Under the basic structure of a company with an Audit & Supervisory Board, the Daifuku Group (collectively referring to the Company and its subsidiaries; hereinafter the “Group”) has flexibly introduced and expanded systems to enhance management transparency and the management monitoring and supervision functions.
The Group’s corporate governance system is established based on the following basic stance.
Corporate governance system
Daifuku is a company with an Audit & Supervisory Board. The Company enhances its corporate governance framework to oversee and supervise business execution by developing a Board of Directors consisting of ten members, including five independent outside directors, and an Audit & Supervisory Board consisting of four members, three of whom are elected from outside the Company. More than one-third of the Board of Directors are independent outside directors. The composition indicates that the Company considers diversity. To supplement the functions of the Board of Directors, the Company has an Advisory Committee, which deliberates on the nomination, election and dismissal, and the remuneration of the management team members. Audit & Supervisory Board members, together with the Audit & Supervisory Board Office, further strengthen cooperation between the Audit Division and the accounting auditor to deepen and streamline audit work.
The Audit Division conducts internal control system (J-SOX) assessment tests effectively by having regular and as-needed meetings with the accounting auditor to share views and information. Audit & Supervisory Board members are also present at the assessment tests and audit the effectiveness of the tests. Also, the Audit Division has established a system for reporting to the Board of Directors and the Audit & Supervisory Board, and reports on internal control as necessary. In addition, to ensure the effectiveness of internal audits, with basic matters pertaining to internal audits stipulated in the Rules on Internal Audits, the Audit Division ensures independence from other business execution units and conducts internal audits appropriately based on an annual audit plan.
To encourage rapid decision-making on business execution, the Company has introduced a corporate officer system. The Company has also introduced an audit officer system to strengthen auditing functions. The President and CEO (hereinafter the “CEO”) directs each Global Business and the Corporate Functions and identifies and addresses issues common to the entire Group through the committees under the direct control of the CEO.
Basic policy for corporate governance and disclosure based on the Principles of Japan’s Corporate Governance Code
The Group has clarified “Daifuku Group’s Basic Policy for Corporate Governance” (hereinafter the “Policy”) and summarized the status of the initiatives the Group is taking on all 83 items of the Japan’s Corporate Governance Code. The Policy shows our basic approach to corporate governance at the beginning, organizes the specific response status in code order, and introduces reference points for securities reports and the Daifuku Report as integrated reporting.
Corporate Governance Report
Corporate Governance Framework
1. Directors and the Board of Directors
Daifuku's Board of Directors consists of ten directors. The 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 the 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 managing officers and the audit officer joining as observers. The CEO serves as the chair of the Board of Directors. The Company holds regular monthly meetings of the Board of Directors, with extraordinary meetings convened, as necessary. In the fiscal year ended March 31, 2023, the Company held extraordinary meetings of the Board of Directors on five occasions. The five independent outside directors provide insightful advice and recommendations to the Board of Directors based on their abundant experience in, and extensive knowledge of, corporate operations, corporate legal affairs, accounting, ESG, etc. from a global perspective. They also ensure the transparency of management and supervise business execution by the inside directors.
2. Audit & Supervisory Board members and the Audit & Supervisory Board
The Company maintains an Audit & Supervisory Board comprising four Audit & Supervisory Board members, three of whom are elected from outside the Company, with the remaining member a full-time member from inside the Company. The Company held meetings of the Audit & Supervisory Board on nine occasions during the fiscal year ended March 31, 2023.
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.
3. 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 consists of three or more members, including one or more representative directors and one or more outside directors, and meets three times or more a year. In the fiscal year ended March 31, 2023, all four outside directors and one representative director served on the Committee and met seven times. An outside director serves as the chair of the Committee to secure the independence and objectivity of the Committee.
4. Other bodies, etc.
The 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 CEO as appropriate. In the fiscal year ended March 31, 2023, the Management Advisory Meeting met two times.
In addition, 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 and further revitalize 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.
The Company holds officers meetings at which the matters to be discussed by the Board of Directors as stipulated in the Rules of the Board of Directors are reviewed and formulated, and the matters stipulated in the Rules of the Officers Meeting are reported. The officers meeting is composed of all directors and all corporate officers, and meetings are held with the attendance of Audit & Supervisory Board members and an audit officer. The meetings are held every month in conjunction with scheduled Board of Directors meetings.