Showa Denko continuously promotes corporate governance to ensure the soundness, effectiveness, and transparency of management, and to contribute enhancing its corporate value, thereby contributing to the sound growth of society and earning its full trust and confidence. To that end, it is essential for the Company to strengthen relations with its stakeholders, including shareholders, customers, suppliers, community residents, and employees. Based on the above, the Company has clarified its mission in the form of Our Vision and Showa Denko is working hard to realize this Vision.
Implementation status of corporate governance measures
Policies and procedures of the Board of Directors in the selection of senior management personnel and the nomination of candidates for Directors and Auditor & Superisory Board Members
Candidates for Directors must possess sufficient knowledge, experience and capabilities to fulfill their obligations as Directors. Senior management personnel are selected by additionally taking into account, among others, their corporate and individual performance. Candidates for the Audit & Supervisory Board Members must possess, in addition to an appropriate level of expertise in the areas of finance and accounting, sufficient knowledge, experience and capabilities to fulfill their obligations as Audit & Supervisory Board Members.
The Nomination Advisory Committee deliberates the nomination of candidates for the aforementioned positions and submits recommendations to the Board of Directors. The Committee is an advisory body to the Board of Directors and more than half of its members are independent outside directors.
Explanation regarding the selection of senior management personnel and the nomination of candidates for Directors and Audit & Supervisory Board Members
Reasons why each candidate has been nominated are stated in the Reference Materials for the General Meeting of Shareholders.
Criteria on the independence of outside directors
The Board of Directors has established independence standards for Outside Directors based on independence criteria stipulated by law and the Tokyo Stock Exchange and selects candidates who meet the standards. See the Attachment of Corporate Governance Basic Policies for the independence standards.
Policies and procedures for the Board of Directors in determining the remuneration of senior management personnel and Directors
Showa Denko has newly introduced performance-linked stock-based remuneration, and the remuneration of Executive Directors and Corporate Officers now consists of base remuneration, which is decided according to job title and others, as well as short-term performancelinked remuneration and mid- to long-term performance-linked remuneration, which are determined in consideration of corporate and individual performance and others under the performance evaluation system.
The Remuneration Advisory Committee as an advisory body to the Board of Directors and a majority of its members are Independent Outside Directors and Outside Audit & Supervisory Board Members. It deliberates the remuneration of each Executive Director and Corporate Officer and submits recommendations to the Board of Directors. Remuneration of Outside Directors consists of base remuneration only. The amount of remuneration paid to Directors and Audit & Supervisory Board Members in 2016 is as given below.
|Paid amount||Number of applicable persons|
|Directors(excluding outside Directors)||¥231 million||10|
|Auditors(excluding outside Auditors)||¥55 million||3|
|Outside Directors and Auditors||¥68 million||6|
Overview of Governing Bodies/Committees/Councils
|Governing Body||Members||Meeting frequency|
|Board of Directors||
||Once or twice a month
(The board had 15 meetings in 2016. The average rate of attendance was 98.6%.)
||Once a week in principle|
|CSR Committee||Same as above||Twice a year in principle|
|Board of Auditors||5 Auditors (Three of them are outside Auditors. (One is female.))|
Board of Directors
Showa Denko introduced the corporate officers system to clearly separate the business execution function from the management supervision function. Under the system, a top management team composed of the president and corporate officers makes prompt and dynamic decisions on management. At the same time, the number of Board of Directors members has been substantially reduced while the number of independent outside directors has been kept at two or more for the enhancement of the supervision function.
The Board of Directors decides basic policies of the Company. It also thoroughly discusses and makes decisions regarding matters specified in the Companies Act or the Company's Articles of Incorporation as well as important issues in executing business operations, while promoting prompt and dynamic decision making on management.
We appoint directors with emphasis on the viewpoint of corporate governance, aiming to strengthen the Board of Directors' monitoring and supervisory functions and ensure the propriety of decision making process. We have adopted a management system in which corporate officers dedicate themselves to business execution, which is their primary duty, but do not concurrently serve as directors, in principle. Furthermore, we have abolished the system of officer directors except the Chairman and the President, while strengthening monitoring by Auditors including outside Auditors and mutual supervision among directors.
The term of office of directors is set to one year to ensure a quick and flexible formation of management team corresponding to changes in the business environment.
Board of Auditors
Showa Denko employs an auditor system. The Auditors attend the Board of Directors meetings and other important internal meetings, offering opinions as necessary. They conduct audits on execution of business operations through on-site investigations, interviews with responsible persons, and reference to important documents so as to provide suggestions, advice, and recommendations for securing soundness in management. They also audit group companies in cooperation with auditors of major affiliated companies.
Showa Denko concluded an auditing contract with KPMG AZSA, and this audit corporation performs accounting audits for the Company.
The Accounting Auditor confirms the annual audit plan with the Auditors and reports the audit results to them. The Accounting Auditor and the Auditors also exchange information and views as required, to promote their cooperation.
Management Committee and R&D Committee
The Management Committee, which is chaired by the President, deliberates and decides on matters to be referred to the Board of Directors' meetings and important matters pertaining to overall management of the Company. The decisions are made after deliberations on two occasions. As for the investment issues to be submitted to the Management Committee, risk analysis as well as achievement/progress management are conducted in advance, through preliminary risk reviews and examinations by a relevant task team. The basic business policies including Company's medium-term business plans are decided not only through the deliberation of the Management Committee but also through sufficient examination by all corporate officers.
The R&D Committee deliberates and makes decisions on important issues related to research and development.
Internal Audit Department
We have the Internal Audit Department reporting directly to the President. The Internal Audit Department investigates the overall execution of business including group companies and verifies its accuracy, validity and efficiency. It also investigates and verifies the functional state of management policies, business plans and internal control systems. The results of internal auditing are also reported to the Auditors for mutual cooperation with Auditors' auditing.
Showa Denko positions CSR Committee at the top level of our corporate governance system to check all management measures from the CSR perspective. We also established the Security Export Control Committee and Safety Measures Committee under the CSR Committee. Moreover, we set up Responsible Care Promotion Council, Risk Management Promotion Council, Human Rights/Corporate Ethics Promotion Council and IR Promotion Council to deliberate on the respective matters.
Responsible Care Promotion Council
Under the CSR Committee, Showa Denko established the Responsible Care Promotion Council for preliminary discussions concerning important issues around Responsible Care.
Risk Management Promotion Council
We have established a risk management system around the CRO (Chief Risk Officer). Important risk-related matters are deliberated by the Risk Management Promotion Council and determined by the CSR Committee.
Human Rights/Corporate Ethics Promotion Council
The Showa Denko Group considers “compliance with social justice and corporate ethical norms” to be one of its most important management priorities. It regards human rights as the core theme of corporate ethics. The Human Rights/Corporate Ethics Promotion Council chaired by the CRO determines the medium- to long-term principles and makes annual plans for the activities related to human rights and corporate ethics, with an eye to raising awareness among all Group employees.
IR Promotion Council
The IR Promotion Council is chaired by the CFO. The Council examines the comprehensive measures and basic plans for IR, centrally manages the important factual data, such as the financial results, in line with the Tokyo Stock Exchange’s timely disclosure rules, and ensures the appropriate disclosure of important facts.
Showa Denko conducts information disclosure and IR activities to help shareholders and investors deepen their understanding of its corporate management, business activities, and strategies so that they can evaluate its corporate value in an appropriate manner. To this end, we work to communicate proactively with shareholders and investors, improve management transparency, and strive to disclose information concerning Showa Denko in an easy-to-understand, fair, timely, and accurate manner. In April 2018, the Revised Financial Instruments and Exchange Act was enforced in Japan, and to ensure compliance with the fair disclosure rules of this law, we revised our disclosure policy and made it public on our website.
Security export control Committee
For all export products, Showa Denko’s Security Export Control Committee, established under the CSR Committee, determines whether or not government permission is required, investigates customers, and makes a decision on whether to enter into each transaction through systematized procedures.
Safety Measures Committee
We also established the Safety Measures Committee under the CSR Committee. Showa Denko examines comprehensive measures and basic plans for the environment, safety, and health, and offers relevant opinions to the related agencies.