Japanese
Corporate Governance
Basic Philosophy
Pursuant to the Companies Act in Japan, OYO Corporation has established a board of corporate auditors and adopted an executive officer system. The Company works to enhance management transparency, clarify responsibilities and quicken decision-making by separating and securing decision-making and supervisory functions on management by the Board of Directors, monitoring of management by the Board of Corporate Auditors, and execution of duties by executive officers, respectively.
Endeavors on enhancement of corporate governance
OYO Corporation has been implementing the following measures to strengthen Corporate Governance.
| Fiscal Year | Initiatives | Directors (of which, outside directors) | Corporate auditors (of which, outside Corporate auditors) |
|---|---|---|---|
| 2014 |
|
8 (1) | 4 (2) |
| 2015 |
|
8 (2) | 4 (2) |
| 2016 |
|
9 (2) | 4 (2) |
| 2017 |
|
7 (2) | 4 (2) |
| 2018 |
|
8 (3) | 4 (2) |
| 2019 | 8 (3) | 3 (2) | |
| 2020 | 9 (3) | 3 (2) | |
| 2021 |
|
9 (3) | 3 (2) |
| 2022 |
|
9 (3) | 3 (2) |
| 2023 |
|
7 (3) | 3 (2) |
Corporate Governance Structure
Main Meeting Bodies and Their Activities
| Board of Directors | To maintain and improve management efficiency, our Board of Directors is composed of four directors who are familiar with our business and three outside directors who are independent and do not have any conflicts of interest with general shareholders. In addition, Statutory Corporate Auditor and two Outside Corporate Auditors also attend all meetings of the Board of Directors as a rule. Ordinary meetings of the Board of Directors are held at least once every three months, while extraordinary meetings of the Board of Directors are held when necessary, and in addition to supervising the execution of duties by directors, the board makes decisions on important matters concerning OYO Corporation's management policies, etc. In fiscal 2022, a total of 13 meetings were held. The term of office of director is one year. We also hold meetings for exchanging opinions with outside directors to ensure that their extensive experience contributes effectively to our company's management. |
|---|---|
| Board of Executive Officers | OYO Corporation has adopted an executive officer system to increase specialization, expedite decision-making, and strengthen supervisory and monitoring functions. The Board of Executive Officers is comprised of three directors (concurrently serving as executive officers) and twenty executive officers (as of March 24, 2023). With regard to execution of operations, meetings of the Board of Executive Officers are held at least once a month as a rule, separate from meetings of the Board of Directors, to discuss overall management issues and to deliberate the execution of material operations following the policies decided by the Board of Directors. |
| Board of Corporate Auditors | The Board of Corporate Auditors is comprised of three corporate auditors, two of whom are independent outside corporate auditors (as of March 24, 2023). The Board of Corporate Auditors holds regular meetings once a month as a rule. Corporate auditors also attend all meetings of the Board of Directors as a rule, and its system is such that the corporate auditors monitor the management and the execution of duties by directors for adequacy and appropriateness. |
| Optional meetings | As other initiatives, we have established optional meetings such as the "Management Strategy Meeting," where full-time officers can freely discuss management issues, and the "Business Field Report Meeting," which aims to deepen the understanding of outside directors about our business. We strive to establish a system to enhance the decision-making and supervisory functions of the Board of Directors by establishing these optional meetings. |
Skill Matrix
To appropriately fulfill our management philosophy, management vision, medium-term business plan and other business strategies, OYO Corporation considers it vital to achieve
decision-making function on important matters of business execution through extensive discussions by the Board of Directors and to demonstrate appropriate supervision and audit functions
for business execution, while making sure to strike a good balance between both aspects.
From this perspective, we have defined knowledge, experience, abilities and other attributes as "corporate management / management strategy", "sales / marketing", "technology", "finance /
accounting", "legal affairs / compliance / risk management", "ESG/SDGs", "global experience", and "ICT / DX". Below is a table showing the expected skills for each officer (top 3). Please
note that these skills will be reviewed as appropriate based on the external environment and the situation of our management strategy, among other factors.
Skills Matrix of Directors / Corporate Auditors
| Name | Position | Expected Skills (top 3) | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Corporate Management Management Strategy |
Sales Marketing |
Technology | Financial Accounting |
Legal affairs Compliance Risk Management |
ESG SDGs |
Global Experience |
ICT・DX | ||
| Masaru Narita | Director | ● | ● | ● | |||||
| Hirofumi Amano | Director | ● | ● | ● | |||||
| Yuichi Hirashima | Director | ● | ● | ● | |||||
| Munehiro Igarashi | Director | ● | ● | ● | |||||
| Shoji Osaki | Outside Director | ● | ● | ● | |||||
| Takeshi Miyamoto | Outside Director | ● | ● | ● | |||||
| Yoko Ikeda | Outside Director | ● | ● | ||||||
| Shinichi Kagawa | Statutory Corporate Auditor | ● | ● | ● | |||||
| Jun Naito | Corporate Auditor | ● | ● | ● | |||||
| Takao Orihara | Corporate Auditor | ● | ● | ● | |||||
Internal Control System
Status of Preparation of Internal Control System
The basic policies for Internal Control was approved at the Board of Directors meeting. In order to ensure the appropriateness of our Group's operations, the compliance system, risk management system, information storage management system and the Group's management system will each be strengthened further according to these policies to build an effective Internal Control system.
Status of Preparation of Risk Management System
Our company, with the President and Representative Director as the overall responsible party, is actively working on the improvement of a risk management system with the Head Office as the supervising department. We conduct a review of the management risks across the entire Group at the beginning of each year and report to the Board of Directors, while each department creates and executes risk prevention plans, including the identification of risks and the corresponding measures they would take within their respective areas. The execution statuses of each department are discussed in their regular management meetings. We have also established the "Code of Corporate Conduct / Corporate Standards of Business" as the ethical standards to be followed by all executives and employees in the Group. We also utilize the "Compliance Handbook" to ensure the awareness and thorough understanding of compliance management throughout the Group.
Status of Internal Audits and Auditing by Corporate Auditors
Our Compliance Department conducts internal audits for business operations across all management activities to assess legal compliance, the appropriateness of financial reporting, and to
evaluate effectiveness and efficiency. The results of these internal audits are reported regularly to management meetings, the Board of Auditors meetings and the Board of Directors
meetings.
The auditors attend Board of Directors meetings and management meetings, exchange information with the accounting auditors, the Compliance Department, and other auditors from Group
companies. They also conduct hearings with various internal departments and affiliated companies to audit the activities of the directors and others involved in the company's operations.
Officer Remuneration System
Remuneration for directors and corporate auditors is determined within the total amount of remuneration previously resolved at the General Meeting of Shareholders.
Overview of Remuneration systems
| Officer category | Types of Remuneration | ||
| Fixed Remuneration | Performance based remuneration | ||
| Basic remuneration | Bonuses | Stock remuneration | |
| Directors | ● | ● | ● |
| Outside Director | ● | - | - |
| Corporate Auditor | ● | - | - |
Directors
Directors are responsible for improving business performance each business year and increasing corporate value over the long term. Therefore, their remuneration consists of a fixed, basic remuneration based on their role, a shortterm performance-based bonus and medium- to long-term performance-based remuneration.
Outside Director
Remuneration of outside directors consists only of basic remuneration due to their role and independence.
Corporate Auditors
Corporate auditor remuneration is based on fixed remuneration, since corporate auditors are responsible for auditing the execution of duties, and is decided by the Board of Corporate Auditors.
Determination Process of Director Remuneration
Remuneration for directors is determined by the President, who is entrusted by the Board of Directors, following deliberation and reporting by the Nomination and Remuneration Committee, a
discretionary advisory body to the Board of Directors. The Nomination and Remuneration Committee consists of two representative directors and three outside directors, and is chaired by an
outside director. In addition to these committee members, two outside corporate auditors participate as observers. In fiscal 2022, the committee held two meetings.
Basic remuneration, bonus and stock remuneration are calculated and determined as follows.
Basic remuneration
The basic remuneration is determined by establishing a remuneration gap depending on the director's role, the possession of representative rights and concurrent executive officer duties.
Bonus
From the standpoint of evaluating short-term performance, the bonus is determined, by calculating the payment rank according to the achievement level of performance regarding five indices including consolidated operating income (as shown in the table below), from the range of 1.0 month to 3.0 months, or no payment.
- Consolidated operating income
- Consolidated operating income margin
- Consolidated ordinary income
- Consolidated ROE (Returns on Equity)
- Net income attributable to owners of the parent
| Evaluation Item | Lank1 | Lank2 | Lank3 | Lank4 | Lank5 | Unranked |
|---|---|---|---|---|---|---|
| Consolidated Operating Income | Income recorded | Income recorded | Loss recorded*2 | |||
| Consolidated operating income margin | Less than 5% | Ensured more than 5% | ||||
| Consolidated ordinary income | Income recorded | Achievement of financial results forecast*1 | ||||
| Consolidated ROE (Returns on Equity) | Less than 5% | 5% or more | 7% or more | 9% or more | 11% or more | |
| Net income attributable to owners of the parent | Income recorded | Achievement of financial results forecast*1 | ||||
| Other | - | - | - | - | Special Circumstances*3 | |
| Amount of bonus (monthly salary) | 1.0 month | 1.5 month or more | 2.0 month or more | 2.5 month or more | 3.0 month or more | Not paid |
- *1 Initial financial results forecast disclosed to the Tokyo Stock Exchange (±10%).
- *2No bonuses will be paid if loss is recorded on a consolidated or non-consolidated basis.
- *3Notable matters such as early achievement of the medium-term business plan targets.
In the fiscal year ended December 2022, we set the figures in the consolidated financial results forecasts announced on February 10, 2022, as targets, that is, consolidate ordinary income of 4,300 million yen and net income attributable to owners of parent of 2,900 million yen. Actual results were consolidated operating income of 2,518 million yen, consolidated operating income margin of 4.3%, consolidated ordinary income of 3,033 million yen, consolidated ROE of 2.7%, and net income attributable to owners of parent of 1,864 million yen.
Stock remuneration
Our company has introduced a share-based remuneration system called the "Board Benefit Trust (BBT)" for directors, excluding outside directors. This system utilizes funds contributed by
our company to acquire our company's shares through a trust, and the acquired shares are granted to our directors through this trust based on their performance. The timing for our
directors to receive these shares is typically upon the time of their retirement. This system aims to clarify the alignment between director remuneration and our company's performance and
share value, to increase awareness among directors by sharing the risk of share price fluctuations with our shareholders so that they commit to achieving our medium-term management plan
and increasing our company's corporate value in the long term.
Based on this system, one point is one share, and the calculation of this annual share-based remuneration is as follows-
Number of points for delivery of shares
Basic points for the position of each director
Performance-linked coefficient
Basic points for the position
Representative Director, Chairman / President: 2,500; Representative Director, Deputy President: 2,000; Director: 1,500
Performance-linked coefficient
Performance-linked coefficient is calculated for four indices depending on the achievement ratio against budget and is applied within the range of 0.00 or 0.70 to 1.20. However, for the number of points to be awarded in 2024, the performance-linked coefficient will be determined within the range of 0.00 or 0.55 to 1.35 for consolidated net sales, consolidated operating income margin, and consolidated ROE, to allow for adjustment based on the achievement level of numerical targets for the medium-term business plan.
- Consolidated Net Sales
- Consolidated Operating Income Margin
- Consolidated Ordinary Income
- Consolidated ROE
Summarizing the Number of points for delivery of shares is as follows.
| Position | Basic points | Performance-linked coefficient | Number of points for delivery of shares |
|---|---|---|---|
| Representative Director, Chairman / President | 2,500 |
0.00,0.70～1.20 (0.00,0.55～1.35*) |
0,1,750～3,000 (0,1,375～3,375*) |
| Representative Director, Deputy President | 2,000 |
0,1,400～2,400 (0,1,100～2,700*) |
|
| Deputy President | 1,800 |
0,1,260～2,160 (0,990～2,430*) |
|
| Director | 1,500 |
0,1,050～1,800 (0,825～2,025*) |
*Performance coefficient and number of points for delivery of shares to be applied at the time of grant in 2024.
The coefficient applied to the points to be awarded in March 2023 based on the fiscal 2022 results is 0.00.
Total Amount of Remuneration by Officer Category, Total Amount of Remuneration by Type, and Number of Target Officers (FY 2022)
| Class of Executive officers |
Total amount of remuneration (million yen) |
Total amount of remuneration by type (million yen) | Number of target officers | ||
| Fixed Remuneration | Performance based remuneration | ||||
| Basic remuneration | Bonuses | Share-based remuneration | |||
| Directors (Excluding Outside Directors) | 176 | 162 | 13 | - | 6 |
| Corporate Auditors (Excluding outside corporate auditors) | 16 | 16 | - | - | 1 |
| Outside officers | 43 | 43 | - | - | 6 |
At the 49th Annual General Meeting of Shareholders held on March 29, 2006, the abolition of directors' retirement benefits plan was resolved, and 3 million yen will be paid to a director at the time of resigning.
At the 50th Annual General Meeting of Shareholders held on March 28, 2007, it was resolved that the total amount of remuneration for Directors shall be no more than 240 million yen per year (including employee salary portion). Nine Directors were in office as of the conclusion of that Annual General Meeting of Shareholders.
Separately from the above, based on the Board Benefit Trust (BBT) scheme, at the 64th Annual General Meeting of Shareholders held on March 26, 2021, it was resolved to continue the scheme with some modifications. The modification sets the maximum amount that can be additionally contributed to the Trust during the applicable period will be the number of business years pertaining to the applicable period multiplied by 40 million yen. Therefore, the maximum contribution amount for the applicable period of the current mid-term management plan from 2021 to 2023 will be 120 million yen. The maximum number of points to be awarded is 20,000 points per year. Nine Directors were in office as of the conclusion of that Annual General Meeting of Shareholders.
At the 57th Annual General Meeting of Shareholders held on March 26, 2014, The total remuneration amount for directors was resolved to be within 45 million yen per year. The number of corporate auditors incumbent at the conclusion of the general meeting of shareholders is four.
