Priority Theme 7: Reinforcement of Corporate Governance and Compliance

Priorities

  • Reinforcing corporate governance
  • Further spreading awareness of placing greatest priority on compliance

Affected Stakeholders

Directly:Employees
Employees:Local Communities, Shareholders and Investors, Creditors

Reasons for being Priority Issues (Opportunity & Risk)

We are living in a time when the future outlook is increasingly uncertain, what with climate change, the changing demographic structure, and infectious diseases that spread globally. In order to sustain international business growth as we strive to survive the “once-in-a-century” change in the auto industry, we at TOYO TIRE believe it essential to ensure management transparency and pursue fairness within the organization. To this end, we recognize that we have a responsibility to various stakeholders, and it is necessary to maintain an appropriate management system and increase awareness that compliance is the most important issue, and we have positioned these as issues that should be addressed with priority.

Policies

TOYO We properly implement the principles of the corporate governance code in order to implement effective corporate governance. We ensure the rights and equality of shareholders, strive to establish appropriate cooperation and dialogue with stakeholders other than shareholders, and work to secure appropriate information disclosure and transparency to achieve this. Taking into consideration its accountability toward shareholders, the Board of Directors properly fulfills its roles and duties to raise profitability, increase capital efficiency, etc., in order to achieve sustainable growth and raise the Company’s corporate value in the medium- and long-term.
As for efforts to strengthen compliance required to embody this philosophy, the Toyo Tire Group compiled not only the “Toyo Tire Group Charter of Corporate Behavior” as corporate action principles applied uniformly across the Group in order faithfully conduct business activities but also the “Toyo Tire Group Code of Conduct” for each director and employee to put the charter into practice. We strive to spread these throughout the Group. We have established the “Global Anti-Corruption and Anti-Bribery Policy” that supports the Ten Principles of the “United Nations Global Compact (UNGC)”. We are striving to ensure free and fair competition.

Global Anti-corruption and Anti-bribery policy (Additional information in January 2019)

Ideal Status in 2020

Engaging in business activities with integrity while constantly improving management transparency

TOYO TIRE’s SDGs (Ideal Status in 2030)

We will contribute to minimize social impact of extreme weather phenomena derived from climate change by building a robust value chain.

Goals

We will increase the transparency of management and aim to implement highly specialized, effective corporate governance by spreading awareness of the corporate philosophy and improving compliance levels.

Responsibilities (April 2020)

Corporate Officer & Vice President of Corporate Headquarters

Activity Promotion System (April 2020)

Corporate Governance System

Corporate governance system of the Toyo Tire Corporation consists of the Board of Directors, which is responsible for decision-making and supervision; the Executive Committee, which serves as the decision-making body for business execution; the Special Committees, which act as deliberative and consultative bodies for their respective areas; and the Audit & Supervisory Board, which audits the performance of the Board of Directors and overall business execution. Our corporate governance structure allows these organs to effectively fulfill their respective functions and responsibilities.
In February 2020, we established a Nomination and Compensation Committee, an advisory body for the board of directors on personnel affairs, compensation, and other matters concerning Directors. At the 104th Annual General Meeting of Shareholders held on March 27, 2020, it was resolved to introduce a monetary compensation receivables system for granting restricted stock to internal directors in order to incentivize them to pursue the sustainable enhancement of corporate value and ensure that they share said value with our shareholders.
In addition, we appropriately manage conflicts of interest. We have determined that the outside directors appointed by the Company carry no risk of conflicts of interest with general shareholders and reported them as independent directors. Regular independent evaluations of the Board of Directors ensure the functionality and effectiveness of the Board of Directors and various committees.

Governance structure *As of April 2020

Governance structure *As of April 2019

Internal Control System

In accordance with the Companies Act in Japan, the basic policy on constructing the internal control system was decided by the Board of Directors, and the internal control system was created in line with that basic policy. The basic policy is reviewed each year to reflect changes in the management environment and to ensure that our internal control system remains effective.
“Reporting Hotlines” have been established and operated as a system to enable employees to directly report and seek advice regarding their concerns, such as compliance issues that could develop into a crisis. In addition, multiple reporting routes have been secured, and a system that makes it easy for required information to rise to the governance organization has been created.

Risk Management System

As for post-crisis response, we have established a risk management system that the Vice President of Crisis Management (Vice President of Corporate Headquarters) is responsible for as stipulated in the Risk Management Rules. A risk management officer for each material risk that could have a major impact on the Group and stipulates countermeasures for both non-emergency and emergency situations by creating a Risk Management Manual.
When a crisis occurs, the risk management officer convenes the Emergency Response Meeting, decides on the most appropriate response based on the impact the crisis will have on the Group and stakeholders, and resolve the problem.
As for the Group’s subsidiaries and affiliated companies, Affiliated Company Management Rules have been established to strengthen necessary governance in order to increase Group performance and strengthen business while all entities respect the independence of each other. In addition, the managing departments and managers are clearly indicated, operations are streamlined, and management standardized.

Role of Governance Entities in Priority CSR Themes

In order to strengthen governance related to efforts targeting the seven priority CSR themes, the Executive Committee (chairperson: President) has created a system to promote the Group’s sustainability management.
In the group-wide working groups (WG) established upon approval by the Executive Committee, we identify the sustainable development goals (SDGs), the impacts, risks, and opportunities in various priority themes, and plan for actions. And the corporate officer in charge of the Corporate Headquarters compiles the information and reports it to the Executive Committee. The effectiveness of the processes for each theme discussed by WGs is debated and evaluated when the report is made to the Executive Committee.
Based on the strategy and policy set by the WG, the related special committees develop plans for important activities, analyze the results, and formulate improvement measures. And the progress in implementing the plans by the divisions responsible for execution of business operations is reported to the Executive Committee.
We disclose the information about the action of each priority theme an once year as “CSR Report.” Before disclosing, the report is reviewed by the corporate officers in charge of the various control departments and finally approved by Corporate Officer & Vice President of Corporate Headquarters.
The staff in charge of rerated the theme promotes engagement with stakeholders about each priority theme. And Corporate Officer & Vice President of Corporate Headquarters aggregates the results of engagement and shares them to the Group as necessary at any time.

Promotion System of Sustainability

  • *Toyo Tire Corp.

  • * As of April 2020
  • ** Persons in charge of affiliated companies also participate in all WGs.
  • *** The SDGs WG has members who are closely related to each goal as members.

Compliance Promotion System

Within our Group, compliance is deemed a matter of the highest priority in management, and the president works as the party in charge of compliance to create and improve the compliance system.
In addition to establishing the Compliance Committee, one of the special committees that debates and examines issues related to promoting compliance, we have a system of compliance officers and are striving to promote compliance, mainly by the chief compliance officer (CCO), compliance officers (CO), and compliance leaders (CL).
The CCO and COs have the authority to investigate, direct (including suspend business operations and shipping) and make compliance related proposals for the entire Group and the department they are responsible for, respectively. We have also established a system in which the CCO reports to and consults with an external profession organization regarding compliance problems that occur. As assistants to COs, CLs are responsible for promoting various activities in the workplace. CLs are also required to report to their supervisors if they become aware of compliance problems and appropriately respond in accordance with the situation.
We have a structure in place that enables prompt investigation when a compliance issue (or a suspicion of one) is reported to the CO. Efforts related to the investigation and measures implemented to prevent recurrence are announced within the company. We make use of this information as the investigation whether does not have any similar cases (horizontal deployment), reconfirmation of laws and internal rules. And when a similar case occurs, we use it as a reference for solving the issues and for measures to prevent recurrence.

Compliance Promotion System

Promotion System of Anti-corruption and Anti-bribery

We established the “Global Anti-corruption and Anti-bribery policy” and this went into effect in January 2019. We are promoting the proper execution of the policy and spreading the policy throughout the company.

  • *Toyo Tire Corp.

Promotion System of Anti-corruption and Anti-bribery

  • *Affiliated companies, the HR and General Affairs manager of each company promotes activities based on the group policy.
TOYO TIRE belongs to the following trade associations:

Grievance Mechanism

  • Reporting Hotline (Creating an Internal Control System) * Targets: Employees, Business Partners
  • Customer Relations Department * Targets: Customers, Local Communities
  • Inquiry Form (on the Website) * Targets: Customers, Shareholders and Investors, NGOs
  • Labor-Management Council Meetings * Targets: Employees
  • Consultation Desk for Compliance with the Antimonopoly Act * Targets: Employees
  • IR meetings * Targets: Shareholder, Investor

Main Resources

  • Total compensation for corporate officers

    - Directors (11 people): 277 million yen *Upper limits of 300 million yen/year
    - Audit and Supervisory Board members (5 people): 60 million yen *Upper limits of 80 million yen/year
    * The number of officers and the total amount of their compensation, etc. above includes compensation of 59 million yen to six outside officers (Outside Directors and Outside Auditors), as well as compensation to three Directors and one Auditor who retired from office during FY2019.
    *Revision in the amount of compensation to Directors: Given that the responsibilities of Directors are expected to increase further due to changes in economic conditions and the operating environment and that the number of Outside Directors is planned to be increased with the aim of further strengthening corporate governance, in March 2020 the amount of compensation to Directors was revised to be within 450 million yen per year (of which 50 million yen or less per year will go to Outside Directors). As a result of a review of the compensation system for officers together with this revision, it was decided to provide Internal Directors with a new compensation (monetary compensation receivables, within 50 million yen per year) in the form of a grant of restricted stock within the range of the above-mentioned amount of compensation in order to incentivize them to pursue the sustainable enhancement of corporate value and ensure that they share said value with our shareholders.

  • Compliance Officers (as of April 2020): 22
  • Compliance Leaders (as of April 2020): 123

Activities in 2019