To increase the value of the company and gain the trust and support of the
stakeholders including shareholders, customers, clients, and local
communities, it is essential to establish a management structure that
emphasizes sound management and allows for prompt and precise response to
sudden changes in the management environment.
i) Board meeting
Our Board of Directors, composed of nine members, including three external directors, is dedicated to fostering open and constructive discussions and making decisions on critical business executions based on a management strategy aimed at enhancing the company's long-term value. We consider a balance of knowledge, experience, and abilities among each director, as well as diversity in terms of gender and international representation. The skills matrix outlining this composition is disclosed. Furthermore, the Board of Directors consists of 10 male members and 2 female members, resulting in a female representation of 16.7%. To ensure agility in responding promptly to changes in the business environment, directors serve one-year terms.
A regular board meeting is held monthly as a general rule and an interim board meeting is held as occasion demands in each case. The board meeting makes important decisions based on the board meeting regulations in addition to matters stipulated in laws and articles of incorporation and supervises the status of business execution of each Director. All auditors attend the board meeting to supervise the status of business execution of Directors.
Ferrotec implemented the evaluation of effectiveness of the board meeting while receiving advice from external organizations in order to improve the functions of the board meeting and increase the corporate value as shown below. In January 2023, a questionnaire on configuration, management, and discussion of/at the board meeting, and dialogue with shareholders, etc. (hereafter, “questionnaire in March 2023”) was conducted for all Directors and Auditors, who were members of the board meeting. For how to answer, anonymity was secured through direct answering to an external agency. Analysis, discussion, and evaluation were implemented at the regular board meeting in April 2023 based on the report of aggregate results from the external agency.
The major items of the questionnaire in March 2023 are shown below. For answering, a 5-step evaluation method and description method were adopted.
Ferrotec has set up the compensation committee as an advisory board for the board meeting to deliberate and decide monthly remuneration, performance-linked remuneration of Directors according to the decision policy related to the content such as the compensation of each Director, etc. to report it to the board meeting. In order to ensure validity and transparency of the decision process of the remuneration level and amount, the compensation committee is configured with 5 directors in total: 3 independent Outside Directors and 2 Internal Directors. In March 2023, the meeting was held 11 times (including written resolution) and each commissioner attended all meetings. Since March 2023, opportunities for external experts to attend were set up and an exchange of opinions was implemented while receiving advice on remuneration levels and the latest trends of domestic and overseas companies to promote the discussion about an appropriate executive compensation system and individual remuneration amount, etc. in the Ferrotec group in future.
Ferrotec has set up the nominating committee as an advisory board for the board meeting to select candidates of Directors and Executive Officers, and deliberate and decide the appointment of Directors and Auditors of main subsidiaries to report it to the board meeting. The nominating committee is configured with 5 directors in total; there are 3 independent Outside Directors and 2 Internal Directors in order to ensure fairness, appropriateness, and management effectiveness in the selection of candidates, etc. In March 2023, the nominating committee was held 6 times and each commissioner attended all meetings.
ii) Audit & Supervisory Board
Ferrotec has adopted the Audit & Supervisory Board system. Ferrotec's Audit & Supervisory Board is configured with three auditors in total: one Full-time Auditor who is familiar with the business contents, business environment and internal situation of the Ferrotec group and two Outside Auditors who are familiar with law, finance / accounting. The Audit & Supervisory Board is stipulated in the regulations to be held at least eight times a year and an occasional Audit & Supervisory Board is held as needed. Incidentally, a Full-time Auditor attends important meetings of the Executive Committee in addition to the board meeting to make an opinion statement as occasion demands so that the business execution of Directors can always be supervised. In addition, they work closely with the Internal Audit Office and Accounting Auditors by exchanging information and opinions with them as occasion demands and holding a meeting periodically, for example, to improve the audit function.
iii) Executive Committee
Ferrotec has introduced an executive officer system and appointed each Executive Officer appointed at the board meeting as the responsible duty/department manager to clarify the division of roles in business execution in order to clarify functions and roles of the board meeting and executive body and enable prompt and flexible decision-making and business execution in a rapidly changing environment. The Executive Committee is held monthly to sufficiently table the matters to be discussed at the board meeting and to clarify the issues to discuss at the board meeting; it also plays a role in promoting flexible business execution for the matters for which authority on quick decision making has been transferred from the board meeting.
Ferrotec has established a basic policy for the establishment of an internal
control system and has formulated various rules for all business operations,
including “Compliance Guidelines”, “Rules on Duties and Authorities”, “Rules
on Division of Duties”, “Internal Information Management Rules”, “Rules on
Disclosure of Important Information”, “Rules on Management of Trade
Secrets”, “Rules on Management of Confidential Information on Business
Partners”, “Basic Rules on Protection of Personal Information”, “Policy on
Response to Antisocial Forces”, “Rules on Business Continuity Management in
the Event of Disasters”, “Security Export Management Rules”, “Risk
Management Rules”, and “Internal Reporting Rules” to clarify the roles and
responsibilities of each organization. Furthermore, in accordance with the
amendment to the Corporation Law enacted on May 1, 2015, Ferrotec has
revised its basic policy for the establishment of internal control systems,
implemented internal checks based on the management control organization and
other corporate governance systems for business execution and supervision,
and developed a risk management system. With the legal advisory contract
with Goto Law Office, we receive legal advice as necessary in the course of
business. We also undergo accounting audits from EY Ernst & Young ShinNihon
LLC, our accounting auditor, based on the audit contract, and receive
reports on matters that are pointed out during and after the audit.