Corporate Governance
Concept and System
Based on our group management principle of "Always Putting the Customers First," we are committed to fulfilling our corporate social responsibility in order to achieve sustainable growth and increase corporate value, in cooperation with the government, local communities, consumers, shareholders, retailers, suppliers, sales partners, financial institutions, employees, and other stakeholders, and will make it a fundamental approach to support corporate governance. As a "Health Creation Company" that contributes to the health of customers around the world, we will work to further strengthen and enhance our corporate governance system to realize our long-term vision of becoming a "Global Tea Company".
System
Corporate Governance Structure
System overview （since July 26, 2023）
| Organization Form | Company with Audit & Supervisory Committee |
|---|---|
| Number of Directors | 14（of which Outside Directors: 5） |
| Number of Independent Directors | 5 |
| State of Voluntary Establishment of Committees | Nomination & Remuneration Committee |
| Accounting Auditor | KPMG AZSA LLC |
Board of Directors
The Articles of Incorporation stipulate that the maximum number of Directors(excluding Directors who are Audit and Supervisory Committee Members) shall be 11 and the maximum number of Audit and Supervisory Committee Members shall be 4. To enhance the Board of Directors’ supervisory functions, Independent Outside Directors shall be a third or more of all Directors. The Board of Directors shall have, as a whole, a balanced set of knowledge, experience and skills in accordance with management strategies, etc. to effectively fulfill its roles and responsibilities. The Board shall have an appropriate number of members who are diverse in terms of gender, internationality, career history, age, and other attributes.
Audit & Supervisory Committee
The Articles of Incorporation stipulate that the number of Audit and Supervisory Committee members shall be three or more, but not more than the number stipulated in the Articles of Incorporation, and that the majority shall be Outside Directors. The Audit and Supervisory Committee shall select a full-time Audit and Supervisory Committee member from among the Directors who are Audit and Supervisory Committee members. One or more Audit & Supervisory Committee Members shall have appropriate experience and skills and necessary knowledge regarding finance, accounting and legal affairs, in particular, considerable knowledge regarding finance and accounting.
Reasons for electing Outside Directors and Outside Audit & Supervisory Committee Members
| Hideo Takano | Mr. Hideo Takano has deeply participated in business support for a variety of companies at the Tokyo Chamber of Commerce and Industry for many years. Leveraging his extensive experience and broad insight, he has provided opinions, advice, and proposals that contribute to the enhancement of the ITO EN Group’s corporate value, from a standpoint independent of the Board of Directors and the management of the Company. Based on these accomplishments and his wealth of experience, we have elected him as an Outside Director in the expectation that he will continue to provide advice and effective supervision of the Group's management. Because the appointment of Mr. Takano does not fall under the matters which the Tokyo Stock Exchange defines as those that could give rise to conflicts of interest with general shareholders, he is independent from the Company. |
|---|---|
| Keiko Abe | Ms. Keiko Abe has extensive experience and expert knowledge as a professor of the University of Tokyo’s Graduate School of Agricultural and Life Sciences and has been actively involved in research in the field of food functionality for many years. The Company newly appointed her as Outside Director because it has determined that she is able to provide useful advice in the field of research and development related to future medium- to long-term management based on her extensive experience and knowledge. Because the appointment of Ms. Abe does not fall under the matters which the Tokyo Stock Exchange defines as those that could give rise to conflicts of interest with general shareholders, she is independent from the Company. |
| Yuichi Usui | Mr. Yuichi Usui has considerable experience and a wide range of insight as a police officer for many years and also has experience in being directly involved in company management in a logistics company. He applies his diverse experience and insight to the Company's management, provides a broad Based on these accomplishments and his wealth of experience, we have elected him as an outside director so that he can continue to provide risk-related advice and conduct highly effective audits of the Company's management, drawing on his experience as a corporate executive as well. Because the appointment of Mr. Usui does not fall under the matters which the Tokyo Stock Exchange defines as those that could give rise to conflicts of interest with general shareholders, he is independent from the Company. |
| Yutaka Tanaka | Mr. Yutaka Tanaka has expertise as well as extensive knowledge and experience as a certified tax accountant. From the time of his appointment as an Outside Audit & Supervisory Board Member, he has provided a bird's-eye view of the Group's overall management from a standpoint independent of the Board of Directors and management team, and has made statements that contribute to the enhancement of the Group's corporate value. Based on these accomplishments and his wealth of experience, he is appointed as an outside director so that he can continue to provide advice based on his expertise and experience and conduct highly effective audits of the Company's management. Because the appointment of Mr. Tanaka does not fall under the matters which the Tokyo Stock Exchange defines as those that could give rise to conflicts of interest with general shareholders, he is independent from the Company. |
| Hitoshi Yokokura | Mr. Hitoshi Yokokura has expertise and a wide range of knowledge and experience as a certified public accountant and lawyer. As an Outside corporate Auditor, he mainly audits the legality of the execution of duties by directors and provides advice and recommendations as appropriate. Based on these accomplishments and his wealth of experience, he is appointed as an outside director so that he can continue to make suggestions from an accounting and legal perspective and conduct highly effective audits of the Company's management. Because the appointment of Mr. Yokokura does not fall under the matters which the Tokyo Stock Exchange defines as those that could give rise to conflicts of interest with general shareholders, he is independent from the Company. |
Nomination & Remuneration Committee
The purpose of the establishment of the Nomination & Remuneration Committee is to enhance the independence and objectivity of the functions of the Board of Directors and its accountability. For this reason, appropriate involvement of and advice from Independent Outside Directors shall be obtained when the nomination and remuneration of Directors and others, and important matters related to corporate governance are examined by the committee. The Nomination & Remuneration Committee shall consist of three or more Directors including Outside Directors of the Company as members, a majority of whom shall be Independent Outside Directors of the Company.
Upon request from the Board of Directors, the Nomination & Remuneration Committee shall deliberate on the following matters and report the results to the Board of Directors.
1. Policy concerning composition of the Board of Directors
2. Matters relating to the election and dismissal of Directors, Executive Officers, and the proposal of candidates for Directors, Executive Officers, and Audit & Supervisory Board Members
3. Matters relating to proposals for the election or dismissal of Representative Directors and Directors and Executive Officers
4. Matters relating to president succession planning
5. Matters relating to the remuneration system, remuneration limit and remuneration amount for Directors and Executive Officer
6. Matters relating to the personnel affairs and remuneration of officers of major subsidiaries and affiliated companies
7. Other matters relating to corporate governance
Composition of Committees
-
- Member
- Audit and Supervisory Committee Member Director (Outside) Yuichi Usui
-
- Member
- President Daisuke Honjo
-
- Member
- Vice-President Shusuke Honjo
-
- Member
- Audit and Supervisory Committee Member Director (Outside) Hitoshi Yokokura
-
- Member
- Director（Outside）Keiko Abe
Evaluation of the Effectiveness of the Board of Directors
The Company has been analyzing and evaluating the effectiveness of the Board of Directors every year since FY2015, in an effort to improve its functioning.
Evaluation method in FY2022
Self-assessment by questionnaire
Individual interviews based on the results of the questionnaire
Tabulation and analysis of questionnaire and interview results
Evaluation items in FY2022
1. Size and makeup of the Board of Directors
2. Discussions of the Board of Directors
3. State of operation of the Board of Directors
4. Relationship with shareholders
5. Structure of, deliberations at, etc. of Nomination & Remuneration Committee
6. Self-assessment
Results of evaluation in FY2022
The size and operation of the Board of Directors are sufficient to fulfill its management decision-making and supervisory functions, and the composition of the Board is well balanced, including the appointment of a female director. In addition, it was confirmed that the prior explanation of agenda items to outside directors and corporate auditors and the timely provision of corporate and industry information have enhanced opportunities for information sharing and further deepened discussions.
On the other hand, the necessity of active discussion about medium- to long-term management strategies from ESG and sustainability perspectives, and of sharing and discussing the status of efforts toward the aim of becoming a Global Tea Company with domestic and overseas group companies has also been pointed out.
Going forward, the Company will seek to improve the effectiveness of the Board of Directors by continuing working to solve issues.
Remuneration for Corporate Officers
Remuneration, etc. of Directors is deliberated by the Nomination & Remuneration Committee, which consists of a majority of Independent Outside Directors, to ensure objectivity and transparency in accordance with the Company’s basic views on corporate governance and basic views on remuneration. The Board of Directors determines the remuneration, etc. of Directors, giving due respect to the report by the Nomination & Remuneration Committee. Remuneration, etc. for directors, distinguishing between those who are members of the Audit and Supervisory Committee and those who are not, shall be determined within the limit of remuneration resolved at the General Meeting of Shareholders. The Nomination & Remuneration Committee deliberates on the individual remuneration, etc. of Directors, including whether it is consistent with the basic policy and whether it has been evaluated based on the remuneration standards, and the Board of Directors shall determine the individual remuneration, etc. of Directors by respecting the report by the Nomination & Remuneration Committee.
Basic policy
1. Remuneration shall be such that it is in compliance with the management principle of the ITO EN Group, “Always Putting the Customer First,” and will contribute to sustained corporate growth and development and the enhancement of corporate value.
2. Remuneration shall be determined in proportion to the significance of Directors’ roles and responsibilities and their contribution to the Company’s business performance.
3. Remuneration shall be closely linked to the sharevalue price of the Company’s stock, so that Directors share the impact of share price fluctuations with the Company’s shareholders and the remuneration serves as an incentive for management.
4. Remuneration shall be determined based on objective and fair deliberations and with references to external data.
Executive remuneration amounts
Remuneration, etc. of Directors (excluding Outside Directors and Directors who are Audit and Supervisory Committee Members) of the Company shall comprises fixed remuneration and variable remuneration, withfixed remuneration comprising approximately 65% and variableremuneration approximately 35%. (approximately 20% of performance-based remuneration and approximately 15% of share-based remuneration) Remuneration, etc. for Outside Directors and Directors who are Audit and Supervisory Committee Members shall be fixed remuneration only.
Fixed remunerations
Fixed remuneration shall be the basic reward paid in cash according to the position and role, and shall be paid monthly in principle.
Variable remuneration
Performance-linked remuneration is a monetary remuneration determined based on the evaluation of performance during the evaluation period and, in principle, shall be paid monthly.
The stock-based compensation shall be a restricted stock compensation plan that allocates shares of the Company's common stock once a year to each director and executive officer in accordance with position and role during the term of office, for the purpose of increasing the level of interest in the Company's stock price and business performance and further enhancing motivation and morale to increase the stock price and improve business performance by linking stock price to that of the Company and by placing in a position to share the value with shareholders in terms of the impact of stock price fluctuations.
- (1) Evaluation of variable remuneration
- The Company shall perform a comprehensive performance assessment in which, in order to link the business performance and remuneration, the Company designates management indicators as measures of performance, sets the standard ratio of consolidated performance to non-consolidated performance for each position, considers each Director’s responsibilities, and awards points to each Director with respect to each management indicator.
- (2) Management indicators used to measure performance
- The Company’s management indicators used to measure performance shall include “net sales (growth),” “operating income (profitability),” “cash flows from operating activities (stability),” “earnings per share (profitability),” “return on equity (efficiency)” and “dividend on equity ratio (shareholder return).”
Internal Control System
Basic views
Based on our management philosophy of "Always Putting the Customer First," we have adopted a basic policy on internal control systems at a meeting of the Board of Directors in order to increase the transparency of our business operations and further improve the effectiveness and efficiency of our group's internal management systems, in line with the interests of all our stakeholders and to earn their trust.
Operation of internal control system
The Internal Auditing Department, which reports directly to the President and Executive Officer and is independent of other administrative and operational departments, conducts audits of the internal control system. The results of these audits are discussed at the Internal Control Promotion Committee, chaired by the director in charge of internal control, and are resolved in the Internal Control Report at the Board of Directors meeting.
In addition, the Compliance Office of the Legal Department and the Internal Auditing Department strive to raise awareness of compliance with a wide range of laws and regulations, social norms, and corporate ethics, check the appropriateness of business operations, provide ongoing compliance education, and make timely improvements to operations that are not fully in place.
Moreover, the Company tries to operate the internal control system by adopting a system to report important matters to the Board of Directors or the Executive Board.
Risk management system
- (1) To develop the risk management system, the Company establishes Risk Management Regulations and has a Risk Management Committee chaired by the President and Executive Officer.
- (2) The Risk Management Committee shall ascertain the status of risk information and responses of the Group, and report to the Board of Directors on the identification and evaluation of significant risks and responses to avoidance, reduction, etc. of such risks.
- (3) The Company shall establish committees, etc., for each risk area, such as compliance, sustainability, quality, disaster countermeasures, etc., and establish a system to coordinate with the Risk Management Committee.
- (4) The Company has developed a system to minimize damages when an unforeseen situation occurs by establishing a task force headed by the Representative Director and President to prevent the expansion of damages by taking prompt measures.
Intellectual Property
Intellectual property system
In accordance with its intellectual property policy and important strategies defined in the medium- to long-term management plan, the Company promotes intellectual property management that contributes to solving social issues and improving corporate value. The Company has in-house patent attorneys and lawyers and also has an Intellectual Property Department dedicated to IP matters, as well as consulting outside experts. Moreover, the members of the Intellectual Property Department are assigned to the research and development section of the Production Division, thereby ensuring systems that proactively provide support to the research and development sections exist.
In cooperation with each department, the Intellectual Property Department provides support for strategies for research and development and brand and intellectual property-related education. Moreover, the Intellectual Property Department began IP Landscape activities last year and provides recommendations at research and development strategy meetings and business planning meetings. Details of these activities and the risk management issues related to intellectual property are reported by the executive officers in charge to the Board of Directors, and feedback is obtained.
Support for management strategies
ITO EN Group mission of being a Health Creation Company
The Group provides unique products that have significant health value and contributes to customers’ healthy living through its support of research and development by intellectual property activities regarding the functionality of food, including the impact of green tea and matcha on cognitive functions.
Long-term vision of becoming a Global Tea Company
In its core tea-related business, the Company also helps address environmental and social issues through its business activities by protecting intellectual property rights in the supply chain, starting with tea plantations through to tea products and used tea leaves recycling.
In the technology field of tea (International Patent Classification: A23F3), the percentage of our patents in the top 5% of citations in the same technology category is approximately 16%. Our intellectual property rights related to our proprietary technologies and products give us a competitive advantage and enable us to provide products that meet the diverse needs of our customers. The Company is also helping tackle environmental and social issues through its business activities by implementing a recycling-oriented business model based on intellectual property rights, including the recycling of used tea leaves, organic farming using fewer pesticides, and sustainable containers and packaging.
To help strengthen overseas operations, the Company aims to acquire IP rights and avoid IP infringement risks around the world and, to this end, will gather data on intellectual property globally and acquire rights in an appropriate and effective manner.
To support the strengthening of our overseas business, we will promote appropriate and effective acquisition of intellectual property rights while collecting information on intellectual property in each country in order to acquire intellectual property rights in those countries and avoid risks.
Investment for the development of human resources and encouragement of innovation
The Company’s growth has been driven by a range of innovations, such as the creation of beverages from unsweetened tea which had previously been considered impossible. Innovation is the Company’s source of growth.
The Intellectual Property Department provides education to promote the acquisition of knowledge and skills of each department involved in the creation of intellectual property, including the R&D, marketing, and manufacturing departments, and strives to develop human resources involved in the creation of intellectual property. On the institutional side, there is an "invention compensation system." Through the operation of this system, we encourage the creation of intellectual property by our employees and promote our business.
Appropriate tax management
The ITO EN Group complies with laws and regulations both in Japan and overseas and ensures the development and appropriate application of internal rules based on the Group management principle of "Always Putting the Customer First." The Group also seeks to comply with tax-related laws and regulations both in Japan and overseas and to properly file tax returns and pay taxes in accordance with legal requirements.
Furthermore, by ensuring tax transparency and reliably meeting its tax obligations in a timely and appropriate manner, the Group contributes to the economic and social development of all the countries and regions in which it operates.
Information disclosure system
Fundamental Approach
The Company has established the Inside Information Management Regulations for the purpose of preventing insider trading that violates the Financial Instruments and Exchange Act by setting management standards and other rules for inside information.
Based on the Inside Information Management Regulations, the Company has built a system to report and disclose facts about changes in the operation, business and assets of the Company and facts that could have a significant impact on the investment decisions of investors.
System
