Through efforts to strengthen corporate governance, enhance risk management, and implement thorough compliance, the Takuma Group is working to build structures that make possible highly transparent and appropriate decision-making and to maximize its corporate value by assessing and managing risk in an appropriate manner and by preventing the cessation of business operations and loss of social trust from violations of laws and regulations.
In order to safeguard and steadily increase Takuma’s corporate value over the long term, it is essential not only to ensure the development of the company's businesses, but also to clearly define governance in corporate operations—that is, to ensure that shareholders' oversight of operations is carried out appropriately and that officers carry out their operational responsibilities by means of a process that is clear, rational, efficient, and legally compliant. For that reason, we strive to develop an internal control system based on the awareness that strengthening the Corporate Governance Code is a top-priority management issue. Similarly, we’ve formulated the Takuma Group Ethics Charter and the Takuma Group Code of Conduct in order to ensure awareness of the importance of compliance and made it available to all officers and employees while working to raise awareness and provide education on associated provisions. Furthermore, we've established an Internal Reporting System that consists of both internal and external helplines that serve as internal reporting hotlines. The Board of Directors oversees compliance with the Takuma Group Ethics Charter and the Takuma Group Code of Conduct through yearly reports related to these initiatives. In addition, the Audit & Supervisory Committee includes four outside directors who bring a high degree of independence to their roles, and we’re committed to continuously increasing Takuma’s corporate value by strengthening oversight of officers.
As of June 25, 2024
The Board of Directors was comprised of six directors (excluding directors who are members of the Audit & Supervisory Committee) and five directors (of whom four were outside directors). The Board of Directors meets regularly once a month as a rule and whenever else it is necessary to make decisions about important issues related to business management and issues established by law and ordinances, as well as to oversee the execution of the directors’ duties.
Directors: 11 (10 men and 1 woman), including 4 outside directors (3 men and 1 woman)
During FY2023, the Board of Directors complied with internal regulations concerning its discussion and reporting responsibilities by approving resolutions related to the Company’s basic policies concerning management, matters related to the execution of important operations, and matters designated by law and in the Company’s Articles of Incorporation; by reporting on important topics outlined in the medium-term management plan, including progress towards achieving KPIs related to the Key Issues (Materiality), overseas business initiatives, digital transformation (DX) implementation initiatives, and R&D themes deemed likely to lead to medium- and long-term business growth; and by discussing the directions of the business portfolio, capital policy, M&A strategy, and human capital for the formulation of the 14th midium-term management plan, and by offering feedback on the contents of exchanges of views with investors in the context of Takuma’s IR activities.
In order to accelerate management decision-making and clarify where management responsibilities are placed, we have adopted an executive officer system in which we appoint executive officers who are entrusted with the responsibility of executing our business activities. There were 15 executive officers (including those who also serve as directors).
Moreover, we have also established a Committee of Executive officers, which is chaired by the president/chief executive officer, as an organization that deliberates matters that are brought up at meetings of the Board of Directors and other important issues related to the execution of our business activities. This committee communicates and provides direction about items decided by the Board of Directors and other important items related to the execution of our business activities appropriately to the divisions that are to execute them.
An Audit & Supervisory Committee that consists of five members, of whom four are outside directors, is responsible for accounting and operational audits. Members of the committee attend important meetings, including those of the Board of Directors and the Committee of Executive officers, and they strive to understand and observe the status of business execution in a timely and appropriate manner. Drawing on their professional background and experience, they express their opinions as necessary from an objective perspective, and they conduct strict auditing of the business execution performed by the directors. In addition, members of the Audit & Supervisory Committee work together to conduct audits of business sites, departments, and subsidiaries in line with audit policies and other guidelines while regularly exchanging information, including through reports on topics such as audit plans and audit status from independent auditors and the Internal Auditing Department. They also work to communicate effectively and share information with subsidiaries’ directors, auditors, and other personnel, and they receive business reports from subsidiaries as necessary.
During FY2023, the committee discussed topics including audit policies, audit plans, division of responsibilities, evaluation of the accounting auditor, development of a consensus on director appointment and remuneration proposals (except for directors who are members of the committee), and audit report drafts. It also identified the following as key audit items in the audit plan and pursued related activities:
In addition, the committee examined issues surrounding directors’ and executive officers’ execution of their responsibilities, for example by asking whether the key policies set forth in the medium-term management plan were being appropriately implemented and by reviewing the following:
Takuma has put in place structures to ensure Audit & Supervisory Committee members can do their jobs effectively by establishing an Audit & Supervisory Committee’s Office to help carry out the committee’s work.
We have established the Nominating & Compensation Advisory Committee to increase transparency and objectivity in the selection of candidates for director and executive officer positions and in the determination of the compensation and other terms so as to enhance the oversight function of the Board of Directors. The Committee includes a total of six members: four independent officers (independent outside directors), a representative director, and the executive officer in charge of human resources. The Nominating & Compensation Advisory Committee, which reports to the Board of Directors, discusses topics related to executive appointment, dismissal, and compensation as well as topics related to CEO succession planning. Having received those reports, the Board of Directors makes final decisions on related matters after sufficient discussion while respecting the Committee’s report.
During FY2023, the committee deliberated the following topics and reported to the Board of Directors:
To maintain an appropriate number of members who can conduct effective discussions and assure that the body can appropriately carry out its role of decision-making on basic policies and important matters related to the company's management and supervision of directors’ and executive officers’ execution of their job responsibilities, Takuma takes various steps to ensure that the Board of Directors’ membership exhibits a good balance of knowledge, experience, and ability. The Policy on the Appointment and Dismissal of Executives put in place by the Board of Directors establishes appropriate processes for appointing and dismissing executives along with basic requirements for director candidates and executive officers; criteria for appointing director candidates, executive officers, and other positions; and criteria for dismissing directors and executive officers.
The Nominating & Compensation Advisory Committee, whose membership consists of independent officers, representative directors, and the officer in charge of human resources (with a majority of independent outside directors), discusses the appointment and dismissal of directors and executive officers, including the position of president and CEO, in accordance with the Policy on the Appointment and Dismissal of Executives put in place by the Board of Directors. The Board of Directors makes final decisions in such matters after sufficient discussion based on factors including directors’ past and present performance of their responsibilities while respecting reports and advice from the Committee.
Takuma designates all outside executives who satisfy certain qualifications as independent executives.
We assess the independence of outside directors based on standards of independence adopted by the Tokyo Stock Exchange as well as our own internal Standards for Determining the Independence of Outside Executives.
In Takuma's view, the following individuals do not exhibit sufficient independence to qualify as an independent executive:
*1: “Individuals/entities whose principal business partner is Takuma” refers to individuals and entities that earned at least 2% of their consolidated net sales during the most recent business year from Takuma.
*2: “officers” refers to managing directors, executive officers, and other personnel.
*3: “Principal business partners of Takuma” refers to individuals and entities whose payments to Takuma constituted at least 2% of Takuma's consolidated net sales during the most recent business year.
*4: “A certain amount” refers to at least JPY 10 million (for individuals) or at least 2% of gross sales (for organizations) during the most recent business year.
*5: “Major shareholder” refers to an individual or entity that holds at least 10% of the total voting rights.
In order to increase the effectiveness of the Board of Directors, all directors participate in a questionnaire and interviews about the body’s effectiveness once a year. Those results are then analyzed, evaluated, reported to the Board by the executive in charge of the evaluation process, and discussed by the Board.
In the FY2023 evaluation, the effectiveness of the Board of Directors was analyzed and evaluated from five perspectives: the body’s composition, its operation, the responsibilities of its members, its overall effectiveness, and the operation of the Nominating & Compensation Advisory Committee, which was established with the goal of enhancing the Board’s oversight function. This evaluation found that the Board had operated in an effective and efficient manner and that it was implementing ongoing initiatives to improve its functionality and ensure its effectiveness, for example by holding multiple deliberations on the 14th medium-term management plan, which began in FY2024, to deepen discussions on the business portfolio, capital policy, and other issues.
Meeting on June 28, 2016, the 112th Annual General Meeting of Shareholders resolved to limit compensation and other remuneration paid to directors (except Audit & Supervisory Committee members) to JPY 350 million per year. When the Annual General Meeting of Shareholders in question ended, there were six directors (not counting Audit & Supervisory Committee members).
Meeting on June 26, 2019, the 115th Annual General Meeting of Shareholders resolved to pay monetary compensation rights not greater than JPY 90 million per year to directors (except Audit & Supervisory Committee members) for use in acquiring restricted stock, separate from the above compensation limit. (The resolution limited the total number of shares of Takuma common stock issued or disposed for this purpose to 120,000 shares per year.) When the Annual General Meeting of Shareholders in question ended, there were six directors (not counting Audit & Supervisory Committee members).
Meeting on June 28, 2016, the 112th Annual General Meeting of Shareholders resolved to limit compensation and remuneration paid to directors who are members of the Audit & Supervisory Committee to JPY 72 million per year. When the Annual General Meeting of Shareholders in question ended, there were four directors that were members of the Audit & Supervisory Committee.
Takuma's Policy on Executive Compensation and Other Remuneration, which was established by resolution of the Board of Directors, codifies Takuma's policies for determining compensation and other remuneration for directors (except Audit & Supervisory Committee members). The policy is revised as necessary by resolution of the Board of Directors following consultation with, and consideration of recommendations submitted by, the Nominating & Compensation Advisory Committee.
Takuma has adopted the following basic policies concerning the determination of compensation:
| Compensation system | details | ||
|---|---|---|---|
| Compensation system | Fixed compensation | details | Fixed compensation is set depending on the role and responsibilities of each position and paid on a monthly basis. |
| Compensation system | Bonuses | details | Takuma has adopted a set of standards for calculating bonuses based on indicators such as fiscal year performance and achievement of targets, and the Board of Directors determines whether to pay bonuses and, if so, in what amount using those standards as a guide. Bonuses are paid at predetermined times each year. As a general rule, bonuses are capped at a maximum of 40% of fixed salary (annual amount). |
| Compensation system | Stock compensation | details | Stock compensation takes the form of shares of restricted stock that are granted in advance. Monetary compensation rights set depending on the role and responsibilities of each position are allocated at predetermined times each year, and shares in Takuma are granted in exchange for the pay-in of those rights. The ratio of stock compensation to fixed compensation (annual amount) shall be a maximum of 40%, with the ratio increasing for more senior positions. |
The Nominating & Compensation Advisory Committee, whose membership consists of independent officers, representative directors, and the officer in charge of human resources (with a majority of independent outside directors), discusses matters related to compensation and remuneration programs, the amount or calculation standard for each director’s compensation and other remuneration, and other executive officers’ compensation and other remuneration in accordance with the Policy on Executive Compensation and Other Remuneration and reports the results to the Board of Directors. Having received that report, the Board of Directors makes final decisions on related matters after sufficient discussion while respecting the Committee's report.
In determining the amounts of individual compensation packages, the suitability of those packages is verified based on factors including the Group's performance, compensation levels for executives at other companies, and employee salary levels.
Compensation for directors who are Audit & Supervisory Committee members and related issues are determined through discussion of directors who are Audit & Supervisory Committee members, within the scope set forth by the General Meeting of Shareholders.
Because the Group's business operates primarily on a build-to-order basis and because it considers consolidated ordinary profit to be the most important management indicator, consolidated order value and consolidated ordinary profit serve as key performance indicators in calculating bonuses that are based on fiscal year performance.
Specifically, a calculation table is used to calculate a coefficient based on the consolidated ordinary profit for the business year in question, the rate of growth relative to the average consolidated ordinary profit for the most recent three years, the extent to which the consolidated ordinary profit target has been achieved, and the extent to which the consolidated order value target has been achieved. Bonus amounts are then determined based on this coefficient. (Consolidated ordinary profit performance figures are calculated before deducting executive bonuses at companies included in consolidated accounting.) Performance forecasts included in the financial briefing announced in May are used as target values in the evaluation.
In order to implement management with a greater awareness of capital efficiency, we have decided to incorporate ROE into our performance evaluation indexes in addition to consolidated orders received and consolidated ordinary income in conjunction with the start of the 14th medium-term management plan beginning in FY2024.
Specifically, the consolidated ordinary profit, the extent to which the consolidated ordinary profit target has been achieved, and the extent to which the consolidated order value target has been achieved, and ROE for the relevant fiscal year will be used to calculate coefficients in a calculation table, and bonus amounts will be determined based on these coefficients.
Takuma offers directors stock compensation in the form of shares of restricted stock as a medium- and long-term incentive and as a means of sharing shareholder value. Transfer is restricted for a period of 30 years from the date on which the allocation of Takuma common stock is made, and the restriction is removed when that period ends or if the individual in question passes away, completes his or her term, retires, or otherwise ends his or her involvement with the company before the period ends for a legitimate reason approved in advance by the Board of Directors.
| Executive category | Total compensation and other remuneration (millions of yen) | Total compensation and other remuneration by type (millions of yen) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Basic compensation | Performance-linked compensation and other remuneration | Non-monetary compensation and other remuneration | ||||||||||
| Executive category | Director (except Audit & Supervisory Committee member) | Total compensation and other remuneration (millions of yen) | 269 | Total compensation and other remuneration by type (millions of yen) | Basic compensation | 194 | Total compensation and other remuneration by type (millions of yen) | Performance-linked compensation and other remuneration | 35 | Total compensation and other remuneration by type (millions of yen) | Non-monetary compensation and other remuneration | 40 |
| Executive category | Director (Audit & Supervisory Committee member) (outside director) |
Total compensation and other remuneration (millions of yen) | 56 (36) | Total compensation and other remuneration by type (millions of yen) | Basic compensation | 56 (36) | Total compensation and other remuneration by type (millions of yen) | Performance-linked compensation and other remuneration | - | Total compensation and other remuneration by type (millions of yen) | Non-monetary compensation and other remuneration | - |
*Performance-linked compensation and other remuneration consists of bonuses awarded to directors (except Audit & Supervisory Committee members).
*Non-monetary compensation and other remuneration consists of shares of restricted stock granted to directors (except Audit & Supervisory Committee members).
Internal audits of Takuma and its group companies are carried out by the Internal Audit Department, a specialized auditing department positioned independently from operational departments that reports directly to the president. The Department evaluates the implementation and operation of internal controls based on applicable laws, the Articles of Incorporation, internal rules, and other guidelines and determines whether operations are being carried out in an appropriate and efficient manner.
Internal audits are carried out in accordance with the Internal Audit Department Activity Policies and the Annual Audit Plan.
The results of each internal audit are summarized in an internal audit report, whose contents are reported to the president and Audit & Supervisory Committee members before being distributed to involved departments. In the event improvements, corrective measures, or other action is necessary, that information is included in the internal audit report, which is then distributed to involved departments once it has been approved by the president, at which point it comprises instructions for various actions to be taken. Departments receiving these instructions undertake the directed actions without delay and report on the viability of their implementation along with improvement plans and information about the status of measures taken to the president via the Internal Audit Department in the form of a Measure Response Form.
The following information relating to compliance with standards of conduct and ethics is audited:
