Management Policy

Corporate Governance

Overview of Corporate Governance

1. Basic Approach to Corporate Governance

ShinMaywa Industries, Ltd. (the “Company”) believes that it is vital to conduct our business in accordance with relevant laws and regulations, social norms and common sense, as well as ensuring transparency and rationality in management, in order to sustainably increase our corporate value, and in addition to creating and operating a corporate governance system, to consider and work to improve the contents of that system.

2. Overview of Corporate Governance System and Reasons for Adopting that System

In consideration of its business format and scale, the Company has introduced an executive officer system subsequent to its adoption of a corporate auditor system and establishment of the Board of Directors and the Audit & Supervisory Board.
The following chart provides an overview of the Company’s corporate governance system.

Company's Management System
(a) Board Members and Board of Directors

The Board of Directors is comprised of nine (9) Board Members (including three (3) Outside Board Members). They are President and Chief Executive Officer Tatsuyuki Isogawa, who serves as Chairman of the Board, and Directors Kanji Ishimaru, Katsuyuki Tanuma, Atsushi Itami, Akira Nishioka and Toshiki Kume, as well as Outside Directors, Yoshifumi Kanda, Nobuya Hideshima and Seiko Nagai. The Board of Directors’ meetings are held once a month, in principle, to discuss and consider important management issues based on the Medium-term management plan and to monitor the execution of duties by Board Members as appropriate.

The Outside Board Members are mainly expected to monitor management of the Company from an objective position that is independent of the management personnel, provide advice on management and provide broad and diverse perspectives for realizing increasing corporate value and sustainable growth over the medium- to long-term. They are selected from among persons who have management experience and other diverse experience, skills and expertise and are effectively independent of the Company.

The Company’s Articles of Incorporation provide that the number of Board Members should not exceed ten (10).

(b) Audit & Supervisory Board Members and Audit & Supervisory Board

The number of Audit & Supervisory Board Members is five (5). They are Audit & Supervisory Board Members Koji Nishida and Tadahiro Shimasaka and Outside Audit & Supervisory Board Members Tomosaburo Kinda, Eri Sugiyama and Fumihiko Kimura. These Audit & Supervisory Board Members conduct audits by participating in the meetings of the Board of Directors and other important meetings within the Company, hearing reports on the Company’s operations from Board Members and employees, and inspecting approved documents. The three Outside Corporate Auditors are appointed from among corporate executives, lawyers, and certified public accountants.

Applying their varied experience and backgrounds, they help to ensure neutrality and effectiveness of auditing by expressing their opinions on execution of duties by Board Members, mainly from the perspectives of expertise in their specialized fields.

(c) Accounting Auditor

The Company has appointed Grant Thornton Taiyo LLC as its accounting auditor, and has created an environment in which audits can be conducted in a fair and proper manner by providing the auditor with accurate management information.

(d) Nomination and Compensation Committee

In addition to setting its Board Members’ and Executive Officers’ terms of office at one (1) year in order to evaluate management personnel’s performance and clarify their responsibilities, the Company voluntarily established a “Nomination and Compensation Committee” with a view to further improving the transparency and appropriateness of personnel affairs and compensation programs. The Committee is consulted in advance when selecting candidates for executive positions and determining executive compensation and bonuses.

The majority of the Committee members and the chairperson are Outside Board Members, and this ensures the independence and fairness of the Committee.

(e) Sustainability Committee

The Sustainability Committee has been newly established to respond to various Environmental, Social and Governance (ESG) issues in corporate management, and is oriented to management from a long-term perspective. The Committee identifies important CSR issues (materiality) and sets KPIs, monitors and supervises the state of progress in investigations and other activities in the subcommittees related to each ESG element (Environmental Subcommittee, Social Subcommittee and Governance Subcommittee), checks the achievement status of KPIs and reviews plans, and reports on the status of these matters to the Board of Directors (in principle, twice a year).

(f) Executive Committee

The purposes of the Executive Committee are to plan company-wide management strategies, discuss and report on important matters related to business execution, and conduct deliberations on the Medium-term management plan, etc. Meetings of the Committee are held several times a month, depending on proposals.

(g) Executive Officers

The Company has adopted an executive officer system intended to strengthen management functions by transferring authority over individual business operations to Executive Officers in order to speed up decision-making processes and clarify executives’ responsibilities while freeing up the Board Members (Board of Directors) to focus on evaluating individual businesses, making decisions about the allocation of management resources and exercising supervision over business operations from a company-wide perspective. Through this executive officer system, the Company aims to enhance its corporate governance and realize higher operational efficiency.

The Company has the following seventeen (17) Executive Officers (including five (5) Executive Officers concurrently serving as Board Members) and they are mainly responsible for conducting individual business operations.

Deputy Chief Executive Officer (Technology and CSR Management) (Responsible for Aircraft Business, Corporate Planning Division, Research & Development Department)
Vice President of Corporate Planning Division
Kanji Ishimaru
Senior Managing Executive Officer (Quality Assurance and Production Management) Katsuyuki Tanuma
Managing Executive Officer (Sales Management) Atsushi Itami
Managing Executive Officer (Human Resources Management) (Responsible for Human Resources & General Affairs Department, Legal Department)
General Manager of Human Resources & General Affairs Department
Akira Nishioka
Managing Executive Officer (Finance & Accounting Management) (Responsible for Finance & Accounting Department)
General Manager of Finance & Accounting Department
Toshiki Kume
Managing Executive Officer (Responsible for Fluid Business)
President of Fluid Division
Takashi Kunihara
Managing Executive Officer (Responsible for Industrial Machinery Systems Business)
President of Industrial Machinery Systems Division
Takahiro Asano
Managing Executive Officer (Responsible for Parking Systems Business)
President of Parking Systems Division
Kyosuke Nakano
Managing Executive Officer President of Aircraft Division Katsuo Tanaka
Managing Executive Officer (Responsible for Special Purpose Truck Business) President of Special Purpose Truck Division Koichiro Oda
Executive Officer General Manager of Information Technology & Security Department, Corporate Planning Division Koji Fukai
Executive Officer General Manager of Business Development Department, Special Purpose Truck Division Masayuki Tomita
Executive Officer Vice President of Hiroshima Plant, Special Purpose Truck Division Yoshihiro Nagao
Executive Officer Senior Vice President of Parking Systems Division Masatsugu Nakase
Executive Officer Senior Vice President of Industrial Machinery Systems Division, Vice President of Wire Processing Systems Department Satoshi Nii
Executive Officer Vice President of Sano Plant, Special Purpose Truck Division Takashi Akimoto
Executive Officer Vice President of Sales & Marketing Department, Special Purpose Truck Division Hidetomo Ishihara

<List of Main Committees Members>

Members of the main committees are as set out in the following table.

(◎: Chairman/Committee chairperson, 〇: Member or observer participant)

Company's Management System

(Note) In addition to the above, Executive Officers who are presidents of the divisions and other designated persons attend meetings of the committees, depending on the agenda.

3. Other Matters Relating to Corporate Governance

To develop systems for ensuring proper business operations, the Company’s Board of Directors has established a Basic Policy on Creation of Internal Control Systems.
Details are as follows:

(a) System for ensuring that the execution of duties by Board Members is in accordance with laws and regulations and the Articles of Incorporation

The Company conducts its corporate activities in compliance with laws and regulations and social norms, based on its Corporate principles, Management philosophy, Action guidelines and Code of conduct.

The Board of Directors, including the Outside Board Members who do not have conflicts of interest, supervises the execution of duties by Board Members, and the Audit & Supervisory Board Members audit the appropriateness of execution of those duties.

In order to evaluate Board Members’ performance and clarify their responsibilities, the Company has set Board Members’ terms of office at one (1) year, and with a view to further improving the transparency and appropriateness of personnel affairs and compensation programs, established the “Nomination and Compensation Committee” which is comprised of a majority of Outside Board Members.

Also, with the aim of clarifying responsibilities and promptly carrying out operations regarding corporate social responsibility (CSR), the Company has appointed an Executive Officer in charge of CSR.

In addition, the Company has been striving to eliminate compliance risks through early detection of problematic events, and through self-cleansing mechanisms, by establishing a “Corporate Ethics Helpline” as a whistleblowing contact point.

(b) System for retaining and managing information related to execution of Board Members’ duties

The Company records information related to execution of Board Members’ duties based on internal rules including the Board of Directors Rules and Requests for Decisions Rules in writing or electromagnetic media, and retains the information for the period specified in the Document Handling Rules.

(c) Rules on management of risk of loss and other systems

The Company has developed internal rules and manuals, mainly by the departments in charge, with respect to risks related to compliance, export trade control, information management, quality control, environmental management, disasters and other matters. Education for employees is conducted, and information concerning thorough compliance with laws and regulations is provided in a timely manner and widely circulated.

As regards risks related to business performance, the Company has established rules, etc. on risk management, and each division has proactively created risk management systems adapted to their business characteristics. Meanwhile, as well as monitoring by the Head Office of the status of risk management of each division, the Company has established risk management systems through implementing disaster risk, financial risk and other company-wide cross-division risk countermeasures.

(d) System for ensuring efficient execution of Board Members’ duties

The Company aims to strengthen management functions by transferring authority over individual business operations to Executive Officers in order to speed up decision-making processes and clarify executives’ responsibilities, while enhancing corporate governance and increasing operational efficiency through evaluation of individual businesses and decision-making and supervision concerning the allocation of management resources by Board Members.

Also, the Company formulates and regularly reviews and revises single fiscal year and Medium-term management plans that divide duties within the systems for execution of organizational duties and clarify authorities and responsibilities.

(e) System for ensuring the execution of duties by employees in conformance with laws and regulations and the Articles of Incorporation

The Company has established its Action guidelines and Code of conduct as guidelines to its employees for acting in accordance with laws and regulations, social norms and common sense principles. It has also designated a “ShinMaywa Corporate Ethics Day” and “Corporate Ethics Month” to promote efforts to raise compliance awareness and enable various compliance systems to take root within the organization.

The Company also requires employees to execute their duties in accordance with laws and regulations, the Articles of Incorporation, and internal rules, including the Requests for Decision Rules and the Division of Duties Rules, and conducts internal audits based in the Internal Audit Department to verify compliance with these requirements. As well as aiming for early detection and elimination of compliance risks, the Company strives to detect problematic events widely through use of its whistleblowing contact points and other means.

(f) System for ensuring appropriate operations in corporate organizations comprised of the Company and its subsidiaries

The Company shares its Corporate principles, Management philosophy, Action guidelines and Code of conduct with each of the companies in the ShinMaywa Group and carries out its corporate activities in compliance with laws and regulations and social norms.

Also, based on the rules on Group company management, reports are requested as necessary regarding the execution of duties by officers, employees and others (“officers and employees”) at all Group companies, or the ShinMaywa departments in charge engage in mutual consultations. The Company also dispatches its own officers and employees to Group companies to serve concurrently as their board members, auditors, etc. in order to ascertain the status of their execution of business operations while facilitating reporting and discussion between the Company and Group companies.

In addition to these measures, internal audits are conducted based in the Internal Audit Department, and as well as aiming for early detection and elimination of compliance risks, the Company strives to detect problematic events widely by also making its whistleblowing contact points available for use by each of the ShinMaywa Group companies.

(g) Matters related to employees in cases where Audit & Supervisory Board Members request the placement of employees to assist them in the performance of their duties, the employees’ independence from Board Members, and the effectiveness of instructions by Audit & Supervisory Board Members to those employees

In cases where Audit & Supervisory Board Members request the placement of employees to assist them in the performance of their duties, in addition to the deployment of Audit & Supervisory Board member staff, the Company provides support as necessary by related departments. In the event of placement of full-time Audit & Supervisory Board Member staff, the opinions of the Audit & Supervisory Board Members regarding the personnel transfers and evaluations of the staff are listened to and respected.

(h) Systems for reporting by Board Members and employees to Audit & Supervisory Board Members, other systems related to reporting to Audit & Supervisory Board Members, and systems for ensuring that disadvantageous treatment is not incurred because of such reporting

In addition to reporting from Board Members on the status of execution of their duties at the Board of Directors, the Company allows Audit & Supervisory Board Members to attend meetings of important internal committees, including the Executive Committee. Also, to enable regular exchange of opinions with the Representative Director and the Outside Board Members, the Company endeavors to ensure that the Audit & Supervisory Board Members have opportunities to do so.

As well as those measures, Audit & Supervisory Board Members are able to engage in mutual exchange of opinions and share information with officers and employees of the ShinMaywa Group companies, and the Company endeavors to ensure that opportunities for doing so are provided.

Reports are also made by the Company’s Internal Audit Department to the Audit & Supervisory Board Members on the status of implementation and the results of internal audits of the ShinMaywa Group companies.

The Company does not subject persons who have made reports to Audit & Supervisory Board Members concerning the performance of duties by officers and employees or engaged in whistleblowing in accordance with the whistleblowing system to unfavorable treatment because of the reports or the whistleblowing.

(i) Systems for ensuring that audits by Audit & Supervisory Board Members are conducted  effectively

Regarding the payment of costs incurred in the execution of Audit & Supervisory Board Members’ duties, invoices for payment in advance or reimbursement received from Audit & Supervisory Board Members are paid unless it is found that the expenses are not necessary for execution of the Audit & Supervisory Board Members’ duties.

At the request of Audit & Supervisory Board Members, the Company discloses important documents such as requests for decisions and also conducts examinations and provides reports and explanations related to the duties of Board Members and employees. Opportunities are also provided to Audit & Supervisory Board Members for exchange of opinions with the Accounting Auditor.

4. Other Matters

(a) Requirements for resolutions for election of Directors

The Articles of Incorporation provide that resolutions for the election of Directors shall be adopted by a majority vote of the attending shareholders who hold one-third (1/3) or more of the voting rights of shareholders entitled to exercise voting rights. It is also provided in the Articles of Incorporation that resolutions for the election of Directors shall not be by cumulative voting.

(b) Matters for resolution by the General Meeting of Shareholders that may be resolved by the Board of Directors

(i) Acquisition of Treasury Shares
To enable the implementation of flexible capital policies in response to changes in the management environment, the Articles of Incorporation provide that the Company may by resolution of the Board of Directors acquire treasury shares by market transactions or other means pursuant to Paragraph 2 of Article 165 of the Companies Act.

(ii) Interim Dividends
The Articles of Incorporation provide that, for flexible profit sharing with shareholders, the Company may by resolution of the Board of Directors distribute the dividends of surplus (interim dividends) specified in Paragraph 5 of Article 454 of the Companies Act to shareholders who are listed or recorded in the final shareholder register or registered pledgees of shares on September 30 each year.

(c) Requirements for special resolutions of the General Meeting of Shareholders

The Articles of Incorporation provide that special resolutions of the General Meeting of Shareholders of the Company pursuant to Paragraph 2 of Article 309 of the Companies Act shall be adopted by two-thirds (2/3) or more of the votes of the attending shareholders who hold one-third (1/3) or more of the voting rights of shareholders entitled to exercise voting rights. The purpose of this provision is to facilitate the operation of General Meetings of Shareholders by relaxing the quorum for special resolutions of the General Meeting.

(d) Agreements for limitation of liability

Pursuant to the provisions of its Articles of Incorporation, the Company has entered into individual agreements with all Outside Board Members and Corporate Auditors on limitation of their liability for damages, as stipulated in Paragraph 1 of Article 423 of the Companies Act. Under such agreements, the maximum amount of their liability for damages is the minimum amount provided for under law.

(e) Officers, etc. liability insurance agreement

The Company has entered into a liability insurance agreement for officers, etc. with an insurance company, with Board Members and Audit & Supervisory Board Members as the insured persons, as stipulated in Paragraph 1 of Article 430-3 of the Companies Act. Under the terms of the insurance agreement, in the event that insured persons are liable to pay compensation for damages in relation to the execution of their duties, compensation for damages and litigation expenses will be covered up to a maximum amount of two (2) billion yen, and the premiums are paid in full by the Company. Pursuant to the agreement with the insurance company, insured persons are not covered for their liability to pay damages caused by improper execution of their duties, such as in cases of a demand for compensation because of illegal receipt by the insured person of a personal benefit or advantage or criminal conduct by the insured person, or because of a decision or action by the insured person that deviated from the authority conferred on him or her by the Company. Therefore, this insurance will not adversely affect the appropriate execution of duties by the insured persons.

(f) Promotion and enhancement of dialogue with shareholders

The Company strives to promote and enhance constructive dialogue with its shareholders by providing them with information that is necessary for or useful in properly exercising their voting rights, holding investor conferences, and periodically conducting shareholder surveys. Feedback and comments gathered from the Company’s shareholders through such avenues are then reported to the Board of Directors and other officers and departments concerned, thereby maintaining effective systems for dialogue with shareholders.