Corporate Governance
- Basic Approach
- Key Initiatives for the Reinforcement of Corporate Governance
- Quick Reference of Corporate Governance Organization
- Corporate Governance Framework
- Criteria for the Independence of Outside Directors
- Reasons for Selection of Outside Directors and Audit & Supervisory Board Members
- The Effectiveness Evaluation of The Board
- The Board and Independent Outside Director Attendance at Board
- Executive Remuneration
- Policy on Cross-Shareholdings
- Policy for Promoting Constructive Dialogs with Shareholdersarrow
1：Basic Approach
Under the group corporate philosophy, the Daiken Group is committed to sustainable improvements in corporate value for all shareholders and stakeholders. In order to achieve efficient, sound, and transparent management, we enrich the management system, the organizational system, and the internal control system, and take the basic approach that always seeks to optimize corporate governance, and we constantly work to improve it. Based on the basic policy on corporate governance established in 2015, we are making constant improvements to respond to the ever-changing business environment surrounding the group in the ceaseless pursuit of the optimal corporate governance system.
2：Key Initiatives for the Enhancement of Corporate Governance
| 2002 | Made the shift to the chief executive officer system |
|---|---|
| 2003 | The compliance committee was established. |
| 2008 | Reorganized to the risk & compliance management committee for reinforcement. |
| 2010 | Reduced the number of directors from 11 to 9. |
| 2011 | An outside director was selected (outside directors: 1/9) |
| 2012 | The term for directors was reduced from two years to one year. |
| 2015 | Outside directors increased from 1 to 2 (Outside directors: 2/9) The basic policy on corporate governance was established. The nomination and remuneration committee and the Corporate Governance Committee were established. |
| 2016 | The effectiveness evaluation of the Board was started. |
| 2017 | Evolved the conventional management philosophy and corporate code of conduct and established the group corporate philosophy and the group conduct guidelines. |
| 2018 | A female outside Audit & Supervisory Board Member was selected. Introduced the transfer restricted stock-based compensation system. |
| 2019 | Reduced the number of directors from 9 to 7 (outside directors: 2/7) |
| 2020 | Outside directors increased from 2 to 3 (outside directors: 3/8) |
| 2021 |
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| 2022 | Reorganized the CSR committee to the sustainability promotion committee to enhance initiatives for sustainability. Revised the CSR basic policy to the Daiken sustainability basic policy. |
3：Quick Reference of Corporate Governance Organization
| Main Items | Details |
|---|---|
| Design of the organization | Company with Audit and Supervisory Committee |
| Nomber of Directors(non-Director, Audit and Supervisory Committee Member)(outside director) | 4 (0) |
| Nomber of Director, Audit and Supervisory Committee Member(outside director) | 5 (3) |
| Number of board meetings convened (fiscal 2022) | 13 times |
| (Average attendance rate of outside directors) | (100%) |
| Number of Audit and Supervisory Committee convened (fiscal 2022) | 10 times |
| (Average attendance rare of Outside Director) | (100%) |
| The term for Directors(non-Director, Audit and Supervisory Committee Member) | 1 year |
| The term for Director, Audit and Supervisory Committee Member | 2 year |
| The executive officer system | Adopted |
| Voluntary committee of the Board |
|
| Auditors | Gyosei & Co. |
4：Corporate Governance Framework
Under the group corporate philosophy, we are committed to sustainable improvements in corporate value for all shareholders and other stakeholders; therefore, we continuously pursue and improve the optimal corporate governance system. As part of this pursuit, we have divided the executive function and the supervisory function and have strengthened the supervisory function of the directors who serve as Audit and Supervisory Committee members. In June 2021, we shifted to a company with Audit and Supervisory Committee aiming to further strengthen our corporate governance and enhance our medium-term and long-term corporate value by further expediting the execution of operations and the relevant decision-making process. In addition, we established the mechanisms below, which we consider the most efficient structure to maximize the effectiveness of corporate governance at present.
- We have introduced executive officer system and the executive position system to achieve efficient execution and clarify responsibilities.
- To strengthen the impartiality, transparency, and soundness of management, we established the Governance Committee, which consists of independent outside directors to the majority. The Governance Committee provides advice and proposals at the request of the Board of Directors, in the examination of particularly important matters including the nomination and remuneration of directors and executive officers, improvement in the effectiveness of the entire Board of Directors, and the establishment of governance structures.
- To strengthen the supervisory and audit functions, we select highly independent outside directors.
- To strengthen the decision-making function, we established the Executive directors committee.
Execution of operations
We introduced an executive officer system in June 2002 to ensure expedited, efficient, and sound decision-making. The present management structure consists of 20 executives consisting of 9 directors (including 3 outside directors and 3 directors who also serve as executive officers) and 11 executive officers. The executive directors, executive officers, and employees execute their duties in accordance with the Group Corporate Philosophy and the Group Conduct Guidelines as the bases of compliant management.
Board of Directors
The Board of Directors consists of 9 directors (including 3 outside directors).
The responsibility and role of the Board of Directors is to exercise its supervisory function over management, thereby ensuring impartiality and transparency in management, and to make important executive decisions for our company.
To properly fulfill its role and responsibility, the Board of Directors has established the Governance Committee, which consists of independent outside directors to the majority. The Governance Committee provides advice and proposals at the request of the Board of Directors, in the examination of particularly important matters including the nomination and remuneration of directors and executive officers, improvement in the effectiveness of the entire Board of Directors, and the establishment of governance structures, thereby further enhancing the effectiveness of the Board's supervisory function on execution.
In accordance with the applicable laws, the Articles of Incorporation, the resolutions of the general meeting of shareholders, the Rules for the Board of Directors, the Group Corporate Philosophy, and the Group Conduct Guidelines, the Board of Directors makes decisions concerning the management policy of the company, management strategies, business plans, the acquisition and disposition of important properties, and important organizational and personnel matters, while supervising the execution of operations at our company and its subsidiaries.
Expertise and Experience of Directors (Skills Matrix)
The composition of the Board of Directors and the distribution of the expertise and areas of experience of the Directors will be as follows. For the main items of expertise and experience, the Company has set core skills for conducting fair and highly transparent management, such as corporate management, ESG, finance and accounting, risk management, and compliance, etc.; skills of high importance as a construction materials manufacturer based in Japan, such as domestic business strategy and DX; and skills related to manufacturing technology in factories at the cutting edge of manufacturing and related to R&D, the source of the Company’s medium- to long-term competitive advantage.The Company has also set global business strategy and DX for strengthening its position in overseas markets, which is of particularly high importance for realizing the management strategy set out in the long-term vision.
Directors and executive officers
The executive directors execute their duties based on the roles determined by the Board of Directors in accordance with the applicable laws, the Articles of Incorporation, the resolutions of the Board of Directors, the Regulations for Operational Authorities, the Regulations for the Division of Duties, the Regulations for Approval and Authorization, and other in-house regulations. They also report the status of execution to the Board of Directors to share the status of execution of duties at least once every three months and whenever necessary.
The executive officers are appointed by the Board of Directors following deliberation by the Governance Committee and are engaged in the execution of operations in specified fields in accordance with the applicable laws, the Articles of Incorporation, the resolutions of the Board of Directors, the Regulations for Executive Officers, and other in-house regulations. They determine specific objectives in each assigned field and efficient methods for attaining them, and periodically report the status of execution to the Executive directors committee thereby striving to achieve efficient execution.
Establishment of nomination, remuneration, and governance structures
To obtain appropriate engagement and advice from independent directors in the examination of particularly important matters that include the nomination and remuneration of directors and executive officers, improvement in the effectiveness of the entire Board of Directors, and the establishment of governance structures, we have established the Governance Committee as an advisory institution for the Board of Directors, thereby ensuring the effectiveness of the Board's supervisory function on execution.
The Governance Committee is made up by independent outside directors to the majority and is chaired by an independent outside director.
Audit and Supervisory Committee and its members
The Audit and Supervisory Committee consists of five Audit and Supervisory Committee members, including three independent outside directors.
The Audit and Supervisory Committee conducts audit in accordance with the annual audit plan.
The Audit and Supervisory Committee exercises its authority specified by applicable laws and conducts audits of the proper execution of duties by directors in accordance with the Rules for the Audit and Supervisory Committee and the Audit Standards for the Audit and Supervisory Committee in collaboration with the auditors and the internal audit division.
They also pursue the improved quality of audit through participation in important management meetings and access to important documents and have periodic opinion exchanges with the president.
Internal audit
To strengthen our internal audit function, we have an internal audit division that is directly controlled by the Audit and Supervisory Committee. The division conducts internal audits of overall operations, and provide reporting and explanation concerning operational improvement to the Audit and Supervisory Committee and the president when necessary, thereby promoting information sharing.
The internal audit division evaluates the establishment and management of internal control concerning financial reporting from an independent viewpoint.
Accounting audit
We have concluded audit agreement with Gyosei & Co. to receive statutory audits required by the Companies Act and by the Financial Instruments and Exchange Act. The Auditors conduct audits of financial statements from an independent third-party standpoint. We receive reports on audit results, exchange opinions when necessary, and ask for advice for improvement.
We provide information and data and establish an environment that enables rapid and correct audit.
5：Criteria for the Independence of Outside Directors
The Company has established the following criteria to determine the independence of outside directors.
The Company considers an outside director independent if the person meets the requirements of category 1, has met them at any time in the past, currently meets the requirements of categories 2–6, and has met them for the past five years.
1. Persons affiliated with the Daiken Group
A person shall not be a director (excluding an outside director), an Audit and Supervisory Committee member (excluding an outside Audit and Supervisory Committee member), an accounting advisor, a corporate officer, an executive officer, or an employee (hereinafter collectively called “Directors”) of the Company or any of its subsidiaries and affiliates (hereinafter collectively called the “Daiken Group”).
2. Holder of voting rights of the Company
- A person shall not be a shareholder who owns 10% or more of the Company’s voting shares nor a Director of such shareholder entity.
- A person shall not be a Director of a company wherein 10% or more of the voting shares are owned by the Daiken Group
3. Person affiliated with a business partner entity
- A person shall not be a Director of a business partner entity that has business transactions with the Company worth 2% or more of its consolidated annual sales or annual purchase amount as appropriate, or with which the Daiken Group has business transactions worth 2% or more of its consolidated annual sales or annual purchase amount as appropriate.
- A person shall not be a Director of a financial institution that is a major lender of the Daiken Group (which lends an amount equivalent to 2% or more of the Daiken Group's consolidated total assets).
- A person shall not be a Director of the Daiken Group’s lead managing underwriter.
4. Professional (attorney, certified public account, consultant, or others)
- A person shall not be a certified public accountant who serves as the Daiken Group’s accounting auditor, or an employee, partner or associate of an auditing firm that is the Daiken Group’s accounting auditor.
- A person shall not receive compensation of 10 million yen or more from the Daiken Group as a public certified accountant, certified tax accountant, attorney, or consultant, in addition to compensation as a director or auditor of the Daiken Group.
5. Recipient of donations
A person shall not receive donations that exceed 10 million yen annually from the Company nor shall the person serve in an executive role in an organization that receives donations that exceed 10 million yen annually from the Company.
6. Other
- A person shall not be a relative within two degrees of kinship of a person who fails to meet the requirements of the above categories 1 to 5 (excluding an unimportant person).
- A person shall not be a Director of a company between which the Daiken Group directors are mutually appointed.
6：Reasons for Selection of Outside Directors and Audit & Supervisory Board Members
Reasons for Appointment of Outside Directors as Audit and Supervisory Committee Members
| Name | Reasons for appointment and expected roles (overview) |
|---|---|
| Shingo Ishizaki | Has been engaged in investment bank operations at securities companies for many years, and possesses abundant financial expertise acquired through said experience. Expected to play supervisory and advisory roles in the execution of duties by directors, from a specialized perspective based on the said expertise, especially in financial accounting, thereby contributing to the increased governance of our company. Involves no risk of conflicts of interest with the general shareholders of our company regarding human relationships, capital relationships, business relationships, or other relationships with our company, and satisfies the Criteria for the Independence of Outside Directors specified by our company. |
| Yuko Asami (family register name: Yuko Katsuo) |
Is a professor at the Faculty of Economics, Gakushuin University, and has served as a committee member for the Ministry of Finance, the Financial Services Agency, and other organizations demonstrating adequate expertise in finance and accounting. Expected to play supervisory and advisory roles in the execution of duties by directors from a specialized perspective based on the said expertise, especially in corporate accounting, thereby contributing to the increased governance of our company. Has no experience of engagement in corporate management other than serving as an outside director but is considered capable of properly executing the duties of an outside director for the reasons above. Involves no risk of conflicts of interest with the general shareholders of our company regarding human relationships, capital relationships, business relationships, or other relationships with our company, and satisfies the Criteria for the Independence of Outside Directors specified by our company. |
| Kiyoshi Mukohara | Has been engaged in the management of financial institutions for many years and possesses abundant financial and managerial expertise acquired through the said experience. Expected to play supervisory and advisory roles in the execution of duties by directors from a specialized perspective based on the said expertise, especially in corporate management, thereby contributing to the increased governance of our company. Has a history of working at Sumitomo Mitsui Trust Bank, Limited, a major lender of Daiken Corporation, until March 2015, and as a director at Sumitomo Mitsui Trust Holdings, Inc., which is the parent company of the above, but has resigned as a director of the two companies and all other executive positions seven years ago and, therefore, involves no risk of conflicts of interest with the general shareholders of our company regarding human relationships, capital relationships, business relationships, or other relationships with our company, and satisfies the Criteria for the Independence of Outside Directors specified by our company. |
*1: The three directors above satisfy the criteria for independence assessment specified by the company and have been registered in compliance with the regulations of the Tokyo Stock Exchange.
*2: The three directors above are members of the Governance Committee and are engaged, from an objective and neutral standpoint, in the selection of directors for the company and the determination of executive remuneration and governance structure.
7：The effectiveness evaluation of the Board
To increase the effectiveness of the Board and to improve corporate value, the Daiken Group has implemented the effectiveness evaluation of the Board once a year since the end of fiscal 2016. Based on the self-assessment by all directors and deliberations at the Governance Committee in which the chairperson and majority of the members are independent outside directors, the effectiveness of important decision-making in management and proper business execution has been conformed to be sufficiently secured. The issues to work on for more effective the Board operations have been extracted, and they have been continuously putting effort into the improvement of responses.
Key issues and responses
Results of the evaluation in fiscal 2022 and responses to future issues
The Board's effectiveness evaluation implemented in fiscal 2022 evaluated that its sufficient effectiveness, which was equal to or surpassed that of the previous fiscal year, has been secured as they steadily executed the responses to the issues recognized in the previous fiscal year and proceeded with the improvement measures. Particularly regarding their involvement in the PDCA process in executing and verifying management strategies, such as the ex-post evaluation of the important investment case and the monitoring of the progress status, it has been confirmed that the Board effectively fulfilled their functions and sufficiently functioned in regard to the role to be involved in the governance structure by the Governance Committee. To further improve the effectiveness of the Board, we will proceed with the responses to the following issues.
Further discussions on the president candidate development plan and succession of the Board to secure sustainability of the functions of the management and the Board
Continuation of the discussions on the realization of the long-term vision and the important issues, including the following three themes, with a view to improving sustainable corporate value beyond the vision.
- Human resource development toward the securing of diversity and human resource strategies including the improvement of the internal environment
- Internal control and risk management in the entire group
- Response to sustainability issues
8：The Board and Independent Outside Director Attendance at Board
The board meetings convened and attendance rate of independent directors
| Fisical 2020 | Fisical 2021 | Fisical 2022 | |
|---|---|---|---|
| Number of board meetings convened | 13 | 12 | 13 |
| Average attendance rate of outside directors | 100% | 100% | 100% |
| Mizuno Kouji | 13/13 | 12/12 | 3/3 |
| Furube Kiyoshi | 13/13 | 12/12 | 3/3 |
| Shingo Ishizaki | 10/10 As an independent outside audit & supervisory board member |
12/12 （2 of 12）As an independent outside audit & supervisory board member |
13/13 |
| Masafumi Inoue | 3/3 As an independent outside audit & supervisory board member |
- | - |
| Yuko Asami | 12/13 As an independent outside audit & supervisory board member |
11/12 As an independent outside audit & supervisory board member |
13/13 （3 of 13）As an independent outside audit & supervisory board member |
| Kiyoshi Mukohara | - | 9/10 As an independent outside audit & supervisory board member |
13/13 （3 of 13）As an independent outside audit & supervisory board member |
Audit & supervisory board meetings ・ Audit & supervisory committee convened and attendance rate of independent directors
| Fisical 2020 | Fisical 2021 | Fisical 2022 | |
|---|---|---|---|
| Number of audit & supervisory board meetings convened | 14 | 13 | 4 |
| Average attendance rate of independent outside audit & supervisory board members | 97% | 96% | 100% |
| Number of audit and supervisory committee convened | - | - | 10 |
| Outside director audit and supervisory committee member attendance rate | - | - | 100% |
| Masafumi Inoue | 4/4 | - | - |
| Yuko Asami | 13/14 | 12/13 | audit & supervisory board meetings（4/4） Number of audit and supervisory committee（10/10） |
| Shingo Ishizaki | 10/10 | 3/3 | Number of audit and supervisory committee（10/10） |
| Kiyoshi Mukohara | - | 10/10 | audit & supervisory board meetings（4/4） Number of audit and supervisory committee（10/10） |
9：Executive Remuneration
Procedure
The Board has the authority to make decisions on the policy concerning the amounts and the method of calculating executive remuneration, and the authority is delegated to the Board of Representative Directors by a Board resolution. The reason for delegation was because we judged that the Board of Representative Directors would be suited to evaluate each director’s responsible division while taking into consideration the entire company’s business performance, etc. In determining remuneration, to secure transparency, fairness, and objectivity, remuneration is determined by the Board of Representative Directors after deliberations and recommendations by the Nomination and Remuneration Committee (Governance Committee after the General Meeting of Shareholders on June 25, 2021) in which the chairperson and majority of the members are independent outside directors.
Composition
Executive remuneration is composed of mission remuneration as fixed remuneration, performance remuneration as the performance-based remuneration, and stock-based compensation. The proportion of the performance-based remuneration in the remuneration for the directors (except for the director who is an Audit and Supervisory Committee Member and outside director) is around 40% and is designed to fluctuate according to performance.
- Stock-based compensation
- To reflect medium- to long-term performance and corporate value improvement, the transfer restricted stock-based compensation system has been introduced. (Except for directors who are Audit and Supervisory Committee Members and outside directors)
- Performance remuneration
- Performance-based remuneration based on the accomplishments/results in company performance
- Mission remuneration
- Fixed remuneration to be determined based on one’s duty. To ensure the background of the money amount, the breakdown (Audit and Supervisory Committee Member compensation in addition to representative compensation, supervisor compensation, and executive compensation) is organized and determined.
Executive Remuneration for the Fiscal Year Ended March 2022
The total amount of remuneration to each executive classification, the total amount of remuneration by type, and number of target executives are as follows.
| Executive Classification | Total Amount of Remunerations, etc. (1 million yen) | Total Amount of Remunerations, etc. by Type (1 million yen) | Number of Target Executives | |||
|---|---|---|---|---|---|---|
| Mission remuneration | Performance remuneration | Stock-based compensation | Retirement Benefits | |||
| Director*1 | 200 | 98 | 92 | 8 | – | 5 |
| Director(Audit and Supervisory Committee Member) | 36 | 36 | - | - | – | 2 |
| Audit & supervisory board members*2 | 10 | 10 | - | - | – | 2 |
| Outside Directors and Audit & supervisory board members | 42 | 42 | - | - | – | 8 |
*1: Except for outside directors
*2: Except for outside Audit & supervisory board members
*3: The total amount of remunerations, etc. above is based on the standards before revision by the resolution by the 106th General Meeting of Shareholders held on June 24, 2022.
10：Policy on Cross-Shareholdings
The Company’s basic policy for holding shares for purposes other than pure investments (cross shareholdings) is to focus on the shares of companies that are expected to enable the Company to generate appropriate synergy by maintaining and strengthening business ties and relationships with other companies. Nevertheless, the Company will sell the cross-held shares if such shares are deemed no longer sufficiently meaningful as cross-shareholdings.
To ensure that the effects and reasonableness of cross-shareholdings are in line with their purposes, the Company shall closely and specifically examine, both from the qualitative and quantitative aspects, whether the benefits and risks associated with cross-shareholdings justify the cost of capital and report the results of such an examination to the Board of Directors annually to review all cross shareholdings.
With regard to the exercise of voting rights, the Company shall exercise voting rights to ensure that such rights contribute to the enhancement of corporate value. In exercising voting rights, the Company shall not make cookie-cutter decisions based on quantitative criteria alone. Decision on how to exercise voting rights shall be made on the basis of a comprehensive assessment of whether such decisions will contribute to improvement of medium- to long-term corporate value of both the Company and the investee companies.
For further explanation of the purpose and rationality of holding shares in each individual company as cross shareholdings, please refer to the Company’s annual securities report.
11：Policy for Promoting Constructive Dialogs with Shareholders
To build a medium- to long-term relationships of trust with shareholders and investors and to ensure that investor relations (IR) activities contribute to the sustainable enhancement of the Company’s corporate value, the Company has established the following policy for active and constructive dialogs with shareholders and investors:
1. Top management’s engagement and appointment of a director for dialogs with shareholders
Because the Company positions IR as one of the top priorities of corporate management, top management actively engages in IR activities as the persons ultimately responsible. In addition, the Company appoints an executive officer in charge of IR to ensure consistency and continuity by centrally managing the deployment of IR activities.Our outside directors, other directors, and executive officers play proactive roles in such activities when necessary, considering the purpose of the activities and the topics of dialogs.
2. Measures to ensure organic coordination among departments
Our company specifies the department in charge of IR in its division of duties policy and ensures that the necessary management resources (such as skilled human resources) and authority are provided to that department for the execution of IR duties. In order to promote constructive dialogs with shareholders and investors, we support dialogs by directors and executive officers with shareholders and investors through a framework that ensures coordination with the divisions in charge of corporate planning, finance, accounting, general affairs, legal affairs, public relations, and ESG at all times.
3. Initiatives to enrich dialogs with shareholders and investors
The Company holds earnings briefings for shareholders and investors semiannually and publishes its financial results briefing materials on the Company’s website.We also have interviews with individual investors and provide explanations to shareholders when necessary. To promote a better understanding of our company, we strive to provide easy-to-understand information concerning financial and nonfinancial information, such as the Group Corporate Philosophy, medium-term and long-term management strategies, and ESG initiatives. When developing and publishing the Group’s management strategies and management plans, the Company clearly specify the earnings plan, investment plan, and capital policy, among other matters, based on a full understanding of the overall cost of capital.Among the disclosed documents, we endeavor to disclose and provide the necessary information in English for dialogs with shareholders and investors.
4. Measures to provide feedback to management and the Board of Directors
The opinions and concerns of shareholders and investors identified through dialogs are reported quarterly by the executive officer in charge of IR to the Board of Directors and the Executive Committee, which is the decision-making body for the execution of business. At the same time, the Company shall ensure that the thought-provoking opinions and concerns all shareholders and investors are reflected in corporate management to help enhance corporate value on a sustainable basis.
5. Measure to control insider information in conducting dialogs with shareholders and investors
With regard to the control of insider information in conducting dialogs with shareholders and investors, the Company set a certain period of time before the Company makes any earnings announcements as a quiet time when the content of any dialogs is restricted. In order to prevent the risk of insider information leaks in interviews with shareholders and investors, the Company shall ensure that only those directors, executive officers, and other authorized persons who are fully educated about fundamental information management are allowed to conduct interviews with shareholders and investors.
Corporate Governance Report
Corporate Governance Report（PDF 1MB）【Last Update: July 20, 2022】