Corporate Governance Structure

Corporate Governance Structure

Corporate Governance Structure

Decision Making, Business Execution, and Audits

Transparency and the speed of decision-making are improved through deliberations between directors who are well versed in the Company's business and outside directors who maintain a high degree of independence. Through audits by Audit & Supervisory Board, the legality, efficiency, and rationality of the directors' activities and the appropriateness of their decisions are rigorously examined.

Further, in order to increase transparency in the appointment of outside directors and outside Audit & Supervisory Board members, in fiscal year 2014 the Company drew up independence standards for outside directors and Audit & Supervisory Board outside members.

Board of Directors

The Board of Directors, of which meeting is held once a month in principle, is comprised of ten directors including four independent outside directors, aiming to achieve sustainable growth and increase corporate value of the Group over the medium to long term as a decision-making body. To achieve these goals, the Board of Directors improves profit-earning capability and capital efficiency, and determines the general direction of the Group, including corporate strategies. Also, in addition to monitoring and supervising execution of business by management, including directors and officers, the Board of Directors develops provisions related to the execution of duties by directors, and establishes a framework to take supervision responsibility related to the execution of business.

The Board of Directors has a maximum of 15 members, as specified in the Company's Articles of Incorporation. In order to help ensure that corporate management maintains the trust of shareholders, the term of office for directors is set at one year.

Third-party Evaluation of the Board of Directors
In fiscal year 2015, the Company's Board of Directors conducted an evaluation of the Board of Directors with support of J-Eurus IR Co., Ltd., an external organization. The Board of Directors held discussions on the outcome of evaluation, and analyzed and assessed the effectiveness of the Board of Directors.

The Board of Directors confirmed that the structure to fulfill the supervisory function for management has been established in terms of the size, composition, operation, attributes of each member, status of committees, and other factors. The Board of Directors also confirmed that each Director and Audit & Supervisory Board Member proactively participated in open, vibrant discussions at the Board of Directors meetings, the proceedings of which the chairman controlled appropriately. Consequently, the Company considers that the Board of Directors functions effectively.

Issues to be addressed that were pointed out were the need for greater focus in discussions on essential subjects to be deliberated at the Board of Directors and strengthening of the succession plan. To address these issues, the Board of Directors Office, an organization to provide support to the Board of Directors, was established.

The Company will continue its efforts to achieve improvement, including screening and prioritization of subjects and enhancement of the Nomination Advisory Committee's activities.

Management Board

To expedite the decision-making process of the Board of Directors, decisions regarding business execution are delegated to the Management Board. The Management Board consists of the president, officers, subsidiary heads who report directly to the president (including four foreign nationals), and standing members of the Audit & Supervisory Board. It meets once a month in principle.

Its decisions are reported to the Board of Directors.

Audit & Supervisory Board

The Audit & Supervisory Board has four members, two of whom are from outside Yokogawa, and meets once a month in principle. Its members carry out auditing in accordance with an annual plan that specifies priority audit items. Audit & Supervisory Board members also attend meetings of the Board of Directors and the Management Board as well as other important meetings and hold regular meetings with departments involved with internal auditing, legal affairs, and business ethics, the last of which promotes the compliance system. At these meetings, they exchange opinions, share information about the status of their activities, and actively present recommendations. In addition, the Audit & Supervisory Board members deepen mutual cooperation with the accounting auditor and exchange information with the accounting auditor regularly and as needed to improve the quality of audits by both sides and make the audits more efficient.

Nomination Advisory Committee and Compensation Advisory Committee

The Company has established the Nomination Advisory Committee and the Compensation Advisory Committee as voluntary advisory bodies to give opinions in response to consultations from the Board of Directors regarding nominating directors and determining compensation.

The Nomination Advisory Committee and the Compensation Advisory Committee are each composed of six directors appointed by the Board of Directors, and four of the six members of each committee are outside directors.

Nomination Advisory Committee
With respect to the appointment of Director and Audit & Supervisory Board Member candidates, the selection of officers and the next representative director and president as well as the qualities (attributes, track record, etc.) sought after in directors, the Nomination Advisory Committee shall give advice so as to ensure that, from the perspective of all stakeholders, suitable personnel is in place to contribute to the Group's sustainable growth as well as its corporate governance.

Compensation Advisory Committee
The Compensation Advisory Committee shall give advice so that the compensation system and compensation for Directors and officers encourage appropriate challenges targeting the Group's growth, help to hire and retain excellent human resources, and which are suitable from the perspective of all stakeholders.

The Compensation Advisory Committee considered and recommended the introduction of a restricted stock compensation plan to provide incentives for directors to achieve sustainable enhancement of the Company's corporate value and to promote shared values among directors and shareholders.