Corporate Governance Guide

Guideline for Corporate Governance, Compliance and Risk Management

Revised: April 1, 2017

Teijin´s Basic View on Corporate Governance

  • The shareholders entrust capital into the Company and thus, the Company is required to achieve profits through its business activities and to ultimately increase shareholder value over the medium and long-term. It is the basic mission of the Company to comply with such shareholders´ entrustment. Based on this basic mission, the Company must fulfill its respective responsibilities to its stakeholders (interested parties), such as employees, business partners, customers, consumers, local residents and communities, etc. In the meantime, the Company as a member of society is expected to perform business activities in full observance of social norms and contribute to society.
  • Amid this basic framework, we work to conduct superior corporate activities through corporate management that embraces corporate governance. By emphasizing corporate governance, we aim to contribute to the company´s prosperity, fulfill our corporate social responsibility ("CSR") and ensure accountability (full disclosure of information that we are responsible for explaining).
  • Teijin implements a management structure that ensures transparency and fairness based on the beliefs stated above and will disclose information on a timely basis. In addition, to boost competitiveness, Teijin must create an organization and mechanism that enables it to make speedy decisions and to execute those decisions. Furthermore, Teijin requests each of the Group Companies and the Managers to conduct superior business activities as well as to promote with every effort the increase in the shareholder value.

Mechanisms for Decision-Making, Surveillance and Control, and Audit

Outline and basic policies

Teijin has adopted and will continue to adopt appropriate mechanisms for corporate governance, from time to time. Accordingly, Teijin will review the mechanisms yearly and such changes may be made in accordance with changes in the social and legal environment.

Directors and the board of directors

  • 1.
    Roles of the board of directors

    The main goal of Teijin´s Board of Directors is to maximize shareholder value each fiscal year and over the medium and long-term. At the same time, it must pay close attention to the position of the stakeholders other than the shareholders. The Board of Directors must also deliberate, determine, and approve any management policies, and the overall plans of the entire Teijin Group, and any other items required by law or other regulations. Furthermore, the Board of Directors is responsible for ensuring accountability. It must also clarify its policies on compliance and how to manage risks surrounding the company, and supervise those implementations.

  • 2.
    Composition and Chairman of the Board of Directors
    • (1)
      The Company shall have not more than ten Directors and around four of them shall be outside Directors.
    • (2)
      The Chairman ("Chairman") and President are appointed from the internal Directors, and the President also serves as CEO (President shall be hereinafter called "CEO"). Other internal Directors may, in principle, hold concurrent posts as chief officers.
    • (3)
      The outside Directors must satisfy the Independent Director requirements, to be stipulated separately.
    • (4)
      As a part of the separation of surveillance and control functions, and internal business execution, the Chairman will preside as chairman of the meetings of the Board of Director . In the case of a chairman-of-the-board-of-directors vacant seat, a chairman of the board is selected from the Senior Advisor who is a director or outside director.
  • 3.
    Position of Chairman

    The Chairman will not engage in any executive activity of the Company´s business and will not be nominated as a Representative Director unless otherwise necessary.

  • 4.
    Representative director

    In principle, the Company shall have not more than three Representative Directors including the CEO.

  • 5.
    Term of Office of Directors

    The term of office of Directors shall be one year. Nothing shall prevent the reelection of the current Directors (including outside Directors), unless disqualified by age and others limits to be determined separately.

Advisors and the Advisory Board

  • 1.
    Advisory Board as Consultative Body

    The Board of Directors will establish the Advisory Board, mainly consisting of well-experienced persons from inside and outside Japan, and will obtain advice and recommendations aimed at a "more improved management" and an "enhancement of transparent management." While the Advisory Board itself has no power to make decisions, it has the authority to make proposals and recommendations and to give advice to the Board of Directors. The Board of Directors must fully respect and take into account the Advisory Board´s proposals, recommendations, and advice.

  • 2.
    Composition and Chairman of the Advisory Board
    • (1)
      The Advisory Board is composed of outside advisors, the Chairman (or the Senior Advisor when the position of the Chairman is vacant) and CEO.
    • (2)
      Outside advisors will be around five to seven, including two or three non-Japanese advisors. Also outside advisors are required to satisfy the requirements of Independent Directors.
    • (3)
      The Chairman will chair the Advisory Board.
  • 3.
    Frequency and Contents of Meeting
    • (1)
      The Advisory Board´s ordinary meetings shall be held twice a year.
    • (2)
      The Advisory Board has a function of nomination and compensation committee, deliberating the following items with respect to nominations and compensation.

Items of nominations and compensation

  • 1.
    To deliberate the change of CEO and recommend the successor (decided by the Board of Directors);
  • 2.
    To select candidates of CEO, to deliberate a plan to foster successors for the position of CEO, and to review the progress of the plans;
  • 3.
    To deliberate the selection of the Chairman based on CEO´s proposal;
  • 4.
    To deliberate the compensation system of the Directors, Corporate Auditors, and Corporate Officers of the Teijin Group;
  • 5.
    To deliberate the standards of the compensation of the Directors, Corporate Auditors and Corporate Officers of the Teijin Group;
  • 6.
    To evaluate CEO´s performance; and
  • Notes1:
    Except for items 1, 5 and 6 above, CEO will in principle leave the meeting room and not participate in the deliberation.
  • Notes2:
    The Chairman shall leave the meeting room and not participate in the deliberation for matters concerning the Chairman.

Nomination Consultative Committee and Compensation Consultative Committee

  • 1.
    Nomination Consultative Committee and Compensation Consultative Committee as consultative bodies

    In addition to the above Advisory Board, the Company shall establish and manage the Nomination Consultative Committee and the Compensation Consultative Committee, as consultative bodies of the Board of Directors to further enhance the transparency concerning the appointment of directors and officers. Both committees shall have a function to make proposals and recommendations to the Board of Directors with respect to the nomination, evaluation and amount of compensation of Directors and the Senior Management other than the Chairman and CEO and the nomination of Statutory Auditors, and the Board of Directors shall fully respect and take into account the relevant proposals and recommendations and make decisions.

  • 2.
    Composition and Committee Chairman
    • (1)
      The Consultative Committees shall be composed of four members, namely two outside Directors, the Chairman and CEO respectively.
    • (2)
      The Committee Chairman shall be appointed from two outside Directors.
  • 3.
    Contents of meeting

    Both of the Consultative Committees shall deliberate the following items with respect to nominations and compensation based on CEO’s proposals.

Items of nominations

  • 1.
    To deliberate the selection of candidates of the Representative Directors;
  • 2.
    To deliberate the selection of candidates of the Directors;
  • 3.
    To deliberate the selection of candidates of the Statutory Auditors;
  • 4.
    To deliberate the matters concerning promotion and demotion of internal Directors and the Senior Management; and
  • 5.
    To deliberate the matters concerning the standard of independence of outside Directors and outside Statutory Auditors.

Items of  compensation

  • 1.
    To evaluate the performance of and to deliberate the matters concerning the amount of compensation for internal Directors and the Senior Management.
  • Notes:
    Above items of nominations and compensation for deliberation shall not include the matters concerning the Chairman and CEO.

Statutory Auditors and the Board of Statutory Auditors

  • 1.
    Board of Statutory Auditors
    • (1)
      Roles of the Board of Statutory Auditors

      The Board of Statutory Auditors consists of all the Statutory Auditors and is in charge of surveying and auditing the management. All of the Statutory Auditors should attend the Board of Directors meeting and any other important internal meetings and express their opinions, make recommendations and give advice.

    • (2)
      Composition of the Board of Statutory Auditors
      • (a)
        There shall be, in principle, five Statutory Auditors, and the majority shall be outside Statutory  Auditors to secure transparency of the Board.
      • (b)
        From an auditing perspective, it is important to use full-time Statutory Auditors, who are familiar with the Company´s internal matters.
      • (c)
        Outside Statutory Auditors are required to satisfy the requirements of independent Statutory auditors separately determined. Outside Statutory Auditors are selected by taking into consideration of the balance in the Board of Statutory Auditors and their specialties.
    • (3)
      Nomination of Statutory Auditors

      The Board of Statutory Auditors shall make a proposal or give prior consent in determining the candidates of Statutory Auditors. The four-year statutory term of office of the Statutory Auditors shall be respected.

  • 2.
    Committee of Teijin Group Statutory Auditors
    • (1)
      Roles of the Committee of Teijin Group Statutory Auditors
      • (a)
        The Committee of Teijin Group Statutory Auditors will be responsible for surveying and auditing the entire Teijin Group which correspond to Group management and financial consolidation management. The Committee of Teijin Group Statutory Auditors will, among others, deliberate and ensure the basic policy for auditing and the selection of key auditing items of each business on the basis of Teijin Group basic auditing policy and plan to be decided by The Board of Statutory Auditors of the Company.
      • (b)
        The Committee of Teijin Group Statutory Auditors will share information among them in its ordinary meetings and enhance the performance level of auditing through the members´ mutual study.
    • (2)
      Composition of the Committee of Teijin Group Statutory Auditors

      The Committee of Teijin Group Statutory Auditors are in principle composed of Teijin´s Statutory Auditors, full time statutory auditors of the Teijin Group Companies and members of Group Auditors Office of the Company.

    • (3)
      Overseas Teijin Group Companies

      The principle axis is an internal audit to be performed by the Corporate Audit Department of the Company. Audits of accounting are performed by outside auditing firm ("Auditing Firm") elected by the Shareholders´ Meeting. Teijin´s Statutory Auditors and members of Group Auditors Office will visit to audit these companies from time to time in accordance with a plan.

  • 3.
    Relations among the Board of Statutory Auditors, the Committee of Teijin Group Statutory Auditors and other Auditing Body
    • (1)
      The Board of Statutory Auditors and Group Companies shall strengthen close relationships with their Auditing Firms. The Board of Statutory Auditors shall in principle initiate in the appointment and change of Auditing Firm.
    • (2)
      The Board of Statutory Auditors and Group Companies shall strengthen close relationships with the Corporate Audit Department to obtain internal audit information on a permanent and overall basis.

Compliance and Total Risk Management under Internal Control System

Compliance

  • 1.
    Basic principles of Compliance

    Basic principles of compliance to be observed to achieve corporate governance are stated below:

    Basic Principles of Compliance

    • 1.
      All directors, officers, and employees of the company are required not only to comply with the laws and regulations, but also to sincerely act as a good member of the enterprise and society based on the ethics and values socially mandated. This sincere behavior is essential for the increase in shareholder value.
    • 2.
      According to the above, the Company strives to incorporate fair and adequate management while working with society by fully complying with social rules, standards, ethics, and laws and regulations. In addition, it will abide by the corporate philosophy and corporate standards of conduct and other regulations.
    • 3.
      The Company requests that all the managers and employees of each of the Teijin Group Companies fully understand the compliance policies stated above and behave accordingly, which will help Teijin Group in its creative growth.
  • 2.
    Internal Control and Compliance Systems

    Compliance, including corporate ethics, is an important part that supports internal control. The Group aims to be a corporate group that maintains a high level of corporate ethics.

  • 3.
    Full Awareness of Business Code of Conduct, Corporate Standards of Conduct and Related Regulations

    The compliance principles are based on the "Business Code of Conduct" and the "Corporate Standards of Conduct" as stated in the "Teijin Group´s Corporate Ethics Guideline". Teijin´s Board members will review the "Business Code of Conduct" and the "Corporate Standards of Conduct" and other related regulations, from time to time. In reviewing the above, they will consider compliance issues, risk management and the responsibilities for any stakeholders, and ensure that they are passed down to all the companies and employees of the Teijin Group.

Total risk management

  • 1.
    Principles of Total Risk Management

    Within corporate management, risk management and compliance are very important. A total risk management system is established to monitor Teijin Groups overall management.Total risk management utilizes preventive measures to handle any risks that the enterprise may face in achieving corporate governance. The basic principles are stated below:

    Basic Principles for Total Risk Management

    • 1.
      The Company has a duty to continue its business activities that enhance shareholder value and that satisfy the expectations of every stakeholder, especially shareholders. Therefore, it is essential that the enterprise deal with every risk (uncertainty) that may threaten the achievement of the mission. The Company will comprehensively and efficiently grasp, evaluate and control risks that exposes the entire enterprise and will take systematic and organizational approaches for the purpose of making it useful for the corporate management.
    • 2.
      The Company´s Board Directors conducts assessment of both management strategy risk, which includes formulating management strategy and plans with strategic action and decision of individual investment projects, and business operating risk, which could adversely affect the Teijin Group Companies. The Board of Directors focuses on the assessment of these risks as significant decision-making information.
    • 3.
      The Company requests that each of the Teijin Group Companies and all their managers fully understand the principles of Total Risk Management as stated above and cope with every risk (uncertainty) that may threaten corporate activities.
  • 2.
    Policies and Operation
    • (1)
      To promote Total Risk Management, the Chief Social Responsibility Officer ("CSRO") is assigned in charge of business operating risk, while CEO is directly in charge of management strategy risk.
    • (2)
      Total Risk Management Committee ("TRM Committee") to comprehensively manage business operating risk and management strategy risk is established under the Board of Directors.
    • (3)
      CEO chairs the TRM Committee. Committee members are CSRO and other persons assigned by CEO.
    • (4)
      The Board of Directors deliberates and determines Total Risk Management basic policies and annual plans that are proposed by the TRM Committee, as well as managing significant risks for the Teijin Group, supporting business continuity.
  • 3.
    Audit by Statutory Auditors

    Statutory Auditors perform audits to confirm that the Board of Directors is carrying out the determination of adequate policies, surveillances and controls of the Total Risk Management.

Accountability

Basic recognition

The accountability of the company is an integral part of corporate activities for the business to prosper and enhance shareholder value. The company should clearly present its mission and vision and present a clear explanation of the corporate governance mechanisms on every occasion. Furthermore, compliance policies and Total Risk Management must be instilled into the entire Teijin Group. Teijin Group behaves as a company that takes requests from shareholders and society into consideration in order to achieve a higher degree of accountability.

Basic policies

  • 1.
    In disclosing information, the basic policy is to disclose the same contents inside and outside Japan simultaneously.
  • 2.
    In addition to disclosing the financial information that is legally stipulated, the Company will proactively discloses corporate information from the standpoint of CSR.
  • 3.
    The general meeting of shareholders of the Company will be "open" to its shareholders and the Company will respect the communicating with its shareholders.
  • 4.
    The Finance & IR Division shall be in charge of and the Chief Financial Officer shall be responsible for investor relations´ functions including information disclosure and communication with shareholders and others.
  • 5.
    The Finance & IR Division shall work on centrally managing information transmission to investors while planning the external disclosure of medium- to long-term management strategies and important matters of business, and it shall strive for coordination through meetings and close contact with relevant offices.

Measures for enhancing dialogue with shareholders

  • 1.
    To a reasonable extent, senior management shall make responses to engage in actual dialogue with shareholders.
  • 2.
    In addition to holding regular presentations for operating results, active measures, such as company overview presentations, and facility tour/presentations, shall be taken to enhance opportunities for dialogue with overseas and domestic institutional and individual investors.
  • 3.
    The Finance & IR Division shall arrange both opinions of investors grasped through dialogue and    questions from analysts at presentations, and successively provide these to Directors, the Management and Statutory Auditors  as feedback.

Measures to control insider information

Coordination shall be made with the business operation divisions and the corporate planning divisions to control important information related to the competitive strategies of individual business and information related to high-level business confidentiality, and guidelines on external disclosure shall be shared.