Introduction
The purpose of these guidelines is to prescribe the basic views and guidelines relating to the corporate governance of ORGANO CORPORATION (the “Company”) and to contribute to sustainable growth and medium- to long-term enhancement of corporate value of the Company under the following Management Philosophy and Long-term Management Vision.
Management Philosophy
Organo serves as a valuable partner company by leveraging its leading-edge technologies cultivated through long experience with water treatment, by contributing to the industries that create the future, and by playing a key role in the development of societal infrastructure.
Long-term Management Vision
- At Organo, we seek to expand our business through high value-added separation and purification as well as analysis and manufacturing technologies, and by providing products and services that promote the creation of value and which resolve the challenges that confront industry and society.
- We proactively contribute to a better tomorrow by cultivating people today who will improve upon the way things were done yesterday, as a company where all employees are energetic and passionate about their work.
Chapter 1 General Rules
(Basic views on corporate governance)
- Article 1
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The Company will engage in efforts to enhance corporate governance that conforms to the following basic views in order to realize fair and trustworthy management and improve management efficiency.
(1)The Company will respect the rights of shareholders and ensure equality. (2)The Company will take into account the benefits for a wide range of stakeholders including shareholders/investors, consumers/customers, business partners, employees and local communities, and cooperate with these stakeholders appropriately. (3)The Company will disclose the Company’s information timely and properly, and ensure transparency. (4)The Directors, Audit and Supervisory Board Members, and Executive Officers will recognize their fiduciary responsibilities, and will effectively fulfill their expected roles and duties. (5)The Company will hold constructive dialogue with shareholders.
Chapter 2 Rights of Shareholders and Ensuring Equality of Shareholders
(General Meeting of Shareholders)
- Article 2
- In order for shareholders to secure sufficient time to consider the proposals to the General Meeting of Shareholders and exercise their voting rights appropriately, the Company will send the notice of the Ordinary General Meeting of Shareholders no later than three weeks before the date of the General Meeting of Shareholders and also disclose the content of the notice on the websites of the Company and the Tokyo Stock Exchange prior to sending the notice. In addition, the Company will prepare the English version of the notice of the General Meeting of Shareholders and disclose it on the websites of the Company and the Tokyo Stock Exchange.
- 2
- The Company will strive to establish an environment where all shareholders, including those who do not attend the General Meeting of Shareholders in person, can exercise their voting rights appropriately via the “Electronic Voting Rights Exercise Platform” or by other means.
- 3
- The Company will analyze the reasons if a certain number of votes are cast against the Company’s proposals at the General Meeting of Shareholders, and hold dialogue with shareholders and take other necessary measures.
(Ensuring equality of shareholders)
- Article 3
- The Company will treat its shareholders equally in proportion to their equity interests, give consideration so that the exercising of shareholders’ rights including the rights of minority shareholders is not hindered in effect, and respond appropriately to ensure that these rights are secured in effect.
- 2
- The Company will establish the Special Committee for the purpose of practicing fairness when conducting important transactions, etc. with the Company’s parent company and its subsidiaries (excluding the Company and the Company’s subsidiaries) (hereinafter the “Parent Company Group”), and monitoring and supervising issues regarding conflicts of interest between the Parent Company Group and minority shareholders in such transactions to appropriately protect the interests of minority shareholders.
(Capital policy)
- Article 4
- The Company will strive to provide distribution of profits taking into account the Company’s revenue status while adhering to a basic policy of providing stable and continuous dividends.
The Company will utilize internal reserve funds in business investments and R&D investments, etc., to achieve sustainable growth.
- 2
- In the event that the Company implements a capital policy that results in a change of control or a significant dilution, the Company will sufficiently deliberate the necessity and rationale at the meeting of the Board of Directors in order not to infringe the interests of existing shareholders, and provide appropriate explanations to shareholders.
(Basic policy on the Cross-Shareholdings and exercise of voting rights for Cross-Shareholdings)
- Article 5
- The Company will not acquire or hold the shares of concerned companies (the “Cross-Shareholdings”) except when it judges that the holdings contribute to enhancing the Company’s corporate value such as strengthening medium- to long-term cooperation with customers, business partners, etc., expanding transactions and creating synergies.
- 2
- The Board of Directors will, each year, the comprehensively evaluate the benefits and risks of each individual Cross-Shareholding in light of the holding costs and verify the rationale of holdings from a medium- to long-term perspective.
- 3
- If the Board of Directors judges that the holdings are not deemed reasonable as a result of the verification in the preceding paragraph, the Company will, in principle, proceed with reducing the amount of holdings through measures such as the sale or transfer of the shares.
- 4
- The Company will make a judgment regarding exercising voting rights for Cross-Shareholdings from the perspective of whether or not the exercising contributes to the medium- to long-term enhancement of corporate value for both the Company and the investee companies. In particular regarding shares of listed companies, the Company will prescribe the standards for approval or disapproval of proposals deemed to be of high importance, such as appropriation of surplus, election of officers, remuneration for officers and anti-takeover measures, and will respond in accordance with such standards.
(Basic policy on transactions between related parties)
- Article 6
- The Company shall require the approval from the Board of Directors for competitive transactions and conflict of interest transactions with Directors and the corporations, etc. substantially controlled by Directors, and shall report important matters relating to conflict of interest transactions between a Director and the Company to the Board of Directors. In addition, the Company will examine the presence or absence of related party transactions between Directors as well as their close relatives and the Group companies each year, and monitor the situation.
- 2
- Regarding transactions between the Company and major shareholders, etc., the Company shall require obtaining prescribed decision and approval for transactions in accordance with the size, characteristics, significance and other factors of the transactions, in a similar manner as with transactions with other companies that do not have a capital relationship with the Company.
Chapter 3 Consideration of the Benefits of Stakeholders
(Group Company Code of Conduct)
- Article 7
- The Company will prescribe the “Organo Group Company Code of Conduct” as a basic code of conduct with which officers and employees of the Company group (the “Group”) must comply, and will disclose the code of conduct on its website, etc.
- 2
- At the Board of Directors, the Company will periodically check the degree of observance and implementation of the “Organo Group Company Code of Conduct.”
(Responses to the issues over sustainability)
- Article 8
- The Company will make efforts so that the corporate activities of the Group align with and contribute to maintaining the natural environment and social systems, and will thereby promote the “sustainability management” that aims to enhance sustainability and further growth of the Group. In line with these efforts, the Company will engage in solving social and environmental issues through its businesses in a positive and active manner.
(Sustainability Committee)
- Article 9
- The Company will establish the Sustainability Committee as an executive organ consisting of Executive Directors and Executive Officers with titles in order to promote sustainability management.
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- The Sustainability Committee will consider the basic policy, plans, goals, etc. relating to the Company’s sustainability, and present and periodically report them to the Board of Directors.
(Ensuring diversity in the Company)
- Article 10
- The Company will recognize that existence of diverse viewpoints and values reflecting the different experience, skills and profiles inside the Company may become the strength in ensuring the sustainable growth of the Company, prescribe policies, etc. for ensuring diversity, and establish an environment and system where diverse human resources can play an active role regardless of nationality, gender, creed and physical condition.
(Whistleblowing system)
- Article 11
- The Company will establish the Whistleblowing Regulations and establish the system where the Group’s officers and employees can directly report to or consult with the Company’s Legal Dept., the Audit and Supervisory Board Members, or external lawyers about systematic or personal legal violations. In addition, the Company will ensure that information about the person who makes a report in accordance with the said regulations will be kept in confidence and that such person will not be treated adversely due to the act of making the report.
- 2
- The Board of Directors will establish an appropriate system for whistleblowing and will receive reports every year about the operational status of the whistleblowing system and supervise the system.
Chapter 4 Ensuring Appropriate Information Disclosure and Transparency
(Policy on information disclosure)
- Article 12
- The Company will prescribe the Disclosure Policy as a policy on information disclosure as described in Exhibit 1, and will strive to disclose information timely and properly.
Chapter 5 Duties of the Board of Directors, Etc.
(Form of corporate organs)
- Article 13
- The Company will adopt the company with Audit and Supervisory Board as its form of corporate organ. The Board of Directors will make decisions relating to the execution of important business and supervise the status of business execution, and the Audit and Supervisory Board will audit the performance of duties by Directors. In addition, the Management Meeting consisting of Executive Directors and Executive Officers with titles will propose medium- to long-term strategies, etc. and discuss important management agendas.
- 2
- The Company will introduce an Executive Officer System in seeking to differentiate the “management decision-making and supervision function” of Directors and the “business execution function” for Executive Officers, thereby clarifying responsibilities and accelerating decision-making.
(Roles of the Board of Directors)
- Article 14
- The Board of Directors will achieve an efficient and effective corporate governance as entrusted by shareholders and take responsibility in that the Company will grow sustainably and maximize its long-term corporate value through the corporate governance.
- 2
- To fulfill the responsibility in the preceding paragraph, the Board of Directors will demonstrate the supervision function on overall management and ensure the fairness and transparency of management, as well as make best decisions for the Company through decision-making, etc. on important business executions including the formulation of the Medium-term Management Plan and the profit planning for a single fiscal year, and investments and loans over a certain amount.
- 3
- The Board of Directors will prescribe the matters to be submitted to the Board of Directors in the Board of Directors Regulations and the Detailed Regulations on the Operations of the Board of Directors.
- 4
- With regard to decision on the business executions other than matters to be submitted to the Board of Directors, the Company will prescribe the scope and content of matters delegated to the Management Meeting, Director and President, supervising Directors and others according to the size, characteristics and significance, etc. of each matter in the Authorization Regulations, the Management Meeting Regulations and the Internal Approval Regulations.
- 5
- The Board of Directors will prescribe the basic policy on the internal control system and appropriately establish the system for internal control, risk management and others across the Group. In addition, the Board of Directors will use the Internal Auditing Dept. to supervise the operational status of the system.
(Roles of Independent Outside Directors)
- Article 15
- Independent Outside Directors will provide advice on overall management utilizing their own experience and insight.
- 2
- Independent Outside Directors will supervise management through important decision-makings, etc. by the Board of Directors.
- 3
- Independent Outside Directors will supervise the conflict of interest between the Company and Directors/controlling shareholder, etc., and also appropriately reflect the opinions of stakeholders including minority shareholders on the Board of Directors from an independent viewpoint.
(Chairman of the Board of Directors)
- Article 16
- A Director determined in advance by the Board of Directors shall act as the Chairman of the Board of Directors.
- 2
- The Chairman of the Board of Directors will strive to enhance the quality of discussion at a meeting of the Board of Directors and manage the Board of Directors effectively and efficiently.
(Composition of the Board of Directors)
- Article 17
- The number of the Company’s Board of Directors shall be between three and ten, and in principle, one-third or more of its members shall be Independent Outside Directors. Independent Outside Directors shall include those who have management experience in other companies, etc.
- 2
- The Company will identify the knowledge, experience, ability, etc. that the Board of Directors should possess as a whole in order for the Company to grow sustainably and maximize its long-term corporate value. Based on this foundation, the Company will elect in a balanced way persons with such knowledge, experience, ability, etc. in order that deliberations at the Board of Directors are made in a multifaceted and effective manner.
(Qualifications for Directors and procedures of nomination/dismissal)
- Article 18
- Directors shall have excellent personality, insight, ability and extensive experience, as well as a high ethical viewpoint.
- 2
- The Board of Directors will determine the candidates for Directors through the consideration and opinions of the Nomination and Remuneration Advisory Committee based on the composition of the Board of Directors specified in Article 17 as well as the evaluation of the qualifications required for Directors specified in the preceding paragraph, business performance and other factors.
- 3
- If a Director falls under the criteria for considering dismissal prescribed by the Company, such as a continuation of poor business performance in a certain period or an occurrence of a significant scandal, the Company will consider as to whether or not it is necessary to dismiss the Director. If the dismissal is deemed relevant in consideration of external environmental factors, etc., the Board of Directors will determine that it dismisses the person from Representative Director, Director with titles and other positions and does not nominate the person as a reelection candidate for Director.
(Composition of the Audit and Supervisory Board)
- Article 19
- The number of the Company’s Audit and Supervisory Board shall be around three to four, and the Company shall strive to elect at least one person who has sufficient knowledge of finance/accounting among them.
- 2
- The Company believes that ensuring the diversity of the Audit and Supervisory Board is useful for its deliberation to be made in a multifaceted and effective manner, and will elect in a balanced way persons with diverse knowledge, experience and ability.
(Qualifications for Audit and Supervisory Board Members and procedures of nomination)
- Article 20
- Audit and Supervisory Board Members shall have excellent personality, insight, ability and extensive experience, as well as a high ethical viewpoint.
- 2
- In the election of the candidates for Audit and Supervisory Board Members, the Director and President will prepare a personnel proposal based on the composition of the Audit and Supervisory Board specified in Article 19 and the evaluation of the qualifications required for Audit and Supervisory Board Members specified in the preceding paragraph and other factors, and then the Board of Directors will determine those candidates after obtaining the consent of the Audit and Supervisory Board.
(Criteria for independence and restrictions on concurrent positions of outside officers)
- Article 21
- The Company will prescribe the criteria for independence of outside officers as described in Exhibit 2, in light of the independence standards for independent officers prescribed by the Tokyo Stock Exchange and their profile information.
- 2
- In principle, outside officers shall not concurrently serve as director or audit and supervisory board member of more than three listed companies excluding the Company.
(Nomination and Remuneration Advisory Committee)
- Article 22
- The Company will establish the Nomination and Remuneration Advisory Committee as an advisory body to the Board of Directors.
- 2
- The number of the Nomination and Remuneration Advisory Committee shall be equal to or above three, the majority of whom shall be Independent Outside Directors in order to secure the independence of the committee.
- 3
- The Nomination and Remuneration Advisory Committee will consider matters relating to the nomination of officers such as the election and dismissal of the Company’s Directors, matters relating to the remuneration, etc. that Directors of the Company will receive and other necessary matters, and will provide its opinions to the Board of Directors.
(Remuneration, Etc. for Directors, etc.)
- Article 23
- The remuneration for Executive Directors shall consist of the fixed part according to respective positions of Directors, the performance-linked remuneration as a short-term incentive, and the stock-based remuneration as a medium- to long-term incentive.
- 2
- Executive Directors shall be subject to restrictions on transfer of the Company’s shares delivered as remuneration for a period of three years from the time of delivery of the shares (prohibition of transfer, creation of security interest and other disposal).
- 3
- Remuneration for Non-Executive Directors and Audit and Supervisory Board Members shall be a fixed amount according to their respective positions in the Company.
- 4
- The amount of remuneration, etc. for each Director shall be determined by the resolution of the Board of Directors after obtaining opinions based on review by the Nomination and Remuneration Advisory Committee and within the scope of the total amount of remuneration, etc. for all Directors determined by the resolution of the General Meeting of Shareholders.
- 5
- The amount of remuneration, etc. for each Audit and Supervisory Board Member shall be determined through discussion by the Audit and Supervisory Board Members within the scope of the total amount of remuneration, etc. for all Audit and Supervisory Board Members determined by the resolution of the General Meeting of Shareholders.
(Succession plan)
- Article 24
- The Director and President will take responsibility for formulating the selection/development plan for his/her successor.
- 2
- The Board of Directors will appropriately supervise the successor selection/development plan formulated by the Director and President and provide necessary advice to the Director and President. The successor selection/development plan will include the qualifications required for Director and President.
- 3
- The revision to the qualifications required for the Director and President will be determined by the resolution of the Board of Directors after obtaining opinions based on review by the Nomination and Remuneration Advisory Committee.
(Special Committee)
- Article 25
- The Company will establish the Special Committee as an advisory body to the Board of Directors.
- 2
- The Special Committee will consist of Independent Outside Directors, selected by resolution of the Board of Directors.
- 3
- The Special Committee will deliberate on important transactions, etc. with the Parent Company Group from the standpoint of protecting the interests of minority shareholders and submit or report the resulting recommendation to the Board of Directors.
(Risk Management Committee)
- Article 26
- The Company will establish the Risk Management Committee in order to appropriately manage risks (“Major Risks”) that could significantly impact business activities, and the committee, as an executive organ, consists of Executive Directors, Executive Officers with titles, and other members who are selected from general managers in charge of a department managing Major Risks and from presidents of subsidiaries.
- 2
- The Risk Management Committee shall make decisions or receive reports on matters necessary to identify, analyze and assess Major Risks, and to promote responsive action, and it shall present or report important matters at the Board of Directors meetings.
(Training for Directors and Audit and Supervisory Board Members, etc.)
- Article 27
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In order for Directors and Audit and Supervisory Board Members (including outside officers) to acquire knowledge necessary for appropriately fulfilling their roles and duties, the Company will offer or arrange training opportunities based on the following policies at the expense of the Company.
(1)If Directors or Audit and Supervisory Board Members newly assume office, the Company will implement or arrange training relating to their duties and responsibilities as officers, and will provide opportunities to obtain explanations regarding the Company’s management plan, business overview and internal rules and other regulations. (2)After those persons assume office as Directors or Audit and Supervisory Board Members, the Company will continue to implement training relating to laws and regulations, management, compliance, etc., and also arrange for external organizations to provide trainings. In addition, the Company will explain its businesses as necessary and offer opportunities such as office inspections so that those persons can deepen their understanding regarding the Company’s businesses. (3)The Company will implement or arrange training relating to the duties and responsibilities as officers for Executive Officers who are to be candidates for Directors.
- 2
- The Board of Directors and the Audit and Supervisory Board will check the implementation status of the training specified in the preceding paragraph every year.
(Operations of the Board of Directors meetings and important meetings)
- Article 28
- The Company will set the schedules of the ordinary Board of Directors meetings and their major deliberation matters as well as the schedules of important meetings such as the Management Meeting and the Monthly Business Conference for the next fiscal year by the end of each fiscal year, and will notify Directors and Audit and Supervisory Board Members thereof.
- 2
- Except for particularly urgent or highly confidentiality matters, the Company will distribute the materials relating to the agendas and proposals at the Company’s Board of Directors to Directors and Audit and Supervisory Board Members sufficiently prior to the date of the Board of Directors. In principle, the Company also will distribute agendas and materials regarding important meetings, etc. including the Management Meeting and the Monthly Business Conference prior to the date of those meetings. In addition, the relevant departments/divisions will provide advance explanations as necessary.
(Access to internal information by Independent Outside Directors and Audit and Supervisory Board Members)
- Article 29
- Independent Outside Directors and the Audit and Supervisory Board Members of the Company may ask for explanations or reporting by Directors, Executive Officers and employees, or may ask for submission of internal materials whenever those actions are necessary or deemed appropriate.
- 2
- At the Company, the Secretary Office will provide the necessary support so that Independent Outside Directors can perform their duties appropriately.
- 3
- At the Company, a secretariat for the Audit and Supervisory Board will provide the necessary support so that the Audit and Supervisory Board and each Audit and Supervisory Board Member can perform their duties appropriately.
(Self-assessment)
- Article 30
- Every year, the Board of Directors will perform an analysis/assessment on the overall effectiveness of the Board of Directors, and will release a summary of the results.
Chapter 6 Dialogue With Shareholders
(Dialogue with shareholders)
- Article 31
- The Company will hold constructive dialogue with investors including shareholders (“Shareholders, etc.”) within a reasonable scope and by a reasonable method in order to contribute to sustainable growth and medium- to long-term enhancement of corporate value of the Company.
- 2
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The Company will prescribe the policies relating to the system establishment, initiatives and other matters for promoting constructive dialogue with Shareholders, etc. as specified below:
(1)The supervising Director of the Corporate Strategy and Planning Dept. will manage the overall dialogue with Shareholders, etc. and promote constructive dialogue with Shareholders, etc. (2)The responsible person of Corporate Strategy and Planning Dept. will serve as a contact point for dialogue with Shareholders, etc., and in accordance with the purpose and contents of meetings, the Director and President, other Directors including outside Directors, Audit and Supervisory Board Members or General Manager of Corporate Strategy and Planning Dept. etc., will respond under the reasonable scope. (3)The Corporate Strategy and Planning Dept. will play a key role in the dialogue with Shareholders, etc., exchanging information with the Accounting Dept., the Legal Dept. and other relevant departments/divisions on a daily basis, and strive to provide accurate and fair information. (4)In addition to individual meetings and telephone conferences with Shareholders, etc., the Company will hold a financial results presentation for investors half yearly, utilize investor conferences hosted by securities companies and enhance information disclosures through its website, the notice of the General Meeting of Shareholders, shareholder letters, financial results presentation materials and other media. (5)The Company will report to the Board of Directors material matters from among the evaluation/comments obtained through investor briefing sessions and the opinions obtained through the dialogue with shareholders. (6)In accordance with the Insider Transaction Prevention Regulations and the Disclosure Policy, the Company will ensure information protection and management and make efforts for fair disclosure. (7)The Company will identify beneficial shareholders as necessary in order to ensure effective dialogue with Shareholders, etc.