Corporate Governance


Basic Stance on Corporate Governance

The Kawasaki Group’s basic stance on corporate governance is to raise enterprise value through effective and sound management while forming solid relationships with all stakeholders, including shareholders, customers, employees, and communities, through highly transparent management practices. The Kawasaki Group is striving to further strengthen and enhance corporate governance systems as appropriate for its businesses and scale.


Overview of Corporate Governance Systems

The Kawasaki Group is a company with an Audit & Supervisory Committee and has voluntarily established a Nomination Advisory Committee and a Compensation Advisory Committee as advisory bodies to the Board of Directors as a well as a Management Committee, an Executive Officers Committee, and other governance bodies.
Kawasaki’s main deliberative bodies are as follows.

Board of Directors

The Board of Directors comprises 12 Directors (of whom, five serve as Audit & Supervisory Committee Members), with the chairman serving as the presiding officer by resolution of the Board. Six Directors are Outside Directors (of whom, three serve as Audit & Supervisory Committee Members) and independent of business execution. By avoiding having Directors serve concurrently as officers responsible for specific businesses (the internal company presidents, etc.), the Company seeks to enhance the separation of management oversight and business execution and thereby further reinforce the Board of Director's oversight functions.
Furthermore, the Nomination Advisory Committee and Compensation Advisory Committee have been established as advisory bodies to the Board of Directors in an effort to reinforce the transparency and objectivity of its deliberations. A majority of the members of both committees are Outside Directors, as are the presiding officers of each. The Nomination Advisory Committee discusses such matters as policies regarding the appointment and dismissal of Directors and other officers and the appropriateness of candidates for such positions. The Compensation Advisory Committee discusses such matters as Director compensation policy and the appropriateness of the Director compensation system. These committees provide reports and advice to the Board of Directors.

Audit & Supervisory Committee

The Audit & Supervisory Committee comprises five Directors, including three Outside Directors. To secure effective oversight, the two Internal Directors have been appointed as full-time Audit & Supervisory Committee Members. Furthermore, to ensure the reliability of financial reporting, the Company appoints Audit & Supervisory Committee Members who have considerable knowledge of finance and accounting.

Business Execution Framework

Kawasaki has adopted an executive officer system in order to facilitate response to rapid changes in the business environment. To accelerate decision making, a great deal of authority over business execution decisions is delegated to the executive Directors and executive officers, who are appointed by the Board of Directors.
Kawasaki maintains a Management Committee, comprising mainly executive Directors and internal company presidents, as an advisory body to the president. The Management Committee discusses matters that are important to business execution. This framework helps improve the appropriateness and efficiency of decision making and business execution.
Kawasaki also maintains an Executive Officers Committee, comprising all of the executive officers, with the President as the presiding officer. This committee issues business execution policy based on management policy and plans determined mainly by the Board of Directors and Management Committee as well as decisions made by the Management Committee. It also discusses management issues, striving to build unified consensus in Group management.

The Kawasaki Group's Governance Structure (As of June 24, 2022)

* Internal conferences that consider the formulation and revision of management plans


Corporate Officers (As of June 24, 2022)

Name(date of birth) Position Executive Independent Years of Service as a Director* Nomination Advisory Committee Compensation Advisory Committee Woman Non-Japanese National Board of Directors Meetings Attended Audit & Supervisory Committee Meetings Attended
Yoshinori Kanehana
(Feb.19,1954)
Chairman of the Board 10 13/13 -
Yasuhiko Hashimoto
(May.15,1957)
Representative Director, President, and Chief Executive Officer 4 13/13 -
Katsuya Yamamoto
(Nov.21,1957)
Representative Director, Vice President, and Senior Executive Officer 5 13/13 -
Hiroshi Nakatani
(Aug.9,1960)
Representative Director, Vice President, and Senior Executive Officer 2 13/13 -
Jenifer Rogers
(Jun.22,1963)
Outside Director 4 13/13 -
Hideo Tsujimura
(Jun.6,1954)
Outside Director 2
Presiding officer

Presiding officer
13/13 -
Katsuhiko Yoshida
(Apr.5,1954)
Outside Director New - -
Akio Nekoshima
(Sep.30,1958)
Director (Audit & Supervisory Committee Member) 2
(4)
13/13 17/17
Nobuhisa Kato
(Jun.1,1960)
Director(Audit & Supervisory Committee Member) New - -
Atsuko Ishii
(Nov.17,1957)
Outside Director(Audit & Supervisory Committee Member) 2
(5)
13/13 17/17
Ryoichi Saito
(Feb.3,1950)
Outside Director(Audit & Supervisory Committee Member) 2
(3)
13/13 17/17
Susumu Tsukui
(May 3,1969)
Outside Director(Audit & Supervisory Committee Member) New - -

* Years of service figures in parentheses for Audit & Supervisory Committee Members include years of service as Audit & Supervisory Board Members when Kawasaki was a company with an Audit & Supervisory Board. Note that Kawasaki transitioned from a company with an Audit & Supervisory Board to a company with an Audit & Supervisory Committee on June 25, 2020.

Presiding Officer of the Board of Directors

The Chairman of the Board of Directors serves as the presiding officer of the Board of Directors.


Corporate Governance Functions (organizations, committees, etc.)

Nomination Advisory Committee
Role An advisory body on policy and standards for the appointment and dismissal of corporate officers and such appointment and dismissal.
Composition Presiding officer: An Outside Director
Members: Two Directors and three Outside Directors, the latter of which includes one Audit & Supervisory Committee Member
Meeting frequency 12 times in fiscal 2021
Compensation Advisory Committee
Role An advisory body on the policy for and systems of corporate officer compensation as well as individual compensation.
Composition Presiding officer: An Outside Director
Members: Two Directors and three Outside Directors, the latter of which includes one Audit & Supervisory Committee Member
Meeting frequency 12 times in fiscal 2021
Management Committee
Role Assists the president as an advisory body with regard to Group management.
Discusses important business execution issues.
Composition Presiding officer: The president
Members: Includes executive Directors and internal company presidents

Note: The full-time Audit & Supervisory Committee Members participate in the committee as part of their auditing of business execution.

Meeting frequency Roughly three times a month (33 times in fiscal 2021)
Executive Officers Committee
Role Instructs about business execution policy based on management policy and management plans determined by the Board of Directors as well as information on important matters decided by the Management Committee.
Serves as a venue for communicating necessary and important information regarding business execution and for exchanging opinions.
Composition Presiding officer: The president
Members: All executive officers appointed by the Board of Directors

Note: The full-time Audit & Supervisory Committee Members participate in the committee as part of their auditing of business execution.

Meeting frequency Twice a year (twice in fiscal 2021)
Sustainability Committee
Role Discusses and decides on measures to promote social, environmental, and Group sustainability.
Monitors adherence to such measures and the achievement of their aims.
Composition Chair: The president
Members: Directors (excluding the Audit & Supervisory Committee Members and Outside Directors), internal company presidents, Director in charge of sustainability, and Head Office division general managers

Note: The Outside Directors participate in the committee so that the committee can glean the benefits of their external expertise and opinions and reflect them in its decision-making process. The Audit & Supervisory Committee Members participate in the committee as part of their auditing of business execution.

Meeting frequency At least twice a year (three times in fiscal 2021)
Company-wide Compliance Committee
Role Discusses and decides on measures to ensure thorough compliance throughout the Kawasaki Group.
Monitors adherence to such measures and the achievement of their aims.
Composition Chair: The president
Members: Directors (excluding the Audit & Supervisory Committee Member and Outside Directors), internal company presidents, Director in charge of compliance, and Head Office division general managers, and others

Note: The Outside Directors participate in the committee so that the committee can glean the benefits of their external expertise and opinions and reflect them in its decision-making process. The Audit & Supervisory Committee Members participate in the committee as part of their auditing of business execution.

Meeting frequency At least twice a year (twice in fiscal 2021)
Company-wide Quality Committee
Role Discusses Company-wide quality control policy and ensures its application.
Shares information about quality control among the Head Office, internal companies, and other related companies.
Composition Presiding officer: The vice president in charge of technology
Members: Representatives from the Corporate Planning Division, Corporate Technology Division, and related divisions of the internal companies and other related companies, among others
Meeting frequency Roughly four times a year (four times in fiscal 2021)
Major Project Committee
Role Manages risk before bidding on and making investment decisions regarding major projects that could significantly impact operations and financial performance.
Evaluates the risks of projects and considers ways of addressing such risks.
Composition Presiding officer: The general manager of the Corporate Planning Division
Attendees: Representatives of relevant Head Office divisions and the divisions handling relevant projects
Meeting frequency Held as needed

Director Appointment

Director Appointment Process

Candidates for Director are nominated by the Board of Directors in accordance with its established “Qualities Required of a Director.” As the Company has various business segments with different business activities, the Board of Directors appoints Internal Directors with broad experience as managers of each business and Head Office function, and Outside Directors with rich experience in corporate management, legal affairs, and public administration, respectively. As a result, the Company has secured a diverse Board of Directors, taken on the whole, with the needed balance of knowledge, experience, and ability, as summarized in the following table. The items listed in the skills matrix are based on the definition of the fields of supervision necessary to realize Group Vision 2030 as "vision, strategic thinking, and governance to increase enterprise value","business structure transformation", and "growth initiatives related to infrastructure development". To realize these fields of supervision, the following areas* designate expectation and experience required of each director.

* An area in which the Board of Directors is expected to use its knowledge and experience to lead discussions.

Name Position within the Company Areas of expectation Required experience
Business strategy Governance Finance and accounting Personnel & organizational management Monozukuri (technology, development, production & quality) Sales & marketing IT, DX & security Corporate management Global Legal & administration Finance & research organizations
Yoshinori Kanehana Chairman of the Board
Yasuhiko Hashimoto Representative Director, President, and Chief Executive Officer
Katsuya Yamamoto Representative Director, Vice President, and Senior Executive Officer
Hiroshi Nakatani Representative Director, Vice President, and Senior Executive Officer
Jenifer Rogers Outside Director
Hideo Tsujimura Outside Director
Katsuhiko Yoshida Outside Director
Akio Nekoshima Director (Audit & Supervisory Committee Member)
Nobuhisa Kato Director (Audit & Supervisory Committee Member)
Atsuko Ishii Outside Director (Audit & Supervisory Committee Member)
Ryoichi Saito Outside Director (Audit & Supervisory Committee Member)
Susumu Tsukui Outside Director (Audit & Supervisory Committee Member)

Director Appointment Criteria

Qualities Required of a Director

  1. Possessing an in-depth understanding of and support for the Kawasaki Group’s corporate philosophy and visions.
  2. Being able to make positive contributions towards sustainable growth and improving medium- and long-term enterprise value.
  3. Having a Company-wide perspective and a wealth and breadth of experience, resourcefulness and specialized expertise to this end.
  4. Being able to oversee corporate management and business execution from an independent and objective position as a member of the Board of Directors.
  5. Being able to execute their authority in a proactive and positive manner, and appropriately voice opinions at Board of Directors meetings or to top management.

Note: To ensure the effectiveness of audits, Directors serving as Audit & Supervisory Committee Members must be highly knowledgeable about the Company’s business or have deep insight and expertise in corporate management, legal affairs, finance and accounting, public administration or other fields. At least one Director serving as an Audit & Supervisory Committee Member must have substantial knowledge of finance and accounting.

Independence Criteria for Outside Directors

An Outside Director is deemed to be independent if none of the following apply:

  1. The Outside Director is currently employed by the Company as an executive Director, executive officer, manager or other key employee, or if any company at which said Director was employed over the past ten years (including key subsidiaries as defined by said company) (hereafter the “former employer”) has had business dealings with the Kawasaki Group, and the average transaction amount over the last five fiscal years exceeds 2% of the average sales amount of the Kawasaki Group and that of the former employer over the last five fiscal years.
  2. The average compensation that the Outside Director (or legal entity if set up as a legal entity) receives directly from the Kawasaki Group in their capacity as a specialist or consultant of legal, accounting, or tax matters (excluding compensation as an officer of Kawasaki) over the last five fiscal years exceeds 10 million yen.
  3. The average amount of donations and other contributions made by the Company over the last five fiscal years to an NPO at which said Outside Director serves as an executive officer exceeds 10 million yen and exceeds 2% of total revenues or the current account balance of said organization.
  4. Said Outside Director’s former employer is a major shareholder of Kawasaki, holding 10% or more of the issued shares.
  5. Said Outside Director has a first-degree or second-degree relative to which bulleted item 4 applies, or is an executive Director, executive officer, manager or other key employee at the Kawasaki Group.

Reasons for Appointment of Outside Directors

Jenifer Rogers

Ms. Rogers has served as an in-house lawyer and counsel at financial institutions in Japan and overseas for many years. Since 2018, as an Outside Director of the Company, she has provided helpful opinions and advice on important management decisions based on her extensive international experience and deep insights into legal affairs, compliance, and risk management cultivated in those positions from a standpoint independent from the Company’s business execution. In consideration of these points, the Company has determined that she is suitable as an Outside Director.
Furthermore, the Company has appointed her an independent officer, as it judges that she meets the Tokyo Stock Exchange’s standards of independence and is not at risk of having a conflict of interest with general shareholders.

Hideo Tsujimura

Mr. Tsujimura has served as Senior Managing Director, in charge of Intellectual Property Department and R&D Division of Suntory Holdings Limited, Representative Director, President & Chief Executive Officer of Suntory Business Expert Limited, Director, Executive Vice President, Chief Operating Officer, MONOZUKURI Division, and Senior General Manager, Research & Development Department of Suntory Beverage & Food Limited, and in other important positions. Since 2020, as an Outside Director of the Company, he has provided helpful opinions and advice on important management decisions based on his extensive management experience and deep insights into product development and intellectual property from a standpoint independent from the Company’s business execution. In consideration of these points, the Company has determined that he is suitable as an Outside Director.
Furthermore, the Company has appointed him an independent officer, as it judges that he meets the Tokyo Stock Exchange’s standards of independence and is not at risk of having a conflict of interest with general shareholders.

Katsuhiko Yoshidaa

Mr. Yoshida has served in such roles at Kao Corporation as a Representative Director, Senior Managing Executive Officer, with overall responsibility for the Consumer Products Business Department; and in addition to his abundant experience in management, he also has deep insight into sales and marketing. It was therefore determined that he will be able to play a sufficient role in supervising business operations and increasing corporate value as an Outside Director. In consideration of these points, the Company elected him as a new Outside Director with the expectation that he will perform supervision using his expertise and knowledge.
Furthermore, the Company has appointed him an independent officer, as it judges that he meets the Tokyo Stock Exchange’s standards of independence and is not at risk of having a conflict of interest with general shareholders.

Reasons for Appointment of Outside Directors Serving as Audit & Supervisory Committee Members

Atsuko Ishii

Ms. Ishii has never been involved in the management of a company except as an outside officer, but has served in important positions at the Ministry of Health, Labour and Welfare, including as Director-General of the Osaka Labour Bureau, Deputy Director-General, Director-General of the Equal Employment, Child and Family Policy Bureau, Director-General for General Policy and Evaluation, and Director-General of Social Welfare and War Victims’ Relief Bureau. In 2017, Ms. Ishii was appointed as an Outside Audit & Supervisory Board Member of the Company and in 2020 as an Outside Director (Audit & Supervisory Committee Member) and has made significant contributions to ensuring the soundness of the Company’s management and enhancing its enterprise value based on her abundant experience in and deep insight into Japan’s labor administration. In consideration of these points, the Company has determined that she is suitable as an Outside Director serving as an Audit & Supervisory Committee Member.
Furthermore, the Company has appointed her an independent officer, as it judges that she meets the Tokyo Stock Exchange’s standards of independence and is not at risk of having a conflict of interest with general shareholders.

Ryoichi Saito

Mr. Saito has served in important positions at NSK Ltd., including Senior Vice President, Head of Corporate Planning Division HQ, Director, Representative, Executive Vice President, Head of Corporate Strategy Division HQ, and Crisis Management Committee Chairperson and possesses abundant management experience and deep insights into business planning, finance and accounting, and risk management. In 2019, Mr. Saito was appointed as an Outside Audit & Supervisory Board Member of the Company and in 2020 as an Outside Director (Audit & Supervisory Committee Member) and he has made significant contributions to ensuring the soundness of the Company’s management and enhancing its enterprise value. In consideration of these points, the Company has determined that he is suitable as an Outside Director serving as an Audit & Supervisory Committee Member.
Furthermore, the Company has appointed him an independent officer, as it judges that he meets the Tokyo Stock Exchange’s standards of independence and is not at risk of having a conflict of interest with general shareholders.

Susumu Tsukui

Mr. Tsukui has never been involved in the management of a company except as an outside officer but has served as President of the Hyogo-ken Bar Association and in other important positions, and he also has abundant experience as an attorney and deep insight into legal affairs. In consideration of these points, the Company elected him as an Outside Director serving as an Audit & Supervisory Committee Member with the expectation that he will perform supervision using his expertise and knowledge.
Furthermore, the Company has appointed him an independent officer, as it judges that he meets the Tokyo Stock Exchange’s standards of independence and is not at risk of having a conflict of interest with general shareholders.


The Effectiveness of the Board of Directors

Board of Directors Meeting Attendance Rates (Includes Extraordinary Meetings)

(FY)

Unit 2017 2018 2019 2020 2021
Board meetings held Number of times 15 17 17 14 13
Attendance rate of all Directors % 99.4 99.0 99.0 100 100
Attendance rate of Outside Directors % 100 100 96.1 100 100
Attendance rate of all Audit & Supervisory Board Members % 98.6 100 100 100 -
Attendance rate of all Outside Audit & Supervisory Board Members % 97.7 100 100 100 -

Note: On June 25 2020, Kawasaki transitioned from a company with an Audit & Supervisory Board to a company with an Audit & Supervisory Committee. The attendance rates of all Audit & Supervisory Board Members and Outside Audit & Supervisory Board Members for fiscal 2020 given above are the attendance rates of the Audit & Supervisory Board Members at Board of Directors meetings before the transition to a company with an Audit & Supervisory Committee.

Directors’ Terms of Office/Restrictions

Directors’ terms of office Directors 1 year
Directors (Audit & Supervisory Committee Members) 2 years
Criteria regarding restrictions on concurrent service as Director The Board of Directors stipulates that if a director of the Company is to serve concurrently as an officer of another listed company, the maximum number of concurrent appointments is limited to three companies excluding the Company. The Company discloses the status of concurrent positions held by each director in the notice of the General Meeting of Shareholders and in the Annual Securities Report.

Evaluation of the Board of Directors' Effectiveness

The Board of Directors strives to ensure that its members, including independent Outside Directors, engage in free, vigorous discussion based on their insights and experience and reach appropriate management decisions. As part of these efforts, since fiscal 2015, the Board of Directors annually evaluates and analyzes the effectiveness of its operations.

Evaluation Method

An anonymous survey of all Directors is carried out based on advice from and with the cooperation of outside experts. The specific steps of this process are as follows.

  1. The Board of Directors confirms the status of initiatives to address issues identified via the previous evaluation.
  2. The Board of Directors determines evaluation methods to be used, key items to be surveyed, and other matters pertaining to the upcoming evaluation.
  3. All Directors are surveyed.
  4. External specialists aggregate and analyze the survey results, and the Board of Directors discusses findings from the analysis.
  5. The Board of Directors determines issues to be addressed and policies for countermeasures based on findings from the analysis and the results of its discussion.

Items Surveyed

The survey questions (main items) are as follows, with a 5-point scale and free writing section. To more accurately evaluate the effectiveness of the Board of Directors, the number of questions was increased from four to seven items, and these questions take into account the changes made in the revision of the Corporate Governance Code.

Survey Question Items

  • Composition of the Board of Directors
  • Operation of the Board of Directors
  • Discussions of the Board of Directors
  • Monitoring function of the Board of Directors
  • Training
  • Interactions with shareholders (investors)
  • Audit & Supervisory Committee

Evaluation Results

The analysis of survey results found that the Board of Directors’ operations were evaluated highly overall, and significant improvement was seen especially in regards to the following three items identified as issues to be addressed in the previous year. While the items of “clarifying requirements for Director candidates” and “upgrading leadership succession plans” received high evaluations, the Company will continue to actively engage with these issues in terms of the further strengthening of governance and the enhancement of corporate value.

  • Clarifying requirements for Director candidates
  • Upgrading leadership succession plans
  • Strengthening collaboration with the Nomination Advisory Committee and Compensation Advisory Committee

We will continue to make efforts for improvement as there are items that need to be enhanced and new issues identified in this evaluation.

As a result of discussions at the Board of Directors meeting based on the results of the above analysis and other factors, the operations of the Board of Directors have been deemed effective.

Initiatives to Further Improve Effectiveness

Based on the results of this evaluation and the discussions at the Board of Directors meeting, the main issues to be addressed are as follows. We will continue our efforts to further improve the effectiveness of the Board of Directors.

  1. Enhancing the content of the Board of Directors’ discussion regarding medium to long-term management policies
    In fiscal 2021, the Board of Directors engaged in the discussion of important management policies and strategies (e.g., sustainability management policies, human resource strategies, corporate transformation) in light of the Corporate Governance Code. In fiscal 2022, there will continue to be discussion on important issues toward achieving Group Vision 2030, and efforts will be made to further strengthen governance.
  2. Committing to the fulfillment of the requirements for Director candidates
    The Board of Directors and the Nomination Advisory Committee strive to identify skills and other requirements for Director candidates in light of the Company’s medium- to long-term management policies and strategies. Accordingly, a Board of Director skills matrix has been developed, and it is disclosed in the Corporate Governance Report. To strengthen the Board of Directors’ field of supervision needed to achieve the Group Vision 2030 set forth in the skills matrix, the Company will verify whether the requirements for candidates have been met and take necessary measures to satisfy them.
  3. Formalizing leadership succession plans
    After defining the qualities and requirements needed for each key position, succession candidates were selected through interviews with the President and Vice President and narrowing the pool of candidates based on external assessments. In fiscal 2022, the candidate recruitment process will be systematized, and the aim is to formalize leadership succession plans by documenting this system in writing.
  4. Strengthening internal control systems and risk management structures
    Last fiscal year, a Group-wide risk management system was developed, and structures have been established to make periodic reports for the Board of Directors concerning the monitoring of its operational status. In fiscal 2022, the Company will formalize timely deliberations by the Board of Directors for major risks identified during monitoring; and in order to strengthen compliance, the monitoring of the results of evaluations regarding the development and operation of internal control systems of the Group as a whole will be enhanced by having the Head Office proactively supervise the Group.

Additional Issues to be addressed in fiscal 2022

Securing diversity among core human resources
Concerning the diversity of core human resources, after organizing perceptions on the current status of the Group and ideas for securing diversity, the results will be discussed by the Board of Directors and incorporated into a concrete action plan, whereby a system to increase its feasibility will be established.


Audits

Internal Audits

The Auditing Department, which is an internal audit division and consists of 15 persons, works to improve the internal control function by, for example, conducting regular audits to confirm that the Kawasaki Group’s execution of general business activities is properly conducted in accordance with laws and internal rules.
Concerning the audits of overseas subsidiaries, they will be conducted not on-site but remotely in response to COVID-19.

Audits Conducted by the Audit & Supervisory Committee

The Audit & Supervisory Committee Members carry out the following activities in accordance with the basic audit policy, audit system, and assignment of duties decided by the Audit & Supervisory Committee. In fiscal 2021, the visits to overseas subsidiaries were suspended due to the spread of COVID-19, but as in fiscal 2020, this did not have a major impact on the Company’s auditing activities due to the utilization of an online video conferencing system.

  • Meet with Directors and executive officers (internal company presidents)
  • Attend meetings of the Board of Directors
  • Attend meetings of the Management Committee and other important meetings
  • Coordinate with Outside Directors not serving as Audit & Supervisory Committee Members
  • Conduct operational audits of the Head Office and operating divisions and survey subsidiaries
  • Coordinate with the full-time Audit & Supervisory Members of Group companies
  • Coordinate with internal audit divisions
  • Coordinate with the independent auditor
  • Inspect important documents
  • Receive explanations from the Nomination Advisory Committee and secretariat of Compensation Advisory Committee

The full-time Audit & Supervisory Committee Members attend important meetings, such as those of the Board of Directors and Management Committee, voicing their opinions as needed. Through the above activities, they work to maintain the auditing environment, gather information within the Company, and build and regularly monitor the operation of internal control systems. The full-time members also share the information they collect internally with the outside Audit & Supervisory Committee Members on a regular basis.
The outside Audit & Supervisory Committee Members attend meetings of the Board of Directors and, when necessary, other important meetings, such as those of the Management Committee, voicing their opinions as needed based on their respective expert knowledge. They strive to obtain the information necessary for auditing through the above activities and to maintain the auditing environment in cooperation with the other Audit & Supervisory Committee Members. They also share information with the full-time Audit & Supervisory Committee Members by such means as attending meetings of the Audit & Supervisory Committee.

Attendance Rate at Audit & Supervisory Board Meetings and Audit & Supervisory Committee Meetings

(FY)

Unit 2017 2018 2019 2020 2021
Audit & Supervisory Board meetings held Number of times 17 17 17 5 -
Audit & Supervisory Committee meetings held* - - - 13 17
Audit & Supervisory Board Members’ attendance rates % 100 100 100 100 -
Outside Audit & Supervisory Board Members' attendance rate % 100 100 100 100 -
Audit & Supervisory Committee Members’ attendance rate* % - - - 100 100
Outside Audit & Supervisory Committee Members' attendance rate* % - - - 100 100

* On June 25 2020, Kawasaki transitioned from a company with an Audit & Supervisory Board to a company with an Audit & Supervisory Committee.

Independent Audits

With regard to independent auditing, we undergo audits of our financial statements by the independent auditor KPMG AZSA LLC. The Audit & Supervisory Committee receives an outline of the audit plan and a report on important audit items from the independent auditor, and the Audit & Supervisory Committee explains its auditing plan to the independent auditor. The Audit & Supervisory Committee periodically receives reports on the results of audits by the independent auditor and, conversely, the independent auditor receives reports on the results of audits by Audit & Supervisory Committee, which strives to keep lines of communication open with the independent auditor by also exchanging information and opinions. When necessary, Audit & Supervisory Committee Members take part in the audits performed by the independent auditor, and may also receive reports from the independent auditor concerning audits when appropriate.

Independent Auditor Compensation

(FY)

Unit 2017 2018 2019 2020 2021
Compensation based on audit certification services Millions of yen 231 238 239 253 421
Kawasaki Heavy Industries Ltd. Millions of yen 185 190 190 205 334
Consolidated subsidiaries Millions of yen 46 47 48 48 87
Compensation based on non-audit services Millions of yen 8 74 306 261 234
Kawasaki Heavy Industries Ltd. Millions of yen 5 71 303 258 231
Consolidated subsidiaries Millions of yen 2 2 2 2 2

Director Compensation

The compensation system for Directors (excluding Audit & Supervisory Committee Members and Outside Directors) is based on the following basic policy with the aim of achieving the Group Vision 2030, “Trustworthy Solutions for the Future,” established in November 2020.

Basic Policy

Placing stronger emphasis on contribution to the Company’s goals, the revised compensation system is designed to reward each recipient based on their responsibilities and accomplishments. To this end, it not only provides short-term incentives but also rewards Directors for their contributions to medium- to long-term improvement in corporate value. In this way, we aim to promote the sharing of value between Directors and stakeholders, including shareholders.

Compensation for Directors (Excluding Audit & Supervisory Committee Members and Outside Directors)

Compensation for Directors consists of basic compensation, short-term incentives, and long-term incentives. Basic compensation and short-term incentives are paid in cash. Long-term incentives are paid in the form of performance-based stock compensation to promote the sharing of benefits and risks between the Directors and shareholders in addition to more strongly incentivizing medium- to long-term contribution to corporate value. These three components of Director compensation account for approximately 50%, 30%, and 20%, respectively, of the total, assuming that the Group's consolidated operating results in the preceding fiscal year reached target levels and that each Director’s individual performance targets for said fiscal year are fully met.

Compensation Levels

Compensation levels are set appropriately, taking into consideration conditions at other companies and officer compensation survey data from an external specialized organization. Compensation levels for each position are generally as indicated below, with compensation for the Director, President, and Chief Executive set at 100.

Chairman of the Board: 87
Director, President, and Chief Executive: 100
Director, Vice President, and Senior Executive Officer: 65
Director, Managing Executive Officer: 44

Composition of Director Compensation (Excluding Audit & Supervisory Committee Members and Outside Directors)

Payment method Details
Basic compensation (fixed compensation) Cash Each Director’s pay grade is determined based on the missions assigned to them.
Short-term incentives (performance-based compensation) Cash Performance-based compensation is determined in line with single-year operating results and other indicators. Specifically, the amount of this compensation is determined based on consolidated operating results and the level of achievement of each Director’s individual performance targets.
Profit attributable to owners of the parent is used as the indicator for assessing consolidated operating results, with the aim of providing incentives for the steady accomplishment of single-year operating results targets and promoting the sharing of value with shareholders.
The payment ratio applied to this performance-based compensation is determined based on the profit attributable to owners of the parent for the year, as presented in ①, below. Details of the process for determining the level of achievement are presented in ②, below.
Long-term incentives (fixed portion and performance-based portion) Stock Long-term incentives utilize a stock benefit trust and are determined based on fixed points granted to Directors in line with their periods of service as well as performance-based points granted for their accomplishments vis-à-vis individual performance targets. In principle, these incentives are paid to the recipients in the form of both Company shares and cash (the latter being in an amount equivalent to the value of a portion of said shares after conversion) at the time of their retirement as Director. Points granted are divided into fixed points and performance-based points. With regard to fixed points, value is shared with shareholders by granting a certain number of shares based on the term of service. Also, performance-based points are given as incentives to increase corporate value over the medium to long term by granting shares based on the degree of achievement of targets by each eligible director. The degree of achievement of targets by each eligible director is the degree of achievement of targets concerning medium- to long-term issues of the entire company and the organizations and business for which each director is responsible set for each director in the previous fiscal year.
The proportions of fixed points and performance-based points are designed to account for 50% each when the recipient's level of achievement is at a standard level. For the time being, the ratio of the fixed portion and the performance-based portion will be set at 50%:50%, but in the future, the ratio of the performance-based portion will be raised to increase incentives to enhance corporate value over the medium to long term. Details of the process for determining the level of achievement are presented in ②, below.

Composition of Director Compensation

In the case where the Group’s consolidated operating performance in the preceding fiscal year reached target levels and each Director’s degree of achievement of targets set for the preceding fiscal year is 100%.

①Payment Ratio Based on Profit Attributable to Owners of Parent

Profit Attributable to Owners of Parent Payment ratio (%)
Less than 0 -
0 to less than ¥25 billion 0~45
¥25 billion to less than ¥45 billion 50~95
¥45 billion to less than ¥70 billion 100~195
¥70 billion or more 200~

②Process for Determining Level of Achievement of Individual Performance Targets

Setting of Targets

Each Director sets their own targets in terms of addressing short-, medium and long-term issues, including those associated with business units and operations under their supervision and Company-wide issues. These include targets pertaining to important financial indicators as well as targets associated with initiatives aimed at realizing the United Nations Sustainable Development Goals (SDGs), efforts to improve employee engagement, and other aspects of non-financial performance.

  • Targets for short-term issues: Targets to be achieved by the end of the fiscal year
  • Targets for medium- to long-term issues: Targets to be achieved in light of the Group Vision 2030

Methods for Assessing the Level of Target Achievement

The targets set by Directors are assessed at the end of each fiscal year, and the degree of achievement is reflected in compensation. The assessment of each Director is determined as described below.

  • President: All Outside Directors who serve as members of the Compensation Advisory Committee conduct individual, face-to-face interviews with the President and make a determination through deliberations among those Outside Directors.
  • Vice President: Outside Directors who serve as members of the Compensation Advisory Committee conduct individual, face-to-face interviews with the Vice President and make a determination through deliberations among those Outside Directors.
  • Other Directors: The President conducts interviews of the individual Directors jointly with the Vice President, formulate an assess through deliberations with the Vice President, and refers the matters to the Compensation Advisory Committee for a decision.

Compensation of Audit & Supervisory Committee Members and Outside Directors

To ensure their professional independence, compensation for these individuals consists only of fixed compensation and is not linked with performance.

Methods for Determining Compensation

The total maximum amount of compensation for Directors (excluding Audit & Compensation Committee Members) is set by a resolution passed at the General Meeting of Shareholders. Within this limit, the amount of compensation is determined by the resolution of the Board of Directors based on the deliberations of the Compensation Advisory Committee. The presiding officer and a majority of the members of the Compensation Advisory Committee are Outside Directors.
The Board of Directors may also resolve to entrust the president with the responsibility of determining the amount of compensation for each Director. In such cases, however, the president is required to honor the conclusions reached via the deliberations of the Compensation Advisory Committee and comply with policies regarding the determination of the amounts of Director compensation and methods for calculating such compensation.
Compensation for Audit & Supervisory Committee Members is determined by deliberations among Directors who serve as Audit & Supervisory Committee Members.

Fiscal 2021 Compensation

Number of recipients Unit Total compensation Total compensation by type
Monetary compensation Stock compensation
Basic compensation Performance-based compensation Stock purchase fund
Directors (excluding Audit & Supervisory Committee Members and Outside Directors) 5 Millions of yen 385 237 69 9 69
Audit & Supervisory Committee Members (excluding Outside Directors) 2 Millions of yen 71 71 - - -
Outside Officers 6 Millions of yen 80 80 - - -

Notes: 1. For performance-based compensation portion of monetary compensation, the total amount paid for performance-based compensation under the previous compensation system and short-term incentive compensation under the new system in indicated.

2. For stock compensation, the amount recorded as expenses for the current fiscal year is indicated based on performance-based stock compensation introduced pursuant to a resolution of the 198th Ordinary General Meeting of Shareholders held on June 25, 2021 and differs from the actual amount paid.

3. The total maximum amount of annual compensation for Directors (excluding Audit & Supervisory Committee Members) is set at ¥800 million based on a resolution passed at the 197th Ordinary General Meeting of Shareholders held on June 25, 2020.

4. The total maximum amount of performance-based stock compensation is set at ¥325 million per year, with the annual number of Company shares to be allocated to the recipients being limited to 50,000 shares. At the 198th Ordinary General Meeting of Shareholders held on June 25, 2021, these frameworks were approved separately from the total maximum amount of annual compensation for Directors (excluding Audit & Supervisory Committee Members).

5. The total maximum amount of annual compensation for Audit & Supervisory Committee Members is set at ¥120 million based on a resolution passed at the 197th Ordinary General Meeting of Shareholders held on June 25, 2020.


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