Disclosure and Dialogues
We recognize that appropriate and timely information disclosure to the shareholders and investors, and active dialogues with them are essential for sustainable growth and medium- to long-term enhancement of our corporate value. In accordance with the disclosure rules established by laws, regulations and stock exchanges, we disclose our financial and non-financial information appropriately. We also take initiative in the provision of information not designated therein to ensure the transparency of management. Regarding the dialogues with shareholders and investors, we fully feedback the results into the company, and make use of them in our management strategies and business operations, to further fulfill the dialogues in the future.
Handling of Corporate Governance Code
Based on the Corporate Governance Code established by Tokyo Stock Exchange, we have established Corporate Governance Guideline on which we should rely in our corporate activities. We will review the Guideline as necessary to fulfill the governance.
Corporate Governance System
The structure of our corporate governance system is as follows:
- Form of organization
- Company with Audit & Supervisory Board
- Structure of the Board of Directors
- 9 Directors,of which 4 are outside Directors (3 Independent Officers)
- Functions of the Board of Directors
- Deliberation and determination of all important matters related to management and execution of operation, and also mutual monitoring and supervision with respect to the execution of duties
- Term of Office of Directors
- 1 Year
- Number of times of the Board of Directors meetings
- Structure of Audit & Supervisory Board
- 4 Audit & Supervisory Board Members,of which 2 are Outside Auditors (2 Independent Officers)
- Functions of Audit & Supervisory Board
- Report and deliberation of duties by Directors, the establishment and implementation of internal controls, internal audit guidelines for quarterly and year-end results, and details, and results of audits
- Number of times of Audit and Supervisory Board meetings
- Adoption of executive officer system
- Nomination and Remuneration Advisory Committee
- Consists of President & CEO and 5 Outside Officers(6 in total).Serves as an advisory body to the President & CEO to ensure transparent determination process concerning the appointments of candidates for Directors and Executive Officers, appointment and removal Representative Directors, commissioning and decommissioning of roles, and the remuneration system and the remunerations on Directors and Executive Officers.
- Corporate Management Meeting
- Consists of Executive Officers and the heads of key divisions. Serves as an advisory body to the President & CEO for the purposes of deliberations and reports on important matters related to the execution of operation.
Corporate governance system and internal control system are shown in the following figure.
Initiatives to Strengthen Corporate Governance
We have strengthened the corporate governance as shown in the following figure. To further enhance the effectiveness, we will make efforts for improvement.
Auditing by Internal Auditing Division and Audit & Supervisory Board
Audit & Supervisory Board and Internal Auditing Division conduct appropriate internal audits through the following:
- Auditing body
- Audit & Supervisory Board Members
- Attendance to import meetings, including those of the Board of Directors Interviewing Directors, Executive Officers, and employees on the status of operations and the execution of duties
- Internal Auditing Division
Internal auditing division directly reporting to the President (5persons)
Evaluation on the legality and rationality of the Company's business operations
Advices and recommendations on the effectiveness and efficiency of business operations
Independent evaluation of establishment and operation of internal control concerning the financial reports, and report to J-SOX Management Meeting
- Audit & Supervisory Board and the Internal Auditing Division, together with Accounting Auditors, conduct audits in cooperation, while giving full consideration to the independence of one another, through close communication such as exchanging options on various topics including their yearly auditing plans and critical audit items, auditing methods, inspection and quality control systems, and audit results
Based on the recognition that internal controls serve as the foundation of corporate governance, Directors establish, maintain, and evaluate an appropriate internal control system, conduct ongoing inspections and make improvements to the system, and periodically review their basic policy for internal controls. Given that internal controls ensure and maintain the reliability of compliance, appropriate risk management, and financial reports, we also pay sufficient attention to the effectiveness and efficiency of operations. The establishment of this system enables the Board of Directors to make decisions on appropriate information and subsequently, the execution of business.
Evaluation of Effectiveness of the Board of Directors
An evaluation of the Board of Directors by each Director is conducted annually in order to ensure the effectiveness and appropriateness of decision making and supervision by the Board of Directors and in an effort to improve their functions. Discussions are made on the understandings of current status and the areas that require improvement in relation to the effectiveness of the Board of Directors overall.
For fiscal 2019, an anonymous questionnaire was completed in December 2019 by all Directors and Audit & Supervisory Board Members that comprise the Board of Directors. The results of the questionnaire were analyzed, discussed and evaluated at the Board of Directors meeting.
Based on the responses to the questionnaire, we evaluated the effectiveness of the Board and recognized that there remains room for improvement.
- The size, composition, and administration of the Board of Directors were mostly positively evaluated as was the case last fiscal year, and the effectiveness of the Board of Directors overall was properly assured.
- Regarding the discussion concerning major risks in the Board of Directors put forward in last year’s evaluation, the situation was improved by tightening the risk examination on the proposal stage concerning the projects exceeding a certain order amount or those with novelty, for example, through revision of criteria for matters to be discussed at the Board of Directors.
- Regarding the operation method including the method of provision of documents and materials, the volume and timing thereof, and the way of utilization of the Nomination and Remuneration Advisory Committee concerning the development of successors, there remains room for improvement, and we will address the issues.
Appointing Criteria and Training of Directors and Audit & Supervisory Board Members
- We appoint Directors who have profound knowledge and results concerning the business operations, who are able to make appropriate decisions for the improvement of the company value based on the viewpoints of diverse stakeholders, and who have high ethical standards and fair-minded personality.
- We appoint Outside Directors who, in addition to the similar criteria to the above, have expertness in different fields from ours and ample knowledge concerning the overall management.
- We, keeping the similar criteria to the above in mind, appoint Audit & Supervisory Board Members who are able to properly audit the performance of duties and business operations of Directors.
- The knowledge held by respective Directors and Audit & Supervisory Board Members and their reasons for appointment are as shown in the following Table.
- The Company provide Directors and Audit & Supervisory Board Members with opportunities of training necessary for performing their roles and responsibilities. When Outside Directors or Outside Audit & Supervisory Board Members newly take their office, we provide them with necessary explanation and information on general circumstances and business issues of the Company, including its business operations, finance and organization.
Remunerations of Directors and Audit & Supervisory Board Members
The remunerations of Directors (excluding Outside Directors) should be appropriate, fair and well-balanced to further enhance the respective Directors’ motivation for the maximization of the Company’s corporate values. The remuneration system is as shown below:
- Remuneration system
- Fixed remuneration + performance-linked remuneration
- Fixed portion of remuneration
- Determined based on the positions of respective Directors
- Performance-linked portion of remuneration
- President and CEO determines the performance-linked remunerations in accordance with the contribution of respective Directors based on the current net profits
- Ratio of fixed remuneration and performance-linked remuneration,calculation formula of performance-linked remuneration,etc.
- President and CEO prepares the draft of revision as necessary, and the Board of Directors determines the ratio,formula, etc. based on the advice of the Nomination and Remuneration Advisory Board
- Remuneration of Outside Directors and Audit &supervisory Board Members
- Fixed-amount remuneration, Which is not linked with thePerformance
Regarding the remunerations of Directors and Audit & Supervisory Board Members in FY2019, in consideration of the current net loss of the previous business year, we did not pay the performance-linked remunerations, and furthermore, decreased the fixed remunerations (by 35% - 20%) excluding those of Outside Officers. The following Table shows the results of the remunerations.
*The above numbers and the remuneration amounts include one Audit & Supervisory Board Member who retired at the Regular General Meeting of Shareholders of June 28, 2019.
Regarding the remunerations of Directors and Audit & Supervisory Board in FY2020, performance-linked remunerations are not paid, and the range of reduction in the fixed remunerations is expanded (50% - 45%) in consideration of the extremely severe business conditions under the COVID-19 issues, although we posted current net profit for FY2019. Regarding the remunerations of officers, as the performance-linked remunerations are based on the net profit of the previous year, we consider that the addition of a factor that reflects the medium- to long-term performance to the remuneration system should be discussed.
We acquire and hold other companies’ shares under the policy of so-called “cross-shareholdings”, which are investment shares for other purpose than pure investment, if it is deemed to contribute to the increase of our corporate value over the medium- to long-term through the establishment, maintenance and strengthening of transactions and cooperative relationship. As a result of annual examination of the significance of holding at the Board of Directors, and if the significance is diluted, we endeavor to gradually reduce the shares.
As a result, our cross-shareholdings are as shown below (as of the end of March, 2020).