Basic Stance on Corporate Governance
In order to improve sustainable growth and mid-to-long term corporate value, the Company, as a member of society, must adhere to the law and social norms.
In addition, we seek to create harmony starting with stakeholders including the customers who use the Bando Group’s products (end users), employees, business partners, shareholders, local communities. We believe it is especially important to gain people’s trust and build better relationships. In line with such thinking, the Company focuses on ensuring sound, transparent and efficient management by enhancing its corporate governance system.
Board of Directors
Bando aims to further enhance auditing and oversight functions by adopting a Company with an Audit & Supervisory Committee structure.
The Company’s Board of Directors consists of eight members, with four of those eight 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 operational efficiency and speed, and has established the Management Advisory Council to assist the president with management decisions.
Audit & Supervisory Committee
The Audit & Supervisory Committee members comprise four directors, of whom three are external directors.
Furthermore, one of the directors serves on a full-time basis.
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. Specifically, resolutions for appointment and determination of remuneration of directors by the Board of Directors, which is chaired by the president, take place after deliberation by the Nominating Committee and Compensation Committee, whose members include external directors and directors serving as Audit & Supervisory Committee members. As of June 27, 2019, the committees are chaired by Mitsutaka Yoshii (president and representative director) and other members include Kyosuke Nakamura (director who is an Audit & Supervisory Committee member) and Takahiro Matsusaka, Takashi Shigematsu and Haruo Shimizu (external directors who are Audit & Supervisory Committee members).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.
Performance-linked Remuneration for Directors
The Company introduced performance-linked remuneration (monetary or stock remuneration) correlated to profit attributable to owners of parent for the purpose of heightening awareness of contributions to improving business performance and corporate value. Furthermore, we are introducing functions to serve as incentives to improve mid-to-long term performance results, such as stock-based remuneration received upon resignation (stock award points are granted each year based on business performance, and a number of shares equivalent to the accumulated points are issued at the time of resignation).
Method to Determine the Amount of Performance-linked Remuneration
Conditions for profit-linked bonus payment
Profit-linked bonus for directors who do not serve as Audit & Supervisory Board members (non-executive directors are not eligible for this benefit) will only be paid if the following conditions related to business performance are fulfilled at the end of the fiscal year.
∙ The dividend per share is more than ¥12 per year
∙ Profit attributable to owners of parent for the fiscal year is more than ¥3,000 million and the Company posts non-consolidated net income
Calculation method for the total amount of profit-linked bonuses
The total amount of profit-linked bonuses to be paid to directors is calculated using the following formula. However, in accordance with this calculation method, the fixed upper limit for the total amount of profit-linked bonuses is ¥50 million.
∙ Total amount of profit-linked bonuses
= Profit attributable to owners of parent before
performance-linked stock remuneration or payment of profit-linked bonus x 0.004 x (1.05)n-4
*n = Number of directors
Standards for stock remuneration payment
The amount of stock remuneration payment will be calculated using the same standards as profit-linked bonus listed above. Stock award points will be calculated each year, divided by the average acquisition price (average unit price of Company stocks acquired by a trustee from stock markets, etc., based on a fiduciary contract), rounding down any number below one. Upon resignation, the Company shall issue a number of shares equivalent to the cumulative total of stock award points granted during the tenure of an applicable director.
Independence Standards and Qualification for Independent Directors
In nominating candidates for independent director, the Nominating Committee ensures that such persons satisfy 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 25, 2019 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 Corporation (SMBC), a major business partner of the Company, due to the 15 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 conducts 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 2% 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, Mr. Shigematsu concurrently holds the positions of Outside Director at Murata Manufacturing Co., Ltd., and Outside Director at Ashimori Industry Co., Ltd. As the Company does not have any special relationships with either Murata Manufacturing Co., Ltd. or Ashimori Industry Co., Ltd., there is no conflict of interest with ordinary shareholders as defined by the Tokyo Stock Exchange, and Mr. Shigematsu has a high degree of independence.
Many years of experience gained working as a manager in manufacturing firms and a related wealth of knowledge enable Mr. Shimizu to conduct auditing and oversight activities from an independent perspective. In addition, Mr. Shimizu concurrently holds the position of Outside Director at Suminoe Textile Co., Ltd., and Outside Director at Ashimori Industry Co., Ltd. As the Company does not have any special relationship with Suminoe Textile Co., Ltd. or Ashimori Industry Co., Ltd., there is no conflict of interest with ordinary shareholders as defined by the Tokyo Stock Exchange, and Mr. Shimizu has a high degree of independence.
Analysis and Evaluation of the Effectiveness of the Board of Directors
For analysis and evaluation of the effectiveness of the Board of Directors, the Board of Directors carried out a self-evaluation survey in regards to their operation and management style and the chair of the Board of Directors carried out his own analysis and evaluation of directors’ self-evaluation. Those results were reported to the Board of Directors and discussed.
The Board of Directors added a member well-versed in R&D and new product development in fiscal 2018. Through lively discussions incorporating a variety of perspectives and with a composition maintaining balance and diversity of knowledge, experience, and skill, the Board of Directors arrived at the conclusion that there are no overall issues with effectiveness. However, they expressed the opinion that it would be desirable to enrich their strategic discussions related to achieving the targets of the mid-to-long term business plan, create more concise materials for the summary of issues, and share a broader range of topics at an earlier stage in order to improve their effectiveness.
The Company has established the Internal Audit Department, an independent organization that is staffed by four people reporting directly to the president. The Internal Audit Department implements systematic internal audits which include the internal control system (covering internal control system for financial reporting) of all departments as well as domestic and overseas affiliates.
Accompanied by the Audit & Supervisory Committee members in principal, the Internal Audit Department conducts on-site audits at Company’s business facilities and affiliates, the results of which are reported to the president, directors not serving as members of the Audit & Supervisory Committee and the Audit & Supervisory Committee.
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 longterm 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 shareholders. 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.
* Details of the Company’s disclosure policy
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, maintaining or strengthening stable, long-term commercial relationships with such firms would contribute to the enhancement of the Bando Group’s corporate value over the mid-to-long term.
The Board of Directors conducts a review of crossshareholdings each year, investigating and verifying items such as whether benefits or risks are commensurate with capital costs, in addition to compatibility with the Company’s retention policies. Cross-shareholdings will be reduced if they are determined to have little significance to the Company.
As a result of verifying the status of related profits for all individual stocks, such as dividends compared against capital cost for balance sheet amounts or related trading profit, the Company confirmed that related profit exceeded capital cost for most of the items applicable for verification. Overall, the Company confirmed that there was qualitative significance for all individual stocks. Consequently, due to dilution of significance for retained cross-shareholdings, the Company confirmed it will consider disposal by sale for some indexes going forward.
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 mid-to-long term. As a shareholder of the supplier, it is our policy to veto any resolutions carrying significant concerns for damage to the corporate value of the Bando Group.
[Principle 2.6] Roles of Corporate Pension Funds as Asset Owners
The Company uses its corporate pension reserves through the Bando Chemical Industries Corporate Pension Fund (hereafter “the Pension Fund”). In addition to formulating basic policies regarding management of the Pension Fund, we established a steering committee to operate, manage, etc. reserve funds.
Individuals who possess expert knowledge on finance are appointed as members of the steering committee. We also contract multiple managing bodies for the reserve to ensure there are no conflicts of interest between corporate pension beneficiaries and the Company. Furthermore, additions or changes to the managing bodies or the managed products are approved by the Pension Fund council and representative council after deliberation by the steering committee. All managing bodies have announced their acceptance of the Stewardship Code.