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 28, 2021
*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(*)||4|
|Directors' term of office||One year (Two years for directors who are Audit and Supervisory Committee members)|
|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||No|
* Judged by the Company's "Criteria for Independence of External Directors and External Audit & Supervisory Committee Members"
(as of June 28, 2021)
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||○||○||Although he has not been involved in corporate management other than in his capacity as External Director or External Auditor, given his wealth of expertise and outstanding insight as an attorney at law, the Company judged him to be suitably qualified as an External Director who will serve on the Company’s Audit and Supervisory Committee and has appointed him as such.||19／19||24／24|
|Yuzo Kawamori||○||○||Given his outstanding insight as a manager of an industry-leading company and wealth of experience in overseas business development, the Company judged him to be suitably qualified as an External Director who will serve on the Company’s Audit and Supervisory Committee and has appointed him as such.||19／19||23／24|
|○||○||Given his wealth of experience as a manager in a wide variety of businesses in the finance industry and outstanding insights into finance and accounting, the Company judged him to be suitably qualified as an External Director who will serve on the Company’s Audit and Supervisory Committee and has appointed him as such.||19／19||24／24|
|○||○||Given her wide range of outstanding knowledge based on her experience as a researcher and as a manager in major posts in the head office divisions of a major heavy industry company, the Company judged her to be suitably qualified as a Director who will serve on the Company’s Audit and Supervisory Committee and has appointed her as such.
*Elected on June 25, 2021
The Company's Executives Remuneration
Policy on Determining Director Remuneration on an Individual Basis
The Company has established a policy for determining the content of remuneration for Directors on an individual basis (excluding those who serve on the Audit and Supervisory Committee; same below). The following provides an overview of such, where individual remuneration is determined by the Board of Directors following deliberations by the Human Resources Committee*1. In determining the content of individual remuneration, etc. for Directors, the Human Resources Committee conducts a multifaceted review, including consistency with the draft and the decision policy, and the Board of Directors basically respects the report of the Human Resources Committee and judges that it is in line with the decision policy.
- Providing remuneration to the Company's Directors on an individual basis serves to ensure that Directors chart sustainable growth for corporate performance and corporate value based on the "Vision of Tokuyama." This also serves to secure and retain human resources through an appropriate level of remuneration, where the Basic Policy functions to determine such content.
- Remuneration for the Company's Directors consists of basic remuneration (monetary remuneration) and performance-linked Share-based Remuneration*2.
- Basic remuneration is composed of a standard amount determined separately for each position from a comprehensive perspective that takes into account the roles and responsibilities of the Director as well as the Company's performance and remuneration data provided by external expert organizations. An evaluation based on the achievement level for the previous fiscal year's targets is added to this determination.
- Performance-linked Share-based Remuneration is based on the fiscal years covered by the Medium-term Management Plan as the target period, and is provided in the form of Company’s shares in accordance with the achievement level for the predetermined performance targets.
- The ratio of remuneration for Company Directors by type is determined in consideration of the ideal balance between the basic standard for the required roles/responsibilities and incentives to stimulate the desire to achieve performance targets.
- The Human Resources Committee is composed of a majority of External Directors and deliberates matters related to human resources and remuneration regarding officers. This Committee also serves as a voluntary advisory committee for the Company that makes appropriate reports and recommendations to the Board of Directors.
- All directors, except those who serve on the Audit & Supervisory Committee, Non-executive Directors, External Directors, and those NOT residing in Japan, are eligible for the performance-linked Share-based Remuneration plane.
Amount of remuneration paid to Directors and Audit & Supervisory Comittee members (For FY 2020)
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)
* The amounts listed above include ¥25 million in expense refunds in the form of performance-linked stock remuneration during the fiscal year under consideration. The above amounts do not include employee salaries paid to directors with duties in an employee's capacity.
Policy on the Holding of Listed Shares for Purposes Other Than Pure Investment
The Company 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. It sold all shares of two listed issue in FY2020, resulting in a total of 22 listed issues of shareholdings as of March 31, 2021.
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.
Analysis and Evaluation of Overall Effectiveness of the Board of Directors
To secure a highly transparent and fair process, the Company undertook an evaluation of the effectiveness of its Board of Directors through an external organization.
This organization conducted a survey of all directors in April 2021, the results of which it then analyzed and reported to the Board of Directors in May 2021.
Although issues pointed out during the previous fiscal year were found to have improved to a certain degree, the report indicated there were still several issues with Group company risk management.
The report largely confirmed that the effectiveness of the Board of Directors during the fiscal year under review had been secured. However, it also indicated there were needs beyond simply effectively monitoring the priority issues formulated in the Medium-term Management Plan and sporadically discussing investment matters at such times. These needs included the importance of organizing issues from a groupwide perspective, conducting risk analyses, and establishing a location for concrete discussions regarding plans to overcome these risks.
The Company will improve the effectiveness of the Board of Directors on an ongoing basis.