Corporate Governance / Compliance

Basic Policies

1. Securing the Rights and Equal Treatment of Shareholders
We respect the rights of all stockholders, who are important shareholders, and shall maintain an environment that ensures that all shareholders, including non-controlling interests, are treated equally and can fully exercise their rights.
2. Appropriate Cooperation with Shareholders
We shall cooperate appropriately with all shareholders while working to achieve sustainable growth and an increase in mid- to long-term corporate value.
3. Ensuring Appropriate Information Disclosure and Transparency
We shall actively disclose information in order to be a company sincerely welcomed by all of our shareholders, and we shall manage our business with transparency and good faith.
4. Responsibilities of the Board
The Board shall take appropriate responsibility for the establishment of mid- to long-term management policies and oversight of directors, and it shall work to build systems to enable transparent, fair, and resolute decision-making.
5. Dialogue with Shareholders
The company shall engage in constructive dialogue with shareholders and investors through the annual General Meeting of Shareholders and other avenues with respect to management principles and other issues as it works to achieve sustainable growth and an increase in mid- to long-term corporate value.
November 2015 Board Resolution

Basic Policy on Corporate Governance

The TS TECH Philosophy calls for us to be a company sincerely appreciated by all of our stakeholders—from shareholders and investors to customers, suppliers, employees, and local communities. We are working hard to enhance corporate governance as an important step toward fulfilling our social responsibility and achieving sustainable business growth and increasing corporate value over the medium to long term.

TS TECH endorses the Tokyo Stock Exchange’s Corporate Governance Code and has set the above basic policies accordingly.

We will continue to work to strengthen our governance system in line with the intent and spirit of the Code.

Changes to the Organizational Layout

Transition to a “Company with an Audit and Supervisory Committee” Structure

Following its approval at the 75th Annual General Meeting of Shareholders held on June 25, 2021, TS TECH transitioned to a “company with an Audit and Supervisory Committee” structure in order to further enhance the supervisory function of the Board of Directors and the corporate governance system itself by appointing directors who are Audit and Supervisory Committee members with voting rights to the Board of Directors.

The newly established Audit and Supervisory Committee directly supervises the internal audit department in its auditing operations. This creates a system that enables efficient organizational auditing of the state of business execution for the entire Group. In addition to the executive officer system that was implemented previously, the Board of Directors will delegate decision-making on important matters of business execution to the directors to the extent legally permitted to ensure swift decision-making in the face of a rapidly changing business environment.

With this change in the organizational layout, the ratio of outside directors on the Board of Directors has been increased to one-third, which is expected to further improve the transparency and objectivity of decision-making.

Establishment of the Nomination and Compensation Committee

In conjunction with the transition to a “company with an Audit and Supervisory Committee” structure, we have established the Nomination and Compensation Committee as an advisory body to the Board of Directors.

Based on advice from the Board of Directors, the Committee discusses the selection and dismissal of directors and executive officers and the standards for selection and dismissals, evaluation standards, the selection and dismissal process, guidelines for deciding on compensation, and matters related to individual performance evaluation and compensation amounts, and then reports to the Board of Directors. This ensures the objectivity, transparency and fairness of decisions on the nomination of and compensation for candidates for the Board of Directors.

The committee is composed of a majority of independent outside directors and is chaired by an outside director to ensure independence from business execution and a system that allows for appropriate deliberations.

Group Governance Structure

The TS TECH Group has established a sound corporate governance system. It includes a Group-wide commitment to the Vision Statement and Mission Statement that comprise the TS TECH Philosophy, a basic policy on corporate governance, and a three-year medium-term management plan. Affiliated companies also have their own effective, efficient corporate governance systems that are based on the laws of their respective countries and their respective businesses.

Important management issues at affiliated companies must be reported to and approved by TS TECH in advance based on the standards stipulated by TS TECH. Affiliated companies must also report business plans, sales results, and financial status as well.

Furthermore, affiliated companies participate in routine compliance and risk verification measures known as the TS TECH Corporate Governance (TSCG) self-verification system. This ensures that the entire TS TECH Group acts as one in promoting compliance and reducing risk.

TS TECH’s internal audit department conducts audits of affiliated companies and works with internal audit departments set up at the head offices in each region to enhance the internal audit structure of the entire TS TECH Group.

Governance System Diagram

1. Board of Directors The Board of Directors is composed of 11 directors (excluding directors who are Audit and Supervisory Committee members) and four directors who are Audit and Supervisory Committee members. The Board of Directors makes decisions regarding management policies, important management issues, and matters mandated by laws and regulations. It also supervises the execution of business operations.
2. Audit and Supervisory Committee The Audit and Supervisory Committee is composed of four Audit and Supervisory Committee members (three of whom are outside directors). Based on the audit policy established by the Audit and Supervisory Committee, it audits the execution of duties by the directors.
3. Nomination and Compensation Committee The Nomination and Compensation Committee is composed of two directors (excluding directors who are Audit and Supervisory Committee members) and three outside directors. It deliberates on matters related to the appointment and dismissal of directors and executive officers and their compensation.
4. Executive Committee The Executive Committee comprises the company’s three representative directors. It conducts preliminary deliberations on such matters as resolutions to be put to the Board of Directors, and, within the scope of the authority assigned to it by the Board of Directors, discusses important matters relating to the execution of the duties of the directors.
5. Executive General Managers Committee The Executive General Managers Committee is made up of 10 executive general managers and regional general managers. This committee discusses policies, plans, and governance related to operations in each division to maintain efficient operations.

Selection of Directors

The regulations for candidates for director positions stipulate that candidates should have impressive leadership abilities, decision-making skills, vision and planning abilities, and should also have the personal qualities and insight fitting a director, among other qualities. Additionally, current directors who are up for reelection cannot have an attendance rate at Board of Directors meetings below 85% without a legitimate reason. In addition, when selected as a candidate, a specific skill matrix should be considered for those skills that directors should have, in light of the Group’s management strategies and business characteristics. The Board of Directors also strives for a balanced structure that reflects gender, global, cultural and other types of diversity in order to facilitate appropriate, swift decision making and promote supervisory functions.

Individuals meeting the requirements who have the skills and who qualify as candidates for director are proposed as official candidates to the Board of Directors after their eligibility and the overall balance of the Board of Directors, among other factors, have been discussed by the Nomination and Compensation Committee. The Board of Directors holds discussions on the candidates for director in light of these reports and the views of the Audit and Supervisory Committee and presents the candidate proposals at the General Meeting of Shareholders.

Skill Matrix

Skill Matrix
  1. * Click to expand

Appointments of Outside Directors

The Company selects persons with extensive experience in corporate management or expertise in various fields as outside directors in order to provide advice and supervision on management from an independent standpoint, taking into account the characteristics of the company’s business.

When selecting outside directors, in addition to satisfying the criteria for independence set forth in the Companies Act, the Ordinance for Enforcement of the Companies Act, and by Tokyo Stock Exchange, Inc., the Company makes decisions in accordance with its regulations for candidates for directors as well as its “Independence Standards for Outside Directors.”

Candidates who serve as an outside director or outside auditor at other listed companies must hold concurrent positions at no more than three companies, including TS TECH.

  • Independence Standards for Outside Directors
Reasons for Appointments of Outside Directors
Name Reason for Appointment
Takeshi Ogita Mr. Ogita has provided valuable opinions and advice related to our management practices as an outside director based on his abundant experience and broad insight as a corporate manager of a pharmaceutical company. We selected him to serve as an outside director in the expectation that he will continue helping to ensure the soundness of our management by reflecting this abundant experience and insight in our management.
Kaori Matsushita Ms. Matsushita has abundant experience and insight through her work in the global planning and promotion of new business and corporate partnership strategies at a comprehensive IT vendor, and diversity management support at a consulting firm. We selected her to serve as an outside director in the expectation that she will help to ensure greater diversity at the Company and the soundness of the Company's management.
Tatsuya Motoda Mr. Motoda has specialized knowledge and abundant experience and insight as a tax accountant, and he has provided appropriate auditing, including sound advice regarding our management, since his appointment as an Audit and Supervisory Committee Member. We selected him to serve as an outside director (Audit and Supervisory Committee Member) in the expectation that he will continue to ensure the soundness of our management and contribute to auditing and supervision.
Hajime Hayashi Mr. Hayashi has broad knowledge and abundant experience as an attorney-at-law, and he has provided appropriate auditing, including sound advice regarding our management, since his appointment as an Audit and Supervisory Committee Member. We selected him to serve as an outside director (Audit and Supervisory Committee Member) in the expectation that he will continue to ensure the soundness of our management and contribute to auditing and supervision.
Tomoko Nakada Ms. Nakada has extensive experience overseas and broad insight as a lawyer, and she has provided appropriate auditing, including sound advice regarding our management, from both a global and female perspective since her appointment as an Audit and Supervisory Committee Member. We selected her to serve as an outside director (Audit and Supervisory Committee Member) in the expectation that she will continue to enhance the diversity of our Board of Directors, help to ensure the soundness of our management, and contribute to auditing and supervision.

Operation of an Internal Control System

Following the inclusion of regulations on internal controls in Japan’s Companies Act in 2006, TS TECH passed a resolution on the basic policies of its internal control system at a Board of Directors’ meeting. Since then, the Board of Directors has reviewed the implementation of this system each fiscal year and passed resolutions on changes to these policies as necessary at Board of Directors’ meetings. Additionally, in accordance with Japan’s Financial Instruments and Exchange Act, the TS TECH Group has established an internal control system to ensure the reliability of its financial reporting. The effectiveness of this system is maintained and internal control is enhanced through regular evaluations of improvements and operations and corrective actions as needed.

In line with the transition to a “company with an Audit and Supervisory Committee” structure, the basic policy on the establishment of an internal control system was revised at the Board of Directors’ meeting held on June 25, 2021.

Compliance Framework

Based on the TS TECH Philosophy, the Group established the TS Standards for Conduct (TS TECH’s norms and ideals as an organization) and TS Guidelines for Conduct (expectations for day-to-day conduct for individual executives, officers, and employees). Regular education is provided to ensure the entire Group is familiar with these concepts.

A director is appointed as a Compliance Officer in order to promote compliance initiatives, and steps are continually taken to prevent legal violations before they occur through regular TSCG self-verifications and deliberations of important ethics and compliance issues by the Ethics and Compliance Committee.

We have established a whistleblower hotline called the TS Corporate Ethics Compliance Consultation Office, which enables employees to bring issues before compliance officers, who respond with rapid, effective investigations and corrective guidance in the event of a problem. Including affiliates in and outside of Japan, the Group receives approximately 100 ethics and compliance inquiries a year, which includes consultations and other cases handled by the TS Corporate Ethics Compliance Consultation Office. In fiscal 2021, the Group had a total of 109 cases. Continuous operation of this framework promotes internal self-improvement.

Remuneration Policy

TS TECH’s basic policy on executive compensation is to ensure that it is transparent and reasonable, with the potential to further motivate sustained business growth.

We established the Nomination and Compensation Committee, chaired by an outside director and composed of three outside directors and two internal directors, as an advisory body to the Board of Directors. When reviewing the level and calculation method of compensation in consideration of the basic policy and social conditions, revising the compensation structure, or determining the individual compensation for directors for each fiscal year, the Board of Directors makes resolutions based on consultations with the Nomination and Compensation Committee and the deliberations of the Audit and Supervisory Committee.

Officer compensation consists of basic fixed compensation, performance-linked remuneration as a short-term incentive, and non-monetary stock-based compensation as a medium- to long-term incentive to enhance the Group’s corporate value over the medium to long term and further share value with shareholders. The composition of annual compensation is approximately 60% base compensation, 25% performance-linked compensation, and 15% stock-based compensation.

Sustainability Promotion Framework

The Group established the Sustainability Committee as an advisory body to the Executive Committee in December 2021 in order to further accelerate its sustainability initiatives. In the same year, it also established its Corporate Communication Department, consolidating the departments responsible for sustainability and public relations to allow for unified management from planning and promotion to information disclosure. Serving as the secretariat, the Corporate Communication Department manages the Sustainability Committee, which cuts across the Group laterally, and reports to the Executive Committee as well as the Board of Directors as necessary. We strive to achieve sustainable growth for the Group and solve social issues by making decisions on sustainability initiatives at the management level.

Sustainability Promotion Framework

Risk Management

Important management issues are carefully deliberated upon by TS TECH’s Executive Committee as well as various advisory committees. Through these discussions, TS TECH makes every effort to avoid and mitigate business risks.

In addition, a Risk Management Officer is appointed from among the representative directors and placed in charge of risk management. The Global Risk Management Committee, comprising directors and other officers, has been set up to deliberate regularly on the results of TSCG self-verifications and discuss responses to serious risks affecting management, ensuring that efforts are continually made to mitigate potential risks.

Findings obtained through TSCG self-verifications are shared with internal audit departments so that they can be applied in risk approach auditing.

Emergency response training

Global Risk Management Committee

This committee was formed in September 2014 as an advisory committee to the Executive Committee to help ensure appropriate identification and control of the various risks affecting global business activities and to solidify the sustainability and stability of the business.

The following year, regional risk management committees were formed in each region to manage the risks specific to these geographic segments and promptly advance risk mitigation measures. TS TECH has also worked to conduct emergency response training that anticipates a range of risks, such as the most frequently occurring natural disasters in each geographic region where the Group does business or the outbreak of an infectious disease.

In fiscal 2021, TS TECH identified four major risks and pursued the appropriate corresponding risk mitigation measures.

Four Major Risks

  1. 1. Stoppage of parts supply
  2. 2. Crisis management
  3. 3. IT equipment failure
  4. 4. Welding fire

Response to the COVID-19 Pandemic

The company’s Risk Management Officer spearheaded the Group-wide emergency response to the COVID-19 pandemic.

A Group-wide COVID-19 emergency response committee was established in Japan to quickly collect information from all Group companies. For parts where the supply chain was considered vulnerable to the impact of COVID-19, various efforts to maintain production, including alternate production of parts and intra-Group supply, were implemented from an early stage, and these efforts helped to prevent shortages and other issues.

Although fixed costs continued to be incurred at sites that had to suspend operations due to the impact of COVID-19, the Group was able to respond to the situation using funds in hand in accordance with Group-wide safe funding guidelines, and, as a result, no production sites experienced major cash flow issues.

As it strives for continued business growth, not only will TS TECH continue to monitor the situation closely and review capital investment and cost-containment measures, it will also implement thorough measures to prevent the spread of infection in line with guidance from national and local governments.

Emergency Response System for COVID-19

Tax Policy

The TS TECH Group’s tax policy aims to fulfill the appropriate tax obligations and social responsibilities, minimize tax risks while maintaining transparency, and contribute to the development of the communities in which the Group operates.

In order to achieve these objectives, the Group has established the TS TECH Group Tax Policy based on the TS TECH Philosophy.

TS TECH Group Tax Policy

1.Tax Governance
The Group positions the reinforcement of tax governance as one of the most important management issues. This policy was approved by TS TECH’s Board of Directors, and the Board of Directors bears final responsibility for tax governance.
2. Compliance
The Group works to promote and instill awareness of compliance among its employees. This enables the Group to comply with and always ensure the correct understanding of tax laws and regulations, etc., in each country and region in which it operates, and to meet the appropriate tax declaration and tax payment obligations.
3. Tax Planning and Tax Havens
The Group will determine investment and business activities according to its business objectives and economic rationality. The Group will avoid tax planning that is not in line with business purposes or operations, as well as tax activities that use tax havens.
4. Transfer Pricing
The Group will abide by international tax frameworks such as the OECD Transfer Pricing Guidelines and the Base Erosion and Profit Shifting (BEPS) Action Plan, and will strive to ensure tax transparency. International transactions between Group companies will comply with the OECD Transfer Pricing Guidelines, and transaction prices will be determined based on the arm’s length principle.
5. Minimal Tax Risk
The Group will conduct the appropriate accounting and tax measures in accordance with the tax systems and tax administrations of each specific country and region. In the event of complicated, unclear tax matters, the Group will consult in advance with external experts and tax authorities to minimize tax risks.
6. Relationship with Tax Authorities
The Group will provide timely, accurate information to tax authorities in each country and region in order to reduce tax risks, and will respond in good faith to maintain trust and good relations.
July 2018 Board Resolution

Policy and Action against Antisocial Forces

The TS TECH Group’s basic policy for internal control requires individual officers and employees to diligently avoid any type of relationship with antisocial groups that can threaten a safe, orderly, and civil society, and to work together as an entire group to demonstrate uncompromising attitudes against such forces. Specific measures include making assessments in advance of the start of new transactions and incorporating provisions for excluding the influence of antisocial forces in preparing agreements.

Intellectual Property Management

The TS TECH Group respects intellectual property rights. In developing products and technologies, we take the utmost care to ensure that the Group does not infringe on the intellectual property rights of others. At the same time, the Group asks others to respect its intellectual property rights.In cases where an infringement is identified, the Group takes all necessary measures, including demanding that infringing parties immediately discontinue any offending activities and offering such parties an opportunity to negotiate in the signing of license agreements. Through actions such as these, the Group works to maximize intellectual property value and minimize loss.

Disclosure Policy

The TS TECH Group promptly and fairly discloses accurate corporate information to its stakeholders, individual investors including shareholders, institutional investors, and analysts. In addition to disclosing information in accordance with the Financial Instruments and Exchange Act and the Timely Disclosure Rules, even when these provisions do not apply, we adopt a proactive approach to the disclosure of information deemed useful and appropriate to our stakeholders.

Our primary means of disclosing information include press releases and the Timely Disclosure Network (TDnet) provided by the Tokyo Stock Exchange. This information is also posted on TS TECH’s website.

To protect the company and its employees from legal liability under the Financial Instruments and Exchange Act and other legislation, the Corporate Communication Department responds to all inquiries from stakeholders. In addition, this Disclosure Policy is shared and fully enforced throughout the TS TECH Group.

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