Corporate Governance

Policy

The corporate philosophy of Toyota Tsusho is, “Living and prospering together with people, society, and the planet, we aim to be a value-generating corporation that contributes to the creation of prosperous societies.” The Toyota Tsusho Group has established behavioral guidelines as a fundamental code of conduct for realizing this philosophy in a legally compliant and appropriate manner as a good corporate citizen.
In keeping with its corporate philosophy, the company has set forth the Basic Policies on Establishing Internal Control Systems to pass on and add depth to The Toyota Tsusho Group Way (Toyotsu Group Way), which articulates the unique values, beliefs, and bedrock principles of the Toyota Tsusho Group, implementing value creation from a customer perspective, and fulfilling our social mission by establishing systems that ensure proper business processes are followed.

Reflecting these basic policies under the corporate auditor system and executive officer system, the company is actively driving forward the further improvement of management efficiency and transparency, full-fledged compliance, and the health of its financial position. Also, while the company is in full compliance with the various principles in Japan’s Corporate Governance Code, we are seriously addressing further enhancement to make the content of our actions more substantive, as well-rounded corporate governance is essential for continued corporate growth and raising our corporate value in the medium and long term.
The company believes that providing all its stakeholders with satisfactory added value and contributing to society through its businesses will accelerate the sustainable growth of the Toyota Tsusho Group and thereby lead to corporate value enhancement.

Corporate Governance Structure (As of April 2020)
Corporate Governance Report
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Corporate Governance Report[PDF:360KB]

Corporate Governance Structure

Toyota Tsusho has adopted the system of a company with an Audit & Supervisory Board to ensure transparent and sound management, and it has also introduced an executive officer system to improve management efficiency and strengthen internal control.

The company carries out consolidated management based on a divisional organization that comprises seven sales divisions under the leadership of divisional CEOs, organizations under the direct control of executive vice presidents, and the Administrative Unit.

Although the company has been advancing the separation of management and operations for some time, it has now taken a step further by deciding that, from April 2020, a non-executive director is to serve as chairman of the Board of Directors as well as chairperson of the Executive Compensation Committee and the Executive Appointment Committee. Furthermore, the number of executive officers who also serve as directors is to be limited to three officers. The Board of Directors, of which half are outside directors, aims to further strengthen the soundness of management and the functioning and quality of the Board of Directors, which serves to make decisions on top-priority management issues and monitor the execution of business. Appointing CEOs of each sales division and the heads of Administrative Units to the position of executive officer is meant to enable fast-paced management that is in close contact with frontline operations. The company is further enhancing its diversity, and currently has four outside directors with highly specialized knowledge. Included among these directors are foreign nationals and individuals from a research organization, two of whom are women. The company aims to boost its expertise and the speed of its decisionmaking by having established CCO, CDTO, CSO, and CFO positions as the persons with ultimate responsibility for their respective functions to facilitate the exercise of high levels of specialization and to reinforce governance functions, as well as to clarify roles and responsibilities.

As a measure to further fortify the supervisory functions of outside directors, dialogue is carried out between the executive officer of each sales division and outside officers. This serves as an opportunity for outside directors to deepen their understanding of the respective business as well as a chance to provide advice from the perspective of an external party. In addition, a meeting for outside officers is scheduled to be implemented three times a year so that outside officers can freely and openly exchange opinions among themselves (outside directors to outside auditors).

Corporate Governance Meetings

In the fiscal year ended March 31, 2020, corporate governance meetings were held several times by members of the Board. Based on the Practical Guidelines for Corporate Governance Systems, which were revised by the Ministry of Economy, Trade and Industry (METI) in September 2018, the following was decided as a result of discussions held on the direction of the corporate governance for which the company should aim.

  • The number of internal directors will be reduced and the ratio of independent outside directors on the Board of Directors will be raised to higher than 1/3.
  • The chairman of the Board will not be appointed to the position of representative director. A non-executive director will serve as chairman of the Board.
  • A non-executive director will serve as chairperson of the Executive Compensation Committee and the Executive Appointment Committee, rather than the President & CEO.
  • The company will introduce a transfer-restricted stock compensation program for providing medium- and long-term stock incentives.
Percentage of Outside Directors
Percentage of Outside Directors

Board of Directors

The Board of Directors comprises eight directors, four of whom are outside directors. The Board makes important management decisions, supervises the execution of business by directors, receives regular reports from division CEOs, and monitors execution conditions at each sales division. Furthermore, the Board periodically receives reports from division CEOs on the status of execution of business by the sales divisions and performs monitoring. The company has submitted notification that three of the four outside directors satisfy the criteria for independence as specified by securities exchanges. Moreover, we are raising the independence of the Board of Directors by having a non-executive director serve as chairman of the Board. Directors are appointed for a one-year term, and the Board of Directors in principle meets once a month. The company has established a support framework so that outside directors can satisfactorily fulfill their management and supervisory functions. The Board of Directors’ Secretariat sends out materials earlier than in the past and provides preliminary explanations along with the proposing department to enhance understanding of business details.

Board of Directors’ Advisory Bodies(Executive Compensation Committee and Executive Appointment Committee)

Toyota Tsusho has established the Executive Compensation Committee and the Executive Appointment Committee as advisory bodies to the Board of Directors. Both committees are chaired by the non-executive director chairman of the Board. In addition, each committee comprises five members—three independent outside directors and two internal directors. Given that independent outside directors make up a majority of each committee, the objectivity and transparency of each committee are being enhanced.

The Executive Compensation Committee investigates executive compensation programs, decision-making policies, and other important matters related to executive compensation, deliberates proposed executive compensation plans, and reports to the Board of Directors.
The Executive Appointment Committee deliberates policies regarding the appointment and dismissal of directors, Audit & Supervisory Board members, and top management. It also deliberates proposed executive personnel plans, as well as the formulation and operation of CEO successor plans and other important matters relating to executives. After deliberating such, the committee reports to the Board of Directors.

<Members Comprising Both Committees>
As of June 23, 2020

Jun Karube (Chairman of the Board, committee chair)
Ichiro Kashitani (President & CEO)
Kumi Fujisawa (Independent outside director)
Kunihito Koumoto (Independent outside director)
Yukari Inoue (Independent outside director)

Evaluating the Effectiveness of the Board of Directors

1. Overview of Evaluation of the Effectiveness of the Board of Directors

Toyota Tsusho evaluates the effectiveness of the Board of Directors annually to continue to maintain and improve the effectiveness of its corporate governance. Specifically, the company administers questionnaires to all members of the Board of Directors, and then the results on the Board’s effectiveness are reported to the Board of Directors after the questionnaire responses are analyzed and evaluated.
An overview of the fiscal year ended March 31, 2020 and the evaluation results are as follows.

Overview of Evaluation Implementation

Individuals evaluated All members of the Board of Directors (11 people) and all Audit & Supervisory Board members (5 people)
Implementation method Administer questionnaires to members of the Board and Audit & Supervisory Board members
Priority themes Further improve the effectiveness of the Board of Directors
Evaluation items 1) Composition of the Board of Directors
2) Operation of the Board of Directors
3) Agenda and deliberation processes of the Board of Directors
4) Support system for the Board of Directors
5) Evaluation of members of the Board and Audit & Supervisory
Board members

2.Overview of Evaluation Results for the Fiscal Year Ended March 31, 2020

For issues extracted from the effectiveness evaluation in the previous fiscal year, based on the results of the tabulation and analysis of questionnaire results, the ratings for all evaluation items were positive overall, owing to kaizen (continuous improvement) measures.
This confirmed the Board of Directors is properly functioning and securing effectiveness.
Looking at operations of the Board of Directors, the schedule for items that should be deliberated or reported is being adequately managed, and the Board of Directors’ Secretariat is providing appropriate support, including at the time of the proposal of agenda items and submission of materials. Also, the Board of Directors is rich with diversity and a system is in place that facilitates brisk discussions among all members of the Board. In the event of unclear points in discussions, if the members of the Board deem it necessary, there are ample opportunities for the Board of Directors to request additional information from the company.

Issues Fiscal year ended March 31, 2020 measures taking into account issues in the fiscal year ended March 31, 2019 Evaluation results for the fiscal year ended March 31,
2020 questionnaire
Provide opportunities to enrich discussions and further deepen understanding of businesses Accelerated timing for sending out convocation notices and to deploy final materials to secure time for preliminary considerations Evaluated as being improved from the previous fiscal year and properly functioning
Provided opportunities to outside directors for the in-depth understanding of businesses Evaluated as being improved from the previous fiscal year and appropriate overall
Narrowed down matters that should be discussed by the Board of Directors Evaluated as being improved from the previous fiscal year and appropriate overall
Effective use of independent outside directors In-depth discussions on the composition of the Board of Directors and roles of outside directors Evaluated as being improved from the previous fiscal year and properly functioning
Regularly held meetings consisting only of outside directors and outside auditors and established opportunities to exchange and share information from an independent stance Held once in the fiscal year ended March 31, 2020 Plan to continue to hold meetings regularly in and after 2020
Promote dialogue with investors and shareholders Details of IR activities were reported at Board of Directors’ meetings Evaluated as being improved from the previous fiscal year and appropriate overall

3. Undertake Further Improvement of the Board of Directors’ Effectiveness in the Fiscal Year Ending March 31, 2021

The company will continue to discuss the three evaluation items and seven issues extracted from the results of the questionnaire, and will implement kaizen measures to further improve the effectiveness of the Board of Directors.

Audit & Supervisory Board

The Audit & Supervisory Board is made up of five members (three of whom are part-time outside Audit & Supervisory Board members) who perform a checking function from an external viewpoint. All Audit & Supervisory Board members regularly exchange opinions with directors, including outside directors, executive officers, and the independent auditor, as well as the Audit Department and other organizations. In this way, Audit & Supervisory Board members strive to ensure the legality, appropriateness, and efficiency of business execution. The Audit & Supervisory Board in principle meets once a month. Audits conducted by Audit & Supervisory Board members are approved by the Audit & Supervisory Board. Per the audit policies and plans reported to the Board of Directors, Audit & Supervisory Board members implement audits and the execution of duties by directors, emphasizing internal controls, mainly focusing on compliance and risk management. Also, an audit is conducted regarding the appropriateness of the results of an accounting auditor audit. A full-time staff is assigned to assist with the duties of Audit & Supervisory Board members, including outside auditors.

Functions and Roles of Committees and Meetings

Toyota Tsusho has established a variety of committees and meetings to strengthen its corporate governance. The company has created a companywide meeting system to deal with issues that affect the entire company; directors and executive officers consider countermeasures for each management issue and, where appropriate, consult the Board of Directors.

1.Sustainability Committee

Toyota Tsusho has conducted CSR activities under the leadership of the Corporate Planning Department based on the idea that sustainability should be linked to management strategy. To promote the further enhancement of its stance on sustainability, it established the Sustainability Management Group within the Corporate Planning Department in April 2019.
The CSR Committee has also been reorganized into the Sustainability Management Committee, which discusses, decides on, and promotes sustainability strategies. Content to be discussed by the Sustainability Management Committee and response to other issues such as climate change will be reported as appropriate to the Board of Directors and action will be taken.

2.Integrated Risk Management Committee

We identify important company-wide risks related to management goals, discuss and decide on policies for dealing with them, and propose to the Board of Directors agenda items related to the management of company-wide risks. In principle, Integrated Risk Management Committee consisting of the vice president and CFO (vice chairman) in charge is held four times a year to make recommendations to the CEO and report to the Board of Directors on the risk situation and response policy on a consolidated basis. Specifically, we clarify the risks that will have a significant impact on the Toyota Tsusho Group management, identify important company-wide risks related to management goals, discuss and determine response policies, verify the effectiveness of the risk management process, and inform the Board of Directors of our suggestions. The Board of Directors applies the continuous plan-do-check-act (PDCA) cycle including sufficient discussion and appropriate measures to lead concrete actions in which appropriate measures and thoroughly deliberated and concrete measures decided.

3.Other Executive Committees and Sub-organizations

Committee Role Frequency of meeting
Mid-term Business Plan Meeting/ Executive Budget Meeting Discusses management plans Once a year
Investment Strategy Meeting Discusses each sales division’s investment strategies Once a month
Investment and Loan Committee Investment and Loan Meeting Discusses investment and lending projects 3 times a month
4 times a month
NEXT Technology Fund Council Discusses projects that develop new markets through new technologies, products, and services from a medium- and long-term perspective Once a month
Top Management Meeting Information is shared among top managers Once a month

4.Corporate Management Committees

Corporate management committees provide opportunities for discussion among executives in charge of multiple divisions throughout the company and are designed to discuss and determine policies on themes of important management strategy that span the entire company.

Committee Role Frequency of meeting
Global Human Resources Committee Shares information on the succession plan and human resources candidates, both of which hold a key position in divisional and regional business strategies, and discusses measures to fortify training Once a year
HR Strategy Meeting Discusses various human resources systems and measures that are connected with the realization of companywide strategies Four times a year
IT Strategy Committee Discusses companywide policies on IT strategies Once a year
Safety Management Enhancement Committee Discusses measures for enhancing safety management Once a month
Specified Import & Export Control Committee Decides on the overall direction regarding transaction management, export, and import of articles subject to import/export controls Once a year
Global Safety & Environmental Promotion Meeting Promotes improvements to occupational safety and health activities and undertakes environmental management throughout the company and domestic group companies Once a year
Kaizen & Cost Reduction Promotion Committee Promotes reductions in costs, and shares and develops improvement case studies throughout the company Once a year

Appointed Outside Officers

Some of the essential elements in the appointment of outside directors are knowledge of governance and accounting, risk discovery capabilities, wide-ranging business-related insight, insight gained from global experience, and contributing to promoting diversity.
Within this framework, the company appoints outside directors with an emphasis on candidates who possess a wealth of knowledge and experience.

Outside directors Major concurrent positions (As of July 1, 2020) Reason for selection Frequency of attendance at Board of Directors’ meetings
Kumi Fujisawa Representative Director, SophiaBank Co.
Director, The Shizuoka Bank, Ltd.
Director, Creek and River Co., Ltd.
In addition to having founded and served as representative director of an investment trust evaluation company, Ms. Fujisawa participated in establishing SophiaBank and serves as its representative director, and she has held numerous government-related positions in organizations such as the METI and the Financial Services Agency. Ms. Fujisawa was selected to continue to serve as an outside director due to the neutral, objective perspective to the advice regarding the company’s management and oversight over business execution she is providing based on her wealth of experience and specialized insight regarding investment, international finance, and diversity. 13/13
Kunihito Koumoto Mr. Koumoto is a noted researcher. He served as a professor at the Nagoya University Graduate School of Engineering before becoming a Toyoda Physical and Chemical Research Institute fellow. Mr. Koumoto was selected for his ability to provide advice regarding company management from an advanced academic perspective to handle the high-level technical innovations the company will implement in the future. 11/13
Didier Leroy Chairman of the Board, Toyota Motor Europe
S.A./N.V.
Mr. Leroy has served as CEO of the Europe Region and president, member of the board, executive vice president, and in other roles for Business Unit Toyota No. 1 of Toyota Motor Corporation. He currently serves as chairman of the board at Toyota Motor Europe S.A./N.V. Mr. Leroy was selected to serve as an outside director due to the neutral, objective perspective to the advice regarding the company’s management and oversight over business execution he can provide based on his wealth of management experience and global, specialized insight regarding the automotive industry, which is in a period of major transformation. 13/13
Yukari Inoue President and CEO, Kellogg Japan G.K.
Director, Suntory Beverage & Food Limited
Ms. Inoue is president and CEO of Kellogg Japan G.K. Ms. Inoue was selected to serve as an outside director because the company believes that she is capable of providing advice on the company’s management and performing oversight of business execution from a neutral, objective perspective based on a wealth of management experience and global expertise, particularly in the B2C business field.

Every month, before the Board of Directors’ meeting has taken place, the outside directors and senior management meet to exchange information and share opinions. Outside directors also participate in the Executive Review Meeting, which is attended by all company executives, and actively share their views on management issues. Additionally, outside directors take part in and provide advice to such committees as the Sustainability Management Committee.

Outside Audit & Supervisory Board members Reason for selection Frequency of attendance at Board of Directors’ meetings Frequency of attendance at Audit & Supervisory Board meetings
Shuhei Toyoda Mr. Toyoda has served as a director of Toyota Motor Corporation and president of Toyota Boshoku Corporation. Since June 2015, he has been the chairman of Toyota Boshoku Corporation. He was selected as an outside director due to his many years of involvement in company management, and the wealth of management experience and specialized insight he possesses, which will enable him to provide appropriate oversight over the Board’s performance of its duties. 12/13 14/14
Yuichiro Kuwano Mr. Kuwano has worked as an attorney-at-law for many years and was selected to provide appropriate oversight over the Board’s performance of its duties from an independent perspective based on his wealth of experience and expertise in corporate law and compliance. 13/13 14/14
Tsutomu Takahashi Mr. Takahashi has worked as a certified public accountant for many years and was selected to provide appropriate oversight and restraint for the execution of duties by directors from an independent perspective based on his extensive experience and expertise in corporate accounting, auditing, and compliance. 10/10* 10/10*
  1. *After assuming position on June 25, 2019, and attendance as of the end of March 2020.

Executive Compensation

Fiscal Year Ended March 31, 2020

Executive compensation comprises fixed compensation and performance- linked compensation in the form of bonuses. The ratio of the two forms of compensation is roughly 50:50. For fixed compensation, a fixed amount is determined for each executive, while bonuses are determined by the Board of Directors by broadly taking into consideration the company’s financial performance based on key management indicators such as consolidated profit for the year attributable to owners of the parent during the fiscal year ending March 31, 2021 (in the fiscal year under review, the result was 135.5 billion yen compared to a forecast of 150.0 billion yen), measures to carry out the Mid-term Business Plan based on our longterm vision, the company’s business environment, and other factors as well as reports on the results of deliberations on the method of calculating bonuses and the appropriateness of amounts by the Executive Compensation Committee, of which a majority of the members are independent outside directors. Compensation of outside directors comprises only fixed compensation, and no bonuses are paid from the perspective of maintaining independence from the execution of business.

The upper limit of director compensation is 70 million yen per month (set by resolution at the June 23, 2017 ordinary General Meeting of Shareholders), and amounts are determined by the Board of Directors within this limit. Bonuses paid to directors other than outside directors are set by resolution at the ordinary General Meeting of Shareholders for each fiscal year.

Compensation of Audit & Supervisory Board members comprises only fixed compensation, and no bonuses are paid from the perspective of maintaining independence to properly conduct audits. The upper limit of Audit & Supervisory Board member compensation is 16 million yen per month (set by resolution at the June 20, 2014 ordinary General Meeting of Shareholders), and amounts are determined by the Audit & Supervisory Board within this limit.

Directors and Audit & Supervisory Board members are not paid severance bonuses.

The Executive Compensation Committee, of which a majority of members are independent outside directors, was established to investigate director compensation, and determinations are made by resolution of the Board of Directors taking into consideration the result of the committee’s investigations.

Executive category Total amount of compensation and other remuneration (Millions of yen) Total amount per type of compensation (Millions of yen) Number of executives
Basic remuneration Stock options Bonuses
Directors (excluding outside directors) 614 320 293 10
Audit & Supervisory Board members (excluding outside Audit & Supervisory Board members) 83 83 2
Outside Directors and Audit & Supervisory Board members 100 100 8
  1. *1Included above are three directors and one outside officer who retired as of the end of the 98th General Meeting of Shareholders, which was held on June 25, 2019.
  2. *2At the 96th General Meeting of Shareholders, which was held on June 23, 2017, the upper limit for the compensation of directors in total was set at 70 million yen per month.
  3. *3At the 93rd General Meeting of Shareholders, which was held on June 20, 2014, the upper limit for the compensation of Audit & Supervisory Board members in total was set at 16 million yen per month.

Changes in and after the Fiscal Year Ending March 31, 2021

The upper limit of director compensation was revised by resolution at the June 23, 2020 ordinary General Meeting of Shareholders in tandem with the reduction in the number of members of the Board to within an annual 600 million yen. The amount is to be determined by the Board of Directors within this limit.

As of the resolution at the June 23, 2020 ordinary General Meeting of Shareholders, as compensation for members of the Board, excluding compensation for outside directors, incentives will be provided to enhance medium- and long-term performance and corporate value. Also, a transfer-restricted stock compensation program was introduced to encourage further sharing of value with shareholders. Under this program, members of the Board, excluding outside directors, will receive compensation in kind for all monetary receivables paid by the company based on the issuance or retirement of common shares. The main details are as follows.

Stock compensation limit Up to 200 million yen in total awarded to eligible directors per year
Stock compensation per individual director Determined each year based on the company’s performance, etc.
Class of shares to be allocated and allocation method Issuance or disposal of common stock (with transfer restrictions set out in allocation agreement)
Total number of shares to be allocated Up to 200,000 shares per year in total to eligible directors
Amount paid in To be set at an amount that is not advantageous to eligible directors by the Board of Directors based on the closing price of the company’s common stock on the Tokyo Stock Exchange on the business day before the date of the relevant Board of Directors’ resolution
Transfer restriction period From the allocation date to the date of retirement or resignation of each director
Conditions for lifting transfer restrictions Restrictions are to be lifted at the end of the transfer restriction period
Acquisition of allocated stock by the company without consideration The company may acquire without consideration all or part of the allocated stock during the transfer restriction period in the case of violation of laws or regulations or any other reason stipulated by the Board of Directors
Process of determining allocation to each director To be determined by the Board of Directors after deliberation by the Executive Compensation Committee
Adjustments associated with reorganization Transfer restrictions will be lifted on a number of shares calculated on a reasonable basis in the case of reorganization such as a merger in which the company is the absorbed company or becomes a wholly owned subsidiary

The above transfer-restricted stock compensation program also applies to members of top management who do not concurrently hold a position as a director. Toyota Tsusho plans to issue or retire some of its common stock.

Compensations for Each Director