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Corporate Governance

Corporate Governance

Fundamental Corporate Governance Policy

Further Boosting Corporate Value

The Daikin Group believes that the role of corporate governance is to accelerate decision making and operational execution work in anticipation of and in response to changes in management tasks and the management environment while concurrently promoting consistently high levels of management transparency and soundness, thereby increasing the Group's corporate value.

Going forward, the Group will continue to raise corporate value by ensuing the increasing sophistication of speedy management and still-higher levels of soundness and transparency. We will achieve this by constantly reviewing and implementing optimal corporate governance and by spreading best practices throughout the entire Daikin Group.

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Corporate Governance Structure

Management and Operational Execution Systems

Rather than adopt a U.S.-style "committees system" that completely separates decision making and work supervision from operational execution, Daikin Industries, Ltd. has adopted an "integrated management" system that it has judged to be effective in speeding up decision making and execution based on the Daikin Group’s characteristics. In an integrated management system, directors quickly make strategic decisions and conduct sound supervision, thus achieving management responsibility through cooperation across all management and at the same time achieving work execution responsibility. The company is also strengthening monitoring functions from an independent perspective through measures such as the appointment of numerous external corporate officers. In addition, Daikin Industries, Ltd. has introduced an Executive Officer System to accelerate the speed of execution based on autonomous judgments and decisions in units handling each region, division, and function.

Directors are selected with an emphasis on having a diverse range of personnel representing people of varying genders, nationalities and experience. As of June 2017, we have 11 directors (including one woman and one non-Japanese national) who oversee prompt and strategic decision making and sound management throughout the entire Group.

Daikin Industries, Ltd. appoints three external directors and two external members of the corporate auditors with no vested interest in our company. We ensure these external directors have abundant experience and deep insight and can, therefore, offer a sophisticated perspective on a broad range of issues as they participate in decision making and supervise management. Our main selection criterion therefore is directors of listed companies with a wealth of business experience.

We also ensure that our external directors do not hold more than five positions (including their position with Daikin Industries, Ltd.).

To ensure that the external directors can effectively contribute to Daikin Industries, Ltd.’s corporate governance system, the employees in the Management Planning Office are assigned to strive to provide the external directors with early notice of Board of Directors meetings. In addition, in the case that an external director is not able to attend a Board of Directors meeting, the assistants provide the external director with related materials and subsequently provide the external director with an explanation of the proceedings of the meeting and provide other assistance.

Audit System

Daikin Industries, Ltd. employs an Audit and Supervisory Board and seeks to nominate two or more outside members to its Audit and Supervisory Board. The principal nomination criteria for external Audit and Supervisory Board members are the same as those for external directors and include independence from the Company in terms of not having a relationship of interest with the Company. As of June 2017, Daikin Industries, Ltd.’s four Audit and Supervisory Board members include two external Audit and Supervisory Board members.

The external Audit and Supervisory Board members attend meetings of the Board of Directors as well as other important meetings and receive reports. In addition, they are able to express diverse opinions.

To ensure effective audit functions, the Audit and Supervisory Board receives reports on important issues related to management and performance when necessary and also investigates relevant units, confirms approval of documents, and regularly exchanges opinions with representative directors, executive officers, and the independent auditors.

To ensure the effectiveness of audit and supervisory board members, there is the Office of Audit and Supervisory Board Members and support staff for assisting audit and supervisory board members in their duties. Staff of the Office of Audit and Supervisory Board Members carry out their duties under the orders of corporate auditors. Audit and Supervisory Board members’ decisions on employee transfers and evaluations take into account the opinions of the Audit and Supervisory Board.

Organizational Structure Supports Speedy Management Implementation

We are striving to ensure prompt decision-making by having a smaller number of directors and having them take part in practical debate on issues. Three organs—the Board of Directors Meeting, the Group Steering Meeting, and the Executive Officers Meeting—are the main decision-making bodies and as a rule each is convened once a month.

The Board of Directors is the Group-wide decision-making body for items stipulated in laws, regulations, and articles of incorporation. The board periodically conducts self assessments with regards to its effectiveness. In fiscal 2015, the Board of Directors Meeting was convened 16 times, with external directors attending on average 91% of the meetings and external Audit and Supervisory Board members attending on average 84% of the meetings.

The highest deliberation organ for the Group’s management system is the Group Steering Meeting, which strives to constantly speed up the pace at which Daikin decides on future direction and solves issues related to important management policy and strategies. The Group Steering Meeting was convened six times in fiscal 2015.

To ensure that the interests of stakeholders other than shareholders are respected and protected, the Board of Directors oversees the Internal Control Committee, the Corporate Ethics and Risk Management Committee, the Information Disclosure Committee, and the CSR Committee.

Corporate Governance Structure (as of end of June 2017)

Corporate Governance Structure (as of end of June 2017)

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Corporate Officer Remuneration, Etc.

To ensure the transparent management of its corporate officer personnel and remuneration processes, Daikin Industries, Ltd. has established the Human Resources and Compensation Advisory Committee. This committee engages in discussions and deliberations regarding issues including corporate officer nomination criteria, corporate officer candidates, and remuneration. The committee consists of five members, including three external directors, one in-house director, and one executive officer, with the committee chair being chosen from the external directors.

The remuneration of directors and Audit and Supervisory Board members is determined so as to fall within the aggregate remuneration ceiling for directors and corporate auditors as set by a resolution at the general shareholders’ meeting. Based on a report from the Human Resources and Compensation Advisory Committee, the directors’ remuneration is determined by a resolution of the Board of Directors while the corporate auditors’ remuneration is determined by a resolution of the Audit and Supervisory Board.

Daikin Industries, Ltd.’s corporate officer remuneration system is designed to accord with the Group’s management policy and respond to shareholders’ expectations by increasing corporate officers’ motivation to promote a sustained increase in Group performance over the medium to long term and thereby contributing to a rise in the Group’s corporate value.

Directors’ remuneration includes “fixed compensation,” “performance-linked compensation” that reflects the Group’s short-term performance (net sales and operating income) and each director’s job responsibilities, and “stock options” that reflect the Group’s medium- to long-term performance. The performance-linked compensation of Daikin directors is given a somewhat higher ratio of linkage with performance than average to ensure that the incentive effect of that compensation is sufficient.

The remuneration of external directors and corporate auditors includes “fixed compensation” only.

Compensation levels are determined based on consideration of Daikin’s performance and remuneration levels compared to those of other leading manufacturing companies in Japan after analyzing and comparing data from an outside specialized institution on the remuneration of corporate officers active in approximately 200 Japanese companies listed on the First Section of the Tokyo Stock Exchange.

In fiscal 2015, the CEO’s annual compensation was 230 million yen and the median employee compensation was 7.1 million yen. The CEO-to-employee pay ratio was thus 32-to-1.

Corporate Officer Remuneration (Fiscal 2015)

Category Total compensation
(Million yen)
Fixed compensation
(Million yen)
Performance-linked compensation
(Million yen)
Persons paid
Base compensation Stock options Bonus
Director (Excluding external directors) 1,254 775 128 350 10
Audit and Supervisory Board member (Excluding external Audit and Supervisory Board members) 65 65 - - 3
External corporate officers 59 59 - - 4

Corporate Officers with Compensation Over 100 Million Yen (Fiscal 2015)

Name Total compensation (Million yen) Category Company Total of different types of compensation (millions of yen)
Base compensation Stock options Bonus
Noriyuki Inoue 338 Director Daikin Industries, Ltd. 213 27 97
Masanori Togawa 230 Director Daikin Industries, Ltd. 138 27 65
Ken Tayano 176 Director Daikin Industries, Ltd. 109 13 41
President Daikin (China) Investment Co., Ltd. (Consolidated subsidiary) 12 - -
Guntaro Kawamura 119 Director Daikin Industries, Ltd. 75 13 30
Masatsugu Minaka 117 Director Daikin Industries, Ltd. 6 13 29
Director Daikin Europe N.V. (Consolidated subsidiary) 67 - -
Jiro Tomita 105 Director Daikin Industries, Ltd. 61 10 33
Takashi Matsuzaki 103 Director Daikin Industries, Ltd. 61 10 31

Accounting Auditor Compensation (Fiscal 2015)

Auditing expenses 201 million yen
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Group-Wide Governance

To ensure governance throughout the entire Group, including companies acquired by Daikin, the Group Management Meeting aims for action based on unified opinion throughout the Group. It does this by sharing important Group policies and basic strategies, as well as providing support for problem-solving in Group companies. The Group Auditors Meeting, made up of auditors from the main Group companies, works to strengthen auditing and control functions throughout the Group and ensure that these functions are working to the fullest.

To further raise corporate governance and Group management as a multinational company, Daikin has put a Chief Global Group Officer position in place. Under this position, the Group strives to further improve cohesiveness across global operations.

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