Basic ideas

Basic Approach to corporate governance

Tokai Carbon recognizes that enhancing medium to long-term corporate value is the most important management objective. We believe that responding to the expectations of all stakeholders, including customers and shareholders, and building favorable relationships, is essential in achieving this objective. To this end, we embrace the corporate philosophy of Strength in Trust.
Through this philosophy and through the policies and values outlined in our Guidelines and Global Code of Conduct, we are working to develop an effective corporate governance structure.

Structure

Corporate governance system

As a company with an Audit & Supervisory Board, Tokai Carbon focuses on enhancing the effectiveness of audits by Audit & Supervisory Board members and our internal audit functions. At the same time, we work to strengthen the management supervision functions of the Board of Directors by appointing multiple external directors and establishing voluntary committees in order to realize an appropriate corporate governance structure. Furthermore, to clarify the functions and responsibilities of corporate officers engaged in business execution, we have adopted an executive officer system and established a Managing Executives Meeting to enhance and strengthen the business execution functions of the organization.

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Board of Directors

The Board of Directors is responsible for making decisions on important management matters and overseeing business execution. In principle, the Board meets monthly. As of March 30, 2023, there are eight directors, including three external directors. The Nomination Committee and Compensation Committee, for which the majority of members are external directors, have been created as voluntary advisory bodies for the Board of Directors. The Risk Management & Compliance Committee and Sustainability Committee also a voluntary advisory body, has been established immediately under the Board of Directors.

Audit & Supervisory Board members and the Audit & Supervisory Board

As a general rule, the Audit & Supervisory Board of the Company meets monthly. As of March 30, 2023, there are four Audit & Supervisory Board members, of whom two are External Audit & Supervisory Board members. Audit & Supervisory Board members perform audits based on the auditing policies and audit plan adopted by the Audit & Supervisory Board. Audit & Supervisory Board members attend Board of Directorsʼ meetings and other important meetings, and investigate the status of business operations and assets to confirm the status of business execution by directors.

Management Committee

The Company has established the Management Committee under the Board of Directors. This committee deliberates and makes decisions on important management matters in accordance with basic policies adopted by the Board of Directors. The Management Committee meets once a week, in principle, with participation by executive officers and Audit & Supervisory Board members, etc. To assist the Management Committee with its work, we have also established committees to deliberate particular types of matters and report their findings to the Management Committee for higher-level consideration.

Initiatives

Strengthening the Effectiveness of the Board of Directors

In 2016, Tokai Carbon established the Nomination Committee, Remuneration Committee, Management Committee, and Risk Management & Compliance Committee to ensure strong governance led by the Board of Directors. As a result, significant improvements compared to the previous year were noted on various fronts. These improvements became apparent in the annual Board of Directors effectiveness evaluation.
At Tokai Carbon, the three External Directors deepen their understanding of key issues by actively attending important meetings other than those of the board. That the nonpartisan, objective opinions of the External Directors have greatly contributed to enhancing the oversight function of the Board of Directors was pointed out in board effectiveness evaluations.
The new more-robust governance system has largely taken hold. Evaluation results indicate that initial benefits are being appropriately maintained and further improvements in board effectiveness are being achieved.

Establishing an internal control system

To ensure that Tokai Carbon Group properly executes business operations in accordance with relevant laws, regulations and the Articles of Incorporation, the Company continuously improves its internal control system. Improvements are undertaken in accordance with the “Basic Policy for Establishing an Internal Control System,” which was adopted at the May 2006 meeting of the Board of Directors and is revised as necessary.

Management Appointment Process

The appointment of Directors, Audit & Supervisory Board Members, and Executive Officers begins with the formulation of recommendations by the Nomination Committee, which is an advisory body to the Board of Directors and consists of one internal board member three external board members. The Nomination Committee prepares its recommendations by comprehensively considering the experience, knowledge, expertise, and other qualities of internal and external candidates. After approval by the Board of Directors, candidates for Director and Audit & Supervisory Board positions are submitted to the General Meeting of Shareholders for approval.
The Company discloses the reasons for nominating internal and external candidates for Director and Audit & Supervisory Board positions in reference materials provided for the General Meeting of Shareholders. To see an example, please refer to pages 4 to 16 of the Notice of FY2020 Annual Meeting of Shareholders.
“Notice of FY2022 Annual Meeting of Shareholders”(PDF: 98KB)

Executive remuneration

At the FY2005 Annual Meeting of Shareholders held on March 30, 2006, it was resolved that the amount of monetary remuneration for directors of the Company shall be within 350 million yen per year.
At Tokai Carbon, executive remuneration* is composed of basic remuneration, which is a fixed amount, performance-based remuneration, which varies depending on the achievement of performance objectives, and restricted stock-based remuneration which only executive directors who live in Japan are eligible for.
Performance-based remuneration consists of "Short-term incentive" based on the annual target achievement and "Long-term incentive" based on the three-year targets and the material initiatives, which are difficult to evaluate in a short term. Non-financial targets, such as sustainability performance, including the climate change, were added to the "Short-term incentive" and "Long-term incentive" targets from March 30, 2023.
Non-executive directors who are independent of business execution and Audit & Supervisory Board members are eligible only for fixed remuneration as performance-based remuneration is not suitable for their duties.
The executive remuneration system and the evaluation and remuneration for each executives are determined after deliberations by the Remuneration Committee, which is chaired by an external board members.
*Executives: President& CEO, Member of the Board, Executive Officer

■Remuneration structure

■Composition ratio of remuneration (based on standard remuneration)

* For performance-based remuneration, the ratio assumes 100% achievement of the target.