Daikin 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. The Group will continue to raise corporate value by ensuing the increasing sophistication of speedy management and still-higher levels of transparency and soundness. We will achieve this by constantly reviewing and implementing optimal corporate governance and by spreading best practices throughout the entire Daikin Group.
Rather than adopt a U.S.-style "committee system" that completely separates decision making and work supervision from operational execution, Daikin Industries, Ltd. has adopted an "integrated management" system that provides more advanced management. We believe that this system is 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 and appropriate supervision and guidance, thus achieving management responsibility through cooperation across all management and at the same time achieving work execution responsibility through prompt action. Directors make decision, execute operations, and provide supervision and guidance in an integrated manner, thus executing their own decisions and taking responsibility for seeing these through. We appoint numerous external officers, who monitor the execution of operations from an independent perspective and offer appropriate supervision and advice during decision making, in the process taking responsibility for supporting our "integrated management" from the standpoint of transparency and soundness. To improve actual execution of operations, Daikin Industries, Ltd. has introduced an Executive Officer System, whose members are appointed by the Board of Directors. The goal of this system is 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. This helps us globalize, expand our scope of business, and achieve diversity in management. With the guidepost of ensuring that our external, female, and non-Japanese national directors are independent of Daikin, represent a diverse group, and allow transparency, as of the end of June 2018, we have 10 directors (including one woman and two non-Japanese nationals). These directors oversee prompt and strategic decision making and sound supervision and guidance throughout the entire Group.
Daikin Industries, Ltd. appoints three external directors 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 have an average tenure of 7 years and 2 months and 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 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.
Daikin Industries, Ltd. employs an Audit & Supervisory Board and seeks to nominate two or more outside members to its Audit & Supervisory Board. The principal nomination criteria for external Audit & 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 2018, Daikin Industries, Ltd.'s four Audit & Supervisory Board members include two external Audit & Supervisory Board members.
The external Audit & 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 & 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 & Supervisory Board members, there is the Office of Audit & Supervisory Board members and support staff for assisting Audit & Supervisory Board members in their duties. Staff of the Office of Audit & Supervisory Board members carry out their duties under the orders of corporate auditors. Audit & Supervisory Board members' decisions on employee transfers and evaluations take into account the opinions of the Audit & Supervisory Board.
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 management 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. It also provides sound, appropriate supervision and guidance in the execution of operations. The board periodically conducts self assessments with regards to its effectiveness. Each director is interviewed individually as a way to confirm his or her effectiveness. In fiscal 2017, the Board of Directors Meeting was convened 16 times, with external directors attending on average 83% of the meetings and external Audit & 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 the Daikin Group decides on future direction and solves issues related to important management policy and strategies. The Group Steering Meeting was convened 9 times in fiscal 2017.
In addition, with the introduction of the Executive Officer System, we have established the Executive Officers Meeting, a platform to promote speedy implementation and thorough deliberation regarding Important management tasks related to operational execution.
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.
To ensure the transparent management of its corporate officer personnel and remuneration processes, Daikin Industries, Ltd. has established the HRM Advisory Committee and the Compensation Advisory Committee. These committees engage in discussions and deliberations regarding issues including corporate officer nomination criteria, corporate officer candidates, and remuneration. As of the end of June 2018, the HRM Advisory Committee and the Compensation Advisory Committee consist 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 & Supervisory Board members is determined so as to fall within the aggregate remuneration ceiling based on a report by the HRM Advisory Committee and the 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 & 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 just under 300 Japanese companies listed on the First Section of the Tokyo Stock Exchange.
|Total of different types of compensation (millions of yen)||Persons paid|
|Base compensation||Stock options||Bonus|
|Director (Excluding external directors)||1,250||746||133||370||8|
|Audit & Supervisory Board member (Excluding external Audit & Supervisory Board members)||64||64||-||-||2|
|External corporate officers||76||76||-||-||5|
|Name||Total compensation (Million yen)||Category||Company||Total of different types of compensation (millions of yen)|
|Base compensation||Stock options||Bonus|
|Noriyuki Inoue||410||Director||Daikin Industries, Ltd.||263||29||116|
|Masanori Togawa||273||Director||Daikin Industries, Ltd.||166||29||76|
|Ken Tayano||170||Director||Daikin Industries, Ltd.||99||14||45|
|President||Daikin (China) Investment Co., Ltd. (Consolidated subsidiary)||11||-||-|
|Masatsugu Minaka||132||Director||Daikin Industries, Ltd.||8||14||36|
|Director||Daikin Europe N.V. (Consolidated subsidiary)||72||-||-|
|Jiro Tomita||147||Director||Daikin Industries, Ltd.||92||14||40|
|Takashi Matsuzaki||109||Director||Daikin Industries, Ltd.||66||11||32|
|Auditing expenses||243 million yen|
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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