SustainabilityGovernanceCorporate governance
Basic views on corporate governance
The Company recognizes that effective corporate governance is a priority management issue. Based on the recognition that “a company is a member of society and public entity,” our basic stance on corporate governance is to ensure management transparency and to strengthen the trust placed in us by our shareholders, business partners, employees, local communities, and all stakeholders. Our objective is accordingly to increase the Group’s corporate value and achieve sustainable and sound growth, and to contribute to society through our surface treatment processing business.
Corporate governance structure
TOCALO is a company with an Audit & Supervisory Board and appointed outside officers. The Board of Directors, and Audit & Supervisory Board members oversee and audit the execution of duties by directors.
We consider the General Meeting of Shareholders as not only the primary decision-making body, but also as an important opportunity for shareholders to deepen their understanding of the Company and accordingly hold a company information session following the meeting. We make every effort to schedule the Ordinary General Meeting of Shareholders on a day when the greatest number of shareholders would be able to attend.
The Company’s corporate governance system is structured as in the following diagram.
Board of Directors
The Board of Directors meeting is held in the middle of each month, and extraordinary meetings are held as necessary. Directors also convene management policy meetings to discuss and deliberate important management issues.
Most directors (other than outside directors) are in attendance at important internal meetings held daily on topics including the Company budget, sales, manufacturing, and quality, where they exchange viewpoints and formulate a unified management message and approach for the Company.
| Board of Directors | ||||
|---|---|---|---|---|
| Position | Name | Meeting attendance in FY2023 | Attendance rate in FY2023 | |
| Directors | Chairman & Representative Director | Noriyuki Mifune | 17/17 | 100％ |
| Representative Director, President and Executive Officer | Kazuya Kobayashi | 13/13 | 100％ | |
| Director, Deputy President and Executive Officer | Nobuyuki Kuroki | 17/17 | 100％ | |
| Director, Managing Executive Officer | Hiroshi Goto | 17/17 | 100％ | |
| Director, Managing Executive Officer | Takayuki Yoshizumi | 13/13 | 100％ | |
| Outside directors | Directors | Toshimitsu Kamakura | 17/17 | 100％ |
| Directors | Keiko Takihara | 17/17 | 100％ | |
| Directors | Yoko Sato | 17/17 | 100％ | |
| Directors | Kazuyuki Tomita | 17/17 | 100％ | |
Executive officer system
The Company adopted an executive officer system with the objectives of strengthening its corporate governance by accelerating the decision-making and fortifying the supervisory function of the Board of Directors, fortifying the Company’s business execution function, and improving management efficiency. The Company currently has 13 executive officers (as of the submission date of the Securities Report for fiscal 2021). Executive officers report and provide details about the status of their areas of responsibility at the Board of Directors meetings and management policy meetings. Executive officers also convene executive board meetings where they are informed about and discuss the resolutions of the Board of Directors.
Nomination & Remuneration Advisory Committee
The Company maintains a Nomination & Remuneration Advisory Committee as a discretionary advisory body to the Board of Directors. The committee generally meets once every two months and is comprised of a majority of independent outside directors, of which one serves as the committee’s chair. The committee deliberates on topics including the election and removal of directors, the appointment and dismissal of representative directors, the content of individual remuneration for directors, and director successor plans, and submits its council and recommendations to the Board of Directors.
Audit & Supervisory Board and accounting auditor
The Company’s Audit & Supervisory Board consisted of four corporate auditors, two of which are outside auditors, as of the date of the Securities Report for fiscal 2021. The Company believes the auditing structure including outside auditors is effective for monitoring management and considers the structure to be appropriate for the Company’s current status. The Audit & Supervisory Board meets, in principle, once a month to fulfill the duties stipulated laws and regulations and in accordance with the board’s rules.
As of the date of submission of the Securities Report, the Company’s external accounting auditor is PricewaterhouseCoopers Japan LLC.
| Audit & Supervisory Board | ||||
|---|---|---|---|---|
| Position | Name | Meeting attendance in FY2023 | Attendance rate in FY2023 | |
| Audit & Supervisory Board member | Audit & Supervisory Board member | Hidetoshi Shin | 10/10 | 100％ |
| Audit & Supervisory Board member | Hirosuke Hamada | ー | ー | |
| Outside Audit & Supervisory Board member | Audit & Supervisory Board member | Toshihiko Yoshida | 14/14 | 100％ |
| Audit & Supervisory Board member | Noriko Kaji | ー | ー | |
Officer selection and appointment
Individual servings on the Board of Directors are first considered based on their abundant experience and achievements leading operations as heads of departments and their potential ability to apply their knowledge and insight to overseeing the Company’s operations from multiple perspectives. Once identified, the Board of Directors deliberates on each candidate, considering the individual’s management skills and aptitude, their past contributions to the Company and, as a balance against overemphasis on solely those attributes, the contribution they would provide to the diversity of the Board of Directors. The chart below summarizes the career experience and expertise from which each of the current members are expected contribute to the Board of Directors.
Directors
| Name | Gender | Outside |
Primary areas of experience and expertise* | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Corporate management, management strategy | Sales, marketing | Manufacturing, technology | Legal, compliance | Financial, accounting | International perspective, diversity | Environmental and social issues | |||
| Noriyuki Mifune | M | ● | ● | ● | ● | ● | |||
| Kazuya Kobayashi | M | ● | ● | ● | ● | ● | |||
| Nobuyuki Kuroki | M | ● | ● | ● | ● | ||||
| Hiroshi Goto | M | ● | ● | ● | ● | ● | |||
| Takayuki Yoshizumi | M | ● | ● | ● | ● | ||||
| Toshimitsu Kamakura | M | ● | ● | ● | |||||
| Keiko Takihara | F | ● | ● | ● | |||||
| Yoko Sato | F | ● | ● | ● | |||||
| Kazuyuki Tomita | M | ● | ● | ● | ● | ||||
Audit & Supervisory Board members
| Name | Gender | Outside |
Primary areas of experience and expertise* | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Corporate management, management strategy | Sales, marketing | Manufacturing, technology | Legal, compliance | Financial, accounting | International perspective, diversity | Environmental and social issues | |||
| Hidetoshi Shin | M | ● | ● | ● | ● | ● | |||
| Hirosuke Hamada | M | ● | ● | ● | |||||
| Toshihiko Yoshida | M | ● | ● | ● | |||||
| Noriko Kaji | F | ● | ● | ● | |||||
- The charts do not represent each individual’s full range of experience and expertise.
Reasons for appointment of the independent and outside directors
| Name | Independent officer | Reason for appointment |
|---|---|---|
| Toshimitsu Kamakura | ○ | Mr. Kamakura has extensive experience and broad insight as a lawyer. He is an outside director that has been appointed as an independent officer because he was deemed to have no vested interest in the Company and unlikely to have conflicts of interest with general shareholders. |
| Keiko Takihara | ○ | Ms. Takihara is deeply knowledgeable in health promotion as a specially appointed professor of the Health and Counseling Center of Osaka university. She is an outside director that has been appointed as an independent officer because she was deemed to have no vested interest in the Company and unlikely to have conflicts of interest with general shareholders. |
| Yoko Sato | ○ | Ms. Sato is a certified accountant with specialized expertise in finance and accounting. She has been appointed as an independent officer because she was deemed to have no vested interest in the Company and unlikely to have conflicts of interest with general shareholders. |
| Kazuyuki Tomita | ○ | Mr. Tomita has experience in the development of thin film and semiconductor processes at a major manufacturing company and managing experience at a subsidiary company. He is an outside director that has been appointed as an independent officer because he was deemed to have no vested interest in the Company and unlikely to have conflicts of interest with general shareholders. |
Board of Directors effectiveness evaluation
The Company conducts annual effectiveness evaluations of the Board of Directors and takes steps to
improve the Board’s effectiveness and functionality.
In fiscal 2023, the Secretariat of the Board of
Directors prepared a questionnaire for all directors and Audit & Supervisory Board members to
evaluate the effectiveness of the Board. The evaluation results indicated that the composition,
operation, and freedom to express opinions of the Board of Directors were generally appropriate and
identified areas where the Board could further improve, such as securing time for deliberation of
capital policy and medium- and long-term management issues. The evaluation results were reported to the
Board, and the Board is taking steps to implement improvements, including revising its agenda to
allocate sufficient time for discussion of the above items or considering delegating responsibility to
other management committees.
Training for directors and Audit & Supervisory Board members
Directors of the Company continue to develop their skills by participating in external courses and seminars to deepen their understanding of laws and regulations and their roles and responsibilities as corporate directors. The Company’s full-time Audit & Supervisory Board members are members of the Japan Audit & Supervisory Board Members Association and enhance their knowledge by attending the association’s meetings and seminars on auditing practices for medium-sized firms as well as by sharing information with other Audit & Supervisory Board members.
Director and corporate auditors support system
Outside directors are supported by the HR & General Affairs Division of the Secretariat of the Board of Directors. Outside corporate auditors are supported by the Auditing Division, which provides auxiliary and secretariat work for the Audit & Supervisory Board.
Policy for determining director remuneration
The Company policy for determining the amount and structure of director remuneration is for the Nomination and Remuneration Advisory Committee to deliberate and then submit its counsel and recommendations to the Board of Directors for final decision.
The amount and structure of director remuneration is determined using the following guidelines.
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Basic Policy
The Company formulates director remuneration structure to provide appropriate incentive to enhance corporate value by considering the individual director’s duties and responsibilities, corporate performance, and other factors based on their status as part time or full time. Remuneration for directors (excluding outside directors and part-time directors) consists of fixed basic remuneration and performance-linked remuneration in the form of monetary and stock remuneration. Remuneration for outside directors and part-time directors, who perform primarily supervisory functions, is basic remuneration only due to the nature of their position.
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Basic remuneration
Basic remuneration is a monthly monetary remuneration determined by a comprehensive consideration of the individual’s duties, responsibilities, and years in office.
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Performance-linked remuneration
Performance-linked remuneration serves as an incentive to continually increase corporate value. It is linked to performance indicator targets and provided in the form of monetary compensation and stock compensation with the intention of promoting the sharing of value with shareholders.
The performance-linked remuneration is calculated by applying a multiplier obtained from the three-year average of the Group’s ordinary income, ordinary income ratio, ROE, and ROA (based on ordinary income) to base remuneration.
The performance indicators and their values are reviewed for consistency with the management plan in light of changes in the business environment, and the Board of Directors determines their appropriateness based on the counsel and recommendations of the Nomination and Remuneration Advisory Committee.
Performance-linked monetary compensation is uniformly paid every month. Performance-linked stock compensation is provided one time per year on a set date in the form of shares with a 30-year restriction on transfer. The Board of Directors removes the restriction at the time an individual retires from a predetermined position as a director of the Company or a subsidiary of the Company.
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Payment ratio of remuneration
The ratio of basic remuneration, performance-linked monetary compensation and performance-linked stock compensation for directors (excluding outside directors and part-time directors) is set at approximately 7:2:1 when the performance targets are achieved, with the performance targets being the three-year average of the Group’s ordinary income, ordinary income ratio, ROE, and ROA (based on ordinary income). The Board of Directors determines the appropriateness of the ratio based on the counsel and recommendations of the Nomination and Remuneration Advisory Committee.
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Delegation of individual compensation decisions
The specific amounts of monetary or stock remuneration for each director is based on a proposal amount prepared based on the calculation method established by the Board of Directors and deliberated by the Nomination and Remuneration Advisory Committee, which is chaired by an independent outside director and comprised of a majority of independent outside directors. The Board of Directors considers the counsel and recommendations of the Nomination and Remuneration Advisory Committee, and the Representative Director decides the remuneration amount for each individual within the scope delegated by Board of Directors.
Audit system
Reasons for appointment of the outside auditors
| Name | Independent officer | Reason for appointment |
|---|---|---|
| Toshihiko Yoshida | ○ | Mr. Yoshida has expertise and knowledge from his career as a full-time auditor of a publicly listed company. He is an outside auditor that has been appointed as an independent auditor because he was deemed to have no vested interest in the Company and unlikely to have conflicts of interest with general shareholders. |
| Noriko Kaji | ○ | Ms. Kaji has expertise in finance and accounting from his career as a tax accountant. He is an outside auditor that has been appointed as an independent auditor because he was deemed to have no vested interest in the Company and unlikely to have conflicts of interest with general shareholders. |
Internal auditing
The Auditing Division, which is under direct supervision of the president, serves as the Company’s internal audit department. In accordance with the internal audit plan, the Auditing Division audits of each of the Company’s organizations throughout the year, in principle, and regularly reports its findings, points for improvements, and other matters directly to the Board of Directors and corporate auditors. Internal audits of subsidiaries are carried out in collaboration with the Corporate Planning Division and Overseas Business Division of the Company and the internal audit departments of the subsidiaries.
Audit & Supervisory Board audits
The Company’s Audit & Supervisory Board consists of four corporate auditors (two of which are outside corporate auditors). The Audit & Supervisory Board deliberates and stipulates the board’s audit policies, plans, and methods. All board members attend the Company’s Board of Directors and corporate policy meetings, and full-time auditors also attend other important internal meetings. The Audit & Supervisory Board monitors the earnings performance of subsidiaries by receiving monthly written reports and holding a Group Audit & Supervisory Board Member Liaison Council every three months. In addition, auditors of the subsidiaries report actively share information with the board, including reporting their quarterly earnings results and audit results.
Accounting audits
The Company audit for the fiscal year ended March 31, 2024 was conducted by two certified public accountants, Mr. Takuya Urakami and Mr. Teruaki Arioka of PricewaterhouseCoopers Japan LLC , with the assistance of three certified public accountants from the Company and 13 other accountants. Mr. Urakami has been providing accounting services to the Company for one year, and Mr. Arioka has been providing accounting services to the Company for three years.
- PricewaterhouseCoopers Kyoto LLC merged with PricewaterhouseCoopers Arata LLC on December 1, 2023, becoming PricewaterhouseCoopers Japan LLC.
Strategic shareholdings
As of the end of March 2024, the Company does not hold strategically held shares. In principle, the Company does not hold shares for strategic purposes.
Anti-takeover measures
The Company has not adopted anti-takeover measures.