Corporate Governance Guide
Guideline for Corporate Governance, Compliance and Risk Management
Revised: December 1, 2022
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, Monitoring and Control, and Audit
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 shall 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 Chair of the Board of Directors
- (1)The Company shall have not more than ten Directors and four or more of them shall be outside Directors.
- (2)The Chairperson ("Chairperson") 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 monitoring and control functions, and business execution, a chair of the Board of Directors is selected from an outside director.
- 3.Position of Chairperson
The Chairperson 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 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 give advice to the Board of Directors. The Board of Directors makes decisions by taking into account such advice.
- 2.Composition and Chair of the Advisory Board
- (1)The Advisory Board is composed of outside advisors, the Chairperson 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 outside director, who serves as chair of the Board of Directors, 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 shall deliberate the following items from a broad, long-term perspective.
- (a)Business plans and strategic directions of the Company (including long-term and medium-term plans);
- (b)Corporate governance, CSR and corporate ethics;
- (c)Business performance of the Company;
- (d)Politics, economy and legislation inside and outside Japan; and
- (e)Other matters concerning management in general.
Nomination Advisory Committee and Compensation Advisory Committee
- 1.Nomination Advisory Committee and Compensation Advisory Committee as consultative bodies
The Company shall establish and manage the Nomination Advisory Committee and the Compensation Advisory 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 all Directors and the Senior Management 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 Chair
- (1)The Advisory Committees shall be composed of all outside Directors, the Chairperson and CEO respectively. In the case of absence of the Chairperson of the board, the outside directors and CEO are made up.
- (2)The Advisory Committee Chair shall be appointed from outside Directors.
- 3.Contents of meeting
Both of the Advisory Committees shall deliberate the following items with respect to nominations and compensation based on CEO's proposals.
Items of nominations
- 1.To deliberate the change of CEO and recommend the successor
- 2.Election and resignation of candidates of the Representative Directors;
- 3.Election and resignation of candidates of the Directors (including the Chairperson);
- 4.Election and resignation of candidates of the Statutory Auditors;
- 5.Promotion, demotion, election and resignation of internal Directors and the Senior Management;
- 6.To deliberate the matters concerning the standard of independence of outside Directors and outside Statutory Auditors; and
- 7.To select candidates for CEO as well as to review a plan and the progress in its implementation by the CEO to develop potential successors.
In principle, the CEO will not participate in decision making during the deliberation of item 1, and the Chairperson will not participate in decision making in the deliberation of item 3 concerning the Chairperson as they are interested parties.
Items of compensation
- 1.To deliberate the compensation system of the Directors, Statutory Auditors and Corporate Officers of the Teijin Group;
- 2.To deliberate the standards of the compensation of the Directors, Statutory Auditors and Corporate Officers of the Teijin Group; and
- 3.To evaluate the performance of and to deliberate the matters concerning the amount of compensation for internal Directors (including the CEO) and the Senior Management.
Regarding items 2 and 3 above, in principle, the CEO will not participate in decision making during deliberation concerning the CEO, and the Chairperson will not participate in decision making concerning the Chairperson as they are interested parties.
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 monitors and audits the management. All Statutory Auditors shall attend the Board of Directors meeting and important internal meetings and express their opinions, make proposals 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 must satisfy the requirements of independent statutory auditors, to be stipulated separately. 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.
- (1)Roles of the Board of Statutory Auditors
- 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 monitoring and auditing the entire Teijin Group which correspond to Group consolidated 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 based on 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 is, 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
Internal audit performed by Corporate Audit Department shall be the major part of audit to overseas Teijin Group Company. Accounting audit shall be performed by outside auditing firm ("Auditing Firm"). Teijin's Statutory Auditors and members of Group Auditors Office will audit these companies from time to time in accordance with an audit plan.
- (1)Roles of the Committee of Teijin Group Statutory Auditors
- 3.Relations among the Board of Statutory Auditors, the Committee of Teijin Group Statutory Auditors and other Auditing Entity
- (1)The Board of Statutory Auditors and the Committee of Teijin Group Statutory Auditors shall strengthen close relationships with Auditing Firms of Teijin and Group Companies. The Board of Statutory Auditors shall in principle initiate in the appointment and change of Auditing Firm.
- (2)The Board of Statutory Auditors and the Committee of Teijin Group Statutory Auditors 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
- 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 Code 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 Code of Conduct and Related Regulations
The compliance principles are based on the "Code of Conduct". Teijin's Board of Directors will review the "Code 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, officers and employees of the Teijin Group.
Total Risk Management
- 1.Principles of Total Risk Management
Risk management, as well as compliance, is a key to supporting internal control. A total risk management (TRM) system is established as a comprehensive system that covers the entire management of the Teijin Group. The TRM is positioned as a preventive measure against the uncertainty that the Company may face, and its basic principles are stated as follows:
Basic Principles for Total Risk Management
- 1.A Company has a mission to continue its business activities that enhance shareholder value and that satisfy the expectations of every stakeholder, including shareholders. Therefore, it is necessary for the Company to deal with every risk (uncertainty) that may threaten its achievement. The Company comprehensively and efficiently identifies, assesses and manages such risks that exposes the entire group and takes an organizational and systematic approach for the purpose of utilizing them in group management.
- 2.The Board of Directors of the Company manages the risk of the entire Teijin Group, conducts assessment of both strategic risk management, which includes formulating management strategy and plans with strategic action and decision of individual investment projects, and operational risk management, which could negatively affect the Teijin Group Companies. The Board of Directors focuses on the assessment of these risks as significant decision-making information.
- 3.The Company requires that each of the Teijin Group Companies and all their directors fully understand the principles of TRM as stated above and deal with every risk (uncertainty) that may threaten corporate activities.
- 2.Policies and Operation
- (1)To promote TRM, the Chief Social Responsibility Officer ("CSRO") is assigned in charge of operational risk, while CEO is directly in charge of strategic risk.
- (2)Total Risk Management Committee ("TRM Committee") is established under the Board of Directors, to manage both operational and strategic risks in an integrated manner.
- (3)CEO chairs "TRM Committee", committee members are CSRO and other persons assigned by CEO.
- (4)The Board of Directors deliberates and decides the basic policy and annual plan related to TRM proposed by "TRM Committee", as well as manages major risks for the Teijin Group, and establishes a system for business continuity.
- 3.Audit by Statutory Auditors
The Statutory Auditors Conducts audits to check whether the Board of Directors is appropriately conducting policy decisions, supervising and monitoring regarding TRM.
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.
- 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 disclose corporate information from the standpoint of ESG.
- 3.Information disclosure and communication with shareholders and investors shall primarily be conducted by the Investor and Public Relations Department under the supervision of the Chief Officer (Corporate Strategy).
- 4.Investor and Public Relations Department shall centrally manage information disclosure to shareholders and investors, along with providing external disclosure of medium- to long-term management strategies and other important matters of business in close coordination with the relevant internal departments and offices.
Measures for enhancing dialogue with shareholders and investors
- 1.To a reasonable extent, senior management shall make responses to engage in actual dialogue with shareholders and investors.
- 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 shareholders and investors.
- 3.Investor and Public Relations Department shall arrange both opinions of investors grasped through dialogue and questions from analysts at operating results presentations, company overview presentations and others. Chief Officer (Corporate Strategy) regularly shall provide these for Directors, the Management and Statutory Auditors as feedback.
Measures to control insider information
When externally disclosing important information related to the competitive strategies of individual businesses and information pertaining to highly confidential trade secrets, the corporate strategy planning divisions and the business operation divisions shall strive to strictly control such information by sharing guidelines and ensuring close coordination.