Corporate Governance Guideline
1-1. Objectives of Guidelines
TechnoPro Holdings, Inc. (hereinafter referred to as the "Company") hereby has established and published its "Corporate Governance Guidelines" (hereinafter referred to as the "Guidelines") for the following objectives in order to ensure the sustainable growth of the TechnoPro Group (the Company and its subsidiaries: hereinafter collectively referred to as the "Group")and to enhance its corporate value over the medium to long term, fully taking into account the spirit and intent of the Japan Corporate Governance Code established by the Tokyo Stock Exchange.
- (1)To clearly state the Company's corporate governance framework and operating policies in accordance with the objectives of the Group's business activities and the Company's basic approach to corporate governance.
- (2)To clarify what the Company should do to achieve the best corporate governance.
- (3)To increase the common interests of shareholders over the long term, fulfill our fiduciary responsibility and accountability to shareholders, and thereby enable shareholders to hold the Company's shares with confidence over the long term.
1-2. Positioning of Guidelines
- These Guidelines are established by a resolution of the Board of Directors as a high-ranking set of regulations, following the Companies Act, other relevant laws and regulations, and the Articles of Incorporation.
- The Board of Directors shall continuously review the effectiveness and appropriateness of the Guidelines and amend or abolish them as necessary by its resolution.
2-1. Basic Approach to Corporate Governance
- The Company shall continuously endeavor to enhance and strengthen corporate governance based on the following recognition:
- (1)Corporate governance is the foundation for the realization of the Group's management philosophy, sustainable growth, and medium-to long-term enhancement of corporate value.
- (2)Corporate governance is essential to earn the trust of all stakeholders, including shareholders, investors, local communities, business partners, and employees, and to ensure the fairness and transparency of the Company's decision-making.
- The Company's basic policy is to comply with all the principles of the "Corporate Governance Code" set forth by the Tokyo Stock Exchange. If the Company does not implement or is considering implementing any of the principles, the Company shall explain the reasons and direction of such implementation to its shareholders and other stakeholders.
2-2. Corporate Governance as a Holding Company
- The Company, as a holding company, shall be primarily responsible for formulating and monitoring basic management policies of the Group such as corporate philosophy, code of conduct, management strategies, management plans and budgets for single fiscal years, allocating management resources, creating synergies within the Group, and managing and supervising the management of the Company's subsidiaries from the perspective of promoting strategies and achieving overall optimization through the unification of the Group.
- The Company, based on the preceding paragraph, shall ensure that the execution of the Group's business is appropriately carried out by the Company's subsidiaries in accordance with their respective business characteristics, and shall seek to integrate management to the extent possible through the concurrent appointment of directors, integration of administrations and meetings, etc. The Company's governance structure, including the Board of Directors, shall be developed and operated in accordance with the above.
2-3. Corporate Philosophy
- The Company has established the following TechnoPro Group Purpose by resolution of the Board of Directors as the Group Corporate Philosophy that forms the basis of the business activities of the Group and shall strive to realize this philosophy through the appropriate establishment and operation of corporate governance system.
- The Board of Directors monitors periodically the status of the penetration of the above corporate philosophy in the Group.
The Group Corporate Philosophy - TechnoPro Group Purpose
Driving the Power of Technology and Talent
to Co-create Value Together with our Customers
for a Sustainable Society
2-4. Code of Conduct
- In pursuit of building good relationships with stakeholders and realizing a sustainable society as a corporate group trusted by society, the Company has established the "TechnoPro Group Code of Conduct" (hereinafter "the Code") by a resolution of the Board of Directors and practices corporate behavior in accordance with the Code. The Code states clearly the basic stance of the Group on environmental preservation, including climate change issues, respect for human rights and diversity, consideration for employee health and working environment, fair and appropriate transactions with business partners, and appropriate treatment of information and assets.
- The Company outlines "the Six Core Commitments of TechnoPro Group" (hereinafter "the Commitments") as the code of conduct for the Group executives and employees, and endeavors to realize the Code by upholding and prompting the Commitments.
- The Board of Directors monitors periodically the status of the implementation of the above-mentioned Code of Conduct in the Group.
- Based on the recognition that addressing sustainability issues is an important management agenda that not only reduces risks but also leads to profit-earning opportunities for the Group, the Company establishes the TechnoPro Group Sustainability Basic Policy by a resolution of the Board of Directors and in pursuit of sustainable growth that integrates business with the ESG (Environment, Social and Governance) matters, and holds the Sustainability Committee chaired by the President and CEO.
- The Sustainability Committee reviews and makes decisions on policies, initiatives and operation of important matters related to sustainability, and the Company endeavors to actively and proactively address these issues throughout the entire Group.
- The Board of Directors receives regular reports on matters to be discussed by the Sustainability Committee, and if there are any agenda items to be discussed by the Board of Directors, the Board of Directors shall discuss them.
2-6. Ensuring Diversity
- The Company makes efforts to promote diversity throughout the Group, regardless of gender, age, or nationality etc., based on the recognition that the diversity of experiences, values, and backgrounds contributes ensuring sustainable growth as the Group.
- The Company shall appropriately disclose the Group's targets and progress regarding the recruitment and promotion of women, foreign nationals etc., as well as its policies for human resource development and internal environmental improvement and the status of implementation of such policies.
2-7. Medium-Term Management Plan
- The Company, in principle, shall periodically announce the Group's medium-term management plan, which has been thoroughly discussed and approved by the Board of Directors based on the identification of environmental insights, risks and opportunities, and the Company's cost of capital.
- In the medium-term management plan, the Company shall present its business strategy and financial plan, as well as profitability, capital efficiency, and other targets, and explain to its shareholders and other stakeholders in an easy-to-understand, logical, and clear manner how it will review its business portfolio, allocate management resources.
- Recognizing that the medium-term management plan is one of the most important commitments to stakeholders, the Company shall do its best to achieve the goals of the mid-term management plan, and shall provide appropriate explanations to shareholders and other stakeholders regarding the status of its efforts to achieve the goals of the plan.
- In the event that the medium-term management plan fails to achieve its goals, the Company shall analyze the causes of the failure, disclose the results of such analysis as appropriate, and reflect the results in the next and subsequent management plan.
2-8. Internal Control System and Whistleblowing
- The Board of Directors of the Company monitors the effective operation of the internal control system in accordance with the Basic Policy Concerning Internal Control System established by a resolution of the Board of Directors, and ensures appropriateness of business execution of the entire Group.
- The Company operates its whistleblowing system by setting up a contact point for reporting within the Group and at an outside law firm, in order to ensure early detection and early correction of organizational or individual violations of laws and regulations and misconduct. The Company secures the confidentiality of information provider and prohibits any disadvantageous treatment as stipulated in the Regulations for the Operation of the Whistleblowing System established by a resolution of the Board of Directors.
- The Board of Directors receives regular reports on the status of the operation of the whistleblowing system in the Group and supervises it appropriately.
2-9. Enterprise Risk Management
- The Company establishes the ERM Committee chaired by the President and CEO to develop systems of enterprise risk management (hereinafter referred to as "ERM"), which is an appropriate risk management framework for the Group as a whole.
- Matters related to ERM are stipulated in the ERM Regulations, which are determined by a resolution of the Board of Directors.
- The Board of Directors receives regular reports on matters to be discussed by the ERM Committee, and if there are any agenda items to be discussed by the Board of Directors, the Board of Directors shall discuss them.
- The Company establishes the Disclosure Policy and the Disclosure Committee, and disclose information in a timely and appropriate manner in compliance with laws, related rules and regulations.
- From the perspective of shareholders, investors, and other stakeholders, the Company shall proactively disclose not only financial information, but also non-financial information including initiatives to address sustainability issues, investments in human capital and intellectual property, and other information. The Company will also collect and analyze necessary data on the impact of climate change-related risks and opportunities on the Group business activities and earnings, and enhance the quality and quantity of disclosure based on the TCFD (Task Force on Climate-related Financial Disclosure), an internationally established disclosure framework, or an equivalent framework.
- The Company shall disclose and provide required information in English in its disclosure documents.
3-1. Corporate Governance Structure
- The Company adopts a company with "Audit & Supervisory Committee" system under the Companies Act in order to strengthen the supervisory function of management by the Board of Directors, to enable prompt decision-making by delegating important business execution decisions to Executive Directors, and to facilitate strategic and in-depth discussions at the Board of Directors meetings.
- The Company establishes and utilizes the Nomination and Compensation Committee to obtain appropriate involvement and advice from Outside Directors with respect to nomination and compensation of the Company's Directors and senior management of the Group, and further enhance the governance function by strengthening objectivity and accountability in such nomination and compensation decisions.
- The Company adopts an executive officer system that allocates executive authority and responsibility for day-to-day business execution to Executive Officers in order to ensure flexible and efficient business operations.
3-2. Composition of Board of Directors
- The number of members of the Board of Directors shall be in accordance with the provisions of the Articles of Incorporation and shall be of an appropriate size to enable the Board of Directors to function effectively and efficiently.
- The Board of Directors consists of Executive Directors who are primarily responsible for business execution and Non-Executive Directors who are primarily responsible for supervising business execution.
- Among Non-Executive Directors, Outside Directors shall, in principle, be Independent Outside Directors who satisfy the requirements of the Independence Standards for Outside Directors set forth in “Independence Standards for Outside Directors”.
- The Company shall keep the ratio of Independent Outside Directors on the Board of Directors at least one-third, with aiming to achieving a majority or more.
- In appointing Directors, the Company shall take into consideration the skills, knowledge, experience, abilities, and areas of expertise of each, as well as diversity, including gender, internationality, work experience, age, and other factors, so that the Board of Directors as a whole can fulfill its fiduciary responsibility to the shareholders.
- While taking into consideration the continuity and stability of the Board of Directors, the Company shall endeavor to ensure that its composition is aligned with the direction of the Group's management, the management strategies and plans, and the progress of the transformation of its business model, by utilizing the skill matrix of the Board of Directors.
- At least one of the Independent Outside Directors (excluding those who are Audit & Supervisory Committee Members) shall have management experience at other companies.
3-3. Roles of Board of Directors
- From the viewpoint of clarifying the roles and strengthening the functions of management supervision and business execution, the Board of Directors is primarily responsible for making decisions on basic management policies and other important business matters, and for supervising the execution of duties by Executive Directors.
- The Board of Directors shall make the best decisions on important matters and basic management policies, etc., as provided by law, the Articles of Incorporation, and the Regulations of the Board of Directors, based on its fiduciary responsibility and accountability to shareholders for the sustainable growth of the Group and the enhancement of its corporate value over the medium to long term.
- The Board of Directors shall delegate decision-making authority related to business execution to the President and CEO and other Executive Directors to an appropriate extent, disclose a summary of such delegation, and establish a system that enables flexible and prompt business execution and an environment that supports appropriate risk-taking by Executive Directors.
- The Board of Directors oversees the fairness and transparency of the Group's management by monitoring the internal control system and the ERM (including matters related to internal control over financial reporting as defined in the Financial Instruments and Exchange Law and the Standards for Assessment and Audit of Internal Control over Financial Reporting) in the Group, and by monitoring competing transactions and conflicts of interest among directors.
- The Board of Directors verifies and supervises the progress of the Group's basic management policies, including the medium-term management plan, as well as the risks, investment profitability, and progress of important business projects of the Group, by receiving reports from Executive Directors and other senior management of the Group (including Executive Officers of the Company, Directors and Executive Officers of the Company's subsidiaries).
- The Board of Directors decides the proposal for the election of all director candidates and the dismissal of all directors after receiving the report of the Nomination and Compensation Committee. The Board of Directors obtains the consent of the Audit & Supervisory Committee with respect to the nomination of candidates for directors who are Audit & Supervisory Committee Members.
- The Board of Directors decides the remuneration of Directors (excluding directors who are Audit & Supervisory Committee Members) within the amount resolved at the General Meeting of Shareholders, based on the deliberation and report of the Nomination and Compensation Committee. The decision on individual remuneration of each director (excluding directors who are Audit & Supervisory Committee Members) is made by a resolution of the Board of Directors, rather than being left to the discretion of the President and CEO.
- The Company includes in the scope of deliberation of the Nomination and Compensation Committee matters related to the personnel and compensation of Directors, Executive Officers of the Company's subsidiaries in order to ensure the integrated management of the Group and to enhance corporate value as the Group, and supervises the Company's subsidiaries through the appropriate exercise of its authority as the controlling shareholder.
3-4. Roles of Executive Directors
- Executive Directors shall execute business operations in accordance with the management strategy, management plan, management structure, and various policies that serve as basic guidelines for business execution, as determined by the Board of Directors.
- Executive Directors shall perform their duties with the duty of care and fidelity, including matters delegated to them by the Board of Directors.
- Executive Directors shall be aware of their fiduciary responsibility to shareholders, and shall perform their duties with appropriate risk-taking.
3-5. Roles of Non-Executive Directors including Independent Outside Directors
- Non-Executive Directors shall provide advice and judgment on matters related to basic management policies and management improvement from the perspective of the Group's sustainable growth and medium- to long-term enhancement of corporate value, based on their skills, experience, and knowledge, In addition to the above, Independent Outside Directors shall provide advice and judgment from the perspective of shareholders and other stakeholders from the standpoint of their independence.
- Non-executive Directors shall supervise the execution of duties by Executive Directors in light of basic management policies. In such supervision, emphasis shall be placed on the reasonableness of the decision-making process, the existence of material and inadvertent errors in fact-finding, and the existence of appropriate risk-taking. In particular, Independent Outside Directors shall, from their position of independence, supervise transactions with conflicts of interest between the Company and its senior management, controlling shareholders.
3-6. Chairperson of Board of Directors
- The chairperson of the Board of Directors shall be a director predetermined by the Board of Directors in accordance with the Articles of Incorporation.
- The chairperson of the Board of Directors shall appropriately manage the agenda so that the Board of Directors can freely and openly exchange opinions and hold constructive and high quality discussions.
3-7. Operation of Board of Directors Meeting
- The agenda, deliberation time, and frequency of Board of Directors meetings are to be set appropriately to enable necessary and sufficient discussion.
- In order to promote active discussions at the Board of Directors meetings, materials related to agenda items are to be distributed well in advance of the meeting date, taking into consideration the preparation time of those attending the meeting. Opportunities for advance explanations are to be provided depending on the content and importance of agenda items. However, this does not apply to particularly urgent or sensitive agenda items or other reasonable circumstances, and the Board of Directors may hold deliberations without prior distribution of materials or explanations.
- The annual schedule of the Board of Directors meetings and possible agenda items are to be determined in advance to the extent possible.
- The Board of Directors secretariat is established in the General Affairs Department to ensure the appropriate and smooth operation of the Board of Directors. The Board of Directors secretariat is in charge of all practical matters related to the operation of the Board of Directors, and provides necessary information to the Board of Directors in cooperation with related departments.
3-8. Board Evaluation
The Board of Directors shall, in principle, once a year analyze and evaluate the effectiveness of itself based on each director's self-evaluation and other relevant information for the purpose of improving the functions of the Board of Directors as a whole, and disclose a summary of the results of such analysis and evaluation.
3-9. Independent Directors Committee
- The Company has and regularly holds the Independent Directors Committee for the purpose of enabling Independent Outside Directors to gather information on the agenda of the Board of Directors and other matters related to the management of the Group, and to exchange opinions and share awareness among Independent Outside Directors.
- The Independent Directors Committee is chaired by the Chief Independent Outside Director.
3-10. Chief Independent Outside Director
Independent Outside Directors shall select a Chief Independent Outside Director by mutual vote in order to facilitate communication and coordination with senior management and collaboration among Outside Directors.
3-11. Concurrent Post at Other Companies
- It is preferable that the Company’s Directors do not simultaneously serve as executives (director, Audit & Supervisory Board Member, executive officer) of more than three listed companies, in addition to their role at the Group, given that they are expected to devote sufficient time and effort required to fulfill their respective roles and responsibilities.
- When a Director receives a request from another company or organization to serve in an executive position, regardless of whether or not said company is listed, the Director must provide notification to the Board of Directors.
- The Board of Directors shall periodically confirm the status of concurrent positions held by Directors. The Company shall disclose the status in an appropriate manner.
3-12. Composition of Audit & Supervisory Committee
- The Company appoints at least three Directors who are Audit & Supervisory Committee Members, a majority of whom shall be Outside Directors.
- The chairperson of the Audit & Supervisory Committee shall be elected by the Committee from among directors who are Audit & Supervisory Committee Members.
- The Audit & Supervisory Committee appoints a full-time Audit & Supervisory Committee Member to ensure the effectiveness of audits.
- At least one director who is an Audit & Supervisory Committee Member shall have sufficient knowledge of finance and accounting.
3-13. Roles of Audit & Supervisory Committee
- The Audit & Supervisory Committee shall determine matters related to the execution of duties by the Committee and Audit & Supervisory Committee members, including audit policies and annual plans, and the method of investigation of the status of the Group's assets.
- The Audit & Supervisory Committee's most important task is auditing legal compliance. Through its members, the Committee actively exercises its investigative authority as provided by law, checks and verifies the status of legal compliance, and monitors and verifies the maintenance and operation of internal control systems related to financial reporting. It does this to audit whether or not the execution of duties by directors is in compliance with laws in general, the Articles of Incorporation, etc., and whether or not company business is carried out appropriately.
- The Audit & Supervisory Committee supervises the execution of business through the exercise of voting rights that each of the Committee's members has as a director, and through the exercise of the right to express opinions regarding personnel items and compensation for Directors (excluding those who are Audit & Supervisory Committee Members).
- The Audit & Supervisory Committee formulates the Evaluation Standards for External Accounting Auditors, evaluates external accounting auditors, and verifies the presence of independence and expertise required of external accounting auditors, using the results of these to determine the content of proposals concerning the selection, dismissal, or non-reappointment of the accounting auditor.
- The Audit & Supervisory Committee endeavors to develop systems for enhancing the effectiveness of audits, including a system for reporting from the Group's executives and employees to Audit & Supervisory Committee Members, and ensuring coordination with the Internal Audit Department, external accounting auditors, and Corporate Auditors of the Company's subsidiaries.
- The Audit & Supervisory Committee shall determine the compensation of directors who are members of the Audit & Supervisory Committee through discussion and within the range of the amount resolved at the General Meeting of Shareholders.
3-14. Roles of Audit & Supervisory Committee Members
- If a director who is a member of the Audit & Supervisory Committee finds any inappropriate act committed by a director, or any fact in violation of laws and regulations, etc., they shall report this to the Board of Directors without delay.
- If a director who is a member of the Audit & Supervisory Committee finds that a proposal or other item to be submitted to the General Meeting of Shareholders is in violation of laws and regulations, etc. or is significantly unreasonable, they shall report this to the General Meeting of Shareholders.
- A director who is an Appointed Audit & Supervisory Committee Member shall properly conduct investigations as provided by law.
3-15. External Accounting Auditors
- The external accounting auditors play an important role in ensuring the reliability of financial reporting and have a responsibility to shareholders and investors.
- The external accounting auditors must ensure independence from the Company and must possess expertise to secure audit quality, along with conducting systematic management for the quality control of auditing.
- The Board of Directors and the Audit & Supervisory Committee secure sufficient time to ensure high-quality audits; provide external accounting auditors access to management, including the CEO and the CFO; and secure substantial coordination between external accounting auditors and the Audit & Supervisory Committee members, Outside Directors, and the Internal Audit Department.
- The Board of Directors and the Audit & Supervisory Committee establish a structure that can respond promptly in the event that the external accounting auditors discover any irregularities and request the Company to take appropriate action or point out any deficiencies or problems.
3-16. Nomination and Compensation Committee
- The Board of Directors establishes the Nomination and Compensation Committee as an advisory body and consults on matters related to nominations and compensations (determination polices on remuneration, remuneration systems and individual remuneration amounts, etc.) for the Company Directors (with the exception of directors who are Audit & Supervisory Committee Members, whose nomination are limited to such directors) and the other Group senior management (which means the Company's Executive Officers, Directors and Executive Officers of the Company's subsidiaries).
- The Nomination and Compensation Committee are held from time to time as needed to deliberate on matters that the Board of Directors or the President and CEO consults on, share information regarding such matters. The Nomination and Compensation Committee shall report the results of the deliberations back to the Board of Directors.
- The members of the Nomination and Compensation Committee shall be appointed by a resolution of the Board of Directors, all of whom shall be Independent Outside Directors. The Board of Directors shall appoint at least one Independent Outside Director who is also an Audit & Supervisory Committee Member to serve as a member of the Nomination and Compensation Committee so that the Audit & Supervisory Committee can accurately exercise its right to state its opinions on personnel matters and compensation of Directors (excluding directors who are Audit & Supervisory Committee Members) at the General Meeting of Shareholders.
- The chairperson of the Nomination and Compensation Committee shall be elected by a resolution of the Committee from among members of the Nomination and Compensation Committee.
- The Board of Directors shall appropriately supervise and coordinate with the Nomination and Compensation Committee by receiving reports from the Committee from time to time.
- Matters related to the Nomination and Compensation Committee is prescribed in the Regulations of the Nomination and Compensation Committee, which requires a resolution of the Board of Directors for changes.
3-17. Support to Directors
- The General Affairs Department and the Audit & Supervisory Committee Office serves as liaison and coordination points for Outside Directors (excluding those who are Audit & Supervisory Committee Members) and for Outside Directors who are Audit & Supervisory Committee Members, respectively, and provide necessary support and information in cooperation with the relevant departments.
- The Board of Directors, the Audit & Supervisory Committee, the Independent Directors Committee, and the Nomination and Compensation Committee may, as necessary, invite the attendance of officers and employees of the Group, in addition to the designated attendees and committee members, and request reports, explanations, or opinions. Directors may obtain advice from outside experts and others at the Company's expense as they deem necessary.
- The Company ensures coordination between the Internal Audit Department and Directors by establishing a system whereby the Internal Audit Department can report directly to the Board of Directors and the Audit & Supervisory Committee as appropriate, in order for the Board of Directors and the Committee to fulfill their functions.
4-1. Appointment and Dismissal of Directors
- The Company formulates the Standards and Procedures for Appointment and Dismissal of Directors as per “Standards and Procedures for Appointment and Dismissal of Directors ”, for the purpose of clarifying the requirements of the Company Directors and the procedures for the selection and dismissal of directors.
- The Board of Directors shall appropriately implement the selection and dismissal of directors through fair and transparent procedures in accordance with the Standards and Procedures for Appointment and Dismissal of Directors, based on the r deliberations and reports of the Nomination and Compensation Committee.
- When proposing the election or dismissal of directors at the General Meeting of Shareholders, the Company shall explain the reasons for such election or dismissal to the shareholders in the notice of convocation.
4-2. Independence Standards for Outside Directors
- The Company formulates its own Independence Standards of Outside Directors as per “Independence Standards for Outside Directors”, in addition to requirements for independence set forth by the Tokyo Stock Exchange.
- The Board of Directors, in principle, shall select as candidates for Outside Directors those who satisfy the requirements of the Independence Standards for Outside Directors.
4-3. Appointment and Dismissal of CEO
- The Company formulates the Standards and Procedures for Appointment and Dismissal of CEO as per “Standards and Procedures for Appointment and Dismissal of CEO ”, for the purpose of clarifying the type of individual expected in a CEO of the Company and the procedures for the appointment and dismissal of CEO.
- The Board of Directors shall take sufficient time and resources to select a CEO based on the corporate philosophy, management direction, and management strategy of the Group, and shall select and dismiss the CEO at an appropriate time in accordance with the Standards and Procedures for Appointment and Dismissal of CEO.
4-4. Succession Plan
- The Board of Directors shall continuously supervise the CEO succession plan, which is formulated based on the deliberations of the Nomination and Compensation Committee.
- The Board of Directors shall periodically check and monitor the succession and development plans for key positions in the Group formulated by the Human Resources Department.
4-5. Executive Compensation
- The following points are taken into consideration to determine compensation program and each compensation for the Company Directors (including Audit & Supervisory Committee Members) and the Group Directors, Corporate Auditors and Executive Officers.
- (1)Reasonableness of the compensation to be accountable and responsible to stakeholders including shareholders.
- (2)Reasonableness to serve as a sound incentive for the accomplishment of management policies and enhancement of corporate performance and shareholder value. Effectiveness of compensation as a means to drive efforts for not only achieving results in the short-term, but also consistently increasing corporate value and shareholder value.
- (3)Reasonableness of the amount of compensation as consideration for the execution of duties, as well as in terms of whether the amount is at a justifiable level to recruit/promote, to motivate and to retain talented personnel.
- The Company formulates the Basic Policy and Procedures for Determining Executive Compensation as per “Basic Policy and Procedures for Determining Executive Compensation” for the purpose of clarifying the policies and procedures regarding the determination of compensation, etc. for Directors (including directors who are Audit & Supervisory Committee Members) and Executive Officers of the Company, as well as Directors, Corporate Auditors, and Executive Officers of the Company's subsidiaries.
- The Company formulates the Policy for Determining Individual Director Compensation (Excluding Directors who are Audit & Supervisory Committee Members) as shown in “Policy for Determining Individual Director Compensation(Excluding Directors who are Audit & Supervisory Committee Members)“ in accordance with laws and regulations.
- The Company shall consult, deliberate, and report to the Nomination and Compensation Committee when establishing, amending, or abolishing basic policies, guidelines, rules, procedures, and other elements necessary for determining the compensation, etc. of the Group's executives.
4-6. Training for Directors
- Directors must proactively collect information on the Group management strategies, earnings, financial conditions, corporate governance and compliance, among other matters, and study diligently to continuously update their knowledge necessary to fulfill their respective roles and responsibilities.
- The Company continuously offers necessary information and knowledge to each Director for executing their responsibilities and provide and arrange training opportunities suitable to each Director along with financial support for associated expenses.
- The Company outlines the "Training Policy for Directors" in executing items noted in the previous paragraph, as shown in “Training Policy for Directors” .
5-1. Securing Shareholder Rights
- The Company treats each shareholder with equality based on each shareholder’s equity stake, and shall not provide any special benefits, including profits from assets, to any particular shareholder.
- The Company takes appropriate measures to ensure that shareholders are not prevented from exercising their rights, including the exercise of their voting rights at shareholders' meetings.
5-2. General Meeting of Shareholders
- The Company sets up an environment in which the will of shareholders is reflected to the maximum extent possible in the General Meeting of Shareholders, the highest decision-making body of the Company.
- The Company sets a schedule related to the General Meeting of Shareholders from the viewpoint of enhancing constructive dialogue with shareholders and providing accurate information.
- The Company secures substantial time for shareholders to consider items on the agenda of the General Meeting of Shareholders. This is to be done by sending the convocation notice at least three weeks prior to the date of the General Meeting of Shareholders in principle and by posting the convocation notice on the Company's official website prior to sending.
- The Company endeavors to ensure convenience for shareholders by using an electronic voting platform and providing English translations of the convocation notice.
- The Board of Directors shall consider whether it is adequately constituted to fulfill its roles and responsibilities, when proposing to shareholders that certain power of the General Meeting of Shareholders be delegated to the Board of Directors.
- In order to prepare for cases where institutional investors who hold shares in street name express an interest in advance of the General Meeting of Shareholders in exercising voting rights, the Company shall work with the trust banks and/or custodial institutions to such consider such possibility.
- The Company provides sufficient explanations to shareholders and engages in a full question-and-answer session at the General Meeting of Shareholders, an opportunity of direct dialogue with shareholders.
- In the event that a substantial number of votes against a company proposal are cast at the General Meeting of Shareholders, the Company shall analyze the reasons for the opposition and the causes of the large number of votes against the proposal, and the Board of Directors shall consider whether or not a response is necessary.
5-3. Policy on Constructive Communication with Shareholders
- The Company conducts investor relations activities proactively based on the belief that constructive dialogue with investors, including shareholders, will contribute to the Company's sustainable growth and enhancement of corporate value over the medium to long term.
- Communication with shareholders and investors is handled by the Communication and IR Office of Management Planning Department, which is overseen by the CFO, and conducts appropriate information sharing and exchanging opinions with related departments from a professional standpoint to enhance communication with shareholders and investors.
- The CFO and CEO plays a central role in dialogue with shareholders and investors. In consideration of the wishes and objectives of shareholders and investors, the COO and other directors (including Outside Directors and directors who are Audit & Supervisory Committee Members) may engage in actual dialogue to the extent deemed reasonable by the Company.
- The Company enhances the means of communication with shareholders and investors by holding regular investor conferences in addition to 1 on 1 meetings.
- The Company considers whether or not to take action as necessary to opinions and requests received during communication with shareholders and investors, which are to be reported appropriately to the Board of Directors.
- The Company endeavors to enhance communication with its shareholders based on the results of periodic surveys of shareholder ownership structure.
- The Company ensures to comply with laws, regulations, and related rules, and to manage insider information appropriately, during communication with shareholders and investors.
5-4. Capital Management Policy
- The Company implements an appropriate capital management from the perspective of maintaining financial soundness and capital efficiency, based on an understanding of its own cost of capital.
- The Company endeavors to allocate free cash flow in a balanced manner between investment in growth and shareholder returns in order to enhance corporate value over the medium to long term.
- The Company sets a target for return on equity (ROE) as one of its key management indicators, and focuses not only on sustainable growth in earnings per share (EPS), but also on creating value by ensuring that return on invested capital (ROIC) exceeds the cost of capital, with the aim of building an optimal capital structure that is appropriate for the Group's business structure and its changes.
- The Company, based on the understanding that the interests of existing shareholders may be materially affected in the event of a capital increase through the issuance of new shares, third-party allotment or convertible bonds, a takeover bid, or in the event of any other change in control or major dilution, shall appropriately disclose such information and the policy of the Board of Directors and take the necessary steps.
- In principle, the Company shall not introduce so-called anti-takeover measures that would forcibly dilute the shares of an acquirer.
- The Company shall explain to its shareholders and other stakeholders each time it changes its basic policies on capital management as stipulated in the preceding paragraphs.
5-5. Shareholder Returns Policies
- In principle, the Company's basic policies for returning profits to shareholders are to continuously distribute appropriate profits with a target annual dividend payout ratio of 50% or more, and to pay stable interim and year-end dividends twice a year.
- The Company shall repurchase its own shares at a time it deems necessary and appropriate, taking into consideration capital efficiency, free cash flow status, availability of investment opportunities for growth, and other factors. In principle, the acquired treasury stock shall be cancelled.
- The Company shall explain any changes to the above basic policies on shareholder return to shareholders and other stakeholders each time these policies are changed.
- The basic policy of the Company and its group companies is to not engage in pure investments. Investments in companies other than consolidated companies, including cross-shareholdings, are limited to the purpose of creating business opportunities or building and reinforcing collaborative relationships, and engages in accordance with the following policies.
- Decisions on new investments are based on their contribution to increases in the Group’s corporate value, for the purpose of holding and from the perspective of medium- to long-term economic rationality.
- During the period in which it holds investments, the Company shall conduct periodic assessments with respect to whether the purpose of holding is being met, as well as the rationality and necessity of holding the investments from multiple perspectives, such as changes in economic advantages and disadvantages (benefits and risks) observed after acquisition, mainly factoring in capital costs. Based on these assessments, the Board of Directors shall examine annually whether or not it is appropriate to continue holding investments. The Company shall disclose the results of relevant examinations in a timely fashion.
- If, as a result of the above examination, it is not appropriate to continue to hold the shares, they are to be sold, disposed of, or reduced in size.
(3)Exercise of Voting Rights
- In exercising its voting rights, in principle the Group decides whether to vote for or against proposals based on whether such proposals are in line with the Group’s investment purposes and whether they enhance the corporate value of the investee, rather than abstaining from voting or giving the investee carte blanche.
5-7. Prevention of Conflicts with Shareholder Interests
- In order to protect shareholder interests, the Company endeavors to prevent the Group executives and employees from using their positions to conduct transactions that are counter to the interests of the Group as well as shareholders.
- When a Director engages in a competing transaction or a conflict of interest transaction, or when the Company engages in a transaction with a related party such as its executives or major shareholders, the Company shall obtain the approval of the Board of Directors after confirming that the transaction will not damage value for the Group and its shareholders based on the rationality of the transaction and the appropriateness of the terms of the transaction. Conflict of interest transactions by Directors (excluding those who are Audit & Supervisory Committee Members) shall be approved by the Audit & Supervisory Committee prior to approval by the Board of Directors. Directors who engage in competing transactions or conflict of interest transactions shall report material facts about these transactions to the Board of Directors without delay after the transactions are completed.
- Directors who have special interests (not only personal interests but also professional interests outside the Company or its subsidiaries) in the resolution of the Board of Directors regarding the preceding paragraph shall not participate in the resolution.
- The Company shall appropriately disclose material facts about each of the transactions set forth in Section 2.
- The Company requires Directors regularly to submit written confirmations reporting the existence of related party transactions.
- In order to prevent insider transactions by the Group executives and employees, the Company establishes the TechnoPro Group Insider Trading Prevention Regulations and strictly applies such rules.
The revision of the Guidelines shall be subject to a resolution of the Board of Directors.
Established: July 1, 2015
Revised: September 29, 2022