SCSK is working to ensure transparency in management, strengthen appropriate governance and monitoring structures, and enhance the soundness of management through ongoing risk management.
Basic Approach and System for Corporate Governance
Embracing its focus on corporate social responsibility, the SCSK Group implements sustainability management with an eye to shareholders and other stakeholders.
From this perspective, the SCSK Group considers raising the efficiency and soundness of management as well as ensuring transparency in the decision-making process as the most basic components of its corporate governance. Rating these matters high among management priorities, we aim to build an optimal management structure that benefits SCSK the most.
We implement each of the principles set forth in the Tokyo Stock Exchange’s Corporate Governance Code and provide detailed disclosures within our Corporate Governance Report based on each principle.
Overview of Corporate Governance System (as of April 1,2024)
History of Efforts to Strengthen Corporate Governance（until 2023）
Corporate Governance Structure
Corporate Governance Structure
Composition of Board of Directors and Committees
◎：Chairperson ○：Committee Member ( )：Attendance record*1
| Position | Name | Board of Directors | Audit and Supervisory Committee | ||
|---|---|---|---|---|---|
| Conflict of Interest Advisory Committee*4 | Nomination and Remuneration Advisory Committee | ||||
| Chairman and Director | Hideki Yamano | ◎ (11/11 meetings) |
− | − | ○ |
| Representative Director President and Chief Operating Officer |
Takaaki Touma | (11/11 meetings) | − | − | ○ |
| Director | Tetsuya Fukunaga | (13/13 meetings) | − | − | − |
| Director Senior Managing Executive Officer |
Tsutomu Ozaki*3 | (−) | − | − | − |
| Director | Masaki Nakajima*3 | (−) | − | − | − |
| Director*2 | Tetsuya Kubo | (13/13 meetings) | − | ○ | ◎ |
| Director (Audit and Supervisory Committee Member) | Hiromichi Jitsuno *3 | (−) | ◎ (−) |
− | − |
| Director(Audit and Supervisory Committee Member)*2 | Kazuko Shiraishi | (13/13 meetings) | (13/13 meetings) | ○ | ○ |
| Director(Audit and SupervisoryCommittee Member)*2 | Yasuo Miki | (11/11 meetings) | (11/11 meetings) | ○ | ○ |
| Director (Audit and Supervisory Committee Member)*2 | Sadayo Hirata | (11/11 meetings) | (11/11 meetings) | ○ | ○ |
| Director(Audit and Supervisory Committee Member)*2 | Hidetaka Matsuishi*3 | (−) | (−) | ○ | ○ |
| Director(Audit and Supervisory Committee Member)*2 | Yumiko Waseda*3 | (−) | (−) | ◎ | ○ |
*1 Attendance records from April 2022 to March 2023
*2 Outside Director
*3 Newly elected(from June 2023)
*4 In addition one independent outside expert (lawyer) has been appointed as a committee member, bringing the total number of committee members to 7.
*5 as of April 1,2024 for positions and roles
Policy on the Protection of Minority Shareholders
Policy on the Protection of Minority Shareholders in Ensuring Independence from Parent Company
To protect minority shareholders, the Board of Directors consists of 12 directors, and 6 of those directors are Independent Outside Director, about whom there are no concerns about conflict of interest with general shareholders. The Board of Directors makes important management decisions and supervises the execution of operations from an independent perspective. Moreover, to ensure fairness and transparency and that appropriate consideration is given to the shared interest of SCSK and its shareholders, SCSK has established the Conflict of Intereset Advisory Committee. This committee is composed of Independent Outside Director and independent outside experts, serving as an advisory body to the Board of Directors or similar entities.
One SCSK director is from the parent company, and efforts are made to strengthen and expand the business foundation. Furthermore, material matters regarding the execution of operations when conducting business are decided based on agreement by the Board of Directors, which ensures the autonomy and independence of management decisions by SCSK, a listed company.
Policy on the Protection of Minority Shareholders in Transactions with Parent Company
SCSK takes steps so that transactions with its parent company Sumitomo Corporation are not detrimental to minority shareholders.
In FY2022, sales to the parent company accounted for 5.2% of total net sales. The parent company places no constraints on business activities, and transaction terms are the same as those that would be applied to regular transactions with clients that we do not have a capital relationship with. We recognize this as ensuring a certain level of independence.
As for those transactions that are material, advance consultations are held with the Conflict of Intereset Advisory Committee, and the Board of Directors decides whether to conduct the transaction after receiving a report from the committee.
Furthermore, we ensure fairness by having reports on the state of business with the parent company regularly submitted to the Conflict of Intereset Advisory Committee.
Election and Dismissal of Directors and Procedures
When electing and dismissing directors (excluding those who are Audit and Supervisory Committee members), the Nomination and Remuneration Advisory Committee is consulted, and the election and dismissal is tabled at the General Meeting of Shareholders after being resolved by the Board of Directors taking into consideration the opinion of the Audit and Supervisory Committee. In addition, for candidates for directors who are Audit and Supervisory Committee members, the approval of the Audit and Supervisory Committee is obtained, and then they are elected or dismissed through the same process.
As for the composition and number of Board of Directors members, decisions are made taking into consideration the skills that should be possessed by the SCSK’s Board of Directors and the balance and diversity of skills possessed by each director.
To maintain and improve directors' supervision of execution of duties, Independent Outside Director about whom there are no concerns of conflict of interest with general shareholders will continue to be selected. Outside Directors who possess management judgement based on a wide range of business activities attend Board of Directors meetings and provide advice to maximize corporate value.
Selection Criteria
Directors (excluding directors who are Audit and Supervisory Committee members)
- Possess knowledge, experience, and track record required of SCSK directors
- Can constructively participate in deliberations at Board of Directors meetings
- Possess outstanding management skills and insight into thoroughly adhering to laws, regulations, and corporate ethics
- For directors who also serve as executive officers, possess extensive knowledge in responsible fields
Directors who are Audit and Supervisory Committee members
- Possess specialized insight and experience as director who is an Audit and Supervisory Committee member and can conduct audits from an objective perspective
Outside Directors
- In addition to the above, possess specialized and broad insights into corporate management and various fields
Reasons for Elections and Summary of Their Expected Roles
| Outside Directors | Reasons for Elections and Summary of Their Expected Roles | |
|---|---|---|
| Tetsuya Kubo (Nomination and Remuneration Advisory Committee Chair) |
Independent Director |
Mr. Tetsuya Kubo possesses robust management experience gained over years of serving in important positions at major financial institutions as well as wide-ranging knowledge pertaining to global businesses. We believe that the experience and insights that he has acquired through his career qualify him to help maintain and enhance the supervision of execution of operations at SCSK and to offer advice on all areas of management, and we have thus selected him as an Outside Director. |
| Kazuko Shiraishi | Audit and Supervisory Committee Member, Independent Director |
Ms. Kazuko Shiraishi possesses a strong, global background as well as wide-ranging knowledge pertaining to environmental, social, and human rights issues gained in her role as a diplomat. She was selected as an Outside Director who is an Audit and Supervisory Committee member because we believe the experience and insights she has acquired through her career qualify her to help maintain and enhance supervision of execution of operations at SCSK and to provide advice on overall management. |
| Yasuo Miki | Audit and Supervisory Committee Member, Independent Director |
Mr. Yasuo Miki possesses a breadth of experience in managing IT companies as well as wide-ranging technology knowledge. He was selected as an Outside Director who is an Audit and Supervisory Committee member because we believe the experience and insights he has acquired through his career qualify him to help maintain and enhance supervision of execution of operations at SCSK and to provide advice on overall management. |
| Sadayo Hirata | Audit and Supervisory Committee Member, Independent Director |
Ms. Sadayo Hirata has a wealth of experience as an engineer as well as academic insight pertaining to IT and technology management. She was selected as an Outside Director who is an Audit and Supervisory Committee member because we believe the experience and insights she has acquired through her career qualify her to help maintain and enhance supervision of execution of operations at SCSK and to provide advice on overall management. |
| Hidetaka Matsuishi | Audit and Supervisory Committee Member, Independent Director |
Mr. Hidetaka Matsuishi possesses robust management experience and wide-ranging knowledge of marketing obtained through his long career at senior positions at a major electric instruments company. He was selected as an Outside Director who is an Audit and Supervisory Committee member because we believe the experience and insights he has acquired through his career qualify him to help maintain and enhance supervision of execution of operations at SCSK and to provide advice on overall management. |
| Yumiko Waseda (Conflict of Intereset Advisory Committee Chair) |
Audit and Supervisory Committee Member, Independent Director |
Ms. Yumiko Waseda possesses specialized knowledge and experience as an attorney and wide-ranging insight into environmental, social, and human rights issues. She was selected as an Outside Director who is an Audit and Supervisory Committee member because we believe the experience and insights she has acquired through her career qualify her to help maintain and enhance supervision of execution of operations at SCSK and to provide advice on overall management. |
Stimulating Deliberation at the Board of Directors Meetings
The secretariat of the Board of Directors led mainly by the Legal Department strives to enhance handout materials for the Board of Directors and to ensure discussions during meetings of the Board of Directors are active and substantial by conducting prior explanations for Outside Directors.
Additionally, the secretariat determines the annual schedule and deliberation matters of the Board of Directors in advance to every extent possible, continuously reviews agenda standards, and carefully selects matters requiring resolution of the Board of Directors. In this manner, sufficient time is dedicated to deliberations on truly material matters.
Evaluating the Effectiveness of the Board of Directors（As for the FY2022）
Initiatives to Improve the Effectiveness of the Board of Directors
Every year, SCSK carries out self-evaluation and analysis concerning the effectiveness of the Board of Directors since FY2016 in order to improve the functions of the Board of Directors and enhance corporate value as a result.
Looking ahead, taking into account the results of this evaluation, SCSK’s Board of Directors will swiftly address the issues identified based on a thorough review and will continue to promote measures for enhancing the functions of the Board of Directors.
Evaluation Method
As for the FY2022 self-evaluation and analysis, we conducted a questionnaire survey in February 2023 of all directors who were Board of Directors members, receiving advice from an outside organization.
Anonymity was ensured by having directors submit completed questionnaires to the outside organization. After receiving a report on the results from the outside organization, an analysis, discussion, and evaluation were conducted at the Board of Directors meeting held in May 2023.
Remuneration for Directors
Basic Policy on Remuneration for Directors and Procedures for Deciding Amount of Remuneration
SCSK pays out annual remuneration to directors including performance-linked compensation, within the maximum amount as determined at the Ordinary General Meeting of Shareholders.
The policies, procedures, and calculation methods, and level of remuneration of directors (excluding Outside Directors, part-time directors, and directors who are Audit and Supervisory Committee members) are decided by resolution of the Board of Directors taking into account the results of examinations by the Nomination and Remuneration Advisory Committee, a majority of whose members consist of Independent Outside Director. The Audit and Supervisory Committee confirms the validity of remuneration level based on roles and duties of directors considering the fairness of the calculation of remuneration and business performance.
Remuneration for directors who are Audit and Supervisory Committee members is determined through discussion among directors who are Audit and Supervisory Committee members pursuant to the provisions of Article 361, Paragraph 3 of the Companies Act.
Types, Summary, and Composition of Director Remuneration
Policy and Indicators for Performance-Linked Compensation
①Performance-linked compensation (cash)
Performance-linked compensation（cash） is calculated by adjusting the standard amount set for each director position based on the Company and personal performances for the fiscal year and is paid after the fiscal year ends.
The ratio of the Company performance portion and the personal performance portion is 100% and 0% for the President, and 60% and 40% for the Senior Managing Executive Officer.
Company performance portion
※1 When obtaining each of the CAGRs and the achievement rate of the fiscal year plan, net sales and operating profit are factored in at a ratio of 30:70
The Company performance portion is calculated by multiplying the standard amount by two coefficients—one is based on the compound annual growth rates（CAGR）※1of net sales and operating profit over the Medium-Term Management Plan period※1while the other is based on the rates of achievement of the net sales and operating profit targets for the fiscal year※1—with the aim of incentivizing the directors to strive to achieve the Company's sustainable growth and its performance plan. The Company performance coefficients are designed so that they can
cause the standard amount to decrease by up to 75% or increase by up
to 80%.
Personal performance portion
- Selection of and focus on high-potential business domains
- Promotion of Value-Driven Management (sharing of philosophy and vision with employees)
- Environmental, social, and governance initiatives
※2 Personal evaluation items
The personal performance portion is calculated by multiplying the standard amount by the coefficient that reflects the evaluation of each person's accomplishments※2in environmental, social, governance, and other areas, with the aim of enhancing the effectiveness of the managerial foundation reinforcement measures underlying the Medium-Term Management Plan's core strategies. The personal performance coefficient is designed so that it can cause the standard amount to decrease by up to 100% or increase by up to 50%.
② Stock-based compensation（non-monetary remuneration）
Each year, SCSK grants the directors (excluding Outside Directors, part-time directors, and directors who are Audit and Supervisory Committee members) its common stock as restricted shares after the Ordinary General Meeting of Shareholders, with the aim of incentivizing them to embody the sustained improvement in corporate value depicted in Grand Design 2030 and promoting greater sharing of value with all shareholders.
The restricted transfer period is, in principle, from the day the restricted shares are granted until the day the person resigns from directorship, in order to facilitate the sharing of value with shareholders over the medium to long term.
Both Senior Executive Officers and Senior Corporate Officers are also granted restricted shares.
Internal Control
SCSK has established the Basic Policy for Building the Internal Control System so that the execution of duties by directors conforms to laws and the Articles of Incorporation and that other operations along with the operations of the corporate group comprising SCSK and its subsidiaries are performed appropriately.
In accordance with this basic policy, we continuously check the effectiveness of the internal control system and conduct reviews based on the changing management climate, which allows us to modify the internal control system on occasion as the need arises. The SCSK Group is working to strengthen governance in order to reasonably guarantee the achievement of the four goals of (1) effectiveness and efficiency of operations, (2) reliability of financial reporting, (3) compliance with laws and regulations related to business activities, and (4) safeguarding of assets during the course of its business operations.
