Basic Policy on Corporate Governance
Chapter 1 General provisions
This basic policy is established by Daiho Corporation (hereinafter referred to as "the Company").It clarifies the Company's basic approach, framework, and management policies regarding corporate governance necessary for sustainable growth and enhancement of corporate value of the Company and its affiliated companies (hereinafter referred to as the "Group") over the medium- to long-term through the realization of the following Management Philosophy.through the realization of the following Corporate Philosophy.Corporate PhilosophyClient firstCreation and pioneeringCoexistenceSelf-responsibility
We aim to continue to be a company with dreams where our employees take pride and responsibility in themselves, act with integrity, a spirit of creativity and a pioneering attitude at all times toward the future. We will seek reasonable profits as a company while striving to be a good company through contributing to each region of society by demonstrating our comprehensive strengths and gaining trust of the community.
- Basic philosophy of corporate governance
Corporate governance in the Group provides a mechanism for the Company and the Group to make transparent, fair, prompt, and decisive decisions to achieve sustainable growth and enhance corporate value and foster trust with our various stakeholders, including shareholders and customers. The Company shall position the development and enhancement of its corporate governance system as one of our most important management priorities and continue to work for the realization of sustainable growth of the Company and better corporate value over the medium to long term,
- Establishment, alteration, or revocation.
Establishment, alteration, or abolishment of this Basic Policy shall be by resolution of the Board of Directors.
Chapter 2: Ensuring shareholder rights and equality,
Dialogue with shareholders
- Ensuring shareholder rights
The Company shall give due consideration to ensure that the exercise of shareholder rights is substantial and shall develop an environment that promotes the exercise of voting rights by shareholders and dialogs with them. The Company shall also treat all shareholders equally according to the nature and number of shares they hold.
- Exercise of rights at shareholders' meetings
Taking into account the fact that the general meeting of shareholders is the highest decision-making body of the Company and a place for constructive dialogs with shareholders, the Company shall endeavor to create an environment in which all shareholders can exercise their rights appropriately at the general meeting of shareholders.
The Company shall endeavor to send out the notice of convocation of the general meeting of shareholders about three weeks prior to the meeting to provide sufficient time for them to consider the agenda, and shall disclose the contents of the notice on the financial instruments exchange and the Company's website prior to shipping.
The Company shall endeavor to create an environment in which all shareholders can exercise their voting rights appropriately by providing opportunities to exercise their voting rights via the Internet or a voting platform and disclosing an English version of such convocation notice on the Company's website.
The Company shall endeavor to set an appropriate date for the general meeting of shareholders to enhance constructive dialogs with shareholders and provide accurate information for that purpose.
In principle, voting rights at the general meeting of shareholders shall be exercisable only by shareholders listed in the shareholders' register or by proxy specified in the Articles of Incorporation. However, if a beneficial shareholder requests in advance to attend the meeting through a shareholder listed in the shareholders' register, the person may attend the meeting after following the prescribed procedures.
- Capital policy
The Company shall distribute dividends to shareholders in a continuous and stable manner while strengthening its management base with an eye to the future. The Company shall use the consolidated payout ratio as an important indicator of shareholder return.
In the event that the Company implements a capital policy that results in a change in control or a large-scale dilution of shares, sufficient explanation shall be provided to shareholders at the meeting of the board directors after examining the necessity and rationality of it.
- Cross-shareholdings policy
The Company shall hold shares for purposes other than pure investment, so-called cross-shareholdings, if they are deemed to contribute to the enhancement of the Company's corporate value.
The Board of Directors shall review the appropriateness of the Company's cross-shareholdings, taking into account whether the benefits and risks associated with the shareholdings are commensurate with the cost of capital and the need to maintain the relationship over the medium to long term. If the significance of the retention of cross-shareholdings is deemed unacceptable as a result of the verification, the Company shall endeavor to reduce the amount.
The voting rights of cross-shareholdings held by the Company shall be judged from the perspective of whether they contribute to the enhancement of the Company's corporate value and whether they are in line with the Company's policy on policy holdings.
- Policy on response to large volume purchases of the Company's shares.
In the event that a party who conducts a large volume purchase of the Company's shares appears, (excluding a tender offer bid), the Company shall seek sufficient information through continuous and constructive dialogs with the party and disclose the opinion of the Board of Directors of the Company in a timely and appropriate manner, or take other measures deemed appropriate, such as engaging in dialogs and negotiations at a deeper level with the party in order to make the purchase enhance the Company's corporate value and sustainable growth.
If the Company's shares are attached to a tender offer, the will of the Board of Directors (including the details of any counteroffer, if any) shall be conveyed to its shareholders in an explicit and adequate language so that they can make an appropriate decision and ensure proper procedures.
- Related party transactions
Directors must obtain the approval of the Board of Directors for transactions with related parties in accordance with laws, regulations, and internal rules, to avoid causing harm to the Company and the mutual interests of shareholders.
- Policy on promoting constructive dialogs with shareholders
The Company shall provide (disclose) information to shareholders and investors in a timely and appropriate manner and seek to improve management through dialogs with them.
The director in charge of IR shall oversee all aspects of constructive dialogue with shareholders, with the participation of the IR department. The management team and the relevant departments that support the dialogue shall make cooperative efforts to facilitate dialogue.
The Company shall hold individual meetings, investor meetings, and various briefings whenever necessary, and utilize the Company's website and other means to enhance opportunities and means for dialogs with shareholders and information dissemination in order to deepen their understanding of the Company's management strategies, business operations, and performance.
The opinions and requests of shareholders obtained through dialogs shall be fed back to the Board of Directors on a regular basis to share the issues raised.
The board of directors shall establish and disclose the Policy for IR Disclosure Information (reference material 1), in addition to developing other adoptable systems to promote constructive dialogue with shareholders and investors.
The director in charge of IR shall properly manage information in accordance with the provisions of the internal rules to avoid undisclosed important material information (insider information) being leaked to outside parties during dialogue with shareholders and investors. In addition, the Company shall engage in appropriate dialogs with shareholders in compliance with the fair disclosure rules based on the laws and regulations.
The board of directors shall endeavor to monitor the composition of the Company's shareholders on a regular basis and utilize this information for IR purposes.
The Company shall explain to shareholders in concrete terms when formulating/announcing the management plan, such as by presenting the basic policies for profit planning and capital policy, as well as targets related to profitability and capital efficiency.
- Ensuring shareholder rights
Chapter 3: Appropriate cooperation with stakeholders other than shareholders
- Appropriate cooperation with stakeholders other than shareholders
The Group shall establish the Daiho Corporation Corporate Code of Conduct in order to ensure appropriate cooperation with customers, local communities, contractors, employees and other stakeholders and to practice business activities based on our management philosophy. The top management shall endeavor to put the code into practice and ensure that all officers and employees understand and comply with it.
The Group shall conduct compliance education for officers and employees at least once a year to instill corporate ethics awareness in them.
- Ensuring Diversity
The Company shall endeavor to create a work environment in which all employees of the Company and the Group can work with vigor and peace of mind while taking diversity into consideration, such as the promotion of women's activities.
- Internal report
The Company shall establish an independent contact point at an outside law firm separately from the internal contact point, for the reporting of acts in violation of corporate ethics, acts in violation of laws and regulations, and any act threating to violate these. In accordance with laws, regulations, and internal rules, the content reported shall be kept confidential, and whistleblowers shall not be treated unfairly.
- Appropriate cooperation with stakeholders other than shareholders
Chapter 4: Ensuring appropriate information disclosure and transparency
- Appropriate information disclosure and transparency
The Company shall disclose information appropriately in accordance with the Companies Act, Financial Instruments and Exchange Act, and other applicable laws and regulations, and the rules of the Tokyo Stock Exchange. The Company shall also disclose information on the Company's management which do not require disclosure according to these laws and regulations as necessary in order to enhance dialogs with stakeholders, ensure transparency and fairness in decision making of the Company, and achieve effective corporate governance.
In addition, the Company shall promote the disclosure and provision of information in English to the extent reasonable from the viewpoint of fairness.
- Appropriate information disclosure and transparency
Chapter 5: Corporate governance system
- The Board of Directors(1) Roles and responsibilities of the Board of Directors
The Board of Directors shall make decisions on important matters stipulated by laws, the Articles of Incorporation, and the Board of Directors’ Regulations, by the trust from shareholders in order to promote the sustainable growth of the Company, enhance its corporate value over the medium to long term, and improve profitability and capital efficiency, and executive directors and corporate officers shall monitor the execution of duties.
To augment maneuverability and flexibility in the execution of operations, the Board of Directors shall delegate decision-making on matters other than those to be decided by the Board of Directors as prescribed in the preceding paragraph to executive directors and corporate officers in accordance with laws and regulations and internal rules.(2) Criteria of composition/selection of the Board of Directors
The board of directors shall be composed of ten members or less in accordance with the Articles of Incorporation. Over one-third of the directors shall be outside directors in order to enhance the effectiveness of the board of directors' supervisory functions over executive directors and corporate officers in the board of directors.
The Company shall establish a non-mandatory Nomination and Compensation Committee as an advisory body to the board of directors, consisting of a representative director and at least two outside directors.
The board of directors shall establish criteria for the selection of candidates for officers (directors and corporate auditors) (reference data 2) and criteria for judging the independence of outside directors when electing directors.
The Board of Directors shall select candidates from among those who meet the selection criteria, consult with the Nomination and Compensation Committee, and based on the results of its report, make decisions on a proposal for the election of candidates to be submitted to the general shareholders’ meeting. The reasons for their appointments shall be stated in candidate appointment proposal of the notices of general meetings of shareholders.(3) Operation and chair of the Board of Directors
The Board of Directors shall be convened and chaired by the representative director (president and CEO) based on the Articles of Incorporation and the Board of Directors’ Regulations, unless otherwise stipulated by laws.The Board of Directors shall be convened and chaired by the representative director (president and CEO) based on the Articles of Incorporation and the Board of Directors’ Regulations, unless otherwise stipulated by laws.
Materials for the Board of Directors shall be distributed according to their content, securing the time necessary for directors and corporate auditors to review them in advance, and other materials necessary to understand the state of management shall be provided as necessary.
The annual schedule of the Board of Directors and anticipated matters to be discussed and reported shall be communicated in advance to the extent possible.
The Board of Directors shall set agendas, deliberation time, and frequency of meetings such that it is able to perform necessary and adequate discussion of important business execution decisions and supervision of work performance.(4) Executive compensation
The Board of Directors shall resolve executive compensation within the limits of the compensation amounts resolved at the general shareholders’ meeting based on the results of its report of consulting with the Nomination and Compensation Committee.
Executive compensation (excluding outside directors and auditors) consists of monthly fixed compensation and stock-based compensation provided according to their position.
Executive compensation shall be reviewed as necessary to make it an appropriate incentive for sustainable growth.(5) Framework for ensuring efficacy
The Board of Directors shall endeavor to ensure the board's effectiveness by conducting an evaluation each fiscal year of all members of the Board of Directors with respect to the composition, operation methods, agenda items, and functions of the Board of Directors. A summary of the evaluation results shall be disclosed in the corporate governance report.
Directors shall be aware of their fiduciary responsibility and shall perform their duties as directors to enhance the Group's sustainable corporate value.
Directors shall collect information necessary for the execution of their duties and shall take active roles and engage in constructive discussions at meetings of the Board of Directors according to their respective values, ethics, and knowledge.
Outside directors shall supervise and advise the execution of business operations from an independent standpoint and oversight function over conflict-of-interest matters. They shall endeavor to ensure that the opinions of the Company's stakeholders are appropriately reflected in the Board of Directors.
The status of concurrent positions held by outside directors shall be disclosed in the reference materials for the general meeting of shareholders and business reports.
- The Board of Corporate Auditors(1) Roles and responsibilities of the Board of Corporate Auditors
Auditors and the Board of Corporate Auditors shall audit whether directors are performing their duties in a loyal manner in compliance with the laws and regulations and the Articles of Incorporation and acting for the mutual benefit of the Company and shareholders.
The Board of Corporate Auditors shall endeavor to develop a system in order to ensure the effectiveness of audits by each auditor.
The Board of Corporate Auditors shall cooperate with representative directors and the Internal Audit Department. They shall also cooperate with outside directors to ensure that they are able to strengthen their ability to gather information.
The Board of Corporate Auditors shall establish criteria for the selection and evaluation of the accounting auditors, confirm their independence and expertise, and ensure appropriate auditing by the accounting auditors.(2) Criteria of composition/selection of the Board of Corporate Auditors
The board of corporate auditors shall be composed of four members or less in accordance with the Articles of Incorporation.
The candidates for corporate auditors shall meet the criteria for the selection of candidates for officers established by the board of directors (reference material 2) and the independence requirements for outside officers. The candidates to be submitted to the general shareholders’ meeting shall be determined with the consent of the board of corporate auditors. The reasons for their appointments shall be stated in candidate appointment proposal of the notices of general meetings of shareholders.(3) Operation and chair of the Board of Corporate Auditors
The Board of Corporate Auditors shall, by its resolution, appoint a chairperson from among the corporate auditors.
The chairperson of the Board of Corporate Auditors shall perform duties delegated to the person by the Board of Corporate Auditors. However, this shall not prevent each corporate auditor from exercising authority.
- Corporate auditor
The corporate auditors shall be aware of their fiduciary responsibility and shall perform their duties as corporate auditors to enhance the Group's sustainable corporate value and the sound management of its business toward the mutual benefit of the Company and shareholders.
Corporate auditors shall make appropriate judgments from an independent and objective standpoint, actively and proactively exercise their authority, and offer appropriate comments at meetings of the Board of Directors or to executing person.
The auditors shall monitor and verify decision-making of the Board of Directors and the establishment and operation status of the internal control system.
Full-time corporate auditors shall endeavor to improve the audit environment, actively collect information within the Company, and make this information available to other auditors.
Outside corporate auditors shall improve effectiveness of the audits conducted by corporate auditors, by expressing objective audit opinions from a neutral standpoint taking into account the information obtained independently or provided by full-time corporate auditors.
The status of concurrent positions held by outside corporate auditors shall be disclosed in the reference materials for the general meeting of shareholders and business reports.
- Independence requirements for outside officers
The Company shall determine the independence requirements for the appointment of outside officers in light of the independence criteria (reference material3) stipulated by the Company.
- Accounting auditors
The Board of Corporate Auditors shall establish criteria for the selection and evaluation of the accounting auditors, confirm their independence and expertise, and ensure appropriate auditing by the accounting auditors.
Accounting auditors shall operate in an organized manner to control the quality of its audit while being secured its independent status from the Company.
The Board of Directors and the Board of Corporate Auditors shall carry out the following actions for proper audit of the accounting auditors.
(1) Ensure sufficient audit time to perform a high quality audit
(2) Ensure that accounting auditors are provided with opportunities to obtain information from executive directors, etc., as necessary.
(3) Establish a system in which accounting auditors can fully corporate with corporate auditors, the Internal Audit Department and outside board members.
(4) Establish a system to respond to cases in which accounting auditors discover fraud, etc., and request the Company to to take appropriate action, or point out deficiencies or problems.
- Support system
Directors and corporate auditors may request the Company to provide information as necessary to execute their duties fully, and the Company shall establish a sufficient support system.
Directors and corporate auditors may appoint outside experts at the Company's expense and seek their advice as necessary to fulfill their responsibilities.
The Internal Audit Department shall report the results of internal audits shall be reported to directors and corporate auditors on a regular basis or on a timely basis as necessary.
- Training for directors and corporate auditors
The Company shall provide and mediate training opportunities and offer financial support to directors and corporate auditors for the acquisition and updating of knowledge necessary to fulfill their roles and responsibilities.
- The Board of Directors
Revised on January 15, 2021
Revised on April 28, 2021
Revised on December 9, 2021
- Basic stanceThe Company shall endeavor to disseminate corporate information, such as its management strategy and financial position, to all stakeholders, including shareholders and investors. In doing so, the Company shall give due consideration to timeliness, fairness, and transparency.
- Information disclosure standardsThe Company discloses information in compliance with the Financial Instruments and Exchange Act and timely disclosure rules established by the Tokyo Stock Exchange. The Company shall proactively disclose information not subject to the timely disclosure rules but deemed useful for investment decisions of shareholders and investors.
- Information disclosure methodsThe Company shall promptly disclose company Information that requires disclosure according to the timely disclosure rules at the Company website, following the disclosure on TDnet (the Tokyo Stock Exchange's Timely Disclosure Network) provided by the Tokyo Stock Exchange. Information deemed useful for facilitating their understanding of the Company shall be posted on the Company’s website as necessary.
- Quiet period.The Company has designated the period from the day following the end of each quarter to the announcement of financial results as a quiet period and refrains from responding to comments or questions regarding the closing in order to prevent closing-related information from leaking and ensure fairness in information disclosure. However, if any disclosure items, such as revisions of financial forecasts or dividend forecasts arise during this period, information shall be disclosed as appropriate.
- The officer candidates must have excellent character and perception.
- The director candidates must have a high level of knowledge and experience in their respective fields of expertise.
- The corporate auditor candidates must have considerable knowledge of finance, accounting, corporate governance, and risk management and have the qualifications to conduct audits from a neutral and objective standpoint and promote the sound management of its business. In addition, at least one person must have a substantial knowledge of finance and accounting.
- The candidate must not fall under any ground for disqualification stipulated in the Companies Act and must not have health problems that affect the performance of their duties
- A person who is/was an executing person (a subordinate of executive directors, corporate officers, etc.) of the Company or its subsidiaries or affiliates (hereinafter referred to as “the Group”).
- A person who directly or indirectly holds 10% or more of the total voting rights of the Company or an executing person of said person or a person who has been said person or an executing person of said matter for any of the past three years.
- A person who directly or indirectly holds 10% or more of the total voting rights of the Group or an executing person of said person or a person who has been an executing person of said matter for any of the past three years.
- An executing person, corporate auditor, or accounting advisor of a company that accepts directors or corporate auditors from the Group, or its parent company, subsidiary, or affiliate.
- A person whose major business partner has been the Group in any of the past three fiscal years (a person who received payment from the Group in an amount equivalent to 2% or more of the person's annual consolidated sales in any of the past three fiscal years) or an executing person of matter.
- A person whose major business partner has been the Group in any of the past three fiscal years (a person who has made payment to the Group in an amount equivalent to 2% or more of the Company’s annual consolidated sales in any of the past three fiscal years or a person who has provided the Group with a loan amounting to 2% or more of the Company's consolidated total assets in any of the said fiscal years) or an executing person or said matter.
- Professionals such as certified public accountants, lawyers, tax accountants, or consultants who have received more than 10 million per year in monetary or other financial benefits from the Group in any of the past three years, other than executive compensation (if the person receiving the compensation is a juridical person or other legal entity, a person who belongs to these).
- A person who has received donations or grants of more than 10 million yen per year from the Group in any of the past three years, or a director, executing person, or any person equivalent thereto.
- The spouse, relative up to the second degree of kinship, or relative living in the same household of a person who falls under the1 through 8 above.