Corporate Governance

We strive to establish and operate a corporate governance structure that upholds transparency, objectivity, and efficiency in management, while responding quickly to changes in the operating environment, to fulfill the trust placed in us by diverse stakeholders.

Our mission is “Pioneering the unknown and Creating the future.” Through the value we deliver—“measure, understand, and connect,” leveraging our measurement technology—we embrace the vision of “supporting a better relationship between people and technology and accelerating the realization of a sustainable society.”

To this end, we have established a Basic Policy on Sustainability and sincerely address safety, quality, environmental, and human rights issues. At the same time, we build and operate a corporate governance framework that preserves transparency, objectivity, and efficiency in management and can respond swiftly to environmental changes. Through these efforts, we aim to enhance corporate value over the medium to long term and achieve sustainable growth, fulfilling the trust of our diverse stakeholders.

We have adopted the form of a company with a board of corporate auditors. Under this system, the Board of Directors and Board of Corporate Auditors provide oversight and audit business execution. To strengthen the business execution function and improve management efficiency, we have introduced an executive officer system. Furthermore, to enhance fairness, transparency, and objectivity regarding the nomination and compensation of officers, and to further improve corporate governance, we have established the Nomination Committee and Compensation Committee as voluntary advisory bodies to the Board of Directors.

The Board of Directors meets regularly at least once a month to make decisions on key matters such as management policies, as well as on items and submission criteria stipulated in the Board of Directors Regulations. It also receives reports from each director on business execution and provides oversight on their execution of duties. Furthermore, we have appointed multiple outside directors to further strengthen the Board’s management oversight function.

During the current fiscal year, the Board discussed critical matters related to business execution, including medium- to long-term business strategies and the next medium-term business plan, analyses and deliberations on management practices mindful of capital costs and share price, improvements in capital efficiency and capital policy, risk management, sustainability measures, and matters concerning human capital and employee engagement.

In addition, committees related to internal control and risk management provide regular reports to the Board of Directors. Directors responsible for internal control also report, in principle on a quarterly basis, on the operational status of internal control and risk management to the Board of Directors.

The Board of Corporate Auditors is composed of three outside auditors. Based on the audit plan, statutory auditors attend key meetings such as those of the Board of Directors and Management Committee, and conduct investigations into the operations and financial conditions of the Company and its subsidiaries to ensure appropriate audits of management decision-making and business execution.

The main matters considered by the Board of Corporate Auditors include: formulating audit policies and audit plans; preparing audit results and audit reports; evaluating, appointing or dismissing, and approving the remuneration of the accounting auditor; and reviewing the development and operation of the corporate governance and internal control systems of the Group.

The nomination committee, which is an advisory body of the board of directors, provides recommendations on the appointment and dismissal of directors, the selection and dismissal of the representative director and executive directors, as well as the appointment and dismissal of executive officers. In the fiscal year 2024, it has held 10 meetings to discuss matters related to the proposals for the appointment and dismissal of directors, proposals for the appointment and dismissal of executive officers, succession planning, and other related matters.

The Compensation Committee, a voluntary advisory body to the Board of Directors, provides recommendations on the basic policies for directors’ compensation, the maximum amount of directors’ compensation, and other important matters related to remuneration from a management perspective. In fiscal 2024, the committee met eight times, reviewing the appropriateness of individual directors’ compensation, evaluating the operation of the executive compensation system following its revision, and organizing discussion points for further revisions to the executive compensation system in future fiscal years.

The Management Committee, composed of executive directors and executive officers, in principle meets biweekly. It conducts detailed preliminary discussions on matters to be submitted to the Board of Directors, makes decisions on important matters related to business execution that are not submitted to the Board, and receives reports on business execution from executive officers. In addition, outside directors and statutory auditors may attend Management Committee meetings and express their opinions.

The Internal Audit Office is an internal auditing department under the direct supervision of the president. It is staffed with dedicated personnel who are well-versed in internal operations and possess expertise in internal controls through involvement with bodies such as the J-SOX Promotion Committee. Based on the internal audit plan, the Internal Audit Office conducts internal audits of the Company and its subsidiaries. The results of internal audits are reported to the Board of Directors and full-time statutory auditors, as well as communicated to the audited departments, with corrective actions taken as necessary.

The Internal Audit Office also supports and assists statutory auditors in the smooth execution of their duties and coordinates with the accounting auditor.

As part of our internal control function, we have established the Compliance Committee, J-SOX Promotion Committee, and Risk Management Committee to formulate policies and plans ensuring effective internal controls, as well as to collect and monitor information through their members.

The executive compensation system is one of the key themes in our corporate governance

Our executive compensation is designed to encourage directors to demonstrate entrepreneurial spirit that fosters continuous and long-term performance improvements, implement management policies and strategies, and meet shareholder expectations. The compensation level is set to secure talented personnel—both inside and outside the Company—who can contribute to our development. Appropriate levels for each position are determined using objective external data and evaluation benchmarks, which are reviewed regularly. The Compensation Committee is involved in the process of determining compensation to ensure transparency and objectivity.

Regarding directors’ compensation, at the 69th Annual General Meeting of Shareholders held on March 17, 2023, we resolved the annual monetary compensation limit for directors and the total monetary compensation to be granted as restricted stock for eligible directors.

Compensation for directors and executive officers consists of fixed compensation as basic salary, performance-linked compensation reflecting short- and medium-term company performance and the performance of their assigned businesses, and stock-based compensation (restricted stock-based compensation) as an incentive for shareholder-focused management and medium- to long-term corporate value enhancement. To ensure sound incentives for sustainable growth, the ratio and composition of compensation are appropriately set according to individual role. For outside directors, only fixed compensation is provided, and at a level appropriate to their role. Outside directors do not receive performance-linked compensation. Considering the advisory function of outside directors in our management (enhancing corporate value through expertise-based advice), we have determined it appropriate to grant a certain level of stock-based compensation to them. Accordingly, outside directors are also eligible to receive stock-based compensation.

• Fixed compensation is determined according to each director’s or executive officer’s position.

• The evaluation indicators for performance-linked compensation combine financial indicators—consolidated order volume, consolidated net sales, and consolidated operating profit—with non-financial indicators such as KPIs from the medium-term business plan. For financial indicators, both short-term performance targets and medium-term growth goals are set to secure annual results while aiming for medium- to long-term growth. For non-financial indicators, we evaluate the progress of initiatives in the medium-term business plan and sustainability-related plans.

•  We introduced non-monetary stock-based compensation in our 70th fiscal year to provide incentives for medium- to long-term corporate value enhancement and to further promote value sharing with shareholders. Restricted stock is granted within the stock-based compensation limit resolved at the General Meeting of Shareholders, according to position, as stipulated in internal rules.

The compensation limit for statutory auditors was resolved at the 61st Annual General Meeting of Shareholders held on March 13, 2015. Statutory auditors’ compensation is set by the Board of Corporate Auditors based on their roles, considering levels at other companies. Statutory auditors receive only fixed compensation—performance-linked compensation and stock-based compensation are not granted.

We recognize enhancing internal reserves to reinforce our management base and prepare for future business development, while also returning profits to shareholders, as key management policies. Our basic policy is to provide continuous and stable dividends. Over the medium term, we target a consolidated payout ratio of 30%.

Regarding the acquisition of treasury stock, our basic approach is to enhance capital efficiency, implement flexible capital policies in response to changes in the operating environment, and further return profits to shareholders. Considering investments for growth and the Company’s financial position, we conduct share buybacks flexibly in the aim of improving shareholder value per share and ROE.

Our executives are expected to have a strong commitment to achieving results, including reflecting the status of strategy execution in the evaluations of management. In recent years, the delegation of authority to the executive side has transformed the role of the board of directors from discussing individual matters to debating the overall direction of corporate strategy. As auditors, we will continue to make recommendations to facilitate deeper discussions on the status of strategy execution.

The environment surrounding our company is still in the midst of significant transformation, but reforms that turn change into opportunity are steadily progressing. For growth, both bottom-up initiatives driven by employees and the execution of management strategies are essential. If we can advance these efforts as a united company, we believe the path to new growth will become more certain.

From an external perspective, it can be said that our company has more strengths than our employees may feel. Stage IV has a clear reform and approach policy that leverages these strengths, and I feel there is great expectation for future growth. Because this is a crucial phase for growth, we will pay careful attention to the establishment and operation of governance, and strive to promote corporate governance, aiming to be a company where all stakeholders, including our employees, can continue to experience sustainable growth.