Corporate Governance

Basic stance

Under the company creed, as an unchanging corporate stance, and the spirit of its management philosophy, which is based on changes in the social and business environment, the Daifuku Group will contribute to the development of society and the economy as a whole, continuously enhancing the effectiveness of corporate governance to achieve sustainable growth and increase corporate value over the medium to long term.

In accordance with this basic stance, we have established the Daifuku Group Basic Policy for Corporate Governance.

Daifuku Group Basic Policy for Corporate Governance (750 KB)

Corporate governance system

Corporate governance system
Diversity in the Board of Directors (ratio)
June 2024 Outside directors Outside directors and outside members of the Audit & Supervisory Board Female directors Foreign national directors
50% (5 out of 10) 57% (8 out of 14) 10% (1 out of 10) 10% (1 out of 10)

Reasons for adoption of the current corporate governance system

Daifuku Co., Ltd. is a company with an Audit & Supervisory Board. Under this basic structure, the Group has flexibly introduced and expanded systems to enhance management transparency and the management monitoring and supervision functions. We believe that the current corporate governance system is appropriate in terms of the workforce and business operations including scale of the Group and that we meet the expectations of shareholders, who entrust management to us.

Enhancement of the corporate governance system

Our approach
2011 Introduces a corporate officer system.
2012 An outside director elected (resulting in 10 directors in total).
2014 Two outside directors elected (resulting in 11 directors in total).
2015 Conducts evaluation of Board of Directors’ effectiveness for the first time.
2016
  • -Establishes Daifuku Corporate Governance Guidelines (revised to a basic policy in 2021).
  • -Establishes the Advisory Committee for nomination and remuneration.
  • -Reviews the appropriateness of cross-shareholdings and clarifies exercising voting rights standards.
2017
  • -Revises the Rules to accelerate decision-making by the management and subsidiaries and clarify authority and responsibility.
  • -Implements evaluation of the Board of Directors’ effectiveness through an external organization.
2018
  • -Three outside directors elected (resulting in 10 directors in total).
  • -Establishes the Pension Assets Management Committee.
    Abolishes takeover defense measures.
2019
  • -Reorganizes conventional corporate code of conduct to formulate the Group Code of Conduct.
  • -A female outside director elected.
  • -Establishes an audit officer position and the Audit Division.
  • -Four outside directors elected (resulting in 11 directors in total).
2020 Establishes the Audit & Supervisory Board Office.
2021 Revises the Group’s management philosophy.
2022 Delists Contec Co., Ltd. due to making it a wholly owned subsidiary.
2023
  • -Establishes new C-suite roles for our chief officers.
  • -Five outside directors elected (resulting in 10 directors in total).
  • -A foreign national outside director elected.

Board of Directors

Daifuku’s Board of Directors makes decisions on important matters stipulated in the Rules of the Board of Directors, such as the determination of management policies, management plans, and corporate governance system. The Board delegates matters other than these important matters to directors and corporate officers. The Board of Directors meetings are attended by all directors with a one-year term of office and all Audit & Supervisory Board members, with a senior managing officer, managing officers, and an audit officer joining as observers. The president and CEO serves as Chair of the Board of Directors. The Company holds regular monthly meetings of the Board of Directors, with extraordinary meetings convened, as necessary.

Composition of the Board of Directors and attendance rate for the fiscal year ended March 31, 2024

Title Name Attendance rate
(times attended / times meetings held)
Representative Director
President and CEO		 Hiroshi Geshiro 100% (16/16)
Director Seiji Sato
Hiroshi Nobuta
Hideaki Takubo 100% (11/11)
Shuichi Honda 100% (5/5)
Toshiaki Hayashi 100% (16/16)
Outside Director Yoshiaki Ozawa
Mineo Sakai
Kaku Kato
Keiko Kaneko
Gideon Franklin 100% (11/11)
Audit & Supervisory Board Member (full-time) Tsukasa Saito 100% (16/16)
Audit & Supervisory Board Member (outside) Ryosuke Aihara
Tsukasa Miyajima 93% (15/16)
Nobuo Wada 100% (16/16)

Notes:

  • Mr. Shuichi Honda resigned from the office of director at the conclusion of the Ordinary General Meeting of Shareholders held on June 23, 2023.
  • Mr. Hideaki Takubo and Mr. Gideon Franklin assumed the office of director and the office of outside director, respectively, at the conclusion of the Ordinary General Meeting of Shareholders held on June 23, 2023.
  • Mr. Toshiaki Hayashi resigned from the office of director at the conclusion of the Ordinary General Meeting of Shareholders held on June 21, 2024.
  • Mr. Ryosuke Aihara resigned from the office of Audit & Supervisory Board member at the conclusion of the Ordinary General Meeting of Shareholders held on June 21, 2024.

Main agenda items for Board of Directors meetings during the fiscal year ended March 31, 2024

  • -Formulation of our long-term vision and the four-year business plan
  • -Revision of Daifuku Environmental Vision 2050
  • -Acquisition of treasury stock
  • -Offering of bonds
  • -Status of cross-shareholdings
  • -Appointment of the Advisory Committee members
  • -Status of activities of the Advisory Committee, etc.
  • -Personnel changes concerning directors
  • -Progress and results of the three- or four-year business plan
  • -Promotion of sustainability initiatives

Independence standards for outside directors and outside members of the Audit & Supervisory Board

At Daifuku, outside directors and outside members of the Audit & Supervisory Board are considered independent if they do not fall under any of Articles 1 to 5 below.

Article 1
A person who falls or fell under any of the following in the last three years:
  • A person who executes business of a company, etc., that is a key customer of Daifuku or whose key business partner is Daifuku*1
  • A lawyer who belongs to a law firm that has concluded an advisory contract with Daifuku or its subsidiary and who was actually in charge of legal business for Daifuku, a certified public accountant (or a certified tax accountant) who was an accounting auditor or accounting adviser of Daifuku or its subsidiary, or an employee, partner, or staff member who belongs to an auditing firm (or tax accountant corporation) that is an accounting auditor or accounting adviser of Daifuku or its subsidiary and who was actually in charge of the auditing service for Daifuku
  • A lawyer, certified public accountant, or certified tax accountant, if not applicable to the above item 2, who provides specialized services, etc., to Daifuku by receiving a large amount*2 of money or assets other than remuneration for an officer, directly from the company
  • An officer or employee of a company, etc., that is a major shareholder*3 of Daifuku
Article 2
An officer or employee of Daifuku’s subsidiary or a person who held such a position during the 10 years before being appointed as such status
Article 3
An executive board member or any other person who executes business of an organization that receives donations or grants exceeding a certain amount*4 from Daifuku (such as a public interest incorporated foundation, a public interest incorporated association, or a non-profit corporation)
Article 4
The spouse or a relative within the second degree of relationship of a person who falls under any of Articles 1 to 3 above, or a relative living together with such a person
Article 5
A person who does not fall under any of Articles 1 to 4 above, but who is deemed likely to have a virtual conflict of interest with Daifuku due to their relationship with the company
  • *1 A customer from whom Daifuku received payment of at least 2% of the amount of Daifuku’s annual consolidated net sales in the most recent fiscal year, or a business partner who received payment from Daifuku of at least 2% of the amount of its annual consolidated net sales in the most recent fiscal year
  • *2 The annual average for the last three years of 10 million yen or more
  • *3A shareholder with 10% or more of the voting rights
  • *4The annual average for the last three years of 10 million yen or more, or 30% of the average total annual expenditure of the organization, whichever is larger

Skill matrix

The Company appoints directors by considering the optimal composition of the Board of Directors in terms of expertise, experience, diversity, etc., taking into account changes in the business environment and the management policies and business plans of the Group. Skill matrix showing the expertise and experience of each director is as follows.

Name Expertise, experience
Corporate management Technology Finance, accounting Legal affairs, risk management Sales, marketing Global Environment, society, governance Tenure
Hiroshi Geshiro ✔ ✔ ✔ ✔ ✔ 9 years
Seiji Sato ✔ ✔ ✔ 9 years
Hiroshi Nobuta ✔ ✔ ✔ 3 years
Hideaki Takubo ✔ ✔ ✔ ✔ ✔ 1 year
Tomoaki Terai ✔ ✔ ✔ ✔ Newly elected
Yoshiaki Ozawa ✔ ✔ ✔ 10 years
Mineo Sakai ✔ ✔ ✔ ✔ 6 years
Kaku Kato ✔ ✔ ✔ ✔ 5 years
Keiko Kaneko ✔ ✔ ✔ 5 years
Gideon Franklin ✔ ✔ ✔ ✔ 1 year

Note:
Up to five skills of individuals are marked with “✔”. The above list does not represent all of the knowledge, experience, and abilities of individuals.

Executive remuneration

The executive remuneration consists of basic remuneration (fixed remuneration), a bonus (short-term performance-linked remuneration that is fluctuated based on performance), and medium- to long-term performance-linked equity remuneration, Board Benefit Trust (BBT). To determine annual remuneration for directors, the total amount of remuneration for individual director is resolved at a Board of Directors meeting following verification by the Advisory Committee whether it is reasonable based on levels at other comparable companies and through deliberations and reporting by the Advisory Committee.

Revision of executive remuneration for the fiscal year ending December 31, 2024 onward

To determine executive remuneration based on a more transparent and fair process with the aim of achieving sustainable growth of the Company and enhancing corporate value over the medium to long term, the Company has revised the executive remuneration system for the fiscal year ending December 31, 2024 onward. A resolution to change the executive remuneration system was passed at a Board of Directors meeting held in February 2024, based on reporting from the Advisory Committee.

[Point 1]
Determination of the amount of remuneration to be made by the Board of Directors, which was previously delegated to the President and CEO (transparency in determination of remuneration)

Regarding the amount of remuneration for individual directors, the President and CEO had been delegated to determine the details of remuneration, etc., for individual directors in accordance with related internal rules. However, following the revision, the Board of Directors will determine the amount of remuneration for individual directors based on reporting by the Advisory Committee.

[Point 2]
Introduction of ESG indicators (taking both business and sustainability perspectives into account)

We have introduced ESG indicators with the aim of supporting further evolution of sustainability management. Specifically, in the calculation of bonus resources, we introduced coefficients linked with evaluation indicators related to the progress concerning 1) safety: zero serious accidents, and 2) environment: CO2 emissions reduction, in addition to consolidated net income. Moreover, as evaluation indicators for the BBT, we will introduce evaluation by external ESG rating agencies and the rate of CO2 emissions reduction, in addition to financial indicators.

[Point 3]
Emphasis on evaluation based on performance and contribution

To reflect performance and the degree of contribution of individual in the remuneration system more than in the case of the current system, the proportion of the performance-linked evaluation component has been increased from 80% for the basic component and 20% for the performance-linked evaluation component to 50% for the basic component and 50% for the performance-linked evaluation component.

Outline of executive remuneration for the fiscal year ending December 31, 2024

Basic remuneration Performance-linked remuneration
Bonus Non-monetary remuneration
Board Benefit Trust (BBT)
Payment criteria Positions and roles Calculate bonus resources from consolidated net income and ESG indicators. Allocate 50% of the resources according to positions and roles. Then, allocate 30% for quantitative evaluation and 20% for qualitative evaluation in the area of responsibility. Short-term assessment Degree of achievement in each fiscal year targets (consolidated net income amount and margin)
Medium- to long-term assessment Degree of achievement of targets for three- or four-year business plan including consolidated net sales, consolidated operating income, ROE, and ESG indicators.
Target recipients All officers Officers
(excluding outside directors and Audit & Supervisory Board members)

[Reference] Composition of remuneration for the fiscal year ended March 31, 2024

Composition of remuneration for the fiscal year ended March 31, 2024

Malus clause

For the purpose of ensuring sound management, in accordance with relevant internal rules and regulations, the Company stipulates that in the event of certain circumstances concerning directors, such director may not acquire the right to receive benefits of BBT before the vesting of the right, upon resolution of the Board of Directors.

Evaluation of the Board of Directors’ effectiveness

The Company regularly examines the composition and operational status of the Board of Directors and evaluates its effectiveness. The Company works to continuously strengthen functions and improve effectiveness by addressing issues identified from the evaluation results.

In the effectiveness evaluation conducted in the fiscal year ended March 31, 2024 as well, the Company ensures objectivity and independence of the effectiveness evaluation by obtaining support from an external evaluation body at key points in the process, such as conducting questionnaires and interviews and analyzing survey results.

Method
  • Anonymous questionnaire for all directors and all Audit & Supervisory Board members
  • Interviews with one representative director and five outside directors
Evaluation items
  • How the Board of Directors should be
  • Composition of the Board of Directors
  • Operation of the Board of Directors
  • Discussions at the Board of Directors
  • The Board of Directors’ monitoring function
  • Performance of outside directors
  • Support system for directors and Audit & Supervisory Board members
  • Training
  • Dialogues with shareholders and investors
  • Subjects’ own actions
  • Operation of the Advisory Committee
Initiatives and evaluation for the fiscal year ended March 31, 2024
Recognition of issues as a result of the effectiveness evaluation for the fiscal year ended March 31, 2023 Detailed initiatives for the fiscal year ended March 31, 2024 Evaluation results of the questionnaire for the fiscal year ended March 31, 2024
Ensuring diversity of core human resources We have conducted improvement measures, such as expanding early female leaders development program eligibles, from assistant managers to candidates of assistant manager positions, to increase the number of female candidates for managerial positions. The improvement was appreciated.
Diversity in the composition of the Board of Directors The Company appointed a foreign national director.
Group’s overall business portfolio The Company set aside time to discuss at the Board of Directors meetings. The majority of respondents evaluated the issue as being adequately overseen. On the other hand, some respondents indicated a request for continued consideration of this issue.
To improve effectiveness in the future
Recognition of issues as a result of the effectiveness evaluation for the fiscal year ended March 31, 2024 Future initiatives
Reviewing the Group’s overall business portfolio from the perspective of ensuring sustainable profitability and cost of capital The Board of Directors will seek more sophisticated management system, in light of the issues that need to be discussed with greater awareness of cost of capital and return on capital.
Training of successor candidates To achieve medium- to long-term growth and sustainable enhancement of corporate value, we will continue to consider the target employees and contents of training system for successor candidates, in addition to enhancing training for officers based on their skills in light of the management strategy.

Advisory Committee

The Company has established a voluntary Advisory Committee to strengthen the independence, objectivity, and accountability of the functions of the Board of Directors regarding the nomination, dismissal, and the remuneration of directors and corporate officers. The committee is chaired by an outside director and the majority of members are outside directors.

Composition of the Advisory Committee and attendance rate at the committee meetings for the fiscal year ended March 31, 2024

Title Name Attendance rate
(times attended / times meetings held)
Outside Director Yoshiaki Ozawa (Chair) 100% (9/9)
Mineo Sakai
Kaku Kato
Keiko Kaneko
Gideon Franklin 100% (7/7)
Representative Director Hiroshi Geshiro 100% (9/9)

Main agenda items for the committee meetings during the fiscal year ended March 31, 2024

  • Nomination

    • -Personnel matters for the General Meeting of Shareholders
    • -Personnel matters for the management
    • -Corporate governance system, and other

  • Remuneration

    • -Executive remuneration system
    • -Evaluation of performance bonuses for officers and Board Benefit Trust (BBT)
    • -Verification of levels of executive remuneration, and other

Audit & Supervisory Board

With an awareness of their fiduciary responsibilities to shareholders and with a view to continuous corporate growth and medium- and long-term improvement in corporate value, Audit & Supervisory Board members and the Audit & Supervisory Board carry out auditing activities for fulfilling their duties, including auditing of directors’ execution of duties, auditing of the internal control system, and assessment of the appropriateness of auditing conducted by the accounting auditor, in accordance with the Rules of the Audit & Supervisory Board, the Standards for Company Auditor Audit, and the Standards on Audit Concerning the Internal Control System.

Composition of the Audit & Supervisory Board and attendance rate at Audit & Supervisory Board meetings for the fiscal year ended March 31, 2024

Title Name Attendance rate
(times attended / times meetings held)
Audit & Supervisory Board Member (full-time) Tsukasa Saito 100% (8/8)
Audit & Supervisory Board Member (outside) Ryosuke Aihara
Tsukasa Miyajima
Nobuo Wada

Note:
Mr. Ryosuke Aihara resigned from the office of Audit & Supervisory Board member at the conclusion of the Ordinary General Meeting of Shareholders held on June 21, 2024.

Main agenda items for Audit & Supervisory Board meetings during the fiscal year ended March 31, 2024

  • Resolution

    • -Audit plans
    • -Reappointment of accounting auditors
    • -Consent to audit compensation for accounting auditors
    • -Audit reports by the Audit & Supervisory Board
    • -Consent to proposals for election of Audit & Supervisory Board members
    • -Partial amendments to the Rules of the Audit & Supervisory Board
    • -Amendments to the standards for evaluation and appointment of accounting auditors
    • -Types of non-assurance services subject to pre-approval to be contracted to accounting auditors, and other

  • Reporting

    • -Reports on the activities of the full-time Audit & Supervisory Board member and the Audit & Supervisory Board Office
    • -Reports on the implementation of audits
    • -Reports on the results of on-site audits of business units
    • -Audit plans of the Audit Division, and other

  • Deliberation and discussion

    • -Drafting audit reports of Audit & Supervisory Board members and the Audit & Supervisory Board
    • -Partial revision of the remuneration system for Audit & Supervisory Board members, and other

Audit & Supervisory Board Office

To enhance the effectiveness of audits conducted by Audit & Supervisory Board members and the Audit & Supervisory Board, the Company has established the Audit & Supervisory Board Office to assist with the duties of Audit & Supervisory Board members and appointed an audit officer of the same rank as a corporate officer as the general manager of the Office.

Other bodies and systems

Audit Division
The Audit Division reports to the Board of Directors and the Audit & Supervisory Board. Standing in a position that is independent from the business execution lines, the Audit Division conducts audits of the status of the development and operation of internal control systems in the Group.
Management Advisory Meeting
Management Advisory Meeting is held to confer on important management matters. With all directors and Audit & Supervisory Board members in attendance, this meeting also seeks the opinions of related corporate officers, audit officers, executives, and external specialists on an as-needed basis. The Management Advisory Meeting is convened by the President and CEO as appropriate. In the fiscal year ended March 31, 2024, the Management Advisory Meeting met two times.
Officers meeting
The Company holds officers meetings to review and formulate the matters to be discussed by the Board of Directors as stipulated in the Rules of the Board of Directors and reports the matters stipulated in the Rules of the Officers Meeting. The officers meeting consists of all directors and all corporate officers. It is held with the attendance of Audit & Supervisory Board members and an audit officer. The meeting is held every month in conjunction with scheduled Board of Directors meetings.
Corporate officer system
The Company has introduced a corporate officer system for the purposes of the following:
  • Accelerate decision-making on business execution through a reduction in the number of directors as well as further revitalizing the Board of Directors by promoting more rigorous deliberations.
  • Engage in functional and efficient business operations by broadly promoting employees with knowledge of business operations to serve as corporate officers and execute business based on the authority bestowed upon them by the Board.

Cross-shareholding strategy

Basic policy

Our basic policy is to limit shareholdings, including shares held as cross-shareholdings, to the minimum necessary and to reduce them, and the Board of Directors confirms the status of individual holdings every year. In principle, we will no longer hold new shares for strategic purposes. Circumstances including trade relations will also be taken into consideration when the economic rationale of cross-shareholdings, such as market capitalization, book value, transaction amounts, dividends, ROE, and risk of shareholdings, is examined. Shares which the Board of Directors regards as having no significance will be sold on a timely basis.

In the fiscal year ended March 31, 2024, the Company reduced the holding of 12 issues of shares, including seven issues of shares sold entirely.

Exercise of voting rights attached to cross-shareholdings

We will make decisions individually with an emphasis on improving the corporate value of the cross-shareholding partners over the medium to long term. At the time of the assessment, special attention will be paid to whether the cross-shareholding partner has been tarnished by scandals or has committed an antisocial act. If the cross-shareholding partner has been involved in such circumstances, its managerial approach to improvement shall be scrutinized.

Relationship between cross-shareholders

When a cross-shareholder indicates its intention to sell the Company’s shares, Daifuku shall not hinder the sale of the cross-held shares.

Status of cross-shareholdings on consolidated balance sheets

Disclosures

Basic policy for corporate governance and disclosure based on the Principles of Japan’s Corporate Governance Code

Daifuku Group Basic Policy for Corporate Governance (101 KB)
Disclosure Based on the Principles of Japan’s Corporate Governance Code (837 KB)

Reports

Corporate Governance Report (630 KB)
Shareholders Meeting
Daifuku Report
Securities Report

Related links

ESG Data
Stakeholder Engagement

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