Corporate Governance

Fundamental Approach

Hulic Group recognizes that it is an important business issue to build a corporate governance system with fully functioning internal control, risk management, compliance, and disclosure control.
We intend to sincerely execute business, fulfilling accountability to stakeholders.

《Results in FY2020》

  • Participation rate in the Board of Directors' Meeting: 99%
  • Number of effectiveness assessment of the Board of Directors: 1 time
  • Number of compliance training sessions: 5 times (4 times for employees and once for officers)
  • Number of Risk Management Committee meetings: 4 times
  • Number of Fund and ALM Committee meetings: 22 times (12 regular meetings and 10 special meetings)
  • Number of BCP drills and inspections of stockpiled food and goods: 1 time

Corporate Governance Guidelines

We adopted "Corporate Governance Guidelines" as principles to promote the effective functioning of our corporate governance system. We disclose all information required by the Corporate Governance Code.

Link: Corporate Governance Guidelines

Corporate Governance Mechanism

Fundamental Approach to Corporate Governance

The Hulic Group understands the responsibilities towards all stakeholders, including shareholders, and makes a point of carrying out transparent and sincere corporate management. We adhere to an autonomous governance system led by the Board of Directors with fully functioning internal controls, risk management, as well as compliance and disclosure controls.
The Group has set the Fundamental Approach for Corporate Governance to meet social demands through prompt and resolute decision-making from medium- and long-term perspectives, with the overall goals of improving corporate value and our purpose.

Overview of Corporate Governance System and Reason for Adopting Current System

The corporate governance structure of the Company includes bodies such as the Board of Directors, Audit & Supervisory Board, Nominating Committee, Remuneration Committee, Accounting Auditor, and the internal control system. The Company believes that adopting the managing officer system, appointing external officers, and establishing various committees have enabled us to build a corporate governance system that is sound and highly efficient, as well as one that has an optimal structure for us.

Diagram of Hulic’s Corporate Governance (as of June 1, 2021)

The Company Organization

Board of Directors

The Board of Directors ("The Board") consists of 10 members (four are external directors) who resolve issues specified in laws and the Articles of Incorporation as well as important matters related to business execution based on the Board of Directors Rules. The Board also oversees the overall execution of duties by directors and managing officers.
The Board holds regular meetings (once a month, in principle), and special meetings of the Board of Directors are held when necessary. The Company is strengthening the oversight role of the Board on overall business execution by directors and managing officers to ensure sound management, such as by adopting the managing officer system. The managing officers are appointed by the Board and are responsible for business execution. In addition, the Company believes effective corporate governance is ensured by reinforcing the structure of the internal audit function and by improving the internal control system. The Company’s Articles of Incorporation stipulate that the Board should consist of no more than 12 members in order to facilitate its functioning.

Audit & Supervisory Board

Hulic is a company with an Audit & Supervisory Board, which includes five Audit & Supervisory Board members (two are full-time auditors and three are External Auditors, following the Companies Act and Ordinance for Enforcement of the Companies Act).
In audit conducted by the Audit & Supervisory Board members, auditors monitor the operations of the internal control system and the status of its implementation through audit of the execution of duties by directors, managing officers and each division in accordance with the audit basic policy and the audit basic plan formulated by the Audit & Supervisory Board. These audits include attending the Board of Directors meetings as well as other meetings and committees when required, interviews on the execution of duties by directors and managing officers, and reviewing important documents, approval documents and accounting records, etc. The Audit & Supervisory Board Office has been established to support the duties of the Auditor & Supervisory Board members.

Nominating Committee

The Nominating Committee, consists solely of independent external directors, deliberates on the appointment of candidates for director and the Audit & Supervisory Board membership.

Remuneration Committee

Specific amounts for the remuneration of directors are deliberated on and determined by the Remuneration Committee, which consists solely of independent external directors, within the limits of the amounts approved at the General Meeting of Shareholders.

Accounting Auditor

The Company has an audit contract with Ernst & Young ShinNihon LLC to conduct audits.

Managing Officer System

We separate oversight of management by the Board of Directors and business execution by introducing the managing officer system to ensure soundness and efficiency of business management.

Committees

We established four committees to ensure cross-departmental deliberation and coordination on company-wide matters.

Committee Name Purpose, Matters Deliberated and Coordinated
Compliance Committee
  • Formulation and revision of compliance program.
  • Matters related to information security management.
Risk Management Committee
  • Timely manage and respond to overall risk in accordance with the Basic Rules of Risk Management.
  • Respond to facts occurred.
Fund ALM Committee
  • The basic matters related to ALM.
  • Procurement and investment of funds.
  • Sale, purchase and investment of securities.
  • Matters pertaining to the market risk management and liquidity risk, etc.
Sustainability Committee
  • Initiatives on sustainability and implementation of related activities.
  • Formulation and revision of materiality and related KPIs.

Attendance rate at Board of Directors’ meetings, Audit & Supervisory Board meetings, and discretionary committee meetings

The Company's Board of Directors, Audit & Supervisory Board, Nominating Committee and Remuneration Committee include the following members:
As of June 1, 2021, there were 14 males and one female members. (The percentage of female officers was 6.7%.)

Title Name Board of Directors Audit & Supervisory Board Nominating Committee Remuneration Committee
Chairman, Representative Director Saburo Nishiura - - -
President, Representative Director Manabu Yoshidome - - -
Vice President, Representative Director Hidehiro Shiga - - -
Vice President, Representative Director Takaya Maeda - - -
Director, Senior Executive Managing Officer Hajime Kobayashi - - -
Director, Senior Executive Managing Officer Tadashi Nakajima - - -
External Director Tsukasa Miyajima -
External Director Hideo Yamada -
External Director Atsuko Fukushima -
External Director Kaoru Takahashi -
Full-Time Audit & Supervisory Board Member Shigeo Nakane - - -
Full-Time Audit & Supervisory Board Member Masahiro Okamoto - - -
External Auditor Koichi Nezu - - -
External Auditor Nobuyuki Kobayashi - - -
External Auditor Kenichi Sekiguchi - - -
  • The chairpersons are indicated with ◎.

Attendance rate at Board of Directors’ meetings, Audit & Supervisory Board meetings, and discretionary committee meetings in FY2020

Title Name Board of Directors Audit & Supervisory Board Nominating Committee Remuneration Committee
Chairman, Representative Director Saburo Nishiura 100% - - -
President, Representative Director Manabu Yoshidome 100% - - -
Vice President, Representative Director Hidehiro Shiga 100% - - -
Vice President, Representative Director Takaya Maeda 100% - - -
Director, Senior Executive Managing Officer Hajime Kobayashi 100% - - -
Director, Senior Executive Managing Officer Tadashi Nakajima 100% - - -
External Director Tsukasa Miyajima 100% - 100% 100%
External Director Hideo Yamada 100% - 100% 100%
External Director Atsuko Fukushima 87% - - 100%
External Director Kaoru Takahashi 100% - 100% -
Full-Time Audit & Supervisory Board Member Shigeo Nakane - 100% - -
Full-Time Audit & Supervisory Board Member Takuya Asai - 100% - -
External Auditor Koichi Nezu - 93% - -
External Auditor Nobuyuki Kobayashi - 100% - -
External Auditor Kenichi Sekiguchi - 100% - -
  • *Attendance rates are calculated based on the meetings held in January to December 2020.
  • *Takuya Asai resigned his position as of March 23, 2021.

Executive Officer Nominations

We follow the policies and procedures specified below when nominating candidates for the Board of Directors or the Audit & Supervisory Board.

Policy on Nominating Board of Director and Audit & Supervisory Board Member Candidates

When nominating candidates for the Board of Directors or the Audit & Supervisory Board, in addition to having excellent character and insight and appropriately fulfilling the duty of care, candidates are selected based on their professional experience and expertise as well as the contribution they are expected to make on improvements to the corporate value from an unbiased perspective. Efforts are made with regard to Audit & Supervisory Board candidates in particular, to appoint at least one candidate with extensive accounting knowledge.

Procedures for Nominating Board of Director and Audit & Supervisory Board Member Candidates

When nominating candidates for the Board of Directors or the Audit & Supervisory Board, reports are submitted to the Board of Directors after deliberation by the Nominating Committee, which is comprised entirely of independent external directors. The reasons for nominating each candidate are included in General Meeting of Shareholders convocation notices.

Independent External Directors and Independent External Auditors Nominations

Nominating Committee and Remuneration Committee

We have established “discretionary committees” following the enactment of the Corporate Governance Code, effected on June 1, 2015. All members of each committee are independent external directors from 2019. In addition, we made all four external directors as members of Nominating Committee and Remuneration Committee to further strengthen governance from 2021 since both committees are highly interrelated.

Nominating Committee

The Nominating Committee serves the function of reporting to the Board on the nomination of officers, and deliberates on the following matters:

  • 1.Selection of director and auditor candidates, changes to directors (promotion, etc.) and dismissals of directors
  • 2.Other items concerning succession plans and matters concerning the abovementioned items, as deemed necessary by the Board

The committee consists of 4 members that are all independent external directors. In principle, the committee is held at a request of chairperson of the committee in December, once a year. In addition, other committee members can convene the committee if deemed necessary.

Remuneration Committee

The Remuneration Committee is appointed by the Board, and deliberates and makes decisions on the matters outlined below.

  • 1.Remuneration standards and other matters pertaining to the remuneration of directors
  • 2.Matters concerning the remuneration of directors, as deemed necessary by the Board

The committee consists of 4 members that are all independent external directors. In principle, the committee is held at a request of chairperson of the committee in December and March, twice a year. In addition, other committee members can convene the committee if deemed necessary

Matters pertaining to Policies for Determining the Amount and Means of Calculating Executive Officer Compensation, etc.

Policy for Determining Executive Officer Compensation, etc.

Compensation of directors consists of basic fixed compensation, which is based on post and the weight of responsibilities, and performance-linked compensation, which is linked to earnings performance of the Company and contribution to earnings. In accordance with a resolution at the 86th General Meeting of Shareholders, a portion of performance-based compensation is allocated to a share-based payment plan designed to give incentives for performing duties, in order to achieve the sustainable growth of the Company and to enhance corporate value from the shareholders’ perspective.
Furthermore, compensation of external directors and external auditors solely consists of basic compensation (fixed amount) in light of their roles and responsibilities.
Moreover, a resolution pertaining to the method for determining executive officer compensation was passed at a Board of Directors meeting held on February 18, 2021.

General Meeting of Shareholders Resolution Details, Determination of Specific Compensation Related to Executive Officer Compensation, etc.

A resolution at the 90th General Meeting of Shareholders stipulates an annual amount of up to JPY900 million (up to JPY120 million for external directors) for Board of Director monetary compensation, with bonus payments paid within that range. Additionally, a resolution at the 85th General Meeting of Shareholders stipulates an annual amount of up to JPY150 million for Audit & Supervisory Board member monetary compensation.
A resolution at the 90th General Meeting of Shareholders stipulates a change in Board Benefit Trust (BBT) to a maximum of 250,000 points per fiscal year with regard to share-based payments for directors (excluding external directors).
When determining specific compensation, the Remuneration Committee, which consists entirely of independent external directors authorized by the Board of Directors, deliberates and makes decisions within the scope of compensation determined by the General Meeting of Shareholders. Further, Audit & Supervisory Board member compensation is determined as a separate system from director compensation within the scope of compensation determined by the General Meeting of Shareholders, in consultation with the Audit & Supervisory Board.

Performance-based Compensation

Director compensation (excluding external directors) includes performance-based compensation, which consists of bonus payments and stock compensation, and basic compensation, which is in addition to performance-linked compensation. Performance-linked compensation accounts for 40 to 50% and basic compensation accounts for 50 to 60% of total director remuneration. Hulic uses the percentage of change in preceding fiscal year consolidated ordinary income as an indicator for performance-based compensation. Our business performance is concisely represented by consolidated ordinary income as it takes into account interest expenses and other nonoperating income, thus we decided to use the percentage of change in consolidated ordinary income as it is considered to represent a medium- to long-term sustainable increase in shareholder value.
Moreover, the total amount of performance-based compensation for directors will not change if the percentage change in the preceding fiscal year's consolidated ordinary income falls below a certain level. The ratio of performance-based compensation in the form of bonuses (monetary portion) to share-based compensation (BBT) is 1:1, and a clawback mechanism is in place that will revoke share-based compensation granted in the past if any misconduct occurs.

Directors/Auditors’ Compensation

FY2020

Post Total amount of compensation
(JPY million)
Total amount by type of compensation
(JPY million)
Number of directors/auditors
Fixed compensation Performance-linked variable compensation (in stock) Performance-linked variable compensation (bonus)
Directors
(excluding External Directors)
981 510 235 235 7
Auditors
(excluding External Auditors)
72 72 - - 2
External Directors/Auditors 126 126 - - 7
  • (Note) The amount of stock compensation is provision to reserves for stock benefits posted as the portion for the current fiscal year, for performance-linked variable compensation system.

Assessment of the Effectiveness of the Board of Directors

The Board of Directors implements an annual self-assessment to continuously ensure its effectiveness, implementing pertinent revisions to Board management based on these evaluations. The result of FY2020 assessment was concluded that corporate governance was functioning effectively as the analysis and assessment showed that 1) External Directors with diverse expertise comprise 40% of the total, 2) The Board is fostering a culture in which directors can express their opinions, and 3) appropriate risk-taking and risk management in being carried out.
However, the following points were confirmed as ongoing challenges for the Board to work on.

  • Ensure that the meetings are proceeded more efficiently by requesting materials that articulate discussion points, and practice more extensive deliberation and discussion for important resolutions including medium- and long-term management policy.
  • Indicate a wide range of risks involved in business and further enhance the appropriate level of risk evaluation.
  • Deepen discussion on environment, social and governance (ESG)-related topics referencing objective indicators with a view to the private sector's role in relation to achieving the SDGs.

Corporate Governance Report

The Company prepares and submits the Corporate Governance Report (in Japanese only) outlining the status of corporate governance to the Tokyo Stock Exchange as part of timely disclosure based on the regulations of the Tokyo Stock Exchange.

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