Corporate Governance

Tokyo Seimitsu has adopted a company structure with an audit and supervisory committee.
For dealing with matters that do not fall under the criteria for submission to the Board of Directors, the Company has adopted an Executive Officer System to speed up the decision-making process by delegating a large amount of authority to the Head of each company after defining their scope of duties and authority in accordance with the relevant regulations of the Company. In addition, the Executive Management Meeting strives to share information and enhance deliberations across company divisions. In addition, various cross-company committees such as the Risk Management Committee and the Compliance Committee have been established to examine and monitor material issues from various perspectives to make appropriate decisions.

The Board of Directors is composed of eight directors who are not Audit and Supervisory Committee members (two of whom are external directors) and four directors who are Audit and Supervisory Committee members (of whom three are external directors), with the CEO serving as the chairman. The Board of Directors holds regular monthly meetings, and extraordinary meetings are also held as necessary. The Board of Directors convened 16 times in fiscal 2023.

The Board of Directors deliberates on important matters related to management as stipulated by law, the Articles of Incorporation, and the Board of Directors Regulations, as well as monthly, periodic, and annual business results, and supervises the execution of business by each director.

As an independent body, the Audit and Supervisory Committee audits and supervises the execution of business by Directors other than Audit and Supervisory Committee Members. The Audit Department and the accounting auditor exchange opinions on the audit system to determine whether there are problems in auditing, issues, and other matters as needed, and strive to enhance the effectiveness of audits. At the same time, the Audit and Supervisory Committee receives regular reports on findings and related information from internal audits conducted in accordance with the annual audit plan.

In fiscal 2023, we conducted business audits of domestic subsidiaries as we recognized the importance of strengthening the governance of subsidiaries in auditing the construction and operation of internal control systems at subsidiaries. No issues were found during the audits.

The Company has established a Nomination and Compensation Council as a voluntary committee for the purpose of clarifying the independence, objectivity, and accountability of the Board of Directors functions, especially in nomination and compensation to directors. Independent external corporate directors are in the majority (now five members are independents external corporate directors) on the council, helping to realize deliberations fully independent from management.

The Company has in place an executive officer system to make speedy decisions on product development planning to respond quickly and flexibly to market trends. In addition to supervising the progress of business plans at regular monthly meetings of the Executive Management Meeting and Executive Officers’ Meeting, the Executive Officers’ Meeting aims to share information across the Company and enhance Executive Officers’ Meeting deliberations.

In selecting Directors of the Company, regardless of individual attributes such as gender and nationality, persons with superior dignity, ethics, and insight are selected, and are well versed in corporate management and the Company’s business, or persons with extensive experience in their respective fields of expertise. External Director candidates are those who are capable of fulfilling the function of supervising management from an independent standpoint outside the Company and providing advice on the Company’s corporate activities based on their abundant experience and deep insight.

Ages current as of the end of June 2024/Independent External Corporate Director: ◎ Female: 〇 Foreigner: ●
Note: This matrix represents the areas in which we expect each Director to have more expertise and play a more active role, based on their experience and other factors. This matrix does not represent all the knowledge and experience of each person.

The Company has established policies and procedures for determining the amount of remuneration, etc. for directors in its “Basic Policy on Corporate Governance.” For details about the policy, compensation structure, etc., please refer to the Basic Policy on Corporate Governance.

Among the remuneration paid to directors responsible for business execution, the formula for restricted stock, which is a medium- to long-term incentive to share profits with shareholders, was revised to incorporate capital efficiency (ROE) in 2023 and revised to incorporate ESG score* in 2024.

The Company shall not be engaged in any transactions with Directors and/or major shareholders that may damage the interests of the Company or the common interests of the shareholders, as indicated in “(7) Related Party Transactions” in “2. Directors and Boards” of the Basic Policy on Corporate Governance. When a Director is intending to enter into a transaction with the Company for him/herself or for any third parties, the Director shall obtain prior approval of the Board of Directors according to the rules of the Board of Directors, and report important facts in that transaction at the board meeting. Terms and conditions for the transaction may be determined in the same manner as a transaction with third parties.

To identify any transactions involving a conflict of interest by Directors, the Company checks annually and regularly existence of such transactions (excluding director compensation) between the Company Group and Directors or their family members within the second degree of kinship.

When the Company is intending to enter transactions between the Company and major shareholders or other related parties, then it shall be approved in advance by personnel with authority commensurate with the importance and scale of the transaction in accordance with internal regulations determined by the Board of Directors.

The Board of Directors comprehensively examines whether shares held as cross-holdings are worthwhile based on risk and return from perspective of medium- to long-term economic rationality, and qualitative considerations such as the purpose of holding and credit status. If this examination results in the judgment that it is not worthwhile to retain cross-holdings, in principle such holdings are reduced. However, if it is determined that holding of such shares will contribute toward the improvement of medium- to long-term corporate value, they are retained. As a result of such deliberation, the Company sold 18 cross-shareholdings (including shares subject to deemed holding) for 8,383 million yen between April 2015 and March 2024.

The Company conducts questionnaire surveys of all directors (including Audit and Supervisory Committee members) regarding the roles, functions, and operations of the Board of Directors. The Board of Directors discusses among the internal and external directors the results of the responses being summarized and analyzed, and then the Board of Directors evaluates its effectiveness and discusses future actions.

The Company conducts questionnaire surveys of all directors (including Audit and Supervisory Committee members) on the items listed below regarding the roles, functions, and operations of the Board of Directors. The Board of Directors discusses among the internal and external directors the results of the responses being summarized and analyzed, and then the Board of Directors evaluates its effectiveness and discusses future actions.

For preparing the questionnaire as well as compiling and analyzing the results of the questionnaire, we utilize external organizations to ensure transparency and effectiveness.

The questionnaire not only evaluates each item but also includes open-ended questions about the strengths of the Board of Directors and areas for improvement, and it seeks individual directors' reflections on their contributions to the board, along with any other comments and suggestions they might have.

The Company’s Board of Directors is generally considered to be effective, as members with diverse experience and expertise engage in free and vigorous discussions, and outside directors are provided with ample opportunities to gain a better understanding of the Company.

With regard to the issues we faced last year in strengthening the governance of the entire Group, we are working to improve and strengthen the management system of our subsidiaries and provide effective support as well as supervision. With regard to succession planning and executive training, discussions will be held by the Nomination and Compensation Council.

In addition, with regard to the enhancement of discussions at the Board of Directors meetings, we are reviewing management methods, such as separating deliberations and reporting. Furthermore, from the viewpoint of deepening our shareholders’ and investors’ understanding of our company, we will enhance dialogue related to governance and sustainability, and share feedback with the Board of Directors for use in our efforts to achieve sustainable growth in the future.

At the same time, some issues have been identified from this year’s questionnaire as follows.

In order to further enhance discussions, the Board of Directors will consider reviewing the criteria for submission, speeding up the distribution of materials, and adding to the issues of individual themes. With regard to succession planning, deeper discussions will be held by the Nomination and Compensation Council for formulating a training plan, etc.

Furthermore, we will consider the further enhancement of executive training, such as training for conducting on-site inspections, including at overseas bases. Through these initiatives, the Company is committed to ensure further improvement for the effectiveness of the Board of Directors.