Governance
Corporate Governance Structure
As a company with an Audit and Supervisory Board, we ensure soundness and transparency in management through oversight of the performance of the duties of the Board of Directors by independent Statutory Auditors and the Audit and Supervisory Board.
The Board of Directors has nine members, including three outside Directors. The Audit and Supervisory Board has four members, including two outside Statutory Auditors. To ensure fairness, transparency, and objectivity in procedures related to the nomination of Directors and operating officers and decisions on matters such as remuneration, we have established the optional bodies of a Nomination Committee and a Remuneration Committee.
The membership of each committee consists of Directors (including outside Directors, one of whom serves as chairperson) appointed by resolution of the Board of Directors. These committees deliberate on matters related to nomination and remuneration of Directors as advisory bodies to the Board.
Other efforts whereby we strive to enhance our corporate governance structure include the addition of an executive officer system to improve management efficiency and execute business through dynamic decision-making. We have also established a Board of Outside Officers to allow the exchange of opinions among outside Directors and outside Statutory Auditors and recommendations to the Board of Directors, thereby enhancing Board oversight functions.
Activities status of committee
Role | Personnel composition | Number of meetings held | Contents | |
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Board of directors | Making decisions on major management issues and overseeing the conduct of the business | Nine members (including three from outside the company) |
17 times/year | Appropriate decision-making and management supervision are carried out based on the wealth of business experience of internal directors in the Company and the objective and professional perspectives of Outside directors. |
Audit and Supervisory Board | Monitoring and supervising business execution of Directors and decision-making processes of the Board of Directors | Four members (including two from outside the company) |
13 times/year | Management soundness is ensured from the perspective of full-time Corporate Auditors based on their experience in the Company and from the objective and professional perspectives of Outside Corporate Auditors |
Outside Officers' meeting | Information sharing and awareness raising among the independent Outside Officers | Three Outside Directors, two Outside Corporate Auditors |
6 times/year | The exchange of information and awareness among independent Outside Officers provides effective supervision of management from an independent and objective perspective. |
Nominating committee | Deliberations and recommendations on matters related to the appointment or dismissal of Directors and Corporate Officers officers | Five Directors (including three from outside the company) |
2 times/year | With a majority of independent Outside Officers, including the Chairman, the Committee deliberates on proposals for the appointment and removal of Directors and the selection of representative Director and Coprporate Officers. It also makes recommendations in response to requests from the Board. |
Remuneration committee | Deliberations and decision making on matters relating to the remuneration of Directors and Corporate Officers | Five Directors (including three from outside the company) |
4 times/year | With a majority of independent Outside Officers, including the Chairperson, the Committee deliverates and makes decisions concerning compensation for Directors and Corporate Officers. |
Sustainable Committee
In January 2023, we established the Sustainable Committee under the Board of Directors to address efforts to promote sustainable management within the Group. The Sustainable Committee and its executive body, theSustainable Committee Secretariat, work with the Conference of Business Divisions, Business Units, and Group companies to advise and make decisions on the operation and promotion of sustainable management, the formulation of policies on key issues, management of the progress of initiatives, and the incorporation of these policies into the medium-term management plan. The Sustainable Committee Secretariat promotes action plans and manages KPIs in collaboration with the Business Units and Group companies. The Board of Directors consults with the Sustainable Committee to set policy and provide oversight. The Conference of Business Divisions will work with the Sustainable Committee to share information. Business Units and Group companies implement various measures and provide results and data. The Audit and Supervisory Board and the Audit Oce provide supplemental audits related to these initiatives.
Use of independent Outside Directors and Outside Corporate Auditors
The Company has appointed three Outside Directors and two Outside Corporate Auditors. All five have no personal, capital, or business relationships with our Company and are completely independent. The independence of Outside Directors is in accordance with the requirements of the Companies Act and the standards of the Tokyo Stock Exchange. The role of Outside Directors and Outside Corporate Auditors is to enhance the effectiveness of corporate governance at our company by using their expertise and experience to provide supervision and auditing from a neutral standpoint.
Director Skills and Diversity
In light of the roles played by the Board of Directors in overseeing business operations and making important decisions, the Company deems it essential that the Board consist of members who possess a wide range of perspectives and advanced skills, based on their diverse experiences.Accordingly, it has established the following standards for the selection of Directors.
- Directors must be able to make their best efforts to achieve sustained growth and medium- to long-term increases in corporate value based on the Group’s corporate philosophy and policies.
- They must possess outstanding character, insights, and ethical standing beftting Directors.
- They must possess the drive and abilities needed to perform their duties as Directors with integrity.
- Outside Directors must possess insights and a wealth of experience in fields such as corporate management, the law, or financial accounting and must satisfy the requirements of Outside Directors under Article 2, Paragraph 15 of the Companies Act and the independence criteria established by the Company.
- Directors in executive positions (Representative Directors, the Chairperson, the President, Vice-Presidents, Executive Directors, and Managing Directors) must be chosen from among Directors who have career histories, abilities, leadership, medium- to long-term perspectives, and high ethical standing befitting representatives of the Company.
- They must not be disqualified from serving as Directors under laws or regulations.
Candidates for Directors are chosen from among persons who satisfy the above standards and appointed by the Board of Directors following screening by the optional Nomination Committee
Corporate Governance Initiatives History
The Pack is enhancing individual governance initiatives in response to the demands of the Tokyo Stock Exchange.
Corporate governance initiatives (selected)
2006 | C Line (internal whistleblowing system) introduced |
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2010 | Maximum compensation amounts revised for all Directors and all Corporate Auditors |
2015 | Share-based remuneration stock option plan introduced Outside Directors system adopted |
2016 | Outside Officers’ Conference established |
2019 | Number of Internal Directors reduced (from ten to seven) |
2020 | Countermeasures against large-scale purchases of Company stock (takeover-bid defense measures) abolished Transfer-restricted share-based remuneration program introduced to replace share-based remuneration stock option plan |
2021 | Resolution passed on policy on decisions concerning executive remuneration, etc. Optional bodies of a Nomination Committee and Remuneration Committee established |
2022 | Sustainable Business Team established Electronic voting system for shareholders and platform for electronic exercise of voting rights adopted (for exercise of voting rights via the Internet) Declaration of partnership building (on co-existence and shared prosperity with trading partners and measures barring attempts to shift the burden of transaction terms and conditions onto partners) English-language securities report introduced Skills matrix published in notice of convocation for regular general meeting of shareholders Female Director appointed;Outside Directors appointed as more than one-third of all Directors |
2023 | Sustainable Committee established |
Assessment of the Efficacy of the Board of Directors
To improve the efficacy of the Board of Directors, we implement annual self-assessment surveys of all Directors and Statutory Auditors.
- Assessment method:Questionnaires on the efficacy of the Board of Directors are distributed to all Directors and Statutory Auditors at a Board meeting each December. The efficacy of the Board is analyzed and assessed based on all answers collected from the completed questionnaires in a Board meeting in January of the following year. Efforts to make improvements are based on these findings.
- Response format:Scoring, with spaces for freeform comments
- Response method:Not anontmous
Executive Remuneration Structure
The Company’s executive remuneration system is intended to maintain a competitive position within the industry while improving business results, continually strengthening corporate value, sharing profits with shareholders, and reflecting job responsibilities and results.
Remuneration system
Fixed remuneration | Fixed remuneration figures are determined by considering the base compensation determined in accordance with the Director’s position and responsibilities as remuneration for job execution. It is paid as a fixed monthly amount. |
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Bonuses (performance-linked remuneration) | Bonuses serve as an incentive to improve business results and increase corporate value over the short term. They are paid based on a fixed percentage of the indicator of annual consolidated operating income. The Remuneration Committee determines bonuses with consideration for the contribution of each Director to the businesses of which he or she is in charge, and they are paid at fixed times each year. This indicator was chosen because it makes it possible to verify objectively the results and responsibilities of the management team. |
Share-based remuneration stock options (performance-linked remuneration) | The share-based remuneration stock options program awards share acquisition rights on Company stock to Directors as an incentive to improve business results and increase corporate value over the medium to long term based on shared awareness with shareholders of the risks and rewards of stock-price fluctuations. Only when the rate of growth in consolidated financial results (net sales and operating income) in the fiscal year in which the share acquisition rights were allotted was at least 100% vs. the previous fiscal year may a holder of share acquisition rights exercise all share acquisition rights allotted in that fiscal year. If the rate of growth was less than 100%, then only a portion of the share acquisition rights allotted in that fiscal year, based on the rate of growth, may be exercised. With the adoption of a share-based remuneration program based on transfer-restricted shares, stock options other than those already allotted have been discontinued. New options will not be issued. |
Share-based remuneration program through transfer-restricted shares | The share-based remuneration program based on transfer-restricted shares is a remuneration program adopted to replace the share-based remuneration program of stock options. The goal is to enhance value-sharing with shareholders and contribute to mid- to long-term growth in corporate value. Based on a resolution of the Company Board of Directors, monetary remuneration claims are paid each business year as remuneration related to transfer-restricted shares. Each Director is allotted shares of Company common share through the payment of all monetary remuneration claims as investments in kind. Later, restrictions on the transfer of allotted shares are waived after the Director resigns. |
The Executive Compensation Decision-making Process
A policy on determining specific compensation figures for individual Directors was approved by a resolution of the Board of Directors at its December 26, 2022, meeting. In accordance with this policy and the rules governing it, the Board delegated to the Remuneration Committee decisions on individual amounts of remuneration, etc. for Directors for the business year under review. The Remuneration Committee makes decisions on individual amounts of remuneration, etc. for Directors while verifying consistency with this policy and specific rules on such decisions. The Board also checks to make sure that the method of deciding the specifics of individual remuneration, etc., and the specifics of such remuneration, etc., for Directors are consistent with this policy. The Board has determined that this remuneration does comply with the policy.
Policy, Verification, and Exercise of Voting Rights Concerning Cross-shareholdings
The Company’s basic policy is to avoid cross-shareholdings except when they contribute to sustained business growth and strengthen transaction relationships through joint efforts with the issuer company. The Board of Directors reviews the propriety of individual holdings in detail on a quarterly basis and strives to reduce shareholdings if they are judged not to comply with this policy based on consideration of perspectives such as the economic value and capital cost of each issue, strategic relations, and importance. Voting rights on cross-shareholdings are exercised appropriately based on a close examination of the specifics of resolutions to determine whether they would contribute to increased shareholder value. In principle, we exercise voting rights properly on all resolutions
Internal Controls
Pursuant to the Companies Act and the Enforcement Regulations to the Companies Act of Japan, we maintain the internal controls systems needed for efficient management by securing the propriety of business operations and pursuing business appropriately within the Company and at Group member companies.
Conforming to the Corporate Governance Code
Basic policy on corporate governance
The Company is strongly aware of the importance of corporate governance and will strive to improve management efficiency and establish corporate ethics. Our basic policy is to establish a system to monitor the proper conduct of management activities and to promptly disclose important information that serves the common interests of our shareholders.
Conforming to the Corporate Governance Code
The Company’s corporate governance is described in the Tokyo Stock Exchange Corporate Governance Report. We also publish our initiatives regarding the Corporate Governance Code, which describes the status of corporate governance, on our corporatewebsite.
Here you can find information not just on the principles for which disclosure is required in the Corporate Governance Report, but initiatives regarding all principles.
Dialogue with Shareholders and Investors
The Pack holds briefings on financial results, meets with individual institutional investors, and engages in other activities to deepen understanding of various matters, including its business activities, management strategies, and ESG initiatives. The views of shareholders and investors gathered through such dialogues are reected in management with the aim of increasing corporate value.