Corporate Governance

Basic Philosophy

Dexerials’ management philosophy is “Integrity - Have Integrity and Sincerity,” and in accordance with this we recognize that in order to try and improve the corporate value, and to live up to the expectations and trust placed in us by all the stakeholders who support the corporate activities, the establishment of corporate governance is an extremely important issue.
Based on this fundamental way of thinking, the management's transparency and objectivity is ensured through the composition of the board of directors, due to independent outside directors making up the majority.

Reason for Adopting the Current Structure

Dexerials ensures objectivity and transparency of management by requiring that independent outside directors with no conflict of interest with regular shareholders account for a majority of the Board of Directors. Furthermore, we established the Nomination and Remuneration Committee in July 2019, and we have further clarified the processes for nominating and dismissing officers and determining remuneration.
We are strengthening supervision of management by appointing people with diverse knowledge and experience to ensure that audit and supervisory board members can express their opinions to management from an expert and objective perspective.
Furthermore, we have introduced an executive officer system and are promoting transfer of authority, as well as streamlining decision making and clarifying management responsibilities by making some executive officers subject to entrustment agreements.

Corporate Governance Structure

Executive Functions/Auditing and Supervision

In order to pursue efficiency and transparency through the separation of management and executive functions, the Company has adopted a structure wherein management policies and strategy, etc. are determined by the board of directors, which comprises a majority of independent outside directors, and executive authority is delegated to executive officer. Supervision of management is then conducted by observing the state of executive operations.
Furthermore, the audit and supervisory board, works with the independent outside directors to conduct audits from a neutral standpoint and is strengthening internal control through a system that enables the expression of opinions to management.

Executive Officers

The Company enables prompt decision making and transparency of executive responsibility by selecting ten executive officers including two of whom serve concurrently as director and delegating authority to them.
The four senior executive officers (excluding serving concurrently as director) have enter into an entrustment agreement with the Company as the entrusted executive officer.
Furthermore, in principle, the Company conducts twice-monthly meetings of the board of executive officers, which comprises the ten executive officers as regular members. The board of executive officers examines the status of executive operation as well as issues being faced, in addition to conducting discussion of major proposals in advance of a meeting of the board of directors.

Status of Audits Conducted by the Audit and Supervisory Board

The outside audit and supervisory board members exchange ideas with representative directors, attend important meetings, access to important documents, survey important assets, participate in department hearings, and investigate subsidiary companies, while at the same time coordinating with the internal audit department and independent auditors to enhance the audit's effectiveness and efficiency.
The internal audit department holds monthly meetings at which it confirms the content of audits and exchanges opinions. Furthermore, it works with the independent auditors by receiving explanations of auditing plans from and conducting quarterly opinion exchanges.

Status of Internal Audits

Dexerials’ Internal Audit Department strives to implement an effective and efficient audit, establishes an internal control system, for Dexerials and its group companies, and audits the status of their implementation of and compliance with their respective compliance and risk management system, and also in regards to the results of the internal audit, periodically reviews the status of enhancements, and reports those details to the representative directors, the audit and supervisory board and any related departments.
Specifically, it conducts internal audits based on the auditing plan devised at the beginning of the fiscal year, notifies audited departments of the results of audits, and reports those results to the representative directors and the audit and supervisory board. It also checks the status and results of improvements with regard to content that requires improvement.
Audit and supervisory board members hold monthly meetings at which they confirm the content of audits and exchange opinions.
Also, they conduct quarterly opinion exchanges with the independent auditors, provide information to the independent auditors in relation to major events relating to internal control that are discovered in the course of internal audits, and receive instructions and advice if necessary.

Directors and Board of Directors

Dexerials’ Board of Directors consists of two internal directors and four independent outside directors. In principle, the board of directors conducts regular meetings once per month, where it decides legally mandated matters, determines major management policies and strategies, selects candidates for officers, determines individual remuneration, and oversees execution of business.
The independent outside directors each have extensive experience and knowledge as managers or experts in their field and are able to perform their supervisory functions from an independent perspective.

Basic Policy and Procedures for Nomination of Candidates for Director

With regard to the nomination of candidates for director, the Company selects candidates that possess judgement and ability in accordance with the Company’s corporate philosophy, who have exceptional personal and communication skills, and who display leadership abilities, etc. Furthermore, outside directors are people that are invited from outside the Company with management experience at global corporations, knowledge concerning technological development, and specialist knowledge in fields such as law and financial accounting, and who possess a high degree of independence. Also, outside directors are determined in consideration of the balance of the knowledge, experience, and specialist areas, etc. of the board of directors as a whole.
The majority of the Company’s board of directors is made up of independent outside directors, so it calls for the selection of candidates for director from a more neutral standpoint. Furthermore, in order to deepen a discussion between and internal directors and independent outside directors, resolution for nomination of candidates for director requires a prior deliberation by the Nomination and Remuneration Committee.

Reason for Selection as Director

Position Name Management positions and major concurrent posts Reason for selection
Representative director and president Yoshihisa Shinya President and Executive Officer
Automotive Solutions Business Unit Head
Mr. Yoshihisa Shinya is playing a central role in product development and commercialization with regard to the Company’s entry to new business fields and has deep insight about technology and a wealth of experience in business operations. The Company judged that he is capable of appropriately fulfilling his duties as a Director and therefore selected him as a Director.
Representative director Toshiya Satake Senior Managing Executive Officer
Officer in charge of Internal Audit
Mr. Toshiya Satake has a wealth of experience and deep insight gained through his involvement in investment and financing business at financial institutions and as a manager of a company. He is well versed in the Company’s overall management through involvement in the Company’s auditing in the course of his service as a Standing Audit & Supervisory Board Member, therefore has been selected as Director.
Outside director Masao Hirano Professor at the Waseda University Faculty of Commerce
Outside Director of Litalico, Inc.
External Director of Uzabase, Inc.
Chairman of Spiral Capital Inc.
Mr. Masao Hirano has deep insight about corporate management as a university professor and management consultant. The Company judged that he can provide useful advice for the Company’s management from an objective and professional perspective and therefore invited him as an Outside Director.
Outside director Takashi Yokokura Having held important posts at a listed company, Mr. Takashi Yokokura has deep insight into corporate management. The Company judged that he can provide useful advice for the Company’s management from an objective and professional perspective and contribute to strengthening of the Company’s technology development and business development, and therefore invited him as an Outside Director.
Outside director Takao Tsuji Representative Director of the Board Chairman of JVCKENWOOD Corporation Mr. Takao Tsuji has a wealth of experience about corporate management as the representative director of a listed company and specialized knowledge as an engineer. The Company judged that he can provide useful advice for the Company’s management from an objective and professional perspective and contribute to the Company’s product development and business development in new fields, therefore invited him as an Outside Director.
Outside director Rika Sato Lawyer (Partner at Sato & Partners Law Office)
Outside Director of CMK Corporation
Ms. Rika Sato has deep insight about corporate legal affairs as an attorney-at-law and has a track record of contributing to enhancement of the quality of auditing of the Company as an Outside Audit & Supervisory Board Member of the Company. The Company judged that she can provide useful advice and suggestions that contribute to strengthening of the functions for supervision of the Company’s business execution, and therefore invited her as Outside Director.

Standards for Evaluating the Independence of Outside Directors

If it is determined that outside directors or candidates for outside director of the Company fulfil all of the following requirements, the Company shall deem said outside director or candidate for outside director to be independent from the Company:

  • 1.
    The candidate has not held a position as director (excluding outside director. The same applies hereinafter), audit and supervisory board member (excluding outside audit and supervisory board member. The same applies hereinafter), executive officer, or agent (hereinafter “Director, etc.”) of the Company or any of its subsidiaries (hereinafter the “Dexerials Group”) either currently or in the ten years prior to being appointed.
  • 2.
    The candidate is not related to a Director, etc. of the Dexerials Group within two degrees of consanguinity.
  • 3.
    The candidate is not a major shareholder of the Company (or in the case of a major shareholder that is an organization such as a company, is not affiliated with said organization). (Note 1)
  • 4.
    The candidate is not affiliated with an organization of that is a major shareholder of the Company. (Note 1)
  • 5.
    The candidate is not a major trading partner of the Dexerials Group (or in the case of a major trading partner that is a company, etc. is not affiliated with said organization). (Note 2)
  • 6.
    The candidate is not a major lender or other major creditor of the Dexerials Group (or in the case of a major lender that is an organization such as a company, is not affiliated with said organization). (Note 3)
  • 7.
    The candidate has not received contributions of 10.00 million yen or more from the Dexerials Group in the current fiscal year (in the case the recipient of contributions is an organization such as a company or association, this applies to those who are affiliated with said organization or who have been affiliated with said organization in the previous five years).
  • 8.
    The candidate has not received remuneration from the Dexeriels Group of 10.00 million yen or more as payment for the provision of specialist legal, financial, or taxation services, etc. or consulting, etc. in the current fiscal year (or in the case of a recipient that is an organization such as a company, is not affiliated with said organization).
  • 9.
    The candidate is not subject to reciprocal appointment of outside officers between a company at which the candidate is a Director, etc. and the Dexerials Group. (Note 4)
  • (Note 1): “Major shareholder” refers to a shareholder that directly or indirectly holds 10% or more of total voting rights.
  • (Note 2): “Major trading partner” refers to companies for which payments made or payments received in transactions with the Dexeriels Group account for 2% or more of consolidated net sales of the Dexeriels Group or the trading partner.
  • (Note 3): “Major lender” refers to a lender of a sum that amounts to 2% or more of consolidated total assets.
  • (Note 4): “Reciprocal appointment of outside officers” refers to a scenario in which an outside officer is accepted from a company at which a Director, etc. of the Dexeriels Group serves as an outside officer.

Evaluation of the Effectiveness of the Board of Directors

With the aim of promoting sustainable growth of the company and improving the company’s medium to long-term corporate value, the Board of Directors of Dexerials Corporation conducts self-evaluation of its effectiveness.

(Analysis and Evaluation Method)
With the purpose of ensuring the objectivity and transparency of evaluation, evaluation of effectiveness in Fiscal 2019 was conducted by outsourcing the process of conducting interviews and analyzing their results to a third party. Specifically, the effectiveness of the Board of Directors in Fiscal 2019 was evaluated by directors and Audit and Supervisory Board members based on items on a questionnaire compiled by the Board of Directors Secretariat while a third party conducted interviews with all directors and Audit and Supervisory Board members on their responses and analyzed details of the interviews.
In addition, discussions were held by the Board of Directors based on the above results of analysis and an action plan was formulated detailing priority issues that need to be addressed in the next fiscal year.

(Outline of Evaluation Results)
(1)Summary
While the results of third-party evaluation demonstrated a high standard of effectiveness of the Board of Directors of the Company, the following items were pointed out as matters of particular concern overall:

  • Deepening of communication, etc.
  • Future review of the structure of the Board of Directors to align the board with the medium to long-term management strategies of the Company
  • Knowledge and understanding of the Board of Directors and individual directors of the fields of business of the Company

In addition to the above results, the following items were pointed out as requiring study in order to further improve effectiveness in the future:

  • Discussions on matters such as the medium to long-term management strategies
  • Study of the current state of the structure, organizational design, and decisions on nomination and remuneration of the Board of Directors based on the above discussions
  • Deepening of communication (building of less formal relationships) and sharing of information

(2)Action Plan for Fiscal 2020
In light of the details specified in (1) above, the Company made the following decisions with regard to its action plan for fiscal 2020:

  • Deepening of discussions on matters such as the medium to long- term management strategies
  • Deepening of communication and sharing of information
  • Study of the current state of the structure, organizational design, and decisions on nomination and remuneration of the Board of Directors

Audit and Supervisory Board Members and Audit and Supervisory Board

The Company has adopted an audit and supervisory board system. Dexerials’ audit and supervisory board is comprised of one standing and two independent outside audit and supervisory board members, and together with ensuring transparency and independence, it carries out an auditing and supervisory function of Dexerials’ management.

Basic Policy and Procedures for Nomination of Candidates for Audit and Supervisory Board Member

With regard to nomination of candidates for audit and supervisory board member, candidates that possess experience and knowledge in fields such as corporate management, financial accounting, and law, are selected from inside and outside the Company. Furthermore, outside audit and supervisory board members are invited from outside the Company and possess a high degree of independence in addition to the above.
The majority of the Company’s board of directors is made up of independent outside directors, so it calls for the selection of candidates for officer from a more neutral standpoint. Also, we conduct prior consideration through meetings of independent outside directors when nominating candidates for officer, in order to reflect the opinions of independent outside directors.

Position Name Reason for selection
Standing Audit and Supervisory Board Member Masahiro Kuwayama   Having served in the Legal Affairs Department and as the General Manager of the Internal Audit Department of the Company, Mr. Masahiro Kuwayama has a wealth of experience and insight about legal affairs and audit practices. The Company judged that he is capable of performing appropriate auditing from an objective and professional perspective and therefore selected him as Standing Audit & Supervisory Board Member.
Audit and Supervisory Board Member Toshifumi Takada Professor Emeritus at Tohoku University
Professor at National Chung Cheng University
Mr. Toshifumi Takada has deep insight about accounting and the audit system as a university professor. The Company judged that he is capable of performing appropriate auditing from an objective and professional perspective and therefore invited him as Outside Audit & Supervisory Board Member.
Audit and Supervisory Board Member John C. Roebuck Foreign Law Consultant (Japan) Mr. John C. Roebuck has specialized knowledge about international financial legal affairs and a wealth of experience and insight about management of global companies as a foreign Law Consultant (Japan). The Company judged that he is capable of performing appropriate auditing from an objective and professional perspective and therefore invited him as Outside Audit & Supervisory Board Member.

Standards for Evaluating the Independence of Outside Audit and Supervisory Board Members

If it is determined that outside audit and supervisory board members or candidates for outside audit and supervisory board member fulfil all of the following requirements, the Company shall deem said outside audit and supervisory board member or candidate for outside audit and supervisory board member to be independent from the Company:

  • 1.
    The candidate has not held a position as director (excluding outside director. The same applies hereinafter), audit and supervisory board member (excluding outside audit and supervisory board member. The same applies hereinafter), executive officer, or agent (hereinafter “Director, etc.”) of the Company or any of its subsidiaries (hereinafter the “Dexerials Group”) either currently or in the ten years prior to being appointed.
  • 2.
    The candidate is not related to a Director, etc. of the Dexerials Group within two degrees of consanguinity.
  • 3.
    The candidate is not a major shareholder of the Company (or in the case of a major shareholder that is an organization such as a company, is not affiliated with said organization). (Note 1)
  • 4.
    The candidate is not affiliated with an organization of that is a major shareholder of the Company. (Note 1)
  • 5.
    The candidate is not a major trading partner of the Dexerials Group (or in the case of a major trading partner that is a company, etc. is not affiliated with said organization). (Note 2)
  • 6.
    The candidate is not a major lender or other major creditor of the Dexerials Group (or in the case of a major lender that is an organization such as a company, is not affiliated with said organization). (Note 3)
  • 7.
    The candidate has not received contributions of 10.00 million yen or more from the Dexerials Group in the current fiscal year (in the case the recipient of contributions is an organization such as a company or association, this applies to those who are affiliated with said organization or who have been affiliated with said organization in the previous five years).
  • 8.
    The candidate has not received remuneration from the Dexeriels Group of 10.00 million yen or more as payment for the provision of specialist legal, financial, or taxation services, etc. or consulting, etc. in the current fiscal year (or in the case of a recipient that is an organization such as a company, is not affiliated with said organization).
  • 9.
    The candidate is not subject to reciprocal appointment of outside officers between a company at which the candidate is a Director, etc. and the Dexerials Group. (Note 4)
  • (Note 1): “Major shareholder” refers to a shareholder that directly or indirectly holds 10% or more of total voting rights.
  • (Note 2): “Major trading partner” refers to companies for which payments made or payments received in transactions with the Dexeriels Group account for 2% or more of consolidated net sales of the Dexeriels Group or the trading partner.
  • (Note 3): “Major lender” refers to a lender of a sum that amounts to 2% or more of consolidated total assets.
  • (Note 4): “Reciprocal appointment of outside officers” refers to a scenario in which an outside officer is accepted from a company at which a Director, etc. of the Dexeriels Group serves as an outside officer.

Officers’ Remuneration

(Basic Philosophy)
Remuneration of directors (excluding external directors) is determined by the Nomination and Remuneration Committee based on an amount calculated from the role and achievement of results for the fiscal year, etc. having been evaluated by independent outside directors.
Also, remuneration for audit and supervisory board members is determined through deliberation of audit and supervisory board members, and only basic remuneration is provided.

【Percentages of each type of remuneration by job title】

Job Title Percentage of officer remuneration Total
Basic remuneration Performance-linked remuneration
Performance remuneration Stock compensation
Representative director 50% 30% 20% 100%
Directors (excluding outside directors) 60% 25% 15%
Outside directors 100% - -
Audit and supervisory board members 100% - -

(Basic remuneration)
Amounts are determined according to job title in accordance with internal rules (weighted allocation according to job responsibilities), and a fixed monthly amount of remuneration is paid.
Only basic remuneration is provided to outside directors and audit and supervisory board members.

(Performance-linked remuneration)
Performance-linked remuneration comprises “performance remuneration,” which is paid according to performance during the fiscal year, and “stock compensation (BBT trust),” which is intended to foster the awareness that directors share interests with shareholders and to provide motivation for achieving objectives over the medium to long term. Performance-linked remuneration is designed to motivate the Company’s executive directors to perform management with an awareness of performance and share prices not just in a single fiscal year, but over the medium to long term. “Performance remuneration” is set based on consolidated net sales, consolidated operating income, and ROE, management indicators that are emphasized by the Company and are used as evaluation indicators for all officers, as well as the degree of achievement of individual commitments as an evaluation indicator with regard to executive directors other than the representative director and president. The composition ratio of Performance remuneration is 40% for consolidated net sales, 40% for consolidated operating income, 20% for ROE.

“Stock compensation” is set for the purpose of increasing awareness of contributions to medium to long-term continuous improvements in results and increases in corporate value. Specifically, capital is contributed to a trust every three years for acquisition of the shares necessary for provision to directors (the maximum amount of the contribution in each fiscal year is the amount necessary to acquire 45,000 ordinary shares of the Company’s stock), and thereafter, eligible directors are granted points according to consolidated net sales, consolidated operating income, ROE, and other indicators in the same manner as described above for performance remuneration. Each point granted can be converted into one share of the Company’s ordinary stock, and at the time of separation from the Company, eligible directors are granted shares of the Company’s stock and monies converted at the market value of those shares according to the number of points.

(Decision-Making Process)
In order to guarantee an appropriate remuneration for officersand transparency of decision-making processes, the Company has established a Nomination and Remuneration Committee as an advisory body to the board of directors.
The Nomination and Remuneration Committee shall comprise four outside directors (all) and two representative directors. It shall be chaired by an outside director.
The decision-making process of the board of directors shall involve referral to and deliberation by the Nomination and Remuneration Committee for matters relating to the composition of remuneration of directors and executive officers, determination of the appropriateness of design and setting targets for the performance-linked remuneration system, and evaluation of performance, etc.
The remuneration of individual directors and executive officers shall be discussed by the Nomination and Remuneration Committee and shall be determined at the discretion of the representative director and president at a board of directors meeting, within the range of remuneration determined by a resolution of the General Shareholders Meeting in advance. Furthermore, said discretionary determination by the representative director and president shall be based on the results of the discussion of the Nomination and Remuneration Committee.
The remuneration of individual audit and supervisory board members shall be determined through consultation between audit and supervisory board members, within the range of remuneration determined by a resolution of the General Shareholders Meeting in advance.

(General Shareholders Meeting Resolutions Relating to Officer Remuneration, etc.)
The maximum amount of officer remuneration was set to no more than 300 million yen annually by a February 27, 2013 resolution pursuant to Article 319, Paragraph 1 of the Companies Act (the “Director Monetary Remuneration Limit”). In addition, resolutions were adopted at the fourth ordinary General Shareholders Meeting held on June 23, 2016 specifying the method of calculation and particulars of performance-linked stock remuneration to directors (excluding outside directors) separate from the Director Monetary Remuneration Limit, limiting the total number of points that may be granted in a single fiscal year based on job title, degree of attainment of results, and other factors to 45,000 points, specifying that in principle, shares of the Company’s stock and monies converted into the market value of the Company’s stock equivalent to one share of the Company stock shall be granted to directors for each point at the time of separation from the Company, and specifying that the amount of remuneration, etc. received by directors shall be based on the amount equal to the total number of points granted to each director multiplied by the book value of one share of the Company’s stock held by the trust established in relation to the relevant compensation system (the “Director Stock Compensation Limit”).
There are six directors eligible for remuneration, etc. pursuant to the Director Monetary Remuneration Limit and there are two directors eligible for remuneration, etc. pursuant to the Director Stock Compensation Limit.
The maximum amount of audit and supervisory board member remuneration was set to no more than 50 million yen annually by resolution adopted at the third ordinary General Shareholders Meeting held on May 27, 2015 (the “Audit and Supervisory Board Member Remuneration Limit”).
There are three audit and supervisory board members eligible for remuneration, etc. pursuant to the Audit and Supervisory Board Member Remuneration Limit.

Amount of Officers’ Remuneration in Fiscal 2019

Officer classification Total amount of remuneration, etc.
(millions of yen)
Total amount of each type of remuneration, etc. (millions of yen) Number of subject officers (people)
Basic remuneration Performance-linked remuneration
Stock options Performance-linked stock compensation plan
Directors (excluding outside directors) 114 63 35 16 5
Audit and supervisory board members (excluding outside audit and supervisory board members) 11 11 - - 1
Outside officers 48 48 - - 10