Corporate Governance

Basic Concept

We are pursuing sustainable growth and medium- to long-term enhancement of corporate value under our group management philosophy of "For Confidence and Infinite Challenges."
We have adopted customer first, safety first, and social contribution as our action guidelines.
As part of management structure reform, we have also introduced a holding company structure to create an efficient management framework by separating management decision-making and supervisory functions from business execution functions.
We attach great importance to enhancing corporate governance, and have established a framework to earn the trust and appreciation of stakeholders to accelerate corporate growth and enhance corporate value.
For details, please refer to our "Approach to Each Principle of the Corporate Governance Code".

Approach to Each Principle of the Corporate Governance Code(Japanese Only)

Corporate Governance Framework

Initiatives to Strengthen Corporate Governance

Management (Management Framework)

Based on decisions made by the Board of Directors, we have introduced a one-year term of office for Directors and an Executive Officer framework to facilitate the efficient execution of operations in response to rapid changes in the business environment.
In addition, four Audit & Supervisory Board Members, including three Outside Directors and two Outside Audit & Supervisory Board Members (one full-time Audit & Supervisory Board Member and one part-time Audit & Supervisory Board Member), supervise the execution of business by Directors, and we believe that the management supervision function is sufficient.
Outside Directors and Audit & Supervisory Board Members make useful recommendations from an independent and impartial standpoint, utilizing their extensive knowledge and experience in general management, laws and regulations, finance and corporate governance, etc.
In addition, each Audit & Supervisory Board member attends important meetings such as the Group Management Strategy Meeting to become familiar with our Group's business activities and enhance the effectiveness of management supervision.

Governance Committee

To ensure transparency and fairness in management, we have established the Governance Committee, the majority of whose members are Outside Directors, and serves as an advisory body to the Board of Directors.
The Committee deliberates on policies for the appointment and dismissal of senior management and Audit & Supervisory Board members, policies on the compensation structure and amount of compensation for directors, and matters related to corporate governance, and provides opinions and advice to the Board of Directors.
The composition of the Governance Committee is shown on the right.

Structure of Outside Officers(as of June 29, 2023)

Expertise and Experience of Officers (skills matrix)

Assessment of Effectiveness of Board of Directors

The Company conducts an annual self-assessment in the form of a questionnaire to ensure that the Board of Directors is appropriately fulfilling its roles and responsibilities and to ensure its effectiveness.

1) Evaluation and analysis methods

In March 2024, we conducted a survey among all Directors and Audit & Supervisory Board Members, asking closed and openended questions on the following. The Board of Directors evaluated these aggregate results at its April meeting and reviewed the current strengths and challenges of the Company's Board. The implementation and tabulation of the survey were outsourced to a third-party organization to ensure objectivity.

Survey items: 8 categories, 33 questions

• Roles and functions of the Board of Directors
• Composition and size of the Board of Directors
• Operation of the Board of Directors
• Cooperation with audit institutions
• Relationship with Outside Directors
• Relationship with shareholders and investors
• Operation of Governance Committee
• General overview

2) Evaluation

The Company's Board of Directors continues to assess that the effectiveness of the Board of Directors is largely ensured, as it was in the previous fiscal year. We verified that systems for auditing/ supervising and coordination are structured appropriately, in particular in that the Board of Directors properly supervises the implementation of a whistle-blower system and that regular meetings are held between Outside Directors and the Audit & Supervisory Board. We also verified that discussions from a medium- and long-term perspective in Board of Directors meetings have gradually begun. However, we recognize certain issues requiring attention, such as a successor plan, which remains under discussion by the Governance Committee discussions, and reporting of Board resolutions, and will examine concrete measures going forward.

Examples of Key Discussions at the 2023 Board of Directors Meetings

Group structure reorganization

We held extensive discussions on transitioning from a pure holding company to a business holding company structure to achieve our vision, Ideal Carlit Group in 2030, through faster decision-making, streamlined administrative departments, and human resource rebalancing. To promote our growth strategy, we carefully discussed a merger by absorption between Japan Carlit Co., Ltd., and Silicon Technology Corporation.

Grow Up Plan 2024

We held discussions based on analysis of capital profitability and market valuation to achieve our Mid-Term Management Plan Challenge 2024 and respond flexibly to changes in the business environment. We decided on Grow Up Plan 2024, which focuses on creating more advanced management with an awareness of the cost of capital and stock prices and includes the policy of reducing cross-shareholdings and stable performance-linked dividend payment, as an additional measure for the final fiscal year of the Mid-Term Management Plan.

Officer Compensation

Policy for determining the details of Officer compensation, etc.

The Company determines policies for determining the details of compensation for individual Directors through resolutions by the Board of Directors.
Before reaching these resolutions, the Board of Directors requests and receives advice from the Governance Committee.

Basic policy

Our basic policy for determining compensation for individual Directors is to set it at appropriate levels for their responsibilities under a system linked to shareholder interests so that the compensation serves as a sufficient incentive for the Directors to persistently strive to improve the corporate value.
Specifically, compensation for Directors with executive authority over operations comprises basic compensation, which serves as their fixed compensation, and bonuses, while Outside Directors, who are tasked with supervisory functions, are only paid the basic compensation in light of their duties.

Compensation structure

Type of compensation

Base compensation

As basic compensation, Company Directors are paid a fixed monthly amount determined based on many factors, including their position, responsibilities, what other companies are paying, Company performance, and Company employee wage levels as well as assessments of their duties.

Bonus(Performance-linked stock compensation plan "Board Benefit Trust (BBT)")

• The Company's performance-linked stock compensation plan aims to raise Directors' motivation to contribute to improving performance and increasing corporate value over the medium and long term by clarifying the link between Director compensation and Company performance and share price.
• The maximum total performance-linked stock compensation for a single fiscal year is ¥60 million.
• Directors (excluding Outside Directors) are awarded points corresponding to their level of achievement based on Company regulations for granting shares to Officers. Consolidated ordinary profit serves as the baseline for assessing their level of achievement.
  Consolidated ordinary profit was selected as the baseline metric rather than operating profit, which reflects business activities and fluctuates in response to financing activities, because it expresses the overall profitability of management activities.
  Directors are granted shares of the Company corresponding to the number of points awarded when they acquire rights to receive benefits under certain conditions. In principle, they receive the shares when they step down from their position as Directors.
  The granted shares are acquired from the market or through disposal of the Company's treasury stock using money set in trust in advance

Performance-linked stock compensation plan "Board Benefit Trust (BBT)"

The number of points to be awarded is calculated using the following formula, and points are awarded to the scheduled recipients each year on the day on which the Annual General Meeting of Shareholders concludes.

Table 1︎ Funds for Distribution

Table 2. Point Percentages

Total amount of compensation, etc. for each category of officers (FY2023)