Sustainability
Corporate Governance
Corporate Governance Report
Tokyo Electron Device's Basic Principles of Corporate Governance
Tokyo Electron Device (TED) regards improving profitability and capital efficiency as a top priority for all the stakeholders including shareholders with the aim of increasing its corporate value over the medium and long terms.
For that purpose, TED will develop internal control systems and endeavor to ensure the transparency and soundness of its management and continuously enhancement of corporate governance.
Corporate Governance Framework
TED is a company with an Audit & Supervisory Board. To enhance the objectivity and transparency of management including the processes of appointing Corporate Directors and determining remuneration, TED adopted a system in which the functions of a company with a nominating committee and other committees including the Nominating Committee and the Remuneration Committee are added to the basic organizational structure as a company with an Audit & Supervisory Board. In addition, the executive officer system clearly separates supervision and execution, which allows for quick responses to changes in the external environment.
| Corporate Governance Structure Overview | |
|---|---|
| Board of Directors | Based on its fiduciary responsibility to shareholders, the Board of Directors promotes TED’s ongoing growth and the enhancement of its enterprise value over the medium and long terms, seeking to improve profitability and capital efficiency. To this end, it is the Board’s role and responsibility to decide corporate strategy and other major policies, provide effective oversight of the duties of the corporate directors and vice presidents from an objective standpoint and maintain an environment that supports appropriate risk-taking by executive management. |
| Audit & Supervisory Board | Based on audit plans determined by the Audit & Supervisory Board, Audit & Supervisory Board Members attend important meetings, inspect important documents related to business execution, perform audits of business and accounting, and audit corporate directors' execution of their duties. |
| Nominating Committee | Established within the Board of Directors, the Nominating Committee makes proposals to the Board of Directors regarding candidates for the positions of President & Representative Director and Corporate Director. |
| Remuneration Committee | Established within the Board of Directors, the Remuneration Committee makes proposals to the Board of Directors regarding systems of remuneration for corporate directors and vice presidents and the details of remuneration for the President & Representative Director. |
| Compliance Committee | As an advisory body to the Board of Directors, the Compliance Committee monitors and verifies systems for ensuring compliance and information security, makes proposals to the President as needed, and reports to the Board of Directors. |
| Risk Management Committee | As an advisory body to the Board of Directors, the Risk Management Committee identifies issues of high materiality, monitors the status of measures to respond to companywide and long-term risks, performs multifaceted and objective verification, makes proposals to the President as necessary, and reports to the Board of Directors. |
| Vice Presidents Council | Based on basic policy determined by the board of directors, the Vice Presidents Council formulates, determines, and implements policies and plans for day-to-day general business execution. |
Skills Matrix for Corporate Directors and Audit & Supervisory Board Members
Under the Medium-term Management Plan VISION 2025, TED is working to achieve sustained growth and increase corporate value over the medium and long terms, focusing on enhancing the governance structure. TED's composition of Corporate Directors and Audit & Supervisory Board Members has a good balance in light of the experience and fields of expertise currently considered important by the Board of Directors based on the circumstances surrounding TED and the issues to solve in putting VISION 2025 into action.
Corporate Directors' Attendance at Board of Directors Meetings
| Name | Attendance at Board of Directors Meetings in FY 2022 |
|
|---|---|---|
| President & Representative Director | Atsushi Tokushige | 100% (10/10) |
| Representative Director | Masami Hasegawa | 100% (10/10) |
| Corporate Director | Yukio Saeki | 100% (10/10) |
| Corporate Director | Akihiro Kamikogawa | 100% (10/10) |
| Corporate Director | Kazuki Shinoda | 100% (10/10) |
| Corporate Director | Tetsuo Tsuneishi | 100% (10/10) |
| Corporate Director (Outside Director, Independent Director) |
Koichi Kawana | 100% (10/10) |
| Corporate Director (Outside Director, Independent Director) |
Hiromi Onitsuka-Baur | 100% (10/10) |
| Corporate Director (Outside Director, Independent Director) |
Kei Nishida | 100% (8/8)* |
* The number of times of attendance at Board of Directors meetings by Mr. Kei Nishida is after he took office as a Corporate Director in June 2021.
Attendance at Board of Directors Meetings and Audit & Supervisory Board Meetings by Audit & Supervisory Board Members
| Name | Attendance at Board of Directors Meetings in FY 2022 | Attendance at Board of Audit & Supervisory Meetings in FY 2022 | |
|---|---|---|---|
| Audit & Supervisory Board Member (full-time) | Nobuo Kawai | 100% (10/10) | 100% (7/7) |
| Outside Audit & Supervisory Board Member (full-time) | Katsuyuki Matsui | 100% (10/10) | 100% (7/7) |
| Outside Audit & Supervisory Board Member (part-time) | Norika Yuasa | 100% (8/8) * | 100% (5/5)* |
| Outside Audit & Supervisory Board Member (part-time) | Kiyoyuki Kuwabara | - | - |
* The number of times of attendance at Board of Audit & Supervisory meetings by Mrs. Norika Yuasa is after she took office as a Corporate Director in June 2021.
Reasons for Appointment of Outside Directors (Independent Director)
| Name | Reasons for Appointment |
|---|---|
| Koichi Kawana | In addition to participation in the Board of Directors as an Outside Director of TED, Mr. Kawana has led the operation of the Nominating Committee as chairperson since June 2021 making use of his experience as a manager of listed companies and wide knowledge from global viewpoints and has contributed to highly effective supervision over TED’s management. We invited him to serve as an Outside Director, expecting that his opinions and comments from the viewpoint of a shareholder will continuously contribute to objective supervision. Judging that his assumption of office is not likely to cause a conflict of interest with general shareholders because he has no special interest in TED including personnel or capital relationships and meets the independent officer appointment standards of TED, we nominated him as an Independent Director. |
| Hiromi Onitsuka-Baur | Ms. Onitsuka has contributed to highly effective supervision over TED’s management through participation in the Board of Directors and the Remuneration Committee as an Outside Director of TED, making use of the knowledge in the electrical machinery and IT industries as well as the experience as a company auditor or outside director (audit and supervisory board member) of listed companies. We invited her to serve as an Outside Director, expecting that her opinions and comments from the viewpoint of a shareholder will continuously contribute to objective supervision. Judging that her assumption of office is not likely to cause a conflict of interest with general shareholders because she has no special interest in TED including personnel or capital relationships and meets the independent officer appointment standards of TED, we nominated her as an Independent Director. |
| Kei Nishida | Mr. Nishida has contributed to highly effective supervision over TED’s management through participation in the Board of Directors and the Remuneration Committee as an Outside Director of TED, making use of management experience in listed companies and knowledge in the electronics industry. We invited him to serve as an Outside Director, expecting that his opinions and comments from the viewpoint of a shareholder will continuously contribute to objective supervision. Judging that his assumption of office is not likely to cause a conflict of interest with general shareholders because he has no special interest in TED including personnel or capital relationships and meets the independent officer appointment standards of TED, we nominated him as an Independent Director. |
Reasons for Appointment of Outside Audit & Supervisory Board Members (Independent Audit & Supervisory Board Members)
| Name | Reasons for Appointment |
|---|---|
| Katsuyuki Matsui | Mr. Matsui has financial knowledge and experience from overseas postings at listed companies as well as work experience as a company auditor over many years. We invited him to serve as an Outside Audit & Supervisory Board Member, expecting that he will contribute to enhancing TED’s audit functions with an eye on the future enhancement of manufacturing functions as well. Judging that his assumption of office is not likely to cause a conflict of interest with general shareholders because he has no special interest in TED including personnel or capital relationships and meets the independent officer appointment standards of TED, we nominated him as an Independent Audit & Supervisory Board Member. |
| Norika Yuasa | Having served as an attorney in China and other countries and currently working as a partner at Miura & Partners Legal Profession Corporation, Ms. Yuasa has a wealth of experience and expertise. We invited her to serve as an Outside Audit & Supervisory Board Member, expecting that her experience and expertise described above will contribute to objectively ensuring the appropriateness of audits. Judging that her assumption of office is not likely to cause a conflict of interest with general shareholders because she has no special interest in TED including personnel or capital relationships and meets the independent officer appointment standards of TED, we nominated her as an Independent Audit & Supervisory Board Member. |
| Kiyoyuki Kuwabara | Mr. Kuwabara has a wealth of expertise in finance and accounting obtained through many years of experience as a certified public accountant at an auditing firm as well as work experience as a full-time corporate auditor (outside) of a listed company. We invited him to serve as an Outside Audit & Supervisory Board Member, expecting that his experience and expertise described above will contribute to enhancing audit functions from an objective viewpoint. Judging that his assumption of office is not likely to cause a conflict of interest with general shareholders because he has no special interest in TED including personnel or capital relationships and meets the independent officer appointment standards of TED, we nominated him as an Independent Audit & Supervisory Board Member. |
Decision Policies for Calculation Method of Director Remuneration
(Basic Policies on Corporate Director Remuneration)
The TED Group emphasizes the following points as the basic policies for remuneration for Corporate Directors:
- Competitive levels and plans of remuneration to secure competent management personnel in Japan
- High degree of linkage with short-term business performance and medium- to long-term increase in corporate value aimed at achieving sustainable growth
- Securing transparency and fairness in the remuneration decision process and appropriateness of remuneration
(Approach to Corporate Director Remuneration Levels)
- For remuneration for Corporate Directors of a company defining DRIVING DIGITAL TRANSFORMATION as its mission and seeking to contribute to future social development through it, TED seeks remuneration levels competitive with Japanese companies operating in this field.
- For Corporate Director fixed remuneration, benchmarks are established according to the functions and roles of the respective Corporate Directors based on research data of external research organizations.
- For Corporate Director variable remuneration, annual performance-linked remuneration of up to five percent of net income attributable to owners of the parent is established based on the need for an element corresponding to TED's performance level.
- Medium- to long-term incentive remuneration is established based on the target financial model, period, etc.
(Composition of Remuneration)
- Full-time Corporate Directors
Remuneration for Full-time Corporate Directors is composed of monthly fixed remuneration, annual performance-linked remuneration, and medium- to long-term incentive remuneration. The medium- to long-term incentive remuneration and part of the annual performance-linked remuneration is provided as stock remuneration. - Outside Corporate Directors (Independent Directors)
Only monthly fixed remuneration is paid to Outside Corporate Directors.
Payment of retirement allowances to TED's Corporate Directors was abolished as of fiscal 2015.
(Fixed Remuneration)
- Full-time Corporate Directors
Remuneration levels by post of companies whose market capitalization and scales are similar to TED's are used as benchmarks based on research data of external research organizations. Based on those benchmarks, we have developed a fixed remuneration table specifying the remuneration level range for each post of TED in comparison to the remuneration of the President & Representative Director of TED, which is set at 100. In addition, a fixed remuneration plan for the President & Representative Director developed by the Remuneration Committee based on research data of external research organizations has been determined by the Board of Directors. The fixed remuneration ranges for Corporate Directors of other ranks are calculated by application of the determined amount of the fixed remuneration for the President & Representative Director to the fixed remuneration table, and within those ranges the amounts of fixed remuneration for the other Corporate Directors are determined by the President & Representative Director.
The details of remuneration for non-executive Corporate Directors (Full-time) are determined based on separate guidelines. - Outside Corporate Directors (Independent Directors)
The remuneration range is determined based on research data of external research organizations.
(Annual Performance-linked Remuneration)
- Annual performance-linked remuneration has been established as a remuneration system clearly representing the linkage between Corporate Director remuneration and TED's business performance and shareholder value for the purpose of raising their desire to achieve improved business performance and awareness of contributing to increasing shareholder value.
- Annual performance-linked remuneration is calculated based on the performance-liked remuneration table using the annual amount of net income attributable to owners of the parent (the "Net Income Amount") and the ratio of the Net Income Amount to net sales (the "Net Income Ratio") as indicators. We believe that the Net Income Amount and Net Income Ratio are the best indicators at present, clearly representing the linkage between TED's business performance and shareholder value.
- Sixty-five percent of annual performance-linked remuneration is provided in cash bonuses directly linked to TED's business performance after approval at the Annual General Meeting of Shareholders for each period.
- Thirty-five percent of annual performance-linked remuneration is provided as stock remuneration linked with shareholder value at retirement from the position of Corporate Director.
- Since performance-linked remuneration increases in line with growth in the Net Income Amount and Net Income Ratio under this system, we have established no policy on the payment ratio for performance-linked remuneration to fixed remuneration.
(Medium- to Long-term Incentive Remuneration)
- Medium- to long-term incentive remuneration has been established for the purpose of raising awareness of increasing corporate value over the medium- to long-terms by working to achieve the Medium-term Management Plan. According to the degree of achievement of the financial model established in the Medium-term Management Plan, an amount from 0% to 125% of the base amount, which is calculated according to the post/rank and job responsibilities, is provided.
Consolidated ordinary profit margin and consolidated ROE are used as evaluation indicators for the financial model.
(Determination Process for Corporate Director Remuneration)
- To ensure transparency and fairness, the system for Corporate Director remuneration (fixed remuneration table, annual performance-linked remuneration table, and medium- to long-term incentive remuneration table) is discussed and determined after an original plan is discussed, developed, and proposed to the Board of Directors by the Remuneration Committee.
- The details of remuneration for the President & Representative Director (fixed remuneration and cash bonus) are also determined after an original plan is prepared by the Remuneration Committee and deliberated by the Board of Directors.
- The details of remuneration for Corporate Directors other than the President & Representative Director (fixed remuneration and cash bonus) are determined by the President & Representative Director pursuant to authority delegated by the Board of Directors on the premise of the use of the table according to the job responsibilities and positions/ranks, which is determined by the Board of Directors. The President & Representative Director obtains the Remuneration Committee's consent for such determinations so that the authority delegated by the Board of Directors is be used appropriately. If an original plan contains any inconsistency with the table, the Board of Directors' approval is obtained.
- For annual performance-linked stock remuneration, TED stock is delivered at the time of retirement from the position of Corporate Director according to the points calculated by application of the annual Net Income Amount and Net Income Ratio to the annual performance-linked remuneration table and given to the relevant persons by the end of May each year.
- For medium- to long-term incentive remuneration, TED stock is delivered in the business year following the Medium-term Management Plan final year according to the points calculated by multiplying the base amount specified according to the post/rank, etc. (vested points) by the payment ratio linked with the achievement at the end of the final year of such Plan.
