Corporate Governance

Basic Approach

In order to deserve the trust of our shareholders and other stakeholders, the Companys fundamental approach to corporate governance is not just to ensure compliance with laws and regulations and our Articles of Incorporation, but also to fulfill our social responsibilities based on corporate ethics and to contribute to society while continuously improving enterprise value through efficient and transparent management. We see this as a top management priority.

The azbil Group has established its long-term targets (to achieve by FY2030) and a medium-term plan (FY2021-FY2024), whose aim is to contribute in-line to a sustainable society and achieve growth through providing automation-related products and services. Guided by the Group philosophy of human-centered automation, we will secure our own medium- and long-term development while implementing sustainable enhancement of enterprise value. At the same time, we recognize that it is corporate governance which provides the foundation for such sustainable enhancement of enterprise value, and so improving corporate governance is a key issue for management. We are therefore working to strengthen the supervisory and auditing functions of the Board of Directors, enhance the transparency and soundness of management, and clarify responsibilities for business execution. To facilitate this, we have recently transitioned from being a company with an audit & supervisory board to a company with a three-committee board structure, following the approval of a proposal to amend our Articles of Incorporation at the 100th Ordinary General Meeting of Shareholders held on June 23, 2022.

Azbil Corporation's report on corporate governance (full text) is available here.

Corporate Governance Report revised on 27 June, 2023(PDF/1,401KB)

Basic Policy for Corporate Governance

(1) Ensuring the rights and equality of shareholders

In order to ensure that shareholders rights are substantially secured, the Company takes appropriate measures in accordance with laws and regulations, and, giving due consideration to all shareholders including foreign shareholders and minority shareholders, is promoting the development of an environment in which shareholders can exercise their rights equally and appropriately.

(2) Appropriate cooperation with stakeholders who are not shareholders

In order to achieve sustainable growth and increase enterprise value over the medium to long term, we believe that the Company must be strongly aware of its corporate social responsibility and conduct management that is appropriate for all our stakeholders. For this purpose, we have adopted human-centered automation as our Group philosophy to realize safety, comfort and fulfillment in peoples lives and contribute to the global environment. To this end, we have instituted Guiding Principles for azbil Group Business and established the azbil Group Code of Conduct to provide specific guidelines for all officers and employees of the Company and the azbil Group. In FY2022, we updated a number of basic policies that comprise important concepts underpinning the Companys fundamental stance; this is essential for implementing the Groups philosophy, Guiding Principles, and Code of Conduct. Also, we have set the essential goals of the azbil Group for the SDGs (basic goals and targets) toward achieving the UNs SDGs. With these SDGs as our new guidepost, we aim to connect our philosophy, Guiding Principles, Code of Conduct, and management strategy, leading in series to a sustainable society, and to realize a balance between resolving social issues and sustainable growth. As regards achieving diversity in human resources, we are actively working to promote the advancement of female employees based on the recognition that having diverse values within a company is essential when it comes to achieving sustainable growth.

With regard to the internal reporting system, we believe it is important to (a) encourage employees to use this system by dispelling any concerns that in so doing they might be put at a disadvantage, and (b) ensure that the information thus conveyed is used appropriately. We have therefore established a user-friendly reporting & consultation system—the CSR Hotline—which ensures that the information received is reported to the president & CEO, Audit Committee Members, and outside directors.

(3) Ensuring appropriate information disclosure and transparency

The Company strives to disseminate information so as to ensure transparency and fairness in decision-making, thus realizing effective corporate governance. Specifically, in order to ensure that all stakeholders have a proper understanding of financial information—such as the Companys financial position and business results—as well as non-financial information—such as management strategy, management planning, management issues, and information relating to risk and governance—we actively disclose information on a voluntary basis in addition to the information stipulated by law. The Company also discloses policies and procedures regarding the appointment of directors and corporate executives (shikkoyaku), as well as the selection and dismissal of senior executives including the CEO, and policies for deciding on the remuneration for directors and corporate executives. We will continue to strive to increase the scope of information covered by these disclosures and ensure transparency.

In addition, we are taking appropriate measures to ensure proper audits by the independent accounting auditor: the Company provides sufficient time for audits to be conducted, arranges for the accounting auditor to interview the president & CEO and t
he officer in charge of finance on a regular basis, and continuously conducts quarterly report meetings between the accounting auditor, the Audit Committee, and the Internal Audit Department.

(4) Responsibilities of the Board of Directors, etc.

The basic mission of the Board of Directors is to put in place an appropriate corporate governance system and to implement this so as to achieve sustainable growth for the Company and enhance its enterprise value.

The Board Rules stipulate that basic management strategy and management plans are important items for deliberation, and following discussions that are unrestricted, robust and constructive, the Board will make appropriate decisions. Moreover, to ensure transparency and fairness in management, the Company will ensure timely disclosure and systems for internal control and risk management. At the same time, the Audit Committee, in cooperation with the Internal Audit Department, will successively provide appropriate audits and opinions on management.

The Company recognizes that independent outside directors play a key role in ensuring that the Board properly fulfills its functions and responsibilities, and thus it has appointed eight independent outside directors with a broad range of experience in corporate management and supervision, as well as considerable expertise and knowledge. Drawing on their diverse backgrounds, these independent outside directors adopt a wide range of perspectives to fulfill their responsibilities, offering advice on improving enterprise value, supervising management, etc. For the Board of Directors to effectively fulfill its roles, the Company believes that, in appointing directors, it is important to promote diversity, taking into consideration the balance of knowledge and experience, and also to ensure transparency and objectivity in the selection process.

Giving due consideration to such management strategies as the realization of the medium-term plan, the Company has set out what skill sets are expected of its directors and has confirmed the requisite independence, diversity, and anticipated skills (skills matrix) of its current Board.

Regarding succession planning for the Companys senior management, the Nomination Committee discusses the ongoing training and selection of successors; record the results of those discussions as well as the process of deliberation; and regularly report to the Board of Directors on details of their deliberations. The Company thus ensures that succession planning is implemented in an appropriate and objective manner, that the Board is proactively involved in succession planning, and that the training of potential successors is conducted systematically, with sufficient time and resources. As of June 27, 2023, the total number of directors is 12, with outside directors representing a majority. Board composition demonstrates ample diversity, including that of nationality and gender.

(5) Dialogue with shareholders

In order to meet requirements for corporate accountability while contributing to sustainable growth and the enhancement of enterprise value over the medium to long term, the Company is working to develop and implement a system for promoting constructive dialogue with shareholders and investors.

Regarding the publication of management strategies and plans, as well as presenting basic policies such as earnings plans, the Company strives to provide straightforward explanations of the targets of financial affairs (sales, operating income, ROE, etc.) and non-financial affairs in our medium-term plan, as well as outlining strategies for achieving those targets.

(6) Overview of corporate governance system and reasons for adopting the system

To ensure its own medium- to long-term development, respond to the trust of all its stakeholders including its shareholders, and proceed with consistently increasing enterprise value, the azbil Group sets fortifying the underlying corporate governance as a management priority. Measures have included strengthening the supervisory and auditing functions of the Board of Directors, improving management transparency and soundness, and clarifying the structure of responsibility for the execution of duties.

The Company has transitioned from having an Audit & Supervisory Board to having a three-committee board structure, following the approval of a proposal to amend its Articles of Incorporation at the 100th Ordinary General Meeting of Shareholders held on June 23, 2023. Accompanying this transition to a three-committee board structure, three statutory committees – the Nomination Committee, Audit Committee, and Remuneration Committee – have been established, each consisting of a majority of Independent Outside Directors and being chaired by an Independent Outside Director. In addition, by substantially transferring business execution authority from the Board of Directors to Corporate Executives with clear legal responsibilities, we are clearly separating supervisory and execution functions to ensure a business execution system based on flexible and efficient decision making, while at the same time enhancing the objective supervision of management.

Furthermore, as a company with a three-committee board structure, to ensure the effectiveness of monitoring by the Board of Directors, we have established a forum for providing information to directors and exchanging opinions with corporate executives in the form of a Liaison Meeting for Directors and Corporate Executives and in addition, opinion exchange meetings are held regularly among outside directors. At the same time, we are continuing the system for Executive Officers charged with business execution, aiming to enhance the quality and speed of decision-making.

The Board of Directors is convened monthly in principle, to discuss and consider legal issues, and other important managerial matters as the highest decision-making body for management and provide a major direction, and to exercise appropriate supervision over execution in order to reflect opinions of stakeholders. In business execution, the management meetings, which Corporate Executives and Executive Officers with titles attend, have been established to serve as an executive-level advisory body to assist President & Group CEO in making decisions, and are attended by the full-time Audit Committee Member to ensure the effectiveness of monitoring. The management meetings are held twice a month as part of ongoing initiatives to strengthen business operations through prompt decision making and strict execution.

As of June 27, 2023, the Company has appointed a total of 12 Directors, including four (4) who are involved in business execution and have accumulated experience in the Companys business, management and audits (Hirozumi Sone, Kiyohiro Yamamoto, Takayuki Yokota, and Hisaya Katsuta), as well as eight (8) who are Independent outside directors and have independence, broad experience, a wealth of expertise and knowledge, and rich diversity in the form of nationality and gender (Takeshi Itoh, Waka Fujiso, Mitsuhiro Nagahama, Anne Ka Tse Hung, Minoru Sakuma, Fumitoshi Sato, Shigeaki Yoshikawa, and Tomoyasu Miura). independent outside directors have reached the majority of the Board of Directors. In addition to working diligently to contribute to enhancement of the Companys enterprise value through appropriate oversight and advice during the decision-making process at Board of Directors meetings, these independent outside directors regularly exchange opinions with corporate executives.

Also, a survey was again carried out this year, like last year, to evaluate the effectiveness of the Board of Directors, to identify issues and possible improvements, and to provide suggestions as to how the Boards effectiveness might be enhanced. We were able to confirm that, following the transition to a company with a three-committee board structure, steady progress has been made in both strengthening governance and improving the effectiveness of the Board of Directors. In preparing for this evaluation, the Chairperson led a review with outside directors of the approach and methodology to be used, and—so as to ensure objectivity and facilitate more effective initiatives in the future—an outside organization was tasked with compiling both the survey items and the results.

(7) Status of Activities of the Board of Directors and each committee

In fiscal year 2022, the Board of Directors met a total of 12 times. The 12 Directors attended all of the meetings. Because Directors Shigeaki Yoshikawa and Tomoyasu Miura were elected at the 100th Ordinary General Meeting of Shareholders held on June 23, 2022, their attendance only applies to Board of Directors meetings held after their appointment. Major items discussed at the Board of Directors meetings are as follows.

(Nomination Committee)

As of June 27, 2023, for the Nomination Committee, Takeshi Itoh (Independent Outside Director) serves as the Committee chairperson, Anne Ka Tse Hung (Independent Outside Director), Shigeaki Yoshikawa (Independent Outside Director), and Kiyohiro Yamamoto (Director, President and Group CEO) serve as committee members, with Independent Outside Directors comprising a majority of the Committee. In fiscal year 2022, the Nomination Committee met nine (9) times, and three (3) members of the Nomination Committee (Takeshi Itoh, Anne Ka Tse Hung, and Shigeaki Yoshikawa) attended all of the meetings, and one (1) member (Kiyohiro Yamamoto) participated in eight (8) of them. Specific items considered by the Nomination Committee are as follows.

(Audit Committee)

As of June 27, 2023, for the Audit Committee, Fumitoshi Sato (Independent Outside Director) serves as the Committee chairperson, Minoru Sakuma (Independent Outside Director) and Hisaya Katsuta (Non-executive inside Director) serve as committee members, with Independent Outside Directors comprising a majority of the Committee. Two (2) Independent Outside Directors and one (1) Non-executive inside Director who is versed in the Companys businesses formulate audit plans together with the Internal Audit Department and conduct multifaceted auditing activities, and the internal Audit Committee Member serves on a full-time basis, to enhance the effectiveness of audits by the Audit Committee. The Audit Committee chairperson Fumitoshi Sato has experience as the person responsible for the creation of financial statements as the officer in charge of accounting and finance at another operating company over many years and thus has a wealth of knowledge concerning financial affairs and accounting. Furthermore, the Company established an Audit Committee Office, an organization dedicated to assisting the Audit Committee in its duties, with three (3) staff members assigned to assist the Audit Committee in the execution of its duties. The Audit Committee convenes in principle once a month and holds ad-hoc meetings, as necessary. In fiscal year 2022, it convened a total of 11 times and the three (3) Audit Committee Members participated in all of the meetings. Specific items considered by the Audit Committee are as follows.

The Audit Committee Members determined the task division, and performed attendance at the Board of Directors meetings and a Liaison Meeting for Directors and Corporate Executives, exchange of opinions with Corporate Executives, Executive Officers and President of subsidiaries, investigation of business operations of departments, business sites and subsidiaries, sharing of the audit plan and audit results with the Internal Audit Department, participation in certain operation audits performed by the Internal Audit Department as an observer, communication and exchange of information with Audit & Supervisory Board Members of subsidiaries in Japan, listing to explanations on the status of implementation of audits and audit results, consideration of items, contents, etc. of key audit matters (KAM), and other matters from the Accounting Auditor.

Furthermore, all Audit Committee Members including outside Audit Committee Members were appointed as select Audit Committee Members, and outside Audit Committee Members also conducted many audit operations including meetings to exchange opinions with Corporate Executives and Executive Officers. Moreover, Audit Committee Members discussed internal issues, other companies instances of fraud, and other matters.

Continuing from last fiscal year, though audit activities were affected by COVID-19 to some degree, the Audit Committee used a mix of visiting audits and remote surveys using an online conferencing system. Furthermore, on-site visiting audits were also resumed for overseas subsidiaries.

(Remuneration Committee)

As of June 27, 2023, for the Remuneration Committee, Mitsuhiro Nagahama (Independent Outside Director) serves as the Committee chairperson, Waka Fujiso (Independent Outside Director), Tomoyasu Miura (Independent Outside Director), and Takayuki Yokota (Director, Representative Corporate Executive Deputy President) serve as committee members, with Independent Outside Directors comprising a majority of the Committee. In fiscal year 2022, the Remuneration Committee met seven (7) times and all the four (4) Remuneration Committee Members attended all of the meetings. Specific items considered by the Remuneration Committee are as follows.