Corporate Governance

Corporate Governance Report

    Basic Policy on Corporate Governance

    Fundamental Approach toward Corporate Governance

    Our Group aspires to be a valuable contributor to all kinds of our stakeholders in the society, including the shareholders, the employees, the business partners and others, by promptly and appropriately responding to the changes in the business environment and continuing operational activities which enable the Group to achieve a sound growth. For this purpose, the  Group  has  placed  the  greatest  importance  on  enhancement  of  corporate  governance,  and  in  particular,  “fully  cultivating compliance mind,” “enhancing risk management” and “conducting timely disclosure” as three key initiatives. Furthermore,  the  Group  is  determined  to  make  efforts  in  a  unified  manner,  from  the  top  management  down  to  each  employee of the Group companies, led by the Board of Directors, to develop an internal control system as required by the Companies Act and the Financial Instruments and Exchange Act, as well as to set up a system which is credible to investors, as a financial instruments business operator.

    Our Idea of Corporate Governance

    Our Group aspires to be a valuable contributor to all kinds of our stakeholders in the society, including the shareholders, the employees, the business partners and others, by promptly and appropriately responding to the changes in the business environment and continuing operational activities which enable the Group to achieve a sound growth. For this purpose, the Group has placed the greatest importance on enhancement of corporate governance, and in particular, "fully cultivating compliance mind," "enhancing risk management" and "conducting timely disclosure" as three key initiatives.
    Furthermore, the Group is determined to make efforts in a unified manner, from the top management down to each employee of the Group companies, led by the Board of Directors, to develop an internal control system as required by the Companies Act and the Financial Instruments and Exchange Act, as well as to set up a system which is credible to investors, as a financial instruments business operator.

    Three Important Items in Corporate Governance. Group-wide Promotion of three Committees

    Compliance

    We place compliance at the top of our agenda and raise awareness of it from top management to all employees of the Group companies.

    Risk Management

    Assuming every possible risk, we prepare and practice emergency responses under normal conditions with a special focus on eliminating relationships with anti-social forces.

    Information Disclosure

    We practice disclosure and communication appropriately and on a timely basis to all stakeholders including shareholders.

    Corporate Governance System

    Diagram of Corporate Governance System

    as of 29 February,2020

    Operation of the Meetings of Board of Directors

    The Board of Directors is constituted by Seven directors, two of whom are outside directors.
    Based on the regulations of the Board of Directors, the directors hold regular meetings every month, and extraordinary meetings are held as necessary. As the highest management decisionmaking body, the Board of Directors makes resolutions on management policies and material issues and also supervises the execution of duties by the directors.

    Executive Officer system

    The Company has adopted the executive officer system in order to more clearly segregate the monitoring/supervision of the Company's business management, which is the duty and responsibility of the directors, from the execution of the business, and has 10 Executive Officers as of the end of November 2019. Executive Officers are elected by the Board of Directors, and the Management Meeting, which is made up of the Executive Officers, discusses matters to be resolved at the board meetings in advance and holds consultations on the material issues to be decided by the CEO.

    Nominating and Compensation Advisory Committee

    The Company established the Nominating and Compensation Advisory Committee voluntarily as a consultative body to the Board of Directors to ensure appropriateness and transparency in such matters as the process of selecting candidates in connection with director election proposals submitted to the general meeting of shareholders and resolutions of the Board of Directors relating to allocation of remuneration, etc. to individual directors. The constituent members of the committee include a representative director (one person), a full-time director (one person), outside director(s) (independent director(s), one person or more), and a full-time audit & supervisory board member (outside audit & supervisory board member, one person). An outside director who is a committee member will assume the office of the chair of committee.
    The Board of Directors will continue to fulfill its mandate from the Company's shareholders and investors by respecting the recommendations of the committee to the maximum extent and developing an appropriate governance system.

    Three-way auditing (coordination of audits by corporate auditors, internal audits, and audits by the accounting auditor)

    Audits by corporate auditors The Audit & Supervisory Board Members carry out an efficient and effective audit under an annual audit plan in cooperation with the accounting auditor and the Internal Auditing Department. The full-time Audit and Supervisory Board Members regularly interview each fulltime Director and head of each department and check the status of business execution. They also regularly exchange opinions with Independent Directors.
    Internal audits As a department directly controlled by the President, the Internal Auditing Department carries out an audit of the entire Group under an annual plan and helps correct inadequacies by recommending actions and conducting follow-up activities, including giving specific guidance.
    Audits by the accounting auditor The accounting auditor carries out an audit under an annual audit plan. It carries out not only a fiscal year end audit but also quarterly reviews (accounting auditor: Shinsoh Audit Corporation).

    Status of Outside Directors

    The Company has three outside directors and four outside audit & supervisory board members.With regard to the nomination of Outside Directors, the Company elects persons who can oversee the management from an independent and objective standpoint and be expected to provide constructive advice and recommendations to Directors concurrently serving as Executive Officers. In nominating Outside Audit & Supervisory Board Members, the Company elects persons who can be deemed to audit the operation of the Board of Directors and execution of duties of Directors from an independent standpoint, and who are expected to provide constructive advice and recommendations for the increase of corporate value with their knowledge.

    The reasons for selection of Independent officer

    Outside Directors
    name reasons

     Kenichi Shohtoku

    Outside Director Kenichi Shohtoku has contributed to strengthening the governance system of the Company and the Group by providing valuable advice on various occasions including the Board of Directors meetings and liaison meetings with the Audit & Supervisory Board Members of the Company since assuming office of Outside Director of the Company in February 2012, while leading SCS Global Consulting (S) Pte Ltd as a representative director. In addition, with respect to the overseas activities, etc. of the Company, the Company benefits from his suggestions based on the expertise cultivated through his abundant overseas experiences mainly in consulting as a certified public accountant. In view of the growth of the Group in terms of management over the medium- to long-term, including overseas expansion, the Company deems that his reappointment will contribute to the interests of the Group, and in turn, common interests of its shareholders.

    Hiroyuki Kobayashi

    Outside Director Hiroyuki Kobayashi has abundant experience at a bank and a securities company which is extremely valuable in ensuring the effectiveness of its Board of Directors, as the Company operates the financial instruments business. In addition, as the Company is promoting a group expansion strategy, it may expect objective monitoring and proposals can be expected from him as Outside Director from the aspect of group governance drawing on his expertise in organization development and M&As. In light of the mid- to long-term growth of the management of the Group, we determined that electing him would contribute to the interests of the Group and, turn, the common interests of its shareholders.

    Masao Yamanaka

    Outside Director Masao Yamanaka has provided many companies with legal advice and involved in multiple large-scale corporate legal affairs. He possesses abundant experience as an attorney-at-law and a high level of expertise on corporate legal affairs. In addition, as the Company is promoting a group expansion strategy, it may expect objective monitoring and proposals can be expected from him as Outside Director from the aspect of group governance. In light of the mid- to long-term growth of the management of the Group, we determined that electing him would contribute to the interests of the Group and, turn, the common interests of its shareholders.

     Outside audit & supervisory board member
    namereasons

    Hitoshi Yagi

    Full-time outside audit & supervisory board member Hitoshi Yagi has abundant experience and specialist knowledge acquired at audit divisions of major financial institutions As such, the Company believes that he can fulfill his responsibilities of securing adequacy and appropriateness in the Company’s management.

    Toshinori Kuroda

    Full-time outside audit & supervisory board member Toshinori Kuroda has abundant experience including overseas assignment primarily at a major financial institution as well as specialist knowledge and the Company believes that he can perform a role in ensuring the adequacy and appropriateness of the Company’s management.

    Tatsuki Nagano

    Outside audit & supervisory board member Tatsuki Nagano has experience at major financial institutions and continues to be involved in corporate management and the Company believes that he can utilize his extensive experience and a high level of expert insight to perform a role in ensuring the adequacy and appropriateness of the Company’s management.

    Osamu Doi

    The Company believes that Osamu Doi can perform a role in ensuring the adequacy and appropriateness of the Company’s management based on his abundant experience at major securities 53 companies and at companies that conduct investment banking activities as well as his specialist knowledge.

    Policy for Determining Director Compensation

    Remuneration for full-time Directors consists of monetary remuneration, comprising a “fixed salary” which is scaled according to duties, “performance evaluation remuneration” which is based on the achievement of individual goals such as the performance of each full-time Director, and “Directors’ bonuses” which are linked to consolidated profit before tax, and “stock options” which are aimed to increase the desire and motivation to contribute to the medium- to long-term enhancement of corporate value

    Due to the emphasis on their supervisory function from a standpoint independent of the execution of business, Outside Directors’ remuneration is composed of a “fixed salary” and “stock options” only. No “performance evaluation remuneration” or “Directors’ bonuses” are paid to Outside Directors. The Representative Director drafts proposals for each Director’s remuneration, which are discussed by the Nomination and Compensation Advisory Committee, before being decided by resolution of the Board of Directors.

    Fixed salary

    On the basis of comparisons with the results of surveys of Directors’ remuneration at listed companies, 56 conducted by external specialist agencies, and surveys of the levels of Directors’ remuneration at the Company’s competitors, conducted by the Company, as well as comparison with the highest amounts of remuneration paid to employees of the Company, the Company has established fixed salary scaling guidelines, based on Directors’ duties and posts held by Directors concurrently serving as Executive Officers. Remuneration for each individual Director is discussed by the Nomination and Compensation Advisory Committee, before being decided by the Board of Directors.

    Performance-linked remuneration (performance evaluation remuneration and Bonus)

    The “performance evaluation remuneration” for full-time Directors is based on their individual achievement of single-year performance targets. A “standard evaluation remuneration amount” equal to 33% of the fixed salary is paid monthly together with the fixed salary, and where there is an adjustment based on the achievement of performance targets (of between +55% and -50% of the standard evaluation remuneration), this will be paid as a lump sum together with Directors’ bonuses after the conclusion of the Ordinary General Meeting of Shareholders held during the fiscal year. “Directors’ bonuses,” which are linked to single-year consolidated profit before tax, are calculated by multiplying the fixed salary per annum by a factor, which is the sum of a predetermined factor based on the level of profit before tax, and an extra factor where the single-year target profit before tax has been achieved. This is paid as a lump sum after the conclusion of the Ordinary General Meeting of Shareholders held during the fiscal year

    Stock options

    In order to practice corporate management with a focus on enhancing corporate value over the medium- to long-term, the President and Representative Director drafts proposals for the number of stock options to be granted to each Director, based on the Director’s duties as well as posts held concurrently by the Director as Executive Officer, for each medium-term management plan. These proposals are examined by the Nomination and Compensation Advisory Committee, before being decided by the Board of Directors. A fixed number of stock options are granted to Outside Directors, considering the importance of their management monitoring and supervisory function aimed at enhancing corporate value.

    • Audit & Supervisory Board Members, considering their role, are remunerated with a fixed salary only. Remuneration for each Audit & Supervisory Board Member is decided through discussion of the Audit & Supervisory Board, within the limits of the maximum total amount.

    Amount of Remuneration for Executive Officers

    PositionTotal amount of remuneration, etc. (¥ thousand)

    Total amount by type of remuneration, etc. (¥ thousand)

    Number of recipients (Person)
    Basic remunerationperformance evaluation remunerationBonusStock Option
    Directors (excluding outside directors) 222,030 135,648 44,836 36,486 5,060 7
    Audit & supervisory board members (excluding outside audit & supervisory board members)
    Outside officers 49,076 48,840 236 7

    ※FY2020

    Compliance

    The Tosei Group puts top priority on compliance in management. Everyone in the Group from senior executives to general staff was made aware of compliance.

    Compliance promotion system

    Risk Management and Compliance Committee

    The Company established the Risk Management and Compliance Committee comprising the Executive Officers in charge of each department, all department general managers as well as the risk management and compliance officers of each group company, as an organization to centrally consider risk management and compliance across the Tosei Group. The Committee recognizes, analyzes and assesses the risks of the Group as a whole, gathers information about specific risks and discusses measures to address them and also holds consultations on the promotion of compliance. It raises awareness about compliance, implements a PDCA cycle for risk management and strengthens monitoring in accordance with a "Risk Management and Compliance Program" formulated each fiscal year.

    Response to anti-social forces

    We implement measures as an organization to combat antisocial forces, seeing the elimination of any association with them as a priority. In the event any dispute arises between the Company and anti-social forces, we will stand firmly against them. In addition to providing the basic policies for eliminating any contact with anti-social forces and the checkpoints on the specific actions in the Tosei Group Risk Management and Compliance Guidebook, it has developed "The manual for acting against anti-social forces." In day-today operations, we make it a rule to research and confirm that a new business counterparty is not an anti-social force, prior to the commencement of any transaction.

    Education and training

    In FY2019, we continued to provide group training and online training to all employees, including training on how to deal with anti-social forces, insider trader training, training on the financial instruments business, ESG training and mental health training.
    We also implemented initiatives to raise awareness about compliance such as distributing video learning content about compliance and displaying compliance slogans.

    Risk Management

    Assuming every possible risk, we prepare and practice emergency responses under normal conditions with a special focus on eliminating relationships with anti-social forces.

    Risk management system

    With respect to risk management, which the Tosei Group recognizes to be equally as important as compliance, the Group established the Risk Management and Compliance Committee to recognize and assess risks, to gather information about specific risks and to discuss measures to address them.

    Risk Management and Compliance Guidebook

    Tosei prepared and distributed the Tosei Group Risk Management and Compliance Guidebook as a detailed guide to help Group officers and employees accurately understand risk management and compliance and put compliance activities into practice and are seeking to raise compliance awareness through training and other measures.

    Action in the event of a crisis or disaster

    The Company recognizes situations that are potentially damaging to its corporate value, such as large-scale natural disasters and incidents, accidents, and events that impact generally on customers, residents and wider society, as management crises and, if such an event were to occur, it would set up a Crisis Management Taskforce headed by the CEO, as provided for in the Risk Management and Compliance Regulations, and would take action to control the situation in collaboration with the Risk Management and Compliance Committee members and relevant departments. We have also established a Crisis Communications Manual to speed up and facilitate corporate communication activities in the event of a crisis and are working to raise awareness about dealing with crises properly.

    Action to ensure business continuity

    The Company has formulated a Business Continuity Plan (BCP) to ensure that, in the event of a natural disaster, incident, accident or other event that forced the Company to suspend its core business operations or that made business activities under the normal organizational/personnel structure difficult, the Company would be able to swiftly implement measures to continue business or resume business quickly. Besides formulating a Disaster Response Manual detailing the steps from gaining a basic understanding of the disaster through to making an initial response in the event of earthquake, fire or other disaster, right down to conducting evacuation and relief activities, we also conduct a range of drills including evacuation drills, AED practice drills, and in-house fire-fighting team fire drills.

    Information asset management

    Recognizing that information assets are one of our most important management resources, we have set out provisions on developing and maintaining information management environments in order to properly protect and efficiently utilize information in the Basic Policy on Information Asset Management, and we have established Information Asset Management Regulations and Personal information Protection Rules. Tosei also provides information asset management Training based on its Risk Management and Compliance Program and works to raise awareness about information asset management rules and increase literacy with regard to information asset management.

    TOSEI's Group Ethics Code

    To fulfill our corporate social responsibility, we consistently value a law-abiding spirit when pursuing the Group's Corporate Philosophy, and conduct our business activities in adherence with the principles below:

    1. 1.Integrity and customer focus
      We constantly maintain a sense of humility and integrity in our business activities, acting from the perspective of customers and working to ensure the safety and security of the products and services we provide.
    2. 2.Prompt and appropriate information disclosure
      We promptly and appropriately disclose the information necessary to retain a fair evaluation and understanding from investors and society.
    3. 3.Fair and transparent decision-making
      We make decisions based on appropriate and accountable grounds, in compliance with laws and regulations and internal rules.
    4. 4.Strict compliance with all laws and regulations, and fair trade practices
      We understand the intent and purpose of laws and regulations in domestic and global contexts, and will never engage in transactions that are illegal or otherwise in violation.
    5. 5.Rejection of relations with anti-social forces
      We will reject all ties with antisocial forces and will act resolutely as an organization in dealing with problems and other incidents involving them.
    6. 6.Protection of confidential information
      We will protect and strictly manage all important business information, personal information of customers, information of business partners, and other confidential information.
    7. 7.Establishment of sound operating environment
      We will constantly strive to establish a sound operating environment that always respects human rights, without discrimination or abuse, and will aim for the sound development of our human resources.
    8. 8.Consideration for the environment
      We will remain constantly aware of the importance of environmental issues, and will seek to reduce the environmental footprint of our corporate activities.
    9. 9.Social contribution
      We will remain committed to our CSR activities as a good corporate citizen.
    10. 10.Senior management commitment
      Our senior management will take a leading role in dealing with any violations of these principles, working to investigate the cause and prevent a recurrence. They will fulfill their responsibility to explain to the market and society, including making timely and appropriate information disclosures, and deal fairly and strictly with the offenders, including themselves.

    Timely and appropriate disclosure

    In addition to information disclosed under the Companies Act, the Financial Instruments and Exchange Act, among other laws and regulations, and rules of stock exchanges, the Tosei Group provides corporate information in a timely and appropriate manner to stakeholders, such as shareholders, investors, and business partners, through IR activities and the website.

    Holding of financial results presentations and briefings for individual investors

    個人投資家向け説明会(オンライン)
       Briefing for individual investors

    We hold earning results briefings by top management twice a year (in the second quarter and at the end of the fiscal year), mainly for institutional investors and analysts. We also hold individual meetings with institutional investors and briefings for individual investors to ensure two-way communication, and actively conduct IR activities by visiting overseas institutional investors in Europe and Singapore. Through these efforts, we are striving to gain a better understanding of our company from our stakeholders.

    Disclosure on the website and external evaluation

    As a result of the listing of our shares on the Singapore Exchange, we now simultaneously disclose information in English and Chinese.
    We endeavor to convey how our earning results briefing went to those who were unable to attend by posting the video of our earning results briefing and the corresponding presentation materials on our website and we try to enhance the information we disclose. We also release corporate information for a wide range of stakeholders, including ESG information, and share and shareholder information. In evaluations by third-party organizations that award listed companies for their IR activities, we were rated highly for the availability and ease-of-use of our IR information.