Based upon recognition that corporate governance is a key management priority, Tokuyama has always been working to bolster corporate governance. Taking into consideration the introduction of the Corporate Governance Code in Japan as its basic policy, the Company places the utmost emphasis on ensuring the rights and equality of its shareholders and cooperating with various stakeholders properly 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 its shareholders.
Corporate Governance Structure
as of June 25, 2020
*Tokuyama operates committees focused on risk management and compliance in seven critical and specialized areas, separately from the Risk Management and Compliance Committee. The committees operate under the CSR Promotion Council, overseeing the following areas: financial reporting, antimonopoly and security trade, export trade control, information security, environmental measures, security measures, and product safety and quality assurance.
Corporate governance structure
|Corporate organization||company with an Audit and Supervisory Committee|
Number of Directors
(Number of External Directors)
|Number of External Directors granted to be independent(*)||3|
|Directors' term of office||One year (the same term of office applies to outside Directors)|
|Incentive compensation for Directors||Introduction of Performance-related Share-based Remuneration Plan for Directors|
Number of Audit and Supervisory
(Number of External Audit and Supervisory
|Number of independent officers||3|
|Adoption of an executive officer system||Yes|
|Committees that assist the president in making decisions||Executive Committee : The Executive Committee serves as the Company's decision-making body with respect to the execution of business operations.
Strategy Committee : The Strategy Committee deliberates on the direction in which business is executed.
|Discretionary committee that advises the Board of Directors||Human Resources Committee : The Human Resources Committee holds discussions on such matters as remuneration as well as the selection of director and executive officer candidates.|
|Independent Accounting Auditors||Grant Thornton Taiyo LLC|
|Introduction of anti-takeover measures designed to prevent the large-scale purchase of the Company's shares||Yes(more deteils)|
* Judged by the Company's "Criteria for Independence of External Directors and External Audit & Supervisory Committee Members"
(as of June 25, 2020)
Criteria for Defining the Independence of External Directors
With regard to its Criteria for Defining the Independence of External Directors, the Company adjudges those who do not fall into any of the following categories as demonstrating sufficient independence.
- Persons who are not currently nor in the past 10 years been engaged in the execution of business operations of the Company or its affiliated companies*1.
- Persons who are not currently nor in the past three years been engaged in the execution of business operations of a major trading partner of the Company, or executives thereof. However, the Company's major trading partners are defined as those that fall into either of the following categories:
- Financial institutions that have financed more than 2% of the Company's total borrowings.
- Trading partners that account for more than 2% of the Company's consolidated net sales.
- Persons who currently deem or in the past three years have deemed the Company or an executive thereof to be a major trading partner. However, persons who deem the Company to be a major trading partner are defined as those cases in which the amounts paid by the Company account for 2% or more of the said trading partner's consolidated sales.
- Consultants, accountants or legal professionals who currently receive or in the past three years have received large financial considerations or other property*2 from the Company besides their compensation as a director/auditor. (If the entity in receipt of the assets is an organization, such as a legal entity or an association, the person who belongs to such organization.) However, includes those that fall into either of the following categories:
- Auditors who are responsible for the statutory audit of the Company.
- Law firms that serve as legal counsel to the Company.
- Spouses or relatives within the second degree of kinship of the relevant persons in the sections above (but limited to important persons*3.
- Pursuant to Article 2, Paragraph 3, Item 6 of the Ordinance for Enforcement of the Companies Act of Japan.
- In the case of an individual, a substantial compensation payment is defined as an annual amount of compensation that exceeds 10.0yen million, and in the case of an organization, an amount of 2% or more of the annual total income of that organization.
- In the case of a company, important persons are defined as those who hold the responsible positions of director, executive officer, operating officer and positions equivalent to manager; in the case of an accounting office and audit corporation, certified accountants; in the case of law offices and legal corporations, lawyers; and in the case of a tax accountant office and tax accountant corporation, tax accountants. In other organizations, an important person means directors, such as a director or a councillor.
The table below can be scrolled horizontally.
|name||Audit & Supervisory
|Reason for Selection||
|Meetings of Audit
|Shin Kato||○||○||Given his wealth of experience and broad insight and knowledge as an attorney at law, Mr. Shin Kato is put forward for election as an External Director who is an Audit and Supervisory Committee member.||17／17||25／25|
|Yuzo Kawamori||○||○||The Company appoints those whom it judges, from their outstanding insight and wealth of experience in overseas business development as managers of industry-leading companies, to be suitably qualified to serve as external directors who will be members of the Company's Audit and Supervisory Committee.||13／13||18／18|
|○||○||The Company appoints those whom it judges, from their wealth of experience and outstanding insights into finance and accounting as managers in a wide variety of businesses in the finance industry, to be suitably qualified to serve as external directors who will be members of the Company's Audit and Supervisory Committee.||12／13||17／18|
* The difference in the total number of times for both the Board of Directors and the Audit and Supervisory Committee is due to the difference in the time of inauguration.
The Company's Executives Remuneration
Matters Concerning Policy with Regard to Amount of Executive Remuneration and Methods Used for Calculation
- Based on the executive remuneration rules and executive remuneration stock issuance rules, the remuneration of the Company's executives (excluding directors who are Audit and Supervisory Committee members) comprises fixed basic remuneration and performance-linked stock remuneration, the specific calculations of which will be made by the representative director, president and executive officer upon authorization by the Board of Directors in accordance with the following policy.
- Remuneration for directors who are Audit and Supervisory Committee members is limited to fixed remuneration only, taking into consideration the distinction between full- and part-time work, the status of the division of audit duties, and the content and level of remuneration of directors. This is decided following discussions with directors who are Audit and Supervisory Committee members.
- To achieve more transparent and objective management from the perspective of corporate governance, we have set up a Human Resources Committee, comprising a majority of external directors, who have the task of deliberating personnel matters and remuneration concerning officers and making reports or recommendations to the Board of Directors. The content of executives' remuneration (excluding directors who are Audit and Supervisory Committee members) is calculated in detail by the representative director, president and executive officer and discussed and determined by the Board of Directors after deliberation by the Human Resources Committee.
(a) In the fixed portion, the basic remuneration is calculated by taking into consideration the previous year's consolidated performance and the achievement level of each director's business goals.
(b) To realize the Company's Medium-Term Management Plan, performance-linked stock remuneration has been introduced from September 2018 to clarify the link between executive remuneration and the corporate value of the Company.
Consolidated operating income and other indicators, which are the main financial targets of the Medium-Term Management Plan, have been adopted as indicators for performance-linked remuneration. Based on the achievement level for the fiscal year ending March 31, 2021, which is the final fiscal year of the target period, the system involves the issuance of stock, etc. of the Company as executive remuneration.
(c) The appropriateness of the level of remuneration, etc. is to be confirmed based on the findings of surveys of domestic competitors and comparable companies obtained from a remuneration research company.
Amount of remuneration paid to Directors and Audit & Supervisory Comittee members (For FY 2019)
The table below can be scrolled horizontally.
|Subject of Remuneration||Number of People||Remuneration Amount|
(Excluding directors who are Audit &
Supervisory Committee members)
|Directors who are Audit & Supervisory
(Excluding External Directors)
Policy on Holding Listed Shares for Purposes Other than Pure Investment
Tokuyama holds shares of publicly listed companies on a strategic basis in accordance with the necessities of its business activities as a part of its overall management strategy. This includes the need to maintain and bolster transactions, raise funds, and stably procure raw materials. As far as the strategic holding of shares in publicly listed companies is concerned, the Company will limit its holdings to the minimum level possible taking into consideration the need to ensure efficient corporate management.We sold all shares of 1 listed issue in 2019, resulting in a total of 24 listed issues of shareholding as of March 31, 2020.
In addition, the Board of Directors takes steps to verify the economic rationality of holding shares in publicly listed companies by comparing capital costs that factor in associated risks with accrued benefits while confirming the propriety of its holdings based on an outlook of the future each year.
Evaluation of the Effectiveness of the Board of Directors
To secure a highly transparent and fair process, Tokuyama undertook an evaluation of the effectiveness of its Board of Directors through an external organization.
A survey and interviews of all directors were conducted from March 2020 to May 2020. The result from the survey were analyzed and reported to the Board of Directors in May.
While the survey confirmed that the effectiveness of the Board of Directors was largely confirmed, certain issues were raised such as the promotion of digital transformation (DX) and the development of a risk management system.
The interviews confirmed that a strong relationship of trust has been fostered between external directors, who serve an oversight function, and management, who are charged with the responsibility of executing the Company business and that the provision of substantial information to external directors has helped raise the sophistication of the Board's advisory and supervisory functions. Meanwhile, the interviews also pointed out a lack of broad consideration of medium- to long-term management policies based on an objective analysis of the business environment.
Moving forward, Tokuyama will continue to improve the effectiveness of the Board of Directors through various means including stringently screening agenda items, invigorating deliberations by devising innovative ways to enhance explanation methods, and preparing materials that summarize and sort issues.