We believe that corporate governance is one of the most important aspects of management. As a basic principle of management, we strive to improve the management efficiency of the entire group and conduct thorough governance by enhancing the management of group companies and by strengthening our auditing system. We also disclose adequate information at appropriate times in order to maintain the transparency and soundness of management.
By conducting prompt and appropriate decision making, and through our internal governance function, we are fulfilling our social responsibility as a company, while building strong relationships of mutual trust with our shareholders, investors, customers, employees, the local community, and other stakeholders.

Board of Directors

Our Board of Directors consists of persons who are well versed in the relevant businesses and have knowledge in management. The number of members on the Board must be no more than 10, with no less than one-third of the members appointed having to be outside directors. In nominating Directors, etc., the company formulates a draft after taking into consideration the knowledge, experience, ability, etc., required of Directors in light of the management strategy, and the Nomination Committee carries out deliberations, followed by deliberation by the Board of Directors to determine candidates. Our Board of Directors establishes business strategies, business plans, and other business policies, creates an environment where appropriate risk-taking by the management is supported, and carries out effective oversight of the management.
The Board of Directors leaves daily management tasks that are not subject to the Board’s resolution to the executive directors, and receives reports from them on the status of their respective tasks and on business issues. The directors provide feedback and opinions on these reports, while outside directors provide advice, etc. from their independent stance.

Audit & Supervisory Board

More than half of the members of the Audit & Supervisory Board are outside auditors. Besides fulfilling their responsibilities as auditors from an independent standpoint, they also liaise closely with the company’s outside directors, working to strengthen oversight of company management, and focusing on enhancing corporate governance.

Nomination Committee

The Nomination Committee is composed of at least three members, including the representative director and outside directors. The committee submits reports and recommendations to the Board of Directors regarding the appointment and removal of directors and auditors. The Board of Directors makes its decisions in line with the content of these reports. The committee is chaired by an independent outside director.

Remuneration Committee

The Remuneration Committee is composed of at least three members, including the representative director and outside directors. The Remuneration Committee submits reports and recommendations to the Board of Directors regarding the determination of the remuneration amounts for individual Directors, etc., and the Board of Directors makes a decision in accordance with the content of such reports and recommendations. The committee is chaired by an independent outside director.

 

We transitioned to a pure holding company system on January 1, 2006, under which the function of executing operations was transferred to group companies and group management has been promoted.
The Board of Directors of the holding company is engaged exclusively in the “development of group strategies,” “optimal allocation of the group’s management resources,” and “supervision of execution of the group’s operations.” Meanwhile, directors of group companies assume the role and responsibility of executing operations based on the group strategies. Through this system, we intend to speed up management decision-making and to strengthen supervisory functions, thereby working on the development of an efficient and agile management structure. 
We also strive to keep track of the status of execution of operations and take prompt and necessary action by holding regular meetings of the Management Meeting, in addition to monthly meetings of the Board of Directors and regular meetings of the Audit & Supervisory Board. On top of that, in order to enhance the set of internal control functions, we hold meetings of the specialized committees where necessary, as well as promoting fair corporate activities while securing high transparency with respect to issues common to group companies, with support from the Management Staff Unit. Furthermore, we strive to ensure that the management policies for the entire Group are known to all members of the group, by holding the annual “Meeting to Present Management Policy” attended by executive members of group companies. 

We have formulated the Basic Policy on the Establishment of the Internal Controls System, to ensure that the operations of Daiwabo Holdings and our subsidiaries are conducted appropriately in accordance with the Companies Act.

The Company sends a questionnaire to all directors and Audit & Supervisory Board Members each year to evaluate and analyze the effectiveness of the Board of Directors as a whole and discusses the tally results at meetings of the Board of Directors. The contents of the questionnaire include "Composition and operation of the Board of Directors," "Management and business strategies," "Corporate ethics and risk management," "Performance monitoring and Management evaluation & remuneration," and "Dialogue with shareholders, etc.," with separate questions attached to each content. In addition to this, individual interviews were conducted with each of the officers in order to delve deeper into the issues. For the purpose of obtaining candid opinions from each officer and ensuring objectivity, we outsource the compilation of questionnaire survey results, interviews with officers, and their analysis to a third-party organization. With regard to the survey results, matters such as the composition of the Board of Directors, the selection of appropriate agenda items, and the securing of sufficient time for discussion through efficient management have received generally positive evaluations.
Specifically, with regard to the expansion of time for discussions aimed at the enhancement of medium- to long-term corporate value, the Company has reviewed the agenda items for meetings of the Board of Directors and implemented improvement measures such as the streamlining of operations through advance explanations and the distribution of materials. Although there is still room for continuing consideration and improvement, it was evaluated that progress has been made steadily. 
Based on these results, we understand that we have secured the effectiveness of our Board of Directors as a whole. 
On the other hand, the Company recognized matters such as the following as priority issues: “formulation of a policy for the allocation of management resources based on the cost of capital;” “clarification of the role of the Board of Directors in the formulation and execution of human resources strategies;” “the balance of results indicators;” “the role and functions of the Remuneration Committee concerning remuneration;” “confirmation of the appropriateness of judgments of the appointment of Directors (outside);” “oversight of the development of management human resources;” and “the formulation and operation of a successor development plan for the Representative Director, President and Chief Executive Officer.” We have started to consider comprehensively and continuously improvement measures to improve not only the priority issues but also the various matters pointed out in this survey.
Regarding the proposed improvements, discussions and evaluations are conducted by the Board of Directors, which is composed of a majority of outside directors. Key issues and future initiatives are then reported and proposed, and reflected in the operations of the Board of Directors by incorporating them into the themes for the following fiscal year. Through these efforts, we will continue working to revitalize the Board of Directors and strengthen its oversight functions to contribute to sustainable growth and medium- and long-term improvement of corporate value.

The basic policy for the company’s remuneration scheme for its directors is: to increase their incentives to improve the company’s performance and increase the company’s corporate value over the medium to long term to maintain a level of remuneration that allows the company to acquire and maintain excellent human resources and to ensure the transparency and objectivity of remuneration for directors.
Specifically, remuneration for executive directors comprises (i)base (fixed) remuneration, (ii)performance-based monetary remuneration, and (iii)performance-based stock remuneration. 
The remuneration for outside directors shall consist only of base (fixed) remuneration, in light of their role of providing supervision and advice to the management from an objective, independent standpoint.
 In light of their roles, the remuneration of Audit & Supervisory Board Members consists only of base remuneration (fixed remuneration), and the amount paid to each Audit & Supervisory Board Member is determined by the Audit & Supervisory Board based on discussion among the Audit & Supervisory Board Members.

Base (fixed) remuneration shall be in amounts appropriate for directors’ respective positions and responsibilities and shall be paid on a monthly basis in the form of fixed amounts of money.
With regard to remuneration levels, based on economic and social conditions, as well as the Company’s business environment and results, and after verification by the Remuneration Committee each year that the remuneration level for each person is in accordance with the basic policy above with reference to objective remuneration survey data from external specialized organizations, etc., the committee submits a report and recommendations to the Board of Directors and the Board of Directors makes the final decision.

Performance-based monetary remuneration is paid at a fixed time every year.
The degree of achievement of target values such as consolidated operating profit, etc. are set as indicators, and the amount of such remuneration is calculated based on the previous fiscal year’s performance.
Performance-based stock remuneration is paid at the time of retirement as a reward linked to the achievement of performance targets and the improvement of corporate value over the medium to long term. 
It consists of a performance-unlinked portion and a performance-linked portion. 
The performance-unlinked portion will be set to approximately 30% of the total share-based remuneration.
The maximum amount of the performance-linked portion will be set to approximately 70% of the total share based remuneration. 
The degree of achievement of target values such as consolidated operating profit, etc. are set as indicators, and the amount of such remuneration is calculated within a range of 100% to 0% of the base amount based on the previous fiscal year’s performance.
To determine the performance-based monetary remuneration and the amount of performance-based stock remuneration, etc., the Remuneration Committee, after a review, will submit its report and recommendations to the Board of Directors, who will make the determination in accordance with the contents of the report. 

The respective remuneration ratios for (i) basic remuneration (fixed remuneration), (ii) the performance-based monetary remuneration, and (iii) performance-based stock remuneration for each type of Executive Director will be set to roughly 50 to 35 to 15, assuming maximum performance-based monetary remuneration and performance-based stock remuneration, with the final determination made by the Board of Directors with reference to the objective remuneration survey data of external specialized institutions, etc. 

Having been consulted by the Board of Directors with regard to the individual remuneration amounts for Directors, the Remuneration Committee deliberates on the individual amounts of base remuneration (fixed remuneration), the individual evaluations of executive Directors for performance-based monetary remuneration and performance-based stock remuneration, and their amounts, and submits a report and recommendations to the Board of Directors. The Board of Directors then determines the individual remuneration amounts in accordance with the details of said report and recommendations.