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Corporate Governance

Basic policy

Duskin positions the strengthening of corporate governance as one of its highest priorities in order to meet the expectations of stakeholders, increase corporate value over the medium- to long-term, and achieve continuous growth of business operations. Alongside establishing a management framework that allows us to accommodate changes in our business environment with swiftness and precision, Duskin is building a structure, an organization and systems to ensure transparent and sound management.

Duskin also places compliance at the center of all our corporate activities in order to continuously improve our corporate value.

Management Philosophy

Corporate governance structure

Duskin is a company with an Audit & Supervisory Board. At the Board of Directors, Directors monitor and supervise other Directors' performance. The Audit & Supervisory Board consists of Outside Audit & Supervisory Board Members capable of objectively conducting audits and internal full-time Audit & Supervisory Board Members, who are well acquainted with our business operations and have skills needed to gather information. Under this system, the Audit & Supervisory Board Members, internal and outside, perform accurate audits. We consider this structure highly effective as it supports customer-oriented management while ensuring sound and efficient business operations. This system also enables us to swiftly and precisely respond to changes in the business environment.

In addition, Duskin started using the Operating Officer System in FY2018. Delegating authority to the Operating Officers strengthens the supervisory and advisory functions of the Board of Directors.

■Corporate governance structure (as of April 2019)

Corporate governance structure

■Initiatives to strengthen corporate governance

(FY)

2003 Organized Quality Assurance Committee to establish quality assurance structure within the company (now called CSR Committee)
Established Compliance Promotion Committee (now called Compliance Committee)
2006 Prayerful Management included in the Articles of Incorporation
Established a basic policy for the Internal Control System
Established Risk Management Committee
Duskin stock listed on the first section of Tokyo Stock Exchange and Osaka Securities Exchange*
  • *The cash equity markets of Tokyo Stock Exchange and Osaka Securities Exchange were integrated on July 16, 2013.
2007 Terminated the Directors' retirement benefit program
2008 Increased the number of Outside Audit & Supervisory Board Members from two to three
2013 Participation in Electronic Voting Platform
2014 Increased the number of Outside Directors from one to two
2015 Established Outside Directors and Audit & Supervisory Board Members Council
Increased the number of Outside Directors from two to three
Started to post our shareholders' meeting notice on the internet earlier than distributing print version
2016 Started to analyze and evaluate the effectiveness of the Board of Directors
2017 Established a share-based-remuneration-type stock option program
Introduced Directors Evaluation and Nomination system
Organized Directors Evaluation Committee
2018 Introduced Operating Officer System
Decreased the number of Directors from not more than 15 to not more than 12
Independent Outside Directors account for at least one third of all Directors
2019 The Directors Evaluation Committee was changed to consist of only independent directors and to function an advisory body for the Board of Directors.

■Compositions of the Board of Directors and Audit & Supervisory Board (as of June 25, 2019)

  • Internal/Outside
  • Gender

■Percentage of Outside Directors

Percentage of Outside Directors

Board of Directors

Directors are selected by taking into account the diversity of the board as a whole in terms of abilities, experience, gender and other characteristics. This is for the purpose of enabling the Board to make accurate management decisions in a wide range of business fields while maintaining the soundness, efficiency and effectiveness of the management. The number of Directors is limited to 12.

We select internal Directors from individuals who meet the requirements of becoming Directors, in light of our management philosophy, Duskin's guiding principles and medium- to long-term growth strategies. Outside Directors are appointed from among business executives and experts who are independent and free of any real vested interest in Duskin, after taking into account the diversity of their views, knowledge and management experience.

To enable the Board of Directors to focus on making important management decisions and monitoring business operations in order to swiftly and precisely respond to changes in our business environment, the Board of Directors consists of six internal Directors with extensive knowledge about the group's businesses and three independent Outside Directors.

Audit & Supervisory Board

The Audit & Supervisory Board has five members. There are two full-time members who have considerable knowledge concerning finance, accounting, legal matters and compliance, and three outside members (all independent directors, one woman) who are certified public accountants and an attorney. These individuals are responsible for auditing important decision making processes and the status of business execution of Duskin Group, while supervising the performance of the Directors.

Audit & Supervisory Board Members attend the Board of the Directors meetings and other key meetings, where they share their professional opinions with the Directors. Meetings of the Audit & Supervisory Board are held monthly to discuss decisions on audit policies and progress involving audits.

Advisory bodies

Outside Directors and Audit & Supervisory Board Members Council

Duskin has an Outside Directors and Audit & Supervisory Board Members Council, which is an advisory council for the Board of Directors. Its purpose is to provide beneficial views for ensuring effective corporate governance, while enabling Outside Directors to gather information without affecting their independence. This makes it possible to monitor and supervise Duskin's management from a transparent, fair and objective viewpoint.

Directors Evaluation Committee

The Directors Evaluation Committee was established as an advisory body for the President & CEO to consider Director and Operating Officer candidates and their remuneration, which requires the approval of the Board of Directors.

In April 2019, this committee was changed to an advisory body for the Board of Directors with the aim of improving the effectiveness of the Directors Evaluation and Nomination system. The committee now consists of only independent directors, resulting in greater transparency and objectivity.

CSR Committee

CSR Committee
CSR Committee

To fulfill our corporate social responsibilities (CSR), we have a CSR Committee, which is an advisory council for the Board of Directors. The purpose of the committee is to identify key CSR priorities to be addressed and the scope of our CSR activities in order to implement CSR management across Duskin Group.

Risk Management Committee

Risk Management

Compliance Committee

Compliance

Business execution

Operating Officers' Board

For the President & CEO to conduct business operations based on the basic management policy established at the Board of Directors meetings, Duskin has an Operating Officers' Board, a deliberative body to examine important business matters.

Business Strategy Meeting

Business Strategy Meeting
Business Strategy Meeting

The Business Strategy Meeting is for all Directors and division managers to discuss company-wide business strategies, business portfolios and the allocation of Duskin Group resources from a medium- to long-term perspective.

Budget Meeting

The Budget Meeting is held to monitor budget progress for each business division and identify the discrepancies between forecasts and actual results as well as to discuss measures to be taken.

■Committees and meetings

Name Chair Members Function
Board of Directors Teruji Yamamura
(President & CEO)
9 Directors (3 Outside Directors)
Observers: 5 Audit & Supervisory Board Members (3 Outside Audit & Supervisory Board Members)
Makes decisions about important matters involving the Duskin Group's management and supervises business operations.
Audit & Supervisory Board Yasuto Shigeyoshi
(Standing Audit & Supervisory Board Member)
5 Audit & Supervisory Board Members (3 Outside Audit & Supervisory Board Members) Audits in accordance with laws and regulations including designated number of audits, attends important meetings and monitors the Duskin Group's management.
CSR Committee Kazushi Sumimoto
(Director)
6 Operating Officers (5 are also Directors), 2 Outside Directors, 1 Standing Audit & Supervisory Board Member Determines the medium-term basic policy for CSR, annual CSR activities, and discusses measures for issues requiring attention.
Risk Management Committee Kazuo Okai
(Director)
2 Operating Officers (1 is also a Director), 8 managers of corporate departments, and 2 administration section chiefs of business divisions Discusses annual plans for risk management, causes of incidents and responses, the business continuity plan (BCP), identifies risk factors, and examines risk audit results.
Compliance Committee Kazuo Okai
(Director)
7 Operating Officers (2 are also Directors), 2 Outside Directors, 1 Standing Audit & Supervisory Board Member, 1 labor union chair, 1 attorney Discusses the compliance framework, annual plan, training plans and status of the whistle-blowing system.
Outside Directors and Audit & Supervisory Board Members Council Tadashi Yamamoto
(Outside Director)
3 Outside Directors, 3 Outside Audit & Supervisory Board Members Provides advice to improve medium- to long-term corporate value of Duskin.
Directors Evaluation Committee Tadashi Yamamoto
(Outside Director)
2 Outside Directors, 1 Outside Audit & Supervisory Board Member Provides advice concerning the selection of candidates for Directors and Operating Officers and their remuneration in response to the Board of Directors' requests.
Business Strategy Meeting Teruji Yamamura
(President & CEO)
14 Operating Officers, 3 Outside Directors, 5 Audit & Supervisory Board Members (3 Outside Audit & Supervisory Board Members) Discusses company-wide business strategies, business portfolios and the allocation of Duskin Group resources from a medium- to long-term perspective.
Operating Officers Board Teruji Yamamura
(President & CEO)
14 Operating Officers
Observers: 2 Standing Audit & Supervisory Board Members
Examines important issues involving business operations.
Budget Meeting Teruji Yamamura
(President & CEO)
8 Operating Officers (6 are also Directors), 2 Standing Audit & Supervisory Board Members Monitors budget progress at business divisions, identifies the discrepancies between forecasts and actual results and discusses necessary actions.

Evaluation of the effectiveness of the Board of Directors

Duskin analyzes and evaluates the effectiveness of the entire Board of Directors annually in order to achieve medium- and long-term sustainable growth and stronger corporate value.

The FY2018 analysis and evaluation process and results and FY2019 plan are as follows:

■Analysis and evaluation process

Analysis and evaluation process

■Analysis and evaluation results

Issues Improvements Challenges to be addressed
Strengthening decision making and monitoring functions of the Board of Directors
  • Introduced Operating Officers System. Significant delegation of authority to Operating Officers gives the Board of Directors time for discussing important matters.
  • Enhanced the corporate strategy planning department to facilitate constructive discussions of company-wide management strategies at the Board of Directors meetings.
Review of management plan Enhanced initiatives in line with strategic themes unique to Duskin for sustainable growth
Composition of the Board of Directors
  • Reorganized the Board of Directors by reducing the number of Directors by three and optimized the composition of the Board. Expanded the roles and responsibilities of Directors and Operating Officers and enabled the Board to facilitate strategic discussions and have the results of the discussions reflected in the management of business operations.
More diversity of members
Remuneration system that functions as sound incentive
  • Decided to start using new systems for Directors' remuneration system and remuneration governance in FY2019.
  • Established a framework to have the Directors Evaluation Committee monitor the criteria and process for determining Directors remuneration.
Improvement of objectivity and transparency of the process of selection and dismissal of Directors, including Representative Director, and the process of successor development
  • Disclosed the process of Directors evaluation, selection and dismissal process for Directors in the corporate governance report and improved transparency. Also complied with Japan's Corporate Governance Code Supplementary Principle 4.1.3 for selection of the CEO.
  • Enhanced effectiveness of Directors Evaluation Committee by changing composition to all independent directors.
  • Established a system to have the Directors Evaluation Committee monitor the election and dismissal of Directors.
Development of next generations of senior executives

■FY2019 initiatives

Issues Plans
Enhanced discussions of management strategies
  • Review the business portfolio for sustainable growth while paying due attention to the cost of capital. Regularly review financial policies and resource allocations on investments (facilities, R&D, IT and human resources) and reflect the results in the business operations.
  • The Board of Directors regularly monitors all resolutions made (including management plans) approved by the Board as needed.
Composition of the Board of Directors and development of next generations of executives
  • The Board of Directors shares the selection, development and promotion of current Directors and the next generations of Director candidates.
  • Provide current Directors and the next generations of Director candidates with training for corporate operations and governance, including interactions with external organizations, with the aim of helping them acquire knowledge about management practices and thinking.

Election policies for the Board of Directors

Duskin selects candidates for election as Directors from among individuals who fulfill the basic conditions of having the character, knowledge and ethical views for serving as a Director and who have no health issues that would interfere with performing the duties of a Director.

For internal Director candidates, the Representative Director requests for recommendations from the current Directors and Audit & Supervisory Board Members. Then individuals who can execute medium- to long-term strategies of the Duskin Group and have a positive effect on the organization's vitality are chosen as candidates. The Board of Directors makes final selections after thorough discussions, with advice from the Directors Evaluation Committee (chaired by an Outside Director, the majority is comprised of independent Directors).

For Outside Director candidates, Duskin selects individuals who can maintain independence and have no special financial relationship with the Duskin Group. These individuals must also have a business career and professional knowledge needed for enabling the Board of Directors to perform its supervisory and advisory functions. These individuals must also be able to provide useful advice from many perspectives in order to maintain the transparency and soundness of management and the fairness of procedures. The Board of Directors makes final selections.

Under the provisions of Article 427, Paragraph 1 of the Companies Act, Duskin has contracts with Outside Directors that limit their liability as provided in Article 423, Paragraph 1 of this act. The maximum liability under the contracts is the amount as provided in laws and ordinances.

■Reasons for selections of Outside Directors

Name Reasons for selection/election
Tadashi Yamamoto Extensive experience and insight in corporate management as a Director and Senior Managing Corporate Officer at Wacoal Corporation. Considerable business experience in the fields of human resource planning, international operations and other fields
Tomoya Yoshizumi Extensive experience and insight in corporate management as a Member of the Board and Corporate Vice President at Ajinomoto Co., Inc., including strategic production planning, the Medium-Term Management Plan and implementing M&A strategies for the Ajinomoto Group, supervising business operations in North America as General Manager, North America Division and President of AJINOMOTO NORTH AMERICA, INC.
Nobuko Sekiguchi Extensive experience and insight in corporate management as Managing Corporate Officer, including personnel system reforms and corporate planning such as formulation of its Medium-Term Plan, the annual budget management, organizational restructuring, and M&A transactions.
  • Note: All three are independent directors.

Standards for independence of Outside Directors and Outside Audit & Supervisory Board Members

To ensure the independence of an Outside Director or Outside Audit & Supervisory Board Member, Duskin selects a member in accordance with our own selection criteria* as well as the independence standards of the Enforcement Rules for Securities Listing Regulations of the Tokyo Stock Exchange.

When selecting the candidates, Duskin confirms that they comply with all items of the criteria. Then, the Board of Directors makes the final decision.

  • *Our criteria for independence of Outside Directors and Outside Audit & Supervisory Board Members are in our Annual Securities Report (Japanese version only).

Directors' remuneration

Duskin positions Directors' remuneration as an important issue for our corporate governance. To raise Directors' motivation to achieve medium- and long-term sustainable growth and enhance corporate value, Duskin established the Directors Evaluation and Nomination system. With this system, their contributions and capabilities are determined and reflected in their remuneration.

The remuneration of our Directors other than Outside Directors consists of basic compensation (fixed compensation), a performance-based bonus (short-term incentive) and share based-remuneration-type stock options (medium- to long-term incentive). The determination of remuneration by the Board of Directors includes the use of officer remuneration survey data provided by an external research organization as well as comparisons of Duskin's current remuneration system and level of remuneration with those of companies of a similar size and companies in similar business sectors and with similar operations. The Board of Directors makes the final decisions, taking into consideration the advice of the Directors Evaluation Committee, after thorough discussions. The base compensation is determined in accordance with the responsibilities and rank of each Director. Based on the amount of profit attributable to owners of parent, an upper limit of the funds for the bonuses of all Directors is determined, with the amount distributed to each Director in accordance with the degree of contribution as determined by the Directors Evaluation and Nomination System. Share based-remuneration-type stock options replace part of the basic remuneration. Individuals can receive up to 50 million yen of stock options every year.

The compensation of Outside Directors and Audit & Supervisory Board Members consists of basic compensation and a performance-based bonus. A certain amount is set as base compensation and bonuses for Outside Directors, after taking into account their backgrounds and other matters. Total compensation for all Audit & Supervisory Board Members is determined within the amount resolved at the general shareholders' meeting. Remuneration for each member is determined based on discussions by Audit & Supervisory Board Members.

■Directors remuneration (FY2019) (thousands of yen)

Category Total
remuneration
Type of remuneration Members
Basic
remuneration
Bonus Stock option
Directors* 247,130 194,521 42,200 10,409 6
Outside Directors 23,400 18,600 4,800 0 3
Standing Audit & Supervisory Board Members 52,500 45,300 7,200 0 2
Outside Audit & Supervisory Board Members 29,700 24,900 4,800 0 3
  • *Excl. Outside Directors

Training for Directors

At Duskin, newly elected Directors and Audit & Supervisory Board Members can attend seminars to receive information about their legal duties and responsibilities.

When selecting Outside Directors, the President & CEO explains Duskin's management philosophy and confirms their agreement. Then, Duskin's business strategy and business operations are explained. To help them deepen their knowledge of Duskin, opportunities to visit major business sites, training facilities and plants are provided.

Successor development plan

Duskin provides opportunities for successor candidates with the potential to become senior executives to gain experience at leadership positions of business divisions, regional offices and subsidiaries in order to acquire knowledge about management decisions. The President & CEO conducts monthly individual meetings with all Operating Officers. Quantitative assessments of their performances are made every six months in line with the Directors Evaluation and Nomination System. The President & CEO also reviews their capabilities and performance with them.

Policy related to acquisition and holding of cross-shareholdings

The policy for cross-shareholdings is to hold a suitable number of shares only when there is a legitimate reason for owning these shares. Investments in stocks for which there is no legitimate reason for ownership are reduced or eliminated.

Every year, the Duskin Board of Directors determines if the ownership of each cross-shareholding is proper or not. Decisions are based on the need for each cross-shareholding regarding business activities, such as business alliances, maintaining and strengthening business relationships, Duskin's cost of capital, share price movements and other factors.

Constructive dialogue with investors, analysts and shareholders

Duskin conducts a variety of investor relations (IR) and shareholder relations (SR) activities for the purposes of earning trust in the company's management, receiving a proper evaluation of the company, and achieving sustained business growth and medium- to long-term growth of business operations and corporate value. When requests for individual meetings are received from our shareholders, individual investors or institutional investors, our senior management and Directors respond to the extent believed to be reasonably necessary in relation to the purpose of each request.

Information, evaluation and opinions gained through IR and SR activities are reported at meetings of the Board of Directors twice each year. In addition, reports as deemed necessary are made by the IR Section to an Operating Officer in charge, then from the Operating Officer to the Board of Directors to reflect this information in the management.

We strive to improve our website and other IR information that is useful for individual investors and shareholders to make investment decisions. Duskin discloses the financial results, business strategies, ESG information, news and other topics of interest.

In FY2019, Duskin held company briefings targeting individual investors ten times with 1,090 participants. We also had a booth at the Nikkei IR Investment Fair and TSE IR Festa with 2,500 visitors. Duskin holds financial results briefings for analysts and institutional investors twice every year, and visits institutional investors and analysts quarterly to have active dialogue with them.