Corporate Governance

Basic Policy

In addition to making contributions to social development, protection of life and environmental preservation, ISK strives constantly to respect our shareholders, customers, suppliers, local communities and employees while maintaining transparency in business activities abiding by laws and regulations.
In order to enhance corporate value by maintaining steady business growth and securing profitability, efforts to improve business transparency, reliability and corporate health are among management’s most important concerns, and we have worked hard to strengthen Corporate Governance through business management and enhanced internal controls founded on compliance.

Corporate Governance Structure

Structurally, we operate as a company with an Audit & Supervisory Board. In addition, we set Executive Management Committee under the Board of Directors in order to speed up decision-making by the Board of Directors and efficiently monitor and assess progress in important activities and projects. We have also introduced Executive Officer system with the aim of speeding up decision-making related to business activities.
Furthermore, we have the committees listed on the following page in order to strengthen our Corporate Governance.
The supervision and solving of important issues related to climate change, digital transformation (DX), and human capital are carried out on a company-wide basis by the Sustainability Promotion Committee, which is chaired by the Executive Director and President.

Corporate Governance Structure

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Major Organizational Entities Related to Corporate Governance

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Independence Criteria for Outside Directors

Outside Directors and Outside Audit & Supervisory Board members are considered independent if none of the following applies to them.

1. 1.
   A current or past (within the past 10 years) business executor*1 for ISK or its subsidiaries (collectively, “ISK Group”)
2. 2.
   A current or past (within the past 5 years) principal ISK shareholder (i.e., a shareholder that owns 10% or more of ISK’s voting shares) or a business executor of the principal ISK shareholder
3. 3.
   An ISK Group client, or a business executor of an ISK Group client, whose business dealings with ISK Group have accounted for more than 2% of ISK Group’s annual consolidated net sales for any of the most recent three fiscal years
4. 4.
   An ISK Group supplier, or a business executor of an ISK Group supplier, whose business dealings with ISK Group have accounted for more than 2% of said party’s annual consolidated net sales for any of the most recent three fiscal years
5. 5.
   An accounting professional, legal professional, or other type of consultant or a member of a consulting organization, which receives significant financial or other economic benefit*2 from ISK Group, other than Director remuneration
6. 6.
   A party, or a business executor of a party, which receives or has received (within the past three years) significant financial contribution or assistance^*3 from ISK Group
7. 7.
   A spouse, relative within the second degree of kinship, or relative living together, of anyone that meets the criteria of #1 to #6 above

1. *1
   A person who meets the criteria stipulated in Article 2, paragraph (3), item (6) of the Ordinance for Enforcement of the Companies Act.
2. *2
   Normal remuneration averaging more than 10 million yen over the past three years.
3. *3
   Annual contribution or assistance totaling more than 10 million yen over the past three years.

Board of Directors

The Board of Directors meets at least once a month to make decisions concerning important matters, report on the progress of business execution, review performance, and discuss and decide on how to deal with related issues. Outside Directors supervise the business execution of ISK from an independent and fair standpoint without being directly involved in business execution.

The Executive Management Committee has been established under the Board of Directors to speed up decision-making at the Board of Directors and efficiently monitor and assess the progress of important business projects. It deliberates on overall important management matters and important business execution matters, and submits or reports to the Board of Directors as needed.

Auditing Structure

Corporate Auditors

Corporate Auditors attend important company meetings, including every meeting of the Board of Directors and the Executive Management Committee, constantly obtain information on the Company's operations from Directors, Executive Officers, employees and others in order to gain a full grasp of the Company's decision-making processes and business activities, and, as needed, conduct investigations, etc. of the status of the Company's business and assets.

Internal Auditing

The Office of Internal Audit (comprised of Director of such office and 10 other members), placed under direct control of the Executive Director and President, audits the status of compliance with laws and regulations, operation efficiencies and others pursuant to the Company's Internal Audit Regulations and annual audit plans. It is also responsible for the assessment and audit of internal control over financial reporting.

Basic Policy for the Internal Control System

• Basic Policy for the Internal Control System

  The Company's "Basic Policy for the Internal Control System" has been set up in accordance with the provisions of the Corporation Law of Japan and the associated Enforcement Regulations of the Corporation Law. ISK's basic policy for internal control is outlined below;

  1. 1. Organizational Structures to Ensure that Directors and Employees Carry Out Work Activities Appropriately and In Line with Relevant Regulations and Articles of Incorporation

     1. (1)
        The Company has adopted a management structure that places priority on compliance with laws, rules and societal norms.
     2. (2)
        The Company has established a code of conduct that stresses the importance of compliance activities, and makes sure that Directors and employees follow them strictly.
     3. (3)
        The Company has established a Compliance Committee, headed by the Director in charge of Compliance. This committee creates and implements plans to develop and maintain the compliance structure.
     4. (4)
        Company policy dictates that should it be discovered that any Director or Employee of the Company has acted illegally, transgressed the Company's articles of incorporation, or acted in a way that raises the risk of a legal transgression, the incident must be reported immediately. Furthermore, all records of the reports and investigation are to be kept strictly confidential to ensure that those who report such incidents are not subject to repercussions.
     5. (5)
        The Company has established an Office of Internal Audit to conduct regular audits, and which reports directly to the Executive Director President.

  2. 2. Recording and Managing Information Regarding the Activities of Directors

     The Company maintains written records of the minutes of Board of Directors meetings, proposals submitted for consideration, and other important documents used in the course of Directors' duties. These documents are stored and managed in a way that corresponds to the legal regulations governing official documents, as well as all internal rules and regulations.

  3. 3. Rules and Structures Intended to Manage Risk

     1. (1)
        A set of risk management guidelines has been established to express the Company's basic stance on risk management and to help guard against the risk of unexpected losses.
     2. (2)
        The Company seeks to identify the various types of risk that emerge in the course of normal business activities, taking steps to ensure that each sector of business operations is aware of risk factors that may affect them, and takes steps to manage such risks.
     3. (3)
        When events occur that could have an important impact on the Company's management and business activities, the Corporate Risk Management Committee takes action under the rules developed to manage risk, and assumes control of the Operating Divisions in order to minimize and address problems.

  4. 4. Structures to Ensure that the Execution Activities of Directors are Carried Out Efficiently

     1. (1)
        The Board of Directors meets regularly, a minimum of once a month, to make decisions on important issues that effect the Company, and to oversee the activities of its Directors. In the case of priority issues that relate to business implementation, the Executive Management Committee, made up of Board members who are associated with the issue, discusses it first, and then reports to the entire Board for a final decision.
     2. (2)
        The Company establishes clear and specific numerical targets for achievement, in an effort to improve management efficiency.
     3. (3)
        The Board of Directors allocates work responsibilities to individual executives, and each Director's progress in completing the business tasks allocated to them is reported back to the Board of Directors.

  5. 5. Measures to Ensure that Business Activities Conducted by a Group Company, which Consists of the Company in Question and its Parent and Subsidiary Companies, are Appropriate

     1. (1)
        The Company has established regulations and guidelines for the basic policies concerning execution of its affiliate companies' business activities, and for the various work processes concerning management of affiliated companies.
     2. (2)
        Subsidiaries have the responsibility to uphold the same code of conduct as the Company, and must adhere to the same standards of compliance employed by the group as a whole.

  6. 6. Regulations Governing Employees Assigned to Assist the Duties of Corporate Auditors

     Corporate Auditors may occasionally request that the Company assign personnel to assist them in carrying out their auditing activities. When this need arises, Directors cooperate with Corporate Auditors to select individuals who are able to provide effective assistance.

  7. 7. Measures to Ensure the Independence of the Aforementioned “Assistants” from the Influence of Directors

     When Corporate Auditors ask to have employees assigned to assist with their activities, the views of the Board of Auditors are given top priority in selecting, transferring and evaluating such employees. This is intended as a way to ensure that the employees can act independently, without influence from Directors.

  8. 8. Structure for Reporting Information to Corporate Auditors, Including Reports Provided by Directors and Employees

     1. (1)
        Corporate Auditors attend all meetings of the Board of Directors and the Executive Management Committee,as well as other important company meetings. They are also provided with access to information regarding all important proposals and resolutions made by management personnel.
     2. (2)
        Directors and employees are required to provide necessary reports and information to Corporate Auditors and the Board of Auditors ,as stipulated in the Company's internal reporting regulations.

  9. 9. Structures to Ensure the Efficiency of Auditing Activities

     1. (1)
        The Executive Director President holds regular meetings with auditors in order to exchange opinions regarding the condition of auditing activities and how to improve them.
     2. (2)
        To ensure the effectiveness of auditing activities, Directors are responsible for ensuring that there is close cooperation between Corporate Auditors and the Office of Internal Audit.

  10. 10. Structures to Ensure the Reliability of Financial Reporting Activities

      In order to ensure the reliability of financial reporting, the Company and its affiliate companies have established a structure to operate appropriately, and to improve and evaluate internal controls governing preparation of financial reports in accordance with the Financial Instruments and Exchange Law and other relevant regulations.

  11. 11. Basic Stance on Measures to Prevent Interaction with “Antisocial Groups”

      1. (1)
         The Company strictly prohibits any activity or interaction with “antisocial groups” which may threaten public order or present a danger to the general public. The Company shall be resolute in avoiding any such contact, and will under no circumstances give in to unreasonable demands or pressure from any such group.
      2. (2)
         In order to ensure that no such relationships or activities arise, a section of the General Affairs Division has been assigned specifically to cooperate with police, corporate lawyers and other outside organizations to combat the influence of corporate racketeers. This division will collect relevant information on a daily basis and establish a system to deal with unexpected incidents involving such groups.

Remuneration of Directors

• Policies for Determining Amount and Calculation of Each Director’s Compensation
  Compensation for ISK directors is stipulated in the Officer Compensation Regulations adopted by the Board of Directors and comprises base remuneration, which is based on job position, and performance-based remuneration. Base remuneration is paid according to the Officer Compensation Regulations to directors and executive officers according to their role and position. Outside directors are paid only base remuneration due to their independent position in executing duties.
• Policies for Determining the Nature of Performance Indicators and for Calculating the Amounts and Quantities of Performance-Based Remuneration and Other Compensation
  The performance-based portion of directors’ remuneration (excluding Outside Directors) consists of annual performance-based remuneration and long-term performance-based remuneration, which are structured to ensure both objectivity and a connection with corporate performance in line with the Officer Compensation Regulations approved by the Board of Directors. Annual performance-based remuneration is calculated based on a comprehensive consideration of the company’s performance, for example in the form of net income attributable to owners of parent, which is the final result of corporate activities, together with individual performance evaluation.
• Policies for Determining Non-Monetary Remuneration and for Calculating Associated Amounts and Quantities
  The non-monetary portion of directors’ remuneration (excluding Outside Directors) consists of transfer-restricted shares, and the total amount of monetary claims necessary to grant those shares to directors (excluding Outside Directors) may not exceed ¥90 million per year (excluding the employee portion for officers who also serve as employees). In addition, the total number of normal shares newly issued or disposed by the company may not exceed 95,000 per year. (However, if it becomes necessary to adjust the total number of normal shares that are issued or disposed of as transfer-restricted shares, for example due to a stock split or reverse split involving normal shares, including any gratis allocations, the total number may be adjusted within reason.) The Board of Directors is responsible for determining the specific timing and distribution of such awards to directors.
• Relative Proportions of Remuneration and Other Compensation for Individual Directors
  The relative proportions of base remuneration and performance-based remuneration and other compensation is determined by the Board of Directors after consultation with the Executive Director and Chairman, taking into account advice sought from the Compensation Committee by the Executive Director and President, to whom the Board delegates the task of considering each year’s performance and other factors.
• Matters Concerning Delegation Relating to Decisions on the Content of Remuneration and Other Compensation for Individual Directors
  Regarding the remuneration and other compensation for each Director, the Executive Director and President, who is delegated pursuant to a resolution of the Board of Directors, consults with the Compensation Committee, and a decision is made after deliberations by Executive Directors based on the report compiled by the Compensation Committee in response to the consultation.
  To ensure that Executive Director and President can properly exercise such his authority, the content of the remuneration and other compensation for individual Directors is determined through consultation with the Compensation Committee, comprised of Independent Outside Directors and Independent Outside Audit & Supervisory Board members. The Compensation Committee is responsible for providing advice, views and opinions based on information from executive compensation surveys conducted by third parties and knowledge of individual Committee members.

Policy on Cross-Shareholdings

ISK maintains an amount of cross-shareholdings deemed to build a smooth, stable, and ongoing relationship with business partners, in line with our business strategy. The status of cross-shareholdings is disclosed in our securities report. Other shareholdings have been appropriately reduced.

• Verification of Reasonableness of Cross-Shareholdings
  The reasonableness of currently held cross-shareholdings is regularly verified by the Board of Directors about some factors such as the adequacy of the purpose, the benefits and risks in the context of capital cost, of holding those shares. Based on the results of verification, the Board of Directors decides whether to continue holding or sell cross-shareholdings.
• Cross-Shareholding Voting Criteria
  With regard to the exercise of voting rights arising from cross-shareholdings, our decision is made based on our comprehensive assessment, which includes the content of the proposal, the performance of the company, its management policies, and from the viewpoint of whether or not the resolution will increase shareholder value for the company, and even increase ISK’s corporate value.