Initiatives to Comply with the Code
Reasons for not implementing certain Corporate Governance Code principles
Supplementary Principle 3-2-1:
(i) While we have not established clear and detailed decision standards in relation to the evaluation of outside accounting auditor candidates, we plan to discuss such guidelines, etc. in the future at the Audit Committee, etc.
(ii) We confirm independence and expertise through exchanges of opinions, the state of audit implementation, etc. with the outside accounting auditor pursuant to the “Practice Policy of Statutory Auditors, Etc. Relating to Establishment of Standards for Evaluation and Selection of Accounting Auditors.” Our understanding is that there are no issues with either independence or expertise regarding our current outside accounting auditor, Ernst & Young ShinNihon LLC.
Supplementary Principle 4-1-2:
We explained the medium-term management plan for 2015 – 2017 through the Company website and financial results briefing after reporting on the state of achievement of the plan in the 2017 financial results briefing materials and analyzing the factors. While we currently have not established or announced a medium-term plan in light of the recent rapid changes in the external environment, we plan to announce a medium-term management plan that includes future growth strategies once it is established and finalized.
Supplementary Principle 4-1-3:
The Company implemented an executive officer system two years ago (April 2019), and intends to develop the next generation of executives through delegation of responsibility and authority and propose and execute appropriate plans for the Group as a whole, centered around the Board of Directors, for the succession of top management positions for the purpose of ensuring sustainable corporate growth and increased enterprise value in the medium and long term.
Supplementary Principle 4-11-3:
The outside directors of the Company give assessments and guidance to each director as necessary regarding the effectiveness of the Board of Directors.
Going forward, we will consider disclosure of the results of the items listed above.
Disclosures pursuant to Corporate Governance Code principles
The policy of the Company in relation to cross-shareholdings and its standards for the exercise of voting rights are as follows.
- Policy in relation to cross-shareholdings:
The Company will not hold cross-shareholdings unless it is necessary for a business relationship or collaboration with the Company that involves a capital alliance or stock holding from the viewpoint of avoiding share price fluctuation risks and improving asset efficiency.
- Standards for the exercise of voting rights for cross-shareholding stock
The exercise of voting rights for cross-shareholding stock is decided case-by-case, and we decide how to vote after confirming whether it is reasonable as to whether it impedes the realization of the purposes of the shareholding, whether it may harm the enterprise value of the subject company, etc.
The Company will decide whether to implement a material transaction with a related party with a resolution of the Board of Directors as required pursuant to laws, regulations, and internal regulations. The terms and conditions of transactions with related parties are similar to those of ordinary transactions taking market prices into consideration and based upon the opinions of external advisors. Overviews of material transactions with related parties are disclosed in the securities reports, etc.
Certain Company group companies operated defined-benefit pension plans until 2014 but have since transitioned to defined-contribution pension plans. The pension plans at each group company have been aligned as defined-contribution pension plans.
(i) Our corporate philosophy, management plans, etc. are published on the Company website, in the financial results briefing materials, etc.
(ii) Our basic corporate governance policy is stated on the Company website, in corporate governance-related reports, and in securities reports.
(iii) The compensation of directors who are not Audit Committee Members is determined by delegation to the Nomination and Compensation Committee by resolution of the Board of Directors pursuant to the “Policy Relating to Determination of Individual Compensation and Other Terms for Directors” resolved by the Board of Directors after deliberation by the voluntary Nomination and Compensation Committee, of which a majority of members and the Chairman are independent outside directors, within the total compensation limits resolved by the General Meeting of Shareholders, taking into consideration company performance, details of management, economic conditions, etc. The compensation of directors who are Audit Committee Members is determined through discussion by the Audit Committee within the total compensation limits resolved by the General Meeting of Shareholders, taking into consideration company performance, details of management, economic conditions, etc.
(iv) The policies and procedures for the appointment of the executive team and nomination of director candidates are not provided in internal regulations, etc., however these matters are debated by the Board of Directors following deliberation by the voluntary Nomination and Compensation Committee, of which a majority of members and the Chairman are independent outside directors, with a comprehensive determination as to their ability to grasp the issues of their responsible divisions and cooperate with other officers and employees to resolve issues, their knowledge to ensure compliance with laws, regulations, and corporate ethics, etc., considering the current scale and stage of the business of the Company and based upon the corporate philosophy of the Company, and a resolution of the Board of Directors is obtained as a proposal for the election of the directors at a General Meeting of Shareholders. In relation to the independence of outside directors, we believe that they are independent in that they do not have any special personal relationships, capital relationships, or other conflicts of interest with the Company in accordance with the independence requirements provided by the Tokyo Stock Exchange. With regard to removal, if it has become clear that an officer does not conform to the standards for election or nomination, etc., such as by becoming unable to supervise or manage their areas of responsibility or damaging the enterprise value of the Company through acts in violation of laws, regulations, the Articles of Incorporation, the corporate philosophy of the Company, etc., the Board of Directors debates whether removal is appropriate following deliberation by the Nomination and Compensation Committee, and a resolution of the Board of Directors is obtained as a proposal for the removal of the director at a General Meeting of Shareholders.
(v) In the election and removal of directors, the Board of Directors makes a comprehensive determination of their knowledge to ensure compliance with laws, regulations, and corporate ethics, etc., in addition to their abilities and experience corresponding to their role, and makes a decision based upon their suitability, etc. from the perspective of increasing the social value of the company and improving corporate governance. To determine whether directors (including outside directors) meet the foregoing criteria, we disclose their principal career experience forming the basis for their election in notices of general meetings of shareholders and securities reports.
Supplementary Principle 4-1-1:
The Board of Directors of the Company has clearly provided the material matters for the Company and its group companies to be determined by the Board of Directors in the “Board of Directors Regulations,” “Affiliated Company Management Regulations,” and “Authority Regulations,” in addition to the matters that the Board of Directors is required to decide pursuant to laws, regulations, and the Articles of Incorporation. In addition, aside from the Board of Directors, the matters to be decided by the Representative Director, President and CEO, Director and CFO, directors responsible for business, executive officers, division managers, etc. are clearly provided in the “Authority Regulations.”
The Company determines the independence of officers based upon the requirements provided by the Tokyo Stock Exchange. Three outside directors have been elected as independent officers, and each independent officer maintains their independence without bias toward the interests of management or specific interested parties. Candidates who are able to supervise management independently from an objective standpoint and who have broad insights are elected as outside directors, and their election is debated by the Board of Directors following deliberation by the voluntary Nomination and Compensation Committee, of which a majority of members and the Chairman are independent outside directors, and a resolution of the Board of Directors is obtained as a proposal for the election of the directors at a General Meeting of Shareholders.
Supplementary Principle 4-11-1:
The approach of the Company relating to balance, diversity, etc. of knowledge, experience, and abilities in the Board of Directors as a whole is as provided in 3-1(iv) above. The Company has provided for a maximum of 12 directors (no more than 8 of whom are not Audit Committee members and no more than 4 of whom are Audit Committee members), and considering the current scale of the business, scope of responsibilities, etc., has elected 7 directors (including 3 of whom are Audit Committee members).
Supplementary Principle 4-11-2:
Other positions concurrently held by Company directors are disclosed in securities reports, notices of general meetings of shareholders, corporate governance-related reports, etc. The internal regulations of the Company require the approval of the Board of Directors if a director (other than an outside director) concurrently serves as an officer of another company. The Company bases this upon not only the formal number of concurrent appointments, but also whether they can appropriately fulfill the roles and responsibilities expected of them as a director in practice. The Company has also established a voluntary Nomination and Compensation Committee, of which a majority of members and the Chairman are independent outside directors and requires deliberation by the Nomination and Compensation Committee before obtaining a resolution of the Board of Directors as a proposal for the election of directors at a General Meeting of Shareholders, and debates whether they are appropriate, including their number of concurrent appointments at other companies. The Representative Director, President and CEO and two of the three outside directors who are Audit Committee members concurrently serve as outside directors of other listed companies, however this has no effect on the performance of their duties as directors. The other directors do not concurrently serve as officers outside the Company group. This structure ensures adequate time for them to fulfill the roles and responsibilities to the Company that are expected by the Company.
Supplementary Principle 4-11-3:
As stated under “Reasons for not implementing certain Corporate Governance Code principles” above.
Supplementary Principle 4-14-2:
The Company provides information to enable directors (including Audit Committee members) to continue their studies and acquire the necessary and sufficient knowledge to fulfill their expected roles and responsibilities and bears the necessary expenses for such training.
The Company elects a director responsible for investor relations and has designated the Group Management Strategy Division as the division responsible for investor relations. Our policy and practice is to hold financial results briefings (or publish financial results briefing videos on our website) for shareholders and investors once every six months in principle, and provide individual reports, etc. as required.