Corporate governance
Recognizing the importance of establishing a corporate structure capable of responding to any changes in business conditions, the Group has adopted sustained global growth based on development of competitive strengths in businesses as its fundamental management policy. For this reason, we regard as vital efforts to enhance corporate governance and carry out swift and reasonable management decision-making while securing functions related to checks and balances.
Corporate governance structure
We keep our Board of Directors to the minimum size needed. As part of efforts to ensure efficient oversight of business execution, we’ve established the Nomination and Compensation Committee and the Outside Officer Council Meeting as subsidiary organizations under the Board of Directors. To mitigate business risks, we’ve also established various committees capable of objective, transparent, expert discussions of investment and credit, risk management, and sustainability. To ensure mutual cooperation, the management meeting and the Board of Directors may request reports on important matters discussed by these committees. The important topics discussed in committees are shared with the management meeting and the Board of Directors when reporting is requested, to improve cooperation. Furthermore, the Board of Corporate Auditors, Internal Audit Office, and accounting auditor work together toward more effective auditing of business execution. We strive to enhance various functions and intensify cooperation so that these governance systems can function even more efficiently.
The Group has sought to enhance governance to increase both transparency and objectivity. To further increase the diversity of the Board of Directors, it has welcomed a woman independent Director and a woman Corporate Auditor, for even more diverse exchange of expert opinions. In addition, while already the views of outside officers had been reflected in officer personnel decisions through the Governance Committee, we’ve established the independent Nomination and Compensation Committee to enable even more in-depth discussions. By doing so, we’re seeking to ensure transparency through nomination and compensation measures that reflect recent trends. Furthermore, the Governance Committee has been reorganized into the Outside Officer Council Meeting to contribute to a shared understanding of the issues through close exchange of opinions and information about outside officers and strengthen cooperation with the Board of Directors.
Key efforts to enhance corporate governance
Thinking on Board of Directors balance, diversity, and size
For the Board of Directors, we seek to strike a balance between size and diversity based on a membership structure that accounts for range of experience, nowledge, and abilities, including international considerations. The number of members is maintained at the necessary minimum to enable swift, decisive, effective decision-making. In addition, we secure fairness and transparency in Boardecision-making by appointing Outside Directors for at least one-third of the membership. A Skills Matrix presenting the knowledge, experience, abilities, and other properties expected of each Director and Corporate Auditor is shown below
Executive remuneration
（１）Basic policy on determining executive remuneration
The Board of Directors sets the policies for determining executive remuneration. Remuneration for Directors other than Outside Directors consists of a fixed base remuneration corresponding to the Director’s position, as well as bonuses and stock-based compensation.
Since Outside Directors are appointed to provide advice based on broad-ranging knowledge and experience, they are paid a fixed base remuneration reflecting their roles and responsibilities. Detailed decisions concerning remuneration for each Director are entrusted to the Representative Director, President & CEO. To ensure the appropriate exercise of this authority by the Representative Director, President & CEO, the Board of Directors is advised by the Nomination and Compensation Committee, a majority of whose membership consists of Outside Directors.
（２）Indicators related to remuneration, reasons for selecting these indicators, and how actual remuneration is determined
Analysis and assessment of the Board of Directors
As the Company strives to improve corporate governance, it analyzes and assesses the efficacy of the Board of Directors annually based on evaluations by each Director and Corporate Auditor to determine whether the Board of Directors has effectively fulfilled its roles.
（１）Progress on addressing issues identified in assessment for last year (FY2022)
【Issues identified for FY2022】
- 1We will enhance discussions to contribute to future progress, including new businesses.
- 2 In human-resource management, we will develop specific individual measures such as those aiming to enhance hiring, improve retention, and allocate human resources strategically.
- 3We will consider the roles and name of the Governance Committee, since its responsibilities for sharing information among outside Directors and advising on nomination and remuneration have been transferred to the new Nomination and Compensation Committee.
【Addressing issues identified for FY2022】
- 1The Board of Directors began discussions of strategic businesses as identified in the Mid-term Business Plan, to contribute to future growth and progress.
- 2Some results were achieved in several areas, including enhancing hiring (adequate hiring secured in business and technical fields) and improving retention (YoY reduction in the rate of separation within three years). Employee satisfaction was made visible through an engagement survey. Analysis of the survey results indicate the need for improvement measures in individ- ual sections and levels, in addition to promotion of Companywide measures by the Human Resources Department alone. Currently we’re implementing both these types of measures in parallel.
- 3The Governance Committee was renamed the Outside Officer Council Meeting. It meets once every three months to share information among outside officers and Corporate Auditors regarding issues recognized in the Company.
（２）Progress on implementation in FY2023
As was the case last year, assessments were conducted through the following evaluation process, based mainly on the methods of operating the Board of Directors, deliberations in the Board, and the structure of the Board, among other perspectives.
- Self-assessments based on surveys of all Directors, including outside Directors, and all Corporate Auditors, including outside Corporate Auditors
- Individual interviews with only outside Directors and outside (part-time) Corporate Auditors
- Discussion in the Board of Directors and the Governance Committee based on survey results
- Decision by the Board of Directors on the assessment of the Board of Directors based on these self-assessments, discussions, etc
The results of this assessment of the Board of Directors indicate no serious concerns or other issues in FY2023 with regard to the effectiveness of the Board of Directors. The assessment points to no concerns with regard to the operations, deliberations, or structure of the Board of Directors. As a whole, the Board of Directors functions effectively.
（３）Main issues recognized and future responses
- Human resource strategy and development
・Visualization of progress on improvement measures based on engagement surveys (shared)
・ Drafting and implementing measures to ensure diversity among core human resources - New businesses
・Discussions of strategic businesses where growth can be expected
（４）FY2024 plans
In evaluation of Board of Directors efficacy in FY2024, we plan to ask an outside agency to conduct evaluation and analysis to verify efficacy from a neutral, objective point of view.
Key items related to internal control
Enhancement of the functions of the Board of Directors and the Board of Auditors systems
The Board of Directors is a forum for directing the overall management strategy of the Group, and while ensuring swift decision-making, it formulates basic management policies, decides on matters stipulated by laws and regulations, the articles of incorporation, and other important matters related to management, and supervises the execution of duties by directors. In addition, outside directors and outside auditors attend the Board of Directors meetings, ensuring fairness and transparency in decision-making regarding business execution.
In addition, in order to pursue more effective corporate governance, we strengthen the supervisory function of the Board of Directors by exchanging information and sharing understanding among independent outside directors at the Outside Officers Liaison Council, which is a sub-organ of the Board of Directors.
Strengthening of compliance with laws and regulations and crisis management through deliberations on business execution at management meetings
We hold regular weekly management meetings composed of directors, auditors, and executive officers, where we deliberate and respond to important business execution, compliance with laws and regulations, and crisis management.
Internal control over financial reporting
The Internal Control Committee and the Board of Directors have evaluated that the internal controls related to financial reporting for fiscal 2022 are effective in accordance with generally accepted evaluation criteria. In addition, we have received an audit opinion from the audit corporation that this evaluation is appropriate.
Strengthening of the internal control system
We review the "Basic Policy on Internal Control" every year and make resolutions at the Board of Directors' meetings, and disclose the status of its operation in our business reports.