Intrduction
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 shall 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 shall 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 shall disclose the Company’s information in a timely and appropriate manner,and ensure transparency. (4)The Directors, Audit and Supervisory Board Members, and Executive Officers shall recognize their fiduciary responsibilities, and shall effectively fulfill their expected roles and duties. (5)The Company shall hold constructive dialogue with shareholders.
Chapter 2 Rights of Shareholders and Ensuring Equality of Shareholders
(General Meeting of Shareholders)
- Article 2
- In order to secure sufficient time for shareholders to consider the proposals to the General Meeting of Shareholders and exercise their voting rights appropriately, the Company shall 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 shall 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 shall 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 an electronic voting platform or by other means.
- 3
- The Company shall analyze the reasons if a certain number of votes are cast against the Company’s proposals at the General Meeting of Shareholders, and engage in dialogue with shareholders and take other necessary measures.
(Ensuring equality of shareholders)
- Article 3
- The Company shall 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 shall 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 shall strive to distribute profits taking into account the Company’s revenue status while adhering to a basic policy of providing stable and continuous dividends.
The Company shall 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 shall 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 shall not acquire or hold the shares of concerned companies (hereinafter 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 shall, each year, 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 shall, in principle, proceed with reducing the amount of holdings through measures such as the sale or transfer of the shares.
- 4
- The Company shall 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 shall 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 shall 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 shall 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 magnitude, 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 shall prescribe the “Organo Group Company Code of Conduct” as a basic code of conduct with which officers and employees of the Group must comply, and shall disclose it on the Company’s website, etc.
- 2
- At the Board of Directors, the Company shall 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 shall make efforts so that the corporate activities of the Group align with and contribute to maintaining the natural environment and social systems, and shall thereby promote the “sustainability management” that aims to enhance sustainability and further growth of the Group. In line with these efforts, the Company shall engage in solving social and environmental issues through its businesses in a positive and active manner.
(Sustainability Committee)
- Article 9
- The Company shall establish the Sustainability Committee as an executive organ consisting of Executive Directors and Executive Officers with titles in order to promote sustainability management.
- 2
- The Sustainability Committee shall consider the basic policy, plans, targets, etc. relating to the Company’s sustainability, and submit them to the Board of Directors and periodically report to the Board of Directors.
(Ensuring diversity in the Company)
- Article 10
- The Company shall recognize that the existence of diverse viewpoints and values reflecting the different experience, skills and attributes inside the Company may become a strength for 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 shall establish the Whistleblowing Regulations and establish an environment and systems so that the Group’s officers and employees can directly report to or consult with the Company’s Legal Division, the Audit and Supervisory Board Members, or external lawyers about systematic or personal legal violations. In addition, the Company shall ensure that information about the person who makes a report in accordance with the said regulations shall be kept in confidence and that such person shall not be treated adversely due to the act of making the report.
- 2
- The Board of Directors shall establish an appropriate system for whistleblowing and shall 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 shall prescribe the Disclosure Policy as the policy on information disclosure as described in Exhibit 1, and shall strive to disclose information in a timely and appropriate manner.
Chapter 5 Duties of the Board of Directors, Etc.
(Form of corporate organ)
- Article 13
- The Company shall select a company with Audit and Supervisory Board as its form of corporate organ. The Board of Directors shall be positioned as an organ that makes decisions on basic policies, etc. of the entire Group, exercises sophisticated management judgment, and supervises the execution of business. As well as emphasizing its decision-making functions relating to the execution of important business, the Board of Directors shall strive to strengthen its supervisory functions. Furthermore, the Nomination and Remuneration Advisory Committee shall be established, a non-statutory advisory body consisting of a majority of Outside Directors, to enhance transparency and objectivity relating to the decisions on nomination and remuneration, etc. for Directors, etc. The Audit and Supervisory Board shall audit the performance of duties by Directors.
- 2
- The Company shall introduce an Executive Officer System to allow differentiation between the “management decision-making and supervision function” of Directors and the “business execution function” of Executive Officers, thereby clarifying responsibilities and accelerating decision-making.
(Roles of the Board of Directors)
- Article 14
- The Board of Directors shall achieve efficient and effective corporate governance as entrusted by shareholders and take responsibility for ensuring the Company’s sustainable growth and for maximizing its long-term corporate value through corporate governance.
- 2
- To fulfill the responsibility in the preceding paragraph, the Board of Directors shall realize more sophisticated and in-depth management judgment and make the optimal decisions based on discussions from objective and multifaceted perspectives by Inside and Outside Directors with diverse experience and insight. In addition, the Board of Directors shall strengthen its supervisory function not only to ensure compliance and risk management, but also from the perspective of enhancing corporate value.
- 3
- The Board of Directors shall 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 decisions on business execution other than for matters to be submitted to the Board of Directors, the Company shall prescribe the scope and content of matters delegated to the Management Meeting, the Director and President, supervising Directors and others according to the magnitude, 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 shall 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 shall use the Internal Auditing Dept. to supervise the operational status of the system.
(Roles of Directors)
- Article 15
- Directors shall participate in the Board of Directors’ meetings, applying logical thinking skills from objective and multifaceted perspectives, and shall strive to have sophisticated and in-depth discussions.
- 2
- Independent Outside Directors, from their standpoint independent of business execution, shall contribute to strengthening the supervisory function of the Board of Directors, not only to ensure compliance and risk management, but also from the perspective of enhancing corporate value.
- 3
- Independent Outside Directors shall supervise any conflicts of interest that may arise 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 standpoint.
- 4
- Independent Outside Directors shall take a keen interest in the Group’s business fields, etc., striving to understand the environment in which the Group operates, and make judgments based on their knowledge.
(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 shall 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 members 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 shall 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 shall elect in a balanced manner 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 shall 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 shall consider as to whether or not it is necessary to dismiss the Director. If the dismissal is deemed appropriate in consideration of external environmental factors, etc., the Board of Directors shall determine to dismiss the person from the post of Representative Director, Director with titles and other positions and shall not nominate the person as a reelection candidate for Director.
(Composition of the Audit and Supervisory Board)
- Article 19
- The number of members of the Company’s Audit and Supervisory Board shall be three or four, and the Company shall strive to have at least one Audit and Supervisory Board Member who has sufficient knowledge of finance and accounting among them.
- 2
- The Company believes that ensuring the diversity of the Audit and Supervisory Board is useful for ensuring its deliberations are multifaceted and effective, and shall elect in a balanced manner persons with diverse knowledge, experience and ability.
(Qualifications for Audit and Supervisory Board Members and nomination procedures)
- Article 20
- Audit and Supervisory Board Members shall have excellent personality, insight, ability and extensive experience, as well as high ethical standards.
- 2
- In the selection of the candidates for Audit and Supervisory Board Members, the Director and President shall 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 shall 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 shall prescribe criteria for the 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 information on their attributes.
- 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 shall establish the Nomination and Remuneration Advisory Committee as an advisory body to the Board of Directors.
- 2
- The number of members of the Nomination and Remuneration Advisory Committee shall be three or more, 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 shall 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 shall receive and other necessary matters, and shall 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 (prohibiting 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 shall be responsible for formulating the selection/development plan for his/her successor.
- 2
- The Board of Directors shall 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 shall include the qualifications required for the Director and President.
- 3
- The revision to the qualifications required for the Director and President shall 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 shall establish the Special Committee as an advisory body to the Board of Directors.
- 2
- The Special Committee shall consist of Independent Outside Directors, selected by resolution of the Board of Directors.
- 3
- The Special Committee shall deliberate on material transactions, etc. with the Parent Company Group from the standpoint of protecting the interests of minority shareholders and make recommendations or report the results to the Board of Directors.
(Risk Management Committee)
- Article 26
- The Company shall establish the Risk Management Committee as an executive organ consisting of Executive Directors, Executive Officers with titles, and other members who are selected from General Managers in charge of a division managing Major Risks and from presidents of subsidiaries to pursue appropriate management of risks that may have a significant impact on business activities (Major Risks).
- 2
- The Risk Management Committee shall make decisions or receive reports on matters necessary to identify, analyze and assess Major Risks, and to promote countermeasures to Major Risks, and it shall submit or report important matters to the Board of Directors.
(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 shall 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 shall implement or arrange training relating to their duties and responsibilities as officers, and shall 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 shall continue to implement training relating to laws and regulations, management, compliance, etc., and also arrange for external organizations to provide training. In addition, the Company shall explain its businesses as necessary and offer opportunities such as site inspections so that those persons can deepen their understanding regarding the Company’s businesses. (3)The Company shall implement or arrange training relating to the duties and responsibilities as officers for Executive Officers who are to be candidates for future Directors.
- 2
- The Board of Directors and the Audit and Supervisory Board shall 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 shall set the schedules of the ordinary Board of Directors meetings and the major matters to be deliberated 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 shall notify Directors and Audit and Supervisory Board Members thereof.
- 2
- Except for particularly urgent or highly confidential matters, the Company shall 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 shall also 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 shall 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 Corporate Secretariat Office shall provide the necessary support so that Independent Outside Directors can perform their duties appropriately.
- 3
- At the Company, the Secretariat for the Audit and Supervisory Board shall 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 shall perform an analysis/assessment on the overall effectiveness of the Board of Directors, and shall release a summary of the results.
Chapter 6 Dialogue With Shareholders
(Dialogue with shareholders)
- Article 31
- The Company shall engage in constructive dialogue with investors including shareholders (hereinafter “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 shall prescribe the policies relating to the establishment of the system, initiatives and other matters for promoting constructive dialogue with Shareholders, etc. as specified below:
(1)The Director supervising the Corporate Strategy and Planning Dept. shall manage the overall dialogue with shareholders, etc. and promote constructive dialogue with Shareholders, etc. (2)The responsible person of the Corporate Strategy and Planning Dept. shall 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 the General Manager of the Corporate Strategy and Planning Dept. etc., shall respond to the extent that is reasonable. (3)The Corporate Strategy and Planning Dept. shall play a key role in the dialogue with Shareholders, etc., exchanging information with the Accounting Dept., the Legal Division 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 shall 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 shall report to the Board of Directors material matters from among the evaluations/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 shall ensure information protection and management and make efforts for fair disclosure. (7)The Company shall identify beneficial shareholders as necessary in order to ensure effective dialogue with Shareholders, etc.