SustainabilityOutside Directors Roundtable Discussion

What are your thoughts on TOCALO’s current ESG management?

Summary

Investing in human capital is key to both ESG management and business growth

Kamakura
Surface modification technology helps reduce the environmental impact of manufacturing operations. TOCALO’s ESG management and its growth strategy are thus two sides of the same coin because increasing its business provides more contribution to protecting the environment. Investing in human capital is essential to increasing both its business and its environmental contribution. It’s pleasing to see management actively discussing ways to better create a growth environment for employees.

Takihara
The Company created the Diversity Promotion Division and has made great progress with human resources initiatives in recent years. I recommended last year that TOCALO apply to the Ministry of Economy, Trade and Industry for certification as a Health and Productivity Management Outstanding Organization, and it was wonderful to see the Company be certified on its first attempt.
At the same time, I am closely following the Company’s progress with its items of materiality to “Improvement of manufacturing process sophistication and efficiency” and “Cultivation and activation of diverse human resources.” There is particularly more potential to promote the empowerment of women in the workforce. I believe management is aiming to increase the number of female directors and plant managers in the near future. It will be important to increase awareness throughout the Company about the importance of diversity.

Kamakura
The number of female employees has been increasing. However, I think there’s also an issue that fewer women and men may want to take on the responsibility of being a manager. I think changing the way managers work may also be necessary. The Company won’t be able to cultivate future leaders if employees don’t look at their superiors and think they want to rise to that position. I truly believe this is an issue that the management team should seriously consider.

Tomita
When I’ve talked with female employees, I came away with the impressions that has their own individual view of how they want to conduct their work. When the Company has more women in management positions, I think the perspective on work-life balance will change as will how managers approach their work.

Sato
Everyone—men and women—have their own personal ideas about their work style and career. It will be important to create situations for ambitious and talented people to freely pursue career opportunities. Having more female managers is one part of increasing diversity, and I think it will be a step forward for other ways to become more diverse.

Takihara
Employee health is also important. People perform their best only when they are physically and mentally healthy. I believe using corporate health management to convey the message that the Company cares about every employee will create a sense of well-being.

What other issues do you think the Company will need to address or improve in the future?

Developing technology to broaden the Company’s business range

Tomita
TOCALO’s business is providing surface treatment on machine parts, which it performs at various sites, so the Company’s employees have little opportunity to have direct contact with the final product or the facilities where the products are used. The Company’s technology, however, is certainly contributing to society. TOCALO technology is even playing a part in the recent advances in semiconductors. Unfortunately, this doesn’t seem to be widely recognized yet within the Company.
I believe the Company should communicate to the public that it is now a foundation company for creating a new world and is determined to continue expanding into new fields. Also, I think making people inside the Company aware of this will boost their sense of meaning and satisfaction in their work.

Takihara
I also think it’s very important that the Company communicates its intention to apply its thermal spraying technology to new areas. I also think the Company needs to put more effort into research and development.

Kamakura
Ultimately, the source of TOCALO’s value creation is its technological capabilities. The semiconductor industry has been a major source for sales, and the question now is how to expand into other fields. With its strong technical capabilities, the Company definitely has potential for success. I would also think that demand for its technologies would be high not just in Japan but overseas as well. Focusing on overseas markets could be a driver for further business growth.

Continuing to develop the global strategy

Takihara
TOCALO already has subsidiaries overseas, and developing those companies, including cultivating employees there, is becoming increasingly important not only for expanding its global business, but also to offset the impact from the decreasing workforce in Japan.

Tomita
That’s very true, and I think there is still room for those subsidiaries to grow. Plants with clients in the semiconductor industry, which is its core business area, face a particular challenge because of information confidentiality and the need to have a separate production line for each equipment manufacturer. For the global strategy, I think management should take an overall approach to optimizing its plant operations.

Sato
The Board of Directors meetings and other management meetings also contained less information about the progress of initiatives and about future initiatives than I was expecting.
The role of the management and the outside directors is to think from the long-term perspective about how to balance returning profits to investors and shareholders and how to invest in the Company’s employees. It’s important to clearly communicate to employees how their daily activities relate to the management’s objectives and how much progress is being made. I also think it’s important to show both employees and the public how much value thermal spraying can provide to society.

What do you personally want to contribute to TOCALO as an outside director?

Stimulate discussions at the Board of Directors meetings

Kamakura
The job of an outside director is to check for any errors or uncertainties in the facts upon which management is basing its decisions and also to consider if the public will understand the reasons for the management decisions.
The Nomination & Remuneration Advisory Committee, which I chair, discusses advisory matters as well as various other issues. We sometimes receive information that is fundamental to the management of the Company, and I think it is wonderful to have a system that allows discussion of such matters.
It would be great to be able to talk frankly about matters like those as “consultation topics” separate from discussions about management decisions or reporting. I think there are many matters that should be discussed at board meetings even at the time when the fundamental decision is being made to do or not do something.

Advice for enhancing employee well-being

Takihara
I also think it would be good for the Board of Directors to discuss a wider range of matters. At the monthly Board meetings, it’s hard to get a full understanding of what each internal director thinks about an issue or what they envision for the Company. Talking about a wider range of topics would let us get a better understanding of each other’s perspectives and enable better discussions.
I look forward to providing more advice on ways to enhance the sense of well-being of people at the worksites and managers and to contributing to the TOCALO’s health management and diversity.

Sensing changes in the workplace and preventing governance disruptions

Sato
I want to get to know the worksites better so I can help strengthen governance. TOCALO has an open corporate culture and strong business performance. Many young people have joined the Company, and it seems like there are no significant issues ahead in the immediate future. But that does not mean the currently positive conditions will necessarily continue. I view it as the duty of outside directors to point out and address issues while they are small, before they can undermine governance and lead to misconduct. It’s extremely important to allow us to visit the plants and other worksites so we can notice small changes like that. I want to talk to people at the worksites so I can get a better sense of changes that occur in the Company.

Providing the stakeholders’ view so the Company can grow

Tomita
In the two years since becoming an outside director, I have visited all of TOCALO’s plants. At each plant, I asked the plant managers to share their thoughts on the plant’s management and their contribution to the local community. Hearing what the employees said, which you can’t hear at the Board meetings, reminded me of how much I want TOCALO to continue growing its business. Outside directors also must provide the stakeholders’ perspective and present a view on management that is different from that of the Company’s directors. I want to see TOCALO continue to grow, and an external perspective is important for monitoring the Company’s management.