Corporate Governance

Corporate Governance

Corporate Governance PolicyBusiness Management Organ Related to Managerial Decision-making, Performance of Duties, and Supervision of Such (Our System of Corporate Governance)Regarding Our System of Internal ControlRemuneration for Directors and Audit and Supervisory Board MembersAnalysis and Evaluation of the Board of Directors’ EffectivenessCorporate Ethics Consultation Desk

Corporate Governance Policy

We at EXEDY recognize that constructing a system of corporate governance and thoroughly carrying out compliance management serve as the basis for management.
More specifically, we have arranged a system that monitors and audits the actions of our directors through our board of directors and our audit and supervisory board, and, by improving the functionality of our internal controls and building an organization that immediately responds to changes in our managerial environment, we will make our management more transparent and endeavor to strengthen our system of governance and compliance management.

Basic Policy

1) We will strive to ensure the equality and rights of our stockholders.

2) We will endeavor to cooperate with all stakeholders outside of our stockholders, including customers, business counterparts, creditors, the local community, employees, etc.

3) We will strive to ensure both the transparency and proper disclosure of information.

4) We will endeavor to have our board of directors properly carry out its functions and obligations so that it both makes decisions in a quick and decisive manner and remains fair and transparent.

5) We will strive to have a constructive dialogue with stockholders so that we can improve our medium to long-term business value and continue to grow.

Business Management Organ Related to Managerial Decision-making, Performance of Duties, and Supervision of Such (Our System of Corporate Governance)

Organizational Structure and Administration

Organizational System Company with Audit and Supervisory Board Members
Board of Directors
Chairman of the Board President & CEO
Number of Directors 11
External Directors Present Yes
Number of External Directors 3
Number of External Directors Designated as Independent Executives 2
Corporate Auditors
Audit and Supervisory Board Present Yes
Number of Audit and Supervisory Board Members 4
Outside Audit and Supervisory Board Members Present Yes
Number of Audit and Supervisory Board Members 3

An Outline of Our Current System of Corporate Governance:
Matters Regarding Corporate Affairs, Appointments, Audits and Supervision, and Remuneration

EXEDY’s board of directors is comprised of 11 individuals, three of whom serve as external directors. Our board of directors holds regular meetings once a month, and, when deemed necessary, additional meetings are held under special circumstances, where directors thoroughly discuss the matters at hand and make managerial decisions regarding them.
EXEDY’s audit and supervisory board is made up of four members, three of whom are outside members. These audit and supervisory board members, along with participating in meetings alongside the board of directors where they give advice on managerial decisions from an auditing perspective, also supervise the board of directors in its performance of duties.

As part of our administrative strategies, we convene managing directors meetings, where five individuals from our upper management, consisting of our president and CEO, executive managing officers, and senior executive managing officers, assemble for a corporate review. In addition to this administration of corporate affairs, we also hold management meetings approximately twice a month, the participants of which include all full-time executives. At these meetings, members actively exchange their ideas and opinions, thoroughly conducting both reviews and discussions.

Moreover, in order to carry out corporate affairs in a manner that promptly responds to any changes in our managerial situation, we have been endeavoring to flexibly operate our business by: a.) constructing a board of directors with a small number of members, b.) introducing our executive officer system, and c.) appointing human resources that are knowledgeable and well-informed about business and work-related duties to executive positions.

EXEDY’s financial audits are handled by the certified public accountants Kazuhiko Tomoda and Kengo Yamamoto, who are in the employ of PricewaterhouseCoopers Aarata. These auditors perform periodic audits of our corporation as well as provide us with consulting services regarding accounting matters.

As per our advisory agreements, our legal advisers will, even for matters related to financial affairs, enter into contracts with external specialists, and, as the situation demands, receive any pertinent or relevant advice from them.

With regards to EXEDY’s internal control system, our Global Auditing Department, the division that performs operational audits independent of the direct control of the company president, carries out both compliance checks and operational audits for each and every one of our departments.

Our Reasons for Selecting Our Current System of Corporate Governance

We at EXEDY are carrying out efficient work operations and exercising prompt decision-making through the introduction of our executive officer system, where six of our directors concurrently serve as executives managing corporate affairs. At the same time, so that we can ensure transparency in all business operations, we made our board of directors consist of 11 directors and four auditors, of which six individuals are external executives (and of these six two individuals serve as an independent external directors and two individuals serve as independent external auditors), and we have deemed that our present structure of a company with an audit and supervisory board is currently the optimum choice.

Measures We Implement for Our Shareholders and Stakeholders

1. Our efforts aimed at invigorating the General Shareholders Meeting and streamlining the shareholder voting process

When We Send the General Shareholders Meeting Convocation Notice We distribute the convocation notice for the General Shareholders Meeting approximately three weeks prior to when it convenes.
Exercising voting rights through electromagnetic means It is possible for shareholders to execute their voting rights online.
Efforts aimed at improving the voting process environment for institutional investors, such as using a platform that allows for the electronic execution of voting rights etc. We are currently using ICJ Inc.’s platform which allows for the electronic execution of voting rights.
English Summary of the Convocation Notice We are striving to manage our general meetings, so that our stockholders can further understand the current status of our corporation, through using visualizations such as slides for our business reports.
Additional Points We are striving to manage our general meetings, so that our stockholders can further understand the current status of our corporation, through using visualizations such as slides for our business reports and sign language interpreting.

2. Investor relations efforts

Holding Periodic Financial Briefings for Analysts and Institutional Investors We hold semiannual financial briefings in Tokyo for our institutional investors and stock analysts.
Holding Periodic Financial Briefings for Foreign Investors We hold periodical briefings overseas for our institutional investors and foreign stock analysts.
Disclosing Documents Regarding Investor Relations on Our Company Website On our webpage http://www.exedy.com, account settlements, the convocation notices for our General Shareholders Meetings are available for access. In addition, convocation notices for our General Shareholders Meetings (summary) and fluctuations in our business performance are posted on our homepage in English as well.

3. Never forgetting the importance of our stakeholders

Company Regulations That Always Keep in Mind the Importance of Our Stakeholders By contributing to society, satisfying the needs of our customers, and improving the well-being of our employees, we have achieved an even higher standard as a company, and, through our perpetual corporate development, are fulfilling our responsibility to our stockholders and other concerned parties. We include all of the above in our management philosophy, which we put into practice as per our code of conduct. This is distributed to all of our executives and employees, who then familiarize themselves with its contents.
The Implementation of Environmental Safety and Corporate Social Responsibility Activities We at EXEDY recognize that we have a responsibility as a corporation to take into consideration the impact that our corporate operations have on both our natural and social environments. Because of this, we are continually moving forward with our environmental efforts, and we summarize the results of these efforts, which include each and every one of our businesses, in our annual environmental report. You can view this report at any time on our company’s website.
Additional Points Regarding the policies and efforts that we have established to encourage the success of our female employees
We at EXEDY Group, along with moving forward with employing more women at our production facilities, are also making efforts to encourage our female employees to pursue opportunities in executive and managerial positions. Furthermore, within our network, we currently have female employees serving as directors at some of our locations.

Regarding Our System of Internal Control

Our Approach Towards and Management of Our System of Internal Control

Our management policy includes the extent at which we fulfill our corporate responsibility, how we improve ourselves so that we can be held in high esteem by the society we live in, our corporate ideology and compliance, and our response to environmental issues.
Adhering to the above, our board of directors has resolved to implement a fundamental policy for our system of internal control that upholds all applicable corporate laws and ordinances, and it is detailed as follows. Please note that the status of the following is reported to the board of directors as the situation demands.

1. Managing and saving information related to the duties of our directors

We will properly manage and save information related to the execution of corporate affairs, acting in accordance with our regulations for managing confidential information, preserving documents, and saving documents.

2. Regulations for risk management

We designate our Administrative Headquarters as the department in charge of comprehensive risk assessment, and are developing methods to prevent losses before they happen.

3. Ensuring that our directors conduct their duties in an effective manner

In addition to holding periodic board meetings once a month, we also hold management meetings twice a month that both our full-time directors and executives participate in. At these meetings, we have discussions and examine managerial issues, and, depending on the circumstances, put into place a flexible system that is able to deal with the issue at hand.

4. Ensuring that the duties of our directors and employees conform to all laws and articles of association

EXEDY has established its own code of conduct, and we strive to keep our employees, directors, and executives informed about all laws, articles of association, and company regulations. We ensure that we adhere to compliance management by combining the aforementioned with regulations concerning the protection of whistleblowers.

5. Ensuring that all work done in EXEDY Group is done in a fair manner

Following our regulations for managing affiliates, we unify all administrative tasks pertaining to EXEDY Group at our Administrative Headquarters.

1) System for reporting to EXEDY about matters regarding EXEDY Group directors’ execution of work duties

The manner in which work is being conducted at group companies is confirmed through monthly reports submitted by each company. Important matters regarding how work is conducted are reported and discussed at board of directors meetings and management meetings.

2) System for regulations regarding the management of dangerous losses for group companies etc.

Based on our risk management/compliance regulations, which are also used at our group companies, we will spread our activities conducted to prevent losses.

3) System to ensure that the execution of directors’ work duties at our group companies is carried out efficiently

In order to materialize our midterm consolidated management plan that we have created, we are sharing our objectives and issues with the entire group and endeavoring to ensure a system where work duties are executed effectively.

6. Ensuring that the work conducted by both directors and employees of group companies complies with both the law and our articles of association

We distribute our code of conduct, which comes in the form of a small booklet, to all directors, executive officers, and employees, translating its contents whenever necessary.
Based on our regulations for the management of group companies and our regulations for internal audits, our Global Auditing Department inspects the extent to which regulations are upheld and how the organizations and systems of our group companies are being operated.

7. Employees will assist our audit and supervisory board members as required

Our audit and supervisory board members will, when they deem it necessary, appoint employees to assist them in their duties.

8. Assuring the independence that employees assisting audit and supervisory board members have from directors

All matters concerning employees assisting our audit and supervisory board members, such as their relocation, evaluation, punishment, etc., must first be discussed with and reported to an audit and supervisory board member.

9. Ensuring the effectiveness of instructions given to employees assisting audit and supervisory board members

When an employee is put in the service of audit and supervisory board members, this employee will not serve concurrently with another department, and they must follow all instructions given by any audit and supervisory board members.

10. Reporting to audit and supervisory board members
1) A system for directors and employees to report to audit and supervisory board members

All directors and executives, when discovering any information that could cause considerable damage to EXEDY Group, will immediately report these contents to an audit and supervisory board member.

2) A system for directors, audit and supervisory board members, assistants, or anyone who has received reports from any of the aforementioned to report to audit and supervisory board members

Both executives and employees of EXEDY Group must, when requested by the audit and supervisory board to make a report regarding matters relating to work duties, make both immediate and appropriate reports.

11. Ensuring that individuals who report matters to the audit and supervisory board are not subject to unfavorable treatment due to the nature of their reports

Based on our regulations for protecting whistleblowers, employees will not be dismissed or punished for reporting or speaking about a whistleblowing matter.

12. Matters concerning policies related to liabilities handling and expenses caused by the execution of work duties, such as repayment procedures and the paying of expenses caused by advance payments for the work of audit and supervisory board members

When it is requested that we, regarding the execution of work duties of an audit and supervisory board member, pay in advance for expenses based on corporate law, any expenses and liabilities related to this request, excluding cases where it is not deemed necessary for audit and supervisory board members to execute their work duties, will immediately be processed. We set aside a specific budget each year in order to pay for any expenses etc., which result from the execution of audit and supervisory board members work duties.

13. Ensuring that that the audits of our audit and supervisory board members are being performed in an efficient manner

Full-time audit and supervisory board members will participate in management conferences as well as all other meetings where decision-making occurs, maintaining a system that is always able to grasp the current status of the execution of corporate affairs.

14. Our countermeasures against organized crime

As written in our code of conduct, we resolutely assume countermeasures against organized crime syndicates that threaten the order and safety of civilian societies.

Our Basic Policy and Countermeasures Against Organized Crime

As aforementioned, we resolutely assume countermeasures against organized crime syndicates that threaten the order and safety of civilian societies.
In order to accomplish this, we have established a division within our company that is prepared to deal with organized crime syndicates and is equipped to handle any unjust demands or illegal acts.
We have also included this policy inside of our code of conduct, and we have made sure to distribute it to all of our employees so that they can familiarize themselves with its contents.

A schematic of our system of corporate governance

Board of Directors Meetings and Management Meeting Schedules

In the current fiscal year, we held 12 Board of Directors Meetings and 24 Management Meetings to efficiently operate business and, in addition, held 3 Risk Management Committee Meetings to respond to group-wide problems and discuss recurrence prevention measures. The Global Auditing Department systematically carries out both compliance checks and operational audits for EXEDY and its group companies and regularly reports to audit and supervisory board members.
Full-time Corporate Auditors attend the Management Meeting and the Risk Management Committee and to oversee the company’s operating performance. In addition to a contact point for whistleblowers, we have a corporate ethics consultation desk in place for the entire EXEDY Group.
Further, we opened the "EXEDY Hotline", a consultation desk where employees can report matter to an external lawyer directly. With this initiative we try to prevent and detect illegal activities in an early stage.
In order to thoroughly disseminate this information, we clearly mention the consultation desk in the "EXEDY Code of Conduct", a booklet distributed to every employee of the entire EXEDY Group, to improve awareness regarding compliance.

Total Amount of Remuneration for Directors and Audit and Supervisory Board Members

Category Number Remuneration Amount
Directors
(External)
12
(4)
246 million yen
(16 million yen)
Audit and Supervisory Board Members
(External)
4
(3)
35 million yen
(17 million yen)
Total Amount
(External)
16
(7)
281 million yen
(33 million yen)
Note)
  1. The table above includes two directors who retired at the conclusion of the General Shareholders Meeting held on Tuesday, June 27, 2017. One director who serves without compensation is not included in the table above.
  2. The remuneration amount shown above does not include the salary and bonus paid as employees to directors who serve concurrently as employees.
  3. The upper limit on total compensation decided at the 56th General Meeting of Shareholders held on June 27, 2016:
    • Directors Annual Amount 300 million yen
    • Supervisors Annual Amount 60 million yen
  4. The amounts shown above include directors’ bonuses during the fiscal year under review.
  5. Apart from the above, a cost of 26 million yen was appropriated in relation to remuneration by stock option to seven directors.

Analysis and Evaluation of the Board of Directors’ Effectiveness

We conducted a questionnaire at the FY 2017 Board of Directors Meeting regarding the effectiveness of our Board of Directors. Based on the results, we determined that the effectiveness of the Board of Directors has been ensured. At EXEDY, we will continue our activities to further improve the effectiveness of the Board of Directors.

Corporate Ethics Consultation Desk

Our company has established three kinds of consultation desks to deal with employees’ problems and questions: an internal consultation desk, a contact point for whistleblowers and external consultation desk. After confirming the facts, we respond promptly when problems are confirmed.

Internal Consultation Desk
 At this desk we helps employees with matters concerning the Code of Conduct, ethics, working environment, etc.
Whistleblowers Contact Point
 Here we deal with violations of laws and company regulations.
External Consultation Desk “EXEDY Hotline”
 Established at an external law firm, can be contacted by telephone, email and letters.

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