed the total amount approved by the general meeting of shareholders.
（iv）Policies and Procedures for Appointing Executives and Appointing Directors and Director Candidates Who Are Members of the Audit and Supervisory Committee
The Company has established a Nominating Committee with a majority of external directors. In the interests of enhanced governance, decisions to appoint or release directors are submitted to the Nominating Committee, and handed down by the board of directors following a process reflecting that discussion.
In addition, from the perspective of aiming to establish a system that enables rapid and accurate management decisions and business execution, the selection or dismissal of directors is based on the areas of expertise of the candidates. For the selection of directors who are audit and supervisory committee members, we appoint and release people based on their knowledge of finance and accounting and their ability to supervise. This includes personnel who can provide objective advice concerning corporate management and those who have broad insight and can perform supervision and auditing based on the expertise of candidates who perform decision-making at the board of directors and carry out the management and supervision of the duties of executive directors.
（v） Explanation of Individual Appointments and Nominations
Situations involving the position of directors, their area of responsibility, or concurrent holding of important posts, were disclosed according to the Notification of Convening of the Regular General Meeting of Shareholders for the 45th Financial Period, and posted on our website.（「Notice of Resolutions at the 45th Ordinary General Meeting of Shareholders」）
Basic Principle 4. Duties of the Board of Directors
【4-1. Role and Duties of the Board of Directors (1)】
［Supplemental Principle 4-1-1］
Important judgments and determinations subject to decision by the board of directors itself, and matters set forth in laws and ordinances and the charter, are listed in the Regulations of the Board of Directors as matters for resolution. The matters for which the board of directors is to be responsible are clearly delineated.
On a weekly basis, each division head reports to the directors on the conduct of other business matters concerning the progress in that business. At the same time, the president and representative director and executives confirm the status of business matters at the liaison meeting held every morning or at management meetings convened as necessary. This serves to clearly delineate the scope of responsibility under internal corporate regulations.
【4-9. Standards for and Nature of Determination of the Independence of Independent Outside Directors】
In addition to satisfying the requirements of the Company Act and the qualifications for independent directors set forth by the Tokyo Stock Exchange, the appointment of outside directors is carried out in accordance with the Company’s “Standards for Determining Outside Director Independence.” This determines the independence of the outside directors. Outside directors are thus appointed and are designated as independent directors as prescribed by the Tokyo Stock Exchange and are submitted thereto.
【4-11. Prerequisites for Ensuring the Effectiveness of the Board of Directors and Audit and Supervisory Committee】
［Supplemental Principle 4-11-1］
We select candidates for appointment as directors based on a range of factors, taking into consideration the balance that enables the covering of all business units in the company, the monitoring of suitable and rapid decision making, the creation and operation of risk management systems, and the control and monitoring of business operations. Our policies and procedures include appointing directors and/or directors who are members of the Audit and Supervisory Committee.
［Supplemental Principle 4-11-2］
Current directors and directors who are members of the Audit and Supervisory Committee and who hold important concurrent roles, are listed in the Business Report as well as disclosures in the annual Securities Report.
［Supplemental Principle 4-11-3］
In order to verify on a regular basis that the board of directors is playing its role effectively and functioning appropriately, and to develop suitable measures for addressing problems and reinforcing strengths, the company conducts surveys of the effectiveness of the entire board of directors for each director and reports the analysis and results of the assessment to the board of directors.
As a result of this analysis, the board of directors has confirmed the effectiveness of the oversight of business operations and recognition of important management matters.
At the same time, we have identified areas for improvement such as more vigorous discussion concerning response to stakeholders who are not shareholders and more vigorous discussion concerning the use of external directors.
Moving forward, as we address these opportunities, we will continue to enhance corporate governance to achieve sustained enhancement of corporate value by further improving the function and vigor of the board of directors.
【4-14. Training of Directors and Auditors】
Supplemental Principle 4-14-2
To assist external directors in obtaining knowledge about the business, finances, and organization, the company deepens their understanding of the nature and circumstances of its business by having them observe and confirm actual workplaces within the company. In addition, all directors take the e-training for listed companies offered by the Tokyo Stock Exchange.
Basic Principle 5. Dialog with Shareholders
【5-1. Policy Concerning Constructive Dialog with Shareholders】
We undertake the following activities in order to promote constructive dialog with shareholders.
（i）To bring about constructive dialog with shareholders, the Corporate Planning Department is the point of contact.
（ii）Following discussions led by the Corporate Planning Department and involving the General Affairs and Accounting Department, the representative director and/or competent director joins the dialog as appropriate.
（iii）See “IR Activities” below.
（iv）Opinions and ideas shared with us through IR activities are reported by the Corporate Planning Department at the morning meetings attended by division heads and above and meetings of the board of directors. This contributes to enhanced corporate value at the business units involved.
（v）e strictly control insider information in accordance with our “Regulations for Prevention of Insider Trading.”
|Additional Explanations||Explanations from Representatives Themselves|
|Holding of Regular Briefings for Analysts and Institutional Investors||Held following announcement of half-year and full-year results, mainly in Tokyo.||Yes|
|IR Materials Posted on Website||The company posts information for investors on the “Investor Relations” section of its website.
Information about financial reports is provided in the “IR Library” and “Financial Information” section of “Investor Relations”.
Informational disclosures other than financial reports are included from time to time in “IR News”.
|Department and IR Officer in Charge||Department in charge: Corporate Planning Departmen
IR Officer in charge: Executive Director FUJIWARA Sawako