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    Corporate Governance

    Basic approach

    The Toyota Boshoku group has stated as the first part of its corporate philosophy the desire to promote corporate growth while fulfilling its responsibilities as a good corporate citizen in order to satisfy all stakeholders. To realise this, the Company recognises the importance of maintaining and improving management efficiency, fairness and transparency as a global company alongside efforts to ensure sustainable corporate activities and will strive to expand and enhance its corporate governance.
    Specifically, the Company will advance the following: (1) Securing the rights and equal treatment of shareholders; (2) Appropriate cooperation with stakeholders other than shareholders; (3) Ensuring appropriate information disclosure and transparency; (4) Appropriate execution of the roles and responsibilities of the Board of Directors; and (5) Engaging in constructive dialogue with shareholders.

    Response to the Corporate Governance Code

    Toyota Boshoku has determined that it is in compliance with all principles of the Corporate Governance Code. We submitted the Corporate Governance Report to the Tokyo Stock Exchange.

    Corporate Governance System

    Toyota Boshoku is working to strengthen corporate governance with the aim of increasing corporate value.
    The Board of Directors, the decision-making body for business management, resolves legal matters and important management-related matters and oversees business execution.
    Such matters are deliberated upon extensively prior to submission to the Board of Directors by way of the Corporate Planning Meeting, which shares information and makes decisions on important management issues, and the Corporate Strategy Meeting, which debates such items as company-wide management strategy. This serves to quicken response to management challenges. In addition, efforts are made to regularly monitor and follow-up on the status of business execution at the Management Meeting, where information is shared among internal directors, standing audit & supervisory board members and organisational heads from the different fields.

    Corporate governance system

    Corporate governance system
    (As of June2019)

    Initiatives for improving corporate governance

    Toyota Boshoku appoints four outside directors with extensive experience and broad views in such areas as corporate management. The outside directors serve to ensure the legality and appropriateness of decision-making by the Board of Directors and the execution of duties by directors from an objective standpoint through the function of oversight. This function includes providing suitable opinions and answering queries from the Board of Directors.
    Toyota Boshoku adopts a corporate auditor system, in which a four-person structure that includes two outside audit & supervisory board members audits the management of directors. Audit & supervisory board members attend key meetings, make visiting audits and speak with personnel in each division as well as audit the business execution of directors and the business and financial condition of subsidiaries in Japan and overseas. Such initiatives as assigning dedicated staff to the Audit & Supervisory Board Office help strengthen the functions of audit & supervisory board.
    In April 2019, the position of executive managing officer was changed to operating officer and the number of officers was reduced from 31 to 20, consisting of the Chairman, Vice Chairman, President, Executive Vice Presidents, Directors, Operating Officers and Audit & Supervisory Board Members.

    (FY)
    Initiatives for improving corporate governance

    Ratio of internal and outside directors and audit & supervisory board members

    Ratio of internal and outside directors and audit & supervisory board members

    Ratio of outside officers

    Ratio of outside officers

    Officer composition

    Officer composition

    Establishment of Management Advisory Council

    The Management Advisory Council was established as a forum for the candid exchange of opinions related to such matters as key management strategies, management issues, appointment and dismissal of management, nomination of candidates for director and audit & supervisory board member and compensation for management and directors. The council consists mainly of outside directors and is separate from organisations under the Companies Act.

    Management Advisory Council

    Management Advisory Council

    Policy and procedure for nominating candidates for director and audit & supervisory board member

    A decision is made on the appointment and dismissal of directors and audit & supervisory board members following debate and discussion by the Management Advisory Council.
    The policy on appointment to management and nomination of candidates for director takes into account the fields he/she can cover. This also includes a comprehensive examination to ensure the right person is assigned to the right position so that decision-making is fast and accurate.
    The policy on nomination of candidates for audit & supervisory board member involves a comprehensive examination of whether the person has knowledge regarding finance and accounting, a general understanding of the Company’s business and diverse perspectives on corporate management.

    Reasons for election of outside officers

    Classification Name Independent Officer Supplementary explanation regarding suitability items Reasons for election Number of Board of Directors meetings, Audit & Supervisory Board meetings attended in fiscal 2019
    Directors Takeshi Ogasawara
    Advisor, MUFG Bank, Ltd. Business partner of the Company
    Mr. Ogasawara was elected as a director because it was deemed that he could reflect his extensive experience and broad insight as a manager in the management of the Company and contribute to the maintenance and strengthening of the Company’s corporate governance.
    Attended 12 of 12 Board of Directors meetings
    Akihiro Koyama
    Professor, Faculty of Economics, Gakushuin University
    Mr. Koyama was elected as a director because it was deemed that he could reflect his expert knowledge acquired over many years in corporate finance, research into such areas as corporate governance and corporate management from a global perspective in the management of the Company and contribute to the maintenance and strengthening of the Company’s corporate governance.
    Attended 10 of 10 Board of Directors meetings
    (*1)
    Kazue Sasaki
    Executive Vice President, Toyota Industries Corporation Business partner of the Company
    Mr. Sasaki has many years of experience as a manager and he was elected as a director because it was deemed that he could reflect his extensive experience and broad insight in the management of the Company and contribute to the maintenance and strengthening of the Company’s corporate governance.
    Attended 12 of 12 Board of Directors meetings
    Hiroyuki Ina
    Senior Executive Officer, DENSO Corporation Business partner of the Company
    Mr. Ina was elected as a director because it was deemed that he could reflect his many years of experience and broad insight into business management of the electronic components that form the backbone of an automobile and contribute to the maintenance and strengthening of the Company’s corporate governance.
    (*2)
    Audit & supervisory board members Hiroyuki Yokoyama
    Executive Advisor, Daihatsu Motor Co., Ltd.
    Mr. Yokoyama was elected as an audit & supervisory board member because it was deemed that he could reflect his experience in the Quality Assurance Division and at overseas locations at Toyota Motor Corporation, as well as his extensive experience and insight gained at Daihatsu, in the audit system of the Company and contribute to the maintenance and strengthening of the Company’s corporate governance.
    (*3)
    Masakazu Aida
    Mr. Aida was elected as an audit & supervisory board member because he has many years of experience as a manager and it was deemed that he could reflect this extensive experience and the broad insight he has gained in the audit system of the Company and contribute to the maintenance and strengthening of the Company’s corporate governance.
    Attended 10 of 10 Board of Directors meetings Attended 10 of 10 Audit & Supervisory Board meetings
    (*4)
  • *1 Director Akihiro Koyama was elected as an outside director at the 93rd Ordinary General Meeting of Shareholders held on June 13, 2018, and following his selection, Board of Directors meetings were held 10 times.
  • *2 Director Hiroyuki Ina was elected as an outside director at the 94th Ordinary General Meeting of Shareholders held on June 12, 2019.
  • *3 Audit & supervisory board member Hiroyuki Yokoyama was elected as an outside audit & supervisory board member at the 94th Ordinary General Meeting of Shareholders held on June 12, 2019.
  • *4 Audit & supervisory board member Masakazu Aida was elected as an outside audit & supervisory board member at the 93rd Ordinary General Meeting of Shareholders held on June 13, 2018, and following his selection, Board of Directors meetings were held 10 times and Audit & Supervisory Board meetings were held 10 times.
  • Policy and procedure for determining officers’ compensation

    Basic approach

    "The compensation system for directors (excluding outside directors), operating officers and other similar personnel is based on a reasonable and systematic framework that assures compensation is closely linked to overall company performance and that reflects job roles and responsibilities. Compensation comprises monthly compensation (fixed amount) and bonus (amount dependent on results). Bonuses in particular are determined based on consolidated operating profit for each business year and upon giving comprehensive consideration to such factors as the degree of enhancement of corporate value (social value and economic value) over the medium and long term, dividends, company member bonus levels, trends at other companies and actual past bonus payments.
    No bonuses are paid to outside directors, standing audit & supervisory board members and outside audit & supervisory board members because their role is to handle supervision and monitoring functions from an independent position.
    A resolution concerning compensation was passed at the Ordinary General Meeting of Shareholders on June 14, 2012 in which the maximum amount of compensation was set at ¥50 million a month for all directors and ¥8 million a month for all audit & supervisory board members. The amount of compensation for each officer is determined within the scope of these totals.
    The Management Advisory Council, which mostly consists of outside officers deliberates on compensation and other matters and makes recommendations to the Board of Directors in light of its findings before a decision is made.
    The Management Advisory Council convened on March 29, 2019 as part of the process to determine compensation for executives for fiscal 2019."

    Executive compensation system

    Monthly compensation

    The amount of compensation is determined based on the different ranks and positions in line with the role and work responsibilities as director and operating officer, and paid as fixed monthly compensation.
    The amount of monthly compensation is determined in a reasonable manner by multiplying the standard total amount of compensation for the officers by a set percentage depending on work responsibilities.
    Outside directors and audit & supervisory board members are paid fixed monthly compensation, with the amount set depending on respective roles rather than basic compensation with salary increase.

    Bonuses

    Consolidated operating profit and the increase in corporate value over the medium term are the indices used to determine bonuses with comprehensive consideration given to the degree of achievement. Bonuses based on these indices total at least 35% of the compensation amount, as the standard value.
    The evaluation of bonuses reflects company-wide results for the fiscal year as well as the degree of achievement of fiscal year policy at the individual level, and also incorporates the extent to which corporate value (social value and economic value) has been enhanced over the medium and long terms.
    This method of determining bonuses uses the amount of consolidated operating profit as the index reflecting corporate results and sets an amount for the entire Company. In addition, each individual is evaluated in accordance with the degree of contribution to achieving policy. The amount of consolidated operating profit is the index used as the basis of bonus calculations, which was ¥58 billion for fiscal 2019 (Japanese GAAP).

    Directors’ compensation

    Fiscal 2019 executive compensation for Company directors and audit & supervisory board members was as detailed below.

    Figures in parentheses are the portion for outside officers.
      Directors Audit & supervisory board members Total
    Company members Amount Company members Amount Company members Amount
    Directors’ compensation
    13 directors
    (5 directors)
    348 million yen
    (43 million yen)
    6 audit & supervisory board members
    (3 audit & supervisory board members)
    94 million yen
    (18 million yen)
    19 officers
    (8 officers)
    442 million yen
    (61 million yen)
    Directors’ bonuses
    6 directors
    (—)
    149 million yen
    (—)
    6 directors
    (—)
    149 million yen
    (—)
    Total
    497 million yen
    (43 million yen)
    94 million yen
    (18 million yen)
    591 million yen
    (61 million yen)

    Note: The above table includes the portions for three directors and two audit & supervisory board members (including one outside audit & supervisory board member) who retired at the conclusion of the 93rd Ordinary General Meeting of Shareholders held on June 13, 2018.

    Board of Directors

    The Board of Directors convenes at least once a month, and as the management decision-making body, decides on important management matters such as legal matters, corporate hoshin (policy), business plans and capital expenditure plans, and also monitors business execution.

    Key agenda items for Board of Directors in FY2019

    Matters concerning Ordinary General Meeting of Shareholders
  • Decision on convocation and agenda items
  • Approval of business reports, financial statements, etc.
  • Decision on candidates for director and audit & supervisory board member
  • Matters concerning executive officers and organisation
  • Selection of representative director and executive director
  • Directors’ compensation and bonuses
  • Appointment of Operating Officers, Segment Chiefs, Field Chiefs and Centre Chiefs
  • Matters concerning shares, etc.
  • Implementation of interim dividend
  • Matters concerning general management
  • Formulation of medium-term management plan and global hoshin
  • Establishment of Management Advisory Council
  • Deliberation on business advancement, alliances, reorganisation, etc.
  • Items related to property and assets
  • Other
  • Approval and report on transactions involving a conflict of interest
  • Implementation and report on assessments of the effectiveness of the Board of Directors
  • Condition of the exercise of voting rights on agenda items at the Ordinary General Meeting of Shareholders
  • Examination of stockholdings
  • Operational status of internal control system
  • Report on initiatives relating to quality
  • Support structure for outside directors and audit & supervisory board members

    Internal directors and standing audit & supervisory board members provide explanations about required knowledge pertaining to areas such as the Company’s businesses, financial affairs and organisations when outside directors and outside audit & supervisory board members assume office.
    The Company also sends materials about the Board of Directors meetings beforehand to outside directors and outside audit & supervisory board members and provides them with prior explanations on the important management issues of measures submitted to the Board of Directors. Additionally, the Company has assigned audit & supervisory staff to the Audit & Supervisory Board Office as part of a structure for supporting the business duties of audit & supervisory board members. Audit & supervisory staff support the daily auditing activities of standing audit & supervisory board members while also supporting the auditing activities of outside audit & supervisory board members through the operation of the Audit & Supervisory Board.

    Evaluation results of the effectiveness of the Board of Directors

    Toyota Boshoku analyses and evaluates the effectiveness of the Board of Directors as follows.

    [Method]

  • Analyse operational status and response to challenges identified in the past and report to Board of Directors in January.
  • Deputy Segment Chief in charge of the administrative office of the Board of Directors interviews all directors and audit & supervisory board members, including outside members, in February.
  • Evaluation results and the direction to be taken to resolve issues are summarised and reported to the Board of Directors in March for discussion.
  • [Interview items]

  • Composition of the Board of Directors
  • Report provided for discussion by the Board of Directors
  • Opinion on and requests to the Management Advisory Council
  • Agenda and status of discussion by the Board of Directors
  • Support of outside directors
  • [Overview of Fiscal 2019 evaluation results]

  • The effectiveness of the Board of Directors in making important management decisions and monitoring business execution was confirmed as a result of continued improvements that included streamlining the Board, increasing the ratio of outside directors, sending out materials and providing explanations to outside directors prior to meetings, and delegating authority to the team for executing agenda to narrow down items to those that are most prevalent.
  • Although the Management Advisory Council held discussions on director nominations and compensation after its establishment in July 2018, there is a need to conduct regular reviews of how to proceed with discussions on management issues, including agenda items and date.
  • There is a need to further improve support of outside directors.
  • [Key challenges and improvement measures]

    Toyota Boshoku will strive to make the following improvements to ensure even greater effectiveness of the Board of Directors.

  • The Company continues to take steps to enhance the diversity of its members, but in response to current circumstances, we will foster human resources internally to secure female members and promote the establishment of an environment that encourages English to secure non-Japanese members.
  • In addition to deciding on individual business operations, we will identify strategic themes for debate at the Board of Directors and Management Advisory Council and formulate annual plans to enhance strategy discussions.
  • We will provide information related to risk assessments and further enhance reports on the status of business execution as materials to aid in important decisions.
  • We will systematically implement facility inspections in Japan and overseas for outside directors since this will deepen their understanding of the Company.