Corporate Governance

Corporate Governance

Basic Thinking

Sodick’s management philosophy is to contribute to the development of society by providing superior products and supporting customers’ manufacturing operations based on our guiding spirit of “Create,” “Implement,” and “Overcome Difficulties.” To achieve this, we believe that the most important element is to always conduct management that is transparent and easy to understand for all stakeholders, including shareholders, investors, customers, and employees.
We strive to make efficient use of our management resources, strengthen our risk management and compliance, and maximize corporate value for all of our shareholders and investors.

Corporate Governance Structure and Features

The Company has adopted a company with an Audit & Supervisory Committee in order to enhance corporate governance by strengthening the supervisory function of the Board of Directors and through enhancement of the monitoring system by having the members of the Board of Directors consist of the Audit & Supervisory Committee Members responsible for auditing the execution of duties by Directors. The Board of Directors supervises the execution of duties by the Representative Directors, Directors, and executive officers by performing a supervisory function over management in general and carries out decision-making on important management issues, while the Audit & Supervisory Committee monitors business execution.

Diagram of Sodick Corporate Governance Structure　(as of end-March 2025)

Corporate Governance Structure　 (as of end-March 2025)

• The Articles of Incorporation state that the number of Directors (excluding Directors who are Audit & Supervisory Committee Members) shall be not more than nine.
• The Articles of Incorporation state that the number of Directors who are Audit & Supervisory Committee Members shall be not more than five.
• For information about compliance with the Corporate Governance Code, please refer to our website.

History of Initiatives to Strengthen Corporate Governance　(as of end-March 2025)

Strengthening Management Supervisory Functions

Seven of 12 Directors of the Company are External Directors. They apply their objective perspectives and wealth of knowledge and experience to management, thereby strengthening the corporate governance structure. Furthermore, three of the four Audit & Supervisory Committee Members are External Directors, increasing the objectiveness and fairness of management supervision.
Board of Directors meeting materials are provided in advance to ensure enough time for review. Particularly important matters that require a resolution by the Board of Directors are discussed in advance at management meetings. External Directors receive advance briefings from the Board of Directors Secretariat as necessary. This enables them to compensate any lack of internal information about the Board of Directors agenda, and exercise their management supervision functions.

Role of Each Organization

Composition of Board of Directors and Audit & Supervisory Committee

The Company strives to increase corporate value over the medium to long term in order to provide the highest value to customers based on its philosophy of “Create,” “Implement,” and “Overcome Difficulties” and to contribute to a sustainable society as a company that “Create Your Future.” In this regard, the Company considers a balance of knowledge, experience, and skills of the entire Board of Directors and appoints Directors with diverse backgrounds.
The Directors appointed based on this approach are as shown below.

Overview of Directors
(as of end-March 2025)

※You can see the entire Directors and Audit & Supervisori Board Membersable by scrolling horizontally.

Director

Director who is Audit & Supervisory Committee Member

※You can see the entire table by scrolling horizontally.

• The above table does not encompass all of the expertise possessed by the Directors.
• Note 1: Director Yuji Akutsu and External Director Ayako Sano were elected at the Ordinary General Meeting of Shareholders held on March 28, 2024, and 10 Board of Directors meetings have been held since they assumed their posts.
• Note 2: Director Masato Takagi was elected at the Ordinary General Meeting of Shareholders held on March 28, 2025; no activity applicable in FY2024.
• Note 3: Director who is Audit & Supervisory Committee Member Tetsuro Kawahara and External Director who is Audit & Supervisory Committee Member Yukiko Omura were elected at the Ordinary General Meeting of Shareholders held on March 28, 2024, and 10 Board of Directors meetings and 10 Audit & Supervisory Board meetings have been held since they assumed their posts.
• Note 4: Haruchika Gohara retired from the position of External Audit & Supervisory Board Member at the Ordinary General Meeting of Shareholders held on March 28, 2024, and four Audit & Supervisory Board meetings have been held as of that date. He was elected as an External Director who is Audit & Supervisory Committee Member at the Ordinary General Meeting of Shareholders held on March 28, 2025.

Reasons for Selection of Each Skill and Details

※You can see the entire table by scrolling horizontally.

Evaluating the Effectiveness of the Board of Directors

In order to enhance the effectiveness of corporate governance, the Company conducts an annual self-evaluation regarding the execution of duties by all Directors to confirm that the Board of Directors is performing its professional duties appropriately.
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

A self-evaluation questionnaire is completed by all Directors

Main Content of Questionnaire

• Composition, diversity, and skill balance of the Board of Directors
• Content and frequency of the resolutions and reports
• Active discussion on the agenda, sufficient allocation of time
• Functioning as a supervisory body for management, high-quality discussions
• Discussions on sustainability and human capital
• Providing sufficient information to External Directors

• Deeper understanding of the business by External Directors, implementation of factory tours
• Evaluation of meeting bodies operation (Board of Directors and management meetings)
• Evaluation of Advisory Committee on Personnel and Committee on Compensation
• Roles and duties of External Directors
• Evaluation of the operation of the Board of Directors Secretariat
• Communication status of the Board of Directors, etc.

Effectiveness of Board of Directors is analyzed and deliberated at Audit & Supervisory Board meetings based on each Director’s self-evaluation

FY2024 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, which have been improved since the previous fiscal year.

Initiatives to further improve deliberations and enhance Board’s supervisory functions

FY2025 Management Policy

By delegating authority to management meetings, we will work to address all issues to improve effectiveness, such as enhancing discussions on important matters from a medium- to long-term perspective at Board of Directors meetings, ensuring diversity among core human resources, and assessing the status of their development.

Training for Directors

The Company implements the following measures in order to ensure that Directors are able to perform their functions and roles appropriately.

• Directors take part in training provided by the Japan Association of Corporate Directors, the Japan Audit & Supervisory Board Members Association, and other organizations.
• We give External Directors opportunities to participate in management meetings. We also arrange factory tours in the Kaga Factory, which is our key business site, to deepen their understanding of our business.
• Other Directors and executive officers acquire the knowledge needed to enhance corporate value, and learn about the approaches taken to this, through methods such as e-learning provided by the Tokyo Stock Exchange.

Executive officers are allowed to attend management meetings in order to cultivate successor personnel. In addition, we implement initiatives to develop management personnel through training for executive managers and drawing up long-term business strategies.

Officer Compensation

Basic Approach

Compensation for the Company’s Directors (excluding Directors who are Audit & Supervisory Committee Members) is based on a compensation system that is linked to shareholder profits, taking into consideration the management issues of sustainable growth and mid-to-long term corporate value enhancement. Compensation for each Director (excluding Director who is Audit & Supervisory Committee Member) is determined based on a compensation system that reflects appropriate results while taking company performance and his/her job responsibility into consideration.
The Committee on Compensation, which consists of a majority of External Directors, deliberates on the nature of the compensation system and the need for it to be reviewed from objective perspectives. The Board of Directors then makes decisions based on the recommendations of the Committee.

Compensation System

• Regarding the Company’s officer compensation, compensation for Executive Directors consists of basic compensation (fixed compensation) based on the compensation grade for their position and job responsibilities, short-term performance-related compensation consisting of a single year’s performance reflection, and mid-to-long term incentive compensation based on stock compensation aimed at sharing interests in enhancing corporate value with shareholders. In principle, Non-Executive Directors (excluding External Directors and Directors who are Audit & Supervisory Committee Members) receive basic compensation and short-term performance-related compensation, while External Directors and Directors who are Audit & Supervisory Committee Members receive only basic compensation.
• Regarding the compensation ratio by type of Executive Director, the higher the grade, the higher the amount of performance-related compensation. This is determined by using as benchmarks the compensation levels of companies that are similar to the Company in terms of business size, industry and business types.
• The individual compensation for Directors (excluding Directors who are Audit & Supervisory Committee Members) is determined by the Committee on Compensation, and the individual compensation for Directors who are Audit & Supervisory Committee Members is determined through deliberations by the Audit & Supervisory Committee.

System for Short-Term Performance-Related Compensation

• In order to raise awareness of performance improvement for each business year, short-term performance-related compensation is calculated based on profit attributable to owners of parent for the current fiscal year and compensation ratio by type. Once the performance for the current fiscal year has been finalized, the total amount of performance-related compensation is deliberated by the Committee on Compensation and paid as a lump sum in the form of a bonus within one month after its determination.
• The reason for selecting profit attributable to owners of parent as a performance indicator is because we recognize that an increase in profit attributable to owners of parent will result in an increase in shareholders’ equity, which will be a source of future dividends, and that this aligns with the intentions of shareholders.
• We set targets for the medium-term management plan and increase profit attributable to owners of parent by achieving them.
• Changes in profit attributable to owners of parent including the current fiscal year are shown on Financial Highlights.

System for Mid-to-Long Term Incentive Compensation

• As an incentive for Directors to contribute to the enhancement of corporate value over the medium to long term, we provide Executive Directors with monetary compensation receivables according to their positions, and provide restricted stock compensation allocated from treasury shares according to the amount of the receivables.
• The total amount of monetary compensation receivables is calculated based on two-year average EBITDA and single year’s employee satisfaction survey (ES) scores.
• The reason for selecting EBITDA as the total amount indicator of monetary compensation receivables is that it is not affected by decreases in profits due to an increase in depreciation associated with capital investments or an increase in interest rates. In this way, it is intended to encourage management that contributes to increasing mid-to-long term shareholder value. The reason for also selecting ES scores is because we believe that employee satisfaction should be directly linked to key management indicators such as sales and profits for the Company to grow in a sustainable manner.
• Regarding restricted stock compensation, the number of shares allocated to each Director is determined by the Board of Directors based on the report from the Committee on Compensation.

Details for Officer Compensation（Fiscal Year ended December 2024）

Dialogue with Shareholders and Investors

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 internal meeting bodies 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, Business Unit, and Compliance for the promotion of IR activities.
• 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

Status of Dialogue（Fiscal Year ended December 2024）

Summary of Shareholders and Investors with whom dialogue was conducted

Key dialogue topics and matters of interest

• Economic and demand trends in Greater China
• Measures to strengthen after-sales services
• Progress of structural reforms
• Measures to improve PBR and their status

Feedback to Management and Board of Directors

• Regularly reported to the Board of Directors on the status of dialogues, analysts’ forecasts, and stock price trends
• Appropriately reported to the management on the concerns and opinions of shareholders and investors

Matters incorporated based on dialogue

• Shortened the term of office of Directors from two years to one year
• Changed the Chairperson of the Advisory Committee on Personnel and the Committee on Compensation to an External Director
• Enhanced information disclosure in financial results briefing materials, etc.