Policy
Basic Approach

Under our corporate mission of “illuminating a more affluent tomorrow” and our corporate philosophy of providing the value “for customer peace of mind and satisfaction,” our group of companies takes the basic stance that we maintain fair and steady business activities with respect for people and the global environment, operate businesses focusing on profit while constantly pursuing new technology and high quality, and endeavor to contribute to prosperity of society. In order to implement this basic stance, we formulated the “Basic Policy to Improve the Governance to Secure Fair Business Practices” at the regular Board of Directors meeting held in May 2006. (This basic policy was revised at the regular Board of Directors meeting held in June 2020 to reflect the transition to a company with an Audit & Supervisory Committee and further enhancement of the internal control promotion system.)

The Company will work to further improve the efficiency and fairness of management by promoting initiatives to enhance corporate governance in accordance with the Corporate Governance Code.

Organization and Initiatives
Corporate Governance Structure and Initiatives

The Company transitioned from the former institutional structure of a company with an Audit & Supervisory Board to a company with an Audit & Supervisory Committee at the Ordinary General Meeting of Shareholders held on June 26, 2020.
The main purpose of transitioning to a company with an Audit & Supervisory Committee is as follows.

(a) In order for the Directors who are members of Audit & Supervisory Committee having right to vote in the Board of Directors as well as having the right to express position statement on nomination and remuneration at shareholder’s meetings to further enhance the supervisory function by utilizing the legal authority.

(b) In order to further enhance discussions on management strategies, etc. by transferring the Board of Directors meeting to a monitoring type, since a substantial portion of the Board of Directors' authority to make decision on business execution can be transferred to the Executive Director.

(c) In order to further promote the separation of supervision and execution with regard to the executive officer system introduced in June 2003, in combination with transition of authority mentioned in the previous section (b).

Corporate Governance Structure: Supervision and Management and Internal Control System

Outline of Corporate Governance Structure

(1) The Company’s Board of Directors

In principle, the Board of Directors convenes on a regular monthly basis and holds ad-hoc meetings as necessary, to discuss major executive matters, business issues, and management issues related to the Company's business execution. In fiscal 2019, the Board of Directors held 13 meetings, and attendance rate of all Directors was 100%.

① Composition of Board of Directors

The Company's Board of Directors consists of 14 Directors, including five directors who are Audit & Supervisory Committee members, and five Outside Directors, including three Audit & Supervisory Committee members.
In order to ensure the effectiveness of the supervisory functions of outside directors, the Company attempt to ensure that at least one-third of the Board of Directors meets the Company's Criteria for Determining the Independence of outside directors.
Meidensha’s outside directors satisfy the requirements of independent directors as stipulated in the rules of the Tokyo Stock Exchange.

② Policy for Appointment of Candidates for Director and Appointment/Dismissal Process

The basic policy of the appointment of Directors of the Company is to ensure the diversity of the Board of Directors as a whole and to balance the knowledge, experience, or abilities.
The basic policy of the appointment of Directors who are Audit & Supervisory Committee members is to balance the accounting, finance, and legal knowledge. The number of directors is stipulated as a number that is sufficient to fully deliberate on management issues, with an upper limit of 15 members.
Based on the above, we conduct a nomination of candidates for director that will contribute to the enhancement of the Board of Directors decision-making function and oversight function, by resolution of the Board of Directors, with advice from the Nomination and Remuneration Committee* (voluntary committee), which is chaired by an independent outside director. The candidates are then presented at the General Meeting of Shareholders.
Furthermore, with regard to the dismissal of directors, if it is discovered that a director has breached the law or the Articles of Incorporation, or committed acts that flagrantly breach the director’s nomination policy, the Board of Directors will take the necessary steps to dismiss said director with the advice of the Nomination and Remuneration Committee.

*Meidensha established a voluntary Remuneration Committee in December 2017. In December 2018, the Committee took on the functions of a voluntary nomination committee to become the Nomination and Remuneration Committee. The Nomination and Remuneration Committee is chaired by an independent outside director and is comprised of two outside directors, the chairman of the Board of Directors, and the president of the Board of Directors.

③ Executive Officer System and Executive Structure

Meidensha introduced an executive officer system in June 2003 in order to streamline the Board of Directors, as well as to accelerate management decision-making and to enhance supervisory functions. At the same time, we sought to reinforce the functions of the Board of Directors by promoting the separation of the decision-making authority and supervisory function from the business performance function held by the Board of Directors.
Executive officers selected by the Board of Directors assume responsibility for the execution of specified tasks within the scope of authority transferred by the representative directors, and nimbly perform executive functions under the supervision of the representative directors, in accordance with the Meiden Group’s management policies determined by the Board of Directors.
The executive committee, which comprises executive directors and executive officers with specific roles, is created for executive decision-making, and decides matters based on the rules of internal approval, as well as matters for which consultation from a full-company perspective is required.
Furthermore, apart from the meeting body to make decisions, we established advisory and internal bodies such as review and strategy meetings, and with regard to important management matters, we created a system wherein thorough discussion and deliberation are conducted prior to decision-making, and follow-up strategy and planning and improvement initiatives are conducted following decision-making.
The outline and main points of the proceedings at the Executive Committee and other internal meetings are reported as the status of business execution at the Regular Board of Directors meetings to ensure and improve the effectiveness and supervisory functions of the Board of Directors. As to execute business, executive directors and executive officers with the authority are taking attempt initiatives agilely by making resolutions and settlements. In this way, we are working to conduct executive functions autonomously and nimbly.
With the significant transfer of the authority for business execution from the Board of Directors to the executive officers, officers and executive officers must submit a business execution status report to the Board of Directors at least once every three months in order to ensure the effectiveness of functional supervision by the Board of Directors.

(2) Effectiveness Evaluation of the Board of Directors

Meidensha has a mechanism in place to conduct an analysis and evaluation of the effectiveness of the Board of Directors in order to strengthen the supervisory function of the Board of Directors.
With regard to the activities of the Board of Directors in fiscal 2019, all members of the Board of Directors, including outside officers, conducted self-evaluations of the effectiveness of the Board of Directors, and the following discussions took place at the meeting of the Board of Directors in May 2020.

i. Items Evaluated

Composition and operation (resolution and deliberation methods, etc.) of the Board of Directors, self-evaluations concerning effectiveness of the Board of Directors, other opinions

ii. Outline of Analysis and Evaluation Results

The results of the evaluation of each director and Audit & Supervisory Board Member were collected, and after deliberation by the Board of Directors, it was determined that the quality of operation and deliberation is sufficient, sufficient opinions and advice have been received from outside directors and outside Audit & Supervisory Board Members, and the effectiveness of the Board of Directors is currently secure.
In addition, through the establishment of a system in line with the transition to a company with an Audit & Supervisory Committee, we confirmed our evaluation that there is a trend to promote further deliberation and enhancing of the supervisory function of the Board of Directors.We will also improve understanding of Meidensha’s business environment and strategy and provide ongoing opportunities for discussion such as through explanations in advance, meetings to exchange opinions, and explanatory programs outside of the initiatives of the Board of Directors referred to below.

Composition of the Board of Directors, Nomination & Remuneration Committee, and Audit & Supervisory Board and FY2019 Attendance (Period: April 1, 2019 to March 31, 2020)

Note 1: Refers to the chair of the Board of Directors, Audit & Supervisory Board, and each committee
Note 2: Attendance of each type of meeting is market as XX out of XX

Training for Officers

Legal training is conducted for officers on an annual basis, for the purpose of improving the effectiveness of the Board of Directors and internal control.
In fiscal 2019, we conducted training for our officers by outside instructors, relating to compliance and risk management, as part of internal control activities conducted at all companies.
The Meiden Group conducted trainings on the Companies Act for new officers of Meidensha and affiliated companies.

(3) Initiatives to Utilize Outside Directors

Meidensha seeks active participation in management by outside officers, in order to enhance the supervisory function of the Board of Directors. As such, we are conducting the following initiatives to ensure free and active debates.

① Initiatives at the Board of Directors

i. Advance Explanation of Agendas of the Board of Directors

We give explanations in advance so that directors are able to confirm the content of agenda items prior to participating in meetings of the board of directors. Our system allows us to accept questions, etc., relating to the content of agendas in advance and prepare an explanation to be given at the meeting of the Board of Directors, and this revitalizes and enriches deliberations.

ii. Timely and Appropriate Sharing of Information

Besides the agenda for the meeting, Meidensha provides briefings on current topics relating to the company at meetings of the Board of Directors, with the aim of timely and appropriate sharing of information with outside directors, so that they can share the status of the Company in a timely fashion.

② Initiatives Outside of the Board of Directors

i. Introductory Sessions

We create opportunities to explain the Company’s business and structures, primarily to aid the understanding of newly appointed outside officers.
The officers or general managers in charge of each business explain their business and Meidensha’s governance system to the outside officers, answer their questions and exchange opinions with them.

ii. Meeting for Exchange of Opinions

Apart from legally-required board meetings, we hold monthly discussion meetings in order to best utilize the knowledge of the outside directors and outside audit & supervisory board members.
In these meetings, participants vigorously exchange opinions, mainly concerning matters relating to corporate governance and the Company’s management issues and strategy. The meetings also serve as preliminaries to discuss matters prior to passing resolutions at the Board of Directors.

(4) Auditing System

The Company transitioned from the prior institutional structure of a company with an Audit & Supervisory Board to a company with an Audit & Supervisory Committee at the Ordinary General Meeting of Shareholders held on June 26, 2020.
The Audit and Supervisory Committee consists of five directors, including three outside directors, who are Audit & Supervisory Committee members, and there is also a Support Department for the Audit and Supervisory Committee has been established as a staff organization to support the Audit and Supervisory Committee.The committee communicates with directors, the Internal Auditing Division, and other related divisions, while adhering to the auditing policies, allotted duties, and auditing rules, etc., for Audit & Supervisory Committee members stipulated by the Audit & Supervisory Committee. Committee members attend meetings of the Board of Directors and other important meetings, and audit the execution of directors’ duties through investigations of business and financial conditions.
Directors who are Audit & Supervisory Committee members are granted new authority, such as voting rights at meetings of the Board of Directors and the right to present a position statement at meetings of the Board of Directors relating to nomination and remuneration of officers. We are therefore promoting the establishment of an auditing framework and the enhancement of various initiatives to further strengthen the supervisory function of the Board of Directors, which is the aim of altering our institutional design, through new activities such as monitoring and auditing, etc. of the transfer of authority to executive directors and the status of the governance that guarantees it, in addition to the auditing activities previously undertaken, and by further strengthening cooperation with outside directors, etc.

(5) Internal Auditing System

The Internal Auditing Division conducts internal audits to check the effectiveness and efficiency of business operations, the reliability of financial reporting, the status of compliance with laws and regulations, and the maintenance of assets, covering the Company and all Group companies at home and abroad.
Since fiscal 2016, we have conducted risk management using control self assessment (CSA) at each Meidensha factory and each Japanese subsidiary in order to enhance internal control and increase the efficiency of risk audits at each business unit.
In fiscal 2019, we engaged in activities under the three basic policies of “promoting the three lines of defense and CSA (Control Self Assessment),” “strengthening prevention of faults and misconduct,” and “improving audit quality and thoroughly following up audits.” We conducted new initiatives such as external evaluation of risk management and individual audit reports for officers in charge of specific functions, and we enhanced internal control functions.
In April 2020, we improved the framework to promote internal control by establishing the Internal Control Promotion Headquarters comprising the Management Auditing Division and the newly established Risk Management Division. We will further promote internal control functions by monitoring internal control systems through internal audits in conjunction with the Audit & Supervisory Committee and having a full-time department develop a risk management structure that covers the entire Group.

Officers’ Remuneration

Directors remuneration policy

i. Level of Remuneration

The level of remuneration of Meidensha’s directors is determined based on external objective remuneration market data, economic conditions, industry trends, and Meidensha’s business circumstances, etc., and it is confirmed by the Nomination and Remuneration Committee referred to above.

ii. Composition of Remuneration

Remuneration of directors is performance-based annual remuneration, and comprises basic remuneration and incentive remuneration according to each role. Of these types of remuneration, incentive remuneration comprises remuneration that is linked to business performance as a short-term incentive and stock remuneration as a medium to long-term incentive.

Target Proportion of Each Type of Remuneration (assuming targets were 100% achieved)

iii. Incentive Remuneration System

Performance-linked remuneration, which is a short-term incentive, varies from 0 to 140 depending on the degree of achievement of targets, with perfect achievement of targets counting as 100. We use operating income, which is also used for our financial targets in Medium-term Management Plan 2020, as a performance evaluation indicator, and also give consideration to revisions according to operating conditions and changes to the roles of each officer, etc.

Calculation Formula

Stock remuneration, which is a medium to long-term incentive, grants shares to the Officers’ Shareholders Association for the purpose of further promoting sharing of profit and loss with shareholders.

iv. Remuneration Determination Procedures

The Nomination and Remuneration Committee confirms and considers the content of the remuneration system and the amount of remuneration from an objective perspective prior to determination by the Board of Directors.

FY2019 Results

1. The amount paid to directors includes performance-based remuneration for fiscal 2019.
2. The amount of remuneration paid to directors that concurrently serve as employees does not include the amount of remuneration paid to them as employees.

Tax

Tax Policy

The Meiden Group is aware that ensuring transparency of tax matters and payment of tax is its corporate social responsibility, and understands and complies with the principles of the taxation law of each country and region in which it conducts its global business activities. We contribute to the prosperity of each country and region by paying tax appropriately according to the application of a preferential tax system that avoids double taxation through normal procedures and complies with the aims of each system.
Furthermore, our policy is to refuse to engage in international tax avoidance, such as by complying with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and refusing to use tax havens according to business circumstances.
Going forward, we will work to build friendly and healthful relationships with tax agencies through timely and appropriate provision of information and responding sincerely in the event of advance rulings and tax audits.

Dialogues with Shareholders and Investors

Basic Approach and IR System

When any shareholders wish a dialogue with the Company that will contribute to medium to long-term improvement of the Company’s corporate value, it is Meidensha’s policy that the Company’s management conducts the dialogue to the extent reasonably possible.
A system is in place where an executive officer is placed in charge of IR matters and an IR-specialist department conducts activities to enhance constructive dialogue with shareholders, including institutional investors and strengthens external communication.

Results Briefings

We hold results briefings twice a year in May and November. In addition, we have also commenced briefings for individual investors since fiscal 2018.
We will continue to work to ensure an even fuller disclosure of information through results briefings, individual IR sessions, conferences, the website, and this report, etc., and continue to engage in dialogue with shareholders and investors.

Main IR Activities in Fiscal 2019

The materials for the results briefings are available for viewing. Please visit “Fact Sheet for Account Settlement Briefing Session” under “Investors” on the Corporate website.

Fact Sheet for Account Settlement Briefing Session

Board of Directors & Executive Officers as of July, 2020