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Corporate Governance

Basic Thinking

Sodick’s managerial principle is to contribute to the development of society by supplying superior products and supporting the manufacturing performed by our customers based on our guiding spirit of “Create,” “Implement,” and “Overcome difficulties.”
The company believes that the most important element of this is to manage itself in ways that are transparent and readily comprehensible at all times by all of its stakeholders, including its shareholders and investors, customers, and employees.
Sodick strives to make efficient use of its management resources, strengthen itself in the areas of risk management and compliance, and maximize corporate value for all of its shareholders and investors.

Corporate Governance Structure

Overview of the Structure

  • Sodick has chosen “Company with an Audit & Supervisory Board” as its organizational plan in line with the Companies Act. The Board of Directors engages in decision-making regarding important management issues and carries out its supervisory function with respect to general management. The fairness and transparency of management are ensured by giving full rein to management oversight from an independent standpoint as carried out by Audit & Supervisory Board Members.
  • Sodick has adopted an executive officer system to realize corporate management that is prompt and highly efficient. The Board of Directors entrusts the execution of business to executive officers based on the management organization and segregation of duties.
  • To supplement the functions of the Board of Directors, Sodick has established advisory committees on personnel and compensation whose members may include External Directors on an optional basis. It has also created a governance structure that has increased the transparency of decision-making and further enhanced the Board’s monitoring and oversight functions.

Diagram of Our Corporate Governance Structure

Diagram of Our Corporate Governance Structure

Structure at a Glance  (as of end-March 2020)

Organizational configuration Company with Audit & Supervisory Board
Executive management structure Executive officer system
Matters concerning directors No. of directors 10 Note 1:
Term of appointment for directors per the articles of incorporation 2 years
Chair of the Board of Directors President
Matters concerning auditors Audit & Supervisory Board to be established ? Yes
No. of Audit & Supervisory Board Members 5 Note 2:
Matters concerning External Directors/
auditors
No. of External Directors
(of which, independent officers)
4 (4)
No. of External Audit & Supervisory Board Members
(of which, independent officers)
3 (2)
  • Note 1: The number of directors as per the articles of incorporation will be no more than 15.
  • Note 2: The number of Audit & Supervisory Board Members as per the articles of incorporation will be no more than five.

Role of Each Organization

Board of Directors

  • Oversees supervisory functions over decision-making on important issues and management in general as stipulated in the Board of Directors regulations, including setting basic policy on management and appointing executive officers.
  • Regular meetings of the Board of Directors take place once per month, and when necessary the board also convenes extraordinary meetings.
  • The Board is comprised of 10 directors who supervise management and make important management decisions. They include three internal directors who are not serving as executive officers, three directors who are also serving as executive officers, and four external directors.
  • Opinions, advice, and cross-checking from External Directors serve to improve and revitalize the transparency and credibility of the Board of Directors while also strengthening its management supervision functions.
  • Business meetings, joint technical meetings, quality control meetings, and business report meetings may be held to broaden and deepen understanding of the company and manage it effectively. Directors attend these meetings in order to flexibly make decisions about basic and important items related to the execution of business.

Audit & Supervisory Board

  • The Audit & Supervisory Board is comprised of five Audit & Supervisory Board Members, three of whom are external auditors.
  • The function of the Audit & Supervisory Board is to supervise management from an outside perspective. It determines policies on auditing and the assignment of duties, and receives reports on the implementation and results of audits from the auditors. In addition, it receives reports from directors and accounting auditors on the state of their execution of their duties, and requests explanations thereof as necessary.

Advisory Committee on Personnel

  • The Advisory Committee on Personnel is comprised of five directors, three of whom are external directors.
  • It formulates appointment criteria and policies regarding personnel matters involving directors, Audit & Supervisory Board Members, and executive officers; selects candidates for those positions; and evaluates the current holders of said positions.

Advisory Committee on Compensation

  • The Advisory Committee on Compensation is comprised of five directors, three of whom are external directors.
  • It formulates policy on compensation for directors and executive officers, and deliberates over compensation standards, appraisals, and amounts.
  • President Furukawa is the Chair of both the Advisory Committee on Personnel and the Advisory Committee on Compensation, but objectivity and fairness are ensured by the fact that the majority of directors are external directors.

Strengthening Management Supervisory Functions

Directors and Audit & Supervisori Board Members

  • Four of Sodick’s 10 Directors are external directors. They apply their objective perspectives and wealth of knowledge and experience to management, strengthening the corporate governance structure. Furthermore, three of the five Audit & Supervisory Board Members are external Audit & Supervisory Board Members, increasing the objectiveness and fairness of management supervision.
  • Prior to meetings of the Board of Directors, the external directors and external Audit & Supervisory Board Members and supervisors issue reports to the board in writing about any necessary information, and about any items to be decided or investigated by the board. The external Audit & Supervisory Board Members and supervisors also convene regular monthly meetings of the Audit & Supervisory Board with every Audit & Supervisory Board Members and supervisor in attendance, where they exchange a wide range of information and opinions.

Overview of Directors (as of end-March 2020)

※You can see the entire table by scrolling horizontally.

Director
Name Status & Committees Attendance
(fiscal year ended Dec. 2019)
Fields that are particularly expected of directors/auditors
Board of Directors meetings Audit & Supervisory Board meetings Law and Risk Management Finance and Accounting Corporate Management Manufacturing/
Technology/R&D
Global Marketing/
Sales
Chairman and Representative DirectorYuji Kaneko Advisory Committee on Personnel
Advisory Committee on Compensation
13/13 times
President and Representative DirectorKenichi Furukawa Advisory Committee on Personnel
Advisory Committee on Compensation
13/13 times
Vice President and Representative Director
Sales Managing Division
Keisuke Takagi
13/13 times
Senior Executive Managing Director
Machine Tools Division and Production Management Division
Hideki Tsukamoto
13/13 times
Executive Managing Director
Corporate Division
Hirofumi Maejima
13/13 times
Director
Sales Managing Division /
South China Area
Ching-Hwa Huang
10/10 times
(Note 1)
DirectorKatsuhisa Furuta External
Independent
Advisory Committee on Personnel
Advisory Committee on Compensation
13/13 times
DirectorIchiro Inasaki External
Independent
Advisory Committee on Personnel
Advisory Committee on Compensation
12/13 times
DirectorKazunao Kudo External
Independent
Advisory Committee on Personnel
Advisory Committee on Compensation
12/13 times
DirectorKenzo Nonami External
Independent
(Note 2)
Audit & Supervisory Board Member

※You can see the entire table by scrolling horizontally.

Name Status & Committees Attendance
(fiscal year ended Dec. 2019)
Fields that are particularly expected of directors/auditors
Board of Directors meetings Audit & Supervisory Board meetings Law and Risk Management Finance and Accounting Corporate Management Manufacturing/
Technology/R&D
Global Marketing/
Sales
Audit & Supervisory Board MemberAkio Hosaka 13/13 times 13/13 times
Audit & Supervisory Board MemberYuichi Watanuki 13/13 times 13/13 times
Audit & Supervisory Board MemberMasahiro Shimojo External
Independent
10/10 times
(Note 1)
10/10 times
(Note 1)
Audit & Supervisory Board MemberTakashi Nagashima External
Independent
13/13 times 13/13 times
Audit & Supervisory Board MemberTomio Okuyama External 13/13 times 13/13 times
  • Note 1: Director Ching-Hwa Huang and External Audit & Supervisory Board Member Masahiro Shimojo were elected at the Ordinary General Meeting of Shareholders held on March 28, 2019, and 10 Board meetings / Audit & Supervisory Board meetings have been held since they assumed their posts.
  • Note 2: External Director Kenzo Nonami was elected at the Ordinary General Meeting of Shareholders held on March 27, 2020; no activity applicable in the fiscal year ended December 2019.
  • The above table does not encompass all of the expertise possessed by the directors.

Independence of External Officers

  • Sodick appoints external officers in light of its own original eligibility criteria concerning the independence of external officers (see below) in striving to enhance oversight functions for management and transparency, as well as to strengthen its corporate governance structure.

Prerequisites for Ensuring the Effectiveness of the Board of Directors and Audit & Supervisory Board

Evaluating the Effectiveness of the Board of Directors

Every fiscal year, all directors perform a self-evaluation regarding the extent to which they have fulfilled their professional duties. This is carried out to verify that Sodick’s Board of Directors is performing its professional duties in accordance with our guidelines, in order to boost the effectiveness of corporate governance.
The Audit & Supervisory Board Members analyze and evaluate the overall effectiveness of the Board of Directors based on each director’s self-evaluation, and disclose the result.

Method of Analysis and Evaluation

Self-Evaluation
    A self-evaluation questionnaire is completed by all directors
Main Content of Questionnaire

Role and duties of Board of Directors, Composition of Board of Directors, Supervision by Board of Directors, Support structure for Board directors and Matters concerning external directors.

Compilation & Evaluation
    Effectiveness of Board of Directors is analyzed and deliberated at Audit & Supervisory Board meetings
Fiscal Year ended Dec. 2019 Evaluation Results

The evaluation found that the Board of Directors was functioning properly in regard to its overall effectiveness, including the status of operation, status of deliberation, and management and supervisory functions.

Discussion on Enhancing Effectiveness
    The criteria for agenda items are reviewed to further improve deliberations and enhance Board’s supervisory functions
Fiscal Year ending Dec. 2020 Management Policy

To further improve deliberations and enhance the Board’s supervisory functions, we will review the way it operates, including the criteria for agenda items.

Results for year ended December 2019 Issues for year ending December 2020
Overall effectiveness
  • Sharing of dialogue with investors
  • Review of criteria for agenda items
  • Shortening business reports
  • Enhancing discussions concerning risk assessment
  • Enhancing discussions concerning capital cost
External officer
  • Giving a prior presentation of agenda items to external directors and external auditors
  • Enhancing training content, including ensuring external officers have an awareness of legislation
  • Earlier provision of materials to external officers
  • Increasing frequency of opinion exchange between external directors and the Audit & Supervisory Board

Training for the Board of Directors and Audit & Supervisory Board

  • Newly appointed directors and Audit & Supervisory Board Members take part in training by the Japan Audit & Supervisory Board Members Association.
  • Independent external directors and independent external Audit & Supervisory Board Member look at descriptions of business and observe major business centers and so forth, while also explicating business strategies where appropriate.
  • Other directors, Audit & Supervisory Board Members, and executive officers acquire the knowledge and ways of thinking necessary in order to improve corporate value through e-learning by the Tokyo Stock Exchange.

Opportunities are provided for executive officers and others to participate in management, such as through business report meetings, in order to cultivate successor personnel. In addition, from this fiscal year we launched initiatives aimed at developing human resources at the executive management level, including training in drawing up long-term business strategy. However, as there is scope for further discussion concerning successor planning and training, the training system and the content of this, the Board of Directors will continue to hold discussions on this area.

Improving Transparency of Management

Officer Compensation

Basic Policy on Officer Compensation

  • Compensation for officers is based on a compensation system that reflects job position and results while ensuring linkage to company performance, taking into consideration the management issues of sustainable growth and medium- to long-term corporate value enhancement.
  • Compensation for external directors and auditors is based on a compensation system that is not affected by company performance, thereby ensuring independence from management.

Structure of Officer Compensation

Compensation for directors comprises basic compensation and performance-related compensation.

  • Basic compensation is made up of role-related compensation, management/operations compensation and a sum based on personal contribution to performance.
  • Performance-related compensation comprises the following elements: as an incentive for contribution to short-term performance, an amount of monetary compensation calculated by multiplying basic compensation by a performance evaluation coefficient configured according to profit attributable to owners of the parent; and as an incentive for contribution to medium- to long-term corporate value enhancement, a monetary compensation receivable is provided according to the director’s role (excluding external directors), and stock compensation with restriction on transfer is supplied by way of an allocation of treasury shares according to the amount of this receivable.

Method of Determining Officer Compensation

The amount of compensation for each director is deliberated and decided at an Advisory Committee on Compensation, made up of three external directors and two internal directors appointed by the Board of Directors. The Advisory Committee on Compensation develops the compensation system for directors and considers revisions, and deliberates on the evaluation results and the suitability of the amount of basic compensation / performance-related compensation of each director.

Details for Officer Compensation (Fiscal Year ended December 2019)

Officer category Total compensation Fixed compensation
(millions of yen)
Medium- to long-term performance-related compensation (millions of yen) No. of eligible officers
Basic compensation Short-term performance-related compensation Medium- to long-term performance-related compensation
(stock compensation with transfer restriction)
Director
(excluding External Directors)
248 213 33 1 8
Audit & Supervisory Board Member
(excluding External Auditors)
31 31 - - 2
External Officer 47 47 - - 8
Total 327 292 33 1 18

IR Activities

Sodick regards all of its shareholders and investors as important stakeholders, and places importance on constructive dialogue to improve corporate value. Our Investor Relations Department handles these dialogues with shareholders. In cases where shareholders have individual requests, we consider having directors and others respond to them within reasonable limits by taking into consideration factors like the purpose of the meeting and the importance of the topic. The opinions we receive from our shareholders and investors are reported to the Board of Directors and Business Report Committee as needed, and will be put to use for the future management of the company.

  • For all of our shareholders and investors, the company makes every effort to provide information swiftly based on the principles of transparency, fairness, and continuity, and promotes IR activities conducive to further improving corporate value. The Investor Relations departments are responsible for dialogue with our shareholders and investors. To respond to dialogues from shareholders reasonably and smoothly, it coordinates with the relevant departments, including Accounting and Financial Affairs, Legal Affairs, and Compliance for the promotion of IR activities.
  • Financial results briefings for institutional investors and analysts are held two times per year to serve as a dialogue initiative that is separate from the individual meetings. The annual shareholders’ meeting is also seen as a valuable and important opportunity for dialogue with our shareholders, and efforts are made to set aside adequate question-and-answer time and to conduct tours of our showrooms after the shareholders meeting.
  • For our individual investors, a dedicated page has been created at the company’s website. There, we plan to post information about the company’s businesses, performance, corporate philosophy, etc.
  • Sodick issued an integrated report and held factory tours for analysts and institutional investors in order to promote a constructive dialogue.
  • Regarding measures for controls applying to insider information, Sodick has formulated a Disclosure Policy that is available via our homepage.

Our Structure for Timely Disclosures

Our Structure for Timely Disclosures

Enhancing Internal Management

Internal Governance

Based on the Companies Act, Sodick enacted its Basic Policy on Internal Governance Systems at the Board of Directors meeting on May 17, 2006, in order to ensure propriety in our operations. It was subsequently revised at the Board of Directors meeting on April 17, 2015. This internal governance system strives to build more optimal and efficient structures through continuous reassessment and improvement.

Compliance Structure

  • Sodick evaluates the effectiveness of its internal governance systems through its Internal Audit Office. The results of these evaluations are reported to the directors and Audit & Supervisory Board Members. The company has also established a Compliance Helpline (whistle-blower system) whose purpose is to quickly discover and rectify compliance infractions or potential instances thereof.
  • Sodick has set down compliance regulations as well as the Sodick Group Action Guidelines for Corporate Ethics and Standards for Corporate Behavior (Compliance Guidelines). These form a code of conduct whose purpose is to encourage group officers and employees to act in ways that conform to laws, the articles of incorporation, and social codes. To ensure that they are thoroughly adhered to, the company provides training and education on them to its officers and employees.

Risk Management Structure

  • Sodick has established basic rules for risk management. The company works to determine, analyze, evaluate, and take appropriate measures to avoid the risks present in each department. To prepare for the occurrence or potential occurrence of unforeseen situations that would have a major impact on management, the company has also established a Risk Management Committee and set up the necessary preemptive policies on responding.
  • The Risk Management Committee engages with monitoring and overseeing the company-wide risk management situation, and reports important risks to the Directors and auditors.