Corporate Governance

The ALSOK Group includes "Based on two core principles exemplified by ‘arigato no kokoro’ (a feeling of gratefulness and gratitude) and ‘bushi no seishin’ (a samurai spirit), we devote ouselves to protecting the safety and security of our customers and of society as whole." in its management philosophy and includes "Contributing to Society" in its management policies. In line with this philosophy and policy, we are working to fulfill corporate governance through our operations such as, performance of management and seperation of supervisory, swift decision making, establishment of corporate ethics, and securement of management transparency, while endeavoring to remain the corporate group reliable to all stakeholders. Moreover, we place emphasis on information disclosure. We work positively on IR activity such as the execution of visiting every institutional investor and holding analyst meetings for investors and analysts. The ALSOK Group inspects and reviews such as organization structure, by observing the principles in "Corporate Governance Code" laid down by Tokyo Stock Exchange. We submit "Corporate Governance Report" to Tokyo Stock Exchange every year and post to both Tokyo Stock Exchange and ALSOK website. The ALSOK Group aims at the construction of the organizational structure to which the corporate governance functions more effectively, and will continue the examination of the measure for various systems.

An outline of the Corporate Governance System and Reason to Adopt It

We adopted the audit & supervisory board member system and are satisfied with its effective full audit that improves governance to our executive team.

ALSOK's director consists of 12 members, including 4 outside directors and audit & supervisory board members consists of 4 members, including 3 outside audit & supervisory board members. The Board of Directors, in principle, meets once a month to make important management decisions and while making a decision of basic management policy and important affair concerning business execution it oversees business execution of the directors and executive officers. Headed by the Chairman and Representative Director, the Management Committee, as a general rule, meets twice a month to discuss matters to be presented to the Board of Directors and the business execution policy based on the decision of the Board of Directors. Audit & Supervisory Board, in principle, meets once a month to consult or to resolve important items concerning inspection. Also, one of the audit & supervisory board member attends the Management Committee and observes management execution condition.

We implemented the executive officer system in June 2002, a company-wide system in April 2010, and also appointed a Chief Executive Officer (CEO) and Chief Operating Officer (COO) on April 1, 2011. The Operating Committee, which is headed by the President and Representative Director, meets, in principle, twice a month. This committee is responsible for deciding what issues are to be presented to the Management Committee and the Board of Directors, and discussing the appropriateness and the effectiveness of operational policies on business affairs in advance. We are proud of these systems mentioned above that enable us to make our business more impartial and transparent.

Still, ALSOK and the outside directors are concluding the contract to limit the onus of damage of the law in Article 423 clause 1 based on regulations of Article 427 clause 1 of the Corporate Law. Amount limit for the damage liability based on the concerned contract is assumed to be high amount, either of the lowest amount limit provided in 10 million yen or Article 425 clause 1 of this law. This is aimed for outside directors and outside audit & supervisory board members to sufficiently demonstrate the expected role.

Reasons for Appointment and Duties of Outside Directors and Outside Audit & Supervisory Board Members

As for the outside directors and outside audit & supervisory board members, it is assumed to cover the function of observation and supervision of the management team by objective and neutral standpoint. Also, we do not set any basis nor policy concerning independence to appoint outside directors and outside audit & supervisory board members, although we refer to requirements of independent officers fixed by Tokyo Stock Exchange.

The Company employs 4 outside directors and 3 outside audit & supervisory board members; applications have been submitted to the Tokyo Stock Exchange identifying each of these individuals as independent officers.

Also, outside directors and outside audit & supervisory board members attend meetings of the Board of Directors, at which they offer their opinions on the matters at hand. They receive briefings on the issues to be discussed at meetings of the Board of Directors the day prior to the meeting, allowing them to more effectively monitor management.　 The outside audit & supervisory board members coordinate with the Inspection Department and the Independent Auditing Corporation employed by the Company in regard to audits by audit & supervisory board members, internal audits, and accounting audits as well as auditing branches and subsidiaries. To facilitate this coordination, the outside audit & supervisory board members periodically exchange information with these bodies.

The participation of the outside directors in these meetings enables them to monitor the operational execution of other directors with regard to Internal Control Operations and other matters from an independent standpoint.
They also evaluate the legality of the measures implemented by Internal Control Operations. To this end, they perform both operational and accounting audits of the organization and review all relevant documents.

Compensation for Directors and Audit & Supervisory Board Members

Amount of compensation

Number of members and total compensation for each classification in the fiscal year ended March 31, 2020 are as follows.

Directors
(Excluding outside directors)		 9 members ¥307 million
Audit & Supervisory Board Members
(Excluding outside audit & supervisory board members)		 2 members ¥23 million
Outside directors and audit & supervisory board members 9 members ¥69 million
Total 20 members ¥400 million

Policies and decisions regarding compensation

An annual limit of ¥400 million for compensation of directors and ¥120 million for compensation of audit & supervisory board members has been set by the resolution at the 37th general shareholders' meeting (June 27,2002) and resolution at the 33rd general shareholders' meeting (June 30,1988) each. The compensation of directors includes a fixed amount calculated according to their positions and whether they are an outside director or not, as well as a performance-linked amount, calculated based on an evaluation of the operational execution performance of individual directors in the previous fiscal year conducted in acordance with predetermined standards. The compensation of audit & supervisory board members paid as a fixed amount decided in accordance with standards set by the Audit & Supervisory Board.

Policy concerning the decision of remuneration percentage related to productivity-linked performance and remuneration besides productivity-linked performance

As for the remuneration for the Company's directors (excluding outside directors), the fixed compensation notified in advance paid every June fall into productivity-linked performance (so-called bonus) and is paid 20% of the total annual payments. Also, for the monthly remuneration which is flat fall into remuneration besides productivity-linked performance and is paid 80% of the total annual payments.

Policy concerning the decision of officer's remuneration and its calcuation method

Out of As for the remuneration for the Company's directors (excluding outside directors), as for the monthly remuneration, payment is determined with title by adding "an allowance that goes with the post" and "director allowance" to the basic salary. As for the fixed compensation notified in advance paid, the base amount is determined in conjunction with monthly remuneration.

Index for remuneration of productivity-linked performance, reasons for choosing the index and determination method of remuneration

As for the calculation of fixed compensation notified in advance of remuneration, the figure below shows processed consolidated operating income based as index, and decision of company performance payout rate. Furthermore, individual performance payout rate is determined by the degree of attainment each individual set. In addition, the final payout is determined by the caalculation formula below, with mulitiplying each payout rate on the base amount.

[Framework of base indicator]
Consolidated operating income + Investment gain on equity method + Consolidated bonus

[Calculation formula of fixed compensation notified in advance individual payout]
Individual payout = Base amount × Company performance payout rate × Individual performance payout rate

The reason for adopting the base indicator are below.
1. Performance improvement of the Group including equity method affiliate is the major role for board members.
2. Consolidated operating income excluding the impact of change in bonus paid is considered superiority as the index for company performance.

The name of whom has authority to decide the policy of remuneration of board members and that calculation method, the content of authority and the range of discretionary

The policy of remuneration of board members and that calculation method is decided at Board of Directors.

Activitites of Board of Directors in the decision making process of board member remuneration for the recent fiscal year

The remuneration of directors is the matter to be resolved by Board of Directors regulation, and until now, compensation structure and fixed compensation notified in advance has been revised, and the performance payout rate and individual payout rate in the fixed compensation notified in advance for the fiscal year has been in consideration.
As for the recent fiscal year, on May 10, 2019 at the Board of Directors, the company performance payout rate and individual payout rate concerning fixed compensation notified in advance to be paid in June 2019, was in consideration. Moreover, for the consideration of company performance payout rate, the result of the base indicator was ¥61,490 million (achievement rate 97.3%) to the plan ¥63,207 million.

Condition of Maintenance for Internal Management System

Based on Corporation Law and Financial Instruments and Exchange Law, the Group is maintaining system to secure the rightness of business for other corporations, corporate group which are made up from such company and subsidiraies and agreement for execution of duty as director and employee to law and certificate of incorporation.

System to secure the agreement of execution of duty as directors and employees to law and certificate of incorporation.

  1. Ever since the company started, we have cherished "the ALSOK Charter", that is composed of the founder's spirit and motto of the company. We have encouraged our business activity in accordance with the charter.
  2. We watch the execution of function, by establishing "Board Regulations", "Internal Memo Regulations", "Policies of Dividing Duties", and "Policies of Administrative Authority", dividing administrative authority.
  3. We enacted an "Ethical Rule" as standard for the action based on the ethics with sincere performance of duty.
  4. We adopted "Compliance Rule" and made one of the directors as the director in charge of compliance, who reports activity conditions to Management Committee and the Board of Directors' Meeting if necessary.
  5. We established "Internal Report Rule" in order that we can construct the internal report system and operate it appropriately.
  6. We established the internal audit exclusive jurisdiction department under the direct control of the President. The department regularly inspects management activities at all departments in the headquarters and branches and reports the results to the auditors and directors.
  7. Based on the law of Financial Instruments and Exchange Act, we maintain and operate systems to make the financial reporting properly is maintained and operated.
  8. We adequately conduct various education such as law, articles of incorporation, and internal rules for directors and employees.

System concerning preservation and management of information that lies execution of duty as director

  1. Establish an order concerning primary information that show the execution condition of General Meeting of Shareholders record, Board of Directors record, Management Committee record, request for approval, contracts, account book, financial documents, and other services as to conservation management concerned information.
  2. Allow directors and audit & supervisory board members to browse these information anytime.

Other systems of regulations concerning management of to risk of loss

  1. Together with establishing "Risk Management Rule" and naming the risk management officer, we estimated and evaluated risks. Person in charge should report to the Board of Directors' Meeting and Management Committee as needed and to come out with needed measures of prevention, reduction, transfer of risks or settle coping strategy when risk occurs.
  2. We establish "Disaster Control Regulation", adjust the systems, and measures when natural disaster occurs.
  3. Together with establishing "Information Asset Management Rule" and naming the information asset management officer, we formulate the structure to protect the information asset from threats such as robbery, divulgation, falsification, depredation and disasters.

System to secure efficient execution of director's duty.

  1. The management plan of the mid-term and fiscal year is made based on the business objective.
  2. As for the management plan of fiscal year, it is reported to the Director and the Management Committee every month, and the progress management is carried out monthly.
  3. "Administrative Authority Regulation" is enacted, and an efficient decision making is done by allotting the administrative authority.
  4. The business processing is simplified by the backbone system that uses IT, and is planned to make the management and business more efficient and rationalize.

System to secure propriety of business in corporate group that consists of our company and subsidiaries.

  1. The rule for the business management of the subsidiaries is enacted together with the exclusive competency post set up, and the umbrella administration is carried out. For subsidiaries, besides making report concerning excercise of function, strict guide and supervising toward the subsidiaries is done, by sending the director or the audit & supervisory board member from our company.
  2. Significant information concerning the risk of loss for subsidiaries should be reported to subsidiaries competency post based on the rule for the business management, risk correspondence is carried out in cooperation with the group.
  3. The subsidiaries shares information with our company through various conferences and in-house electronic bulletin boards, and improve operational efficiency through application of operation system common in subsidiaries. Designing the group`s medium-term management plan and annual management plan, progress management of the plans are carried out the monthly business condition reported from subsidiaries.
  4. Our company and the subsidiaries operate the execution of the compliance activity and the internal report system and completely intercept the relation to antisocial forces, and for such occasions, approaches for necessary maintenance of the company structure and cooperation with external specialized agencies are carried out. In cooperation with subsidiaries, internal audit is carried out for significant subsidiaries.

System that secures the effective audit by the Audit & Supervisory Board Members

  1. The audit & supervisory board secretariat is established, and the employee who assists the duty as the audit & supervisory board member is arranged.
  2. The audit & supervisory board secretariat member's personnel affairs are to acquire the agreement of the Audit & Supervisory Board. The audit & supervisory board secretariat members solely comply with command from audit & supervisory board members.
  3. The director and employees report to the audit & supervisory board members about an important matter concerning business.The audit & supervisory board members attend the Board of Directors' Meeting and the Management Committee.The internal audit exclusive competency post performs information exchange regularly together with the audit & supervisory board members.
  4. Appropriate report is carried out promptly by the directors and employees of the subsidiaries, when the report concerning is desired. Department in charge of internal report, reports significant notify including the notify of subsidiaries to the audit & supervisory board members. Furthermore, for our directors, employees and directors of subsidiaries who reported to audit & supervisory board members are not to be unfavorably-treated for the reason to have been reported.
  5. Our company annualy set a certain amount of budget to pay expenditures which come about from the excercise of function of audit & supervisory board members. When the audit & supervisory board members charge for such expenditures, it is handled properly.
  6. The audit & supervisory board members regularly exchange opinions or interview with the President and each general manager, and audit each office and subsidiary. The audit & supervisory board members regularly hold the skull sessions with Audit Corporation.

Condition of Maintenance for the System of Risk Management

Our company is especially attaching importance to risk management on the character to assume securing of a safe society to be a company's business. The Risk Management Committee is organized based on the current Risk Management Regulation enacted in 2002, and the risk management director, Tsuyoshi Murai is assumed to be the chairman. Moreover, the risk management examination organization is enacted in the head office and each office, and it is working on the risk management such as identifying the risk, evaluation, the precaution, and the measures idea as all companies are covering.In addition, the risk examination departmental meeting according to the field put in the Risk Management Committee, risk information on each pertinent field is collected, analyzed, evaluated, and the measure for the risk reduction is examined. To attempt the rapid deployment, the organizational structure is maintained much more in an urgent reporting system when the matter of great importance idea is generated and the installation of the task force.

Regarding compliance, the Compliance Committee that makes the compliance director, Tsuyoshi Murai as chairman is organized and is attempting on compliance. The Compliance Committee works for knowing the compliance consideration toward the director and the employee based on the current Compliance Regulation enacted in 2002, and is regularly checking the business activity condition. For earlier detection and the prevention of the problem in corporate ethics, "ALSOK Hotline" was installed in 2004, and when encountering a malfeasance, misbehavior, and an anti-ethical act that the employees and officers lies a company, the system that can internally be informed is constructed without receiving a prejudicial treatment. Moreover, as a window of reports, besides the existing internal window, external window has been established in 2016.

Additionally, the Group set "Basic policy for information security" as cornerstone of ensurement of information security, and apply to all employees including board members and all information assets. Based on information assets management regulation, Information Assets Management Committee is organaized under Tsuyoshi Murai, director in charge of information assets management, as chairman, which construction and promotion of information assets management system and trainings concerning serious accidents are conducted. Furthermore, when serious accident occurs, the Group lay out the framework of corresponding to the accident and prevention of recurrence, and establish ALSOK-CSIRT(Computer Security Incident Response Team).

As for the lawsuit, the dispute, and other legal risk, the legal affairs room is enacted and it corresponds while cooperating with each operations division. Moreover, our company is straightening the system to prevent the risk beforehand as adviser contracts with seven law firms are concluded, and advice and guidance such as events concerning an important legal problem and compliance are received properly. The lawyer is made to take part in the corporate governance through the maintenance of compliance looking up at such advice and guidance.

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