Basic Stance on Corporate Governance
In order to improve corporate value, the actions of the Company are based on an adherence to the law and social norms as a member of society. In addition, the Company recognizes the importance of building positive relationships with customers (end users), current and potential investors, business partners, local communities and others. Accordingly, the Company focuses on ensuring sound, transparent and efficient management by enhancing its corporate governance system.
Board of Directors
To reinforce audit and oversight functions, the Company transitioned to a Company with an Audit & Supervisory Committee by resolution of the General Meeting of Shareholders held on June 23, 2016.
The Company’s Board of Directors consists of seven members, with three of those seven members serving as members of the Audit & Supervisory Committee. The Board makes decisions concerning basic management policies, important management issues, and legally stipulated matters, as well as monitoring the work performance of directors and corporate executive officers. The Board’s three external directors are charged with the independent oversight of business operations. The Board meets at least once a month. In addition, the Company maintains a corporate executive officer system to improve oper- ational efficiency and speed, and has established the Management Advisory Council to assist the president with management decisions.
Audit & Supervisory Committee
The Audit & Supervisory Committee is composed of three members serving as external directors and one internal member serving on a full-time basis. Under the Companies Act, external directors must command a majority on the Audit & Supervisory Committee. Ensuring this ratio is higher than the statutory minimum enables auditing and business oversight activities to be multi-faceted and undertaken by experts from a variety of fields.
Nominating Committee and Compensation Committee
Despite having no legal obligation under the Companies Act, the Company has established the Nominating Committee and Compensation Committee to serve as consultative bodies of the Board of Directors in an effort to further strengthen corporate governance.
Decisions regarding director appointments and compensation are made by a resolution of the Board of Directors following deliberations by the Nominating and Compensation committees. The Audit & Supervisory Committee must approve the appointment of directors who will serve on it. The Audit & Supervisory Committee also deliberates on the remuneration of said directors.
To meet the requirements stipulated in the Financial Instruments and Exchange Act pertaining to financial reporting performed by internal control reporting systems, the Bando Group maintains internal control in accordance with the basic frameworks for internal con- trol outlined in Financial Services Agency criteria, and undertakes evaluations and reporting as defined by said criteria. The Company will work to further improve the effectiveness of internal control primarily through the Internal Control Promotion Office and based on the four objectives of internal control: (1) reliability of financial reporting, (2) operational effectiveness and efficiency, (3) legal compliance regarding business activities, and (4) asset protection.
Basic Stance on the Elimination of Antisocial Forces
The Group takes stringent measures to eliminate antisocial forces by investigating prospective business partners prior to commencing new transactions based on relevant Group policies and the Bando Group Code of Conduct, which stresses the overriding importance of adhering to the law and corporate ethics. In addition, the Group maintains an internal reporting system to thoroughly raise awareness of the necessity of avoiding any actions that are illegal or contrary to corporate ethics. In the event that a business partner is revealed to be an antisocial organization, the Group will immediately dissolve its relationship with this organization.
The Group has formulated and distributes to all Group executives and employees the Bando Group Code of Conduct, which stipulates proper actions in such areas as “compliance with laws and corporate ethics,” “product and service safety,” “honest and fair business activities,” and “fair and equitable procurement transactions.” In addition, the Group works to raise awareness of compliance by designating October as the Bando Group Corporate Ethics Month, conducting training sessions on the Bando Group Code of Conduct at Company business facilities or domestic and overseas affiliates every other year, and providing opportunities to discuss these topics internally. Moreover, the Group has established a system to further promote compliance by adopting an internal reporting system that includes external lawyers as well as a service for providing information on the formulation, revision and abolition of relevant laws.
The Company has established the Internal Audit Department, an independent organization that is staffed by three people reporting directly to the president. The Internal Audit Department implements systematic and comprehensive internal audits (which include the internal control system) of all depart- ments as well as domestic and overseas affiliates. Accompanied by audit & supervisory board members, the Internal Audit Department conducts on-site audits within the Company and at affiliates, the results of which are reported to the president, directors and audit & supervisory board members.
The Company promotes fair and highly transparent management by disclosing important information in an appropriate and timely manner to shareholders and all other stakeholders.
The Company maintains PR functions that include timely information disclosure by the General Administration Department. In addition, the Company has established a system to facilitate the timely disclo- sure of information to stock exchanges and discloses such information on the Company website.
Disclosures Based on Principles of Japan’s Corporate Governance Code
The Company complies with the principles of the Corporate Governance Code.
Principle 1.4 Cross-Shareholdings
Cooperative relationships with a range of firms across fields such as financing, development, procurement, production and sales are essential if the Company is to prevail as a manufacturer of rubber and plastic components against fierce global competition. The Company’s policy is to own shares in suppliers where it is judged that, in line with business strategy, main- taining or strengthening stable, long-term commercial relationships with such firms would contribute to the enhancement of the Group’s corporate value over the mid-to-long term.
Decisions relating to the exercise of any voting rights pertaining to cross-shareholdings are taken based on a general consideration of whether the proposed voting resolution is (a) consistent with the aforementioned policy, and (b) likely to contribute to the enhancement of the corporate value of the equity issuer over the medium and long term.
Principle 1.7 Related Party Transactions
Any related party transactions involving the Company’s directors or major shareholders must be approved and reported in accordance with internal rules to prevent any transactions that would be detrimental to the interests of the Company or shareholders. The status of any transactions between the Group and directors or their close relatives (within two degrees of kinship) is subject to periodic reporting.
Principle 3.1 Full Disclosure
- 1. Details of the Company’s Management Philosophy and mid-to-long term business plans are provided on the Company’s website.
- 2. Details of the Company’s basic stance on corporate governance and related policies are provided in Annual Report 2016 (p.36).
- 3. Please refer to p. 36 of Annual Report 2016 for details of how remuneration for directors was determined before March 31, 2016. From fiscal year ending March 31, 2017, onward, remuneration of executive directors will consist of basic salary, a profit-linked bonus and performance-linked stock remuneration, while non-executive directors are entitled only to a basic salary. Limits on director remuneration are determined by resolution of the General Meeting of Shareholders. Current maximum annual remunera- tion is set at ¥190 million for all directors not serving as members of the Audit & Supervisory Committee, and at ¥84 million for all directors serving as Audit & Supervisory Committee members. Besides this direct monetary remuneration, directors are collectively entitled to annual grants of performance-linked stock remuneration of up to ¥50 million that are held in trust (this excludes non-executive directors). Any remuneration for directors is separate to salary and bonuses to which they are entitled for any concurrent position as an employee.
To ensure greater transparency in determining remuneration for directors, the Company has instituted the Compensation Committee, which is composed of the president, a director serving as an Audit & Supervisory Committee member, and an external director. The Board of Directors approves proposals for director remuneration based on the deliberation and advice of the Compensation Committee. With regard to the remuneration of directors serving as Audit & Supervisory Committee members, any proposals are approved by the Board of Directors following Audit & Supervisory Committee consultation.
- 4. Any internal candidates for appointment to a direc- tor’s position must satisfy the nomination criteria listed below.
- (1) Adequate comprehension of, and the ability to implement, the Company’s “Management Philosophy,” “Our Corporate Goals,” “Management Policy,” and the “Group Code of Conduct”
- (2) Strong determination to maximize value for shareholders and corporate value, coupled with the ability to display strong leadership
- (3) Ability to make practical, mature business deci- sions in a management capacity
- (4) Strong business ethics and high integrity and value Candidates for nomination as external director must have the capacity to provide inde- pendent oversight of operational execution and counsel and advice to contribute to sustained growth in corporate value, based on an appre- ciation of corporate management and business strategy.
Candidates for nomination as director serving as an Audit & Supervisory Committee member must have the capacity to conduct auditing and oversight activities from general and specialist viewpoints, based on an appreciation of aspects of business such as management, finance, accounting and risk management. The Articles of Incorporation set the maximum numbers of directors as 10 for directors not serving and five for directors serving on the Audit & Supervisory Committee.
To ensure greater transparency in appointment of directors, the Company has instituted the Nominating Committee, which is composed of the president, a director serving as an Audit & Supervisory Committee member, and an external director. The Board of Directors approves any candidates for appointment to director based on the deliberation and advice of the Nominating Committee. With regard to the appointment of any directors serving as Audit & Supervisory Committee members, nominations are confirmed by the Board of Directors after their approval by the Audit & Supervisory Committee, based on the advice of the Nominating Committee.
Supplementary Principle 4.1.1
Besides any statutory items or other matters as stipulated in the Articles of Incorporation, the Board of Directors deliberates and determines important matters related to business execution as stipulated in the regulations pertaining to the Board of Directors, including management policies and plans, personnel-related decisions, plans for financing and capital investment, and the establishment or dissolution of subsidiaries or affiliates. Responsibility for deciding other items of business is delegated by the Board to the president. In addition, in accordance with Japanese laws and regulations and the Articles of Incorporation, with the Company’s transition to a Company with an Audit & Supervisory Committee, some important business matters have been delegated to the president. To help improve the speed and efficiency of business execution, the president can delegate authority to make decisions on these matters to corporate executive officers as appropriate.
Principle 4.9 Independence Standards and Qualification for Independent Directors
In nominating candidates for independent director, the Nominating Committee ensures that such persons sat- isfy the independence criteria set by stock exchanges and are also capable of fulfilling their role and responsibilities from an independent standpoint. The rationales for the appointment of those independent directors serving as of June 23, 2016 are summarized below.
Many years of experience and related business knowledge gained working in managerial positions in financial institutions afford Mr. Matsusaka the capacity to conduct auditing and oversight activities from general and specialist viewpoints. He is not influenced by the views of Sumitomo Mitsui Banking Corp. (SMBC), a major business partner of the Company, due to the 12 years that he has spent working at other companies since leaving SMBC. Moreover, it is judged that the Company’s decision-making is not subject to any undue influence by SMBC since (a) the Company con- ducts business with a number of financial institutions, (b) business with SMBC is conducted on the same terms as with other banks, and (c) loans from SMBC are equivalent to only about 5% of the Company’s total assets. Hence, since there is no conflict of interest with ordinary shareholders as defined by the Tokyo Stock Exchange, Mr. Matsusaka has a high degree of independence.
Many years of experience gained working as an engineer or manager in manufacturing firms and a related wealth of knowledge enable Mr. Shigematsu to conduct auditing and oversight activities from an independent perspective. In addition, the lack of any special relationship between the Company and Fujitsu Ten Limited means that there is no conflict of interest with ordinary shareholders as defined by the Tokyo Stock Exchange, and that Mr. Shigematsu has a high degree of independence.
Many years of experience gained working as a man- ager in manufacturing firms and a related wealth of knowledge enable Mr. Shimizu to conduct auditing and oversight activities from an independent perspective. In addition, the lack of any special relationship between the Company and EXEDY Corporation means that there is no conflict of interest with ordinary sharehold- ers as defined by the Tokyo Stock Exchange, and that Mr. Shimizu has a high degree of independence.
Supplementary Principle 4.11.1
The Company ensures that the composition of the Board of Directors includes a diverse range of talented people of impeccable character with suitable experience and knowledge, taking into consideration the business environment and the related issues faced at the time. With regard to the size of the Board, to ensure lively and frank exchanges of opinion, the limits on the number of directors have been set at 10 for directors not serving and five for directors serving on the Audit & Supervisory Committee.
Supplementary Principle 4.11.2
Directors concurrently occupy the following positions with other listed companies.
Corporate Auditor, Fukui Belt Industries, Ltd.
Chairman & Representative Director, Fujitsu Ten Limited Outside director, Murata Manufacturing Co., Ltd.
Supplementary Principle 4.11.3
The Company has analyzed and evaluated the effectiveness of the Board of Directors at its meetings held in 2015. This involved directors and Audit & Supervisory Committee members each completing a self-evaluation questionnaire on the operation of the Board of Directors. The Board chairperson conducted an analysis and evaluation and reported the results to the Board for internal discussion. The exercise concluded that the Board’s lively discussion based on multi-faceted viewpoints supported its effective operation.
Supplementary Principle 4.14.2
The Company provides directors with training as required on or after appointment through training seminars, the provision of literature regarding directorial roles and responsibilities, and by providing other opportunities to acquire required knowledge at the Company’s expense. External directors are provided with materials and explanation to ensure a basic knowledge of the Company’s operations, and opportunities are provided to visit offices and factories in Japan and abroad as deemed appropriate.
Principle 5.1 Policy for Constructive Dialogue with Shareholders
Regarding all shareholders and investors as important stakeholders, the Company believes it is important to deepen mutual understanding based on a constructive dialogue about how to enhance corporate value and to use such dialogue as the basis for proper management policy. In line with such thinking, the executive director in charge of administrative functions oversees the dialogue in coordination with the central departments responsible for finance, general affairs and corporate planning and provides briefings to domestic and foreign institutional investors, and disclosure of information such as the details and progress of business plans, Group performance, and returns to shareholders. In these meetings, the president and the senior management of the Company seek to engage in dialogue with institutional investors about long- term creation of corporate value so that stakeholder views can better be reflected in the management of the business. The full online disclosure of any materials presented at such meetings via the Company’s website ensures fair disclosure to individual investors and share- holders. Since the General Meeting of Shareholders also provides another valuable opportunity to engage with shareholders, the Company seeks to avoid holding it on the most popular dates, and also ensures that adequate time is allocated to the Q&A session.
The content of dialogue with shareholders and investors is reported as necessary to the Board of Directors and executive officer meetings. The Company has also instituted policies on disclosure and insider trading as part of efforts to prevent any occurrence of insider trading.