Corporate Governance System
In an effort to further strengthen its corporate governance system, the Daikyo Group shifted to a “Company with Committees” system in June 2005 (currently, Company with Nominating Committee), after approval was received at the Ordinary General Meeting of Shareholders held that same month.
Under this system, supervisory functions are separated from executive functions in order to reinforce the system of checks and balances and accelerate the decision-making process. Moreover, Daikyo is actively strengthening risk management by carrying out such measures as enhancing 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.
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.|
(As of June 28, 2018)
1. Corporate Structure and Internal Control System
Corporate Governance Structure
Details of Corporate Organizations
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%.
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.
When selecting candidate directors, the Committee bases its decisions on the knowledge, experience, and skills of the individuals, and also takes into consideration the balance of the number of directors so that active deliberations take place in the Board of Directors. Outside directors are selected from among persons with corporate experience and/or that have specialized knowledge that will be valuable to the Company in areas such as accounting, finance, law, and international relations. Directors other than outside directors are selected from among Company representatives, as well as persons with responsibility for Control Depertmant and persons who are thoroughly familiar with the Group’s main businesses.
With regard to the selection of executive officers, the Committee deliberates on candidates determined to be qualified for group management, from both inside and outside the company, and refers proposals to the Board of Directors.
The Nominating Committee met a total of three times during the fiscal period under review. The attendance rate of committee members at these meetings was 100%.
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.
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%.
Group Management Meetings
Matters of importance to the running of the Group’s business affairs are systematically deliberated and decided upon at Group Management Meetings attended by executive and other officers and held in principle once a month. In addition, Business Division Meetings attended by executive and other officers are held in principle once a week to deliberate and determine important proposals relating to the Group’s condominium development and sales business.
A review of risk management system responses related to business and administration is carried out at the Group Management Meeting and the Business Division Meeting, where the status of each risk is analyzed and a complete picture of the current risk management status is formed.
Relationships between Outside Directors and the Company
Outside Directors: 3
＜Relationships with the Company 1＞
Name Type Relationships with the Company* a b c d e f g h i j k Toru Hambayashi Coming from another company Tomoharu Washio Scholar Yuji Yamamoto Certified public accountant
*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
＜Relationships with the Company 2＞
Name Affiliation committee Independent director Supplemental explanations for applicable items Reasons for selection as independent director if applicable Nominating committee Compensation committee Audit committee Toru
○ ○ ○ ○ 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. 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
○ ○ ○ ○ 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
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
○ ○ ○ ○ 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
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.
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.
Systems to Ensure the Proper Operation of the Company and its Subsidiaries
We have instituted administrative rules for Group companies, requiring them to seek prior approval for important management matters.
We constantly monitor for conflicts of interest or unusual transactions between the parent and subsidiaries, with executive offices reporting as needed to the Audit Committee.
The Group Audit Department internally audits or advises Group companies, presenting its results of audits and other activities to the Audit Committee while endeavoring to increase the effectiveness of internal controls by pointing out areas requiring improvement by providing instruction to audited business units.
The Legal and Compliance Department oversees risk management for the Group while obtaining reports from Group companies on adverse incidents and providing instructions as needed.
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
Resolutions to be resolved at the Ordinary General Meeting of Shareholders by Board of Directors
To enable Daikyo to make flexible dividend payments, and as stipulated under Daikyo’s Articles of Incorporation, the Company may ― unless otherwise provided for by laws and regulations ― make decisions concerning dividend payments and any other matters set forth in Article 459, Paragraph 1, of the Japanese Corporate Law by Board of Directors’ resolution and not by resolutions made at shareholders’ meetings.
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.
2. Total Amount of Compensation for Directors and Executive Officers
Policy concerning the determinvbation of officers' compensation
In order to achieve mid- to long-term increases in shareholder value, emphasis is placed not only on current performance, but also on mid- to long-term results when determining compensation for Directors and executive officers of the Company, and it is believed to effectively function as an incentive. In deciding the amount of compensation, the Company considers the balance with the employee wage levels and executive compensation levels at other companies and sets compensation at an appropriate level in accordance with the roles and responsibilities that directors should fulfill to realize the vision to which the Group aspires. Specific compensation amounts are decided by the Compensation Committee.
Structure of compensation
Compensation paid to persons executing business has a structure that maintains business execution functions, which are the main duties of such persons, and is linked to performance. Compensation comprises fixed compensation, performance-based compensation, and share-based compensation.
Fixed compensation is determined according to each individual’s role, and is based on certain amounts for each rank. Performance-based compensation varies within a range from 0% to 200% of the standard amounts for each rank, with 50% being determined based on the degree of attainment of the consolidated net income target and 50% determined according to the overall assessment of work performance, and so on for each executive officer. In the case of the representative executive officer, performance-based compensation is based solely on the degree of attainment of the consolidated net income target and ranges from 0% to 200% of the standard amount.
Share-based compensation is compensation paid as shares of stock at the time of retirement in an amount calculated according to the total of the points granted to officers each year. As of the time of submission of this report, a transition has been made to share-based compensation from share price-related compensation that was paid in cash or shares of stock up to the amount equal to the total number of points multiplied by the share price at the time of retirement of an officer. Compensation paid to outside directors has an effective structure for maintaining the audit and supervisory functions regarding the performance of duties by persons who execute business, one of the main roles of the outside directors. Compensation comprises fixed compensation and share-based compensation.
Fixed compensation is in principle paid in fixed amounts.
Share-based compensation is compensation paid as shares of stock at the time of retirement in an amount calculated according to the total of the points granted to outside directors each year. As of the time of submission of this report, a transition has been made to share-based compensation from share price-related compensation that was paid in cash or shares of stock up to the amount equal to the total number of points multiplied by the share price at the time of retirement of an outside director.
Compensation paid to Directors and executive officers in the fiscal year under review
Classification Number of persons Fixed compensation
（Millions of yen）
（Millions of yen）
share price-related compensation
（Millions of yen）
Total Amount（Millions of yen） Directors（internal） 4 9 1 △0 10 Directors（Outside） 3 27 − 2 29 Executive Officers 13 187 90 51 329 Total 20 224 91 53 369
- Compensation for the three executive officers concurrently serving as Directors is segmented and stated in compensation for Directors (Internal) and executive officers, respectively. The number of executive officers concurrently serving as directors is stated as both Directors (Internal) and executive officers.
- The point-based compensation in the above share price-related compensation in the fiscal year under review is the difference between the amount calculated by multiplying the points held by incumbent directors at the end of the fiscal year under review by the average closing price of Daikyo’s common stock on the Tokyo Stock Exchange during the first 30 trading days starting from the 45th trading day preceding the last day of the fiscal year under review and the amount calculated in the same way on the last day of the previous fiscal year. Share price-related compensation for directors retiring during the year under review, is the difference between the amount calculated by multiplying the similarly calculated amount at the end of the previous fiscal year by the average closing price of Daikyo’s common stock on the Tokyo Stock Exchange during the first 30 trading days starting from the 45th trading day preceding the retirement date.
- In addition to the above, as final payment for retirement benefits, executive officer who retired in the fiscal year under review received ¥7 million.
- The above amounts do not include salaries for employees who are also executive officers.
The total value of compensation of each officer of the Company
Not stated because there are no personnel with total compensation of ¥100 million or more.
3. Types of Shares Held
Investment shares held solely for the purpose of investment
For the year ended March 31, 2017 （Millions of yen） For the year ended March 31, 2018（Millons of yen） Total reported on
Total reported on non-consolidated balance sheets Total dividends received Total gain or loss on sales Total amount of valuation gain or loss Total reported on non-consolidated balance sheets Impairment accounting Unlisted shares 95 95 2 − − − Shares other than unlisted shares 1,100 1,096 25 − 604 −
Number of Directors
The Company’s Articles of Incorporation stipulate that the number of Directors of the Company shall be three or more
Resolution Required for Election of Directors
Daikyo’s Articles of Incorporation stipulate that resolutions for the election of Directors shall be adopted by a majority vote of the shareholders present who hold one-third or more of the total of the voting rights of shareholders entitled to exercise voting rights. The Articles of Incorporation stipulate that cumulative voting shall not be used for resolutions concerning the election of Directors.
Requirements for Extraordinary Resolutions at General Shareholders' Meetings and Class Shareholders' Meetings
Shareholders’ Meetings and Class Shareholders’ Meetings As stipulated under the Articles of Incorporation, matters which shall be passed by an extraordinary resolution at General Shareholders’ Meetings, as provided for under Article 309, Paragraph 2, of the Japanese Corporate Law, and at Class Shareholders’ Meetings, as provided for under Article 324, Paragraph 2, may be approved by two-thirds or more of the voting rights of the shareholders in attendance at the meetings, at which shareholders having one-third or more of the total of the voting rights of all shareholders entitled to exercise their voting rights must be in attendance. This serves to ensure the smooth running of these meetings by alleviating the need for a quorum to be present for an extraordinary resolution to be taken.
4. Total Amount of Compensation for Auditors
Compensation paid to auditors in the fiscal year under review
Classification For the year ended March 31, 2017 (Millions of yen) For the year ended March 31, 2018 (Millions of yen) Compensation for audit certification services Compensation for other services Compensation for audit certification services Compensation for other services Daikyo (non-consolidated) 154 − 154 − Consolidated subsidiaries 64 − 64 − Total 219 − 218 −
- Compensation for audit certification services includes compensation for work pursuant to requests from the parent company’s accounting auditors.
Other Important Details Concerning Compensation
There are no notable matters.
5. Details of Non-audit Operations of the Company of Certified Public Accountants
There are no notable matters.
6. Policy on the Determination of Auditors’Compensation
No particular policy for the determination of compensation for the Company’s Certified Public Accountants and assistants has been specified, rather it is determined by considering the number of days reasonably deemed to be required, based on the scale of the Company’s business.