Securities Code:8840

Corporate Governance

This section provides basic stance on corporate governance and progress with other policies.

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Basic Approach to Corporate Governance, Capital Structure, Corporate Attributes, and Other Basic Information

We are striving to build an optimal corporate governance with the aims of ensuring soundness of management, appropriate information disclosure and transparency, and improving efficiency. As a “Company with Nominating Committee, etc.” we have separated the supervision from the business execution and clarified the responsibilities of the Board of Directors, etc. in order to reinforce the function of checks and balances for business execution and accelerate the decision-making process. Moreover, Daikyo is actively strengthening risk management by expanding and enhancing, etc. the compliance framework. Through these measures, the Company aims to cooperate appropriately with all stakeholders, and endeavors to ensure fair treatment of shareholders and actively engage in constructive dialogue with them.

CORPORATE GOVERNANCE REPORT [657KB]

(As of June 28, 2018)

Recent Actions to Reinforce Corporate Governance

2005 Shift to a “Company with Committees” system (currently, “Company with Nominating Committee” system) Seeking to separate the supervisory functions from the executive functions in order to reinforce the system of checks and balances and accelerate the decision-making process, the Group established three committees: Audit Committee, Nominating Committee, and Compensation Committee. Outside directors make up the majority of each committee.
2006 Integration of administrative departments Strengthened Group consolidated management by integrating the administrative departments of two companies―Daikyo Kanri Incorporated (now DAIKYO ASTAGE INCORPORATED) and Daikyo Jutaku Ryutsu Incorporated (now DAIKYO ANABUKI REAL ESTATE INCORPORATED)―into the relevant administrative departments of DAIKYO INCORPORATED (Daikyo). Under this arrangement, both companies delegate discretion regarding certain administrative matters to the relevant administrative departments of Daikyo.
2008 Reorganization of the Group Compliance Dept. into the Group Internal Control Promotion Dept. (now Group Legal and Compliance Dept.) Further strengthened and upgraded internal controls, including responses to Companies Act and Financial Instruments and Exchange Act.

Reasons for Non-compliance with the Principles of the Corporate Governance Code

(Principle 2-6)
With respect to conflicts of interest between beneficiaries of corporate pension funds and the Company, the important investment decisions are made by the resolution of the board of delegates, including the head of Finance, Accounting and Corporate Planning Headquarters and appropriate control is implemented. Currently a former officer responsible for finance is assigned as president of the corporate pension funds, however, as systematic promotion and assignment of human resources with appropriate capacity for investment are insufficient, we continue to make efforts to establish a personnel and management framework.

(Principle 4-1-3)
We established opportunities for executive officers, etc. to participate in the group management by attending the Group’s important meetings, etc. from the aspect of fostering successors. In addition, we clarified the responsibilities of the individual executive officers and continue to review the use of performance evaluation for those responsibilities for fostering successors by establishing the governance system from the previous fiscal year. However, the succession plan and fostering successors were not thoroughly discussed, and we therefore continue discussion at the Board of Directors.

Disclosure Pursuant to the Principles of the Corporate Governance Code

(Principle 1-4)
The Company does not possess cross holdings of shares.

(Principle 1-7)
The Company has determined that “when conducting transactions with officers of the Company, the transactions will be conducted under the same conditions as for an ordinary customer” and that “selection of business partners shall be fair, transparent, and in accordance with Group Business Partner Selection Regulations.” In principle, the Company’s policy is to disclose important transactions with related parties. Furthermore, in transactions with major shareholders, the Company examines each transaction with respect to profitability, importance, and transparency. Transactions with the Company’s officers that are considered to be self-dealing or pose a conflict of interest require the approval of the Board of Directors in accordance with the provisions of the Companies Act. Transactions with related parties other than the Company’s officers are also subject to blanket approval by the Board of Directors.

(Principle 2-6)
With respect to conflicts of interest between beneficiaries of corporate pension funds and the Company, the important investment decisions are made by the resolution of the board of delegates, including the head of Finance, Accounting and Corporate Planning Headquarters and appropriate control is implemented.
Currently a former officer responsible for finance is assigned as president of the corporate pension funds, however, as systematic promotion and assignment of human resources with appropriate capacity for investment are insufficient, we continue to make efforts to establish a personnel and management framework.

(Principle 3-1)
(i) We disclose management philosophy, etc. on the Company’s homepage and management strategy and plan in financial results, respectively.
(Reference)
Management philosophy, etc. http://www.daikyo.co.jp/english/company/philosophy.html
Management strategy and plan (financial results) http://www.daikyo.co.jp/english/reports/fiscal.html

(ii) With respect to our basic philosophy and basic policy on corporate governance, please refer to (1 Basic Approach to Corporate Governance, Capital Structure, Corporate Attributes, and Other Basic Information 1. Basic approach)

(iii) With respect to the policy and procedure when the Board of Directors determines compensation of management executives and directors, please refer to (2 Business Administration Organization and Other Corporate Governance System related to Management Decision Making, Execution and Supervision, 1. Matters concerning Composition of Organization and Organizational Operation, etc., (Regarding Compensation for Directors and Executive Officers), Disclosure Details for Policy for Determining Compensation Amount or its Calculation Methods, (1) Policy and Procedure concerning the Determination of Compensation for Directors and Executive Officers

(iv) The Company determines details of the agenda for the election and dismissal of directors, which are submitted to the General Meeting of Shareholders at the Nominating Committee independently from the Board of Directors. In addition, it deliberates the agenda for the election and dismissal of executive officers to be submitted to the Board of Directors.
The Company has not determined a policy to elect directors; however, it has been determined that the directors have excellent character and insight as well as extensive knowledge and that the inside directors must be less than 65 years old as the age criteria.
With respect to the election of executive officers, the Company introduced performance evaluation for executive officers from the previous fiscal year and has utilized the evaluation at the deliberation of the Nominating Committee. The Company continues to systematize the performance evaluation for executive officers along with the design of compensation for officers. With respect to dismissal, in case that it is deemed that directors and executive officers have not fulfilled their functions based on evaluation such as company performance, the Nominating Committee may deliberate dismissal.

(v) The term of office of directors and executive officers for the Company expires upon the last day of the Ordinary General Meeting of Shareholders held with respect to the last business year that falls within one year after their election. According to the procedures stated in the above (iv), each year, the Company deliberates the agenda for the election of directors to be submitted to the last Ordinary General Meeting of Shareholders for the fiscal year and that of executive officers to be submitted to the Board of Directors held on the applicable day of the General Meeting of Shareholders.
With respect to reasons for electing candidates for directors including new candidates who are management executives, they are as described in the notice of the Ordinary General Meeting of Shareholders.
The notice of the Ordinary General Meeting of Shareholders. (http://www.daikyo.co.jp/english/stock/meeting.html) In addition, with respect to the election of executive officers, the Company makes judgment in line with the requirements stated in the above (iv) based on individual business experience and knowledge. The personal histories of individual executive officers are posted on the Company’s homepage. The composition of officers (http://www.daikyo.co.jp/english/company/board.html) In addition, in case that it is deemed that directors and executive officers have not fulfilled their functions, based on evaluation such as the company performance, the dismissal is deliberated.

(Principle 4-1-1)
With respect to the scope of delegating to management by the Board of Directors, please refer to (2 Business Administration Organization and Other Corporate Governance System related to Management Decision Making, Execution and Supervision, 3. Reasons for Choosing the Current Corporate Governance System, (1) Roles and Responsibilities of the Board of Directors).

(Principle 4-9)
With respect to criteria for assessing the independence and qualities of independent outside directors, please refer to (2 Business Administration Organization and Other Corporate Governance System related to Management Decision Making, Execution and Supervision, 1. Matters concerning Composition of Organization and Organizational Operation, etc. (Regarding Independent Officers), Other Matters concerning Independent Officers).

(Principle 4-11-1)
For the Company’s approach to the composition of the Board of Directors, please refer to “(2) Matters concerning the Board of Directors” in “2-2. Matters concerning Functions such as Business Execution, Auditing, Supervision, Appointment and Determining Compensation.”

(Principle 4-11-2)
Concurrent posts of officers, etc. at other listed companies are set forth in personal histories of directors and executive officers in securities reports. Further, we target at no more than five companies where outside directors hold positions.

(Principle 4-11-3)
The Board of Directors maintains a free and open-minded atmosphere as well as constructive discussions, and each director expresses and discusses effectively with the respective knowledge at the Board of Directors and in each committee, and outside directors can maintain a moderately tense relationship with the Executive Department. Due to the above, it can be assessed that the Board of Directors fully fulfills its responsibilities for supervising management.
In addition, with respect to matters for improvement from last year, we consider that there was a certain level of improvement due to diversification and activation of discussions through regular meetings and more intelligent agenda selection as well as early distribution of materials for the Board of Directors. However, we confirmed that there is further room for improvement for deepening of discussions.
Based on this result of the evaluation for the effectiveness, we will further enhance the effectiveness of the Board of Directors by sorting out the particularly important issues as follows and continuing to make efforts in the future, as well.

  • Detecting mid- to long-term issues/active discussions to contribute to the improvement of corporate value
  • Continuous monitoring of the status of progress for the Medium-term Management Plan
  • Active discussions for investigating the cause when the business plan by segment is not achieved.
  • Implementation of regular meetings consisting of only outside directors

With respect to these issues, the Chairperson of the Board of Directors and the Secretariat of the Board of Directors will mainly strive to improve.

(Principle 4-14-2)
Executive officers shall strive to acquire the necessary knowledge in management such as by attending the internal important meetings, etc. and we provide external training and coaching as appropriate for the elected executive officers. With respect to directors, internal directors shall make a profound study in the same manner as above while outside directors shall, since they have excellent personality and insight and have extensive knowledge, implement updating the knowledge for the Company through the progress reports of the business department and financial condition report, etc.

(Principle 5-1)
With respect to the policy concerning constructive dialogue with shareholders, please refer to (3. Implementation of Measures concerning Shareholders or Any Other Interested Parties, 2. Activities concerning IR, Other, <Policy for Promoting Constructive Dialogue with Shareholders>.

Other Special Circumstances that May Significantly Affect the Company’s Corporate Governance

Between the Company and the ORIX Group, there are sales transactions that include contracted building management and construction contracting. In terms of personal relationships, one executive officer of the Company is from the ORIX Group. At the same time, the Company operates independently to maximize corporate value. As personal relationships with the ORIX Group do not impede the Company’s own management decisions, the Company deems that it maintains a certain degree of independence.

Regarding Directors

Number of directors in the Articles of Incorporation A maximum limit to the number has not been specified
Term of office of directors in the Articles of Incorporation One year
Chairperson of the Board of Directors President
Number of directors 5

Matters concerning Outside Directors

Number of outside directors 3
Number of outside directors appointed as independent officers 3

Relationships with the Company 1

Categories for Relationship with the Company
*Marked with ○ if the director currently falls or has recently fallen under the category
Marked with △ if the director fell under the category in the past
*Marked with ● if a close relative of the director currently falls or has recently fallen under the category
Marked with ▲ if a close relative of the director fell under the category in the past
a. Executor of business of the Company or subsidiary of the Company
b. Executive or non-executive director of the parent company of the Company
c. Executive of a fellow subsidiary of the Company
d. Person with the Company as a major client or supplier or an executive thereof
e. Major client or supplier of the Company or an executive thereof
f. Consultant, accountant, or legal professional who receives a large amount of monetary consideration or other property from the Company other than compensation as an officer of the Company
g. Major shareholder of the Company (or an executive of a major shareholder if the shareholder is a legal entity)
h. Executor of business (himself/herself only) of a client or supplier of the Company (which does not correspond to any of d, e, or f)
i. Executive of a company with which the Company mutually appoints outside officers (the director himself/herself only)
j. Executor of business (himself/herself only) of a company or organization that receives donations from the Company
k. Other

Toru Hambayashi : Coming from another company
Relationships with the Company*
a b c d e f g h i j k
Tomoharu Washio : Scholar
Relationships with the Company*
a b c d e f g h i j k
Yuji Yamamoto : Certified public accountant
Relationships with the Company*
a b c d e f g h i j k

Relationships with the Company 2

Toru Hambayashi
Relationships with the Company
Affiliation committee Independent director
Nominating committee Compensation committee Audit committee
Supplemental explanations for applicable items

The Tokyo Stock Exchange was notified of Mr. Hambayashi’s independent officer status, as stipulated by the Securities Listing Regulations, since he meets criteria for assessing independence at the Company (Please refer to [II Business Administration Organization and Other Corporate Governance System related to Management Decision Making, Execution and Supervision, 1. Matters concerning Composition of Organization and Organizational Management, etc. (Regarding Independent Officers), Other Matters concerning Independent Officers]) and is not at risk of creating conflicts of interest with general shareholders.
(Significant concurrent posts)
Outside director of FAST RETAILING CO., LTD.,
outside director of Unitika Ltd.

Reasons for selection as independent director if applicable

Mr. Hambayashi has extensive experience as a representative director at Nichimen Corporation and Sojitz Corporation. He has a discerning eye for business cultivated through the management of a general trading company, as well as rich international perspectives. The Company appointed Mr. Hambayashi as an independent officer so that he can supervise the Company’s management by leveraging this know-how, as well as provide his opinions and advice that can contribute to the growth of the Daikyo Group and improvement of the shareholder value in the future.

Tomoharu Washio
Relationships with the Company
Affiliation committee Independent director
Nominating committee Compensation committee Audit committee
Supplemental explanations for applicable items

The Tokyo Stock Exchange was notified of Mr. Washio’s independent officer status, as stipulated by the Securities Listing Regulations, since he meets criteria for assessing independence at the Company (Please refer to [II Business Administration Organization and Other Corporate Governance System related to Management Decision Making, Execution and Supervision, 1. Matters concerning Composition of Organization and Organizational Management, etc. (Regarding Independent Officers), Other Matters concerning Independent Officers]) and is not at risk of creating conflicts of interest with general shareholders.
(Significant concurrent posts)
Fellow, Kwansei Gakuin University,
Councilor of Japan External Trade Organization

Reasons for selection as independent director if applicable

Mr. Washio has an extensive international background, having worked for JETRO for many years and being posted abroad for a long time. The Company appointed Mr. Washio as an independent officer so that he can supervise the Company’s management by leveraging his international perspective based on his career in the Company’s future business development to respond to global society, as well as provide his opinions and advice that can contribute to the growth of the Daikyo Group.

Yuji Yamamoto
Relationships with the Company
Affiliation committee Independent director
Nominating committee Compensation committee Audit committee
Supplemental explanations for applicable items

The Tokyo Stock Exchange was notified of Mr. Yamamoto’s independent officer status, as stipulated by the Securities Listing Regulations, since he meets the criteria for assessing independence at the Company (Please refer to [II Business Administration Organization and Other Corporate Governance System related to Management Decision Making, Execution and Supervision, 1. Matters concerning Composition of Organization and Organizational Management, etc. (Regarding Independent Officers), Other Matters concerning Independent Officers]) and is not at risk of creating conflicts of interest with general shareholders. (Significant concurrent posts)
Representative, Certified Public Accountant Yuji Yamamoto
Outside Auditor, COCO’S JAPAN CO., LTD.
Outside Director, RYOBI LIMITED

Reasons for selection as independent director if applicable

Mr. Yamamoto is an expert in finance and accounting with practical experience as a CPA for many years. In addition, he was involved in company management as a representative director and CEO, and has an extensive career as an outside director and outside auditor. The Company appointed Mr. Yamamoto as an independent officer so that he can supervise management through such extensive experience and professional know-how, as well as provide his opinions and advice, etc. that can contribute to strengthening corporate governance and improvement of shareholder value for the Group.

Various Committees

Composition of members and chairpersons’ attribute of each committee

All committee members Full-time committee members Internal directors Outside directors Committee chairpersons (chairpersons)
Nominating Committee 5 0 2 3 Outside director
Compensation Committee 3 0 0 3 Outside director
Audit Committee 3 0 0 3 Outside director

Matters concerning Functions such as Business Execution, Audit, Supervision, Appointment and Determining Compensation

Corporate Governance Structure

governance

Board of Directors

The Board of Directors makes decisions on executive matters that cannot be delegated to executive officers pursuant to laws and regulations or the company’s Articles of Incorporation and important executive matters specified in the Board of Directors Rules. The Board makes decisions on fundamental policies regarding business plans, capital policies, and internal control systems and performs functions of periodic checking on these matters. With the exception of these matters decided by the Board of Directors, the Board delegates executive decisions to the representative executive officer to enhance the efficiency and pace of decision making and executive action. The Board of Directors receives reports from the executive officers and the various committees regarding the status of the performance of their duties.
The Board of Directors met a total of thirteen times during the fiscal year under review. The attendance rate of the directors at these meetings was 100%.

Nominating Committee

The Nominating Committee, consisting of five directors, including three outside directors as of the submission date. The Nominating Committee determines the content of proposals relating to the election and dismissal of directors submitted to the General Shareholders Meeting. Election and dismissal of directors are conducted pursuant to resolutions of the General Shareholders Meeting. The Nominating Committee also deliberates on proposals relating to the appointment and dismissal of executive officers determined by resolution of the Board of Directors.The Nominating Committee has the authority to decide candidates for directors to be submitted at the General Meeting of Shareholders as specified under the Companies Act, and the right to deliberate the selection of executive officers and representative executive officers, etc. The Nominating Committee met on three occasions in total for the year ended March 31, 2018. The attendance rate of members of the Committee at these meetings was 100%.

Audit Committee

The Audit Committee audits the performance of duties by directors and executive officers and prepares audit reports. The Committee also has the authority to determine the accounting auditors that will be submitted to the General Shareholders Meeting for approval pursuant to the Companies Act. The Committee receives summary reports on the status of business operations from the president and representative executive officer, reports on the results of internal audits and on overall internal controls from the executive officer in charge of the Group Audit Department, and accounting audit reports from the accounting auditor, and based on these reports, evaluates the performance of duties by the executive officers and the Company’s internal control systems.
The Audit Committee met a total of five times during the fiscal year under review. The attendance rate of committee members at these meetings was 100%.
As of the day of submission of this report, Audit Committee member Yuji Yamamoto is a financing and accounting expert with many years of practical experience as a certified public accountant.

Compensation Committee

The Compensation Committee has the authority to make decisions regarding policies on the compensation of directors and executive officers specified by the Companies Act and the authority to determine the individual compensation amounts of each director and executive officer.
The Compensation Committee met a total of four times during the fiscal period under review. The attendance rate of committee members at these meetings was 100%.

Executive Committee, etc.

Important decision-making, monitoring and discussions and information-sharing concerning the business execution are done in the following organizations.

  • Executive Committee : Composed of executive officers, etc. and deliberates and determines business and investment projects beyond a certain amount and important matters, etc. concerning the business execution of the Group (Meeting frequency, once a week in principle).
  • Debriefing to President by Department: Composed of executive officers and those responsible for each business, etc. and discusses the strategy of each business and direction of the business, change of business environment and status of the achievement of the plan, etc. (Meeting frequency, once a month in principle).
  • Group Management Liaison Meeting: Composed of executive officers, etc. and shares important information concerning the business execution of the entire Group (Meeting frequency, once a month in principle).

Diagram concerning Internal Control System

governance

Compliance System

Daikyo has established the Group Compliance Consultation System and other structures and developed a framework, namely the Compliance Help Desk for investigating, responding to, and correcting violations of laws, internal regulations, and social norms. In addition, Daikyo established the Group Compliance Division to promote compliance and establish and maintain compliance systems.
Daikyo conducts e-learning for all Group officers and employees and informs and educates personnel within the Company and Group companies using information sites.

Risk Management System

Daikyo positions risk management as a key management issue and maintains sound management by comprehensively and appropriately managing risks that are likely to occur in the execution of business and conducts internal checks to address those risks as necessary as one aspect of its internal control systems.
Business divisions fully investigate the risks associated with major business and investment projects, and decisions are made by the Group Management Meeting, the highest decision-making body on the operational level, after a screening by the Group Risk Management Department. Subsequent monitoring is conducted regarding the status of profitability and other conditions.

Internal Audit System

The Group Audit Department, which has responsibility for internal audits, is independent of executive functions. The Department systematically conducts business audits and reports on the results of its audits to the Audit Committee. In addition, the Audit Committee maintains a framework of cooperation that enables it to direct the Audit Committee Secretariat or the Group Audit Department to conduct audits, investigations and other activities, as necessary. As well as giving suggestions and guidance on areas of improvement to departments undergoing audits, the Audit Committee works to improve the effectiveness of internal controls.

Accounting Audit

In accordance with the Japanese Corporate Law and Financial Instruments and Exchange Law, Daikyo has concluded an auditing contract with KPMG AZSA LLC (a member firm of the KPMG network) for the auditing of the Company’s accounts. In addition to regular audits, Daikyo strives to hold proper discussions, ensure confirmation with KPMG AZSA and to perform fair accounting procedures with regard to accounting issues.
There are no conflicts of interest between Daikyo and the independent auditing company or its employees engaged in the audits of the Company’s accounts.
Certified public accountants and assistants to the audit of the financial statements who carried out accounting audit operation for the fiscal year ended March 31, 2018
Designated and Engagement Partners: Yukio Kumaki, Takaki Okano, Koji Fukai
(Composition of the team of assistants to the audit of the financial statements for the fiscal year under review)
CPAs: 13; others: 24

Reasons for Choosing the Current Corporate Governance System

We are striving to build optimal corporate governance with the viewpoint of ensuring soundness of management, appropriate information disclosure and transparency, and improving efficiency and adopt the system of a “Company with Nominating Committee, etc.” We have separated the supervision from the business execution and clarified the responsibilities of the Board of Directors, etc. in order to reinforce the function of checks and balances for business execution and accelerate the decision-making process.

Roles and Responsibilities of the Board of Directors

  • Recognizing the roles of the Board of Directors at a Company with Nominating Committee, etc. as essential to business decision-making and overseeing execution of duties of individual directors and executive officers, the Company’s Board of Directors holds constructive discussions in line with management strategy and management plan, etc. and determines important business execution.
  • The Board of Directors makes decisions on executive matters that cannot be delegated to executive officers pursuant to laws and regulations or the company’s Articles of Incorporation and important executive matters specified in the Board of Directors Rules. The Board makes decisions on fundamental policies regarding business plans, capital policies, and internal control systems and performs functions of periodic checking on these matters. With the exception of these matters decided by the Board of Directors, the Board delegates executive decisions to the representative executive officer to enhance the efficiency and pace of decision making and executive action.

Roles and Functions of Outside Directors

The Company specifies that the requirements for electing outside directors are to fulfill the roles to provide opinions and advice so that their professional knowledge and experience cultivated through their experience can be utilized for managing the Company. Particularly independent outside directors are in the position as outside directors who are not at risk of creating conflicts of interest with general shareholders, therefore in addition to the requirements for electing outside directors, we receive their opinions and advice from the viewpoint that they can promote the sustainable growth of the Company and aim to improve mid- to long-term corporate value objectively as the third party based on their knowledge with respect to management policy and management improvements of the Company and the Group. In addition, they appropriately fulfill their roles as members of the Nominating, Audit, and Compensation Committees.

Other

Adoption of takeover defense measures : None

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