Basic Approach to Corporate Governance
Our basic policy is to increase management transparency and execute efficient business operations. Based on this policy, we place importance on practicing compliance and fulfilling our responsibilities to all stakeholders. Accordingly, we have built an organizational structure to address the changes in the management environment and have taken steps to operate a fair management system, strengthening our internal systems. We are determined to continue our efforts to pursue healthy, transparent and prompt management and further improve and enhance corporate governance in the future.
Incidentally, we have adopted the structure of a company with corporate auditors because we believe that this structure can fully perform the monitoring and supervisory functions of management. We have set the term of office for board directors to one year to clarify the responsibilities of management, flexibly establish an optimum management system to respond to changes in the management environment and increase opportunities for checking the confidence of shareholders. In addition, total remuneration of board directors and corporate auditors is resolved at the General Meeting of Shareholders. The Internal Audit Department implements the internal audit to secure the appropriateness of our overall operations.
Chart of Corporate Governance System
Reasons for not Implementing Certain Principles of the Corporate Governance Code
【Principle 3-1 (1) (Disclosure of the Company’s ideals (management philosophy, etc.) and management strategy/plan)】
【Supplementary principle 4-1-2 (Medium-term management plan)】
【Principle 5-2 (Formulation/disclosure of management strategy/plan)】
We have formulated the DIP brand statement based on the corporate philosophy and share the long-term ideals of the company with the shareholders and investors. Regarding the management strategy and earnings planning in the medium to long term, we have developed the medium- to long-term vision as the internal goal. In addition, we set and disclose the targets for a single fiscal year with awareness of the capital costs at the beginning of each fiscal year. We are all working on achieving these targets as one. With respect to the disclosure of the management plan in the medium to long term that accurately grasps the capital cost, we recognize it as a management issue, as before. When we determine the specifics and are ready to provide explanations of them to the shareholders, we will consider making disclosure of the plan.
With respect to the specific actions for achieving the targets for each fiscal year and the medium- to long-term vision and the quarterly progress of such actions and the issues regarding the allocation of management resources, including the review of the business portfolio, we will endeavor to provide clear explanations through business reports, summaries of accounts, materials for financial results briefings and other materials by using expressions that are easy for the shareholders and investors to understand. In addition, we will ensure the full understanding of everyone at briefings and meetings, including the financial results briefing, with the shareholders and investors.
【Supplementary principle 4-10-1 (Appropriate involvement of independent external directors in nomination, remuneration, etc.)】
We have a system that emphasizes prompt decision-making by a meeting body, and thus the number of board directors is currently seven. Regarding the number of independent external directors, we judge that the current number of three independent external directors is ideal.
In addition, we do not have any optional committees, etc. However, there is close cooperation between the independent external directors and the management/auditors, while our independent external directors make proposals to the management and conduct supervision in cooperation with the corporate auditors at the management meetings of the officers and meetings of external directors and corporate auditors, among other meetings. With respect to particularly important matters, such as nomination and remuneration, the involvement of and advice from independent external directors are obtained as necessary.
Disclosures based on each principle of the corporate governance code
【Principle 1-4 (Cross shareholdings)】
We have not held and will not hold cross shareholdings with the sole intention of deepening transactional relationships. If we do hold cross shareholdings, we will formulate and disclose the policy and views for the reduction of such shareholdings.
Because we have not held cross shareholdings, we have not established any specific criteria concerning the exercising of voting rights of the shares we hold for strategic purposes. However, if we do hold such shares in the future, we will establish the criteria concerning the exercising of voting rights through the deliberations of the Board of Directors to accomplish the objectives of the shareholdings and contribute to the improvement of corporate value.
We hold shares of other companies from viewpoints such as economic rationality concerning our alliances, including business collaborations and capital tie-ups, and the fulfillment of our social responsibility, including the cultivation of venture companies. We establish and improve the internal regulations and constantly verify the effects and policy of the shareholdings based on the appropriateness of the objectives and whether the benefits and risks of the shareholdings correspond to the capital cost, among others, during the deliberations of the Board of Directors.
【Principle 1-7 (Related party transactions)】
In principle, we do not undertake any transactions between related parties (hereinafter referred to as “Transactions between Related Parties”).
If a board director should undertake a Transaction between Related Parties, the board director would be required to submit a prior report to the Board of Directors on the details of the transaction pursuant to our Guidelines for Transactions between Related Parties. Upon receiving such a report, the Board of Directors would deliberate on it in order to make a resolution. Only when the resolution of approval is made can the board director undertake the Transaction between Related Parties. After the implementation of the Transaction between Related Parties, the board director shall report the details of the transaction to the Board of Auditors, and the Board of Auditors shall audit the legality of the transaction.
We have also requested that board directors submit the Confirmation on Transaction between Related Parties each quarter, and the Secretariat of the Board of Directors will check it to guarantee the effectiveness of the above restrictions. So as not to conflict with the above restrictions, we have made inquiries to our attorney and other experts as necessary in the course of handling such issues.
【Principle 2-6 (Roles of the asset owner of corporate pensions)】
We have not introduced corporate pensions. If we do introduce corporate pensions in the future, we will make arrangements for personnel, such as the appointment/allocation of human resources with appropriate competence according to a plan, and will disclose the details of such arrangements. In addition, we will appropriately manage any conflicts of interest that may arise between the payee of the corporate pensions and the company. We have introduced the defined contribution pension plan and hold internal seminars for asset formation and investment management, among other education and training for employees.
【Principle 3-1 (Full disclosure)】
We recognize that the disclosure of useful information for shareholders and other stakeholders is an important management issue, so we make such disclosures proactively.
(1) Under the corporate philosophy “Dreams, ideas and passion set DIP in motion,” we advocate the DIP brand statement “One to One Satisfaction” to ensure that each of the shareholders and other stakeholders are satisfied through their sympathy with our ideas and commitment and that we achieve continuous business development and make a contribution to society.
Please see the following URLs for the details of our corporate philosophy and DIP brand statement:
< Corporate philosophy >
< DIP brand statement >
(2) Our basic policy is to enhance management transparency and implement efficient corporate operations. Based on this policy, we place importance on practicing compliance and fulfilling our responsibilities to our shareholders and all other stakeholders. For this purpose, we have constructed an organizational structure that addresses the changes in the management environment, and have taken measures to operate a fair management system, strengthening our internal systems. We are determined to continue our efforts to pursue healthy, transparent and prompt management and further improve and enhance our corporate governance in the future.
(3) With regard to the remuneration system for our management team and board directors, with the exception of external directors and auditors who are required to perform independent supervisory and monitoring functions, our basic policy is to establish a remuneration system that can facilitate sustainable growth and the improvement of corporate value in the medium and long terms through the activation of sound entrepreneurship, by considering the amount that enables us to secure and maintain excellent human resources based on values shared with shareholders and objectivity and transparency for sufficient accountability.
The aim of the remuneration system of executive directors is to better clarify the link between monetary remuneration as the basic remuneration and our stock value, while raising awareness of the need to contribute to improving medium- and long-term performance and increasing corporate value. The system consists of stock options that are conventionally provided to officers and the performance-linked remuneration (BIP trust) that is introduced from the 20th term (the fiscal year ending February 2017). The amount of performance-linked remuneration is determined by comprehensively considering the ratio of medium- and long-term performance-linked remuneration in the annual remuneration and level of difficulty of achieving the business target by setting objective benchmarks in consideration of our business scale and other factors by using the remuneration database aggregated and analyzed by an external specialized institution.
[External directors and auditors]
The remuneration of the external directors and auditors is, in principle, limited to monetary remuneration as the basic remuneration from the viewpoint of securing the effectiveness and independence of the supervision and auditing.
(4)With regard to the appointment of board directors and corporate auditors, the candidates recommended by the President & CEO or other board directors are checked to ensure that they meet the basic policy for appointment described below, and they are then examined at a meeting of the Board of Directors. With the resolution of the Board of Directors, the candidates are appointed unofficially, and their appointment is then determined by a resolution of the General Meeting of Shareholders. When a proposal of appointment of auditor/s is submitted to the General Meeting of Shareholders, the consent of the Board of Auditors is required. The basic policy for the appointments is as described below.
Our basic policy for the appointment of executive directors requires the appointment to be based on the fact that the relevant candidates are equipped with a wide range of knowledge and experience as necessary for decision-making on corporate management and have track records and expertise in the fields and operations they have experienced for the effective implementation of the supervisory functions of management.
With regard to the appointment of outside directors, our basic policy is to appoint at least two independent outside directors through consideration and determination, paying attention to the appropriate balance of their diverse knowledge and experience. They are required to be capable of implementing the monitoring and supervisory functions of the management through the important decision-making of the Board of Directors, supervising whether or not there is any conflict of interest between the Company and the management team, controlling shareholders and the like and making proactive suggestions concerning the management policy and management improvement to increase the medium- and long-term corporate value.
Our basic policy for the appointment of auditors is to select people with a high level of expertise and extensive experience in specific fields such as tax accountants, certified public accountants, attorneys and corporate managers to enhance the monitoring and supervisory functions.
In addition, in the removal of board directors, the Board of Directors deliberates it in a timely and appropriate manner in accordance with the basic policy for the appointment of directors and decides on the candidates for board directors to be removed by its resolution, and then the General Meeting of Shareholders approves it by its resolution. In addition, in the removal of corporate auditors, the Board of Directors deliberates it in a timely and appropriate manner in accordance with the basic policy for the appointment of corporate auditors and selects the candidates for removal by its resolution, and the General Meeting of Shareholders decides on it by its special resolution.
(5) The reasons for the appointment/removal of the board directors are reported in the convocation notice of the General Meeting of Shareholders and the Securities Report, and those for the appointment/removal of the corporate auditors are reported in the Securities Report.
【Principle 4-1-1 (Review of the matters to be resolved by the Board of Directors)】
We have set the items to be determined by resolutions of the Board of Directors in the Regulations of the Board of Directors. Specifically, items concerning the General Meeting of Shareholders, items concerning the settlement of accounts, items concerning the stock & corporate bonds and share warrant, items concerning the budget and business plans, items concerning personnel and organizational affairs, items concerning the disposal and acceptance of important property exceeding a certain amount of money, items concerning funds and assets such as large amounts of investments and loans, items concerning subsidiaries and affiliates, other items stipulated by the Companies Act and other laws and regulations and other similar important items are to be determined by resolutions of the Board of Directors.
Regarding the items concerning the business strategies, they are deliberated, reported and thoroughly discussed at meetings of executive officers and division managers that are held regularly with the attendance of the executive directors, and are then submitted to the Board of Directors.
We encourage the delegation of authority to exercise the business from the perspectives of adequate discussion regarding management strategies and strengthening of the functions of monitoring and supervision. We will continue to consider such delegation according to the scale, importance and risk of each business, among other factors, and establish a flexible and strategic management system.
【Principle 4-9 (Independence standards and qualification for independent external directors)】
For the independent external directors to execute the monitoring and supervisory functions, we have established the Criteria for the Independence of the External Officers, and we disclose them in this corporate governance report, etc.
In addition to the viewpoint of independence, we have selected individuals with expertise in business strategies and who are able to hold candid, active and constructive discussions at meetings of the Board of Directors as candidates for independent external directors. At meetings of the Board of Directors, the appointed independent external directors have made proactive suggestions for increasing the medium- and long-term corporate value from the viewpoint of the management policy, management improvement and the like.
【Supplementary principle 4-11-1 (Preconditions for ensuring the effectiveness of the Board of Directors)】
The Board of Directors of our company consists of executive directors who are acquainted with each business or corporate operation and undertake the flexible execution of operations, and external directors equipped with a high level of expertise and broad viewpoints who are able to provide advice and supervision to the management. The diversity and adequate scale of the Board of Directors are determined through discussions.
Our basic policy for the appointment of executive directors is to select individuals based on their extensive knowledge and experience as required for the decision-making of the company management and their track records and expertise in the fields and operations they have experienced for the effective implementation of the supervisory functions of the management.
Meanwhile, our basic policy for the appointment of external directors is to select at least two independent external directors who have extensive experience as corporate managers, a deep knowledge of corporate strategies, experience in a specialized field and the like through consideration and determination to maintain an appropriate balance.
Through the appointment of board directors of diverse backgrounds and ages, the Board of Directors of our company, which is well balanced in terms of its knowledge, experience and capabilities with its multifaceted structure, has encouraged prompt decision-making through active discussions and has performed the most effective and efficient functions of the Board of Directors.
【Supplementary principle 4-11-2 (Situation of concurrent holding of positions of executive officers of other companies)】
The three external directors of our company do not concurrently hold any executive positions in any other listed company. In fact, they have energetically engaged in their duties within our company by making proactive suggestions concerning our businesses at the meetings of the external directors and auditors and the management meetings of the officers as well as those of the Board of Directors.
Although one of the two external auditors of our company has concurrently assumed the position of corporate auditor of two listed companies, this seems to be within a reasonable number of companies for concurrent positions of the officers of listed companies. In fact, the relevant external auditor has vigorously engaged in supervisory and auditing operations to raise our corporate value, such as holding corporate governance seminars for board directors, corporate auditors and employees as well as full attendance at meetings of the Board of Directors of our company.
Incidentally, the concurrent positions of our board directors and auditors in other listed companies are described in the convocation notice of the Annual General Meeting of Shareholders and the Securities Report published on our website.
【Supplementary principle 4-11-3 (Assessment of the effectiveness of the Board of Directors)】
With respect to the effectiveness of the entire Board of Directors, we conduct internal self-assessment, in principle. The assessment method is by means of discussion. We have made an objective assessment of whether the Board of Directors has been functioning appropriately by holding meetings of the outside directors and auditors.
The meeting of the external directors and auditors consists of three independent external directors and four auditors, who retain highly effective functions to supervise the Board of Directors. The analyses and assessments mentioned at the meeting of external directors and auditors were submitted by the external directors to the meeting in which all board directors participated, where each director made a self-assessment and the effectiveness of the entire Board of Directors was analyzed and assessed.
As a result of the analyses and assessments, some issues were found concerning the contents of the proposals at the Board of Directors, the meeting proceedings, the method of running the meetings, etc., so we will undertake further examinations and improve these matters.
【Supplementary principle 4-14-2 (Disclosure of the policy for training board directors and corporate auditors)】
We have provided a range of training opportunities, not only for the board directors and corporate auditors but also for all other employees in accordance with their duties and operations. Specifically, video content linked with our business strategies is provided internally at DIP University, which we have developed jointly with Business Breakthrough Inc., and the board directors and corporate auditors are also able to take the courses via PC and smartphone without geographical and time constraints.
We have offered the board directors opportunities to attend internal training sessions held by our company and external seminars, and we have offered the board directors opportunities to attend internal training sessions held by our company and external seminars, and our board directors and corporate auditors have attended the internal training provided by inviting specialists about the themes that could be issues in this fiscal year or medium to long term , including holding discussions, and made other efforts to diligently study aggressive governance for our sustainable growth.
In addition, board directors have held regular management meetings of officers, and centered on the external directors, they are seeking to obtain knowledge and train themselves through discussions on management strategies and social situations.
In holding the internal training sessions, even if our board directors and corporate auditors could not attend, an environment has been developed so that board directors and corporate auditors who are absent on the day can gain the knowledge and undertake the training by using recorded DVDs or streaming.
Moreover, the corporate auditors belong to the Japan Audit & Supervisory Board Members Association with the support of our company, and acquire the expertise necessary to fully play the role and exercise the authority as corporate auditors through attendance at the training hosted by the Association. DIP has supported them in these activities.
【Principle 5-1 (Disclosure of the policy for constructive dialogue with shareholders)】
We are aware that the opinions of shareholders and investors who are our important stakeholders are essential for our sustainable growth and the improvement of our medium- and long-term corporate value. Based on this awareness, not to mention disclosure according to the laws and regulations, we have dispatched information on our management strategies and business environment to deepen understanding and respond proactively to questions and inquiries for more detailed dialogues through briefings on earnings as well as individual meetings for shareholders and investors that are held by our president & CEO and director in charge of the IR division, and through the strengthening of information disclosure on our website.
In addition, we have prepared an IR policy to proceed with constructive dialogues with our shareholders and disclosed it on our website.