Corporate Governance

Basic Thinking

Sodick’s management principles are to contribute to society’s development by providing superior products and lending support to its customer’s creation and manufacturing endeavors (“monozukuri”)—work grounded in the Company’s guiding spirit of “Create,” “Implement,” and “Overcome Difficulties.”
The Company believes that the most important element of this is to manage itself in ways that are transparent and readily comprehended at all times by all of its stakeholders, including its shareholders and investors, its customers, and its employees.
It is striving to make efficient use of management resources, strengthen itself in the areas of risk management and compliance, and maximize corporate value for all of its shareholders and investors.

Corporate Governance Structure

Structure Summary

  • Sodick has chosen “Company with Audit & Supervisory Board” as its organizational plan in line with the Companies Act. The Board of Directors engages in decision making regarding important management issues and carries out its supervisory function with respect to general management, while fairness and transparency of management are ensured by giving full rein to management oversight from an independent standpoint as carried out by Audit & Supervisory Board Members.
  • Sodick has adopted an executive officer system to make the execution of corporate management prompt and highly efficient. The Board of Directors entrusts the execution of business to executive officers based on the management organization and segregation of duties.
  • To supplement the functioning of the Board of Directors, Sodick has established advisory committees on personnel and compensation whose member optionally may include outside directors. It has also created a governance structure that has increased the transparency of decision-making and further enhanced the Board’s monitoring and oversight functions.

Corporate Governance Structure

Structure Summary

Structure Overview(as of June 30, 2016)

Form of organization Company with Audit & Supervisory Board
Executive management structure Executive officer system
On directors No. of directors 13 NOTE 1
Term of appointment per articles of incorporation 2 years
Chair of the Board of Directors President
On Audit & Supervisory
Board Members
Audit & Supervisory Board established? Yes
No. of Audit & Supervisory Board Members 5 NOTE 2
On outside directors and
outside Audit & Supervisory
Board Members
No. of outside directors
(of which, independent officers)
3 (3)
No. of outside Audit & Supervisory Board Members
(of which, independent officers)
3 (1)

NOTE 1: The number of directors as per the articles of incorporation will be 15 or less.
NOTE 2: The number of Audit & Supervisory Board Members as per the articles of incorporation will be 5 or less.

Role of Each Structure

Board of Directors

  • Assigned supervisory functions over decision-making on important issues and management generally as stipulated in the Board of Directors regulations, including setting basic policy on management and the appointing of executive officers.
  • Regular meetings of the Board take place once per month, and when necessary the Board also convenes extraordinary meetings.
  • The Board comprises 13 directors who supervise management and make important management decisions. They include internal directors who are not serving as executive officers (3), internal directors who are also serving as executive officers (7), and outside directors (3).
  • Opinions, advice, and cross-checking from outside directors serves to improve and rejuvenate the transparency and credibility of the Board of Directors while also strengthening its management supervision functions.
  • Business, joint technical, quality control, and business report meetings may be held to broaden and deepen understanding of the Company and manage it effectively. Directors attend these meetings in order to flexibly make decisions about basic and important items related to the execution of business.

Audit & Supervisory Board

  • The Board comprises five Audit & Supervisory Board Members, three of whom are outside Audit & Supervisory Board Members.
  • The function of the Board is to supervise management from an outside perspective.
    It determines policies on auditing and the assignment of duties, and receives reports on the implementation and results of audits from the Audit & Supervisory Board Members.
    In addition, it receives reports from directors and accounting auditors on the state of their execution of their duties and requests explanations thereof as necessary.

Advisory Committee on Personnel

  • The Committee comprises six directors, three of whom are outside directors.
  • It formulates the criteria and policies regarding personnel matters involving directors, Audit & Supervisory Board Members, and executive officers; selects candidates for those positions; and evaluates the current holders of them.

Advisory Committee on Compensation

  • The Committee comprises six directors, three of whom are outside directors.
  • It formulates policy on compensation for directors and executive officers, and deliberates compensation standards, appraisals, and amounts.

Improving Management Supervision Functions

Outside Directors and Outside Audit & Supervisory Board Members

  • Three of Sodick’s 13 directors are outside directors. They apply their objective perspectives and wealth of knowledge and experience to management, strengthening the corporate governance structure. Furthermore, three of the five Audit & Supervisory Board Members are outside Audit & Supervisory Board Members, increasing the objectiveness and fairness of management supervision.
  • Prior to meetings of the Board of Directors, the outside directors and outside Audit & Supervisory Board Members will issue reports to it in writing about any necessary information, and about any items to be decided or investigated by the Board. The outside Audit & Supervisory Board Members also convene regular monthly meetings of the Audit & Supervisory Board with all Audit & Supervisory Board Members in attendance, where they exchange a wide range of information and opinions.

Main Activities of the Outside Directors and Outside Audit & Supervisory Board Members and Reasons for Their Appointments
(fiscal year ended March 31, 2016)

Outside directors

Name Independent
officer
Board of
Director
meetings
(14)
Audit &
Supervisory
Board
(13)
Reason for
appointment
Kenichi
Tsugami
Yes Attended 14
(100%)
- Possesses abundant experience and insights as an enterprise proprietor, and was appointed an outside Audit & Supervisory Board Member to make use of that experience. Additionally, was nominated as an independent officer because has no stake in the Company—guaranteeing full independence from the president and other managers of corporate affairs—and there is no concern that any conflicts of interest with general shareholders would be created.
Toshiaki
Kurihara
Yes Attended 9
(90%)
(NOTE 1)
(NOTE 2)
- In addition to abundant experience at financial institutions, possesses broad insights cultivated from serving as a director and Audit & Supervisory Board Member at business corporations. Was appointed an otuside director to get useful advice about Sodick’s management strategy. Additionally, was nominated as an independent officer because has no stake in the Company—guaranteeing full independence from the president and other managers of corporate affairs—and there is no concern that any conflicts of interest with general shareholders would be created.
Katsuhisa
Furuta
Yes -
(NOTE 3)
- Possesses broad insights about control and robot engineering cultivated through long years of research at universities, as well as experience with engaging in organizational operations as a university president and study society chairman. Was appointed an outside director to get useful advice about Sodick’s management strategy. Additionally, satisfies the requisites for an independent officer based on the rules of the Tokyo Stock Exchange as well as the requisites set down in Sodick’s Criteria for the Independence of Outside Officers. As such, was also nominated as an independent officer.

Outside Audit & Supervisory Board Members

Takashi
Nagashima
Yes Attended 10
(100%)
(NOTE 1)
10
(100%)
(NOTE 1)
Asked to serve as a Sodick Audit & Supervisory Board Member in order to apply highly specialized knowledge and broad insights as a certified public accountant and licensed tax accountant to the strengthening of the Company’s structures. Additionally, was nominated as an independent officer because has no stake in the Company—guaranteeing full independence from the president and other managers of corporate affairs—and there is no concern that any conflicts of interest with general shareholders would be created.
Kazuhito
Shimoyama
Attended 13
(92.8%)
(Note 2)
Attended 13
(100%)
Asked to serve as a Sodick Audit & Supervisory Board Member in order objectively monitor the state of internal governance preparation and the soundness of management for handling risk.
Tomio
Okuyama
Attended 13
(92.8%)
(Note 2)
Attended 13
(100%)
Asked to serve as a Sodick Audit & Supervisory Board Member in order objectively monitor the state of internal governance preparation and the soundness of management for handling risk.
NOTE 1:
Outside Director Toshiaki Kurihara and Outside Audit & Supervisory Board Members Takashi Nagashima were appointed at the annual shareholder’s meeting on June 26, 2015. The board of directors and the Audit & Supervisory Board have each met 10 times since the two received their respective appointments.
NOTE 2:
In the event that this individual cannot attend a Board of Directors meeting, they are sent an appropriate report on the details of the meeting and asked for their opinions and advice on management of the Company.
NOTE 3:
Appointed June 2016, hence activities for the fiscal year ended March 31, 2016, are not applicable.

Sodick Co., Ltd., Criteria for the Independence of Outside Officers*1

1 Not applicable to any of the following criteria.

*In the event of an organization such as a corporation, the criterion is speaking of the person who manages corporate affairs for that entity.
  1. (1)Corporate affairs manager for the Group*2
  2. (2)Person treated as a major business partner of the Group*3
  3. (3)Major business partner of the Group*3
  4. (4)Attorney, certified public accountant, licensed tax accountant or consultant who, in addition to the officer compensation from the Group, receives cash or other profits financially that exceed a certain amount*4
  5. (5)Individual who receives donations or assistance from the Group that exceed a certain amount
  6. (6)Shareholder who in essence owns 10% or more of general voting rights in the Company
  7. (7)Corporate affairs manager for a corporation that in essence owns 10% or more of general voting rights in the Group
  8. (8)Individual who has a serious business relationship with or stake in the Group
  9. (9)Individuals for whom any of items (1) through (8) above applied during the past three years
  10. (10)In the event that a person who corresponds to any of items (1) through (9) above is a person of importance*5, that person’s spouse or relative who is a relation in the second degree or closer
  1. *1Outside directors and outside Audit & Supervisory Board Members
  2. *2Corporate affairs manager for a public company, executive, executive officer, individual who carries out business for a non-company corporation or organization, or employee of a corporation or organization including companies
  3. *3Individual with business dealings whose transaction value with the Group in the most recent business year exceeds 2% of consolidated sales for either party (in the event that the business partner concerned is an organization such as a corporation, that entity’s corporate affairs manager)
  4. *4Total of which in the case of individuals exceeds ¥10 million in one business year, or in the case of organizations such as corporations exceeds 2% of consolidated sales for either party
  5. *5Among corporate affairs managers, an individual who executes important business such as a director (excluding outside directors), executive, or executive officer

2 Additionally, individuals who do not have a background such it could be reasonably judged
that they could not perform their duties as an independent outside officer.

Improving Transparency of Management

Officer Compensation

Process of Determining Compensation for Officers

  • The annual shareholders’ meeting decides on the broad framework of compensation for directors. As for the amount of compensation for each director, the president will draft proposed amounts after discussions based on the decisions of the board of directors. The actual amounts are set after approval has been received from the Advisory Committee on Compensation comprising the president and outside directors.
  • The annual shareholders’ meeting decides on the broad framework of compensation for Audit & Supervisory Board Members. Within those limits, the amounts of compensation for each Audit & Supervisory Board Member are decided by discussions among the Audit & Supervisory Board Members.

Guidelines for Determining Compensation for Officers

Compensation for Sodick officers entails computing benchmark amounts for each officer based on increases and decreases in the following three sums and then adjusting the whole and individual amounts on that basis.

  1. (1)Standard amount for each officer
  2. (2)Increase or decrease in amounts linked to business performance appropriate to consolidated current net income
  3. (3)Amount appropriate to the officer’s job responsibilities

Compensation for outside directors is a fixed amount.
No performancelinked compensation is given.

Details of Compensation for Officers (fiscal year ended March 31, 2016)

Officer category Total amount of
compensation
(In million yen)
Total compensation by type (In million yen) No. of officers
to which applies
(Persons)
Basic
compensation
Stock
options
Bonuses Retirement
benefits
for officers
Director
(excluding outside
directors)
261 261 - - - 10
Audit & Supervisory
Board Member
(excluding outside
Audit & Supervisory
Board Members)
30 30 - - - 3
Outside officer 32 32 - - - 6
Total
325 325 - - - 19

*At present, the Company does not confer compensation in the form of stock options, bonuses, or retirement benefits
for officers.

Investor Relations Activities

Sodick regards all of its shareholders and investors as another set of important stakeholders, and places importance on constructive dialogue to improve corporate value. For all of our shareholders and investors, the Company makes every effort to provide information swiftly based on the principles of transparency, fairness, and continuity, and implements IR activities conducive to further improving corporate value.

  • The Investor Relations Department is responsible for dialogue with our shareholders and investors. To conduct dialogue reasonably and smoothly, as necessary it will collaborate with relevant departments including Accounting and Financial Affairs, Legal Affairs, and Compliance in the implementation of its IR activities.
  • In the event that individual requests come from shareholders or investors, the Company will consider the purpose of a meeting and importance of the topic and within reasonable limits investigate responses from directors. Opinions and the like expressed by our shareholders and investors will be reported as necessary to the Board of Directors and Business Report Committee, and every effort will be made to apply them to the Company’s future management.
  • Results briefings for institutional investors and analysts are held two times per year as a dialogue initiative separate from individual meetings. The annual shareholders’ meeting is also seen as a valuable and important opportunity for dialogue with our shareholders, and efforts are made to set aside adequate question-and-answer time. For our individual investors, a dedicated page has been created at the Company’s website. There, information about the Company’s business, performance, and management policies is posted in readily comprehended ways. Furthermore, to promote constructive dialogue the Company also plans to issue an annual report for the fiscal year ending March 31, 2017, and offer a plant tour and meeting for institutional investors and analysts. The Company is also investigating ways to enhance its IR tools and hold briefings for individual investors.
  • Regarding measures for controls applying to insider information, Sodick has formulated a Disclosure Policy.

Structure for Timely Information Disclosure

Structure for Timely Information Disclosure

Enhancing Internal Management

Internal Governance

Based on the Companies Act, Sodick enacted its “Basic Policy on Internal Governance Systems” at the Board of Directors meeting of April 17, 2015, in order to guarantee propriety in operations. The internal governance system strives to create more optimal and efficient structures through continuous reassessment and improvement.

Compliance Structure

  • Sodick evaluates the effectiveness of its internal governance systems through its Internal Audit Office. The results of that evaluation are reported to the directors and Audit & Supervisory Board Members. The Company has also established a Compliance Helpline whose purpose is to quickly discover and rectify compliance infractions or potential instances thereof.
  • Sodick has set down compliance regulations as well as the Sodick Group Action Guidelines for Corporate Ethics and Standards for Corporate Behavior (“Compliance Guidelines”). These form a code of conduct whose purpose is to encourage Group officers and employees to act in ways that adhere to law, the articles of incorporation, and social codes. To ensure their pervasiveness, the Company provides training and education on them to its officers and employees.

Risk Management Structure

  • Sodick has established basic rules for risk management. It works to determine, analyze, evaluate, and take appropriate measures to avoid the risks present in each department.
    To prepare for the event that an unforeseen situation has occurred or is threatening to occur that would have a major impact on management, the Company has also established a Risk Management Committee and set up the necessary preemptive policies on responding.
  • The Risk Management Committee engages with monitoring and overseeing the company-wide risk management situation, and reports important risks to the directors and Audit & Supervisory Board Members.

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