Corporate Governance

Based on OUR PHILOSOPHY (TIS INTEC Group Philosophy) and Group Vision, we have formulated basic corporate governance policies aimed at improving the Group’s corporate value over the medium and long terms. We are working constantly to enhance corporate governance.

Basic Policy

TIS will constantly strive to achieve the highest level of corporate governance and will work to maintain and further enhance its approaches to corporate governance.
Management believes that the key to good corporate governance is to ensure transparency and fairness in decision-making processes, make full and effective use of management resources, and raise the integrity of management practices through swift and accurate assessment of situations, from the viewpoint of promoting sustainable corporate growth and boosting medium- and long-term corporate value. Accordingly, management at the Company is committed to upholding good corporate governance in line with the following basic principles.

  1. To respect the rights of shareholders and to ensure equality.
  2. To consider the interests of stakeholders, including shareholders, and work with stakeholders in an appropriate manner to achieve stated goals.
  3. To disclose corporate information appropriately and ensure transparency.
  4. To engage in constructive dialogue with shareholders based on a medium- to long-term investment perspective.

Compliance with the Corporate Governance Code

TIS complies with all principles of the Corporate Governance Code.
The status of the Company’s responses to each principle of the Corporate Governance Code is described in the Corporate Governance Report.

Corporate Governance Structure

Form of Organization Company with audit & supervisory board
Chairman of the Board Chairman
Number of Directors 9, including 3 external directors
Director's Term of Office 1 year
Number of Audit & Supervisory Board Member 5, including 3 external audit & supervisory board members
Term of Office for Audit & Supervisory Board Members 4 years
Number of Independent Directors 6, including 3 external directors and 3 external audit & supervisory board members

Reason for Selection of Current Corporate Governance Organization

TIS is a Company with an Audit & Supervisory Board, a model chosen for its double-check function through which the Board of Directors oversees the execution of business activities and the Audit & Supervisory Board audits activities to ensure operations are legal and appropriate. In addition, the Company aims to strengthen the supervisory function of the Board of Directors by appointing outside directors with industry- and corporate management-related experience and insight and drawing on advice and recommendations from an independent standpoint to ensure the validity and appropriateness of decision-making by the Board of Directors.

Organizational Chart

* PDF files must be viewed with Adobe Reader

Directors and Board of Directors As stipulated in its Articles of Incorporation, the Company's Board of Directors will comprise at least three and no more than 15 directors, and to strengthen the supervisory functions of the Board of Directors, a policy has been established that one-third or more of the directors must be independent external directors. At present, three independent external directors have been appointed.
For swift and dynamic decision-making by the Board of Directors, the Board of Directors convenes in principle once monthly and also meets on an ad hoc basis whenever necessary.
TIS holds an information meeting once a year to present management direction as well as meetings ahead of Board of Directors' meetings—in principle, twice a month—to give external directors and outside members of the Audit & Supervisory Board sufficient background information to participate in discussions. In addition, the Company organizes study sessions with experts—in-house and external—and arranges visits to local Group facilities and offices. TIS also creates opportunities when external directors can exchange opinions with the president and sets up meetings that involve only external directors and outside members of the Audit & Supervisory Board. This facilitates smooth but vigorous discussion by the Board of Directors.
Nomination Committee The Nomination Committee was established as advisory bodies to the Board of Directors to ensure objectivity and transparency in decision-making processes pursuant to appointment of directors and to strengthen the corporate governance structure.
The independent outside director chairs the committee, with the majority of members, including the committee chair, being independent outside directors.
Compensation Committee The Compensation Committee was established as advisory bodies to the Board of Directors to ensure objectivity and transparency in decision-making processes pursuant to compensation of directors and to strengthen the corporate governance structure.
The independent outside director chairs the committee, with the majority of members, including the committee chair, being independent outside directors.
Group Internal Control Committee The Group Internal Control Committee is charged with promoting various measures to maintain and improve the internal controls of the Company and its subsidiaries, to evaluate the operational status of the internal control systems and to recommend any corrective action to be taken to the Board of Directors, if necessary.
The committee, chaired by the TIS President, comprises standing directors, standing Audit & Supervisory Board members, persons responsible for the internal control management, and any person whose attendance is authorized by the committee.
Corporate Sustainability Committee The Corporate Sustainability Committee evaluates and validates the status of the corporate sustainability activities of the Group as a whole.
The committee, chaired by the TIS President, comprises standing directors, standing Audit & Supervisory Board members, persons responsible for the promotion of corporate sustainability, and any person whose attendance is authorized by the committee.
Management Committee The Company has established the Management Committee to deliberate and report on important matters affecting business execution at the Company and the Group as a whole.
Investment Committee The Investment Committee was established to verify/advise on plans for investment projects, monitor ongoing projects and assess whether to continue them with the aim of minimizing related risks and earning higher returns on investments.
CVC Investment Committee The Company makes corporate venture capital (CVC) investments and enhances alignment with venture capital companies in the form of open innovation in order to (1) create new business, (2) expand existing businesses, and (3) promote business collaboration with customers. For such investments, the CVC Investment Committee decides whether or not to execute an investment and monitors the executed investment.
Corporate-wide Proposal Review Process For large-scale projects to be addressed by the Group as a whole, the Corporate-wide Proposal Review Process was implemented to review drafts prior to actual proposals to customers, in order to detect and reduce risks as early as possible.
System Development Meeting System Development Meetings are held to identify potential risk factors in large-scale projects to be undertaken by the Group as a whole, to develop measures to prepare for risks, to resolve issues before they materialize, and to terminate any project with losses.
Audit & Supervisory Board Members and Audit & Supervisory Board The Audit & Supervisory Board comprises five auditors (of which three are external auditors). Each auditor will perform audits of directors' business execution in accordance with the audit & supervisory policies established by the Audit & Supervisory Board. In addition, the Company works closely with its financial auditors, exchanging information and sharing opinions on a regular basis in addition to receiving the annual financial audit plan and reporting on results of financial audits from Ernst & Young ShinNihon LLC, with which the Company has entered and auditing contract. Furthermore, the Audit & Supervisory Board receives the audit reports of the auditing department and exchanges opinions on a regular basis.

Executive Officer System

The Company has adopted an executive officer system to accelerate management decision-making and supervisory functions of the Board of Directors. Directors delegate business execution to Executive Officers, and these Executive Officers provide specific direction, orders, and supervision to each business unit head.

Viewpoint regarding Composition of Board of Directors

The Board of Directors shall be composed of no more than 15 directors, at least one-third of whom shall be independent external directors. The Board of Directors recognizes its fiduciary responsibility toward shareholders, supervises management strategy, management plans and other important decision-making and business execution of the Company, as prescribed by laws and regulations, the Articles of Incorporation and Company regulations, and bears a responsibility to ensure sustainable growth and enhance medium- to long-term corporate value. In the case of directors that constitute the Board of Directors, after engaging in discussion at meetings of the Board of Directors, the Company shall nominate persons who have extensive experience, strong insights and a high level of specialization that is appropriate for these obligations based on the election criteria prescribed by the Company.

Summary of Results of Analysis and Evaluation of Effectiveness of Entire Board of Directors

Since fiscal 2016, ended March 31, 2016, the Company has evaluated the effectiveness of the Board of Directors each fiscal year. This process reveals issues and points for improvement and leads to initiatives that will raise the effectiveness of the Board of Directors to a higher level. For the fiscal 2022 evaluation, all directors and members of the Audit & Supervisory Board were given a questionnaire to be submitted anonymously. The questionnaire asked them to conduct a comprehensive self-evaluation and self-analysis of the composition and operation of the Board of Directors, and then the Board of Directors pursued discussions based on the results. The method and results of the evaluation, as well as future issues brought to light through this process and measures to address such issues are described below.

1. Method of evaluation

TIS distributed a questionnaire regarding the effectiveness of the Board of Directors to all directors and members of the Audit & Supervisory Board and obtained responses. In addition, personnel of its administrative office conducted an interview to all directors and members of the Audit & Supervisory Board. The Company’s Board of Directors then used these results to analyze and evaluate the effectiveness of the Board of Directors.
Note that TIS conducted this effectiveness evaluation based on advice and verification by an external attorney.

2. Results of analysis and evaluation of effectiveness of the Board of Directors

The Company’s Board of Directors concluded that a certain degree of effectiveness had been ensured to appropriately supervise the approval of important management matters and business execution, such as the execution status of business activities and investments at the Company and Group companies, through deliberation based on Company regulations. In addition, the Board of Directors concluded that the level of effectiveness continues to trend upward, reflecting improvement measures based on the results of the effectiveness evaluation conducted in the previous fiscal year.
However, management acknowledged the importance of promoting discussions to further improve the functions of the Board of Directors in order to promote more sophisticated management of the Company.

3. Future issues and associated responses, based on analysis and evaluation

In light of the analysis and evaluation previously mentioned, TIS will focus particular efforts on the following issues.

  1. (1) Further improve the functions of the Board of Directors
    Aiming at promoting more sophisticated management, the Company will sort out issues, such as the Board of Directors’ supervisory function for the medium- to long-term growth and sharing roles of executive officers, to create the management structure for the future.
  2. (2) Promote discussions to improve medium- to long-term corporate value
    The Board of Directors will plan and discuss themes for improved corporate value, such as medium- to long-term strategies, and carry out proactive activities to enhance corporate value.

Policy and Procedures for Election, dismissal, and Nomination of Directors, etc.

In nominating candidates for directors, audit & supervisory board members and executive officers, the Board of Directors will nominate persons with abundant experience, a high level of insight and advanced specialization based on the following election criteria that make them suitable as directors or audit & supervisory board members in order to realize effective corporate governance and contribute to the sustainable growth of the Company as well as the enhancement of its medium- to long-term corporate value while also considering aspects of diversity such as gender, internationality, career and age.
If a situation arises where a management executive should be dismissed, the Board of Directors shall determine a dismissal proposal. However, the dismissal of a director shall be conducted in accordance with the Companies Act and other relevant provisions.

Reason for Election of Directors and Audit & Supervisory Board Members

  • Directors
Toru Kuwano After assuming the office of President and Representative Director of the Group company, Mr. Kuwano was appointed as a Director of the Company in June 2013 and President and Representative Director in June 2016. Since April 2021, he has assumed the office of Chairman and Director of the Company. He has a wealth of experience and knowledge about the Company's and its Group's business, as well as in business administration.
Since April 2021, he has also assumed the position of Chairman and Director as a non-executive Director, in order to realize fair management supervision. He has promoted a stronger and more effective corporate governance structure and worked toward the sustainable growth and increase in the medium- to long-term corporate value of the Company. He was appointed as a Director since he is highly expected to continue to fulfill the duties of significant decision-making for the Company’s Group as well as the administration and oversight of business management.
Yasushi Okamoto Mr. Okamoto served as Senior Managing Executive Officer and Division Manager of the planning and development department of industrial systems from July 2016, and as Director from June 2018, after having been engaged in corporate business in the corporate planning department of the Company for many years. He was appointed to the office of President and Representative Director in April 2021.
Based on these experiences, he is a person who can exert leadership to further promote the sustainable growth and increase in corporate value of the Group through the steady implementation of the current Medium-Term Management Plan (2021-2023). He was appointed as a Director since he is highly expected to fulfill the duties of significant decision-making for the Group and oversight of business management.
Masahiko Adachi Mr. Adachi has been in the office of Representative Director since June 2018 following the office of Division Manager of the corporate department and the financial system department of a financial institution and the Group company. Based on these experiences, he was appointed as a Director since he is highly expected to promote the sustainable growth and increase in corporate value of the Group through the steady implementation of the current Medium-Term Management Plan (2021-2023), enhance and promote group governance centered on the corporate function, and fulfill the duties of significant decision-making for the Group and oversight of business management.
Josaku Yanai Mr. Yanai was mainly engaged in the corporate section in the corporate planning department of the Company and its Group company for many years. He assumed the office of Executive Officer and Division Manager of corporate planning division of the Company in April 2011. He became a Director of the Company in June 2016 and a Representative Director in April 2021. He has a wealth of experience and knowledge about the business of the Company and its Group, as well as in business administration. Based on these experiences, he was appointed as a Director since he is highly expected to further promote the sustainable growth and increase in corporate value of the Group through the steady implementation of the current Medium-Term Management Plan (2021-2023) and fulfill the duties of significant decision-making for the Group and the administration and oversight of business management.
Takayuki Kitaoka Mr. Kitaoka was engaged in business related to IT infrastructure of INTEC Inc., the Company's major subsidiary, and served in management administration of the Group companies at the Company for three years from April 2012. Furthermore, he has assumed the office of President and Representative Director of INTEC Inc. since April 2018 and the office of Director of the Company since June 2018. He was appointed as a Director since he is highly expected to continue to promote the duties of INTEC Inc. assigned by the current Medium-Term Management Plan (2021-2023) and to fulfill the duties of significant decision-making for the Group and the administration and oversight of business management, based on the above experiences and from the viewpoint of Group management.
Akira Shinkai Mr. Shinkai was engaged in business of new service planning and marketing and has assumed the office of Director and Executive Vice President of INTEC Inc., the Company's major subsidiary, since April 2018, and the office of Director of the Company since June 2018. Based on these experiences, he was appointed as a Director since he is highly expected to continue to promote the current Medium-Term Management Plan (2021-2023), and fulfill the duties of significant decision-making for the Group and the administration and oversight of business management.
Koichi Sano Mr. Sano worked mainly in the finance and accounting departments, and served as Executive Vice President and Representative Director of Mitsui Chemicals, Inc., and has a wide range of experience and a wealth of expertise in corporate management.
Since assuming the office of External Director of the Company in June 2016, he has given advice and suggestions from an independent perspective by utilizing these experiences and expertise in the Company's business to ensure that the decisions to be made by the Company's Board of Directors will be reasonable and appropriate. He was appointed as an External Director as he is highly expected to be a person who will continue to contribute to the increase of the corporate value and enhancement of the corporate governance of the Company.
Fumio Tsuchiya Mr. Tsuchiya previously worked in an important position in overseas offices and the Corporate Planning Department of Japan Airlines Co., Ltd. (“JAL”). After having assumed the office of Director of JAL in June 2004, he served as Managing Director and was thereafter appointed as President & CEO of JALCard, Inc. in June 2007, which is a group company of JAL. He has a wide range of experience and a wealth of expertise in corporate management.
Since assuming the office of External Director of the Company in June 2017, he has given advice and suggestions from an independent perspective by utilizing these experiences and expertise in the Company's business to ensure that the decisions to be made by the Company's Board of Directors will be reasonable and appropriate. He was appointed as an External Director as he is highly expected to be a person who will continue to contribute to the increase in corporate value and enhancement of the corporate governance of the Company.
Naoko Mizukoshi Ms. Mizukoshi is a qualified lawyer and has a wealth of professional knowledge of, and experiences in, intellectual property, ICT and international transactions.
Since assuming the office of External Director in June 2018, she has given advice and suggestions from an independent perspective to ensure that the decisions to be made by the Company's Board of Directors will be reasonable and appropriate by utilizing these experiences and expertise in the Company’s business. Since February 2021 she has acted as Chairperson of the Nomination and Remuneration Committees which are voluntary advisory bodies to the Board of Directors, and fulfils an important role in the deliberation and advice to the Board of Directors on the nomination and remuneration of directors etc. She is highly expected to be a person who will continue to contribute to the increase in corporate value and enhancement of corporate governance of the Company.
She has not participated in corporate management but has expertise in corporate legal works. Therefore, she was appointed as an External Director since she could discharge duly the duties of External Director.
  • Board of Directors Skills Matrix
Name of Directors Company
Management
Industry
Knowledge
International
Experience
Finance/
Accounting
Legal/
Intellectual
Property
Toru Kuwano

Yasushi Okamoto

Masahiko Adachi

Josaku Yanai

Takayuki Kitaoka


Akira Shinkai


Koichi Sano


Fumio Tsuchiya

Naoko Mizukoshi

  • Audit & Supervisory Board Members
Tetsuya Asano Mr. Asano has a wealth of expertise in finance and accounting as well as in corporate management, accumulated through many years of experience of working at financial institutions and managing companies.
He was appointed as an Audit & Supervisory Board Member, as he is expected to discharge audit and supervisory duties regarding the execution of duties of the Company's directors in a fair and appropriate manner.
Tatsufumi Matsuoka Mr. Matsuoka has a wealth of expertise in finance and accounting as well as corporate management based on experience accumulated through his service at financial institutions and management of companies over many years.
He was appointed as an Audit & Supervisory Board Member, as he is expected to discharge audit and supervisory duties regarding the execution of duties of the Company's directors in a fair and appropriate manner.
Yukio Ono Mr. Ono is a licensed certified public accountant. His expertise and knowledge in the field of finance and accounting are beneficial to the Company in strengthening the audit system of the Company. Although he has not participated in corporate management, he was appointed as an External Audit & Supervisory Board Member as he is considered to be able to appropriately perform the duties of External Audit & Supervisory Board Member as a result of the above credentials.
Akiko Yamakawa Ms. Yamakawa is a qualified lawyer. Based on her experience, such as being responsible for litigation at global corporations, she can be expected to provide appropriate monitoring and supervision of the global business execution of the Company. Although she has not participated in corporate management, she was appointed as an External Audit & Supervisory Board Member as she is considered to be able to appropriately perform the duties of External Audit & Supervisory Board Member as a result of the above credentials.
Hiroko Kudo Ms. Kudo is highly knowledgeable in domestic and international finance and administration and holds a doctorate in public policy. She is also active globally as a university professor and researcher. Although Ms. Kudo has not participated in corporate management, she was appointed as an External Audit & Supervisory Board Member. Because management at TIS felt she would be able to suitably execute the duties of a committee member by drawing on the extensive experience and knowledge she has accumulated to date and thereby help TIS improve the value provided in DX services as a way to address social issues through business activities—highlighted in the TIS INTEC Group’s medium-term management plan—and deepen and expand global operations.

Profiles of our corporate officers are available here .

Training Policy for Directors and Auditors

For directors and auditors, including external directors and external auditors, the Company will provide and arrange training opportunities that are appropriate for individual directors and auditors and support the cost of such training. The objective of such training is to provide an opportunity to acquire necessary knowledge regarding the Group's businesses, financial affairs and organization and to understand the duties and responsibilities required of directors and auditors when assuming office, as well as to continuously update these attributes during the term of office.

External Directors and External Auditors

The Company has three external directors and three external auditors. The determination of the independence of external directors and external auditors is prescribed by the requirements of the Companies Act as well as judgement criteria to ensure the independence of external directors and external auditors (referred to as "external officers" hereafter) as described below, with reference to the rules and regulations of the Tokyo Stock Exchange.

For reference: Criteria Concerning Independence of External Officers (revised December 21, 2016)

The determination of the independence of external directors and external auditors is prescribed by the requirements of the Companies Act as well as judgement criteria to ensure the independence of external directors and external auditors (referred to as "external officers" hereafter) as described below, with reference to the rules and regulations of the Tokyo Stock Exchange.

  1. External directors (including candidates) are defined by Article 2, Paragraph 15 of the Companies Act (Requirements of External Directors) and have never served as an executive director, manager or other employee of the TIS INTEC Group (Note 1) even in the past.
  2. External auditors (including candidates) are defined by Article 2, Paragraph 16 of the Companies Act (Requirements of External Company Auditors) and have never served as a director, manager or other employee of the TIS INTEC Group even in the past.
  3. In the current fiscal year and during the past three fiscal years, none of each of the following items shall apply to external officers.
    1. A counterparty which has transactions principally with the Company (Note 2) or a person who executes that counterparty's business
    2. A counterparty which has transactions principally with the TIS INTEC Group (Note 3) or a person who executes that counterparty's business
    3. A consultant, accounting professional or legal professional who has received a large amount of money or other assets (Note 4) other than remuneration of officers from the Company. In addition, when these are received by an organization such as a corporation or partnership, this includes persons who belong to the applicable organization.
    4. A major shareholder of the Company (Note 5). In addition, when the major shareholder is a corporation, this includes a person who executes the business of the corporation.
    5. A person other than those in (Ⅰ), (Ⅱ) and (Ⅲ) above who executes the business of a counterparty of the Company (Note 6)
    6. A person who was formerly a member of a counterparty which is in a situation of cross-assumption of offices of external officers
    7. A counterparty or former member of the counterparty that receives donations from the Company
  4. External officers must not be a relative within the second degree of a person who falls under each of the following items.
    1. A person mentioned in (Ⅰ) to (Ⅲ) of the previous clause
    2. A person who executes the business of a subsidiary of the Company
    3. A non-executive director of a subsidiary of the Company (limited to external auditors)
    4. A person who fell under (Ⅱ) or (Ⅲ) above or a person who executes the business of the Company (including a non-executive director in the case of an external auditor) recently (in the current business year and during the past four business years)
  5. In addition to the above, there exist no circumstances in which duties imposed on an independent external officer are reasonably deemed not to be achieved.
  • Note 1: The "TIS INTEC Group" means the Company and its subsidiaries.
  • Note 2: A "counterparty which has transactions principally with the Company" means a counterparty which provides products or services to the Company and whose payments from the Company constitute at least 2% of the sales of such counterpart in one fiscal year. The main bank (MUFG Bank, Ltd.) and the lead managing underwriters (Nomura Securities Co., Ltd., Mitsubishi UFJ Morgan Stanley Securities Co, Ltd., and SMBC Nikko Securities Inc.) of the Company shall also each be a "counterpart which has transactions principally with the Company," regardless of the transaction amount.
  • Note 3: A "counterparty which has transactions principally with the TIS INTEC Group" means a counterparty with sales exceeding 2% of the total consolidated sales of the TIS INTEC Group.
  • Note 4: "A large amount of money or other assets" means the total value exceeds 10 million yen per fiscal year. This shall apply also to a consultant, accounting professional or legal professional that enters a consulting agreement or similar arrangement and periodically pays an amount of money or other assets, regardless of the amount.
  • Note 5: A "major shareholder" means a person or company, and the like, that directly or indirectly holds 10% or more of total voting rights. However, the Company's leading shareholders (the top 10 approximately) shall be treated as "major shareholders."
  • Note 6: A "counterparty which has transactions with the Company" means the case when transactions with the Company per fiscal year constitute at least 2% of non-consolidated sales of the Company.

Primary Activities of External Directors and External Auditors (Year ended March 31, 2022)

Status Name Primary Activities
Director Koichi Sano Mr. Sano attended all 22 meetings of the Board of Directors held in fiscal 2022 He provided comments as necessary in discussions of matters for resolution, based on his experience in corporate management and the insights thus gained. He has served on the Nomination and Remuneration Committees which are voluntary advisory bodies to the Board of Directors, and fulfils an important role in the deliberation and advice to the Board of Directors on the nomination and remuneration of directors, etc.
Director Fumio Tsuchiya Mr. Tsuchiya attended all 22 meetings of the Board of Directors held in fiscal 2022 He provided comments as necessary in discussions of matters for resolution, based on his experience in corporate management and the insights thus gained. He has served on the Nomination and Remuneration Committees which are voluntary advisory bodies to the Board of Directors, and fulfils an important role in the deliberation and advice to the Board of Directors on the nomination and remuneration of directors, etc.
Director Naoko Mizukoshi Ms. Mizukoshi attended all 22 meetings of the Board of Directors held in fiscal 2022. She provided comments as necessary in discussions of matters for resolution, from the specialized perspective of a Lawyer. Since February 2021, she has acted as Chairperson of the Nomination and Remuneration Committees which are voluntary advisory bodies to the Board of Directors, and fulfils an important role in the deliberation and advice to the Board of Directors on the nomination and remuneration of directors, etc.
Auditor Sadahei Funakoshi Mr. Funakoshi attended all 22 meetings of the Board of Directors and all 12 meetings of the Audit & Supervisory Board held in fiscal 2022. He provided comments as necessary in discussions of matters for resolution, based on his experience and insights into corporate management.
Auditor Yukio Ono Mr. Ono attended all 22 meetings of the Board of Directors and all 12 meetings of the Audit & Supervisory Board held in fiscal 2022. He provided comments as necessary in discussions of matters for resolution, from the specialized perspective of a Certified Public Accountant.
Auditor Akiko Yamakawa Ms. Yamakawa attended all 22 meetings of the Board of Directors and all 12 meetings of the Audit & Supervisory Board held in fiscal 2022. She provided comments as necessary in discussions of matters for resolution, from the specialized perspective of a Lawyer.

 

Summary of Content of Liability Agreements

In accordance with Article 427, Paragraph 1 of the Companies Act, each of Audit & Supervisory Board enters into an agreement with the Company that limits legal responsibility for liability compensation as set forth under Article 423, Paragraph 1 of the same law.
The limit of liability compensation, based on these agreements, is an amount provided for in Article 425, Paragraph 1, of the same law.

Outline of Policy on Officers' Remuneration

1. Policy on determining officers’ compensation

The Company established the Compensation Committee, comprising mainly independent external directors, as an advisory body to the Board of Directors to ensure objectivity and transparency in the process for determining officers’ compensation and to strengthen the corporate governance structure.
The basic policy on officers’ compensation is to provide greater incentive to improve business results through a system of compensation linked to measures of Company performance. Appropriate amounts are determined by the Board of Directors, based on discussion with and suggestions from the Compensation Committee.

2. Structure of officers’ compensation

Compensation to Company directors consists of a basic component, a performance-linked component and a performance-linked stock incentive. When measures of Company performance are fully achieved, compensation comprises the basic component, the performance-linked component and the performance-linked stock incentive in a ratio of 6:3:1.
*TIS introduced this performance-linked stock compensation system in fiscal 2019 for directors, executive officers and executive fellows (excluding external directors and those resident outside Japan) to increase eligible directors’ awareness of their contribution to enhanced business performance and improved corporate value over the medium to long term, and to better align their interests with those of shareholders. 

3. Structure of compensation for external directors and Audit & Supervisory Board members

Compensation paid to external directors is limited to basic compensation only, with no performance-linked component.
Compensation for Audit & Supervisory Board members is decided through discussions among corporate auditors. In order to maintain a high degree of independence, compensation is not linked to business performance and consists solely of basic compensation. 

4. Other

  1. Upon the introduction of the performance-linked stock incentive plan, the Board of Directors decided to stipulate a provision for illegal acts in the Stock Delivery Regulations. The provision allows the Company to reclaim the amount equivalent to the shares delivered to violators and cancel any points accrued under the performance-linked stock incentive scheme explained below.
  2. To boost medium- to long-term business performance, directors (excluding outside directors) are asked to contribute a certain portion of their basic compensation toward the purchase of treasury stock through the Company’s share ownership plan for directors and officers, and they are expected to retain such stock in full for the duration of their time in office so that the acquired stock shares value with all shareholders.

5. Process for determining executive compensation

  1. Attainment of business goals and achievement of business plans formulated at the beginning of the fiscal year in accordance with the mid-term management plan are evaluated at the Performance Evaluation Meeting held in late May.
  2. The President and Representative Director evaluates the directors and Audit & Supervisory Board members at the meeting referred to in (a) above.
  3. The Compensation Committee meets in the middle of June to consult on the results of the evaluation in (b) above and on the appropriate amounts of compensation based on the results of evaluation.
  4. The Board of Directors votes on whether to approve the amounts of executive compensation proposed by the Compensation Committee in (c) above.
  5. Monthly payments of the annual compensation amount determined by the Board of Directors in (d) above start in July.
  6. A third-party agency is contracted to research the executive compensation level of other companies for comparison in July.
  7. The Compensation Committee meets in November to consider the results of the research in (f) above and modifications to executive compensation, as appropriate.

The amount of performance-linked stock compensation is calculated in accordance with the Stock Delivery Regulations. The Board of Directors and the Compensation Committee have no room for discretion.

6. Status of activities by the advisory committee regarding determination of officers’ compensation

In the fiscal year ended March 31, 2022, the Compensation Committee met five times in total and provided advice on the appropriateness of officers’ compensation of the Company by comparison and analysis of the compensation amounts of peer companies conducted by the research agency. The Board of Directors presented proposals on officers’ compensation based on the advice given by the Committee.

7. Calculation of compensation amount

1) Basic compensation

Basic compensation is paid according to the size of the role and scope of responsibilities of each position.

2) Calculation of performance-linked compensation

Performance-linked compensation is determined by the degree to which measures of corporate performance have been achieved, on the basis of the management plan for each fiscal year, and shall fall within 0% and 50% of a performance evaluation coefficient, which is determined based on the basic compensation for each position.
For every officer, organizational performance and individual performance are each evaluated on a five-point scale to determine the amount of performance-linked compensation based on the amount determined by corporate performance evaluation. 
(organizational performance component: individual performance component = 3:7)
When the corporate performance evaluation coefficient is 30% in the standard model, 33% is applied to AA of organizational performance evaluation/individual performance evaluation, 27% to BB, 20% to CC, 13% to DD, and 7% to EE. 

3) Performance-linked stock incentive

When the performance-linked stock incentive was introduced, the Board of Directors established the Stock Delivery Regulations. Points are granted to directors on a scale between 0% and 15% of basic compensation, set for each position according to the level of achievement made toward reaching performance targets stated in the management plan and as provided for in the Regulations. The number of shares delivered will correspond to the number of points accumulated.
The following indicators were adopted to measure corporate performance: Consolidated Operating Income, Earnings Per Share (EPS) and Service Business Gross Profit (as financial indicators) to encourage pursuit of business growth for the attainment of enhanced corporate value as expected by the shareholders, and Job Satisfaction, Customer and Service Satisfaction, and Business Partner Satisfaction (as nonfinancial indicators) to encourage pursuit of higher satisfaction with the Company among stakeholders.

Remuneration for Directors and Audit & Supervisory Board Members (Year ended March 31, 2022)


Recipients
(Persons)
Remuneration
(Millions of yen)
Remuneration by type
Basic remuneration Performance-linked remuneration Performance-linked
Stock compensation
Directors
(External Directors)
9
(3)
264
(32)
196
(32)
45
(-)
21
(-)
Audit & Supervisory Board Members
(External Auditors)
5
(3)
70
(28)
70
(28)
-
(-)
-
(-)
Total
(External Directors and External Auditors)
14
(6)
334
(61)
267
(61)
45
(-)
21
(-)

Notes

  1. For the fiscal year ended March 31, 2022, compensation for directors does not include the employee portion for directors who serve concurrently as employees. The Company has not introduced a retirement benefit system for directors, and does not pay any directors’ bonuses.
  2. As of March 31, 2022, the Company has nine directors, including three external directors, and the Company's Audit & Supervisory Board comprises five members, three of whom are external.
  3. Limits on compensation (basic compensation and performance-linked compensation) for directors and members of the Audit & Supervisory Board were approved at the First Annual General Meeting of Shareholders on June 25, 2009, with the limit on compensation for directors set at ¥400 million per year (of which, external directors receive no more than ¥50 million) and that for members of the Audit & Supervisory Board set at ¥85 million. At the conclusion of the annual general meeting of shareholders, the number of directors was eight (including two outside directors) and the number of members of the Audit & Supervisory Board was four (including three outside members of the Audit & Supervisory Board).
  4. The figures for performance-linked stock compensation represent the amounts recognized as expenses for four directors (excluding outside directors and non-full-time directors). Note that this performance-linked stock incentive was approved by shareholders at the 10th Annual General Meeting of Shareholders on June 26, 2018, wherein eligible persons are directors (four directors excluding external directors and non-full-time directors), executive officers and executive fellows, and that its partial amendments and continuation were approved by shareholders at the 13th Annual General Meeting of Shareholders on June 24, 2021, wherein directors (excluding outside directors and non-full-time directors) and executive officers of INTEC Inc., a subsidiary of the Company, were added to the eligible persons, and the upper limit on the number of shares is 132,100 (including 99,000 for the Company) per business year, to be delivered through a trust into which the Company contributes up to ¥700 million (including ¥520 million for the Company) in each specified period (three business years) for the eligible persons.

Constructive Dialogue with Shareholders

TIS will actively engage in constructive dialogue with shareholders based on the IR Policy in order to contribute to the Company's sustainable growth and the enhancement of its medium- to long-term corporate value. In addition, the Company will strive to develop a system to promote constructive dialogue with shareholders.
The director of the IR Department will supervise dialogue with shareholders, consider response methods with the President and Representative Director, executive officers in charge, and the IR Department and respond appropriately.
The IR Department will share information and exchange opinions in a timely manner based on respective specialist standpoints with relevant departments and support dialogue with shareholders through organic collaboration.
In relation to shareholders, TIS will strive to enhance means of dialogue such as individual interviews as well as responses by telephone and the holding of business results briefings and small meetings, etc. Furthermore, in addition to actively conducting information disclosure, which will be the premise for dialogue, the Company will strive to expand the contents of the Integrated Report, which will be positioned as an effective tool for dialogue.
TIS will share opinions, etc. put forward in constructive dialogue with capital market participants such as shareholders, investors and securities analysts within the Company through reports, etc. to the Board of Directors, and use them in reviewing the Company's management strategy, and for other purposes.
In the case of dialogue with shareholders, TIS will pay sufficient attention to the fairness of information disclosure and manage internal information appropriately in accordance with the Rules for Prevention of Insider Trading
TIS will conduct a substantial shareholder survey twice a year, in principle, and as necessary and endeavor to gain an understanding of the shareholder structure.

Cross-shareholdings and basic policy on exercise of voting rights on cross-shareholdings

1. Policy on cross-shareholdings

While TIS has made reduction of domestically listed shares a priority issue and adheres to this as much as possible in accordance with Company-defined basic policy on corporate governance, the Company holds shares in other companies, including start-ups and venture companies, only when management believes that it will contribute to the sustainable growth and higher medium- to long-term corporate value of the Company and the Group. Specifically, when cooperation, co-creation and stable partnerships with such companies are deemed essential to continuous creation of business opportunities and utilization of technologies to actively promote business development particularly in the areas of financial inclusion, urban concentration and regional decline, low-carbon/decarbonization and health concerns, which are all social issues where the TIS INTEC Group can help to realize a more sustainable society, then such cross-shareholdings are considered investments consistent with the Group’s growth strategy and defined as strategic shareholdings.
In verifying the rationale behind retaining these holdings, management has divided them into the three categories described below and considered their value to TIS and the TIS INTEC Group using the method assigned to each category:

  • Capital alliance partners
  • Customers
  • Others

The details of the examination methods are as follows:

Capital alliance partners

After an acquisition, shares are held for a predetermined period of time to establish a foundation for the strategic alliance. After that period, the capital alliance is qualitatively reviewed to determine status and ongoing viability as a collaborative business venture. When it is deemed that the significance of the shareholding is diminished, any listed shares are sold based on market conditions and other factors. For any privately held shares, measures are discussed with the issuer and sold as soon as a buyer is found. 

Customers

A percentage of total business-related revenue and dividend income from the issuer and companies affiliated with the issuer is calculated on a balance sheet basis to determine whether the respective shareholding exceeds 10%. Based on the result and other qualitative evaluation, such as any expected future transactions, when the significance is deemed diminished, any listed shares are sold based on market conditions and other factors. For any privately held shares, measures are discussed with the issuer and sold as soon as a buyer is found.

Others

A process is undertaken to determine whether or not business transaction volume with the issuer in the last fiscal year increased by 5% or more compared with the average of the past three fiscal years. When the significance of shareholding is deemed diminished based on the result – except when difficulties in securing personnel or technology necessary for the operation are anticipated – any listed shares are sold based on market conditions and other factors. For any privately held shares, measures are discussed with the issuer and sold as soon as a buyer is found.

In addition, as TIS pursues reduction of cross-shareholdings in line with the aforementioned policy and corporate stance, management seeks to push the cross-shareholdings on a balance sheet basis as a percentage of consolidated net assets below the 10% benchmark. Toward this end, the balance sheet amount of cross-shareholdings as of March 31, 2022, dropped by ¥8,294 million, to ¥54,359 million, mainly through reduction in nine issues (¥7,538 million), of which eight were completely sold off, and changes in market value due to stock market conditions. Consequently, the aforementioned ratio declined 4.5 points to 17.9% as of March 31, 2022, but if strategic shareholdings are excluded from the calculation, the ratio falls to 11.7%.

2. Criteria for exercising voting rights for cross-shareholdings

TIS appropriately exercises voting rights for the listed shares in its possession after comprehensively determining whether such action will contribute to the sustainable corporate growth and higher medium- to long-term corporate value of the TIS INTEC Group and investee company, taking into consideration policy advice from proxy advisory firms.

3. Number of issues held by the Company for purposes other than portfolio investment and total amounts recorded on the balance sheet

Category Fiscal 2021, ended March 31, 2021 Fiscal 2022, ended March 31, 2022
Number of issues total 88 issues 85 issues
(of which) Strategic shareholdings 48 issues 52 issues
Cross-shareholdings 40 issues 33 issues
Total balance-sheet amount total 62,654 million yen 54,359 million yen
(of which) Strategic shareholdings 21,881 million yen 18,946 million yen
Cross-shareholdings 40,773 million yen 35,413 million yen

Note: In the consolidated fiscal year ended March 31, 2022, TIS acquired five new issues (¥646 million), mostly venture companies with which it has formed capital alliances, seeking to build strategic partnerships aimed at promoting open innovation.

4. Relationships with strategic shareholders

If strategic shareholders of TIS indicate an intention regarding the sale, etc. of TIS shares, we will respond appropriately without preventing such a sale. Moreover, we will not conduct transactions that lack economic rationality with strategic shareholders.

Takeover Defense Measures

TIS has not introduced takeover defense measures.

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Update : June 27, 2022, 15:42