Basic Approach to Corporate Governance, Capital Structure, Corporate Profile, and Other Basic Information
1. Basic Approach
We recognize corporate governance as a means for maximizing corporate value. As such, we reorganize our organizational structure when appropriate to accommodate the expansion of our business ventures, to manage profits and losses of each of our businesses, and to further clarify authority and responsibilities. We also focus on further enhancing the capabilities of the Board of Directors (which serves as the Company’s decision-making body), of Audit & Supervisory Board members (hereinafter, “ASB members”) and the Audit & Supervisory Board to monitor directors’ performance of their duties, as well as on improving our internal control systems in order to prevent improprieties in business activities.
To continually increase management transparency and fairness, we appropriately present statutory disclosure documents and actively conduct IR activities using our website and other appropriate means.
Corporate governance structure
|Organization||Company with Audit & Supervisory Board|
|Number of directors||7 directors, 3 of whom are outside directors
– Outside director ratio: 42% (3 of 7)
Board of Directors
The Board of Directors has seven members, consisting of four internal directors (currently without female directors) and three outside directors (including one female director). In principle, Board of Directors’ meetings are held once monthly, constituting a system that allows speedy and efficient decision-making. To clarify the managerial responsibilities of directors and create a management system that is able to respond swiftly to changes in the management environment, the term of service for directors is prescribed as one year.
In the fiscal year ended March 31, 2023, 18 meetings of board of directors were held, and discussions were conducted based on the business strategy and reports on the status of execution[ of duties] and [matters relating to ]material business execution (such as organizational system development, commencement of new businesses, withdrawal from businesses, acquisition of shares, and changes to personnel-related systems) set forth in laws and regulations or internal rules. Under the policy for strengthening of board of directors functions related to strategies and supervision, the board of directors endeavored to enhance discussions, such as by increasing time spent discussing business strategy and the like at the board of directors meetings and improving the quality of submitted materials. Further, monitoring was conducted on a regular basis in relation to the status of communication with investors and the status of measures concerning sustainability.
Attendance at meetings of the board of directors in the fiscal year ended March 31, 2023 was as follows.
The Management Council conducts key discussions and decision-making related to business operations. In principle, Management Council meetings are held once a week but may be held whenever necessary. Furthermore, necessary information from Management Council meetings is shared with outside officers.
Audit & Supervisory Board
The audit and supervisory board is composed of three independent outside audit and supervisory board members (of whom one will be a woman). Each of the audit and supervisory board members conducts audits in accordance with each fiscal year plan, conducts reporting and consultation regarding the results and details of the audits in audit and supervisory board meetings, which, in principle, are regularly held once a month, expresses to the directors opinions as appropriate, and endeavors to ensure the soundness and effectiveness of management through collaboration with internal auditors or the internal audit office and independent auditors.
Nomination and Compensation Committee
We have established a Nomination and Compensation Committee consisting of all outside directors, the President and Representative Director, and one other internal director. The objective of the committee is to strengthen transparency and objectivity by obtaining the opinions and advice of outside directors before the Board of Directors deliberates matters related to individual nomination proposals and compensation of directors (excluding outside directors).
Composition of the Nomination and Compensation Committee: 2 internal directors and 3 outside directors
Chairperson: Koki Kimura
Committee Member: Hiroyuki Osawa
Committee Member: Satoshi Shima (outside director)
Committee Member: Akihisa Fujita (outside director)
Committee Member: Yuki Nagata (outside director)
The scope of deliberations of the Nomination and Compensation Committee is as follows:
(1) Nominations for and appointments of director candidates along with HR policy proposals
(2) Basic policy proposals for the director compensation system
(3) Compensation condition proposals for directors (including calculation method)
(4) Specific compensation proposals for individual directors (including calculation method)
(5) Other matters requested by the President and Representative Director
In the fiscal year ended March 31, 2023, three meetings of the nomination and compensation committee were held. Deliberations were conducted with respect to evaluation of directors, personnel proposals regarding individual directors, the amount of compensation for individual directors, and the composition of compensation for directors, and discussions were also conducted regarding personnel proposals regarding individual senior corporate officers, measures for a succession plan, and establishment of CxO.
Attendance at meetings of the nomination and compensation committee in the fiscal
year ended March 31, 2023 was as follows.
|Koki Kimura||3 of 3 meetings (100%)|
|Hiroyuki Osawa||3 of 3 meetings (100%)|
|Satoshi Shima||3 of 3 meetings (100%)|
|Akihisa Fujita||3 of 3 meetings (100%)|
|Yuki Nagata||3 of 3 meetings (100%)|
(Notes) 1. Figures in parentheses indicate the number of meetings attended divided by the number of meetings held during the term of office.
2. Asterisks (*) denote independent outside directors.
Evaluation of the effectiveness of the Board of Directors
The Company conducts self-evaluation and analysis of the effectiveness of its Board of Directors with the aim of enhancing its capabilities and maximizing corporate value.
FY2023 Board of Directors effectiveness evaluation:
During the period from January 2023 to February 2023, a survey was conducted among all directors and ASB members. We ensured anonymity by having an external organization record the results. The results of the survey were analyzed, discussed, and evaluated at the Ordinary Board of Directors Meeting held in April 2023.
Survey focus points
– Composition of the Board of Directors
– Management of the Board of Directors
– Discussions at the Board of Directors meetings
– Director and ASB member support systems
– Discussions with shareholders (investors)
Analysis/evaluation of Board of Directors effectiveness survey results:
The survey responses were generally positive, and the Company’s self-evaluation was that the board of directors is operating effectively overall. The following points in particular were highly commended.
–Agenda items to be deliberated at the board of directors meetings are appropriately submitted to the board of directors without being delegated unnecessarily to the president and representative director, management committee (a meeting body related to [business] execution that is composed mainly of inside directors), and the like
–(Outside directors and outside audit and supervisory board members) Their opinions are appropriately reflected in decision-making and determinations
–Inside directors conduct reporting to the board of directors with sufficient financial foundations
In addition to the above, overall improvements were seen in scores in comparison with the evaluation of the board of directors for the previous fiscal year, and we confirmed that the effectiveness of the board of directors has improved through reform activities.
Initiatives for improving the effectiveness of the Board of Directors:
The board of directors and the secretariat of the board of directors worked on the following matters, taking into consideration the results of evaluation of the effectiveness of the board of directors for the previous fiscal year.
–Operational reform of the board of directors
Improvements were made to ensure that directors had sufficient time to deliberate each agenda item, such as by reviewing cost controls and settlement
amounts regarding investment matters and the like and by promoting delegation of business execution to the management committee. Improvements were made to ensure that each director had more time to examine agenda items by providing materials for the board of directors even earlier.
–Enhancement of discussion with an awareness of medium- to long-term strategies and profitability and capital efficiency
Reports were made in a timely manner on the status of business growth and management impact for each business, including future impacts, and discussions were held regarding selection and concentration of company-wide business and medium- to long-term business strategy.
–Strengthening of reporting on the status of dialogue with shareholders and investors
Reports were made once a quarter on the status of dialogue with shareholders (investors) and the opinions of, and matters pointed out by, shareholders (investors) were shared with the board of directors.
Measures to be taken in the future
The Company recognizes that a priority issue to be addressed in the future is optimization of the period of time taken for each meeting, improvement of materials to be submitted and methods for sharing information, and further enhancement of discussions regarding governance and mid- to long-term strategies.
Based on the results of the evaluation, the Company will continue to seek further improvement in the effectiveness of the board of directors overall in the future.
We are developing our internal structure with the basic policies of our internal control system as its base.
The Group has established a code of ethics that emphasizes the importance of compliance and ensures that all officers and employees are fully aware of what that entails through an information system, training, and the like. In addition, the Group has established an internal reporting system as a check against activities that are illegal or go against our Articles of Incorporation and to prevent scandals, and has prepared a system to exclude antisocial forces.
For our information management system, we have established rules for information management, clarified denotation for important documents and how they should be stored, and created a system for safely saving and managing personal information, important business secrets, and information regarding director work activities.
Overview of Timely Disclosure System
1. Our stance and policy on timely disclosure
We believe that timely and appropriate disclosure of information to shareholders, investors, local communities, and other stakeholders will promote greater understanding of the Company, allowing proper evaluation of the Company. We are always working to improve our internal systems to ensure that we can disclose corporate information in a timely, accurate, and fair manner from the perspective of our stakeholders.
We also ensure that our officers and employees are educated on subjects such as insider trading and information subject to timely disclosure through internal training programs both when they join the Company and annually.
2. Internal system for the timely disclosure of corporate information
To ensure thorough internal management of corporate information and appropriate and timely disclosures, several specialized departments have been set up under the direction and supervision of the management and company-wide initiatives have been launched. In order to improve the accuracy and content of disclosure materials, we have established a system in which multiple departments mutually check each other’s work while confirming the quality of our internal control system through regular internal audits. We also have auditors regularly conduct quality and legality checks of our accounting information. In addition, the Company’s management and specialized departments have established a system in which they collect and report timely and appropriate information that follows our disclosure guidelines from our subsidiaries, which is then disclosed if deemed necessary.
3. Procedure for timely disclosure
(1) Of information regarding important decisions and occurrences
The senior corporate officer in charge of IR business operations works alongside the IR and Legal Affairs departments to analyze information reported by each of the Company’s departments and the Group’s companies. They then follow the guidelines for timely disclosure, determining whether information needs to be disclosed, what exactly to disclose, the method of disclosure, then disclosing the information promptly.
As a result, any important matters determined subject to timely disclosure are reported to the Management Council or President and Representative Director, then presented to the Board of Directors (directly depending on the level of importance), and promptly disclosed upon approval by the Board of Directors.
(2) Of information regarding financial results
The accounting department shall consult with accounting auditors and outside experts as necessary to make a report regarding carefully examined financial results materials (consolidated financial results and quarterly financial results) for the senior corporate officer in charge of IR business operations and, upon approval of Board of Directors, promptly disclose the information.
4. Method of timely disclosure
The Company discloses corporate information without delay via TDnet and EDINET and also distributes disclosure materials to the press. In addition, the Company posts publicly disclosed corporate information on its website and otherwise strives to provide timely, accurate and fair updates to all shareholders and investors.