Corporate governance

Basic approach to corporate governance

The Aichi Steel Group believes in the importance of realizing a sustainable society through business activities in order to achieve sustainable growth and improve medium- to long-term corporate value. Based on this belief, we work to enhance corporate governance so that we can manage our businesses with a high level of fairness, transparency, and efficiency in accordance with our vision, and build strong relationships with our shareholders, customers, and all other stakeholders.

Executive management structure changed to strengthen governance

To create a governance system that can handle difficult competitive environments, we changed our executive management structure to focus on “roles” that can achieve faster decision-making and speedier business execution.

We started by eliminating the original Officer and Executive Officer positions, establishing a new Executive Officer position that sits above Senior Chief as an employee position, and reducing executive ranks and numbers from 34 to 12 to simplify the structure. In addition to the roles of General Manager and Company President, we established a new Officer position, instead of the previous person in charge of a division, in order to further accelerate decision-making and business execution.

Roles of each position

Managing Executive Officer Supports the President from a management perspective while fulfilling the roles of General Manager and Company President
Executive Officer Executes business functions on the spot through prompt management decisions, and shares information with the management team
Officer Oversees and takes responsibility for all operations within a department as the chief officer in charge of the department

Corporate governance structure

Aichi Steel uses an Audit & Supervisory Board. This system concentrates authority and responsibility for business execution to the Board of Directors, as the ultimate body for management decision making, and assigns the role of audit and supervision of the Board of Directors to the Audit & Supervisory Board and Audit & Supervisory Board Members, which are independent of the Board of Directors and business execution. We believe this system achieves appropriate management decisions and execution of duties while providing sufficient organizational checks and balances.

We employ two independent outside Directors and two outside Audit and Supervisory Board Members, with extensive experience and broad insights as managers, who supervise and audit the execution of duties of the Directors, and we develop systems that function effectively to ensure objectivity and neutrality of management oversight.

Internally, we also develop and properly operate systems to ensure the appropriateness of our operations in line with the Internal Control System Basic Policy.

Corporate governance system diagram

Status of the Board of Directors and the Audit & Supervisory Board

The Board of Directors, comprising Directors appointed by shareholders, makes decisions regarding material matters affecting the Company through discussion and mutual supervision regarding such aspects as necessity, legality, and efficiency. Audit & Supervisory Board Members and the Audit & Supervisory Board examine these decisions for legal violations and other compliance matters. From fiscal 2018, discussions, including with outside Directors, have been held several times a year on special topics such as challenges and future business strategies.

2016 2017 2018 2019 2020
Directors and Audit &
Supervisory Board Members
15 15 10 10 10
Outside Directors 2
(including 1 female)
2
(including 1 female)
2
(including 1 female)
2
(including 1 female)
2
(including 1 female)

Attendance rates in fiscal 2020

No. of
Meetings
Director attendance rate Auditor attendance rate
Inside
Directors
Outside
Directors
Standing
members
Outside
members
Board of Directors 14 97.8% 92.9% 100% 100%
Audit &
Supervisory Board
13 -
(Directors are not members of
the Audit & Supervisory Board)
100% 100%

Evolution of corporate governance

Over the years, Aichi Steel’s corporate governance structure has constantly evolved to improve the effectiveness of the Directors and strengthen governance to manage businesses with a high level of fairness, transparency, and efficiency. With the rapidly changing business environment of recent years, from the once-in-a-century transition of the automotive industry to efforts toward carbon neutrality, we have implemented further reforms, including simplification of the executive management structure and adoption of a new Executive system, to accelerate decision-making and business execution. Going forward, we will continue these efforts to accurately understand the business environment and strengthen governance.

Board of Directors and Audit
& Supervisory Board
Other Committee and
Executive Systems
Earlier Appointment of outside Audit & Supervisory Board Members
2005 Tenure of Directors reduced to one year (2006) Established CSR Committee (2006)
2010 Number of Directors reduced through introduction of an Executive Officer system (2013) Introduced Executive Officer system (2013)
2015 Appointment of outside Directors (2015)
Number of outside Directors increased (2016)
Started evaluating effectiveness of Board of Directors (2016)
Established Director Remuneration and Personnel Planning Committee (2018)
Established Corporate Planning Committee (2017)
Disbanded CSR Committee (2018)
2020 Introduced Restricted Stock Remuneration Plan (2020) Managing Executive Officer and Senior Managing Executive Officer consolidated into a single Managing Executive Officer role (2020)
Introduced Executive system to simplify executive management structure and accelerate business execution (2021)

Selection and removal of senior management, and nomination of Director and Audit & Supervisory Board Member candidates

In November 2018, we established a voluntary Executive Remuneration and Nomination Committee, with the majority of members being independent outside Directors and the chairman also being an independent outside Director. For the purpose of selection and removal of senior management, and nomination of Director and Audit & Supervisory Board Member candidates, the Committee regularly and as required evaluates and carefully considers experience and knowledge, performance and other factors, and then reports to the Board, which makes the necessary decisions.

Outside Directors and outside Audit & Supervisory Board Members

When selecting outside executives, we refer to the Enforcement Rules for Securities Listing Regulations established by the stock exchange. After comprehensive evaluations of candidate knowledge, experience and abilities, we select persons who we judge capable of overseeing our business.

List of outside Directors and outside Audit & Supervisory Board Members

Outside Directors

Name Reasons for selection
Koichi Yasui Mr. Koichi Yasui has abundant experience, broad insight, an excellent and highly ethical character acquired through active performance as a corporate manager following experience in important positions in the sales division of Toho Gas Co., Ltd., a core company in the Chubu area. Leveraging these assets, the company expects that he will devote himself to strengthening supervisory functions for overall management. Since 2015, as an Outside Director, with regard to important matters in Board of Directors deliberations, he has provided proactive opinions and proposals etc. that come from his independent position and distinct viewpoint from a background in a different industry, helping to strengthen corporate governance. Thus, he was selected by the company.
Yuko Arai Ms. Yuko Arai has abundant experience, broad insight, an excellent and highly ethical character acquired through active performance as a corporate manager following experience in important positions in the sales division of All Nippon Airways Co., Ltd., which has developed its business globally and ANA Akindo Co., Ltd.. Leveraging these assets, the company expects that she will devote herself to strengthening supervisory functions for overall management. Since 2016, as an Outside Director, with regard to important matters in Board of Directors deliberations, she has given proactive opinions and proposals etc. that come from her independent position and distinct viewpoint from a background in a different industry, helping to strengthen corporate governance. Thus, she was selected by the company.

Outside Audit & Supervisory Board Members

Name Reasons for selection
Koichi Ito Mr. Koichi Ito has abundant experience, broad insight, and an excellent and highly ethical character acquired through active performance in important positions in the sales division of Toyota Industries Corporation, which operates globally. Moreover, he will attend our Board of Directors and Audit & Supervisory Board meetings and provide the management of the company with useful opinions and advice. Thus, he was selected by the company.
Katsuyuki Ogura Mr. Katsuyuki Ogura has abundant experience, broad insight into accounting, finance and audit businesses, and an excellent and highly ethical character acquired through active performance in administrative divisions, including accounting and personnel affairs, of Toyota Motor Corporation, which operates globally. Moreover, he will attend our Board of Directors and Audit & Supervisory Board meetings and provide the management of the company with useful opinions and advice. Thus, he was selected by the company.

Executive remuneration

When determining executive remuneration, the Executive Remuneration and Nomination Committee, which has a majority of members being independent outside Directors and the chairman also being an independent outside Director, carefully considers the issue and then reports to the Board of Directors, which makes the necessary decisions.

Remuneration for Directors, excluding outside Directors, comprises a fixed monthly remuneration, bonuses such as performance-linked bonuses, and stock compensation such as non-monetary remuneration.

Monthly remuneration is determined in accordance with individual roles and responsibilities up to a maximum limit set at the General Meeting of Shareholders. Bonuses are determined with full consideration given to factors such as performance linked to consolidated operating profits and employee bonus levels. Bonuses are determined as short-term incentives and deliberated on by the Board of Directors. Stock compensation is provided as a medium- to long-term incentive for further sharing value with shareholders and as an incentive to continue improving corporate value. It is allocated as restricted stock.

Remuneration for outside Directors and Audit & Supervisory Board Members comprises monthly remuneration only, up to a maximum limit set at the General Meeting of Shareholders.

Total remuneration, total remuneration by type, and number of executives for each executive classification

(Fiscal 2020)

Executive classification Total
remuneration
(million yen)
Total remuneration by type
(million yen)
Number of
executives
Fixed
remuneration
Performance-
based
remuneration
Retirement
bonus
Directors
(excluding outside Directors)
233 179 29 24 5
Audit & Supervisory Board Members
(excluding outside Audit &
Supervisory Board Members)
68 68 - - 2
Outside executives 36 36 - - 4

Ensuring effectiveness of the Board of Directors

To confirm the effective operation of the Board of Directors as a whole, we survey all members of the Board of Directors, including outside Directors and Audit & Supervisory Board Members, and report the evaluation results to the Board of Directors.

These results confirm that the composition, operation, deliberation and oversight of business execution of the Board of Directors are generally appropriate, and that the Board of Directors as a whole operates effectively. On the other hand, they also show that some issues remain, including greater provision of information to outside executives.

Going forward, we will strive to further improve effectiveness in response to these issues and changes in the social environment.

Communication with shareholders and investors

In line with our policy for constructive dialogue with shareholders, we actively engage in dialogue with shareholders and investors and work to promote mutual understanding.

Executives in charge of accounting are responsible for dialogue with shareholders. They work to enhance engagement through channels including individual meetings, regular briefings on financial results for institutional investors and on company information for individual investors, and plant tours. When necessary, opinions and other information gained through dialogue are provided internally as feedback.

We maintain a period of silence between the day after closing accounts through to the day before announcing results. While limiting dialogue with shareholders and investors, we take other necessary measures in accordance with our company rules to ensure proper management of insider information within the company.

Main IR activities

  supplementary explanation
Regular briefings for individual investors We hold briefings organized by securities companies. We discuss various topics including company overviews, financial results, and medium-term management plans.
Regular briefings for analysts and institutional investors We hold briefings for analysts and institutional investors twice a year (end of second quarter and end of fiscal year). We discuss financial results and medium-term management plans.
Website publication of IR materials We publish financial summaries, securities reports, business reports, medium-term management plans, annual report briefing materials, and Aichi Steel Integrated reports (CSR, Financial, and Environmental reports).
Division/contact for investor relations Finance & Accounting Div.

Directors and Audit & Supervisory Board Members

  1. Takahiro Fujioka
    President
    Attendance at Board of Directors meetings
    14 of 14 (100%)
  2. Motoshi Nakamura
    Executive Vice President
    Attendance at Board of Directors meetings
    14 of 14 (100%)
  3. Naohiro Yasunaga
    Director and Managing Executive Officer
    General Manager, Manufacturing Innovation Headquarters
    Safety and Environmental Officer
    Attendance at Board of Directors meetings
    14 of 14 (100%)
  4. Katsunori Kojima
    Director and Managing Executive Officer
    Smart Company President
    Attendance at Board of Directors meetings
    11 of 11 (100%)
  5. Koichi Yasui
    Outside Director
    Attendance at Board of Directors meetings
    13 of 14 (93%)
  6. Yuko Arai
    Outside Director
    Attendance at Board of Directors meetings
    13 of 14 (93%)
  7. Hiroaki Chino
    Audit & Supervisory Board Member
    Attendance at Board of Directors meetings
    14 of 14 (100%)
  8. Hirofumi Yokota
    Audit & Supervisory Board Member
    New
  9. Koichi Ito
    Outside Audit & Supervisory Board Member
    Attendance at Board of Directors meetings
    14 of 14 (100%)
  10. Katsuyuki Ogura
    Outside Audit & Supervisory Board Member
    Attendance at Board of Directors meetings
    14 of 14 (100%)

Number of Directors 6

Percentage of
outside Directors
(number of female
Directors)
33%(1

Number of meetings of
the Board of Director
14

Attendance rate at
Board of
Directors meetings
97.6%