Corporate Governance

Corporate Governance

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Corporate Governance

Overview of corporate governance

Basic approach to corporate governance

Sinanen Holdings and our group companies recognize that continuously increasing corporate value by ensuring the transparency and soundness of management and promoting swift decision-making and execution is the basis of corporate governance and see this as an important management issue.

Correspondence to Corporate Governance Code

The Company respects the purpose of the Corporate Governance Code, and implements all items of the code.

Overview of corporate governance structure and reasons for adoption thereof

In order to respond to changes in the business environment surrounding the Company, the Company has adopted a holding company structure in order to (1) clarify the delegation of authority and responsibility in each business, (2) expedite management decisions, and (3) establish a group management system that enables flexible and agile management.
In addition, the Company has selected a company with an Audit/Supervisory Committee as its organizational design in order to realize strengthening of auditing and supervisory functions and speeding up of decision making, and we believe that these objectives are consistent with the purpose of the holding company system. In addition to the above, the Company has established a voluntary Nominating and Compensation Committee to enhance the independence and objectivity of the Board of Directors and to further enhance the corporate governance function.

1. Board of Directors

Our officer system consists of four Directors (excluding those who are members of the Audit/Supervisory Committee; no Outside Directors) and five Directors who are members of the Audit/Supervisory Committee (all five of whom are Outside Directors).

Members:

President and CEO Masaki Yamazaki(chairman)
Representative Director and Senior Managing Naoki Shimizu
Director Kenji Madokoro
Director Miwa Mitsuhashi
Outside Director and Audit/Supervisory Committee Member(Full time) Kazuhisa Hirano
Outside Director and Audit/Supervisory Committee Member Ren Shino
Outside Director and Audit/Supervisory Committee Member Nobutaka Murao
Outside Director and Audit/Supervisory Committee Member Hiroyuki Mitani
Outside Director and Audit/Supervisory Committee Member Yuichiro Munakata

Our Articles of Incorporation set for that we will have no more than six Directors (excluding Directors who are members of the Audit/Supervisory Committee) and no more than six Directors who are members of the Audit/Supervisory Committee.
They also state that resolutions to appoint Directors of the Company shall be made at the General Meeting of Shareholders by majority vote when shareholders with at least one-third of voting rights are in attendance and that such resolutions shall not be made by cumulative voting.

2. Management Meeting

The Company has established a Management Meeting as a place to provide advice on decision-making by the President and CEO on important matters related to the execution of business. Management Meetings are held regularly, once per month, as well as when necessary, and are used as a venue to discuss management policy and important matters related to management. Management Meetings are chaired by the President and CEO, and are attended by full-time Directors, officers in charge, and the persons nominated by the President.

3. Audit/Supervisory Committee

The Audit/Supervisory Committee of the Company is comprised of five people including the chairperson and committee members; the committee audits and supervises the legality of the execution of business of Directors, as well as the validity and appropriateness of decision making and managerial judgments, through attendance at the monthly meetings of the Board of Directors and through the committee's auditing activities.

Members:

Outside Director and Audit/Supervisory Committee Member(Full time) Kazuhisa Hirano(chairman)
Outside Director and Audit/Supervisory Committee Member Ren Shino
Outside Director and Audit/Supervisory Committee Member Nobutaka Murao
Outside Director and Audit/Supervisory Committee Member Hiroyuki Mitani
Outside Director and Audit/Supervisory Committee Member Yuichiro Munakata

4. Nominating and Compensation Committee

The Company has established a voluntary Nominating and Compensation Committee, which is not based on the Companies Act, to deliberate on the appointment and dismissal of Directors of the Company and Directors and Auditors of Group companies, as well as compensation for officers. The voluntary Nominating and Compensation Committee is chaired by the President and CEO and consists of five Directors who are Audit/Supervisory Committee Members. Nominations of candidates for Directors (including Directors who are Audit/Supervisory Committee Members) of the Company and Directors and Auditors of Group companies are made by the Board of Directors based on the recommendations of the President and CEO, which are deliberated and proposed by the voluntary Nominating and Compensation Committee. Note that the consent of the Audit/Supervisory Committee is obtained for nominations of candidates for Directors who are Audit/Supervisory Committee Members. With regard to the individual compensation for Directors and Auditors of the Company and its Group companies, based on internal rules, the voluntary Nominating and Compensation Committee decides the compensation for Directors who are not Audit/Supervisory Committee Members, and the compensation for Directors who are Audit/Supervisory Committee Members is proposed by the voluntary Nominating and Compensation Committee and decided by the Audit/Supervisory Committee. In this way, we believe we increase the transparency and objectivity of procedures related to decisions on officer nominations and individual compensation for officers, contributing to further enhancement of corporate governance functions and healthy growth of the Group as a whole.

Corporate Governance System

Corporate bodies

Directors

Number of Directors as set forth in articles of incorporation 12
Term of office of Directors as set forth in articles of incorporation 1 year
Chair of Board of Directors President
Number of Directors 9
Status of appointment of Outside Directors Appointed
Number of Outside Directors 5
Number of Outside Directors designated as Independent Officers 5

Appointment policy for Outside Directors

The Company has not clearly prescribed standards or a policy concerning independence for the appointment of Outside Directors, however, at the time of selection, candidates for which independence can be secured in consideration of the independence standards of a financial instruments exchange are selected.
The basic policy for selecting candidates for Outside Directors is that they possess the extensive experience and deep knowledge required of Outside Directors or exceptional knowledge in the fields of law and corporate accounting as well as the ability to express fair and objective opinions from an independent standpoint in order to improve the corporate governance of the Group.

Reasons for election of Outside Directors

Name Member of Audit/
Supervisory Committee
Independent
Officer
Reason for election Attendance
Number of meetings attended/Number of meetings, percentage of meetings attended (FY 2022)
Kazuhisa Hirano We elected Mr. Hirano because we determined that his expertise as a US certified public accountant and certified internal auditor can be utilized to improve the Company’s corporate governance. Board of Directors: 14/14 (100.0%)
Audit/Supervisory Committee: 12/12 (100.0%)
Ren Shino We elected Mr. Shino because we determined that his extensive experience and broad knowledge as a lawyer can be utilized to improve the Company's corporate governance. Board of Directors: 14/14 (100.0%)
Audit/Supervisory Committee: 12/12 (100.0%)
Nobutaka Murao We elected Mr. Murao, based on the judgment that he can utilize his rich experience and wide range of insight as a financial bureaucrat, news program anchor, and university professor to improve the Company's corporate governance. Board of Directors: 14/14 (100.0%)
Audit/Supervisory Committee: 12/12 (100.0%)
Hiroyuki Mitani
We elected Mr. Mitani because we determined that his broad knowledge based on his extensive experience in corporate management and experience in human resources development acquired as a university and business school professor can be utilized to improve the Company's corporate governance. Board of Directors: 11/11 (100.0%)
Audit/Supervisory Committee: 10/10 (100.0%)
Yuichiro Munakata We elected Mr. Munakata because we determined that his professional knowledge and abundant experience in accounting and auditing as a certified public accountant as well as his international experience and international perspective through overseas assignments can be utilized to increase our corporate value and the Company's corporate governance. -

*The attendance status of Mr. Mitani covers the period since he was appointed on June 22, 2022.
*Mr. Munakata is a newly elected Outside Director.

Outside Directors

We have established a structure so that, without exception, Outside Directors are invited to meetings of the Board of Directors, receive materials, etc., and are offered the same explanations from the departments submitting proposals as the other Directors. The notices, materials, and other information sent to Outside Directors is the same as what is sent to the other Directors.
In addition, the board is set up so that Outside Directors are given access to important management information and are able to express their opinions. Furthermore, they attend meetings of the Board of Directors from an independent standpoint and leverage their expert knowledge as they actively offer their opinions.

Evaluation of effectiveness of Board of Directors

The Secretariat of the Board of Directors regularly conducts paper-based surveys on the effectiveness of the Board of Directors and reports the results at meetings of the Board of Directors.
The most recent survey indicated that the operations and affairs of the Board of Directors was generally effective in the fiscal year ended March 31, 2021. Specifically, the frank discussions, including critical opinions from Outside Directors, and the careful review of the risks and benefits of cross-shareholdings according to capital cost were recognized. On the other hand, distribution of materials for meetings of the Board of Directors well in advance and the reduction of special terminology/industry-specific terms within the materials were noted as issues.
In response, we will continue to promote proper operations of the Board of Directors and implement improvement measures to address the issues to enable the Board of Directors to further contribute to improvement of corporate value.

Evaluation Process

1. Implementing the Questionnaire Once a year, we implement a written questionnaire targeting all the directors.

2. Analyzing and Evaluating Results The Secretariat of the Board of Directors analyzes the results obtained from the questionnaire and reports the results to the board.

3. Addressing Issues Based on discussions at the Board of Directors, we identify issues and take improvement measures.

FY2022 FY2023
Recognition of Major Issues Evaluation Summary Compared to
Previous Period
Improvement Measures
Operation of the Board of Directors Providing relevant materials well in advance of board meetings
  • Distributed the annual reporting schedule in advance and requested early material preparation
  • First distribution made three business days in advance for all 14 meetings
Improvement trend
Improvement
trend
  • Regularly provide internal communication regarding early submission
Ensuring Board of Directors meeting materials are easy to understand
(reducing the use of technical and industry jargon)
  • Released a group glossary
  • Standardized format of board meeting materials
Improvement
Improvement
  • Regularly update and share glossary
Scrutinizing individual cross-held shares by the Board of Directors
  • Insufficient discussion regarding the sale of cross-held shares
Deterioration
Deterioration
  • Ensure discussion at Board of Directors meetings on purpose of cross-held shares and the associated risks, etc.
Support for directors Preparing an orientation program for new directors
  • Although mainly implemented by the Human Resources Department, the content needs to be studied
Deterioration
Deterioration
  • Continue current orientation
  • Study content
  • Report to the Board of Directors that orientation is conducted by the Human Resources Department provide internal communication regarding early submission
Providing opportunities for directors to acquire the knowledge and awareness they need, and coverage of expenses, etc.
  • Some in-house training was carried out, but it was insufficient
Deterioration
Deterioration
  • Human Resources Department to study the implementation of external training
Internal control Ensuring proper internal controls and company-wide risk management systems, fully utilizing internal audit departments, and overseeing the status of their operation
  • Risks should have been anticipated in advance, such as: delays in passing on higher procurement costs in the electric power business to higher prices; and the extraordinary loss related to the large-scale onshore wind power generation business in South Korea.
  • Must study strengthening of the risk management system, going forward
Improvement trend
Improvement
trend
  • Study initiatives to build a risk management system
Feedback to senior management Providing appropriate feedback to the Board of Directors regarding opinions expressed at financial results briefings, etc.
  • IR reports delivered at two Board of Directors meetings
Improvement
Improvement
  • Continue IR reports
  • Consider sharing feedback after each financial results briefing, which is currently not being done

Director training

For director training, we have established an environment that allows active participation in external seminars and training to promote acquisition of the necessary knowledge and understanding of roles and responsibilities.
In addition, for newly elected Directors who are not members of the Audit/Supervisory Committee, we carry out training utilizing internal and external training programs.

Audits

Audit Committee

We are a company with an audit/supervisory committee. The committee is comprised of five members: one full-time and four part-time (all Outside Directors).

Main activities of members of Audit/Supervisory Committee

The member of Audit/Supervisory Committee audited the execution of duties of Directors through attendance at important decision making-related meetings such as of the Board of Directors, the Management Meeting, and the Nominating and Compensation Committee (voluntary), received regular reports from the Internal Control Department, made requests for audits and reports to the Internal Control Department, examined the internal control systems of key operating companies, and viewed important documents such as approval forms. Moreover, they receive reports from Directors and persons in charge and shared opinions with them as necessary.
The member of Audit/Supervisory Committee attends meetings of the Board of Directors and the Nominating and Compensation Committee (voluntary), Business Executive Manager Meetings (held twice per year), and receives reports on activities of the full-time Audit/Supervisory Committee members to share opinions.
In addition, the Audit/Supervisory Committee interviews the President and CCO, and in addition, receives monthly reports on important matters relating to management status from Business Executive Directors, to provide their opinions on Group strategies and offer suggestions on how to improve the risk management system. In addition, they provided a report to the Board of Directors on the status of audit activities once every quarter.

Internal Audits

The Company has prescribed the mission of internal audits as being "to enhance and preserve the value of the Group by providing risk-based and objective assurance, advice, and insight" and the definition of internal audits as being "to evaluate and improve the effectiveness of each risk management, control and governance process with a disciplined attitude and systematic methodology as internal audit specialists," and conducting internal audits of the entire group.

Executive Compensation

Outline of the details of the decision policy

A) The basic remuneration for the President shall be determined at a competitive level, taking into consideration the levels of other companies in the same industry and public.

B) The basic remuneration for full-time officers shall be determined by multiplying the base amount by a coefficient determined for each position, with the base amount for the President as the base amount. The determination of the base amount and the coefficients for each position shall be left to the discretion of the Nominating and Compensation Committee.

C) Remuneration for part-time Directors (excluding Directors who are members of the Audit/Supervisory Committee) shall be determined separately.

D) The ratio of performance-linked compensation to the total amount of compensation for officers shall be approximately 15%.

E) The performance-linked compensation for the President shall be determined by calculating the consolidated ordinary income, etc., and this shall be the performance-based amount. The performance-linked compensation for other full-time officers shall be determined by multiplying the performance-based amount by a coefficient determined for each position. The total amount of performance-linked compensation shall not exceed a certain percentage of consolidated ordinary income, etc. The performance-linked compensation for each individual, including the President, will be finally determined by taking into account the contribution to medium- to long-term performance. The determination of the performance-based amount, coefficients for each position, and medium to long-term evaluation shall be left to the discretion of the Nominating and Compensation Committee.

F) Stock based compensation with restrictions on transfer is granted to Directors other than those who are Audit/Supervisory Committee Members, and the restriction on transfer is lifted on the condition that certain performance targets determined by the Board of Directors of the Company are achieved. The number of shares to be granted shall be equivalent to 10% of the basic remuneration, and the specific allocation to each eligible Director shall be determined by the Board of Directors.

Details of Executive Compensation (fiscal 2022)

Officer Type Total Amount
(¥ Million)
Total Amount by Type (¥ Million) Number of People
Fixed Compensation Performance-linked Compensation Non-monetary compensation, etc.
Directors
(excluding Audit/
Supervisory Committee
Members and
Outside Directors)
140 109 14 17 4
Directors
(Audit/Supervisory Committee Member)
(excluding 
Outside Directors)
Outside Directors 43 43 5

(Notes)

1. The total amount of compensation, etc., for Directors does not include the employee salary for Directors who concurrently serve asemployees.

2. Non-monetary compensation in the form of restricted stock compensation is recorded as an expense for the fiscal year under review.

Incentives

The Company has introduced the following compensation system for Directors other than Audit/Supervisory Committee Members.

Performance-linked compensation system

In order to raise awareness of the need to improve the Company's performance in each fiscal year, the Company has set consolidated ordinary income as the target performance indicator for a single fiscal year, and the amount calculated in accordance with the degree of achievement of the target value is multiplied by the coefficient that corresponds to the contribution to medium- to long-term performance and then paid in cash every month as performance-linked compensation in addition to the fixed compensation. The reason for selecting consolidated ordinary income as the performance indicator is that the Company believes it is important to improve overall profitability, including not only operating activities but also financial activities.

Stock based compensation (post-delivery performance-linked share-based compensation) system

The Company has introduced this system to provide incentives for the sustainable enhancement of the Group's corporate value and to promote further value sharing with our shareholders.

Internal control

Based on the Companies Act and the Ordinance for Enforcement of the Companies Act, we have passed a resolution on the status of development and implementation of a "system for ensuring appropriate operations" (internal control system) and are promoting highly sound management and business operations based on solid internal control.
For details of the internal control system, please refer to the "Report on Corporate Governance" submitted to the Tokyo Stock Exchange.

Exclusion of antisocial forces

We recognize that having relationships with antisocial forces is a violation of compliance and have implemented measures to firmly refuse such dealings as an ongoing priority.

  1. The Sinanen Holdings Group's Charter of Conduct and Basic Policy on Development of an Internal Control System contain explicit repudiation of relationships with antisocial forces and have been published internally and externally to demonstrate our intent.
  2. We have placed the Legal Affairs Office in charge of our response and shall endeavor to build cooperative relationships with specialist external organizations such as the police, Tokyo Center for Removal of Criminal Organizations, and attorneys.
  3. We have joined a specialized external group and work to gather information while putting together a system for taking inquiries and receiving guidance in the event of an incident.
  4. A clause excluding organized crime groups is inserted in our contract templates.

Policy on cross-shareholdings

The Company holds cross-shareholdings for the purpose of strengthening and facilitating business relationships and alliances.
Every year, the Board of Directors reviews the economic rationale of major cross-shareholdings of this type from a medium- to long-term perspective to determine whether or not to keep them.
Additionally, exercising of voting rights with respect to cross-shareholdings is carried out based on a comprehensive consideration of whether the matter will contribute to improving our corporate value and the common benefit of the investee's shareholders.

Dialog with shareholders and investors

The Company believes that constructive dialog with its shareholders and investors contributes to its sustainable growth and improves its corporate value in the medium to long term.

  1. To facilitate constructive dialog with all shareholders and investors, the officer in charge of the Corporate Planning Department, the Corporate Planning Department and the Finance and Accounting Department have formed a point of contact under the supervision of the President and CEO to respond appropriately to inquiries. The Corporate Planning Department is in charge of the planning and execution of specific matters related to dialog with shareholders and investors and works closely with each division of the Company, including the Finance and Accounting Department, the Growth Strategy Department, and operating companies.
  2. In regard to dialog and interviews with shareholders and investors, basically either the President and CEO or members of senior management (primarily the officer in charge of Corporate Planning Department) participate in interviews directly. This is to fulfill our accountability as a listed company and to faithfully reflect the knowledge and ideas gained through constructive dialog with shareholders and investors in future management decisions. When engaging in such dialog with shareholders and investors, we do not communicate insider information (material facts that have not been made public) to specific individual on a selective basis.
  3. We actively disclose IR information on our website to shareholders and investors to promote a deeper understanding of the Group's management policies, basic strategies, financial situation, etc. and will continue working on enhancing that information.

Efforts to promote meaningful General Meetings of Shareholders and facilitate the exercise of voting rights

Supplementary descriptions
Early notice of convening of General Meetings of Shareholders We make an effort to send out notices of General Meeting of Shareholders before the legally required date to the meetings to facilitate the exercise of voting rights.
Avoidance of days on which many companies hold shareholders meetings We make an effort to avoid days on which many companies hold shareholders meetings when setting the date for ours.
Electronic exercise of voting rights We have made it possible to exercise voting rights electronically.
Participation in platform for exercising voting rights electronically and other efforts to improve environment for institutional investors to exercise voting rights We have adopted a platform for institutional investors to exercise voting rights operated by ICJ, Inc.
Provision of notices of convocation (summaries) in English The Company posts an English version of the convocation notice on the Tokyo Stock Exchange, the Electronic Proxy Voting Platform (ICJ), and the Company's website on the same day as the Japanese convocation notice.

IR activities

Supplementary descriptions Explanations by representative
Disclosure Policy creation and publishing The Disclosure Policy has been published on the Group's website.  
Regular IR conferences for individual investors The Company holds company briefings for individual investors multiple times a year. In addition, we record and distribute financial results briefings held for analysts and institutional investors, and try to ensure fairness in the dissemination of information by providing individual investors with an environment in which they can also watch. No
Regular IR conferences for analysts and institutional investors The Company holds financial results briefings for analysts and institutional investors. We also make efforts to communicate with analysts and institutional investors by disclosing financial results presentation materials on the Company's website for quarterly financial results, as well as by visiting institutional investors and responding to individual interviews. Yes
Publishing of IR material on website We have established an IR site on our website, where we post not only financial results and financial information, but also explanatory materials for financial results, timely disclosure materials, shareholder newsletters, and various notices. Some of the above material is also provided in English.
Establishment of IR department (persons in charge) We have established an IR/SR team within the Corporate Planning Department.
Other In order to deepen the understanding of our company, we focus on providing information via the Internet, and actively disseminate the details of our initiatives through Group Topics on our website and various SNS.

Efforts related to respect for the stakeholder's perspective

Supplementary descriptions
Provision on respect for stakeholder's perspective within internal rules The Sinanen Holdings Group's Charter of Corporate Conduct stipulates the fulfillment of our corporate social responsibility, which is based on the concept of faith to fulfill our duties in response to the trust of a wide range of people, including stakeholders, as the foundation of our management.
Implementation of environmental conservation and CSR activities

The Sinanen Holdings Group Charter of Corporate Conduct recognizes the importance of the global environment and stipulates that we will actively work to address environmental problems.
In addition to addressing environmental issues through our business activities, such as our renewable energy business, in 2020, Sinanen Co., Ltd. launched the "Sinanen Akari-no-Mori Project" for protecting bountiful forests through the use of clean energy. Through the project, we collaborate with municipalities and non-profit organizations on tree planting and forest protection activities in the aim of creating bountiful forests and preventing global warming.
At the Group's headquarters office, we are engaged in energy conservation activities, including thorough air conditioning temperature control.

Achievements in other CSR activities

[Support for cultivation of the next generation]

• Conducting an environmental education program for junior high school students on the theme of energy mix

• Giving lessons on antibacterial practices at elementary schools

• Holding the "Itsumo Arigato (Thank You) Essay Competition" for elementary school students nationwide

• Participation as a sponsor in the IR Presentation Contest for University Students to assist in increasing the financially literacy of the younger generation

[Social/international contribution]

• Support for agriculture-welfare collaboration activities which aim to support the employment of people with disabilities through agriculture

• Donating naturally grown rice harvested through agriculture-welfare collaboration activities to organizations working to reduce child poverty

• Participation in the "Kids Earth Fund" for children around the world in need of assistance due to illness, conflict, or disaster

• Participation in the smile for people project that supports independence of people with disabilities and domestic resource recycling

[Regional promotion/environmental conservation]

• Support for the forest maintenance project of the C.W. Nicol Afan Woodland Trust, which aims to conserve the environment and protect biodiversity

• Promotion of the SINANEN Akari no Mori Project, through which we sell 100% renewable energy electricity and donate a proportion of the electricity charges to environmental conservation activities

• Holding a youth soccer tournament to contribute to the future of children and their local communities

• Running a community clean-up walk for the beautification of the community

Other specific activities are stated in the Social Contribution Activities section of our website

Establishment of policy on providing information to stakeholders The Sinanen Holdings Group Charter of Corporate Conduct stipulates the appropriate disclosure of corporate information.