- Corporate Governance Structure
- Management Discussions with Outside Members of the Board and Audit & Supervisory Board Members
- Board of Directors Meeting
- Evaluating the Effectiveness of the Board of Directors Meeting
- Board of Directors Advisory Bodies (Executive Appointment Committee and Executive Compensation Committee)
- Audit & Supervisory Board Meeting
- Functions and Roles of Committees and Meetings
- Details on Deciding the Compensation, etc., for Members of the Board and the Calculation Method thereof, and the Decision Method
- Policy for Investments in Stock
The corporate philosophy of Toyota Tsusho is "Living and prospering together with people, society, and the planet, we aim to be a valuegenerating 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 fundamental 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, 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, the company is actively driving forward the further improvement of management efficiency and transparency, full-fledged compliance, and the soundness 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.
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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 chief executive officers (CEOs) and the Administrative Unit.
For independence, a non-executive director continues to serve as chairman of the Board as well as chairperson of the Executive Compensation Committee and the Executive Appointment Committee. Three senior executive officers are also members of the Board: The president & CEO, the chief strategy officer (CSO), and the chief financial officer (CFO). At least one-third of the members of the Board are independent outside members to strengthen the soundness of management and the functioning and quality of the Board of Directors meeting, which serves to make decisions on top-priority management issues and monitor the execution of business. The CEOs of sales divisions and the heads of the Administrative Unit are appointed as senior executive officers 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 members of the Board (outside directors) with highly specialized knowledge and consisting of a foreign national, an individual from a research organization, and two women.
The company aims to boost its expertise and the speed of its decisionmaking by having established chief technology officer (CTO), chief strategy officer (CSO), chief financial officer (CFO), chief safety & KAIZEN officer (CSKO), and chief human resources officer (CHRO) 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 directors. 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. On-site inspections of domestic subsidiaries by outside directors/auditors (outside members of the Board and Audit & Supervisory Board members (outside)) will be restarted depending on whether COVID-19 is brought under control. Meetings for outside directors/auditors are also held so that they can freely and openly exchange opinions among themselves.
Management Discussions with Outside Members of the Board and Audit & Supervisory Board Members
Management discussions for a free and open exchange of opinions on major management-related topics are held after Board of Directors meetings. In addition to members of the Board, senior executive officers and executive officers with a connection to the topic of discussion also participate in lively discussions, with the results reflected in mid-term business plans.
Topics Discussed in the Fiscal Year Ended March 31, 2023:
- 1Hydrogen and alternative fuel business that contributes to carbon neutrality (keynote speech by Kunihito Koumoto, outside member of the Board)
- 2Management direction for the next 15 years to become a truly global company
- 3Carbon neutrality (specific initiatives for the current fiscal year and issues for the next fiscal year centered on five working groups)
Board of Directors Meeting
Number of Meetings in FY2021: 13
Members of the Board of Directors meeting comprise eight members of the Board, four of whom are outside members of the Board. The Board of Directors meeting makes important management decisions and supervises the execution of business by directors. Furthermore, the Board of Directors meeting 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 members of the Board satisfy the criteria for independence as specified by Financial Instruments Exchanges. Moreover, the independence of the Board of Directors meeting is enhanced by having a non-executive director serve as chairman. Members of the Board are appointed for a oneyear term, and the Board of Directors meeting in principle meets once a month. The company has established a support framework so that outside members of the Board can satisfactorily fulfill their management and supervisory functions. The Board of Directors Secretariat sends out materials earlier and provides preliminary explanations along with the proposing department to enhance their understanding of business details.
Evaluating the Effectiveness of the Board of Directors Meeting
Overview of Evaluation of the Effectiveness of the Board of Directors Meeting
Toyota Tsusho evaluates the effectiveness of the Board of Directors meeting annually to continue to maintain and improve the effectiveness of its corporate governance. Specifically, the company administers questionnaires to all members of the Board and then reports to the Board of Directors meeting on its effectiveness after the questionnaire responses are analyzed and evaluated. An overview of the fiscal year ended March 31, 2023, and the evaluation results are as follows.
|Individuals who responded to the questionnaire||All members of the Board (8 people) and all Audit & Supervisory Board members (5 people)|
|Implementation method||Administer questionnaires to all members of the Board and all Audit & Supervisory Board members|
|Priority Agenda||Further improvement of the effectiveness of the meetings|
Results of Evaluating the Effectiveness of the Board of Directors Meeting
The collected questionnaire responses were generally positive across all of the matters evaluated, confirming the effectiveness of the Board of Directors meeting.
Board of Directors Advisory Bodies (Executive Appointment Committee and Executive Compensation Committee)
Number of Meetings in FY2022: 2 (Executive Appointment Committee), 1 (Executive Compensation Committee)
Toyota Tsusho has established the Executive Appointment Committee and the Executive Compensation Committee as advisory bodies to the Board of Directors meeting. Both committees are chaired by the chairman of the Board without representative rights and with no involvement in operational management. Each committee comprises five members—three independent outside members of the Board and two internal members of the Board. The majority of each committee being made up of independent outside members of the Board enhances the objectivity and transparency of each committee.
The Executive Appointment Committee deliberates the appointment and dismissal of members of the Board, Audit & Supervisory Board members, and senior executive officers. It also deliberates proposed executive personnel plans, as well as the formulation and operation of CEO successor development plans and other important matters related to executives' appointment.
The Executive Compensation Committee deliberates on the policy for determining the details of compensation for each member of the Board, compensation system, compensation proposals to be submitted to the General Meeting of Shareholders, and other important matters concerning the compensation for members of the Board and Audit & Supervisory Board members.
< Members of Both Committees > As of June 23, 2023
- Nobuhiko Murakami (Chairman of the Board/Committee Chairman)
- Ichiro Kashitani (President & CEO)
- Kunihito Koumoto (Independent outside member of the Board)
- Yukari Inoue (Independent outside member of the Board)
- Chieko Matsuda (Independent outside member of the Board)
Audit & Supervisory Board Meeting
Number of Meetings in FY2021: 14
The Audit & Supervisory Board meeting is made up of five members (three of whom are Audit & Supervisory Board members (outside)) who perform a checking function from an external viewpoint. All Audit & Supervisory Board members regularly exchange opinions with members of the Board, including outside members of the Board, executive officers, and an independent auditor, as well as the Audit Department and other entities. In this way, Audit & Supervisory Board members strive to ensure the legality, appropriateness, and efficiency of business execution. The Audit & Supervisory Board meeting in principle meets once a month. Audits conducted by Audit & Supervisory Board members are approved by the Audit & Supervisory Board meeting. Per the audit policies and plans reported to the Board of Directors meeting, Audit & Supervisory Board members implement audits on the execution of duties by members of the Board, emphasizing internal controls, mainly focusing on compliance and risk management. An audit is conducted regarding the appropriateness of the results of an accounting auditor audit. Also, fulltime staff members are 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 company-wide meeting system to deal with issues that affect the entire company. Members of the Board, senior executive officers, and executive officers consider countermeasures for each management issue and, where appropriate, consult the Board of Directors meeting.
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.
Sustainability Management Committee
The Sustainability Management Committee meets annually to discuss and decide on important sustainability-related issues. The committee is chaired by the president & CEO and includes executive vice presidents, sales division CEOs, and relevant Administrative Unit officers as well as four outside members of the Board as advisors and the chairman of the Board and Audit & Supervisory Board members (full-time) as observers.
The committee determines important sustainability-related policies and discusses and decides on social trends and the company's response to them.
Other Key Meetings
|Meetings||Role||Frequency of meeting|
|Mid-term Business Plan Meeting/Executive Budget Meeting||Discusses business plans||Once a year|
|Executive Committee Meeting||Discusses important matters and shares information||Twice a month|
|Executive Officers Meeting||Information is exchanged, shared, and reported between senior executive officers and executive officers||Once a month|
|Senior Executive Officers Meeting||Shares information across sales divisions and overseas regions||Once a month|
Primary Company-wide Meetings
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.
|Meetings||Role||Frequency of meeting|
|Global Human Resources Committee||Shares information on succession plans and candidates for positions that are key to divisional and regional business strategies and discusses measures to fortify training||Once a year|
|Specified Import & Export Control Committee||Decides on the overall direction regarding transaction management and export and import of regulated goods||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|
|Safety and Environment Conference||Discusses measures for enhancing safety management, promotes improvements to occupational safety and health activities, and promotes environmental management||Once a month|
|Carbon Neutrality Promotion Meeting||Discusses action plans, establishment of structures, and sharing of information for promoting carbon neutrality||Once a month|
Details on Deciding the Compensation, etc., for Members of the Board and the Calculation Method thereof, and the Decision Method
Decision policy and decision process
Compensation for members of the Board of Toyota Tsusho shall consist of (i) fixed remuneration as basic compensation, (ii) bonuses (short-term incentives) as performance-linked compensation, and (iii) transfer-restricted stock compensation (medium- to long-term incentives). The ratio of fixed remuneration to performance-linked compensation is determined with a target ratio of 50:50. For performance-linked compensation, the ratio of "bonuses" to "transfer-restricted stock compensation" shall be determined at a ratio of 70:30. Members of the Board are responsible for the final profit (including temporary and incidental gains/losses) of all Toyota Tsusho Group companies, and the amount of performance-linked compensation paid in each fiscal year shall be determined for each position with the consolidated profit for the year attributable to owners of the parent for the previous fiscal year as an indicator.
However, outside members of the Board are independent of operational management, and, therefore, they are paid fixed remuneration only and are not paid bonuses or transfer-restricted stock compensation. Audit & Supervisory Board members are also paid fixed remuneration only because they are independent so that they carry out audits appropriately.
Toyota Tsusho has established the Executive Compensation Committee as an advisory body to the Board of Directors meeting with the majority of the committee members being independent outside members of the Board. The committee is chaired by the chairman of the Board, who has no representative rights and is not involved in operational management. The Executive Compensation Committee shall deliberate on the policy for determining the details of compensation for each member of the Board (hereinafter, "the policy"), the compensation system, compensation proposals to be submitted to the General Meeting of Shareholders, and other important matters concerning compensation.
The Board of Directors meeting shall determine the policy, the proposal on compensation (bonuses for members of the Board) to be presented to the General Meeting of Shareholders, and the compensation for each member of the Board related to transferrestricted stock compensation, taking into account the result of such deliberations. The Board of Directors meeting shall delegate the decision to the president & CEO from the standpoint of flexibly and agilely deciding the amount of compensation for each member of the Board related to fixed remuneration and bonuses. The president & CEO shall determine the amount of compensation for each according to the policy, taking into account opinions gathered during interviews with each member of the Executive Compensation Committee. The Board of Directors meeting deems the compensation, etc., of each member of the Board for the current fiscal year is in line with said decision policy, having confirmed that it is consistent with the policy determined at a Board of Directors meeting and that the findings of the Executive Compensation Committee have been given due regard.
Method of deciding on compensation
- ［ⅰ］Fixed remuneration
Fixed remuneration shall be monthly compensation and shall be set at an appropriate level with reference to the remuneration data of other companies in the industry and taking into consideration the position and responsibilities of each director.
For each fiscal year, Toyota Tsusho shall determine the amount of bonuses to be paid to each individual by adjusting, as appropriate, 70% of the total amount of the specified performance-linked compensation for each position based on the responsibilities of the position and the performance of the duties for which the individual is responsible.
- ［ⅲ］Transfer-restricted stock compensation
For each fiscal year, the amount of transfer-restricted stock compensation to be paid to each individual shall be determined by adjusting, as appropriate, 30% of the total amount of the specified performance-linked compensation for each position based on the responsibilities of the position and the performance of the duties for which the individual is responsible.
However, in cases in which it is not appropriate to grant transferrestricted stock compensation to eligible members of the Board, the full amount of the performance-linked compensation for eligible members of the Board shall be paid as a bonus.
The transfer restrictions on transfer-restricted stock compensation are lifted on the day on which a member of the Board resigns from the company. Compensation to be provided to target members of the Board to grant transfer-restricted stock to them will be a monetary claim, the total value of which will be not more than 200 million yen a year as a limit separate from the aforementioned fixed remunerations and bonuses for them. The class of stock to be allocated will be common shares (those for which transfer restriction is imposed in an allocation agreement). The total number of shares to be issued or disposed of will be not more than 200,000 shares a year for target members of the Board (as resolved by the Ordinary General Meeting of Shareholders held on June 23, 2020). The specific timing of provision and allocation to individual target members of the Board will be determined by the Board of Directors meeting based on deliberations by the Executive Compensation Committee.
- ※1No directors are serving concurrently as employees.
- ※2The above includes two members of the Board (not outside members of the Board) and two Audit & Supervisory Board members (one outside Audit & Supervisory Board member) who retired at the close of the 101st Ordinary General Meeting of Shareholders held on June 24, 2022.
- ※3As per a resolution at the 99th Ordinary General Meeting of Shareholders held on June 23, 2020, 1) the maximum amount of fixed remuneration for members of the Board is 600 million yen per year (including 90 million yen per year for outside members of the Board), and 2) the stock compensation limit is 200 million yen per year (the total number of shares allotted is not more than 200,000 shares per year). There are eight members of the Board (including four outside members of the Board) as of the close of the General Meeting of Shareholders related to 1) above and four members of the Board (excluding outside members of the Board) as of the close of the General Meeting of Shareholders related to 2) above.
- ※4The remuneration limit for the Audit & Supervisory Board members was resolved at the 93rd Ordinary General Meeting of Shareholders held on June 20, 2014 to be 16 million yen a month. There are five Audit & Supervisory Board members including three Audit & Supervisory Board members (outside) as of the close of the General Meeting of Shareholders related to the resolution.
- ※5Total remuneration includes bonuses totaling 172 million yen, subject to shareholder approval at the 102nd Ordinary General Meeting of Shareholders held on June 23, 2023, to be paid to four members of the Board.
- ※6Of the above remuneration, consolidated profit for the year attributable to owners of the parent for the previous fiscal year, which is a performance indicator related to bonuses and stock compensation, was 284.1 billion yen.
- ※7The above stock compensation is, as a reference value, the amount that is assumed (provisional) to be granted as a monetary claim to be used for payment in exchange for the transferrestricted stock, which is the stock compensation for the current fiscal year.
- ※8Ichiro Kashitani, president & CEO of the company, will determine the fixed remuneration and bonuses for the current fiscal year for each Toyota Tsusho member of the Board based on a resolution of the Board of Directors meeting. Please refer to "Decision policy and decision process" above for the details and reasons for the delegation.
Policy for Investments in Stock
Policy for stock ownership for business relationships
Maintaining and strengthening business and collaborative relationships with a variety of companies is necessary for the sustainable enhancement of Toyota Tsusho’s corporate value. The company owns on a limited and strategic basis the stock of important suppliers and other partners where it believes that the ownership of this stock is beneficial and important from a medium- to long-term perspective (shareholding). Once every year, the Board of Directors meeting receives a report about the results of a reexamination of stock holdings and if stock should be retained or sold. It reduces holdings of stocks where ownership is not beneficial.
Examination of justification of stock shareholdings
Toyota Tsusho uses an indicator of its own, which is based on the cost of capital, to determine comprehensive assessments of stock holdings. Assessments incorporate profitability; building, preserving, and reinforcing business relationships; contributions and cooperation for regional and social progress; and other considerations. This process is used to decide if the company should continue to hold a stock and to reexamine the number of shares held.
As needed, constructive dialogues take place with companies in which stock is held from the standpoint of preserving and increasing corporate value and achieving sustainable growth. These dialogues facilitate the sharing of information about management issues and making improvements.
Policy on the exercise of voting rights
Striving to maintain and strengthen partnership with investee companies, Toyota Tsusho engages in communications with these companies that contribute to enhancement of their shareholder interests and corporate value over the medium and long term. Toyota Tsusho’s departments that manage investments take that perspective and appropriately exercise voting rights on the basis of multifaceted and comprehensive consideration of the situation of each investee company.
Policy for when cross-shareholders indicate that they want to sell the shares
If cross-shareholders (i.e. shareholders who hold a share of Toyota Tsusho for the purpose of cross-shareholding) seek to sell the shares, Toyota Tsusho will not hinder the sale of the cross-held shares. In such a case, if Toyota Tsusho has their shares for the purpose of cross-sharing, it will take appropriate measures to reduce those shares in accordance with the Company's policies on cross-shareholdings.