Value Creation Story

Business Overview

ESG Activities

Corporate Information

GovernanceTo retain the trust of all of our stakeholders, KOITO recognizes the importance of ethical standards and theestablishment of a sound management structure. We have identiﬁed enhancing “corporate governance” as one ofour materiality and promoting several activities.

Members of the Board of Directors, Audit and Supervisory Board,
Nomination Committee and Remuneration Committee (as of June 29, 2022)◎ChairCorporate Governance

Board of Directors

Board of Directors
9 Directors(including 3 Outside
Directors)

Consult

Appointment/removal

Consult**

Representative Directors

Nomination Committee
5 Directors(including 3 Outside
Directors)

Audit and Supervisory Board
4 Audit & Supervisory Board Members(including 2 Outside Audit &Supervisory Board Members)

Remuneration Committee
5 Directors(including 3 Outside
Directors)*Deliberate and resolve
draft and policy

Directors

Operational
audit

Collaboration

Collaboration

Corporate Ofﬁcers
Each Department

Audit

Auditing Section

Financial audit

Independent Auditors

Audit & Supervisory
Board Members

Election/dismissal

Election/dismissal

Election/dismissal

Election/dismissal

Directors

General Meeting of Shareholders

Audit andSupervisory Board○Members

Nomination
Committee

Remuneration
Committee

Chairman and CEO

Masahiro Otake

○

◎

◎

President and COO

Michiaki Kato

◎

○

○

Executive Vice President

Kenji Arima○

Executive Vice President

Masami Uchiyama○

Senior Managing Director

Hideharu Konagaya○

Senior Managing Director

Katsuyuki Kusakawa○

Outside Director

Haruya Uehara

○

○

○

Outside Director

Kingo Sakurai

○

○

○

Outside Director

Chika Igarashi

○

○

○

Standing Audit & Supervisory Board Member

Mitsuo Kikuchi○◎

Standing Audit & Supervisory Board Member

Koichi Sakakibara○○

Outside Audit & Supervisory Board Member

Yukinobu Suzuki○○

Outside Audit & Supervisory Board Member

Hiroshi Kimeda○○

Collaboration

Inside Directors/Audit Members

Board of Directors

Outside Directors/Audit Members

Audit and Supervisory Board

Ratio of Outside Directors
Board of Directors

Composition

Frequency

Function

Structure54

9 Directors (6 inside Directors + 3 outside Directors)
Chaired by the President

4 Audit & Supervisory Board Members(2 inside members + 2 outside members)

Once per month in principle

Eight times (FY 2022)

The Board of Directors discusses, reports, andmakes decisions on matters stipulated in the
Board of Directors Regulations, including thosematters stipulated by laws, regulations, and the
Articles of Incorporation, and supervises theexecution of Directorʼs business execution.

The Audit and Supervisory Board Members
participate in the Board of Directors and otherimportant meetings and committees, review
signiﬁcant authorization documents, and audit
the performance of directors. They aremonitoring the structure and operations of theinternal control system.

● All Audit and Supervisory Board Members attend● Other than the Board of Directors, the standing

meetings of the Board of Directors to monitor
Directorʼs business operations.
●The Managing Committee (chaired by the
President), a body to aid the Board of Directors,
is comprised of full-time Directors andCorporate Ofﬁcers. The committee meets, threetimes per month in principle, determines
business execution, reports on progress, andfollows up on business execution.
●The governance structure is being reinforced;
new proposal agendas are required to beapproved at the Managing Committee and thento the Board of Directors.

KOITO INTEGRATED REPORT 2022

Audit and Supervisory Board Members attend
the Managing Committee and other important
meetings, constantly monitor the Directorʼsbusiness execution and express opinions asneeded.
●Improving its auditing functions through close
collaboration between Audit and Supervisory
Board Members, the Internal Audit
Department, and independent auditors byholding periodic meetings and let themexchange information and opinions as needed.

67%

33%

3 Outside
Directors

6 Inside
Directors

Audit andSupervisory Board

50% 50%2 Inside
Directors

2 Outside
Directors

Remuneration
Committee

Nomination Committee

40%

2 Inside
Directors

40%

60%

2 Inside
Directors

3 Outside
Directors

60%

3 Outside
Directors

Main Proposals and Reports at the Board of Directors (from April 2021 to March 2022: 12 meetings)
Proposals

Reports

Total

Ratio

Business strategies, sustainability and governance

18

9

27

33%

Settlement, dividends and other ﬁnancial matters

7

9

16

19%

Internal control, risk management and compliance

4

4

8

10%

HR, appointment and remuneration

15

3

18

22%

Other matters

3

10

13

16%

47

35

82

100%

Total

KOITO INTEGRATED REPORT 2022 55

Value Creation Story

ESG Activities

Corporate Information

Election Policy for Directors and Audit and Supervisory Board Members

Director Effectiveness Evaluation

KOITOʼs policy is to elect a person who is capable of responding to expectations of shareholders as a Director, hasenough experience and advanced knowledge of business administration, and can fulﬁll the duties and responsibilities of a
Director as a Director candidate.
Based on this policy, the nomination committee deliberate and resolve a draft of Director candidates, and then the
Director candidates are determined by the Board of Directors. As a consultative body of the Board of Directors, thenomination committee consists of three independent outside Directors and two inside Directors, in order to ensure
objectivity and transparency of the nominations of the director candidates.
Each Director has a thorough knowledge of the respective business management. Including outside Directors, KOITO
regards Directorʼs knowledge, experience, and capabilities as diverse and well balanced. KOITO will continue to consider
the appropriate structure for the Board of Directors.
As for the election of Audit and Supervisory Board Members, KOITO expects candidates to have a good personality anda strong sense of ethics to accurately, fairly, and efﬁciently execute the audits of the execution of Director duties.

KOITO conducts annual surveys to evaluate the effectiveness of the Board of Directors. The Board of Directors evaluates
itself based on the survey ﬁndings.
The following is the outline of the results of analyzing and evaluating the effectiveness of the Board of Directors.

Specialties and Experience of Directors
Corporate
Sales,Engineering,
Management Procurement
R&D

Production, Quality
Management,
Safe & Environment

Overseas
Segment

Finance &Accounting

Corporate
Planning,
Legal, Personnel○○

Chairman and CEO

Masahiro Otake

○

○

○

President and COO

Michiaki Kato

○

○

○

Executive Vice President

Kenji Arima○○

Executive Vice President

Masami Uchiyama○

Senior Managing Director

Hideharu Konagaya○

Senior Managing Director

Katsuyuki Kusakawa○

Outside Director

Haruya Uehara○

Outside Director

Kingo Sakurai

Outside Director

Chika Igarashi

○

○

○

○
○

○
○

○

○

○
○

○
○
○
○

*Note: Above chart does not represent all skill of each Director.

Outside Directors and Audit and Supervisory Board Members
KOITOʼs policy on electing outside Directors is to appoint persons who satisfy the requirements for outside Directors in
the Companies Act and requirements for independency in the independency standard for the independent ofﬁcer system
of Tokyo Stock Exchange.
Outside Directors shall have abundant knowledge and experience in corporate administration. Outside Audit andSupervisory Board Members shall have technical knowledge of laws and ﬁnance. Both outside Directors and Audit andSupervisory Board Members are elected upon a decision at a General Meeting of Shareholders.

1. The Board of Directors meets monthly, in principle, and promptly and properly discusses important agenda items
based on the Board of Directors Regulations.
2. Prior to the beginning of the ﬁscal year, the annual meeting schedules are announced to Directors and Audit andSupervisory Board Members, including its outside members, making it easier for them to attend the meetings. To
facilitate discussion on management issues of the Board of Directors, the matters to be deliberated and reported
at the meeting and the content of the materials are discussed in advance.
3. In addition to Directors, who have experience in the various business divisions such as management, sales, technical,
production and others, the Board of Directors also receives advice and proposals from outside Directors with extensive
knowledge and experience of corporate management, or with expertise in legal and ﬁnancial matters. The Board of Directors
ensures sufﬁcient time and discusses management issues from a variety of perspectives.

The Board of Directors also operates by reﬂecting the opinions of outside Directors, such as adding the results ofself-evaluations, contents put on the agenda of the Managing Committee, trends in the industry, and the latest technicaltrends to the matters to be reported.
The Board of Directors will continue to further reinforcing its functions as the highest decision-making entity andimproving the speed of making administrative decisions to increase its effectiveness.

Remuneration of Directors
It was approved at the 119th Ordinary General Meeting of Shareholders held on June 27, 2019 that the amount of remuneration, etc. for Directors shallbe no more than ¥1.5 billion a year. In addition, it was approved at the 115th Ordinary General Meeting of Shareholders held on June 26, 2015, that,apart from the amount of remuneration, etc., for Directors, the amount of remuneration, etc., related to subscription rights as stock compensation-type
stock options for Directors shall be no more than ¥200 million a year.
The Directorsʼ remuneration system consists of ﬁxed remuneration, paid monthly, and performance-linked remuneration. Based on our internal
standards on Directorʼs remuneration, KOITO comprehensively determines the amount of remuneration by taking several factors into account:corporate performance, the amount of dividends to shareholders, remuneration amount of other companies, the amount of employeesʼ salaries, as wellas the Directorʼs management capabilities, achievements, and their contributions.
The ﬁxed remuneration amount is calculated by setting a basic amount in based on the size of the role of each Director and their position, thensetting the upper and lower limit amount for each position, the status difference by position, and the difference by the number of years in the position.
Performance-linked remuneration is evaluated and decided based on the belief that it is important to comprehensively consider the goals andachievements of each ﬁscal yearʼs performance (net sales, proﬁts, etc.) and each Directorʼs contribution.
The goal of stock compensation-type stock options is to motivate company managers to contribute to improving business performance andcorporate value in the medium- to long-term by sharing the beneﬁt of rising stock prices and the risk of falling stock prices with shareholders. The
number of stock options granted is based on each Directorʼs status of business execution and level of contribution, etc., and Directors are able toexercises their options once they have lost their position as Director.
The Board of Directors consults with the remuneration committee regarding the policy to determine the remuneration of all and each Director.
The remuneration of each Director is determined by consultations among the Representative Directors, based on the above determination policy
authorized by the Board of Directors. To ensure objectivity and transparency of the Directorsʼ remuneration determination procedure and others, theremuneration committee, an advisory body to the Board of Directors, consists of two inside Directors and three independent outside Directors.
The remuneration of each Audit and Supervisory Board Members has been determined by consultations among Audit and Supervisory Board
Members. For outside Directors, only ﬁxed remuneration is paid, and no performance-linked remuneration is paid.

Status of Audits
Based on the annual audit plans, KOITOʼs Internal Audit Department, an independent organization, conducts audits of
the operations of internal control over ﬁnancial reporting, as well as audits of the legality and appropriateness ofoperations against company-wide departments and KOITOʼs subsidiaries. The departments and subsidiaries implement
the necessary improvements to improve internal control. The Internal Audit Department reports the results of the audits
to Directors and Audit and Supervisory Board Members, and exchanges information with the Audit and Supervisory Board
Members and the independent auditors on the status of audits to facilitate mutual cooperation.
Other than attending and expressing opinions at the Board of Directors, Audit and Supervisory Board Members audit
the execution of Directorsʼ duties, legality and appropriateness of KOITOʼs decision-making based on their knowledge
and experience in each specialized ﬁeld. In addition to Audit and Supervisory Board Membersʼ on-site audits andinterviews with administrative divisions, Audit and Supervisory Board Members attend the audits performed by the
independent auditors and the Internal Audit Department. Audit and Supervisory Board Members strive to improve theeffectiveness of audit by maintaining collaboration with relevant parties, including outside Directors by exchanging
information as needed.

56

Business Overview

KOITO INTEGRATED REPORT 2022

The number of
eligible members

Breakdown of remuneration
Fixed remuneration(million yen)

Performance-linked remuneration(million yen)

Total remuneration(million yen)

Directors

15

786

349

1,136

Audit and Supervisory Board Members

5

103

ー

103

Total

20

890

349

1,239

Notes: 1. The above table includes one retired Director and one retired Audit and Supervisory Board Member at the conclusion of the 121st Ordinary General Meeting of Shareholders
held on June 29, 2021.
2. Aggregate remuneration for the outside Directors and outside Audit and Supervisory Board Members, a total of four individuals, was ¥55 million (ﬁxed remuneration only).
3. In addition to the above, KOITO resolved to abolish its Directorsʼ and Audit and Supervisory Board Membersʼ executive retirement bonuses payment system at the conclusionof the 112nd Ordinary General Meeting of Shareholders held on June 28, 2012 and to grant executive retirement bonuses, at the time of the retirement of each person involved,
to cover the period in post up to the abolition of the system to Directors and Audit and Supervisory Board Members continuing in post subsequent to the conclusion of theaforementioned General Meeting of Shareholders. On the basis of this resolution, an executive retirement bonus of ¥63 million was paid to one retired Director.
These amounts included ¥40 million, which were transferred from provision for Directorsʼ retirement beneﬁts included in the total remuneration, etc. to executives in thebusiness report for past years.
4. Besides the above, one outside Audit and Supervisory Board Member receives executivesʼ remuneration of ¥0 million from Koito Insurance Services Co., Ltd., KOITOʼs
subsidiary.
5. For Performance-linked remuneration, recurring proﬁt is used as an indicator since it reﬂects the overall results of KOITOʼs management activities, and the remuneration is
calculated giving consideration to the year-on-year change in this indicator. The amounts listed for recurring proﬁt for the ﬁscal year under review and for the previous ﬁscal
year are the amounts presented in the non-consolidated statements of income.

KOITO INTEGRATED REPORT 2022 57

Value Creation Story

ESG Activities

Corporate Information

Basic Policy of Internal Control System

Shareholdings

The Basic Policy of the Internal Control System is set as follows to improve and reinforce internal control.

Based on KOITOʼs management strategies and plans, we believe that strengthening business relations with othercompanies is essential to expanding our business and achieving sustainable growth.
From this perspective, we comprehensively consider the issues and hold shares that are held for purposes other thanpure investment. With regard to shareholdings, we regularly scrutinize and verify whether they are commensurate withdividend yields and the cost of capital, while also keeping in mind reductions, in order to determine the appropriatenessof stockholdings.

1. System ensuring that Directors and employees execute
their business duties in compliance with laws and regulations and the Companyʼs Articles of Incorporation
The Compliance Committee, the Compliance Department,
the Internal Audit Depar tment, whistle-blower internalreporting system, and other organizations and systems, aswell as the Code of Corporate Ethics and other relevant regulations, will be developed and enhanced based on the
KOITO Group Corporate Behavior Charter.
At the same time, KOITOʼs Directors, Corporate Ofﬁcers,
and employees will receive education familiarizing themwith the organizations, systems, and regulations.
2. System for the preservation and administration of information on Directors executing their business duties
Regulations will be developed and enhanced to appropriately preserve and administer minutes of the General Meeting of Shareholders, the Board of Directors, the Managing
Committee, and other information on the Directors executing their business duties.
3. Regulations and other systems for managing the risk of loss
Risk Management Regulations and other regulations andsystems for managing risk will be developed to avoid andeliminate material risks that could threaten the Companyʼsviability, and to minimize the impact when they arise. At thesame time, KOITOʼs Directors, Corporate Ofﬁcers, and employees will receive education and training on risk management.
4. System for ensuring the ef ﬁcient execution of businessduties by Directors
The Board of Directors and the Managing Committee meetings will be held regularly. Meanwhile, the Board of Directorsʼ Regulations, the Managing Committeeʼs Regulations,and other regulations pertaining to the execution of business duties by the Directors, as well as the Corporate Ofﬁcer system and other organizations and systems, will be
developed and enhanced to ensure the efﬁcient executionof business duties by the Directors.
At the same time, the business duties will be executed
according to speciﬁc plans that each division develops every
ﬁscal year based on the Presidentʼs policy.
5. System for ensuring appropriate business execution by the
corporate group comprising KOITO and its subsidiaries
KOITO and its group companies will acknowledge the
KOITO Group Corporate Behavior Charter and develop asystem for ensuring and administering the appropriate execution of business duties as follows.
ａ.KOITO clariﬁes matters to be reported in the Subsidiary
Company Management Regulations and other regulations and improves repor ting sys tem. Al so, KOITO
requests regular business reports to the group companies.
ｂ.KOITO comprehensively and thoroughly manages risks ofthe entire group based on the Subsidiary Company Management Regulation and other regulations.
If actions of the group companies are insufﬁcient, KOITO
provides instructions and corrective actions.
ｃ.KOITO requests its group companies to develop andimprove regulations, organizations, and systems for regular meetings of the Board of Directors and the executionof duties by the Directors.
Ofﬁcers serve in multiple posts in important group companies.

58

Business Overview

KOITO INTEGRATED REPORT 2022

ｄ. KOITO ensures that group companies stay in compliancewith laws and regulations based on the KOITO Group
Corporate Behavior Charter and other regulations. Also,
KOITOʼs Management Depar tment and Internal Audit
Department conduct audit and ﬁnancial audit of groupcompanies.
KOITO also clariﬁes matters requiring approvals in theSubsidiary Company Management Regulations and otherregulations so that the applicable business operations areto be executed upon approval by KOITO.
6. Matters pertaining to the status of certain employees, independence from Directors, and the effectiveness of instruction in the event the Audit and Supervisory Board Members
request such employees to assist in the execution of theirdutiesAn Audit and Supervisory Board Membersʼ Ofﬁce will beestablished to help the Audit and Supervisory Board Members execute their duties under the instructions and ordersof the Audit and Supervisory Board Members and the Audit
and Supervisory Board.
Moreover, assignment of personnel to the Audit andSupervisory Board Membersʼ Ofﬁce shall be decided upon
approval by the Audit and Super visor y Board to ensure
independence from the Directors.
7. System for Directors and employees of KOITO and its subsidiaries to repor t to the Audit and Super visor y Board
Members and for preventing unfair treatment of the Directors and employees for reporting to the Audit and Supervisory Board Members
Directors, Corporate Ofﬁcers, and employees of KOITO andits group companies shall report to the Audit and Supervisory Board Members when they learn of matters of material
impact on the Company, serious violations of laws, regulations, and the Companyʼs Ar ticles of Incorporation, andother issues of compliance.
Moreover, each Audit and Supervisory Board Member
shall exercise their own discretion in reporting the ﬁndings
from such repor ts to the Audit and Super visor y Board.
Meanwhile, the Companyʼs organization and systems will
be developed and enhanced to rigorously prevent the unfair
treatment of the Directors, the Corporate Ofﬁcers, and theemployees for reporting to the Audit and Supervisory Board
Members.
8. Policy on expenses arising when the Audit and Supervisory
B o ar d M e mb e r s e xe cu t e t he ir du tie s and s y s t e m f or
enabling the Audit and Supervisory Board Members to conduct effective audits
The Company will pay all necessary expenses involved in
the Audit and Supervisory Board Membersʼ execution of
their duties.
The Audit and Supervisory Board Member will monitor
and audit the execution of business duties at the Company
by means that include attending the Board of Directors, theManaging Committee, the Compliance Committees andother relevant conferences and committees, and examining
important documents.
The Audit and Supervisory Board Members will exchange
opinions periodically or as needed with Directors, Corporate Of ﬁcers, ﬁnancial auditors, and the Internal Audit
Department, among others.

●Basic Standards and Policy for Classiﬁcation of Investment SharesWith respect to the classiﬁcation of investment shares held for pure investment purposes and otherwise, KOITO
designates shares held solely for the purpose of receiving proﬁts from changes in the value of shares or dividends onshares as investment shares for pure investment purposes, and as other shares for investment shares held for purposes
other than pure investment.

●Basic Policy for Voting Rights
The exercise of voting rights is not based on a uniform standard, but rather is based on the perspective of whether it willlead to sustainable corporate growth and enhancement of corporate value over the medium- to long-term.
■Number of brands and amount posted in balance sheet

Unlisted shares

Other shares

Amount posted inbalance sheet(March 31, 2021)

Brands for which we
increased ourshares in FY 2022

Brands for which we
decreased ourshares in FY 2022

Amount posted inbalance sheet(March 31, 2022)

16 brandsーー

16 brands¥ 2,104 millionーー¥ 2,102 million

49 brands

1 brand

11 brands

43 brands¥ 22,987 million¥ 5,787 million¥ 1,606 million¥ 29,214 million*Stocks whose number of shares ﬂuctuated due to the consolidation of shares, stock splits, stock transfers, stock exchanges, mergers, and otherorganizational reorganizations are not included.

KOITO INTEGRATED REPORT 2022 59