Corporate Governance

Basic Approach

The KOITO Group’s basic approach to corporate governance is to recognize the importance of ethical standards and sound management in order to retain the trust of all its stakeholders. Based on this approach, KOITO positions making efforts to enhance corporate governance and strengthen compliance as the most important aspects of its administration.

Organization for Corporate Governance

  1. Board of Directors
    KOITO’s Board of Directors is chaired by the President. The Board of Directors has 12 Directors and 2 outside Directors as members and meets once per month in principle. The Board of Directors discusses, reports, and makes decisions on matters stipulated in the Board of Directors Regulations, including those matters stipulated by laws, regulations, and the Articles of Incorporation, and supervises the execution of Director’s business execution.
     In addition, all Audit and Supervisory Board Members attend meetings of the Board of Directors to monitor Director’s business operations. The Managing Committee (chaired by the President) comprises full-time Directors and Corporate Officers as a body to aid the Board of Directors. The committee meets, in principle, three times per month, determines business execution, reports on progress, and follows up on business execution. The governance is being reinforced, such as that a new activity requires the approval of the Managing Committee and then the Board of Directors before starting.
  2. Audit and Supervisory Board
    The Audit and Supervisory Board comprises four Audit and Supervisory Board Members, of whom two are outside Audit and Supervisory Board Members, and meets regularly. Other than the Board of Directors, the standing Audit and Supervisory Board Members attend meetings of the Managing Committee and other important meetings to express opinions as needed. This structure enables Audit and Supervisory Board Members to constantly monitor the Director’s business execution.
     KOITO also strives to improve its auditing functions through close collaboration between Audit and Supervisory Board Members, the Internal Audit Department, and independent auditors by allowing them to exchange information and opinions as needed, and to hold regular meetings.
Corporate Governance
  • 3. Status of Audits
    Based on the annual audit plans, KOITO’s Internal Audit Department, an independent organization, conducts audits of the operations of internal control over financial reporting, as well as audits of the legality and appropriateness of operations against company-wide departments and KOITO’s subsidiaries. The departments and subsidiaries implement the necessary improvements to improve internal control. The Internal Audit Department reports the results of the audits to Directors and Audit and Supervisory Board Members, and exchanges information with the Audit and Supervisory Board Members and the independent auditors on the status of audits to facilitate mutual cooperation.
     The Audit and Supervisory Board discusses and establishes the annual activity policy, the division of each Audit & Supervisory Board member, and the annual audit plan. The audit is conducted based on the plan. Other than attending and expressing opinions at the Board of Directors, Audit and Supervisory Board Members audit the execution of Directors’ duties, legality and appropriateness of KOITO’s decision-making based on their knowledge and experience in each specialized field. In addition to Audit and Supervisory Board Members’ on-site audits and interviews with administrative divisions, Audit and Supervisory Board Members attend the audits performed by the independent auditors and the Internal Audit Department. Audit and Supervisory Board Members strive to improve the effectiveness of audit by maintaining collaboration with relevant parties, including outside Directors by exchanging information as needed. Audit and Supervisory Board Members conduct audits described above and share its outline with outside Audit and Supervisory Board Member in a timely manner. Outside Audit and Supervisory Board Members contribute to KOITO’s management strategies planning and the enhancement of corporate governance. This is achieved through inquiries and comments made at liaison meetings with the Board of Directors, Audit and Supervisory Board, independent auditors and outside Directors, based on their knowledge in each specialized field as well as information from Audit and Supervisory Board Members. In addition, KOITO has established an Audit and Supervisory Board Member’s Office so that independent staffs can assist Audit and Supervisory Board Members with their duties.
     In fiscal 2020 (from April 31, 2019 to March 31, 2020), a total of 8 Audit and Supervisory Board were held, and all Audit and Supervisory Board Members, including outside Audit and Supervisory Board Members, have attended to all meetings. The main matters discussed in the Audit and Supervisory Board are evaluation, reappointment, and remuneration agreement with the independent auditors, legality or appropriateness of matters discussed in the Ordinary General Meeting of Shareholders, the deliberation and preparation of Audit Report, and preparation of Audit Plan.
     Mr. Yukinobu Suzuki, KOITO’s outside Audit and Supervisory Board Member, has long been served as an important position at National Tax Agency, is currently a certified tax accountant. He has financial and accounting knowledge at certain degree.

    KOITO’s accounting audit has been ARK LLC. since June 2009. The accounting audit is performed by certified public accountants, Junichi Yoshimura and Daiki Matsuura. Furthermore, certified public accountants and persons who passed the certified public accountant examination who belong to ARK LLC. assist the accounting audit.
     KOITO establishes a policy on selecting audit corporations; appropriate size as an audit corporation, the expertise and independence required to accounting auditors, and a system to ensure the appropriateness of accounting audits.

Election Policy for Directors and Audit and Supervisory Board Members

KOITO’s policy is to elect a person who is capable of responding to expectations of shareholders as a Director, has enough experience and advanced knowledge of business administration, and can fulfill the duties and responsibilities of a Director as a Director candidate.
 Based on this policy, the President prepares the draft of Director candidates and proposes it to the Board of Directors which then finalizes the selection of Director candidates.
 
KOITO’s policy on electing Audit and Supervisory Board Members is to select a person who has an excellent personality, as well as great ethical values, to properly, justly, and efficiently carry out the auditing of the execution of duties by Directors. Based on this policy, the Board of Directors selects Audit and Supervisory Board Member candidates upon receiving an approval by the Audit and Supervisory Board.
 
The Board of Directors selects Director candidates who have been serving in important positions in their departments, are familiar with their tasks, as well as the overall operation of KOITO, and have made great contributions to improve the business performance and corporate values of KOITO. The General Meeting of Shareholders then reaches a conclusion on their appointments.
 
Reference Documents for the Notice of the General Meeting of Shareholders describe the reasons for selecting individual Directors and Audit and Supervisory Board Members. Reference Documents for the Notice of the General Meeting of Shareholders also describe the reasons for the dismissal of Directors or Audit and Supervisory Board Members. The Board of Directors makes decisions on the election and dismissal of individual Corporate Officers.
 If a dismissal procedure deviates from the above policy, the Board of Directors approves of the procedure, which is then decided in a General Meeting of Shareholders. The Board of Directors' Regulations stipulate that the election and dismissal of Corporate Officers shall be carried out upon a decision by the Board of Directors.

Outside Directors and Audit and Supervisory Board Members

KOITO’s policy on electing outside Directors is to appoint persons who satisfy the requirements for outside Directors in the Companies Act and requirements for independency in the independency standard for the independent officer system of Tokyo Stock Exchange.
 Outside Directors shall have abundant knowledge and experience in corporate administration. Outside Audit and Supervisory Board Members shall have technical knowledge of laws and finance. Both outside Directors and Audit and Supervisory Board Members are elected upon a decision at a General Meeting of Shareholders.
 When KOITO’s own Directors and Audit and Supervisory Board Members also serve as officers at other listed companies, they are obliged to limit their involvement within the reasonable range. Notice of the General Meeting of Shareholders describes the status of Directors and Audit and Supervisory Board Members as serving as officers of other listed companies.
 Individual Directors have thorough knowledge of business operations and administration. The knowledge, experience, and abilities are well balanced among inside and outside Directors.

Director and Audit and Supervisory Board Member Diversity Policy

Individual Directors have thorough knowledge of business operations and administration. Their diversified knowledge, experience, and abilities are well balanced among inside and outside Directors. KOITO keeps seeking a desirable structure of the Board of Directors.
 Also, KOITO’s policy on electing Audit and Supervisory Board Members is to select candidates who have excellent personalities, as well as great ethical values, to properly, justly, and efficiently carry out the auditing of the execution of duties by Directors as Audit and Supervisory Board Members. Specifically, outside Audit and Supervisory Board Members are selected from those who have technical knowledge of laws and finance.

Director Effectiveness Evaluation

KOITO conducts annual surveys to evaluate the effectiveness of the Board of Directors. The Board of Directors evaluates itself based on the survey findings.
 
 The following is the outline of the results of analyzing and evaluating the effectiveness of the Board of Directors.
  1. The Board of Directors meets monthly, in principle, and promptly and properly discusses important agenda items based on the Board of Directors Regulations.
  2. Annual meeting schedules are announced to all Directors and Audit and Supervisory Board Members, including outside ones, before the start of the fiscal year. The schedule is designed for them to attend the meetings readily. Directors and Audit and Supervisory Board Members actively participate in discussions, and business topics are thoroughly examined.
  3. The Board of Directors receives advice and suggestions from Directors who have worked in the various departments, such as management, sales, technology, and production, and outside Directors who have experience and knowledge of corporate administration. Outside Audit and Supervisory Board Members with technical knowledge of laws and finance also provide their opinions. The Board of Directors thereby discusses and examines business topics from various angles by taking enough time.
The Board of Directors also operates by reflecting the opinions of outside Directors, such as adding the results of self-evaluations, contents put on the agenda of the Managing Committee, technical trends in the industry, and the latest technical trends to the matters to be reported.
 
The Board of Directors will continue reinforcing its functions as the highest decision-making entity and improving the speed of making administrative decisions to increase its effectiveness.

Training for Directors and Corporate Officers

KOITO provides training and seminars for Directors and Corporate Officers to help them acquire the necessary knowledge to understand their roles and responsibilities.

Remuneration of Directors

In terms of remuneration of Directors, KOITO abolished its executive retirement bonus payment system and officer bonus in 2012 and instead adopted a remuneration system based on fixed remuneration and performance-based remuneration.
 The remuneration of Directors is determined based on internal standards for officer remuneration and comprehensive balances, including the company performance, shareholder dividends, remuneration at other companies, and employee salaries, as well as the administrative ability, performance, and contribution of individual Directors.
 To determine the amount of fixed remuneration, the basic amount of fixed remuneration is first set based on the role and position of individual Directors. Then, the upper and lower limits, position-based difference, and difference based on the number of years served in a position are set to calculate the amount of remuneration.
 Performance-based remuneration is evaluated and determined based on a belief that comprehensive evaluation, including targets and achievements, is important by using business performance such as sales and revenue of the fiscal year and the level of contribution by individual Directors as indexes.
 Remuneration of individual Directors is determined based on the authority of the Board of Directors and discussions with the President.
 In 2015, share-linked compensation type stock options started for Directors and Corporate Officers, except for outside Directors. The goal is to motivate business administrators to improve business performance and corporate value in the mid-to-long run and by sharing the benefit of rising stock prices and the risk of falling stock prices with shareholders under the recognition that company performance and share values are extremely closely linked and related to one another.
 Only fixed remuneration is applicable to outside Directors and Audit and Supervisory Board Members, and no performance-based remuneration is granted.

Basic Policy of Internal Control System

The Basic Policy of the Internal Control System is set as follows to improve and reinforce internal control.
  1. System ensuring that Directors and employees execute their business duties in compliance with laws and regulations and the Company’s Articles of Incorporation

    The Compliance Committee, the Compliance Department, the Internal Audit Department, whistle-blower internal reporting system, and other organizations and systems, as well as the Code of Corporate Ethics and other relevant regulations, will be developed and enhanced based on the KOITO Group Corporate Behavior Charter. At the same time, KOITO's Directors, Corporate Officers, and employees will receive education familiarizing them with the organizations, systems, and regulations.

  2. System for the preservation and administration of information on Directors executing their business duties

    Regulations will be developed and enhanced to appropriately preserve and administer minutes of the General Meeting of Shareholders, the Board of Directors, the Managing Committee, and other information on the Directors executing their business duties.

  3. Regulations and other systems for managing the risk of loss

    Risk Management Regulations and other regulations and systems for managing risk will be developed to avoid and eliminate material risks that could threaten the Company’s viability, and to minimize the impact when they arise. At the same time, KOITO's Directors, Corporate Officers, and employees will receive education and training on risk management.

  4. System for ensuring the efficient execution of business duties by Directors

    The Board of Directors and the Managing Committee meetings will be held regularly. Meanwhile, the Board of Directors’ Regulations, the Managing Committee’s Regulations, and other regulations pertaining to the execution of business duties by the Directors, as well as the Corporate Officer system and other organizations and systems, will be developed and enhanced to ensure the efficient execution of business duties by the Directors. At the same time, the business duties will be executed according to specific plans that each division develops every fiscal year based on the President’s policy.

  5. System for ensuring appropriate business execution by the corporate group comprising KOITO and its subsidiaries

    KOITO and its group companies will acknowledge the KOITO Group Corporate Behavior Charter and develop a system for ensuring and administering the appropriate execution of business duties as follows.
    1. KOITO clarifies matters to be reported in the Subsidiary Company Management Regulations and other regulations and improves reporting system. Also, KOITO requests regular business reports to the group companies.
    2. KOITO comprehensively and thoroughly manages risks of the entire group based on the Subsidiary Company Management Regulation and other regulations. If actions of the group companies are insufficient, KOITO provides instructions and corrective actions.
    3. KOITO requests its group companies to develop and improve regulations, organizations, and systems for regular meetings of the Board of Directors and the execution of duties by the Directors. Officers serve in multiple posts in important group companies.
    4. KOITO ensures that group companies stay in compliance with laws and regulations based on the KOITO Group Corporate Behavior Charter and other regulations. Also, KOITO's Management Department and Internal Audit Department conduct audit and financial audit of group companies. KOITO also clarifies matters requiring approvals in the Subsidiary Company Management Regulations and other regulations so that the applicable business operations are to be executed upon approval by KOITO.

  6. Matters pertaining to the status of certain employees, independence from Directors, and the effectiveness of instruction in the event the Audit and Supervisory Board Members request such employees to assist in the execution of their duties

    An Audit and Supervisory Board Members’ Office will be established to help the Audit and Supervisory Board Members execute their duties under the instructions and orders of the Audit and Supervisory Board Members and the Audit and Supervisory Board. Moreover, assignment of personnel to the Audit and Supervisory Board Members’ Office shall be decided upon approval by the Audit and Supervisory Board to ensure independence from the Directors.

  7. System for Directors and employees of KOITO and its subsidiaries to report to the Audit and Supervisory Board Members and for preventing unfair treatment of the Directors and employees for reporting to the Audit and Supervisory Board Members

    Directors, Corporate Officers, and employees of KOITO and its group companies shall report to the Audit and Supervisory Board Members when they learn of matters of material impact on the Company, serious violations of laws, regulations, and the Company’s Articles of Incorporation, and other issues of compliance. Moreover, each Audit and Supervisory Board Member shall exercise their own discretion in reporting the findings from such reports to the Audit and Supervisory Board. Meanwhile, the Company’s organization and systems will be developed and enhanced to rigorously prevent the unfair treatment of the Directors, the Corporate Officers, and the employees for reporting to the Audit and Supervisory Board Members.

  8. Policy on expenses arising when the Audit and Supervisory Board Members execute their duties and system for enabling the Audit and Supervisory Board Members to conduct effective audits

    The Company will pay all necessary expenses involved in the Audit and Supervisory Board Members’ execution of their duties.
    The Audit and Supervisory Board Member will monitor and audit the execution of business duties at the Company by means that include attending the Board of Directors, the Managing Committee, the Compliance Committees and other relevant conferences and committees, and examining important documents. The Audit and Supervisory Board Members will exchange opinions periodically or as needed with Directors, Corporate Officers, financial auditors, and the Internal Audit Department, among others.

The KOITO Group Corporate Behavior Charter

The KOITO Group’s basic management policy is to create customer needs and contribute to the progress of society, while fostering mutually beneficial relationships with all stakeholders, including shareholders, customers, employees, and business partners, under the theme “Light.”
 KOITO recognizes the seriousness and urgency of global environmental problems and thus pursues "Eco-friendly Manufacturing for People and the Earth" in all business activities as it engages in environmental conservation activities.
 To realize the basic policy and activities, KOITO strives to implement corporate activities based on corporate ethics, not to mention staying in compliance with all domestic and international laws, regulations, rules, and their spirits expected from companies based on the following ten principles.
  1. Trusted corporate actions
    We gain customers’ satisfaction and trust by developing and offering safe and high-quality products and services.
  2. Observance of social norms
    We observe relevant laws and rules and conduct proper trade based on fair, transparent and free market competition.
  3. Communication with society
    We communicate with various members of society, including not only our shareholders but also trade partners and local residents, and strive to disclose our corporate information appropriately and fairly.
  4. Respect for humanity
    We respect the diversity of our employees and the character and personality of each of them, regardless of nationality or gender, and strive to build a safe and clean environment where each worker can make best use of their capabilities and fulfill their potential.
  5. Care for the global environment
    We take the initiative and set an example in protecting the global environment through activities on the theme of "Eco-Friendly Manufacturing for People and the Earth."
  6. Contribution to society
    We are aware of our responsibility as a good corporate citizen and actively carry out social contribution activities to help create a better society.
  7. No relation with anti-social forces
    We have no relation whatsoever and deal resolutely with any anti-social force or group that threatens the order and safety of society.
  8. Business management from a global perspective
    In our global corporate activities, we not only observe international rules and local laws but also respect local culture and customs.
  9. Our corporate managers are aware of their duty to comply with the spirit of this Charter. They take the lead and set an example in observing these principles, and make the KOITO Group companies and trade partners familiar with the principles. Furthermore, they grasp opinions inside and outside the companies at all times, manage an effective company structure, and ensure that corporate ethics are strictly observed.
  10. In the event of a breach of this Charter, our corporate managers will express, internally and externally, their will to solve the problem themselves, clarify the facts and strive to investigate the cause and prevent recurrence. In addition, they will disclose information to society promptly and adequately and assume accountability, and severely punish those involved, including themselves, after clarifying their authority and responsibility.