Corporate Governance

In order to realize management that is highly satisfactory for its shareholders, customers, employees, and other stakeholders, T&K TOKA aims to establish a management structure that is robust, highly transparent, and capable of responding swiftly and appropriately to changes in the business environment. To this end, we have set improving and enhancing corporate governance as one of our most important management issues, and are promoting initiatives based on the "T&K TOKA Basic Policy on Corporate Governance."

Changes in the Strengthening of Corporate Governance

Changes in the Strengthening of Corporate Governance

Corporate Governance Framework

To improve and enhance corporate governance, we have adopted a "company with an audit and supervisory committee" system. In addition, we have also established a Nomination Advisory Committee and a Remuneration Advisory Committee, in which outside directors serve as the main committee members, in order to enhance transparency and objectivity in the determination of director nominations and remuneration, which are the pillars of corporate governance.

Board of Directors

The Board of Directors consists of 10 directors, five of whom are outside directors, in order to enhance transparency and fairness in management. The Board of Directors is chaired by the Representative Director of the Company, and deliberates and makes decisions on important matters related to business execution. As a general rule, the Board of Directors meets once per month.

Nomination Advisory Committee

The Nomination Advisory Committee considers the appointment and dismissal of directors, and makes recommendations to the Board of Directors.

Remuneration Advisory Committee

The Remuneration Advisory Committee reviews policies regarding remuneration and so on for directors, as well as the details of remuneration and so on for each director, and makes recommendations to the Board of Directors.

Audit and Supervisory Committee

The Audit and Supervisory Committee consists of four outside directors, and reports, discusses, and makes decisions on important matters.

Management Committee (Executive Council)

The Management Committee (Executive Council) deliberates on important issues related to management strategies and the growth strategies of each department. Among the proposals that are submitted to the Management Committee (Executive Council), those deemed necessary are deliberated by the Board of Directors.

Corporate Governance Framework Diagram (As of June 18, 2021)

Framework as of Fiscal Year Ended March 2022

Nomination Advisory Committee Chair: Satoshi Noguchi
Nomination Advisory Committee Members: Yoshikatsu Masuda, Takatoshi Kida
Remuneration Advisory Committee Chair: Koichi Hanabusa
Remuneration Advisory Committee Members: Yoshikatsu Masuda, Kenji Otaka
Audit and Supervisory Committee Chair: Satoshi Noguchi
Audit and Supervisory Committee Members: Takatoshi Kida, Kenji Otaka, Koichi Hanabusa

Corporate governance system diagram

Status of Outside Officers

Position Name Reason for appointment Attendance at Board of Directors meetings and Audit and Supervisory Committee meetings
Director Kota Isogai Mr. Kota Isogai works for Dalton Advisory KK, a subsidiary of Dalton Investments LLC, which is an investment management firm based in California, USA, and one of our shareholders. Since the acceptance of an Outside Director from Dalton Investments Group, which shares the benefits of increased corporate value as a shareholder of the Company, is expected to further strengthen the corporate governance framework of the Company, he has been appointed as an Outside Director. Attendance of the Board of Directors Meetings
15/15
Director
(Audit and Supervisory Committee Member)
Takatoshi Kida Mr. Takatoshi Kida has served as an Outside Director of the Company since June 2014, and has contributed to the enhancement of our corporate value by ensuring transparency and soundness in management, as his professional knowledge and experience as a lawyer, and his management-independent perspective have been utilized to supervise the management of the Company and strengthen corporate governance. Although he has no experience of being involved in company management other than by serving as an Outside Director in the past, Mr. Kida is expected to continue to strengthen the supervisory functions of the Board of Directors, in view of his past achievements. Accordingly, he has been reappointed as an Outside Director who is an Audit and Supervisory Committee Member. Attendance of the Board of Directors Meetings
15/15
Attendance at Audit and Supervisory Committee meetings
16/16
Director
(Audit and Supervisory Committee Member)
Kenji Otaka Mr. Kenji Otaka has served as an Outside Director of the Company since June 2015, and has contributed to the enhancement of our corporate value through supervision of the management of the Company from an independent standpoint, and also reflecting his global perspectives in the management of the Company, based on his wealth of experience and high level of insight gained as a manager of group companies of a large international corporation. In view of such achievements, Mr. Otaka is expected to continue to strengthen the functions of the Board of Directors. Accordingly, he has been reappointed as an Outside Director who is an Audit and Supervisory Committee Member. Attendance of the Board of Directors Meetings
15/15
Attendance at Audit and Supervisory Committee meetings
16/16
Director
(Audit and Supervisory Committee Member)
Satoshi Noguchi Mr. Satoshi Noguchi has served as an Outside Director of the Company since June 2017, and has contributed to the enhancement of our corporate value by ensuring transparency and soundness in management, as his wealth of knowledge and experience as a person involved in the financial industry and a manager has been utilized to strengthen the management supervision and decision-making functions of the Company. In view of such achievements, Mr. Noguchi is expected to continue to strengthen the functions of the Board of Directors. Accordingly, he has been reappointed as an Outside Director who is an Audit and Supervisory Committee Member. Attendance of the Board of Directors Meetings
15/15
Attendance at Audit and Supervisory Committee meetings
16/16
Director
(Audit and Supervisory Committee Member)
Koichi Hanabusa Mr. Koichi Hanabusa has served as an Outside Director of the Company since July 2019, and has contributed to strengthening the supervisory and decision-making functions of the Board of Directors, utilizing his wealth of experience and expertise in corporate accounting as a certified public accountant in the management and audit and supervisory functions of the Company. Although he has no experience of being involved in company management other than by serving as an Outside Director in the past, Mr. Hanabusa is expected to continue to strengthen the functions of the Board of Directors, in view of his past achievements. Accordingly, he has been reappointed as an Outside Director who is an Audit and Supervisory Committee Member. Attendance of the Board of Directors Meetings
15/15
Attendance at Audit and Supervisory Committee meetings
16/16

Evaluation of the Effectiveness of the Board of Directors

Since fiscal year 2016, we have been conducting self-evaluations and analyses of the effectiveness of the Board of Directors, with the aim of enhancing the functions of the Board of Directors and increasing our corporate value. The following methods were used for self-evaluations and analyses in fiscal year 2020.

  1. 1.Analysis and Evaluation Methods

    We conducted a questionnaire targeting all 10 Directors who are members of the Board of Directors. To ensure anonymity, questionnaires were returned directly to an external organization.
    The main items in the questionnaire were as follows:

    1. (1)Composition of the Board of Directors
    2. (2)Operation of the Board of Directors
    3. (3)Board of Director discussions
    4. (4)Monitoring functions of the Board of Directors
    5. (5)Performance of Internal Directors
    6. (6)Performance of Outside Directors
    7. (7)Support systems for Directors
    8. (8)Initiatives by Directors
    9. (9)Dialog with shareholders and investors
  2. 2.Summary of Analysis and Evaluation Results

    Based on a report of the analyzed results received from the external organization, we evaluated the regular Board of Directors meeting held in February 2021. A summary of the results is as follows.
    The number of members of the Board of Directors, their composition, and the number of items deliberated were appropriate, and the Board of Directors was assessed to be generally functioning effectively. On the other hand, we shared with the Board of Directors some issues, such as the following: (1) the nature of materials of the Board of Directors, in particular the provision of materials and information allowing the Outside Directors to sufficiently undertake deliberations; (2) setting priorities for matters requiring deliberation, and setting an agenda for items of a long-term nature as opposed to regular ones; (3) the nature of supervision inclusive of internal control systems, focusing on how to raise the effectiveness of supervision including that of affiliated companies; (4) the content of and utilization of dialog with shareholders, for regular feedback and training of successors.

  3. 3.Future Actions

    Based on the results of these evaluations, the Board of Directors will ensure more constructive deliberations, striving to ensure its effectiveness overall and to enhance its functions.

Officer Remuneration

[Basic policy concerning remuneration of the Directors]

To ensure that remuneration for Directors functions as sufficient incentive to achieve short-term results and to raise corporate value over the medium to long term, our basic policy when deciding the remuneration of individual Directors is to set a reasonable level based on their responsibilities, with a remuneration system tied to the profits of shareholders.
Remuneration for Directors consists of a base of fixed remuneration together with performance-based remuneration and stock options. For Outside Directors, in the light of their duties, only the base remuneration is used.

  1. 1.Matters concerning remuneration of individual Directors
    • Matters concerning policy for deciding the remuneration amounts for individual Directors and the calculation methods for such
      To secure talented human resources by setting competitive remuneration levels based on duties according to positions and posts, the basic remuneration for Directors of the Company (excluding Audit and Supervisory Committee Members) is a monthly fixed remuneration decided based on a remuneration table according to their positions and the number of years in those positions. Remuneration for Directors who are Audit and Supervisory Committee Members is decided by the Audit and Supervisory Committee, with the cooperation of Directors who are Audit and Supervisory Committee Members.
    • Policy on deciding the ratio for the remuneration of individual Directors
      For the ratio of remuneration of individual Directors, we set the basic remuneration, performance-based remuneration, and non-monetary remuneration (stock-related remuneration) according to the basic policy, with a higher percentage for performance-based remuneration according to the person's position and execution of duties.
    • Matters concerning the content of and determining of policy for the remuneration of individual Directors
      The content of and the method of determining the policy for the remuneration of individual Directors are resolved by the Board of Directors following a report of the Remuneration Advisory Committee. The resolution of the Remuneration Advisory Committee is determined by a majority of the members attending, at a committee meeting where more than half the members of the committee with voting powers are present. The content of the remuneration is decided based on a report considering multiple factors inclusive of consistency with the decision policy, and thus is judged to be in accordance with the decision policy.
  2. 2.Matters concerning performance-based remuneration
    Performance-based remuneration is paid as restricted stock within two months after the General Meeting of Shareholders according to the position of the person, to a limit of 75 million yen per year, according to whether the target values for current consolidated net income were achieved, as incentive to achieve short-term performance targets and to heighten interconnection with shareholder profits. The target values are reviewed as appropriate based on reports of the Remuneration Advisory Committee in line with changes in the business environment.
    The indicators of performance serving as the target are ROE of 5% or better and current profit attributable to owners of parent of 1.7 billion yen or more for the period from the fiscal year ended March 2018 to the fiscal year ended March 2020, and current profit attributable to owners of parent of 400 million yen or more for the fiscal year ended March 2021.
  3. 3.Matters concerning non-monetary remuneration
    Non-monetary remuneration is paid as stock options (stock acquisition right) within one month of the General Meeting of Shareholders according to the position of the person, to a limit of 75 million yen per year, as incentive to raise company performance and corporate value over the medium to long term and to heighten interconnection with shareholder profits.
Position Total
amount
of
remuneration,
etc.
(million yen)
Total amount of remuneration, etc.
by type (million yen)
Number of recipients
Fixed remuneration Performance-based
remuneration
Stock options Amount of
which is
non-monetary
remuneration
Director
(excluding Audit and Supervisory Committee Member and Outside Directors)
145 129 15 15 5
Audit and Supervisory Committee Members
(excluding Outside Directors)
Outside Officers 27 27 5

Status of Audits

Status of Audits by the Audit and Supervisory Committee

The Audit and Supervisory Committee conducts planned and comprehensive audits for all operations of the Company and its subsidiaries. As a general rule, the Committee meets once per month, based on the Audit and Supervisory Committee Regulations. In addition, it holds extraordinary meetings, as necessary. The Committee maintains close cooperation with the Internal Audit Office and the accounting auditor, and exchanges necessary information and opinions with them in a timely manner.

Status of Internal Audits

The Internal Audit Office consists of one manager and three members, and conducts internal audits systematically, in accordance with the Internal Audit Regulations. Regarding internal control, the Internal Audit Office and each committee maintain close cooperation to implement planned internal audits.

Status of Accounting Audits

Regarding accounting audits, we have entered into an audit agreement with Ernst & Young ShinNihon LLC, and undergo accounting audits under the Companies Act and the Financial Instruments and Exchange Act. In addition, the department in charge of accounting holds discussions with the accounting auditor as necessary, and strives to improve transparency and accuracy in accounting.

Sustainability

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