Based on our management philosophy of “Integrity – Have Integrity and Sincerity,” we believe that establishing proper corporate governance is an extremely high-priority issue for meeting the trust and expectations of all stakeholders who support our business activities and for achieving sustainable growth and increasing corporate value.
Reason for Adopting the Current Structure
The Company undertakes ongoing measures intended to enhance corporate governance so that we can build efficient and effective management structures.
Since the Company’s listing, outside directors with high levels of independence and expertise have continuously comprised a majority of the Board of Directors, ensuring management transparency and objectivity.
In addition, with the transition to a company with an Audit and Supervisory Board in 2021, we have accelerated measures to increase the pace of decision making and promote a monitoring model.
With respect to business execution, we introduced an executive officer system and are actively delegating authority.
In conjunction with the introduction of a delegation-type executive officer system in 2019, we encouraged transfers of authority, and in July 2021 we made all executive officers subject to delegation agreements in order to further strengthen business execution systems, promoting the creation of systems that facilitate rapid decision making and clarify responsibility for the execution of business.
With respect to the officer nomination and remuneration decision-making process, in July 2019 we established a non-mandatory Nomination and Remuneration Committee as an advisory organ to the Board of Directors. We ensure objectivity and transparency by selecting officer candidates and determining officer remuneration within a committee of which a majority of the members and chair are outside directors.
Directors and Board of Directors
The Company’s Board of Directors comprises seven members—four independent outside officers and three internal officers. 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.
Audit and Supervisory Board Members and Audit and Supervisory Board
The Audit and Supervisory Board is made up of three members: the Audit and Supervisory Board chair (outside director), a full-time Audit and Supervisory Board member (director), and an Audit and Supervisory Board member (outside director). Appointing an outside director as the Audit and Supervisory Board chair ensures the transparency and independence of audits, and having a full-time member ensures the effectiveness of audits.
The directors who are also Audit and Supervisory Board members are appointed based on their diverse experience and knowledge so that they can express opinions to management from specialized and objective perspectives, thereby reinforcing the oversight of management.
Executive Officers and Board of Executive Officers
The Company has a total of nine executive officers, two of whom also serve as internal directors and seven of whom have entered into delegation agreements with the Company concerning the execution of business. In principle, the Board of Executive Officers meets twice each month with the nine executive officers as regular members to verify the status of business execution and issues and discuss key matters in advance.
Nomination and Remuneration Committee
The Company’s Nomination and Renumeration Committee comprises six members: all four outside directors and two representative directors. Committee deliberations include the selection of officer candidates, confirmation of the officer successor development process, performance evaluations when determining officer remuneration, and the appropriateness of evaluation indicators when determining the remuneration structure and performance-link remuneration.
Internal Audits and Audits by the Audit and Supervisory Board
The Internal Audit Department works to conduct effective and efficient audits, conducts audits concerning the establishment of internal control systems, compliance, observance and maintenance of risk management systems, periodically confirms that status of improvements regarding the results of internal audits, and reports the details to the Audit and Supervisory Board, representative directors, and relevant departments.
Specifically, internal audits are conducted in accordance with an audit plan prepared at the beginning of the fiscal year, and the audit results are reported to the audited department as well as the Audit and Supervisory Board and the representative directors. With regard to any areas that require improvement, the Internal Audit Department confirms the status of implementation and results of improvements.
Monthly meetings are held with the full-time Audit and Supervisory Board member to confirm the details of audits and exchange opinions. In addition, meetings with the accounting auditors are held quarterly to exchange opinions, and information is provided to the accounting auditors regarding any material matters about internal controls that were identified through the internal audits. Guidance and advice are received as necessary.
The company has entered into an audit agreement with PwC Arata LLC, and that firm conducts accounting audits pursuant to the Companies Act and the Financial Instruments and Exchange Act.
PwC Arata and its managing partners who conduct audits of the Company have no special interests in the Company, and further, PwC Arata LLC has taken measures to prevent its managing partners from being involved in accounting audits of the Company exceeding a certain period.
Basic Policy and Procedures for Nomination of Candidates for Director
When nominating director candidates (excluding directors who are Audit and Supervisory Board members), the Company selects candidates based on criteria such as decision-making capabilities and ability in accordance with the Company’s management philosophy, excellent character and communication skills, and leadership. With regard to outside directors (excluding directors who are Audit and Supervisory Board members), the Company invites individuals who have experience as managers at global companies, knowledge relating to technology development, specialized knowledge in areas such as law or financial accounting, and are highly independent.
When nominating candidates for director who are Audit and Supervisory Board members, the Company selects candidates from inside and outside the Company who possess experience and knowledge in areas including corporate management, financial accounting, and law. In the case of outside directors who are Audit and Supervisory Board members, in addition to the above, individuals who are highly independent are invited to serve.
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.
Independent outside directors make up a majority of the Company’s Board of Directors, and accordingly, the mechanism is such that officer candidates are selected from a neutral perspective. In addition, when appointing and dismissing management executives and nominating officer candidates, decisions are made based on the deliberations and reports of the Nomination and Renumeration Committee, a majority of the members and the chair of which are independent outside directors.
Reason for Selection as Director
|Management positions and major concurrent posts
|Reason for selection
|Representative director and president
|President and Executive Officer
Mr. Yoshihisa Shinya plays a central role in product development with regard to the Company’s entry into new business fields and has deep insight about technology and a wealth of experience in business operations. The Company therefore selected him as a Representative Director.
|Senior Managing Executive Officer
|Mr. Toshiya Satake has extensive experience and deep insight gained through involvement in the investment and financing business at financial institutions and as a company manager. He contributes to enhancing the Company’s corporate governance and corporate value, and the Company therefore selected him as a Representative Director.
|Kikuchiseisakusho Co., Ltd. Outside Director
|Mr. Takashi Yokokura has served as representative director and president of a global company and has deep insight into corporate management. The Company determined that he can provide useful advice for the Company’s management from an objective and professional perspective and contribute to strengthening the Company’s technology development and business development, and therefore invited him to serve as an Outside Director.
|Mr. Satoshi Taguchi has held important positions in a global company and has deep insight into corporate management, and the Company expects that he will provide useful advice for the Company’s management from an objective and professional perspective and contribute to reinforcing the Company’s risk management and oversight of business execution, and therefore invited him to serve as an Outside Director.
|Outside director Audit and Supervisory Board Chair
|Lawyer (Partner at Sato & Partners Law Office) Outside Director of CMK Corporation
Outside Director of Nihon Plast Co., Ltd.
|Ms. Rika Sato has deep insight into corporate legal affairs as an attorney at law and has a track record of contributing to enhancement of the quality of auditing by the Company as an Outside Audit and Supervisory Board Member. The Company determined that she can contribute to reinforcing audit and supervisory functions from an objective and professional perspective and provide useful advice that contributes to enhancing compliance and corporate governance, and therefore invited her to serve as an Outside Director and an Audit and Supervisory Board Member.
|Director and fulltime Audit and Supervisory Board Member
|Audit & Supervisory Board Member, Kyoto Semiconductor Co., Ltd.
|Mr. Masato Taniguchi has deep insight about the Group's business, gained through his experience of serving as general manager of engineering and manufacturing units and in key positions at overseas manufacturing sites, and a proven ability to engage in smooth communication with frontline operations. He also has a wealth of experience and insight about audit practice through his service at the Company's audit department and as an audit & supervisory board member of subsidiaries. Based on his experience and insight, the Company judges that he is capable of performing objective, appropriate auditing from a professional perspective and therefore nominates him as a candidate for Director serving as Audit & Supervisory Committee Member.
|Outside director Audit and Supervisory Board Member
|Professor, Graduate School of Business Administration, Hitotsubashi University
|As a university professor, Mr. Tetsuyuki Kagaya possesses extensive knowledge concerning financial accounting, corporate valuation, and risk analysis. The Company determined that he can contribute to reinforcing audit and supervisory functions from an objective and professional perspective and provide useful advice that contributes to enhancing the implementation of ESG management, and therefore invited him to serve as Outside Director and Audit and Supervisory Board Member.
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
Dexerials evaluates the effectiveness of the Board of Directors based on objective third-party evaluations with the aim of achieving sustainable corporate growth and a medium- to long-term increase in corporate value.
(Analysis and Evaluation Method)
In evaluating the effectiveness in fiscal 2021, each director evaluated the board effectiveness in fiscal 2021 based on questionnaire items prepared by the Board of Directors Secretariat for the purpose of ensuring objectivity and transparency of the evaluation. In addition, a third party conducted interviews with all the directors based on the answers it received, and then analyzed the details.
The Board of Directors then held discussions based on the results of the analysis, and formulated an action plan detailing the key issues that need to be addressed in the next fiscal year.
(Outline of Evaluation Results)
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:
1. Continually discuss the functions and roles of the Board of Directors that contribute to enhancing corporate value (including social value) over the medium to long term
2. Implement the following initiatives based on the discussion in 1. described above
(1) Consider further delegation of authority to executive directors
(2) Improve the operation of the Board of Directors (including sharing of management information, time allocation, and meeting methods)
(3) Establish diverse opportunities for communication among directors
3. Discussion on the board composition over the medium to long term
4. Review the action plan of the Board of Directors and flexibly review discussion topics based on the business environment
(2) Action Plan for Fiscal 2022
In light of the details specified in (1) above, the Company made the following decisions with regard to its action plan for fiscal 2022:
(i) Confirm how to define the functions and roles of the Board of Directors that contribute to enhancing corporate value (including social value) over the medium to long term (what is required of the Board of Directors)
(ii) Consider the necessity of reviewing the criteria for proposals to the Board of Directors based on (i)
(iii) Consider how the Board of Directors acts (including the appropriateness of materials for the Board of Directors meetings and the necessity of expanding the time frame) based on (i)
(iv) Consider ways of communication (including those among outside directors) based on (i)
(v) Discussion on the board composition over the medium to long term
Remuneration paid to Company directors is determined by performing a comparative analysis of the remuneration systems and levels of companies with similar scale, industry, and business format as the Company with the Company’s current systems and levels based on officer remuneration research data from an outside research organization.
The remuneration of directors (other than outside directors) is set by the Board of Directors with advice from the Nomination and Remuneration Committee based on amounts calculated from roles and achievement of results for the fiscal year, and other factors in light of the fundamental approach to determining officer remuneration described below.
Remuneration for Audit and Supervisory board members is determined through deliberations by the directors who are Audit and Supervisory Board members.
Fundamental Approach to Determining Officer Remuneration
- Officer remuneration is paid according to the roles, responsibilities, and performance of each officer.
- Remuneration is designed to reflect medium- to long-term management strategies while providing strong motivation to achieve medium- to long-term growth.
- Remuneration levels are set at levels suitable for recruiting and retaining outstanding human resources.
- The process of setting remuneration shall be objective and highly transparent.
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.
Outside directors and Audit and Supervisory Board members are paid basic remuneration only.
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 pay is set based on consolidated net sales, which correspond to the capability to earn revenue through the implementation of the strategy, and EBITDA, and for Executive Directors, other than the President and Representative Director, the level of fulfillment of individual commitments is added as an evaluation indicator.Regarding the above performance indicators, performance-linked pay is calculated at the ratio of 50% consolidated net sales and 50% EBITDA, and the amount determined is divided by 12 and the divided amount is paid monthly from the month following the conclusion of the Annual General Meeting of Shareholders.
“Stock-based compensation” is set separately from base remuneration and performance-linked pay for the purpose of increasing awareness of contributions to medium- to long-term continuous improvements in financial results and increases in corporate value. Specifically, money is contributed to a trust every three years for acquisition of the shares necessary for provision to directors, and thereafter, eligible directors are awarded points according to TSR (total shareholder return) and ROE, which are evaluation indicators specified in order to ensure directors share interests with shareholders and to ensure that not only the benefit of the increase in the share price, but also the risk of the decrease in the share price is shared among the directors and the shareholders, thereby strengthening the directors’ awareness of their contribution to the mediumto long-term improvement in financial results and corporate value.
Each point granted can be converted into one share of the company’s ordinary stock, and every three years, eligible directors are granted shares and monies converted at the market value of those shares according to the number of points.
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.
Following discussion by the Nomination and Compensation Committee, the remuneration of individual directors is determined by a resolution of the Board of Directors within the range of remuneration determined by a resolution of the General Meeting of Shareholders in advance.
The remuneration of directors who are Audit and Supervisory Board members is determined by discussions by the directors who are Audit and Supervisory Board members within the range of remuneration determined by a resolution of the General Meeting of Shareholders in advance.
(General Shareholders Meeting Resolutions Relating to Officer Remuneration, etc.)
The maximum amount of remuneration of directors (excluding directors serving as Audit and Supervisory Committee Members) was set to be no more than 300 million yen annually by resolution adopted at the 9th Annual General Meeting of Shareholders held on June 18, 2021 (the “Director Monetary Remuneration Limit”). In addition, resolutions were adopted at that meeting specifying the method of calculation and particulars of performance-linked stock remuneration to directors (excluding outside directors and directors who are Audit and Supervisory Board members) 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 135,000 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 (excluding directors who are Audit and Supervisory Board members) for each point every three years, and specifying that the amount of remuneration, etc. received by directors (excluding directors who are Audit and Supervisory Board members) 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 four 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 General Meeting of Shareholders held on June 18, 2021 (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.
Percentages of each type of remuneration by job title
|Percentage of officer remuneration
|Directors who are Audit and Supervisory Board members
- Note: The composition ratio of each remuneration is the ratio of each evaluation indicator set as a performance target that is achieved.
Amount of Officers’ Remuneration in Fiscal 2022
|Total amount of remuneration, etc.
(Yen in millions)
|Total amount of remuneration, etc. by type
(Yen in millions)
|Number of eligible Base remuneration officers (Persons)
|Directors (excluding directors serving as Audit and Supervisory Committee Members)
|Directors (Audit and Supervisory Committee Members)
|(of which outside officers)