Enhancing Governance

Policy

Basic Views

The Group's basic approach to build a relationship of trust with each stakeholder, which is the foundation for sustainable growth and enhancement of corporate value over the medium to long term, is set out in our Corporate Philosophy, "Connecting Wishes. Building a Brighter Future. Always Safety First." In addition to the Management Policy and Code of Conduct to realize our Corporate Philosophy, we have established the IINO Group Sustainability Policy consisting of the following nine items as action guidelines for our Group officers and employees: Safety is Priority No.1; Respect for Human Rights; Environmental Protection; Contribute to Society; Ensuring Thorough Compliance; Respects for Customers; Promotion of Diversity; Disclosure of Information and Communication; and Education and Training. We work on corporate activities to solve environmental and social problems by putting the Policy into practice.

To put the IINO Group Sustainability Policy into practice, the Group defines a system of corporate governance that ensures sound management, transparency, and efficiency as a framework for realizing efficient business activities by coordinating the interests of the various stakeholders who constitute a company.

Based on these views and under the Auditor System, we are working to both enrich our corporate governance and secure soundness, transparency, and efficiency in management.

Concerning decision-making and operational execution in management, we are considerate of relationships with shareholders, employees, and other stakeholders, sparing no effort to produce the best corporate results, ultimately in an effort to create sustainable growth and enrich corporate value over the medium to long term.

Basic Policies

1. While providing appropriate response to effectively secure the rights of shareholders and maintain an environment where shareholders can appropriately exercise their rights, we will be considerate in effectively securing fairness for all shareholders.
2. We will be considerate of the rights and standpoints of various stakeholders, including shareholders, employees, customers, transaction partners, creditors, and regional societies, and work for appropriate cooperation with stakeholders.
3. We will actively work toward appropriate disclosure of not only financial information, but also non-financial information, and aim to provide easy to understand and useful information disclosure alongside securing transparency.
4. The Board of Directors, in view of the responsibility entrusted to it by shareholders and in an effort to create sustainable growth and enhance corporate value over the medium to long term, will appropriately fulfill its duties and responsibilities, including maintaining an environment to support appropriate risk taking and having highly effective supervision of directors. Auditors and the Board of Auditors, in view of the responsibility entrusted to them by shareholders, will appropriately fulfill their duties and responsibilities from an independent and objective standpoint, including auditing the execution of duties by directors.
5. To contribute to sustainable growth and enhancement of corporate value over the medium to long term, we will engage in constructive dialogue with shareholders.

Access our Corporate Governance Report here (352 KB)

Structure

Organizational Structure

Organizational Structure

Board of Directors / Executive Committee

The Board of Directors holds regular meetings once a month to decide important matters and supervise the directors' execution of duties and Executive Officers' business execution. Furthermore, the Executive Committee, which consists of the Executive Officers, holds regular weekly meetings to decide matters as requested by the Board of Directors, deliberate on matters as instructed by the Board of Directors, and exchange opinions concerning management.

Composition of the Board of Directors

The Board of Directors, in view of the responsibility entrusted to it by shareholders and in an effort to create sustainable growth and enhance corporate value over the medium to long term, will appropriately fulfill its duties and responsibilities, including maintaining an environment to support appropriate risk taking and having highly effective supervision of directors. To this end, in adequate consideration of balanced knowledge, experience, and ability alongside diversity in the overall Board of Directors, the Company's Board of Directors consists of eight directors (including four outside directors, two of whom are women).

At the General Meeting of Shareholders held in June 2022, the Articles of Incorporation were amended to clarify the management responsibilities of Directors and to set the term of appointment for Directors to one year, in order to develop a management system that can swiftly respond to changes in the management environment.

Directors are appointed from those who are of outstanding character, are knowledgeable, capable, and possess abundant experience, and are able to appropriately fulfill their duties.

Furthermore, outside directors are appointed from those who satisfy the requirements for outside directors set forth in the Companies Act who have constructive opinions and can be expected to contribute to the further growth of the Company. They are also personnel with high levels of professional expertise, such as persons with experience in regulatory supervision or diplomacy, or serving as corporate officers of other companies.

Data List (Composition of the Board of Directors / Attendance of Audit & Supervisory Board Members at Board of Directors meetings)

Annual Securities Report P44: Directors and Executive Officers *Available only in Japanese

Composition of the Board of Auditors

The Board of Auditors, in view of the responsibility entrusted to it by shareholders, will appropriately fulfill its duties and responsibilities from an independent and objective standpoint, including auditing the execution of duties by directors. To this end, in consideration of including persons with appropriate knowledge of finance and accounting, the Company's Board of Auditors consists of four auditors (including two outside auditors).

Auditors are appointed from those who are of outstanding character, are knowledgeable, capable, and possess abundant experience, and are able to appropriately fulfill their duties.

Furthermore, outside auditors are appointed from those who satisfy the requirements for outside auditors set forth in the Companies Act who are of outstanding character, are knowledgeable, capable, and possess abundant experience, and are able to appropriately fulfill their duties.

Refer to our Annual Securities Report for more information about the status of auditing and accounting.

Data List (Composition of the Audit & Supervisory Board)

Annual Securities Report P49: Status of Audits *Available only in Japanese

Officer Skill Matrix

In promoting priority strategies and business foundation strategy under the mid-term management plan, the Nomination and Remuneration Committee deliberated over the skills (knowledge, experience, abilities) to be possessed by the Board of Directors and selected the following eight skills.

Please refer to the following skill matrix, which lists the skills possessed by the Company's directors and auditors.

Skills Matrix

Reasons for Skill Selection and Definitions

Nomination and Remuneration Committee

IINO LINES established the Nomination and Remuneration Committee in October 2019 as a voluntary advisory body serving the Board of Directors to enhance objectivity, transparency, and fairness of procedures concerning the nomination of candidates for Director, etc., and remuneration of Directors and strengthening the supervision and accountability of the Board of Directors to further enhance the corporate governance system. The Committee consists of five members, namely, three Outside Directors and two Representative Directors, and is chaired by an Outside Director. At the request of the Board of Directors, the Committee deliberates on the following matters and provides recommendations to the Board of Directors. The Committee met 11 times in FY2022.

Data List (Composition of the Nomination and Remuneration Committee)

Executive Officer System

Since June 28, 2016, the Company has changed from an operational execution structure with Executive Directors to an Executive Officer system with Executive Officers, and by strengthening decision-making functions regarding important matters and supervisory functions for business execution of the Board of Directors, we are working to further enhance corporate governance.

Management > Officers

Internal Control System

Under mutual cooperation between auditors, the Corporate Audit Office, and the accounting auditor, the Company seeks to strengthen internal controls.

To appropriately implement audits of the IINO Group, auditors monitor the independence of the accounting auditor while receiving explanations regarding the content of accounting audits from the accounting auditor, and through deep cooperation in the form of information exchange with the accounting auditor, raise the quality of their respective audits.

To strengthen corporate governance and internal controls, the Company established an Internal Audit Office in October 2005. In June 2019, the name of this office changed to the Corporate Audit Office.

Based on the Internal Audit Regulations, the Corporate Audit Office cooperates with the Company's auditors and the accounting auditor to periodically conduct audits on all business activities in the IINO Group based on an annual plan to secure appropriate business execution across the entire Group.

Additionally, auditors and the Corporate Audit Office hold periodic meetings once a month in principle, while standing auditors exchange information with the Corporate Audit Office as required to raise the quality of their respective audits.

Initiatives

Independence of Outside Directors and Auditors

Concerning the independence and qualities required of outside directors and outside auditors, the Company has defined the "Criteria Relating to the Independence and Qualifications of Outside Directors and Auditors" below.

Criteria Relating to the Independence and Qualifications of Outside Directors and Auditors

These criteria are to determine the independence of candidates for outside director and outside auditor (hereinafter collectively referred to as "Outside Officers") of the Company and also set forth the qualities required of candidates.

Outside Auditors

As candidates for outside auditor, the Company shall nominate persons who satisfy the requirements for outside auditors set forth in the Companies Act; are of outstanding character; are knowledgeable, capable, and possess abundant experience; and are able to appropriately fulfill the duties of outside auditors, and the Company shall give consideration to ensuring that persons with appropriate knowledge of finance and accounting are included.

Criteria for Determining the Independence of Outside Officers

In the Company's judgment, a person to whom none of the following items applies satisfies the independence criteria for an Outside Officer or candidates for Outside Officer.

1. A business executor of the Company or a subsidiary of the Company*¹.
2. A person for whom the Company is a major business partner*² or a business executor thereof.
3. A major business partner of the Company*³ or a business executor thereof.
4. A current major shareholder of the Company (a person who directly or indirectly holds 10% or more of total voting rights) or a business executor thereof.
5. A person who undertakes audits of the Company as the Company's accounting auditor or an employee etc. thereof.
6. A consultant or accounting, legal, tax, or other professional receiving a significant amount*⁴ of money or other assets from the Company other than executive remuneration. When such a person is an organization such as a corporation or association, this includes a person belonging to such organization.
7. A person who receives a significant amount*⁴ of donations or aid from the Company. When such a person is an organization such as a corporation or association, this includes a director or business executor thereof.
8. When an executive officer or standing auditor of the Company concurrently serves as an outside director or outside auditor of another company, a person who is an executive director, operating officer, or executive officer of such other company.
9. A person who fell under 1 to 8 above during the past three years*⁵.
10. A person falling under 1 to 9 above or, in the case of determining the independence of an outside auditor, a spouse or relative within the second degree of kinship of an important person falling under any of the following items*⁶.
    1. An accounting advisor of the Company (if such accounting advisor is a corporation, including an employee who executes the corporation's duties; the same below)
    2. A director or accounting advisor who is not a business executor of a subsidiary of the Company
    3. A person who fell under (a) or (b) above or who during the past three years has been a director who was not a business executor of the Company

*1

"Business executor" means an executive director, operating officer, executive officer, or other equivalent person or an employee.

*2

"Person for whom the Company is a major business partner" means a person receiving from the Company payments in an amount equivalent to at least 2% of annual consolidated sales in the business partner's most recent fiscal year.

*3

"Major business partner of the Company" means a person who has made payments to the Company in an amount equivalent to at least 2% of the Company's annual consolidated sales in the most recent fiscal year or who has made loans to the Company in an amount equivalent to at least 2% of the Company's consolidated net assets in the most recent fiscal year.

*4

"Significant amount" of money means financial assets received from the Company of 10 million yen or more per year if such person is an individual or if such person is an organization such as a corporation or association, an amount of 10 million yen or more per year that is equivalent to at least 2% of annual consolidated sales or total revenues in such organization's most recent fiscal year.

*5

With regard to 4. above, this means a person who was a business executor of a current major shareholder of the Company during the past three years.

*6

"Important person" includes a director (excluding an outside director), auditor (excluding an outside auditor), executive officer, employee in a management position of department manager or higher, certified public accountant belonging to an accounting auditor, and attorney belonging to a law firm (including an associate).

Effectiveness of the Board of Directors

Aiming to improve the functioning of the Board of Directors to achieve sustainable growth and enhance corporate value over the medium and long term, the Company has undertaken an analysis and review of the effectiveness of the Board of Directors, covering all directors and auditors.

Summary of FY2023 implementation (Conducted in February 2024)

In FY2023, we conducted a 61-question questionnaire covering the following 10 major areas: (1) composition of the Board of Directors, (2) operation of the Board of Directors, (3) discussions at the Board of Directors, (4) monitoring function of the Board of Directors, (5) performance of internal directors, (6) support system for directors and auditors, (7) training, (8) dialogue with shareholders and investors, (9) directors' own efforts, and (10) summary. The results of the assessment evaluation in 2023 are as follows.

Summary

The Company's Board of Directors was confirmed to have an appropriate composition and number of members and to be able to engage in substantive deliberations, as well as an appropriate support system for the Board of Directors, including improvements in materials and reporting content and advanced explanations of agenda items to outside directors to deepen deliberations. The Company received an evaluation from the outside directors that decision-making is appropriately reflected, and the Company evaluates that the effectiveness of the Board of Directors has been ensured as in FY2022.

Challenges recognized in FY2022

1. DX Support
   In the mid-term management plan formulated in FY2023, “Acceleration of DX” is one of the business foundation strategies, and we have been promoting collaboration with startup companies. We recognized the need for further promotion of DX.
2. Board Diversity
   Further promotion of diversity in the Board of Directors has been a issue, and we have achieved a certain level of improvement by increasing the number of female directors to two.
3. Improvement of communication among directors and employees
   Communication between directors and employees, which had deteriorated in response due to the Covid-19 pandemic, was also improved through providing a forum for communication following the end of the pandemic.

Issues recognized in FY2023

As issues in FY2023, the Board of Directors will deepen discussions on the long-term vision, future aspirations and a business strategy, including sustainability-related responses such as corporate value enhancement, PBR improvement and human capital. In addition, we will strengthen monitoring focusing on the use of DX, which has been an issue since FY2022.

Based on the results of the effective evaluation in FY2023, the Board of Directors will fully consider the issues raised and will promote efforts to further improve its effectiveness.

Previous (FY2022) Results: Integrated Report 2023 P63 (PDF)(5MB)