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Corporate Governance
Policies and Basic Approach
The Taisei Group’s fundamental approach to corporate governance is to ensure the swiftness, appropriateness, fairness, and transparency in management decision-making in order to earn the trust of society while pursuing sustained development as a business.
Sustainability Governance and Oversight
Overview of Corporate Governance System
Taisei Corporation has chosen a company structure with an Audit & Supervisory Board. The board of directors (the “Board”) focuses on the Company’s sustainable growth and the enhancement of corporate value in the medium-to-long-term. Its primary roles are: (i) to indicate the future directions from wide viewpoints in respect of the corporate strategy, (ii) to establish an environment that supports appropriate risk-taking by the senior management, and (iii) to effectively oversee the management and Members of the Board from the independent and objective viewpoints. The board comprises twelve (12) members: eight (8) from within the Company and four (4) external members. These external members of the Board, consisting of three (3) men and one (1) woman, provide an objective perspective, enriching board deliberations with diverse views and strengthening management oversight.
To invigorate its operations, the Board has established several internal committees: the Governance System Review Committee, the Executive Personnel Committee, the Remuneration Committee, and the Sustainability Committee. The Management Committee, serving as the highest decision-making body on the execution side, deliberates and resolves business execution matters delegated by the Board. Chaired by the President, the Committee includes eleven (11) members chosen by the Board.
Furthermore, the Company has set up the Sustainability Promotion Committee and the Risk Management Committee. These operational committees deliberate on matters concerning consultations with the Management Committee and the President. To ensure thorough compliance, the Compliance Committee, chaired by an external expert, has been established as a special committee to address consultations with the President.
The Audit & Supervisory Board receives reports from each member about the status and outcomes of their audits. They discuss and decide on statutory issues and those related to the performance of Audit & Supervisory Board members’ duties. Periodic reports on audit plans and results are also received from both the internal Auditing Department and the external Accounting Auditor. This board includes six (6) members: two (2) internal and four (4) external, ensuring a neutral and objective oversight mechanism with the help of External Audit & Supervisory Board Members who possess specialized knowledge and maintain a high level of independence.
Evolution of the Company’s Governance
Corporate Governance Structure (As of July 1, 2023)
Committees within the Board (As of July 1, 2023)
*Please refer to the following links for details on the chairpersons and members of each committee.
Information about Management Menbers
Skill Matrix
Election, Dismissal, and Development Plan of Executives
When nominating the Member of the Board candidates and appointing executive officers, we consider qualifications and overall balance based on individual backgrounds, achievements, personalities, knowledge, experience, and abilities. Additionally, we take into account diversity aspects, including gender, international exposure, career history, and age. Our aim is to select individuals who can contribute to the sustainable growth of the Company and enhance its value in the medium-to-long-term.
Furthermore, the Board identifies skills essential for achieving medium- to long-term objectives and the Medium-Term Business Plan. Nominations for Board membership are based on these identified skills. If the qualifications expected at the time of election are not recognized, the possibility of dismissal is considered.
Regarding the development plan for executives, we identify and nurture management candidates to ensure their retention and commitment. Our training programs focus on equipping them with a broad understanding of the external business environment and proficiency in corporate governance and management strategies.
In the program, we offer opportunities to gain insights from the management perspective from the early stages, such as participating as observers in important meetings including Management Committee, and organizing sessions to exchange opinions with external Members of the Board. By attending externally organized training sessions, our management candidates get the opportunity to interact with leaders from various industries, aiming to broaden their knowledge and network. We are actively working to develop this approach systematically.
Support System for External Executives
The Secretarial Department supports our External Members of the Board, while the Audit & Supervisory Board Members’ Department aids our External Audit & Supervisory Board Members. Before each monthly the Board meeting, relevant materials are distributed and pre-meeting briefings are held. These sessions allow for explanations by internal Members of the Board on agenda items. Regular opinion-exchange sessions and site visits further foster information sharing and collaboration among the Members of the Board. This support structure ensures thorough and lively discussions during Board meetings.
Remuneration, Etc.
①Matters Concerning Policies on Determination of the Remuneration, Etc. for Each Member of the Board
Based on the deliberation by the Remuneration Committee, the Board decided on a policy on determination of the content of compensation, etc. for each Member of the Board at the Board meeting held on February 25, 2021. The details are as follows:
1. Fundamental policy on the determination of the details of remuneration, etc. for each Member of the Board
The remuneration, etc. for Members of the Board of the Company consists of fixed compensation and performance-based compensation, both of which are monetary compensation, as well as non-monetary performance-based compensation (stock compensation). The above policy of remuneration was decided comprehensively considering the matters such as the business scale, content, and performance of both the Company and the Taisei Group, as well as the duties and responsibilities of each Member of the Board.
When determining the details of remuneration, etc. for each Member of the Board, the Board will decide the details of remuneration for each Member of the Board, taking account of the responsibilities and positions of each Member of the Board (including the concurrent positions as an Executive Officer, if applicable; the same applies hereafter), based on deliberation at the Remuneration Committee, which is authorized to deliberate the details of remuneration, etc. before the Board’s decision. The Remuneration Committee shall comprise of Members of the Board (internal) and the same numbers of External Members of the Board as those of Internal Members and shall be chaired by an External Member of the Board. Furthermore, an External Audit & Supervisory Board Member shall be added as a member of the Committee from the viewpoint of securing adequateness of the deliberations at the Committee. Thus, the Remuneration Committee establishes the system to properly consider the details of remuneration, etc. for each Member of the Board.
Schematic diagram of remuneration of Members of the Board of the Company
Composition of the Remuneration Committee
2. Policy on determination of the amount and the calculation methods of fixed Compensation
The fixed compensation shall be paid to each Member of the Board on a fixed date every month during his or her term of office, and shall be determined according to the responsibilities of each Member of the Board, comprehensively taking account of the Company’s business scale, content, and the duties and responsibilities of each Member of the Board, and the fixed compensation to each Member of the Board other than External Members of the Board, shall be progressively increased according to his or her position.
3. Policy on determination of the contents, and the calculation methods of the amount or the number of performance indicators for performance-based compensation; and policy on determination of the contents and the amount, or the number and the calculation methods for non-monetary compensation
The performance-based compensation is established for the purpose of raising the awareness of each Member of the Board to contribute to business performance improvement and enhancement of corporate value. However, External Members of the Board are not eligible for the performance-based compensation
(a) Performance-based compensation (monetary compensation)
The performance-based compensation (monetary compensation) shall be paid to each Member of the Board on a fixed date every month during his or her term of office and the contents and the amount of the compensation shall be determined based on our Company’s short-term performance.
Net income attributable to owners of parent in the consolidated statement of income for the most recent consolidated fiscal year is used as a performance indicator because it is an indicator that shows the final results of Taisei Group’s business activities, and provides the system so that the amount paid to each Member of the Board will be progressively increased according to his or her positional ranks.
(b) Performance-based compensation (stock compensation)
The performance-based compensation (stock compensation) is designed to raise the awareness of Members of the Board to contribute to improving medium- to long-term business results and enhancing corporate value by clarifying linkage between the remuneration of Members of the Board with Taisei Group’s business results and the value of share, and by sharing with shareholders not only the benefits of a rise in share prices but also the risk of a decline in share prices. The stock benefit trust (= Board Benefit Trust) method is adopted, and the date of the Annual General Meeting of Shareholders is the grant date. In accordance with the “Officers’ Share Benefit Regulations” established by the Board, each year during his or her term of office, points are granted and accumulated to one (1) share per point. In the event that a Member of the Board retires and satisfies the beneficiary requirements specified in the “Officers’ Share Benefit Regulations,” the Company’s shares equivalent to the cumulative number of points will be distributed after retirement through prescribed procedures to determine the beneficiary. A part of the payment may be made in cash equivalent to the market value of the Company’s shares instead of the Company’s shares.
As well as the performance-based compensation (monetary compensation), net income attributable to owners of parent in the consolidated statements of income for the most recent consolidated fiscal year is used as a performance indicator because it is an indicator that shows the final results of Taisei Group’s business activities.
The points to be granted to each Member of the Board are determined separately for Representative Directors and other Members of the Board respectively considering the status of achievement of business performance, duties and responsibilities.
4. Policy on determination of the ratio of each type of compensation to be applied to the amount of remuneration, etc.
With respect to performance-based compensation, the Company has set performance values that serve as criteria for monetary compensation and stock compensation and has established a rule that the ratio of performance-based compensation will increase when performance is favorable compared to the criteria.
From a medium- to long-term perspective, the Company has a plan to review for reducing the proportion of fixed compensation and increasing the proportion of performance- based compensation.
However, the compensation for External Members of the Board shall be fixed compensation only.
②Matters Related to the Policy on Determination of the Amount and the Calculation Methods of Remuneration, Etc. for Audit & Supervisory Board Members
The remuneration, etc. for Audit & Supervisory Board Members consists only of fixed remuneration, and the amount for each Audit & Supervisory Board Member is determined by the Audit & Supervisory Board through consultation.
③Matters concerning the resolution of the General Meeting of Shareholders on the remuneration, etc. for Members of the Board and Audit & Supervisory Board Members
④The total amount of remuneration for Members of the Board and Audit & Supervisory Board Members, etc.
Activities / Efforts
Analysis and Evaluation of the Overall Effectiveness of the Board
The Board of the Company analyzes and evaluates effectiveness of the Board and discloses the results annually.
1. FY2022 initiatives based on FY2021 evaluation
In order to strengthen supervisory functions and invigorate the deliberations at the Board, and to accelerate decision-making on business execution, the Company reviewed its governance system in March 2020, which includes a review of agenda items to be resolved by the Board, and further delegation of its authority to executives accordingly.
Taking account of the review, since FY2020, we have strived to enhance the effectiveness of the Board, and we have been also trying to address the issues found in the effectiveness review in FY2021 as follows:
- a)Enhancing discussions on the appropriate governance system, including the size and composition of the Board from a medium- to long-term perspective
As an ongoing issue, the Executive Personnel Committee deliberated on the topics to be considered, including the composition of the members of the Board. - b)To the appropriate extent, further delegation of authority to executives and the implementation of deeper deliberations on important management issues
Based on the analysis of the agenda items, the Board secured enough time for deliberations by narrowing down the number of agenda items, reviewing the matters to be reported, making documents and briefings in a concise manner. - c)Improving the effectiveness of deliberations at the Committees within the Board
In accordance with the topics to be deliberated, we made efforts to deepen deliberations on important issues by ensuring sufficient deliberation time. - d)Discussing specific measures to strengthen the effectiveness of group governance
In order to restructure its group governance, the Company implemented measures such as establishing the system to exchange personnel between the Company and the Group companies and setting up a management committee at each of the major Group companies.
2. Overview of the FY2022 evaluation
The method used to evaluate effectiveness in FY2022, and the results of the evaluation are as outlined below.
(1) Evaluation Method and Process
- The secretariat prepared a self-evaluation questionnaire (evaluation sheet for the Board) and obtained approval thereof from the Board, and all Members of the Board and Audit & Supervisory Board conducted the self-evaluations.
- The evaluation items in the questionnaire are as listed below. Items 1-5 consisted of five-grade assessments and free descriptions, and Item 6 comprised free descriptions.
《Evaluation items》
1. Self-evaluation as a Member of the Board; 2. Structure and operation of the Board; 3. Effectiveness of the Board; 4. Support system; 5. Deliberation and monitoring regarding the medium- to long-term vision and the Medium-Term Business Plan; 6. General Evaluation of the Board
- The External Members of the Board conducted an overall assessment towards the result of the self-evaluations collated by the secretariat.
- At the same time, a lawyer prepared a third-party’s opinion towards the result of self-evaluations.
- Then the Board deliberated on the effectiveness based on the overall assessment and the third-party’s opinion.
(2) Overview of the Evaluation Results
- Since the Board was able to secure a considerable deliberation time towards medium- and long-term management issues, it was assessed that the functions of the Board were improving, while there were some matters which needed to improve from the standpoint of the roles and responsibilities of the Board. In order to further enhance the effectiveness of the Board, the Board will continuously work on the followings:
a) To enhance discussions on the size and composition of the Board and other aspects of the governance system
b) To delegate further authority to executives to the appropriate extent
c) To invigorate deliberations furthermore based on the roles and responsibilities of the Board from a medium-to long-term perspective
Dialogue with Shareholders and Investors
Taisei Corporation is committed to fostering constructive dialogues with shareholders and investors as we strive for sustainable growth and enhanced corporate value in the medium-to-long-term. Our timely and appropriate information disclosures lay the foundation for these dialogues.
In alignment with our Information Disclosure Policy and the Fundamental Corporate Governance Policy, we ensure compliance with legal and stock exchange regulations when revealing financial results, management strategies, risk factors, governance structures, human capital management, intellectual property, and sustainability initiatives. We also strive to share up-to-date insights about our business activities with stakeholders through our website and annual reports.
For dialogue with shareholders and investors, our actions are grounded in our IR Policy. We promote constructive dialogue with our stakeholders through interviews, IR briefings, and general meetings of shareholders. Specifically, we conduct semiannual financial results briefings, hold individual meetings for both domestic and foreign institutional investors, and engage in overseas IR activities. Our Taisei Circle newsletter serves as a communication tool, offering shareholders insights into our focused business activities and ESG initiatives.
Internally, we document these dialogues and interactions. Reports capturing these engagements are shared monthly with senior management and presented in detail to the Members of the Board at least twice a year, ensuring that our investor relations activities contribute to enhancing our management capabilities.
Ensuring the Credibility of Financial Reporting
Internal controls on financial reporting based on the Financial Instruments and Exchange Act are recognized as one of the most important issues for a corporation. We have set up the internal systems including daily monitoring to ensure the credibility of the financial reporting disclosed to the public. The effectiveness of the system is evaluated by the Auditing Department and audited by KPMG AZSA LLC. The results are disclosed in the Internal Control Report and in the Audit Report of Internal Controls. We will fulfill our social responsibility as a corporation by continuing to ensure the effectiveness of these internal controls.
In order to continue to operate the internal control systems relating to financial reporting in a sound manner, we are also publishing messages from the President, implementing e-learning, and other campaigns to raise awareness among executives and employees.
Promotion of Internal Controls
At Taisei Corporation, in May 2006, the Board established the Fundamental Policy to Enhance Operational Compliance Systems, which was revised in July 2022. This policy is designed to ensure that as a Group, we conduct operations both appropriately and efficiently and maintain the reliability of financial reporting. To further enhance compliance and risk management, the Company undertakes various measures. This includes providing training on compliance with the Antimonopoly Act, conducted by external lawyers, primarily targeting executives and staff in the sales division.
Top Management Seminar
Top management convenes for keynote lectures by external speakers and to engage in discussions about management challenges, applying insights to organizational operations.