Corporate Governance
Basic Corporate Governance Policy
We aim to fulfill our social responsibilities as a good
corporate citizen so that we can gain and retain the respect
from stakeholders and be recognized as a valuable enterprise. We
work to establish a high degree of transparency in management
systems to ensure full legal and regulatory compliance and
respect for social norms.
In addition, to coexist with the Earth and society and to
develop sustainably, we have established the Sustainability
Promotion Committee and promoted management initiatives with a
focus on sustainability.
Corporate Governance Structure
We adopt the governance system of a company with an Audit and
Supervisory Committee. The Audit and Supervisory Committee
consists of four directors who are Audit and Supervisory
Committee members (three of whom are outside directors)
appointed at the General Shareholders Meeting.
Since April 2012, we have introduced an executive officer
system to establish a system that enables more detail-oriented
business operations and to promote quicker and more efficient
decision-making.
The Board of Directors has 14 directors
(seven of whom are outside directors) appointed by the General
Shareholders Meeting. It meets once a month, in principle, to
make decisions on matters stipulated by laws and regulations and
in the Articles of Incorporation, draft plans for important
management for the Group, and supervise business execution.
The Management Committee mainly consists of officers at
the level of managing executive officer or above and full-time
Audit and Supervisory Committee members. It meets twice a month,
in principle, to submit important issues related to the
management decisions of the Group to the Board of Directors as
agenda items, and to promptly execute business in accordance
with the management policy determined by the Board of Directors,
as the highest body for business execution.
Regarding
personnel matters and treatment for officers, the Company has
introduced a three-committee system that consists of the
Officers Evaluation Committee, Nomination Advisory Committee,
and Remuneration Advisory Committee, and the following
procedures have been adopted.
Regarding evaluations of
officers, we have introduced mechanisms whereby decisions are
made by the Officers Evaluation Committee, which is chaired by
the President and whose majority members consist of outside
directors. The committee will meet at least twice a year to
perform a comprehensive evaluation based on an assessment of the
level of commitment of executive directors (excluding the
Chairman, President, and outside directors) and a peer review
process by all directors and executive officers, and provide the
overall evaluation results to the Nomination Advisory Committee
and the Remuneration Advisory Committee.
Regarding the
appointment of officers, the Nomination Advisory Committee,
which is chaired by an outside director and whose majority
members consist of outside directors, will review the
composition of officers for the following fiscal year based on
the evaluation of officers and the results of performance
evaluations of employees. A draft will then be submitted to the
Board of Directors where a proposal of the list of candidates
will then be forwarded to the Ordinary General Shareholders
Meeting.
Regarding executive remuneration (excluding that
of directors who are Audit and Supervisory Committee members),
the Remuneration Advisory Committee, which is chaired by the
President and whose majority members consist of outside
directors, prepares a draft of the basic remuneration for the
next fiscal year, after reviews based on the results of officer
evaluation, and the Board of Directors makes the final decision.
In terms of executive bonuses, we use a system of
performance-linked salary for executive directors which
specifically reflects the achievements and responsibilities of
each executive. After the Remuneration Advisory Committee
reviews a draft of calculation rules for the performance-linked
salary for each fiscal year, the Board of Directors makes the
final decision. In addition, restricted stock remuneration for
executive directors is positioned as remuneration for the
responsibility that each management team has to shareholders for
enhancing corporate value. The Remuneration Advisory Committee
reviews the appropriate level for each position, and the
specific number of shares to be paid (the amount of monetary
compensation claims to be applied to pay the acquisition price
of the shares) is determined by the Board of Directors.
Regarding the evaluation of the effectiveness of the Board
of Directors, we have introduced a system in which the Board of
Directors Evaluation Committee, chaired by one of the outside
directors and composed of all outside directors, plays a central
role. The committee reports the results of its evaluation and
makes proposals for improvement to the Board of Directors.
Evaluation of the Effectiveness of the Board of Directors
Since FY2019, we have been analyzing and evaluating the effectiveness of its Board of Directors to further improve its functions. The summary and results of the effectiveness evaluation of the Board of Directors recently performed are disclosed as follows.
- Evaluation method
-
For FY2023, a third-party assessment was made to evaluate
the effectiveness of the Board of Directors in a neutral and
objective manner.
• An anonymous questionnaire survey of all directors and corporate auditors
• A third-party interview of all directors and corporate auditors
• Discussions at meetings of the Board of Directors Evaluation Committee
• Discussions at Board of Directors meetings - Questionnaire contents
-
• Questions about the ideals, composition and operation of
the Board of Directors
• Questions about discussions held at Board of Directors meetings
• Questions about the monitoring functions of the Board of Directors
• Questions about the performance and training of inside/outside directors
• Questions about dialogue with shareholders (investors) - Summary of evaluation result
-
It was confirmed that the Board of Directors appropriately
discusses factors and viewpoints that directors and
corporate auditors should emphasize in decision-making and
supervision concerning basic management policy, business
strategy and important business execution. And the Board of
Directors Evaluation Committee evaluated that the
effectiveness of the Board of Directors is ensured.
In addition, as an approach to the issues recognized in the previous effectiveness evaluation, improvements were made to the operation of the Board of Directors, such as setting time limits for explaining meeting materials and making the materials more concise.
On the other hand, several mid- to long-term issues were identified to further enhance effectiveness including the following: -
Mid- to Long-term Issues
• Strengthening the supervisory function of the Board of Directors, including delegating authority to the Management Committee and reviewing the organizational structure
• Examining the diversity needed on the Board of Directors
• Operating the Board of Directors in a way that further facilitates smooth discussions at its meetings
• Further enriching discussions at the Board of Directors on important matters such as mid- to long-term business strategies and succession planning
We will continue to strive to improve the effectiveness of the Board of Directors, strengthen its functions, and continuously improve corporate value.
- [The Corporate Governance Structures]
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Internal Control Policy
Hanwa is committed to utilizing an effective corporate governance system to achieve sustained growth and other progress, while minimizing exposure to risks associated with achieving business objectives. To this end, we have established a fundamental policy regarding the development and implementation of an internal control system to ensure that business activities are conducted properly and efficiently.
Risk Management
We define "risk" as "uncertainty that may affect the achievement of the Company's business strategy and business objectives" in the Company's “Basic Policy on Risk Management”. And we implement specific measures to control various risks that may arise from business operations within our company group. It is basic concept of the risk management that we contribute to achieving dramatic business growth through proactive investments and business expansion with these measures.
- Risk Management Framework
-
We recognize the strategic importance of risk management as
a material issue, and we have established a framework under
the basic policy determined by the board of directors. We
have appointed the head of risk management within the
management section as the overall responsible person for
risk management. Additionally, we have implemented necessary
risk management structures and specific management methods.
Furthermore, we are actively promoting initiatives to
enhance the overall risk management awareness among top
management. To prevent the occurrence of risks and mitigate
those that do arise, we definitize the departments to
address each risk. Additionally, we develop various
regulations and response manuals.
Specifically, within the various risks surrounding our company—including credit risks (including credit risks related to creditworthiness and country risks), business investment risks, market risks (such as commodity price fluctuations), and compliance risks (including adherence to security trade management and various economic sanctions)—we identify significant risks that could significantly impact our company’s management. We establish a Risk Management Department as a specialized unit to manage these risks effectively. This department collaborates with relevant divisions to develop necessary policies and regulations, ensuring an integrated risk management system on a consolidated basis.
Among these significant risks, for those that can be quantitatively assessed, we calculate risk assets based on the maximum potential loss that could occur in the future on a consolidated basis. Regularly, we assess the overall risk exposure across the entire organization. With this information, we practice management that controls risks within the scope of shareholder capital (risk buffer). To achieve ambitious business growth through proactive investments and expansion, we strategically take risks within the risk buffer, aiming to enhance profitability while considering risk factors. Our goal is to balance improved corporate value with securing of soundness of the management.
UK Tax Strategy
The publication of this strategy statement is regarded as satisfying the duty under Paragraph 16(2),Schedule 19, Finance Act 2016 in UK.