Corporate Governance Structure
Brother Industries, Ltd. (BIL) established the "Brother Group Basic Policies on Corporate Governance"—which establishes policies such as securing the rights and equal treatment of shareholders, appropriate cooperation with stakeholders, the responsibilities of the board of directors, etc., and dialogues with shareholders—in November 2015, and since then has been striving to strengthen its governance in line with these basic policies.
Board of Directors
BIL positions the board of directors as an organ that carries out decision-making on the basic policies of management, high-level management decisions, and supervision of executive operations. As such, the structure of a company with a board of company auditors is adopted as it is thought to be appropriate. The board of directors consists of 11 directors (including five outside directors)*, of which one is a female director. In principle, meetings, which are chaired by the Representative Director & Chairman, are held once each month. In FY2020, the board of directors held 12 meetings. To increase medium- to long-term corporate value, the board formulates management strategies and plans and carries out decision-making on important executive operations. At the same time, the board supervises directors, executive officers, and other parties in their execution of operations, and strives to establish structures that ensure management soundness, such as the Group's internal control and risk management systems.
- (As of June 23, 2021)
Audit & Supervisory Board
The audit & supervisory board consists of five corporate auditors (including three outside auditors)*, and held a total of 12 meetings in FY2020.
The corporate auditors have high levels of expertise in fields such as law and accounting, and following the audit standards established by the audit & supervisory board, mainly conduct the audit activities given below, audit the directors' execution of duties, and conduct audits widely on the establishment and implementation state of the group's internal control system.
- Attendance of board of directors' meetings and voicing of opinions
- On-site audits of group companies and listening to reports
- Interviews and opinion exchange with directors
- Interviews and opinion exchange with executive departments
- Regular exchange of information and opinions with the Internal Auditing Department and accounting auditors (such as three-way audit liaison conferences between the audit & supervisory board, accounting auditors, and Internal Auditing Department, and meetings for reports on financial results)
- (As of June 23, 2021)
Independent Outside Directors
BIL appoints many independent outside directors with extensive experience in corporate management to ensure objective and neutral oversight of management from an external point of view, and thereby strengthens its management oversight function. BIL's independent outside directors provide management advice, decide important matters, and oversee executive operations based on their respective abundant experience, careers, and insights from perspectives independent of BIL's management.
Executive Officer System
BIL has introduced an executive officer system to ensure swift decision-making by separating executive operations and supervision. There are 15 executive officers (including one female executive officer) and five group executive officers (including two non-Japanese nationals)*. Of the executive officers, five are concurrently directors. Executive officers—including group executive officers—are elected by the board of directors, and carry out decision-making and execution of executive operations delegated by the board of directors in accordance with the basic management policies determined by the board. At the same time, the executive officers are responsible for overseeing the operations of businesses, departments, and group subsidiaries under their supervision.
- (As of June 23, 2021)
Nomination Committee and Compensation Committee
BIL has established the Nomination Committee and Compensation Committee as arbitrary advisory committees to the Board of Directors, in order to enhance the independence and objectivity of the functions of the Board of Directors regarding the appointment or removal and remuneration of Directors and Executive Officers. Each of the committees consists of seven directors*, including five outside directors as well as the Representative Director & Chairman and the Representative Director & President, and appoints an outside director as its chairperson (Nomination Committee: Keisuke Takeuchi; Compensation Committee: Kazunari Uchida).
The Nomination Committee must deliberate on the agendas of the general shareholder meeting concerning appointment or removal of directors and the agendas of the board of directors concerning appointment or removal of executive officers in a fair, transparent, and strict manner before the agendas concerned are finalized, and report the outcome to the board of directors. The Nomination Committee also reports on matters such as the succession planning for the CEO and other top management to the board of directors.
The Compensation Committee must discuss the contents of the company rules concerning the standard for calculating the remuneration for directors and executive officers, and the contents of respective remunerations of respective individuals, and report the outcome to the board of directors.
- (As of June 23, 2021)
Brother Industries, Ltd. Governance Structure (As of June 23, 2021)
Effectiveness of the Board of Directors
Conducting Evaluation on the Effectiveness of the Board of Directors
At BIL, respective directors and auditors every year evaluate the effectiveness of the board of directors and report the results to the board of directors. Based on this evaluation, the board of directors analyzes and assesses the effectiveness of the entire board of directors and discloses a summary of its results in a timely and appropriate manner.
The evaluation of the board of directors for FY2020 was conducted in February 2021 by having all directors and corporate auditors answering a survey developed after seeking the opinions of external consultants. The survey's main questions are given below.
- Composition and operation of the board of directors
- Management and business strategies
- Corporate ethics and risk management
- Performance monitoring and evaluation and remuneration of the management
- Dialogues with shareholders, etc.
- Previous fiscal year's issues and results of measures
To guarantee objective analysis, the consolidation of the survey and analysis of results were tasked to external consultants. The board of directors' secretariat conducted analysis using the consolidated data.
- Design of questions for measuring effectiveness of the board of directors together with external consultants taking into consideration factors such as social trends related to corporate governance.
- Evaluation regarding the effectiveness of the board of directors is conducted using a survey method for all directors and corporate auditors. The survey's consolidation and analysis of results are tasked to external consultants. The survey response rate for FY2020 was 100%.
- The results of the survey are analyzed together with external consultants, identifying issues and proposing improvement measures to improve the effectiveness of the board of directors. The analysis results, improvement measures, and other matters are reported to the board of directors and discussed.
- After discussion by the board of directors, measures are implemented to improve the effectiveness of the board of directors. The effects of these efforts are confirmed by the directors and corporate auditors during the following fiscal year's effectiveness evaluation survey.
Board of Directors' Effectiveness Evaluation Results and Response Policy
At the meeting of the board of directors held in May 2021, the evaluation results were discussed, and it was confirmed that BIL's board of directors functioned effectively in general. At the same time, through the evaluation of the board of directors this time, opinions were raised regarding requests and room for improvement about the following areas.
- Further expand opportunities for obtaining knowledge to allow directors to deepen understand about their own duties and fulfill their roles
- Strengthen discussions regarding business portfolio, capital costs, sustainable management, and digital transformation when discussing the next mid-term plan
- Share discussion themes with the board of directors and submit matters for discussion as necessary to ensure rationality and transparency of the Compensation Committee and Nomination Committee. The board of directors will continue to improve the board's effectiveness taking into consideration these opinions.
State of Improvement Regarding Past Evaluation Results
The results of the previous effectiveness evaluation of the board of directors in February 2020 confirmed that BIL's board was functioning effectively overall. However, the issues below were pointed out and the following measures were taken in FY2020.
|Issues pointed out||Measures taken|
|Moving up the timing of providing materials in advance and improving the format||Moving up the timing of providing materials for board of directors' meetings in advance|
|Creating system for officer training and further enhancing this system||Planning acquisition of knowledge by directors|
|Appropriately sharing information about the details of discussions at the Nomination Committee and Compensation Committee||Explaining points that were discussed in the Compensation Committee and Nomination Committee, at board of directors' meetings|
|Being appropriately involved in the execution of group companies' operations, etc.||Deliberating management issues of group companies at board of directors' meetings|
BIL has established an objective and transparent remuneration system based on the clear management responsibilities of officers. The policy is to offer fair remuneration taking into account the remuneration standards of other companies and treatment standards of employees.
BIL's director remuneration consists of the following.
|Type of remuneration||Applicable to||Purpose of remuneration|
|Basic remuneration||All directors||Fixed remuneration (based on position as defined in BIL's director remuneration rules, etc.)|
|Performance-based remuneration||All directors, except outside directors and part-time directors||Reflect responsibilities for achievement in year-on-year business performance|
|Stock option for a stock-linked compensation plan||All directors, except outside directors and part-time directors||Incentive for long-term improvement of corporate value and alignment with vector of BIL's share price|
The composition of each director's remuneration (except outside directors and part-time directors) is roughly in the ratio of 6:2:2 for basic remuneration, performance-based remuneration, and stock option for a stock-linked compensation plan. It is set such that, as the position of the director moves up, the ratio of remuneration other than basic remuneration increases slightly.
At the same time, the remuneration of BIL's corporate auditors is determined by the corporate auditor remuneration rules set by the audit & supervisory board, and all corporate auditors receive only basic remuneration.
For other information on officer remuneration, please see the Securities Report.