HOYA : Corporate Governance Report_20211227

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Corporate Governance Report

[TRANSLATION]

This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

Last Update: December 27, 2021

HOYA CORPORATION

Hiroshi Suzuki, President & CEO Contact: 03-6911-4820 Securities Code: 7741

https://www.hoya.co.jp/english/index.html

The corporate governance of HOYA CORPORATION is described below.

  1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views

HOYA promotes management with the aim of maximizing its corporate value based on the recognition that corporate governance is a matter of utmost importance for management.

As the basis of taking a fair approach to stakeholders, we have adopted a “company with Nomination Committees, etc.” structure simultaneously with the revision of the Companies Act, which enables us to better distinguish the execution and supervision of management to prevent management from being conducted based solely on in-houselogic. We have also set forth in the Articles of Incorporation that the majority of Directors consist of Outside Directors, who actively supervise management by Executive Officers and provide advice in order to improve corporate value from an objective and broad perspective.

HOYA also gives Executive Officers the authority and responsibility for the execution of operations, in order to accelerate decision making and improve management efficiency.

HOYA has established HOYA Corporate Governance Guidelines at the meeting of the Board of Directors, and intends to enhance corporate governance structure and to introduce better governance systems by revising the guidelines.

The HOYA Corporate Governance Guidelines is attached at the end of this report.

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[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

This report is presented in accordance with the Code as it stands after its revision in June 2021.

Supplementary Principle 3-1-3

The Company recognizes that generating appropriate profits by effectively utilizing assets entrusted to the Company for corporate management, namely capital from human resources and shareholders, and providing products and services needed throughout the world, as well as working on social issues, such as reducing the environmental load and preventing human rights violations, including in the supply chain, in carrying out corporate activities are important for the continuation of business in the medium to long term, and carries out activities.

Furthermore, the response to climate change is recognized as a significant issue that will influence the Company’s medium- to long-term competitiveness, and each business division is currently analyzing such impact. Commencing in about a year, the Company plans to make disclosures in accordance with the TCFD for business divisions where climate change is expected to have a particularly significant impact. The Company announced its agreement with proposals of the TCFD in November 2021.

Human capital https://www.hoya.co.jp/japanese/ir2021/esg/hrd.html https://www.hoya.co.jp/japanese/ir2021/esg/labor.html

Climate change https://www.hoya.co.jp/japanese/ir2021/esg/environment.html

Announced agreement with proposals of the Task Force on Climate-related Financial Disclosures (TCFD) https://ssl4.eir-parts.net/doc/7741/announcement/71061/00.pdf

Supplementary Principle 4-2-2

The HOYA Group’s materiality, which was proposed by the executive team in September 2021, was approved by HOYA’s Board of Directors. Going forward, monitoring will be carried out for sustainability initiatives, including more specific KPI formulation. Furthermore, the Company will proceed with formulating a clear written basic policy for sustainability.

Personnel policy, engagement surveys, training, etc. is reported to the Board of Directors in a timely manner.

The Company holds 10 businesses with different qualities as its portfolio. The positioning of each business and the changes to the portfolio with a view to the future are deliberated at meetings of the Board of Directors, and monitoring is carried out by the Board of Directors.

Furthermore, investment into intellectual property are deliberated and monitored by the Board of Directors taking into account the reports on research and development at each business division and the value of technology and brand when considering M&A.

[Disclosure Based on the Principles of the Corporate Governance Code]

Principle 1-4Cross-Shareholdings

It is HOYA’s policy not to cross-hold shares of other listed companies which is aimed for securing promanagement shareholders and this policy is stated in “HOYA Corporate Governance Guidelines”. According to the policy, we do not have such shares. We dispose shares of listed or non-listedcompanies if meaning of holding those shares become diluted. When exercising the voting rights on shares, we will vote against to proposals which will adversely affect rational for holding the shares and/or to proposal which will adversely affect corporate value.

(HOYA Corporate Governance Guidelines, III-3) https://www.hoya.co.jp/english/csr/pdf/Governance_Guideline_E.pdf

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Once a year, the board of directors review each listed share and those non-listed shares with book value of more than 25 mil. yen. The board assess rational and benefit of having these shares compared to disposing those shares. In fiscal 2020, the Company held shares of four public companies. The Company’s Board of Directors decided to sell the shares of two of these because they judged it less significant to keep holding them.

Principle 1-7 Related Party Transactions

The Regulations of the Board of Directors stipulate that the Board of Directors should discuss transactions between the company and executives, directors, and major shareholders https://www.hoya.co.jp/english/csr/pdf/BOD_rule_E.pdf

Supplementary Principle 2-4-1

The Group has taken the policy of not discriminating on the basis of nationality, gender, age or any other distinguishing characteristic in the hiring and promotion of employees. The ratio of female employees in the HOYA Group in FY 2020 was 53.0% and the ratio of female managers was 34.5%.

Furthermore, with regard to the promotion of mid-career hires and foreign employees, foreign employees have been promoted to managerial positions at six out of the ten business divisions of the Group based on the previously mentioned policy of not discriminating on the basis of nationality, age or any other distinguishing characteristic. Moreover, by actively promoting excellent human resources on site at overseas subsidiaries to top managerial positions, the overall globalization of the Group progresses, and the ratio of foreign top management at overseas subsidiaries, including overseas subsidiaries with head office functions, has exceeded 90%. Furthermore, 70% of employees at the Group Headquarters in Tokyo are mid-career hires, and 80% of the people responsible for each department in the Head Office are mid-career hires. The diversification of human resources and globalization are advancing under this policy, and the ensuring of diversity will be maintained with this policy going forward. https://www.hoya.co.jp/japanese/ir2021/esg/labor.html

Principle 2-6 Roles of Corporate Pension Funds as Asset Owners

Hoya Group adopts defined-contribution plans for the employees respecting their autonomous decisionmaking in asset building. Hoya corporation provide e-learning and other education opportunities to these employees.

Principle 3-1 Full Disclosure

HOYA considers it important to disclose information that seems to be beneficial to stakeholders, and the company discloses such information actively. Annual activities are described in Integrated Report on the web site.

https://www.hoya.co.jp/english/ir2021/index.html

  1. Management Mission and Principles https://www.hoya.co.jp/english/csr/philosophy.html
  2. HOYA Corporate Governance Guidelines https://www.hoya.co.jp/english/csr/pdf/Governance_Guideline_E.pdf
  3. The Compensation Committee, which consists only of Outside Directors, decides on a remuneration package for each Director or Executive Officer. https://www.hoya.co.jp/english/csr/governance.html

(iv)The Nomination Committee, which consists only of Outside Directors, selects candidates for Directors and Executive Officers.

https://www.hoya.co.jp/english/csr/governance.html

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  1. The reasons for the Nomination Committee’s selection of candidates for Directors and candidates for Executive Officers serving also as Directors are explained in reference documents for the notice of a general meeting of shareholders.

https://www.hoya.co.jp/english/investor/meeting.html

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Supplementary Principle 4-1-1 Scope of delegation to management

The Regulations of the Board of Directors stipulate that many responsibilities regarding the execution of business operations are transferred to Executive Officers. The Board of Directors discusses and makes decisions on important matters related to the direction of business management, the setting of goals and strategic direction and the rights of shareholders. https://www.hoya.co.jp/english/csr/pdf/BOD_rule_E.pdf

Principle 4-8 Effective Use of Independent Directors

The Articles of Incorporate state that Independent Directors should account for equal to or more than 50% of the Board of Directors. (After the general meeting of shareholders held in June 2021, there are five Independent Directors and one internal Director.)

All five Independent Directors are members of all committees (nomination, compensation, audit), and candid opinions, proposals and questions are made not only at the Board of Directors, but at each committee as well. https://www.hoya.co.jp/english/csr/pdf/AOI_E.pdf

(HOYA Corporate Governance Guidelines II-2V-1)

Principle 4-9 Independence Standards and Qualification for Independent Directors

HOYA has established independence standards for the Nomination Committee’s selection of Independent Directors.

https://www.hoya.co.jp/english/csr/governance.html (HOYA Corporate Governance Guidelines II-3VII-3)

Supplementary Principle 4-11-1 Composition of Board

The Company is a company with Nomination Committees, etc., and five out of the six members of the Board of Directors are Independent Directors. Accordingly, the Board of Directors of the Company acts as a monitoring board, and as their role is to supervise the executive side of the management, the Company believes that experience in corporate management and insight cultivated from that are important skills for Independent Directors. Furthermore, the Company anticipates advice and supervision from wide-ranging perspectives that are not limited to the industries from which they come. Within corporate management experience, the Company prioritizes insight in matters such as global perspective, finance and accounting, technology, M&A and human resource development/diversity, which the Company deems important.

Skill matrix https://www.hoya.co.jp/japanese/ir2021/esg/skill-matrix.html

Supplementary Principle 4-11-2 Concurrent holdings of positions by directors

The Criteria for the Selection of Directors do not limit the number of positions that can be served concurrently by a Director. But a precondition for selection or reappointment is that the percentage of attendance in meetings of the Board of Directors should be at least 75%. As for positions served concurrently by a Director, please refer to reference documents for the notice of a general meeting of shareholders and “Matters Related to Independent Directors” in this report.

https://www.hoya.co.jp/english/csr/governance.html

Supplementary Principle 4-11-3 Board Evaluation

As for the operation of the Board of Directors, a questionnaire survey is conducted once a year (in March), and the Board makes necessary improvements based on analysis and self-evaluation survey results. (HOYA Corporate Governance Guidelines V-3)

Outline of the results of the self-assessment for fiscal 2020:

“It can be said that problematic issues related to the effectiveness of the supervisory function of the Board of Directors were not observed based on such findings as (1) the Independent Directors question and state their

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