Corporate Governance

Fundamental concepts and system

In order to make our Management Philosophy of "We aim to serve as a corporate group that contributes to society through business activities centered on construction" a reality, we consider enhancement of the efficacy of our corporate governance a priority issue.

Corporate governance system

Drawing on the aims of the Corporate Governance Code, Kumagai Gumi has adopted a corporate governance structure that comprises a Board of Directors, a Board of Corporate Auditors, and an independent accounting auditor to enhance the effectiveness of our corporate governance.

To achieve clarity in management responsibilities and to build an optimal management system in response to changes in the business environment, the term of office of Directors is set to one year. We also appoint three Outside Directors who provide counsel to management from an objective standpoint.

The nomination of Directors and Executive Officers and amounts of compensation are determined by the Board of Directors on the basis of reports by the Nomination & Compensation Advisory Committee, composed of the President and Representative Director and Outside Directors, to ensure objectivity and transparency.

With regard to Audit & Supervisory Board Members, we appoint Outside Audit & Supervisory Board Members from among persons who have appropriate experience and capabilities and who have knowledge of finances, accounting, and legal matters, in order to conduct audits with high efficacy.

Regarding accounting audits under the Companies Act and the Financial Instruments and Exchange Act, we undergo impartial audits by GYOSEI & CO.

Meeting the Corporate Governance Code

Details are noted in the Corporate Governance Report, which is available at our website or the Tokyo Stock Exchange website.

Corporate governance system

Major changes in strengthening of Corporate Governance

Improvement of the effectiveness of internal controls

Kumagai Gumi reviews internal rules and management conferences appropriately, and otherwise improves and operates structures to assure appropriateness in work, based on our Basic Policy to Establish Internal Control Systems.
In addition, the Kumagai Gumi Group as a whole undertakes the improvement and operation of internal control with the aim of maintaining the reliability of our financial reporting, based on the Financial Instruments and Exchange Act.


Evaluation of the effectiveness of the Board of Directors

Once a year, Kumagai Gumi Directors and Audit & Supervisory Board Members take part in an anonymous questionnaire survey evaluating the effectiveness of the Board of Directors. We verify the results of the survey and consider improvements. From the FY2018 evaluation onward, we are conducting reviews of our evaluation item settings and evaluation results through external experts.

In FY2020, based on issues for improvement from the previous fiscal year, we worked to energize deliberation in the Board of Directors through review of the number and ratio of Outside Directors, revision of some standards for Board of Directors agendas, measures for strengthening compliance and group governance, exchanges of opinions following proceedings, and other means. Based on subsequent results of self-evaluation and reviews by external experts, we confirmed that the effectiveness of the Board of Directors as a whole is secured. We also shared issues for consideration, including 1) further promotion of delegation of authority through revisions to standards for agendas, 2) promotion of medium- to long-term discussions concerning management, and 3) further strengthening of compliance and group governance.

Directors’ compensation and selection of Outside Executives

Compensation for Directors is based on a system of compensation linked to shareholder interests, functioning appropriately as an incentive to continuously improve corporate value. When determining individual compensation, our basic policy is to set an appropriate level based on the responsibility of the individuals, and, within the limit of the total amount of compensation for Directors decided at General Meetings of Shareholders, determine amounts through the Board of Directors
based on findings reported by the Nomination & Compensation Advisory Committee.

Specific compensation for Directors consists of monetary compensation (fixed compensation and bonuses) and stock compensation. For Outside Directors who bear supervisory functions, it consists of only monetary compensation (of fixed compensation, an amount of compensation according to position). The fixed compensation is monthly monetary compensation, and consists of compensation according to position and compensation according to contribution to business
performance. In addition, the company has adopted a stock compensation system employing trusts, by which the company grants points based on position, etc. each fiscal year to eligible persons, and, generally at the time of retirement, grants shares of stock based on the cumulative number of points.

Compensation for Audit & Supervisory Board Members is determined through deliberation by Audit & Supervisory Board Members, within the limit of the total amount of compensation for Audit & Supervisory Board Members decided at General Meetings of Shareholders.

Compensation, etc. for Directors and Audit & Supervisory Board Members (FY2020) (¥ million)

Executive
category
Total
amount of
compensation
Total amount by type of compensation, etc. Number of
eligible
Executives
Fixed
compensation
Bonus Stock
compensation

Directors
(Outside Directors
among these)

173
(20)
157
(20)
- 16
(-)
9
(3)

Audit & Supervisory
Board Members
(Outside Audit & Supervisory
Board Members among these)

42
(20)
42
(20)
- - 4
(2)

* The stock-based compensation noted is the amount of provisions for stock benefits for Directors recorded in FY2020

Reasons for appointment of Outside Executives / Attendance at Board of Directors meetings (FY2020)

Shigeru Okada has a track record of participation in corporate management as a representative director and president, and chairman, primarily in another industry. Based on his resulting extensive experience and wide-ranging insights, the company has appointed him Outside Director in anticipation that he will provide appropriate guidance and advice to the company's management.

Name Independent
Executive
Reason for appointment Attendance
(Number of times attending /
Number of meetings)
Mikie Yumoto
(resigned June 2021)
Mikie Yumoto has a track record of participation in corporate management as an executive in charge of human resources, primarily in another industry. Based on her resulting extensive experience and wide-ranging insights, the company has appointed her Outside Director in anticipation that she will provide appropriate guidance and advice to the company's management. Board of
Directors
16 times/
16 times
Sakae Yoshida
(appointed June 2020)
Sakae Yoshida has a track record of participation in corporate management as an executive in charge of production departments, primarily in another industry. Based on his resulting extensive experience and wide-ranging insights, the company has appointed him Outside Director in anticipation that he will provide appropriate guidance and advice to the company's management. Board of
Directors
13 times/
13 times
Shigeru Okada
(appointed June 2021)

Shigeru Okada has a track record of participation in corporate management as a representative director and president, and chairman, primarily in another industry. Based on his resulting extensive experience and wide-ranging insights, the company has appointed him Outside Director in anticipation that he will provide appropriate guidance and advice to the company's management. -
Kimie Sakuragi
(appointed June 2021)
Kimie Sakuragi has a track record of participation in corporate management as a standing auditor, primarily in another industry. Based on her resulting extensive experience and wide-ranging insights, the company has appointed her Outside Director in anticipation that she will provide appropriate guidance and advice to the company's management. -
Masaaki Ayukawa Masaaki Ayukawa has a track record of practical work as a certified public accountant. The company has appointed him Outside Audit & Supervisory Board Member in the expectation that he will leverage his resulting extensive experience and expert knowledge to provide appropriate auditing of the company'smanagement from an objective standpoint. Board of
Directors
Board of
Corporate
Auditors
16 times /
16 times
11 times /
12 times
Yutaka Takehana Yutaka Takehana has a track record of participation in key government office positions and corporate management in other industries. Based on his resulting extensive experience and wide-ranging insights, the company has appointed him Outside Audit & Supervisory Board Member in anticipation that he will provide appropriate auditing of the company's management from an objective standpoint. Board of
Directors
Board of
Corporate
Auditors
16 times /
16 times
12 times /
12 times

Kumagai Gumi Group Tax Policy

The Kumagai Gumi Group recognizes that it is an important obligation for companies to fully understand the social significance of tax payment and properly fulfill their tax obligations in each country and region.

 

1.Compliance with Laws and Regulations

The Kumagai Gumi Group fulfills its tax return and tax payment obligations in compliance with tax laws, regulations, and conventions of each country and region.

 

2.Optimization of Tax Expenses

The Kumagai Gumi Group will conduct tax planning, including the utilization of preferential tax systems, within the scope of normal business activities, in order to optimize tax expenses. It should be noted that we will not take any action to reduce the tax burden unreasonably, which is not in line with the spirit of laws and regulations.

 

3.To Reduce Tax Risk

The Kumagai Gumi Group shall endeavor to reduce tax risks by seeking agreement with the tax authorities through advance inquiries and other means regarding matters that are unclear in terms of tax matters.

 

4.Relationship with Tax Authorities

The Kumagai Gumi Group will provide information in a timely and appropriate manner in response to requests from tax authorities in each country and region, and build relationships of trust with and favorable cooperative relations with tax authorities through constructive dialogue.