Corporate Governance

Basic Policy

The KOBELCO Group recognizes that corporate value includes not only business results and technological capabilities but also the stance on social responsibility to all stakeholders affected by its business activities, such as shareholders, other investors, customers, suppliers, employees in the KOBELCO Group, and local communities. Earnestly undertaking efforts to improve all these factors leads to the enhancement of corporate value.

Therefore, corporate governance is not merely a form of the organization, but it is a framework for realizing all the efforts the KOBELCO Group is undertaking. In building the framework, the Group recognizes the importance of establishing a system that contributes to improving corporate value by taking appropriate risks; acting in cooperation with stakeholders; promoting appropriate dialogue with investors in the capital market; maintaining the rights of and fairness for shareholders; and securing transparency in business dealings.

In keeping with this basic policy, the KOBELCO Group pursues medium- to long-term improvements in corporate value, with the Group Corporate Philosophy positioned as the foundation for all its business activities.

Policy regarding Management Structure (Management structure and the range of delegation of management)

The Company believes the basis of its corporate value is the promotion of its integrated management of diverse businesses covering a wide range of segments—various demand fields, business environments, sales channels, and business scales—and the leveraging of that synergy. We also recognize the importance of having discussions with manufacturing sections and making our united efforts for promoting technical development and innovation, which form the foundation for the Company’s continued growth.

Furthermore, to advance its integrated management of diverse businesses, the Company believes it is necessary to promote active discussions and undertake appropriate decision-making with regard to the risk management of its various businesses and the allocation of management resources as well as to flexibly oversee business execution through the Board of Directors. It is desirable to maintain certain cohesion between execution and oversight and to have the Board of Directors served by members with a correct understanding of the Company’s business execution.

In line with this approach, the Company has shifted to adopting an Audit & Supervisory Committee whose members have voting rights on the Board of Directors. Under this governance structure, the Company aims to enable comprehensive audits of its extensive businesses; maintain and strengthen the supervisory function of the Board of Directors; and accelerate decision-making with regard to management without completely separating the oversight and execution functions.

Initiatives to Strengthen Corporate Governance

  • Introduced internal company system and adopted executive officer system
  • Established Corporate Code of Ethics
  • Established Compliance Committee as advisory committee to the Board of Directors
  • Established Corporate Philosophy
  • Appointed two Independent Outside Directors
  • Abolished internal company system and introduced business unit system
  • Established Basic Policy and Initiatives on the Corporate Governance of Kobe Steel, Ltd.
  • Established the Meetings of Independent Outside Directors
  • Established principles on appointment of Directors/Audit & Supervisory Board Members and established standards for Independent Outside Directors/Auditors
  • Launched Kobe Steel’s Fiscal 2016–Fiscal 2020 Group Medium-Term Management Plan
  • Became a company with Audit & Supervisory Committee
  • Revised executive remuneration system (introduced stock-type remuneration)
  • Established training policy for executives
  • Introduced evaluation system for the Board of Directors
  • Turned the Corporate Philosophy into the Core Values of KOBELCO and established Six Pledges of KOBELCO Men and Women
  • Reassessed the role of the Board of Directors from the standpoint of enhancing its oversight functions
  • Appointed the Company’s first female Director
  • Established a new Group Corporate Philosophy by integrating the newly formulated KOBELCO’s View of the Future and KOBELCO’s Mission

Outline of Corporate Governance System

Outline of Corporate Governance System

Features of Corporate Governance System

Features of Corporate Governance System

①Board of Directors

The number of Directors (excluding Directors who are Audit & Supervisory Committee Members) shall be not more than 15 as stipulated under the Articles of Incorporation of the Company. The Company conducts the following actions to ensure that an appropriate number of Directors constitutes the Board of Directors to facilitate substantial discussion at meetings of the Board of Directors as well as enhance the auditing function, while considering its diversity.

Purpose Measure
Reflect the fair and neutral perspectives of external parties and the viewpoints of stakeholders, including minority shareholders Invite several Independent Outside Directors (six including three Directors who are Audit & Supervisory Committee Members)
Strengthen the monitoring functions of the Board of Directors In addition to the President, appoint Directors to oversee the head office division, each business division in materials, machinery, and electric power, and the technical development division; a Director to oversee compliance; and a Director to oversee quality assurance
Enhance fairness and transparency of the Board of Directors and advance growth strategies as a company Appoint Independent Outside Directors so that they will account for one-third or more of the Board of Directors
In principle, the Chairman of the Board of Directors is selected from among the Independent Outside Directors

②Audit & Supervisory Committee

In principle, the Audit & Supervisory Committee of Kobe Steel consists of five members, including two Internal Directors and three Independent Outside Directors. This membership is not only in accordance with the rules on audit and supervisory committees of Japan’s Companies Act, which requires at least three Non-Executive Directors (a majority of whom must be Independent Outside Directors), but it also ensures transparency and fairness and encourages satisfactory auditing for the diversified management of a wide range of business segments. The Chair of the Audit & Supervisory Committee is selected from among the Independent Outside Directors.

Full-time Internal Audit & Supervisory Committee Members are mainly responsible for acting as liaisons between the management team and the Audit & Supervisory Committee and for coordinating with the internal audit departments. Independent Audit & Supervisory Committee Members are responsible for providing expert knowledge with respect to auditing and for maintaining fairness. To ensure these roles are fulfilled, the Company appoints Independent Audit & Supervisory Committee Members from diverse fields, including legal, financial, and industrial circles.

In addition, at least one of the Audit & Supervisory Committee Members must have a considerable degree of knowledge on finance and accounting in order to improve the effectiveness of audits.

Moreover, a new internal reporting system that allows employees to contact the Audit & Supervisory Committee was put in place in fiscal 2020.

③Meetings of Independent Outside Directors

The Company has established the Meetings of Independent Outside Directors to maximize the roles of Independent Outside Directors. The meetings are a platform where the Company shares with Independent Outside Directors information regarding the Company’s businesses other than nomination and compensation of executives.

The Meetings of Independent Directors consist solely of Independent Outside Directors. Regular meetings are held every quarter and ad-hoc meetings are held when necessary.

The Executive Directors of the Company attend the Meetings of Independent Directors as appropriate to share information and exchange opinions with the Independent Outside Directors.

④Compliance Committee

The Company has established the Compliance Committee, which, as an independent advisory body to the Board of Directors, deliberates matters regarding compliance with laws, regulations, and ethics concerning the Company’s business activities.

The Compliance Committee consists of the President, the Director overseeing Companywide compliance, the Executive Officer in charge of Companywide compliance, an external lawyer (without a retainer agreement executed by the Company) in charge of receiving reports via the Internal Reporting (whistle-blowing) System, an Independent Outside Director, and external experts. The majority of the committee consists of members from outside of the Company. The Compliance Committee Meetings was held 3 times in fiscal 2019.

The Compliance Committee plans fundamental policies regarding Groupwide compliance activities, monitors the progress of compliance activities, and submits reports and recommendations on necessary actions to the Board of Directors.

The Compliance Committee holds regular meetings biannually and ad-hoc meetings when necessary.

⑤Nomination & Compensation Committee

The Company has established the Nomination & Compensation Committee as an advisory body to the Board of Directors on important matters concerning nomination and compensation of Directors and Executive Officers, including a successor to the Chief Executive Officer, in order to enhance fairness and transparency in the management of the Board of Directors. The Nomination & Compensation Committee consists of three to five members appointed by the Board of Directors, including the President, with the majority of members comprising Independent Outside Directors. Meetings are held at least once per fiscal year and as needed. The Board of Directors fully respects the opinions of the Nomination & Compensation Committee and its decisions on relevant matters.

Currently, the Nomination & Compensation Committee currently consists of 3 members: Independent Outside Directors Mr. Kono and Mr. Kitahata, President and CEO Mr. Yamaguchi.

⑥Quality Management Committee

The Company has established the Quality Management Committee as an advisory body to the Board of Directors. The committee constantly monitors the effectiveness of measures to prevent a recurrence of the quality misconduct in the Group, in addition to continuously monitoring and advising on activities to strengthen quality management across the Group. Members of the Quality Management Committee comprise two internal executives of the Company and three external experts selected by the Board of Directors who have technical knowledge or legal knowledge on quality control. The committee is chaired by one of the external members.

The Quality Management Meetings was held 3 times in fiscal 2019.

⑦Execution of Duties

The Board of Directors is responsible for deliberating and deciding on matters concerning the execution of important business and legal matters as well as for overseeing business execution.

However, to ensure prompt decision-making, the Company has established deliberation standards for meetings of the Board of Directors and delegated authority, within a certain scope, to persons responsible for specific duties, including the President and other executives.

In addition, by appointing Executive Officers as assistants to Directors who execute duties, the Company has established a system that enables the delegation of business management responsibilities and prompt decision-making with respect to business management.

The term for Directors (excluding Audit & Supervisory Committee Members) and Executive Officers shall be one year to enable the Company to respond flexibly to a volatile business environment.

Results of Resolutions at Shareholders Meeting

Evaluation Results of the Board of Directors’ Effectiveness

Verification Results Regarding Strategic Holdings of Shares Held by Kobe Steel, Ltd.

Remuneration of Directors

The Company has set forth the following remuneration system for Directors in order to improve medium- to long-term corporate value, as well as to effectively offer incentives for Directors to carry out their expected roles to their fullest capacities.

Remuneration for the Company’s Directors (excluding Audit & Supervisory Committee Members) will consist of basic remuneration paid as fixed compensation, performance-based compensation linked to the achievement of business result targets for each fiscal year, and stock compensation with the goal of sharing value with shareholders. Taking into consideration their duties, part-time Internal Directors and Independent Outside Directors will not be eligible or performance-based compensation, and Independent Outside Directors will not be eligible for stock compensation.

The Company’s Directors who are Audit & Supervisory Committee Members will only be paid basic remuneration as fixed compensation, taking into consideration their duties.

The remuneration system for Executive Officers (excluding Directors) is same as the system of Directors.

Background and Experience of Directors and Evaluation of the Board of Directors

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