Corporate Governance

[1] Overview of corporate governance

Basic thinking on corporate governance

The KITZ Group understands the effective functioning of corporate governance to help fulfill our corporate social responsibility and contribute to increasing management efficiency and transparency, as well as sustained increases in corporate value. For this reason, we aim to realize effective corporate governance through maintenance and continuous operation of top management and business execution systems capable of responding to changing business conditions in swift and appropriate ways while also rewarding the trust of all stakeholders and fulfilling our social missions and responsibility.

» Basic Policy on Corporate Governance (PDF 426KB)

» Status of Implementation of the Corporate Governance Code (PDF 130KB)

Organizational design

KITZ employs as its organizational design for corporate governance the structure of a company with an audit and supervisory board, under which authority and responsibility for decision-making on important matters concerning business administration and for oversight of business execution are centered in the board of directors and the audit and supervisory board, and its members provide highly effective oversight of the board of directors from independent and objective perspectives.

Overview of the Company's corporate governance structure

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[2] Corporate governance structure

The board of directors and directors

Based on their fiduciary responsibility and accountability to shareholders, the board of directors and directors have the mission of achieving the sustained growth of the Company and maximizing its corporate value over the medium to long term. To fulfill these responsibilities, the board of directors not only secures fairness and transparency in management by demonstrating its oversight functions over management as a whole but also engages in broad-ranging debate on important matters related to management, makes decisions on such matters as management strategies, medium-term management plans, annual management plans, and basic management policies, and deliberates on important matters as stipulated in laws, regulations, the articles of association, and the board of directors regulations as the decision-making body for Company management.

Directors also mutually oversee business execution by the directors through such means as receiving periodic reports on business execution from executive directors.

Membership of the board of directors consist of seven directors. To enhance management oversight functions, four of these eight members (more than one-third of the board of directors) are independent outside directors.

In principle, the board of directors meets monthly in regular board meetings, quarterly in board meetings on financial results, and at other times as necessary in extraordinary board meetings.

Ensuring diversity on the board of directors

The board of directors considers it important to ensure diversity of board membership, to enable multifaceted and appropriate deliberation in board meetings in order to increase corporate value over the medium to long term.

For this reason, we prepare and disclose a skills matrix on directors to visualize the diversity and skills balance of the board of directors, as well as maintaining a healthy balance overall in the knowledge, experience, abilities, and specialization of directors so that the board of directors can fulfill its roles and responsibilities effectively, based on the Policy on Appointment and Dismissal of Directors and Audit and Supervisory Board Members and the skills matrix on directors. This structure balances diversity in areas that include gender, cosmopolitanism, career history, and age, as well as maintains the appropriate size of the board.

In the appointment of outside directors, we choose human resources with a wealth of experience in corporate management and strong knowledge of legal matters in order to enhance the decision-making, management oversight, and advisory functions of the board of directors. To ensure diversity among directors, we have appointed one female director (outside director).

Skills matrix of directors

The main areas in which each director is expected to demonstrate specialized knowledge based on past experience are indicated with up to three marks. This does not indicate all knowledge and experience that each director possesses.

Skills matrix of directors

Click to enlarge

» Policy on Appointment and Dismissal of Directors and Audit and Supervisory Board Members (PDF 108KB)

The Nomination Committee and the Executive Compensation Committee

To ensure fairness and transparency in personnel decisions concerning director candidates, audit and supervisory board member candidates, and executive officers and in the remuneration of directors and executive officers, the board of directors has established the Nomination Committee and the Executive Compensation Committee as optional advisory bodies to the board. Membership in each of these committees includes a majority of independent outside directors.

Based on the Company's Policy on the Appointment and Dismissal of Directors and Audit and Supervisory Board Members, the Nomination Committee deliberates on such important matters as the nomination of director candidates, audit and supervisory board member candidates, and executive officers and the development of human resources to serve as candidates for future directors and audit and supervisory board members, while the Executive Compensation Committee deliberates on such important matters as policies on the remuneration, as well as any other remuneration-related issues, of directors, executive officers and other executives. Each committee recommends the results of its deliberations to the board of directors for its decision.

Membership in each of the Nomination Committee and the Executive Compensation Committee consists of three or more directors appointed by the board of directors (a majority of whom are independent outside directors). The chair of each committee is an independent outside director appointed through mutual voting among the members. The chairman of the board of directors (or the president if no chairman is appointed) is chosen as one member of each committee.

Fiscal 2022 Nomination Committee and Executive Compensation Committee

Chairperson: Independent Outside Director Kazuyuki Matsumoto
Members: Independent Outside Director Minoru Amoh
  Independent Outside Director Yutaka Fujiwara
  Independent Outside Director Yukino Kikuma
  Executive Chairman Yasuyuki Hotta

Basic policy on directors' remuneration, and remuneration structure

In light of the facts that the main function of KITZ directors (not including outside directors) is to oversee management of the Group as a whole, and they serve as core management in global business execution by the Group and each of its businesses, the Policy on Decisions on the Details of Remuneration for Individual Directors has been established to ensure that the Company can secure outstanding human resources as directors, provide effective incentives toward management oversight of the Group, and improve business performance over the short, medium, and long term. Based on this policy, the structure of remuneration paid to directors consists of base remuneration in a fixed amount, performance-linked remuneration (bonuses), and performance-linked stock remuneration.

» Policy on Decisions on Remuneration for Individual Directors (PDF 151KB)

Ensuring the effectiveness of the board of directors

To increase the effectiveness of its corporate governance and improve the functions of the board of directors as a whole, KITZ evaluates board effectiveness annually by surveying all directors and audit and supervisory board members.

This survey is conducted by distributing an endorsed questionnaire on particularly important matters based on the principles of the Corporate Governance Code and collecting answers to its questions.

In addition, the board of directors discusses such matters as verification of the results of the evaluation of current conditions by the board, sharing of issues, and efforts toward future improvements based on the results of totalizing the answers to the survey and opinions expressed on future effectiveness improvements.

The survey in February 2022 included questions on the formulation and execution of management strategies, sustainability initiatives, the structure of the board of directors, appointment and remuneration of the directors and audit and supervisory board members, auditing, outside directors, stimulating deliberation in the board of directors, and engagement with shareholders and investors. Evaluation of the results showed that the Company's board of directors generally is effective.

In addition, constructive comments were received concerning sustainability initiatives and promotion of non-financial information disclosure and the form of organizational design, and these will be discussed in the board of directors as we strive toward further improvements in efficacy.

The audit and supervisory board and audit and supervisory board members

The audit and supervisory board and audit and supervisory board members carry out business audits and legal audits of the performance of the duties of directors, judge the validity of the methods and results of auditing of financial statements by the accounting auditor as an independent organization entrusted by shareholders to secure sound and sustained growth of the organization, and establish a corporate governance structure worthy of society's trust based on their fiduciary responsibility and accountability to shareholders.

In addition to overseeing the state of performance of executive directors' duty of reporting to the board of directors and the efficacy of functions for mutual management oversight among directors, centered on outside directors, they also verify the legality and validity of decision-making processes and the details of decisions, as well as offer opinions to the board of directors as necessary.

In addition to preparing audit reports, the audit and supervisory board also conducts auditing by audit and supervisory board members based on the audit and supervisory board member auditing standards, audit plans, and division of responsibilities, and it oversees the performance of the duties of directors and verifies the performance of their legal obligations. It also checks on the quality control structure, independence, and other matters related to the accounting auditor, monitors the performance of its duties, and verifies the validity of the results of auditing. The audit and supervisory board also deliberates annually on whether or not to reappoint the accounting auditor and discusses the validity of the audit plan and the propriety of audit remuneration.

The audit and supervisory board consists of five audit and supervisory board members, three of whom are outside audit and supervisory board members (independent audit and supervisory board members), to enhance its functions for highly effective auditing and management monitoring functions. In addition, based on the Policy on the Appointment and Dismissal of Directors and Audit and Supervisory Board Members, membership on the audit and supervisory board maintains an overall balance among the necessary knowledge, experience, abilities, and specialization for the performance of members' roles and responsibilities and includes at least one member with a high level of financial and accounting knowledge.

To ensure the diversity of the audit and supervisory board, one female audit and supervisory board member (an outside audit and supervisory board member) has been appointed.

In principle, the audit and supervisory board meets regularly once a month and holds extraordinary audit and supervisory board meetings at other times as necessary.

In addition, the audit and supervisory board periodically holds tripartite audit meetings with the accounting auditor and the Internal Audit Office to share reports from each of the three agencies and audit information and to exchange opinions on the key points of auditing and other matters. Through this and other means, coordination is achieved among the three audits of internal audits, accounting audits, and audits by audit and supervisory board members. Also, several times a year these tripartite meetings take the form of four-party meetings on auditing and oversight with the addition of the independent outside directors, to promote cooperation through means such as sharing information and exchanging opinions.

Independent directors and independent audit and supervisory board members

KITZ has established its own Standards for Judging the Independence of Outside Directors and Outside Audit and Supervisory Board Members with even stricter requirements than those of the Tokyo Stock Exchange.

All outside directors and outside audit and supervisory board members satisfy the Company's Standards for Judging the Independence of Outside Directors and Outside Audit and Supervisory Board Members and those of the Tokyo Stock Exchange and are reported to the Tokyo Stock Exchange as independent directors and independent audit and supervisory board members.

» Standards for Judging the Independence of Outside Directors and Outside Audit and Supervisory Board Members (PDF 98KB)

The executive officer system and the Management Conference

The Group employs an executive officer system as a system for cross-functional business execution responsibility regarding Group companies in Japan and around the world to focus the Group's comprehensive strengths on corporate strategy. Thirteen executive officers, including those serving concurrently as executive directors, are appointed. In addition, the Management Conference, whose membership consists of executive directors and executive officers, meets monthly for broad-ranging discussions of important management topics and decides on important matters related to business execution.

[3] Support and training structures for directors and audit and supervisory board members

Support for directors and audit and supervisory board members includes providing them with information on resolutions and other matters, as well as related materials, prior to meetings of the board of directors and providing prior explanations as needed through a structure intended to ensure that directors and audit and supervisory board members fully understand the management topics that the Company should address and are able to make appropriate decisions regarding them. Support also includes making more detailed information available if needed by outside directors or outside audit and supervisory board members.

KITZ also maintains a training structure for directors and audit and supervisory board members. To ensure that they can learn the knowledge they need and improve their knowledge and abilities, executive directors and full-time audit and supervisory board members have opportunities to participate in training by outside educational institutions, as well as management study meetings led by instructors invited from outside the organization, after taking their office or beginning at the stage of their candidacy.

To deepen the understanding of outside directors and outside audit and supervisory board members concerning KITZ and Group companies, outside directors and outside audit and supervisory board members have opportunities to take part in such activities as site tours and interaction with core management of individual sites, meetings with Group company presidents and Group technology exchange events, and other activities, as well as briefings on necessary knowledge concerning the businesses, finances, organizations, and other aspects of KITZ and Group companies, the industries in which the Company operates, and such matters as the Company's history, an overview of its businesses, and the Group corporate philosophy structure, the management vision, medium-term management plans, the governance structure, and the compliance structure.

To verify the appropriateness of the content of training for directors and audit and supervisory board members, opinions are collected through the surveys on the efficacy of the board of directors and necessary improvements are made in response.

[4] Dialogue with shareholders and investors

KITZ recognizes its fiduciary accountability for sustained growth and increasing corporate value over the medium to long term, provides opportunities for constructive dialogs with shareholders and investors, and discloses timely, fair, and accurate information based on its understanding of the importance of maintaining fairness and transparency in management. Together with continually providing information on management to encourage understanding of the Company's management strategies and management plans, we also strive to put to use the opinions and requests received through such dialogue in improving management.

For this reason, we maintain an investor relations (IR) promotion structure, the important points of which are summarized below.

  1. Appointment of an executive officer in charge of IR.
  2. In principle, briefings on financial results are held quarterly for institutional investors and analysts, and annually company information sessions for individual investors. These briefings are led by the president or the executive officer in charge of IR. As necessary, directors, including outside directors, and audit and supervisory board members also attend, to encourage dialogs with shareholders.
  3. To prevent insider training, information is managed appropriately in dialogs with shareholders.
  4. Matters, such as the Group management vision and medium-term management plans, are explained in clear, understandable ways.
  5. In addition to information on financial results, such as summaries and securities reports, IR information including management information and information on stock, and information about the general meetings of shareholders are posted on the KITZ website as well.

[5] Cross-shareholdings

KITZ has established a Policy on Cross-Shareholdings, under which, in principle, we do not hold cross-shareholdings for the purposes of securing stable shareholders.

In addition, under the Policy on Cross-Shareholdings the board of directors annually verifies and reviews cross-shareholdings from the perspectives of both economic rationality (quantitative perspectives) and the qualitative significance of such holdings, and share issues judged not to satisfy the Policy on Cross-Shareholdings are sold.

Furthermore, based on the Policy on Cross-Shareholdings voting rights on cross-shareholdings held are exercised through comprehensive judgment of whether to support or oppose individual resolutions based on the perspective of increasing the Group's corporate value, in addition to resolutions of development of appropriate governance structures in the issuer companies and whether they would contribute to increasing their corporate value over the medium to long term.

» Policy on Cross-Shareholdings (PDF 90KB)

Internal controls system

Basic Policy on Internal Controls

To realize the KITZ' Statement of Corporate Mission, which expresses its management philosophy, KITZ has established the Basic Policy on Internal Controls to realize sound and solid Group management foundations, and it has established and operates an internal control system based on the Companies Act and the Enforcement Regulations to the Companies Act.

» Basic Policy on Internal Controls (PDF 152KB)

Internal control system

To realize sound and solid Group management foundations, KITZ has established an internal control system based on the Companies Act and on the Financial Instruments and Exchange Act.

Based on the important matters of internal controls systems as stipulated in the Companies Act, including risk management, compliance with laws and regulations, fair business operations, and appropriate financial reporting, we strive to ensure a structure for promoting risk management and compliance and properly assessing and addressing all operations related to business activities, as well as maintaining and operating a structure to prevent misstatements in financial reports.

In addition, based on the important matters identified in the Financial Instruments and Exchange Act, such as the efficacy and efficiency of operations, reliability of financial reports, compliance with laws and regulations in business activities, and asset preservation, we carry out internal controls on financial reporting compliant with the basic framework of internal controls identified in the Standards and Practice Standards for Management Assessment and Audit concerning Internal Control Over Financial Reporting (Council Opinions) issued by the Business Accounting Council, and the audit and supervisory board, the accounting auditor, and the Internal Audit Office cooperate closely to assess the efficacy of internal controls Companywide.

Internal audits

Internal audits are conducted through business auditing and the internal control audits at KITZ and Group member companies by the Internal Audit Office to audit and check on the functions of internal controls and monitor the state of internal controls and the propriety of business processes Groupwide. The results of the audits are communicated to the president, audit and supervisory board members, and related sections, and follow-up is conducted regarding corrective measures. These are reviewed closely by the Internal Control Committee and reported to the board of directors periodically. In addition, auditing is conducted regarding the important risks faced by each Group member company to elucidate the risks inherent in each section of the Group member company and to avoid and mitigate risks and thus to provide support for business improvements and building structures for legal and regulatory compliance.

Establishment of various committees

To increase the efficacy of the operation of the internal controls system, KITZ has established various specialized committee organizations on such topics as internal controls, responding to crises, risk management, compliance promotion, quality assurance, environment, safety and health, security trade controls, investment and loans review, information security and personal information protection, corporate identity (CI) control, and sustainability promotion. In this way, we assess, control, and improve important matters related to appropriate decision-making in Group management, as well as carrying out other appropriate control activities.

Promotion of compliance management

Basic thinking on compliance management

KITZ recognizes compliance management as a fundamental and essential condition of continued corporate growth. This is expressed in the first element of the Action Guide for the realization of KITZ' Statement of Corporate Mission, which expresses the Group's management philosophy: "Do it True."

Compliance management promotion structure

To minimize the social and economic effects of related issues, in the KITZ Group, both KITZ and each Group member company have established a Crisis and Compliance (C&C) Control Committee chaired by the president. It also is building structures to prevent various management risks, such as those associated with legal, regulatory, and compliance violations, and to respond swiftly and appropriately to any crises that may arise.

Initiatives related to promotion of compliance management

As part of its duties, the C&C Control Committee at KITZ and each Group member company deliberates on the following matters related to promotion of compliance, formulates necessary policies, and implements specific measures.

  1. Formulation of basic policies on development and operation of the compliance promotion program.
  2. Formulation of basic policies on preparation and maintenance of the Compliance Guidebook.
  3. Formulation of basic policies on implementing compliance education.
  4. Responding to any compliance violations that have occurred (including investigation of related facts, investigation of their causes, formulation and implementation of measures to prevent their reoccurrence, and checking on the countermeasures implemented).
  5. Establishment, amendment, and abolition of rules and regulations necessary for compliance promotion.
  6. Other necessary matters related to compliance promotion.

Whistleblowing system (compliance helpline)

To promote compliance management, KITZ and each Group member company has established compliance helplines as a contact point for reporting and consultation concerning information about any acts in violation of laws, regulations, or compliance identified by directors, audit and supervisory board members, executive officers and employees.

Directors, audit and supervisory board members, executive officers and employees of KITZ and each Group member company may use their own companies' compliance helplines, compliance helplines set up by outside law firms, and the compliance helpline of the parent company, KITZ. In this and other ways, we secure a structure that directors, audit and supervisory board members, executive officers and employees can use with peace of mind, by setting up multiple routes for consultation and reporting.

Each compliance helpline is managed and operated by the C&C Control Committee of the Company or the Group member company. Reports and consultations received are investigated swiftly while strictly protecting the confidentiality of the reporting party, and timely and appropriate corrective measures are implemented in response.

Compliance education

KITZ distributes a Groupwide Compliance Guidebook common to the Group that describes the compliance program based on the thinking of Group top management (the Company president) concerning compliance management, the importance of compliance management, the compliance promotion structure, the compliance code of conduct, the whistleblowing system, and other matters related to compliance, translated into the language of each country where the KITZ Group has business bases (Japanese, English, Chinese (Simplified and Traditional), Korean, Thai, German, Spanish and Portuguese), to directors, audit and supervisory board members, executive officers and employees of KITZ and Group member companies around the world to educate and raise awareness concerning compliance and to publicize how to use the contact point for whistleblowing reports (compliance helpline).

» COMPLIANCE GUIDE BOOK [PDF 3.9MB]

We also hold systematic seminars on compliance education annually and individual seminars focusing on the details of the operations of each section when so requested by a section of KITZ or a Group member company. Furthermore, we also strive proactively to foster a culture of compliance, raise awareness, and convey related knowledge through various other means, such as preparing and distributing educational and awareness-raising tools and, recently, deployment of digital content using online tools.

Compliance survey

To check on the permeation of compliance management in KITZ and each Group member company and visualize potential compliance risks, KITZ surveys employees on compliance.

The risks identified through this survey are utilized in such efforts as business process improvements and employee education in accordance with their degrees of importance.

Prevention of bribery and corruption

The KITZ Group has been thoroughly tackling to prevent bribery and corruption, which is one of the highest-priority social issues to realize the sustainable society.

In order to achieve the same, the KITZ Group has endorsed the United Nations Global Compact (UNGC) and has proclaimed that it will "work against corruption in all forms, including extortion and bribery." The KITZ Group has also established and publicized the "KITZ Group Global Anti-Bribery Policy" that clarifies the basic policy on bribery prevention in the KITZ Group and the rules to be followed by its directors, audit and supervisory board members, officers and employees, and clearly prohibits bribery and corruption in the "KITZ Group Compliance Code of Conduct" as well.

In addition, the KITZ Group is also asking its suppliers to comply with, and respect, its "Supplier Guidelines", which includes the prevention of bribery and corruption.

» KITZ Group Global Anti-Bribery Policy (PDF 109KB)

Risk management

Basic thinking on risk management

To control various risks that could have severe impacts on corporate management, KITZ carries out risk management in KITZ and each Group member company.

» Basic Policy on Risk Management (PDF 89KB)

Risk management structure

In the KITZ Group, the executive officer in charge of risk management, who also serves concurrently as a member of the C&C Control Committee, which is chaired by the president, promotes risk management at KITZ and each Group member company based on basic policies decided on by that committee under the supervision of the board of directors.

Risk analysis and evaluation

In the KITZ Group, the importance of anticipated risks related to business activities (totaling 128 risk items) is judged quantitatively along the two axes of their frequency of occurrence and their impact on management based on the basic policy and evaluation standards for risk evaluation formulated by the C&C Control Committee to identify important risks and key risks. Specifically, risks are graded by each evaluation item under the standards for determining their frequency of occurrence and their impact (consisting of the items of human injury, physical damage, liability, loss of profit, loss of trust, and environmental damage), and each is grouped into one of the four zones of high-damage/high-frequency, low-damage/high-frequency, high-damage/low-frequency, or low-damage/low-frequency based on a four-quadrant risk-mapping scale.

Risk management implementation flow

Based on the results of risk evaluation by each organization and through the Management Conference, the KITZ Group identifies important risks and key risks that have a particularly high possibility of significantly impacting management among the important risks, chooses whether to address each risk through avoidance, transfer, mitigation, or retention in light of its importance, and drafts and implements necessary countermeasures under the responsibility of the individual executive officers and Group company presidents.

Important risks and key risks thus identified, and countermeasures drafted for them, are shared with the general manager of the Internal Audit Office. The Internal Audit Office evaluates the state of development and operation of risk management from an independent perspective through means that include checking on the progress and results of related countermeasures through business auditing and other activities.

In addition, based on reports on such matters as priority risks identified in the Management Conference and countermeasures drafted for them, as well as the results of evaluation by the Internal Audit Office, the board of directors carries out necessary deliberation and checks on the ultimate results of implementing countermeasures, among other activities involved in final decision-making and oversight on risk management in the Group.

Supervision by the board of directors


Corporate Governance