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Hitachi

Hitachi Transport System

Corporate Governance

Our corporate governance philosophy is that, along with efforts to increase management transparency and efficiency, we must improve corporate value and achieve sustainable development through business activity based on compliance and ethical conduct. We will follow these ideas as we establish a healthy, highly transparent corporate governance system that will enable us to nimbly respond to changes in the business environment. As part of this effort, the Company has been using "Nominating committee, etc. system" in which management oversight and business execution functions are separate.
Under the system, substantial authorities related to business execution are delegated from the Board of Directors to executive officers, who make prompt decision making about business restructuring and strategic investments. Executive Committee meeting consisting of all executive officers is held once a month in general to discuss material subjects which have impacts on the Company and the entire Group and clarify responsibilities and authorities of the executive officers. Three committees, Nominating Committee, Audit Committee, and Compensation Committee are set up within the Board of Directors, with majority of members consisting of outside directors, to segregate duties and strengthen oversight function. We enacted our "Corporate Governance Guidelines" to provide the basic views, framework and charter of our corporate governance.

Corporate Governance System

As of April 1, 2021

Board of Directors and Committees

Board of Directors determines the Company's basic management policy and supervises execution of duties by directors and executive officers (also passes a resolution by focusing on specific discussions on the Mid-term Management Plan and fiscal budget in addition to matters to be resolved stipulated by laws and regulations, the Articles of Incorporation and the Board of Directors regulations). The management supervision function, Board of Directors considers the subjective opinions of outside directors facilitates both monitoring of the Board of Directors and transparency of management, we have also established three committees overseeing nomination, auditing, and compensation respectively.

[Standards for Appointment Outside Directors]

Outside directors to whom none of the undermentioned standards applied will be appointed as independent officer without the possibility of any conflict of interest with general shareholders.

[Criteria for Independence of Outside Directors]

(a)
A director, corporate auditor, accounting advisor, executive officer, corporate officer, manager and any other person equivalent thereto of a corporation or organization that holds 10% or more of the outstanding shares of the Company, either directly or indirectly, as of the end of the previous fiscal year (collectively, "Related Party"), or those who had been a Related Party in the last five years.
(b)
(a)A Related Party of subsidiaries of corporation or organization described in (a).
(c)
A Related Party of a corporation or organization where 10% or more of its outstanding shares are owned, either directly or indirectly, by the Company as of the end of the previous fiscal year.
(d)
A Related Party of a company whose transaction volume with the Company accounts for 2% or more of the Company's consolidated service revenues for the previous fiscal year, or those who had been a Related Party in the last five years of such company.
(e)
A Related Party of a business partner that receives payments from the Company and its consolidated subsidiaries that account for 2% or more of such company's consolidated service revenues for the previous fiscal year, or those who had been a Related Party in the last five years of such business party.
(f)
A Related Party of a financial institution from which the Company borrows the amount that accounts for 2% or more of the Company's consolidated total assets, or those who had been a Related Party in the last five years of such financial institution.
(g)
A consultant, or accounting or legal professional who receives cash or other economic benefits equal to 10 million yen or more per year (average annual amount if the payment covers multiple fiscal years) in the last five years in addition to Director's remuneration from the Company.
(h)
A person who received donation or financial assistance equal to 10 million yen or more per year from the Company during the previous fiscal year, or those who belong to the recipient organization.
(i)
A Related Party of a company that accepts director(s) or auditor(s) from the Company or its consolidated subsidiaries, or its parent company or consolidated subsidiaries.
(j)
Spouses or relatives by blood or affinity within the second degree of kinship of those described in (a) through (i) (excluding those who are not in an important position such as officer).
(k)
Spouses or relatives by blood or affinity within the second degree of kinship of an executive director, executive officer, corporate officer, or manager or employees of the Company or its consolidated subsidiaries ("Executive"), or those who had been an Executive in the last ten years, and a Related Party of the Company or its consolidated subsidiaries.

Roles of each committee

Nominating CommitteeElects candidates for director (elects appropriate candidates, considering all relevant factors including their past performance and personality)
Audit CommitteePerforms audit of execution of duties by directors and executive officers and prepares an audit report (performs audit of execution of duties by directors and executive officers from the viewpoint of legal compliance and appropriate performance of duties in cooperation with independent auditors and internal audit department, with an aim of establishing a high-quality corporate governance system to maintain social trust)
Compensation CommitteeDetermines compensation, etc. of directors and executive officers (determines the compensation level, etc. for each position commensurate with the ability and responsibilities required of the Company's directors and executive officers and the Company's performance, taking into consideration the compensation level of other companies.)

Executive Committee

Executive Committee investigates important matters concerning operational execution affecting on the Company and the entire group. Executive committee consists of all executives and those who are especially nominated by president and is held regularly (held monthly in principle, additional sessions held as necessary).

Executive Officers

Executive officers execute operations except those Executive Committee considers. Authority has largely being transferred from the board. This has enabled rapid decision-making.

Compensation, etc. of Directors and Executive Officers

Compensation Committee's policy and process for determining the amount of compensation, etc. of directors and executive officers

As the HTS Group positions officers' compensation, etc. as one of the important pillars underpinning corporate governance, we have in place the following compensation governance to ensure that our officers will work toward our brand slogan "Taking on the Future" and our business concept "LOGISTEED" under our corporate philosophy and operate the compensation program according to our basic policy on the compensation plan for officers to deliberate and decide their compensation, etc.

  1. Operation Policy, etc. for the Compensation Committee
    We are in compliance with the Companies Act pertaining to a company with a Nominating Committee, etc. and define the function, size and composition, and operation of the Compensation Committee in the Corporate Governance Guidelines, etc. of Hitachi Transport System. In determining details of compensation, etc. for each board director and executive officer of the Company, the Compensation Committee deliberates appropriately based on objective, necessary and sufficient information including recent status of the officers' compensation, point of discussion, and other companies' plans while collecting information and seeking advice from external compensation consultants on the basic policy, compensation structure, performance-linked compensation scheme, and individual payments, etc. of our compensation plan for officers. The involvement and participation by external compensation consultants in the Compensation Committee is limited to advice on establishing agendas to improve the effectiveness of deliberation in the Committee, and we do not draw their recommendations on consensus building or the appropriateness of the decisions made. We hire Willis Towers Watson as the external compensation consultant.
  2. Activity Status of the Compensation Committee in Determining Compensation, etc. of Last Business Year
    For board director compensation, etc. for FY2019, the Compensation Committee deliberated and determined compensation, etc. for each board director on June 18, 2019 and the-end-of-term bonus for each board director on May 22, 2020 in accordance with the policy for determining compensation, established by the Compensation Committee on December 26, 2018. For executive officer compensation, etc. for FY2019, the Compensation Committee deliberated and determined compensation, etc. for each executive officer on March 29, 2019 and performance-linked compensation for each executive officer on May 22, 2020 in accordance with the policy for determining compensation, established by the Compensation Committee on December 26, 2018. In the meetings held from October 2019 to April 2020, the Compensation Committee carefully deliberated mainly on the revision of the compensation plan for executive officers. The Compensation Committee has decided to introduce a performance-linked stock compensation plan for the Company's executive officers from FY2020, with the aim of raising their awareness to improve medium-to-long-term performance and increase corporate value by further clarifying the relationship between the executive officers' compensation and the Company's performance and stock value and sharing returns and risks associated with stock price movements with shareholders.
  3. Policy on the Determination of the Composition Ratio of Performance-Linked Compensation and Other Compensation
    We determine the composition ratio of performance-linked compensation and other compensation in accordance with the basic policy on the compensation plan for officers. In determining the composition ratio of performance-linked compensation and other compensation, we benchmark our compensation levels against those of peer companies with similar business size based on the "management compensation database" compiled by the external compensation consultant every year to verify the appropriateness of our compensation levels and then determine the compensation levels, etc. for officers commensurate with the ability and responsibilities, etc. required for each position.

Director compensation, etc.

Board director compensation levels are comprised of basic compensation which is fixed compensation. Basic compensation reflects factors such as full-time or part-time service and position and is determined based on the deliberation at the Compensation Committee. Board directors who also serve as executive officers do not receive additional compensation as directors.

Executive officer compensation, etc.

Executive officer compensation levels are comprised of a combination of basic compensation and performance-linked compensation, and determined by reflecting executive's performance review in a base amount commensurate with his/her position. The performance-linked compensation levels are comprised of annual bonus linking to the achievement level of the targets for consolidated performance, division mission, and individual mission in a single year, and stock compensation linking to the achievement level of the Company's performance target for three business years. The composition ratio of officers' compensation by type reflects the level of management responsibility with higher ratio of performance-linked compensation for senior officers. For the ratio of each compensation element by position with the basic compensation as 100, KPIs for performance-linked compensation and reasons for selecting them, and the method to determine the compensation amounts, please refer to "Compensation, etc. of Officers" in the 61st Annual Securities Report (Yuka Shoken Hokokusho) of the Company.

The amount of compensation, etc. of Directors and Executive Officers

Total amount of compensation, etc.(million yen) Total amount by type of compensation, etc.
(million yen)
Number of applicable officers
(person)
Fixed compensation Performance-based Compensation Retirement benefits
Directors
(Excludes Outside Directors)
- - - - -
Executive Officers 612 415 197 - 18
Outside Directors 88 83 4 - 6
  1. Excludes 2 Directors who serve concurrently as Executive Officer from number of Directors paid compensation, etc.
  2. The compensation based on the resolution of the Compensation Committee for FY2019 of Directors and Executive Officers who served from April 1, 2019 to March 31, 2020 is stated.
  3. There is no one whose total amount of consolidated compensation, etc. is over 100 million yen.
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