Corporate Governance

Tokuyama strongly believes creating and continuously providing new value is made possible through the trust of and cooperation with its stakeholders, which include shareholders, customers, trading partners, employees and local communities. This in turn enables the Company to grow on a sustainable basis and to increase its corporate value over the medium to long term. In order to make this a reality, Tokuyama has positioned corporate governance as a key management priority. Tokuyama has always been working to improve corporate governance. Taking into consideration the introduction of the Corporate Governance Code in Japan, the Company places the utmost emphasis on ensuring the rights and equality of its shareholders while strengthening the supervisory function and securing the independence of the Board of Directors. At the same time, Tokuyama works diligently to accelerate decision making and to clarify the business execution responsibilities of its Board of Directors while ensuring appropriate disclosure and transparency and promoting constructive dialogue with shareholders.

Corporate Governance Structure

The Company introduced an executive officer system to separate the supervision and execution functions in April 2011, assigning external directors in June of the said year. The number of external directors was subsequently increased in stages. On June 23, 2017, the Company transitioned from a company with a Board of Auditors to a company with an Audit and Supervisory Committee. The Audit and Supervisory Committee selects three external directors from five Committee members and endeavors to ensure management transparency and fairness. By doing so, it strives to maintain management soundness. As a company with an Audit and Supervisory Committee, the Company seeks to enhance corporate governance at all times by making the best of its rapid decision-making functions and effective supervising/auditing functions.


Establishing a Corporate Governance System to Raise Corporate Value

Board of Directors and Executive Officer System

In addition to deliberating and making resolutions on important matters relating to the activities of the Company, the Board of Directors supervises business operations. During fiscal 2016, the Board of Directors met on 22 occasions.

As of June 23, 2017, Tokuyama’s Board of Directors comprised 12 members. The Company appointed three external directors thereby bolstering the supervisory function of the Board of Directors. Meanwhile, the term of office of directors (excluding directors who are Audit and Supervisory Committee members) is set at one year in order to ensure clear accountability as well as the ability to swiftly address changes in the operating environment.

Tokuyama adopted an executive officer system in April 2011 with the aim of separating the supervisory and executive functions for business operations. As of June 23, 2017, the Company had 13 executive officers.

Based on the rules for approval determined by the Board of Directors, authority is delegated to the business executive system.

Audit and Supervisory Board

Directors who are Audit and Supervisory Committee members attend meetings of the Board of Directors and other important internal meetings for purposes such as gathering information on the status of the execution of businesses, and conduct audits of how the executive officers are executing their duties. As of June 23, 2017, the Audit and Supervisory Committee consists of five directors who are the members of the Committee, including three external directors.

Human Resources Committee

The Human Resources Committee consists of representative directors and external directors. This committee holds discussions on such matters as the remuneration for directors and executive officers and the selection of director and executive officer candidates before Board of Directors meetings take place.

Executive Committee

Members of the Executive Committee are selected by the president and executive officer from among the Company’s executive officers. The Executive Committee serves as the Company’s decision-making body with respect to the execution of business operations. In principle, the committee meets two times each month. Based on the approval rules and regulations determined by the Board of Directors, the Executive Committee deliberates and makes decisions on strategies and other important matters.

Strategy Committee

Members of the Strategy Committee are selected by the president from among the Company’s executive officers. The committee meets once a month and serves as an advisory body to the president. In addition to deliberating on the direction of business execution, the Committee takes steps to confirm the allocation of management resources aimed at evaluating conditions relating to the execution of business with respect to important matters requiring approval while setting the direction of policies relating to the execution of business with respect to specific projects.

CSR Promotion Council

Chaired by the president, the CSR Promotion Council is comprised of all executive officers working in Japan. The Council sets policies on CSR and lays out the goals of our CSR activities, facilitating the execution and attainment of all such activities and goals. The Council focuses on maintaining appropriate corporate governance and internal control, which together are the foundations of CSR. It also discusses important matters regarding internal control.

Risk Management and Compliance Committee

Tokuyama’s Risk Management and Compliance Committee, chaired by the director supervising the Corporate Social Responsibility Division, operates under the CSR Promotion Council. The Committee takes the initiative in promoting risk management and compliance, which are central to effective internal control.

Helpline Committee

The Helpline Committee is responsible for the administration of Tokuyama’s helpline (whistle-blowing) system, which has been established for the purpose of enabling the internal reporting of legally questionable actions and behavior by Group executives and employees.

Departments Responsible for Internal Auditing

Tokuyama has established the Auditing Department and the RC Management Department, which are responsible for internal auditing. These departments perform internal audits of individual divisions and departments of the Company as well as of Group companies.

Policies and Procedures for Appointing Management Executives and Nominating Director and Auditor Candidates

To enable supervision of appropriate decision making and business execution with regard to the Company’s business operations that are centered on chemicals, the selection of internal candidates for directorships appoints people who are well-balanced in terms of their knowledge of each business segment and area as well as the experience they possess. By adding external directors who possess high-level insight and wide-ranging experience as managers, the Company ensures the balance and diversity of the Board of Directors as a whole.

When nominating director (excluding directors who are Audit and Supervisory Committee members) candidates, discussions are held at a Human Resources Committee meeting in advance of the subject appearing on the agenda at a Board of Directors’ meeting. Comprising representative directors and external directors, the Human Resources Committee is the entity that nominates directors, executive officers and others, and discusses such matters as remuneration. The Board of Directors makes its decisions in response to the Human Resources Committee’s report.

In the case of the nomination of directors who are Audit and Supervisory Committee members candidates, the Board of Directors makes its decisions having received the assent of the Audit and Supervisory Committee.


Policies and Procedures for Determining the Company’s Executives Remuneration

The policy relating to the amount of remuneration for the Company’s executives and determining method to calculate such amounts is based on rules of executive remuneration, which are as follows.

1. The remuneration of directors who are Audit and Supervisory Committee members and other directors shall be within a range of remuneration obtained by resolution at a Shareholders’ Meeting.
2. Having received the proposals of remuneration of directors (excluding directors who are Audit and Supervisory Committee members) from the president and executive officer in advance, such proposals shall be discussed at a Human Resources Committee meeting.
3. Individual directors (excluding directors who are Audit and Supervisory Committee members) remuneration shall be in accordance with the amounts decided for each executive and determined by Board of Directors’ resolution.
4. The specific amounts of remuneration for directors who are Audit and Supervisory Committee members shall be determined by the resolution of Audit and Supervisory Board.

In fiscal 2016, a total of ¥114 million, ¥38 million and ¥71 million was paid to five directors, two corporate auditors (Audit and Supervisory Board members) and seven external officers, respectively.

In addition to the aforementioned compensation, an amount of ¥31 million was paid as salaries to three employees, who hold the concurrent position of director.

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