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

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)

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

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.

Skill matrix

The Company appoints directors by considering the optimal composition of 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.

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.

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

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.

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

Main agenda 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

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 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

Other bodies and systems

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

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.

Disclosures