The status and policy of the Company’s measures concerning the main principles of the Corporate Governance Code are as follows.
[Principle 1.4 Policy for Cross-Shareholdings]
ⅰ：Policy regarding shares as cross-shareholdings
The Company will hold cross shareholdings in cases where it judges that they will contribute to maintaining and increasing the Group’s corporate value from a perspective of importance to the medium- and long-term business strategy, reinforcing relationships with business partners, and maintaining a stable fund procurement environment.
Furthermore, in addition to verifying the appropriateness of each individual shareholding in light of the purpose of said holding, the Company will regularly conduct quantitative verification of matters such as the benefits, risks and capital cost of the holding, and report the results to the Board of Directors.
Stocks whose holding is deemed to have little meaning or effect will be sold as appropriate, giving due regard to share prices, market trends, and other information for consideration.
ⅱ：Policy regarding exercise of voting rights
The Company shall exercise its voting rights related to cross-held shares on all proposals for voting after individually judging factors such as whether the proposal will contribute to increasing the Group’s shareholder value, and whether it is appropriate in light of the purpose of shareholding of the Company.
[Principle 1.7 Related Party Transactions]
All transactions with related parties, including officers and major shareholders, are carried out after the required decision has been made through a process of deliberation from specialist perspectives such as finance, accounting, taxation, and law, following the Company’s internal regulations in accordance with the scale and importance of the transaction. Transactions with a conflict of interest for Directors must be approved by the Board of Directors based on laws and regulations, and the Board of Directors Regulations (excluding, however, cases where the transaction is an ordinary transaction as a general consumer, including purchasing over-the-counter goods, where the interests of the Company or the common interests of its shareholders are not harmed).
When such a transaction has occurred, details are disclosed in the Annual Securities Report in accordance with laws and regulations.
[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]
The Company accepts employees only from Group companies, and these employees are subject to the retirement benefit plans of the Company they originally joined. Additionally, the retirement benefit plans of each Group company consist primarily of defined contribution pension plans and lump-sum payments.
Therefore, the corporate pension funds have limitations as asset owners.
With defined contribution pension plans, the Company confirms operations through selection of fund managers and investment products as well as provision of educational opportunities for employees regarding asset management and explanations at the time of joining the Company. Furthermore, the corporate pension funds conduct proper operation as asset owners by entrusting management to institutions that comply with the stewardship code, while appointing highly experienced managers to be in charge of the operation.
[Principle 3.1 Full Disclosure]
ⅰ：Management philosophy, management strategy, and management plan
The Group conducts business activities founded in the Group philosophy shared by all Tokyu Group companies. It has adopted the business philosophy of “identifying social challenges with the spirit of enterprise and meeting the challenges by implementing projects with ideals and ideas.” The Group has worked to generate new value by adapting to changes in the environment with diversity as its advantage while maintaining its challenging DNA and consideration for customers. The entire Group remains committed to bringing about change with an unswerving conviction by daringly taking anticipatory action before change, and we will continue rising to face the changes of each era. Details can be found on the Company’s website under the “Message from the President.”
Message from the President (English) https://www.tokyu-fudosan-hd.co.jp/english/about/message/
Group Philosophy (Japanese): https://www.tokyu.co.jp/company/about/
For details on Value Frontier 2020: To Become a Corporate Group that Continues to Create Value — Stage 2 “Medium-Term Management Plan for 2017 to 2020” disclosed in May 2017, please visit the following URL.
Medium-Term Management Plan (English): https://www.tokyu-fudosan-hd.co.jp/english/ir/mngpolicy/plan/
In addition, the Company issues “Integrated Reports” in an effort to facilitate the understanding by stakeholders of the overall picture of the Group’s progress and creation of value in its business activities.
Integrated Report (English):https://www.tokyu-fudosan-hd.co.jp/english/ir/library/annualreport/
ⅱ：Basic views on corporate governance
For information about the Group’s basic views on corporate governance, please refer to “I. Basic Views on Corporate Governance, Capital Structure, Corporate Attributes and Other Basic Information, 1. Basic Views.”
ⅲ：Policies and procedures in determining the remuneration of the senior management and Directors
Concerning the remuneration for Directors and Audit & Supervisory Board Members of the Company, at the 1st Ordinary General Meeting of Shareholders held on June 26, 2014, it was decided that the annual amount of remuneration for Directors shall not exceed ¥600 million, and the annual amount of remuneration for Audit & Supervisory Board Members shall not exceed ¥120 million. Bonuses are also paid within these limits. The Company has also made clearer the link between Director remuneration and stock price, and has introduced a stock-based compensation system based on a resolution at the 4th Ordinary General Meeting of Shareholders held on June 28, 2017 to have Directors share profits and risks from stock price fluctuations with shareholders. For the stock-based compensation system, a stock granting trust has been set up for Directors excluding Outside Directors, and Managing Officers with whom the Company has concluded mandate contracts, with a maximum of 170,000 shares per year.
In the determination of officer remuneration, the Company aims for a system of remuneration that raises awareness of the contribution of improved medium- and long-term earnings performance to increasing corporate value. Specifically, the Company ensures a certain ratio for the portion of variable remuneration within total remuneration, and remuneration is decided based on the achievement level of key performance indicators in the Medium-Term Management Plan, contribution to achievement of the Plan, and other factors. Specific methods for determining remuneration are as follows. Within the limits for remuneration amounts approved by the General Meeting of Shareholders, remuneration for Directors is decided at a meeting of the Board of Directors that has been briefed on the results of deliberation by the Nomination and Remuneration Committee. Remuneration for Audit & Supervisory Board Members is decided on the basis of discussion among the Audit & Supervisory Board Members.
The system of remuneration for officers (excluding Outside Directors and non-executive Directors) consists of fixed remuneration, performance-based remuneration and stock-based compensation. Fixed remuneration is a consideration for the day-to-day execution of internal operations, whereas performance-based remuneration that takes into consideration the business results in a single fiscal year and the achievement level of management plans. Stock-based compensation is designed to have officers share the benefits and risks of stock price fluctuations with shareholders and increase the contribution to the improvement of medium- and long-term earnings performance and corporate value. Also, for the levels of remuneration for officers (excluding Outside Directors and non-executive Directors), first, the level of remuneration for the President and Representative Director is determined, and then, the levels of remuneration for other Directors and Audit & Supervisory Board Members are determined based on fixed differences in positions. The level of remuneration for the President and Representative Director (monetary compensation plus stock-based compensation) is set around 0.1% of the operating profit for the previous consolidated fiscal year, as consolidated operating profit is adopted as the target index under the Medium-Term Management Plan.
ⅳ：Policies and procedures in the appointment or dismissal of the senior management and the nomination of candidates for Directors and Audit & Supervisory Board Members
In selecting candidates for Directors, the Board of Directors presupposes that the candidates have appropriate character and knowledge for a Director, as well as no health issues that would impede them from executing their duties. The Company also gives consideration to the overall balance of the Board of Directors in order for it to be a structure that ensures diversity, including in terms of gender and internationality.
As candidates for Directors from within the Company, personnel who have insight and judgment ability with a view to achieving the management indicators and other objectives in the medium- and long-term management plan are nominated.
As candidates for Outside Directors, personnel who have rich experience in their respective fields, including management, legal affairs, financial affairs and accounting, while having sensible and objective viewpoints, and are capable of proposing and discussing issues concerning growth strategies and enhancement of corporate governance from an independent point of view are nominated.
Appointment of senior management team members and nomination of candidates for Director are decided every year by meetings of the Board of Directors after consulting with the Nomination and Remuneration Committee, which is a voluntary advisory committee chaired by an Independent Outside Director.
The necessary response with regard to the dismissal of the senior management shall be deliberated and decided by the Board of Directors after consulting with the Nomination and Remuneration Committee in the event of any fraudulent or unjust behavior by the senior management, such as violating the details stipulated in the officers’ regulations, or in the event that it is deemed that the person’s qualifications as senior management are markedly lacking.
As for candidates for Audit & Supervisory Board Members, the Audit & Supervisory Board receives proposals of personnel who have appropriate character for an Audit & Supervisory Board Member, as well as having no health issues that would impede them and the insight required for auditing duties, and after the proposal is consented by the Audit & Supervisory Board, the candidates are nominated by the Board of Directors.
ⅴ：Explanations with respect to the individual appointments, dismissals, and nominations
For the reasons for the nomination of Directors and Audit & Supervisory Board Members, please refer to the “Notice of Convocation of the 6th Ordinary General Meeting of Shareholders” and the “Notice of Convocation of the 4th Ordinary General Meeting of Shareholders.”
Notice of Convocation of the 6th Ordinary General Meeting of Shareholders (Japanese): https://www.tokyu-fudosan-hd.co.jp/ir/stockandbond/generalmeeting/pdf/H_amg2019_1.pdf
Notice of Convocation of the 6th Ordinary General Meeting of Shareholders (English): https://www.tokyu-fudosan-hd.co.jp/english/ir/stockandbond/generalmeeting/pdf/H_amg2019_1.pdf
Notice of Convocation of the 4th Ordinary General Meeting of Shareholders (Japanese): https://www.tokyu-fudosan-hd.co.jp/ir/stockandbond/generalmeeting/pdf/H_amg2017_1.pdf
Notice of Convocation of the 4th Ordinary General Meeting of Shareholders (English): https://www.tokyu-fudosan-hd.co.jp/english/ir/stockandbond/generalmeeting/pdf/H_amg2017_1.pdf
Furthermore, it is the Company’s policy to provide necessary explanations with respect to the dismissal of Directors and Audit & Supervisory Board Members.
[Supplementary Principle 4.1.1]
The Board of Directors develops internal rules such as the Board of Directors Regulations and the Duty Authority Regulations in addition to the matters stipulated in laws and regulations and the Articles of Incorporation. Based on these, the Board of Directors conducts decision-making on important matters related to the Group’s management, such as the management policies, business plans, and large-scale investment plans.
Authority for execution of business and decisions on such execution for matters other than the important matters listed above is delegated to Group Executive Committee and other subordinate meeting bodies, and officers and so forth in charge of the business operations, while the Board of Directors monitors the status of performance of duties of the meeting bodies and officers and so forth.
[Principle 4.8 Effective Use of Independent Outside Directors]
For the Company’s corporate governance, Independent Outside Directors are to have rich experience in management and a high level of discernment and character and related matters, as well as understanding the Group’s wide-ranging business domain and the value they create. They are to provide advice from a broad, high-level perspective, while appropriately supervising executives from a position that is independent from them. The Company recognizes this as an important duty.
To enable appropriate and flexible decision-making on business activities and supervision of execution, the Company considers it advantageous for the Board of Directors to be composed of Directors from inside the Company, who have specialist capabilities and insight about business fields, management plans, personnel, finance and accounting, and so forth, and Independent Outside Directors, who are able to proactively offer opinions on growth strategies and enhancement of governance, and raise concern, from the perspectives of diverse stakeholders and society. The ratio of Independent Outside Directors is approximately 31% under the current system, but the Company is considering ensuring that this ratio is one third or more by 2020.
[Principle 4.9 Independence Standards and Qualification for Independent Outside Directors]
The Company deems Outside Directors to be independent when, in addition to meeting the independence standards for independent officers stipulated by the Tokyo Stock Exchange, none of the following have applied for any of the previous three fiscal years.
1) An executive of a business partner to which the Company’s net sales account for 2% or more of the Company’s consolidated net sales
2) An executive of a business partner whose net sales to the Company account for 2% or more of the business partner’s net sales
3) An executive of a lender from which the Company borrows funds that account for 2% or more of the Company’s consolidated total assets
4) An executive of a major shareholder or investor of the Company with an investment ratio of 10% or more
5) A consultant, accounting professional, or legal professional who receives remuneration of more than ¥10 million a year from the Company besides officer remuneration
6) A spouse or relative within two degrees of kinship of the Director, etc. of the Company or a consolidated subsidiary
[Supplementary Principle 4.11.1]
When deciding on candidates for Directors, the Company considers the balance of personnel able to exercise strengths in management in each of the fields within the Group’s wide-ranging business domain and personnel suited for corporate management and so forth, and seeks to secure a balance and diversity of the overall knowledge, experience, and capabilities of the Board of Directors.
Considering the Group’s wide-ranging business domains, the Company considers the current structure with the number of Directors at around 13 to be appropriate. However, there is a possibility that the structure may change, for example by increasing the number of Independent Outside Directors in order to strengthen the governance structure going forward.
Selection of senior management team members and nomination of candidates for Director are decided every year by meetings of the Board of Directors after consulting with the Nomination and Remuneration Committee chaired by an Independent Outside Director.
[Supplementary Principle 4.11.2]
The notice of convocation of the Ordinary General Meeting of Shareholders for each year lists the status of any significant concurrent positions outside the Company of officers. The notices of convocation of the Ordinary General Meeting of Shareholders can be viewed on the Company’s website.
Relevant information on meeting of shareholders (English):
[Supplementary Principle 4-11-3]
The evaluation of the effectiveness of the Board of Directors is conducted every year, and the appraisals and opinions regarding the effectiveness of individual Directors and Audit & Supervisory Board Members are reported and shared at meetings of the Board of Directors. Regarding matters where changes are needed to further improve effectiveness, continuous verification of remedial progress is undertaken within the annual appraisal of effectiveness. For example, in response to an opinion and evaluation that the method and timing of information provision to each officer was unsatisfactory, necessary reviews were implemented. As a result, the evaluation conducted in the following year showed improvement in effectiveness.
The latest evaluation showed that the structure of the Board of Directors was strengthened and its effectiveness was improving, but the Company will continue working to further enhance its effectiveness.
[Supplementary Principle 4.14.2]
To promote understanding of the roles and responsibilities required of the Directors and the Audit & Supervisory Board Members, the Company provides opportunities such as external training and seminars for corporate managers so they may acquire necessary knowledge on the Company’s business, finances, organization, compliance, and other matters as well as necessary knowledge related to education that they should receive as Directors and Audit & Supervisory Board Members. Moreover, Outside officers are given clear explanations of the management strategy and business activities as appropriate at the time of and after their appointment in order to promote their understanding of the Group.
[Principle 5.1 Policy for Dialogue with Shareholders]
The Company proactively conducts IR activities to promote constructive dialogue with its shareholders. Please refer to the Company’s IR Policy for details including its initiatives and policies.
IR policy (English): https://www.tokyu-fudosan-hd.co.jp/english/ir/policy/
For further reference, the Company’s website also has information on the Group’s disclosure items and so forth based on the respective principles of the Japan’s Corporate Governance Code.
Corporate Governance Code (English): https://www.tokyu-fudosan-hd.co.jp/english/about/governance/
The Company is working on constructive dialogue with shareholders and investors in order to contribute to sustainable growth and the increase of corporate value over the medium and long term. In addition to individual interviews, the Company is proactively working on dialogue by the President, officers in charge and divisions in charge, including through regular investor briefings for analysts and institutional investors as well as regular investor briefings for individual investors. The Company periodically reports the opinions of shareholders and investors obtained through this dialogue to the Board of Directors, and uses them to improve management.