Corporate Governance Structures
1．Basic approach to the governance structure
- The Company has adopted an executive officer system as a company with the Board of Directors and Audit & Supervisory Board Members in order to enhance group management through prompt decision making, clarification of management and execution and interaction between management and execution in response to changes in the business environment surrounding the Group.
＜Board of Directors and Directors＞
- The Board of Directors consists of 9 Directors (including 3 External Directors). The Board of Directors deliberates and makes decisions on important management matters and supervises the execution of duties by each Director in accordance with laws and regulations, the Articles of Incorporation and the Board of Directors Regulations, etc. The Board of Directors meets once a month in principle and as needed. The term of office of Directors is one year.
The following committees are established as an advisory board to the Board of Directors.
1.Nomination and Compensation Committee
The Nomination and Compensation Committee is comprised of three or more Directors selected by resolution of the Board of Directors, of which the majority shall be selected from External Officers, who, in principle, shall be selected from independent External Directors. The committee is established as an advisory board to the Board of Directors in order to maintain fairness, transparency and objectivity in procedures related to the nomination and compensation of Directors, Audit & Supervisory Board Members and Executive Officers, strengthen corporate governance, and report back to the Board of Directors on matters for consultation.
The Special Committee is comprised solely of three or more External Officers selected by resolution of the Board of Directors who, in principle shall be selected from independent External Directors. The committee is established as an advisory board to the Board of Directors in order to protect minority shareholders in transactions or actions that may result in a conflict of interest between controlling shareholders or major shareholders, and report back to the Board of Directors on matters for consultation.
＜Audit & Supervisory Board/Audit & Supervisory Board Member＞
- The Audit & Supervisory Board consists of 4 Audit & Supervisory Board Members (including 2 External Audit & Supervisory Board Members). The Audit & Supervisory Board supervises the execution of duties by the Directors from a standpoint independent of the Board of Directors. The Company also ensure a system whereby each Audit & Supervisory Board Member can understand the deliberation process of resolutions and reports by the Board of Directors. Each Audit & Supervisory Board Member makes necessary statements as needed to provide advice and recommendations to ensure the reasonableness and appropriateness of the Directors' decision making and execution of their duties. The Audit & Supervisory Board meets once a month in principle and as needed. The term of office of Audit & Supervisory Board Members is four years.
- The Company has adopted an executive officer system to separate the roles of management oversight and business execution functions. A part of officers including those in charge of domestic subsidiaries and major overseas subsidiaries also concurrently serve as Executive Officers of the Company or senior employees of the Company.
- Consisted of Chief Executive Officer and Chairman of the Board, corporate Executive Officers and Division Directors, the committee meets once a month to plan, coordinate and report management operations, as well as to share information on improvements and issues.
＜Sales Division Directors committee＞
- Consisted of Chief Executive Officer and Chairman of the Board, sales and development Executive Officers and Division Directors, the committee meets once a month to share the status of sales and development.
＜Division Directors committee ＞
- Consisted of Chief Executive Officer and Chairman of the Board, all Executive Officers and Division Directors, the committee meets once a month to monitor the status of business execution by the Division Director and the status of activities of the entire Group and to identify and share issues on a monthly basis.
- The committee is consisted of Chief Executive Officer and Chairman of the Board, Executive Directors, Director of Corporate Division, Executive Officers (Development), etc. Based on the basic policy on sustainability, the committee meets as appropriate to further strengthen the promotion activities.
（1）Policies and procedures for nominating candidates for Directors and Audit & Supervisory Board Members
- Chief Executive Officer and Chairman of the Board formulates a draft of candidates for senior management, Directors and Audit & Supervisory Board Members, and the Board of Directors deliberates and comprehensively selects and nominates candidates based on the criteria that candidates must possess a certain level of experience and expertise in business management, corporate administration, or a specific field of expertise, and the ability to make accurate and timely decisions based on that experience and expertise, in addition to having outstanding character as an individual and insight to ensure compliance with laws and regulations and corporate ethics, taking into consideration the balance of knowledge, experience and ability of the management team and the Board of Directors as a whole.
The Company has specified six areas of skills for Directors and Audit & Supervisory Board Members that are considered to be important for the Group from the perspective of corporate management and included them in the Reference Documents for the Notice of Convocation in the form of a skill matrix.
In addition, in order to further ensure the fairness and transparency of appointment and nomination procedures, advisory and report procedures of the Nomination and Compensation Committee must be completed before the final selection/nomination of candidates following deliberation by the Board of Directors.
On the other hand, dismissal of senior management, Directors, and Audit & Supervisory Board Members in the event of suspicion of illegal or improper acts, or in the event that they are unable to continue their duties due to health reasons, shall be decided as a proposal to be submitted to the General Meeting of Shareholders following deliberation by the Board of Directors.
- The Company appoints individuals who have experience in legal, financial or accounting fields as well as in other areas within the Company, or who can express their opinions as appropriate, regarding the management, etc. of the Company, based on their experiences as senior managers or management team members of the Company.
- ＜External Directors＞
- Independent External Directors provide advice and recommendations on management policies and management improvements at meetings of the Board of Directors, etc., as appropriate, from the perspective of promoting sustainable growth of the Company and increasing corporate value over the medium to long term and supervise the management of the Company through decision-making on important proposals such as executive personnel and executive compensation, as well as management policies at the Board of Directors meeting.
Independent External Directors have been appointed as members of the "Nomination and Compensation Committee" and the "Special Committee," respectively, in order to supervise the appointment and dismissal of Executives and conflict-of-interest transactions with the parent company.
- ＜External Audit & Supervisory Board Members＞
- In order to ensure the effectiveness and efficiency of operations, the Audit & Supervisory Board exchanges opinions and makes recommendations regarding reports on audit results from each professional and objective perspective.
2．Compensation of officers
- The Company has set forth a policy for determining the amount of compensation for officers or the calculation method thereof, which is as follows.
The Company established the Nomination and Compensation Committee as an advisory body to the Board of Directors in April 2022 in order to ensure fairness, transparency and objectivity in procedures related to the nomination and compensation of senior management and Directors and to strengthen corporate governance.
(1) Basic policy
- ①Compensation for Directors shall be determined by the Board of Directors after deliberation annually within the scope of the total annual amount of compensation for officers approved by resolution at a General Meeting of Shareholders. The level of compensation shall be set for each position using objective benchmarks, such as by referring to survey data from outside expert organizations, in order to contribute to securing and promoting excellent human resources and raising awareness of contribution to raising corporate value.
- ②Compensation for Audit & Supervisory Board Members shall be limited to fixed compensation that is not dependent on changes in business performance and shall be determined through discussions between Audit & Supervisory Board Members within the scope of the total annual amount of compensation for officers approved by resolution at a General Meeting of Shareholders.
- ③The compensation system shall take into account the following points, as well as incentives for execution of the Company's management policy and improvement of business performance.
・Compensation structure that raises awareness of contribution to medium- to long-term business performance and improvement of corporate value.
・The calculation of performance-linked compensation shall use indicators that ensure transparency, objectivity and continuity.
- The compensation system shall be reviewed as necessary to provide an incentive to enhance corporate value over the medium- to long-term.
（2）Total annual executive compensation
- Directors: 800 million yen or less (resolved at the 63rd Ordinary General Meeting of Shareholders held on June 19, 2009, and the number of Directors at the conclusion of the General Meeting of Shareholders was seven.)
Audit & Supervisory Board Members: 100 million yen or less (resolved at the 54th Ordinary General Meeting of Shareholders held on June 30, 2000, and the number of Audit & Supervisory Board Members at the conclusion of the General Meeting of Shareholders was two.)
（3）Authority to determine compensation for Directors
- The Board of Directors has the authority to make decisions on policies concerning the determination of the amount of compensation for Directors or the calculation method thereof. An overview of the relevant procedures is as follows.
- ・The President shall confirm proposals on policies related to decisions made concerning the calculation method for compensation for Directors and shall, in accordance with the details of said policy, draft a tentative proposal for individual compensation amounts to be paid to each Director within the range of the total annual amount determined by resolution of the General Meeting of Shareholders for each term and propose this to the Board of Directors.
- ・Upon receiving an explanation of said tentative draft, the Board of Directors agrees to consult with the relevant committee.
- ・The relevant committee will deliberate on the proposal from the Board of Directors before providing an answer to the Board of Directors.
- ・The President shall follow the prescribed procedures in accordance with the capital and business alliance agreement concluded with Toyota Tsusho Corporation.
- ・Upon the completion of said procedures, the President shall present a final report to the relevant committee and the proposal shall be presented to the Board of Directors as a resolution to be passed by the Board.
- Upon the completion of the above, the Board of Directors shall deliberate on the presented proposal to determine the compensation to be paid to senior management and Directors.
（4）Structure and calculation method of compensation for Directors
- Compensation items shall be determined according to the attributes of officers, and the breakdown and calculation method shall be determined as follows.
- ①Executive Directors
Monthly compensation shall be fixed based on “Basic compensation for directors” and “Additional compensation by position.”.
Bonuses are performance-linked based on the consolidated profits, with a standard bonus amount set for each position and the full amount quantitatively evaluated.
The policy for determining the amount of payment is that the percentage of monthly fixed compensation decreases gradually with a higher position, while the percentage of bonuses linked to performance increases gradually.
||Monthly fixed compensation
||Performance-linked compensation (Bonus)
||Basic compensation for directors + additional compensation by position
||Consolidated net income
|70% of bonus
|30% of bonus
|Percentage of the amount based on the standard bonus amount
in percentage by position
- As for bonuses, which are performance-linked compensation, 70% of the bonus amount is linked to short-term performance and is calculated as the percentage of year-on-year change in consolidated profits, while 30% of the bonus amount is linked to medium-term performance and is calculated as the three-year average change in consolidated profits multiplied by the actual bonus amount in the previous year.
- ②Independent External Directors
From the viewpoint of appropriately exercising a supervisory role from an independent standpoint without executing operations, independent outside directors shall receive only base director compensation as a fixed salary, which shall be within the range of the model base director compensation.
- ③Non-executing executive officers dispatched from the parent company
Non-executing executive officers dispatched from the parent company shall be unpaid.
（5）Total compensation paid to Directors and Audit & Supervisory Board Members for the previous year
||Total amount of remuneration (million yen)
||Total amount of remuneration by Type (million yen)
||The number of eligible persons
||Monthly fixed remuneration
|Audit & Supervisory Board Members
※The reason why the number of Directors in the table above is different from the number of Directors as of the end of the fiscal year under review is that two Directors, who retired at the conclusion of the 75th Ordinary Meeting of Shareholders held on June 22, 2021, is included and three unremunerated Directors are excluded.
※The reason why the number of Audit & Supervisory Board Members in the table above is different from the number of Audit & Supervisory Board Members as of the end of the fiscal year under review is that one unremunerated Audit & Supervisory Board Member is excluded.
3．Performance evaluation of the Board of Directors
- Board of Directors' assessment evaluation was as follows.
（1）Evaluation framework and method
All current Directors and Audit & Supervisory Board Members as of January annual.
- ②Implementation method
Questionnaire（answer is anonymous）
- ③Evaluation item
The questionnaire consists of 30 questions and consists of the following 4 chapters.In addition, an opinion/request section is provided for each question and a free entry section is provided for each chapter.
1．Composition of the Board of Directors
2．Operation of the Board of Directors
3．Agenda of the Board of Directors
4．System to support the Board of Directors
- ④Evaluation Process
January：Distribute and disseminate questionnaire
March：Report the results of the questionnaire and the columns for comments, requests and free entries to the Board of Directors.
Challenges and improvement measures discussed by the Board of Directors
April：The chairman of the Board of Directors assesses the effectiveness of the Board of Directors and reports the results to the Board of Directors
（2）Summary of the evaluation results
- We value the overall evaluation results, judging that corporate governance has been strengthened because there are open discussions to provide a basis for the Board of Directors to fulfill its supervisory function and because the framework of the Board of Directors has been established, etc. among other factors. As a result of our consideration based on the opinions expressed in last year’s questionnaire, the Company established the “Nomination and Compensation Committee” and “Special Committee” as voluntary advisory bodies under the Board of Directors as of April 1, 2022, in line with the principles required by the Corporate Governance Code, and is promoting efforts to enhance corporate governance accordingly. This year, there were also opinions that ensuring diversity among the members of the Board of Directors is an ongoing issue for the Company. Considering the above, we will continue to promote active discussion at the Board of Directors meetings, taking into account the opinions of the voluntary committees, and will make further efforts to meet the requirements of recent corporate governance reforms and strengthen our governance system.