This report is based on the revised version of Japan’s Corporate Governance Code effective in June 2021. (This includes principles for companies listed on the Prime Market applicable from April 4, 2022.)
The Company implements each principle of Japan's Corporate Governance Code.
Disclosures based on each principle
【Principle 1-4: Cross-shareholdings】
The Company’s policy is to examine the mid- to long-term economic rationale and future outlook of cross-shareholdings and, if cross-shareholdings are judged to contribute to improvement of the Group’s corporate value in the medium and long term, to hold shares for the purpose of stabilizing corporate management.
With respect to individual cross-shareholdings, the board regularly examines whether or not to hold shares based on a comprehensive consideration of a range of factors including the purpose of holding the shares and the associated returns and risks, and where cross-shareholdings are considered inappropriate, the sale of the shares is considered.
In addition, to exercise its rights as shareholder, the Company exercises its voting rights on all proposals and judges the pros and cons of each proposal from the viewpoint of improving the corporate value of the portfolio company over the medium and long term.
【Principle 1-7. Related-party Transactions】
In the event of a competing transactions or transactions involving conflict of interests between the Company and a Director or other related party, Tamron carries out the necessary checks, including seeking prior approval by the Board of Directors.
【Supplementary Principle 2-4-1. Ensuring diversity in the promotion of core human resources, etc.】
Tamron, which considers human resources and human rights as one of its CSR themes, makes every effort to provide employees with opportunities to develop and demonstrate their abilities in ways that respect their diversity, character and individuality, while also embracing a global perspective, value teamwork and endeavor to cultivate human resources who harness creativity. Under this policy, Tamron seeks to create a company that inspires people, provides safety and encourages people with diverse backgrounds to work actively, thereby ensuring further growth, going forward.
For detail, please refer to Tamron's website: CSR (https://www.tamron.com/csr/) or the Integrated Report (from page.31 to page.36) posted on Investor Relations (https://www.tamron.com/ir/).
【Principle 2-6. Demonstrating Functions as a Corporate Pension Asset Owner】
Tamron operates a defined benefit corporate pension in combination with a defined contribution corporate pension
Tamron endeavors to ensure that management of reserves for the defined benefit corporate pension is conducted under an appropriate organizational structure given that it affects not only the stable asset formation of employees but also Tamron’s financial position.
Management of reserves for the defined contribution corporate pension is undertaken by employees themselves but given that it affects the stable asset formation of employees, Tamron provides education and training on asset management.
【Principle 3-1. Improvement of information disclosure】
（1）Company aims (Corporate Philosophy, etc.), management strategies and management plans
（2）Basic Approach and Basic Policy Regarding Corporate Governance
（3）Policy and procedures for determining Directors’ remuneration
The Company’s remuneration system for executive directors consists of a fixed base remuneration, short-term incentive remuneration as a bonus in accordance with the business performance for a single year, which is performance -based remuneration, and medium- to long-term incentive remuneration as a performance and stock-based remuneration.
- Our basic policy for maintaining and increasing incentives is to keep an appropriate ratio of performance-based compensation and to use the medium- and long-term incentive compensation a performance and stock-based compensation, to clarify the link between business performance, stock prices, and director compensation and further heighten awareness of the importance of contributing to the improvement of business performance and the increase of corporate value over the medium and long term.
- "Basic compensation" is monthly fixed compensation, and is determined, within a maximum amount of compensation which includes basic compensation resolved at a General Meeting of Shareholders, taking into consideration factors such as the position and contribution of each director and the compensation level at other companies in the industry or companies of a similar size.
- "Short-term incentive compensation" is determined for each Director, within a maximum amount of compensation which includes basic compensation resolved at a General Meeting of Shareholders, taking into consideration factors such as consolidated business performance in a single fiscal year and a qualitative evaluation of individual performance, and it is paid in twelve equal installments.
- "Medium-to-long Term Incentive Compensation" is a performance and stock-based remuneration. The company contributes money within a maximum amount of compensation resolved by a General Meeting of Shareholders to establish a trust. The trust acquires company shares and delivers them to directors through the trust on the basis of points awarded in accordance with position and performance pursuant to the share issuance rules specified by the Board of Directors. In addition to consolidated business performance in a single fiscal year and a qualitative evaluation of individual performance, the level of achievement of the company’s Medium Term Management Plan, including ROE, and TSR are also assessed. The directors are provided with the company shares at the time of their retirement as directors.
Outside directors shall be paid the base remuneration only.
The amount of compensation of individual directors is determined by the Board of Directors based on deliberation by the Compensation Committee, which is chaired by an Outside Director.
[Officer Compensation in the Fiscal Year Ended December 31, 2021]
・Directors (excluding Outside Directors) : 518 million yen (fixed compensation 304 million yen, short-term incentive compensation 95 million yen, Medium- to long-term incentive compensation 118 million yen)
・Outside Directors: 21 million yen (fixed compensation 21 million yen)
・Audit & Supervisory Board Member: 49 million yen (including Outside Corporate Auditor 33 million yen)
（4）Policy and procedures for nomination of director candidates and corporate auditor candidates
- Candidates for directors are determined from among those with extensive ability, knowledge, achievements, dignity and morality in consideration of diversity in terms of gender, age, nationality, experience and other aspects. Candidates for outside director must have management experience at other companies or high levels of expertise or deep insight, and at least one-third must satisfy Tamron's criteria for independence, to strengthen their function of supervising and advising management from an independent and objective standpoint.
To appropriately reflect extensive experience, high-level expertise or insight in its management, the Company names multiple candidates for outside directors who satisfy the criteria for independence set by the Company and who can take on the management supervisory and advisory roles from an independent standpoint. The candidates for directors are subject to approval from the Board of Directors after deliberations within the Nomination Committee chaired by an outside director.
- Candidates for audit & supervisory board member are determined from among those with extensive ability, knowledge, achievements, dignity and morality as well as a high level of expertise and insight in corporate management, legal affairs, financial affairs, accounting and the like in consideration of diversity. The Company names multiple candidates for outside audit & supervisory board member who satisfy the criteria for independence set by the Company and who can take on the management supervisory and advisory roles from an independent standpoint. The candidates for audit & supervisory board member are subject to approval from the Board of Directors after consent from the Audit & Supervisory Board .
- Dismissal of a director or other executive is to be determined by the Board of Director and after deliberations at the Nomination Committee if it is deemed appropriate due, for example, to the violation of any law, ordinance, Article of Incorporation or other rule.
（5）Explanation regarding the election and dismissal and nomination of Directors, etc.
The Notice of Convocation of General Meeting of Shareholders includes the career history of each candidate and the reasons for election.
【Supplementary Principle 3-1-3. Initiatives for sustainability, etc.】
Based on its Corporate Mission, Tamron seeks to increase its corporate value and achieve the realization of a sustainable society. Currently, as indicated by phenomena such as global warming, sustainability crises are growing steadily and progressively more severe. As concerns about social issues—such as human rights and labor issues—become increasingly serious, there are growing expectations for companies to work to resolve social issues. Tamron has identified issues that must be solved to enable sustainable growth for the company and society as key CSR issues. The key CSR issues that we have identified are incorporated into our management strategy, and we set targets for these issues each year as we engage in our corporate activities.
For detail, please refer to Tamron's website: CSR (https://www.tamron.com/csr/
) or the Integrated Report (from page.31 to page.36) posted on Investor Relations (https://www.tamron.com/ir/
【Supplementary Principle 4-1-1. Outline of scope of delegation to Management】
In addition to the matters stipulated in laws and regulations and the Articles of Incorporation, Tamron sets forth matters to be decided by the Board of Directors and the scope of delegation in internal regulations.
【Principle 4-8. Effective use of Independent Outside Directors】
（1）Tamron appoints independent outside directors with management experience at other companies or with high levels of expertise and deep insight, ensuring that at least one-third of candidates satisfy Tamron's independence criteria, to strengthen their function of supervising and advising management from an independent and objective standpoint.
（2）The Outside Directors attend Tamron’s important meetings such as meetings of the Board of Directors, Management Meetings, etc. and they also have regular meetings with Audit & Supervisory Board Members. Tamron also elects a lead Outside Director and puts in place systems for liaison, adjustment and collaboration between Outside Directors and management, Audit & Supervisory Board Members and the Audit & Supervisory Board.
【Principle 4-9. Criteria for Assessing the Independence of Independent Directors and Outside Audit & Supervisory Board Members】
The Company considers that an independent director or an outside Audit & Supervisory Board member (hereinafter, an “outside officers”) is independent if he/she satisfies the standards for independence specified by Tokyo Stock Exchange and does not fall under any of the following items.
1.Executing person of the Company and its subsidiaries (hereinafter, the “Group”).
2.The Group’s major business partner (business partner who has received payment from the Group in an aggregate amount equaling no less than 2% of its annual consolidated sales) or its executing person.
3.The Group’s major business partner (business partner who has made payment to the Group in an aggregate amount equaling no less than 2% of its annual consolidated sales) or its executing person.
4.Executing person of the Group’s major lender (lender from whom the Group has borrowed funds equaling no less than 5% of the Group’s consolidated net assets).
5.The Group’s large shareholder (person holding no less than 10% of voting rights, directly or indirectly) or its executing person.
6.Representative partner or partner of audit _rm which conducts accounting audits of the Company.
7.Consultant, attorney, certified public accountant or other persons who provide professional services who annually receive no less than 10 million yen in cash or other property benefits, other than executive compensation, from the Company
8.Administration officer or other executive persons of an organization, etc. to which the Group annually donates or provides grant in aid of no less than 10 million yen.
9.Executive person of a company with which the Company has relationships through outside executive officers;
10.Spouse or relative within the second degree of relationships of any person listed in 1 through 9 in the above (excluding those who are not important).
11.Any person who has fallen under 1, above, even once in the past, or
12.Any person who has fallen under any person listed in 2 through 10 in the past three years.
【Supplementary Principle 4-10-1. Establishment of a Nomination Committee and Compensation Committee】
Tamron has established a Nomination Committee and Compensation Committee to deliberate on the nomination, appointment, dismissal and compensation of directors and provide the Board of Directors with advice and recommendations, thereby enhancing independence and objectivity in the functions of the Board of Directors in connection with the nomination, appointment, dismissal, compensation of directors. However, Tamron has decided that elect committee chairpersons of the committee from Outside directors and more than half of the committee members should be independent outside directors.
【Supplementary Principle 4-11-1. View on balance, diversity and appropriate board size】
To ensure that the Board of Directors is able to discuss and examine matters sufficiently, make decisions swiftly and accurately, properly manage risks and supervise business execution, Tamron has decided to take the diversity and balance required to cover all of its functions and business units into consideration, have an appropriate board size of not more than 15 directors and ensure the effectiveness of the board as a whole.
Tamron discloses the skill matrix that lists the expertise and experience of each director in a notice of convocation of the General Meeting of Shareholders.
【Supplementary Principle 4-11-2. Concurrent service of Directors as executives at other listed companies】
Tamron discloses the concurrent service of its Outside Directors and Outside Audit & Supervisory Board Members at other companies every year through communications such as the Notice of Convocation of the Ordinary General Meeting of Shareholders and the Annual Security Reports. Tamron also discloses attendance at meetings of its Board of Directors and Audit & Supervisory Board, and the extent of concurrent service is reasonable, allowing Outside Directors and Outside Audit & Supervisory Board Members to dedicate the time and effort needed to properly fulfil their roles and duties.
【Principle4-11-3. Analysis/assessment of the viability of the entire board of directors】
The Company conducts a survey of the directors and corporate auditors regarding the composition and operation of the Board of Directors to self-assess the viability of the overall Board of Directors every year.
At present, discussions that contribute to the sustainable growth of the business and the enhancement of corporate value are being held. As for the governance function, the supervision of business execution and audit independence are functioning effectively. We therefore acknowledge that the viability of the entire Board of Directors is generally and appropriately secured.
The Company builds on efforts to share information on matters such as recent changes in the internal and external environment, feedback on dialogue with shareholders and investors, and progress made on plans for improvement based on such feedback, by carrying out a questionnaire with revised questions each year and once again sharing its understanding of issues based on the survey results and drawing up an improvement plan. In 2021, the Company made improvements, as of the date of filing, in the following areas, which, in light of dialogue with shareholders and investors, the purpose of the revised corporate governance code and other relevant developments, were understood to be issues.
- Improved the composition of the Board of Directors (improvement in the ratio of Independent Outside Directors to at least one-third and election of an individual with management experience at another company as an Outside Director)
- Improved the composition of the Nomination Committee and Compensation Committee (to consist of majority of Independent Outside Directors)
- Shortened the term of office of Directors (to one year)
- Reviewed the indicators for directors' compensation (added TSR (Total Shareholder Return) to the medium-term performance indicators for stock-based compensation)
- Created and disclosed a skills matrix
- Enhanced sustainability disclosures (Integrated Report, website, etc.)
The Company will continue discussions and verifications based on the survey results and work to further enhance the viability of the Board of Directors.
【Supplementary Principle 4-14-2. Training policy for Directors and Audit & Supervisory Board Members】
To fulfil their roles, Directors and Audit & Supervisory Board Members are required to constantly actively gather information and deepen their understanding of Tamron’s financial position, compliance, corporate government and other matters.
When they first take up their post, they are required to acquire necessary knowledge about Tamron’s business, finance, organizations ,etc., and they must undergo training to gain knowledge about the Companies Act and other relevant laws and regulations, corporate governance and other matters required as the officer of a listed company, in order to fulfil the role and responsibilities, including legal responsibilities, of Directors or Audit &Supervisory Board Members entrusted to them by shareholders (fiduciary duty).
After taking up their post, they are required to keep undergoing training on management, compliance and other matters on a regular basis.
【Principle 5-1. Policy for constructive dialogue with shareholders】