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Corporate Governance

Corporate Governance

As a corporate citizen trusted by the international community, the Tokyo Seimitsu Group recognizes that enhancing corporate governance to develop fair and highly transparent management activities is vital, and, following corporate governance basic policy, is working to build effective corporate governance structures and systems.

Basic Policy on Corporate Governance

Core Policies

(1)

The Board of Directors strives to properly perform its roles and responsibilities to make transparent, fair, timely, and committed decisions.

(2)

The Group respects the rights of shareholders and ensures the equality of shareholders.

(3)

The Group strives to have constructive dialogue with shareholders on investment policy that considers mid to long-term returns for shareholders.

(4)

The Group strives to maintain appropriate collaboration with stakeholders (customers, suppliers, employees, creditors, local communities, etc.) other than shareholders.

(5)

The Group strives to ensure proper information disclosure and transparency.

Basic Policy on Corporate Governance (in full)

Corporate Governance Structure

Tokyo Seimitsu has adopted a company structure with an audit and supervisory committee.
For dealing with matters that do not fall under the criteria for submission to the Board of Directors, the Company has adopted an Executive Officer System to speed up the decisionmaking process by delegating a large amount of authority to the Head of each company after defining their scope of duties and authority in accordance with the relevant regulations of the Company. In addition, the Executive Management Committee strives to share information and enhance deliberations across company divisions. In addition, various cross-company committees such as the Risk Management Committee and the Compliance Committee have been established to examine and monitor material issues from various perspectives to make appropriate decisions.

Corporate Governance Structure

Corporate Governance Structure

Board of Directors

The Board of Directors is composed of 8 Directors who are not Audit and Supervisory Committee members (two of whom are External Directors) and four directors who are Audit and Supervisory Committee members (of whom three are External Directors). The Board of Directors holds regular monthly meetings, and extraordinary meetings are also held as necessary. 
The Board of Directors convened 17 times in fiscal 2022.
The Board of Directors deliberates on important matters related to management as stipulated by law, the Articles of Incorporation, and the Board of Directors Regulations, as well as monthly, periodic, and annual business results, and supervises the execution of business by each director.

Main Agenda Items in FY2022

Human resources (executive officer changes/compliance and risk management issues) 

Important location changes

Business planning (development, equipment, personnel, expenses, etc.)

Various audit reports

Various policies

Assessment of the effectiveness of the Board of Directors, etc.

Specific items

Initiatives to improve the effectiveness of the Board of Directors

Check for the existence of problems with the governance system through a related party investigation

Verification of cross-shareholdings (ensuring there are no problems with the governance system)

Approval of reports by executive departments concerning the whistleblower system (disciplinary actions, etc.)

Approval of reports from the Sustainability Committee

Approval of the Sustainability Report and Integrated Report

Approval of reports from the Compliance Committee and Risk Management Committee

Donation for humanitarian aid related to the situation in Ukraine (May)

Conclusion of additional consulting contracts related to sustainability activities (July)

Formulation and disclosure of the Tokyo Seimitsu Group Human Rights Policy (July)

Participation in SEMI’s Semiconductor Climate Consortium (October) 

Preparation for publication of Business Partnership Building Declaration and Multi Stakeholder Policy (November)

Conclusion of a consultation agreement for the formulation of a TCFD response strategy and the review/implementation of measures (January)

Revision of the Tokyo Seimitsu Human Resource Development Policy (March)

Audit and Supervisory Committee

As an independent body, the Audit and Supervisory Committee audits and supervises the execution of business by Directors other than Audit and Supervisory Committee Members. 
The Audit Department and the accounting auditor exchange opinions on the audit system to determine whether there are problems in auditing, issues, and other matters as needed, and strive to enhance the effectiveness of audits. At the same time, the Audit and Supervisory Committee receives regular reports on findings and related information from internal audits conducted in accordance with the annual audit plan. 

Committee Chairman

Internal Director

Members

Four (three external directors in addition to the Committee Chairman)

Frequency of meetings

Once every 2-3 months (convened 12 times in FY2022)

Nomination and Compensation Council

The Company has established a Nomination and Compensation Council as a voluntary committee for the purpose of clarifying the independence, objectivity, and accountability of the Board of Directors functions, especially in nomination of and compensation to the directors. Independent external corporate directors are in the majority (now all five members are external corporate directors) on the council, helping to realize deliberations fully independent from management.

Council Chairman

External Director

Members

Directors who are Audit and Supervisory Committee Members and external directors

Frequency of meetings

11

Functions

Deliberates and reports to the Board of Directors on matters related to nomination of directors, including appointments and dismissals.
Deliberates on and determines the standard of compensation amount per post for director compensation Deliberates and reports to the Board of Directors on matters related to director compensation policies, etc.

Executive Management Meeting and Executive Officers' Committee

The Company has in place an executive officer system to make speedy decisions on product development planning to respond quickly and flexibly to market trends. In addition to supervising the progress of business plans at regular monthly meetings of the Executive Management Meeting and Executive Officers' Meeting, the Executive Officers’ Meeting aims to share information across the Company and enhance Executive Officers’ Meeting deliberations.

Various Committees

Compliance Committee

Chairman

Executive Vice President and CFO

Frequency

Six times a year (seven times in fiscal 2022, in-cluding one extraordinary meeting)

Functions

Revises the ACCRETECH Group Code of Conduct and other rules and regulations
Deliberates on compliance-related education/training plans and the status of related initiatives
Establishes relevant sections and related organizations that deal with major laws, regulations, andsocial norms related to business operations, andensures thorough compliance with laws and regulations
In the event of compliance-related misconduct,the details and response measures to be taken shall be reported to the Board of Directors andthe Audit and Supervisory Committee

Risk Management Committee

Chairman

President and COO

Frequency

6 times a year plus extraordinary meetings as necessary

Functions

Receives reports on the prevention of the occurrence of potential risks from sections related to risk, etc.
Reports to the Board of Directors on the agenda of regular committee meetings as necessary Reports the details of the risk and countermeasures to the Board of Directors the Audit and Supervisory Committee when a report on the materialization of a risk is received and immediately establishes a Risk Response Team as necessary

Information Security Committee

Chairman

Executive Vice President and CFO

Frequency of meetings

Twice a year

Functions

Establishes information security management systems
Establishes information security regulations
Promotes and maintains a system for implementing information security measures, related education and training, regular evaluation, and continuous improvement

Quality Management Committee

Chairman

Director in charge of Quality (Executive Vice President and CFO)

Frequency of meetings

Twice a year

Functions

Deliberates on the adequacy and effectiveness of the of quality management system

Continuously improves the performance and effectiveness of the quality management system Promotes the continuous maintenance and improvement of the quality of our products, services, and operations

Environment Management Committee

Chairman

Executive Vice President and CFO

Frequency of meetings

Twice a year

Functions

Deliberates on and promotes environmental management activities performed at the Tsuchiura Plant and the Hachioji Plant
Checks status of compliance with environmental laws and regulations and the progress of environmental impact reduction activities
Creates and implements Environmental Management System and continuously improves it

Safety and Health Committee

Committee Chairman

General Safety and Health Manager (Plant Manager, Tsuchiura Plant and Plant Manager, Hachioji Plant) 

Frequency of meetings

Once a month

Functions

Maintains and improves safe and comfortable work environments Establishes a system for ensuring safety and managing the health of our employees by appointing legal managers and specialized committees to raise awareness of safety and health in the workplace and to maintain and promote health

Diversity of the Board of Directors

External directors

5

Women (percentage of female directors)

2 (16.7%)

Foreigners (percentage of directors holding foreign nationality)

1 (8.3%) 

Diversity (percentage of female directors and directors holding foreign nationality)

25.0%

Reasons for Appointment of External Directors

June 2023

Name 

Audit and Supervisory
Committee Member
Committee members

Independent
officer

Supplementary information

Reasons for appointment

Kiyoshi
Takamasu

 

The Company has designated Mr. Kiyoshi Takamasu as an Independent Director based on the judgment that there is no risk of conflict of interest with general shareholders since he has never had a certain interest in the Company, i.e., has no current or past experience of executing business with a major business partner or shareholder of the Company, or the same corporation, nor does he have any close relative who has a relationship with the Company.

Kazuya
Mori

 

Although the Company has transactions with Japan Semiconductor Corporation, where Mr. Mori was an executive officer in the past, those transactions account for less than 2% of consolidated net sales. Mr. Mori retired from Japan Semiconductor Corporation two years ago and is no longer an executive of that company.

Currently, Mr. Mori does not have a certain interest in the Company, i.e., he does not execute any business with the Company's major business partners or major shareholders or the same corporation, nor does he have any close relatives related to the company. He meets the Company's independence criteria and is designated as an Independent Director because there is no risk of a conflict of interest with general shareholders.

Yuriko
Sagara 

The Company has designated Ms. Yuriko Sagara as an Independent Director based on the judgment that there is no risk of conflict of interest with general shareholders since she has never had a certain interest in the Company, i.e., experience of being engaged in providing legal, tax, and other consultancy services for the Company, nor does she have any close relative who has a relationship with the Company.

Masaki
Sunaga

The Company has designated Mr. Masaki Sunaga as an Independent Director based on the judgment that there is no risk of conflict of interest with general shareholders since he has never had a certain interest in the Company, i.e., been engaged in providing accounting, auditing, tax, and other  consultancy services for the company, nor does he have any close relative who has a relationship with the Company.

Tsuneko
Murata

Although the Company has transactions with Panasonic Corporation, where Ms. Murata was an executive officer in the past, those transactions account for less than 2% of consolidated net sales. Ms. Murata retired from Panasonic Corporation 10 years ago and is no longer an executive of that company.

Currently, Ms. Tsuneko Murata does not have a certain interest in the Company, i.e., she does not execute any business with the Company's major business partners or major shareholders or the same corporation, nor does she have any close relatives related to the company. She meets the Company's independence criteria and is designated as an independent director because there is no risk of a conflict of interest with general shareholders.

 

Constitution of the Board of Directors (Skills Matrix)

Name Age

External director

Diversity

Major past experience Board of Directors Audit and Supervisory Committee Nomination and
Compensation Council
Skills and experiences
Corporate management/
management strategy
Industry knowledge Technology/intellectual
property/manufacturing
Sales/marketing International business/
grobal experience
Accounting/finance  Legal/
risk management
Personnel/labor/human
resource development
IT/
information systems
Hitoshi Yoshida 63   Measurement technology          
Ryuichi Kimura 60   Semiconductor sales              
Koichi Kawamura 65   Financial institutions            
Takahiro Hokida 61   Semiconductor technology            
Shuichi Tsukada 64   Metrology equipment production                  
Romi Pradhan 54 Overseas subsidiary
management
             
Kiyoshi Takamasu 68 Academic              
Kazuya Mori 63 Corporate management            
Shinji Akimoto 59   Human resources              
Yuriko Sagara 48 ◎○ Attorney            
Masaki Sunaga 61 Certified public accountant/
Tax accountant
           
Tsuneko Murata 64 ◎○ Corporate management            

Ages current as of the end of June 2023/Independent External Corporate Director: ◎ Female: ○ Foreign national:  ●
Note: This matrix represents the areas in which we expect each Director to have more expertise and play a more active role, based on their experience and other factors. This matrix does not represent all the knowledge and experience of each person.

Director Compensation 

The Company has established policies and procedures for determining the amount of remuneration, etc. for directors in its Basic Policy on Corporate Governance. For details about the policy, compensation structure, etc., please refer to the Basic Policy on Corporate Governance.

Basic Policy on Corporate Governance (in full):

Process for Determining Compensation

The Board of Directors delegates the task of determining the compensation structure and compensation standards for each position to the Compensation Planning Committee, consisting of the representative directors and some other directors.

To ensure transparency and objectivity, the proposal of Directors’ compensation amounts and related matters (such as compensation amount per post), and the amount for each directors’ base compensation, performance-based compensation and stock compensation shall be deliberated on by the Nomination and Compensation Council, consisting of directors serving as an Audit and Supervisory Committee members and external corporate directors.

Compensation amounts for directors serving as an Audit and Supervisory Committee members will be mutually discussed and resolved among directors served as an Audit and Supervisory Committee members.

Among the remuneration paid to directors responsible for business execution, the formula for restricted stock, which is a medium to long-term incentive to share profits with shareholders, was revised to incorporate capital efficiency (ROE).

Total Amount of Consolidated Compensation for Each Officer Category

Officer category Total amount
of compensation
(million yen)
Total amount of compensation by type (million yen)  Number of
officers in this
category
Base
compensation
Performance-based
compensation
Stock
options
Restricted stock
compensation 
Non-monetary
compensation (among
forms of compensation listed to the left)
Director (excluding Audit and Supervisory
Committee members and external directors)
561 211 250 88 10 99 7
Director (Audit and Supervisory Committee member)(excluding external directors)   21 21 1
External director 38 38 6

Notes 1.

The number of directors (Audit and Supervisory Committee members) includes one person who retired at the conclusion of the 99th Regular Shareholders’ Meeting held on June 20, 2022.

    2.

The maximum amount of compensation for directors (excluding directors who are Audit and Supervisory Committee members) was resolved at the 98th Regular Shareholders’ Meeting (held on June 21, 2021) to be no more than 480 million yen per year (including 70 million yen for external directors) and a separate limit of 300 million yen per year for non-monetary compensation (restricted stock and stock options). At the conclusion of the general meeting of shareholders, there were nine directors (excluding directors who are audit and supervisory committee members) (including two external directors).

    3.

The maximum amount of remuneration for directors who are members of the Audit and Supervisory Committee was resolved at the 96th Regular Shareholders’ Meeting (held on June 24, 2019) to be within 60 million yen per year. At the conclusion of the General Meeting of Shareholders, there were four directors that are Audit and Supervisory Committee members.

    4.

Individual compensation for directors (excluding directors who are Audit and Supervisory Committee members) is determined by the Board of Directors after consultation with the Advisory Council in accordance with the basic compensation policies, compensation structure, and decision-making process for compensation. The Company has determined that this is done in accordance with the basic policy.

    5.

The indicator for performance-linked compensation is net profit attributable to owners of the parent that is directly linked to the return of profits to shareholders.

Total Amount of Consolidated Compensation for Each Officer

Name Total amount of
consolidated compensation (million yen) 
Officer
category
Company
category
Total amount of consolidated compensation by type (million yen)
Base
compensation
Performance-based
compensation
Stock
options
Restricted stock
compensation 

Non-monetary compensation
(among forms of compensation listed to the left)

Hitoshi
Yoshida 
142 Director  Reporting
company
60 59 21 2 23
Ryuichi
Kimura 
142 Director  Reporting
company
60 59 21 2 23
Koichi
Kawamura
121 Director  Reporting
company
51 50 18 2 20

Notes 1.

The table above only includes officers whose total amount of consolidated compensation, etc. is 100 million yen or more.

    2.

Amounts indicated with figures below one million yen omitted.

Related Party Transactions, Etc.

The Company shall not be engaged in any transactions with Directors and/or major shareholders that may damage the interests of the Company or the common interests of the shareholders, as indicated in “(7) Related Party Transactions” in the Directors and Boards section of the Basic Policy on Corporate Governance. When a Director is intending to enter into a transaction with the Company for him/herself or for any third parties, the Director shall obtain prior approval of the Board of Directors according to the rules of the Board of Directors, and report important facts in that transaction at the board meeting. Terms and conditions for the transaction may be determined in the same manner as a transaction with third parties.

To identify any transactions involving a conflict of interest by Directors, the Company checks annually and regularly existence of such transactions (excluding compensation) between the Company Group and Directors or their family members within the second degree of kinship.

When the Company is intending to enter transactions between the Company and major shareholders or other related parties, then it shall be approved in advance by personnel with authority commensurate with the importance and scale of the transaction in accordance with internal regulations determined by the Board of Directors.

Cross-Shareholdings

The Board of Directors comprehensively examines whether shares held as cross-holdings are worthwhile based on risk and return from the perspective of medium- to long-term economic rationality, and qualitative considerations such as the purpose of holding and credit status. If this examination results in the judgment that it is not worthwhile to retain cross-holdings, in principle such holdings are reduced. However, if it is determined that holding of such shares will contribute toward the improvement of medium- to long-term corporate value, they are retained. As a result of such deliberation, the Company sold 16 cross-shareholdings (including shares subject to deemed holding) for 7,550 million yen between April 2015 and March 2023.

Assessing the Effectiveness of the Board of Directors

The Company conducts questionnaire surveys of all directors (including Audit and Supervisory Committee members) regarding the roles, functions, and operations of the Board of Directors. The Board of Directors discusses among the Internal and External Directors the results of the responses being summarized and analyzed, and then the Board of Directors evaluates its effectiveness and discusses future actions.

1. Method of evaluation

The Company conducts a questionnaire survey of all the Corporate Directors (including those directors who are serving as Audit and Supervisory Committee members) regarding the following points. After discussions among Internal Directors and among External Directors, a summary of the results and an analysis are shared at the Meeting of the Board of Directors, to evaluate the effectiveness of the Boards and to discuss the possibility of further improvement. In order to ensure the effectiveness and transparency of the survey, an external organization is incorporated in compiling and analyzing the survey results.

FY2023 Questionnaire Items

8 items, 28 questions in total

Roles and functions of the Board of Directors (hereinafter, “Boards”), Constitution and scale of the Boards, Management of the Boards, Cooperation with auditing organizations,Relationship with External Directors,Relationship with shareholders and investors,Effectiveness of Nomination and Compensation Council, and Progress in the governance system relative to the previous year.

In addition to an item-by-item evaluation, the questionnaire takes the form of a questionnaire asking each director for comments on the strengths of the Company's Board of Directors and areas for improvement, reflections on each director's own contribution to the Board of Directors, and other free opinions and suggestions.

2. Results of analysis and evaluation of the effectiveness of the Board of Directors

The results concluded that the effectiveness of the Board of Directors was largely ensured, with members with diverse experience and expertise engaging in free and vigorous discussions and providing opportunities for external directors to gain a better understanding of the Company.

Issues raised in the previous year, with regard to strengthening the governance of the Company Group as a whole, efforts are being made to strengthen and improve the subsidiary management system, providing effective support as well as supervision. About succession planning and training for directors, discussions are ongoing in the Nomination and Compensation Council.

In addition, about the enhancement of discussions at Board of Directors meetings, the Company is reviewing our operational methods, for example by separating deliberations and reporting. Furthermore, with a view to deepening understanding of the Company group among shareholders and investors, dialogue on governance and sustainability is enhanced, and the feedback is shared with the Board of Directors and used for initiatives for sustainable growth in the future.

On the other hand, the following issues were reaffirmed through this survey.

Further enhance discussions on medium- and long-term issues.

Deepening of discussions on succession planning and development of an education plan

Enhancement of the training menus for Directors

3. Future actions

The Company's Board of Directors will consider revising the criteria for agenda items, distributing materials earlier and adding individual topics to the agenda about further enhance discussions. About succession planning, the Nomination and Compensation Council will further deepen discussions with a view to formulating a education plan.

Also, about a training for directors, the Company we will also consider further enhancement of on-site inspections, including at overseas locations.

Through these initiatives, we will continue to work towards ensuring the effectiveness of the Board of Directors.




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