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TOYO TIRES WORLDWIDE

G: Sound governance

Challenge

  • Corporate management that responds to social demands, is valued, and carries high expectations

Our policy

The Toyo Tire Group practices the principles of Japan’s Corporate Governance Code in an appropriate fashion to ensure effective corporate governance. We seek to ensure the rights and equal treatment of shareholders and to appropriately cooperate and engage in dialogue with our other stakeholders. We strive to make appropriate information disclosure and ensure transparency to help achieve those aims.
The Board of Directors is accountable to the Company’s shareholders and, as such, strives to appropriately execute its roles and responsibilities in order to enhance profitability and capital efficiency and, by extension, achieve the Company’s sustainable growth and increase corporate value over the medium to long term.
We practice the ideals set forth in our Company Philosophy, Mission, Vision, and Fundamental Values, which together make up our philosophy framework. In order to meet the expectations of our stakeholders and improve our corporate value, we seek to ensure management transparency and efficiency, work to maintain and build appropriate management systems, and endeavor to further strengthen our corporate governance, internal control systems, and compliance.
As part of our efforts to strengthen compliance, which we consider to be the essential element that embodies our philosophy, we established the Toyo Tire Group Charter of Corporate Behavior as a set of common principles to help all Group companies conduct sincere business activities. We also formulated the Toyo Tire Group Code of Conduct to assist all executives and employees in implementing the Charter of Corporate Behavior, and seek to instill that code across the whole Group. The Charter of Corporate Behavior and the Code of Conduct are reviewed when appropriate and any necessary revisions are resolved upon by the Board of Directors.

Responsible executive (as of April 2024)

Corporate Officer and Vice President of the Corporate Headquarters

Organizational responsibilities (as of April 2024)

Corporate governance system

Our corporate governance system consists of the Board of Directors, which is responsible for decision-making and supervisory functions, and, under that, the Nomination & Compensation Committee, which acts as an advisory body to the Board of Directors on appointment, compensation and other matters pertaining to directors. We also have an Executive Committee that makes decisions on business execution, various special committees that deliberate and consult on individual fields, and an Audit & Supervisory Board, a body that audits the Board of Directors and the execution of directors’ duties. This system enables all these functions to be fully exercised.
The Board of Directors meets, in principle, once a month to supervise the execution of duties by directors and decide important matters, including the appointment of the representative director and executive directors, determination of basic management policies, approval of important investment plans, determination or approval of the convening of general meetings of shareholders, agenda items to be presented and the proposals and documents to be submitted (including financial statements and supplementary statements) at the general meeting of shareholders, and to hear reports on the status of business execution. Outside directors attend Board meetings, where they actively exchange opinions, and monitor and supervise management. The Board of Directors also receives regular reports on important management risks debated in the Executive Committee and the Sustainability Committee, supervises risk management and assesses its effectiveness.
The Nomination & Compensation Committee, which acts as an advisory body to the Board of Directors, met twice in fiscal 2023 to discuss executive candidates, executive compensation policies, and the amount of executive compensation, and to give advice, recommendations, and reports to the Board of Directors.
We have introduced a monetary compensation scheme that involves the granting of transfer-restricted shares to internal directors as an incentive to consistently improve our corporate value and to promote a deeper sense of shared value with our shareholders.
We also manage any conflicts of interest in an appropriate manner. The outside directors we appointed are judged to have no conflicts of interest with general shareholders and have been registered as independent officers with the stock exchange. We commission regular external evaluations of the Board of Directors to ensure the Board and the various committees function well and effectively.

Governance structure (As of April 2024)

Corporate governance system
Name No. of meetings per year Chair Role/duties
Audit & Supervisory Board 15 Standing Audit & Supervisory Board member Audits the execution of business by the Board of Directors and directors
Board of Directors 17 Chairman of the Board Decision-making and supervisory body
Executive Committee 24 President Executive decision-making body
Sustainability Committee 4 President Deliberates policies and strategies to strengthen and promote sustainability management and responses to the key sustainability-related issues of Toyo Tire Corporation and Group companies
Compliance Committee 4 Chief Compliance Officer Deliberates and investigates ways to promote, enhance and strengthen compliance at Toyo Tire Corporation and Group companies
Crisis Management Committee 4 Vice president in charge of crisis management Deliberates agenda items concerning planning and management of measures against crises, and continuously conducts risk management
Organization & Personnel Committee 4 President Deliberates key issues related to the organization and human resources
Technical Committee 12 Vice President of R&D Headquarters Deliberates important issues related to R&D (strengthening of our core competence technologies, that are our platform technology and leading technology, to realize the Group’s management vision and medium-term business plans, as well as important issues relating to technology in general)
Quality Assurance Committee 4 Vice President of Quality Assurance, Environment and Safety Headquarters Establishes basic policies and measures to promote and operate a unified quality assurance system across Toyo Tire Corporation and Group companies; deliberates responses to serious quality issues and implements policies, plans and other measures in departments responsible for quality assurance and other relevant divisions
Investment & Credit Committee 27 General Manager of the Corporate Administration Division Deliberates the investments and credit of Toyo Tire Corporation and Group companies

Internal control systems

We determine our basic policy for building internal control systems at Board of the Directors meetings and then put appropriate systems in place. We review the basic policy each year to reflect changes in our business environment and other factors. The Board of Directors resolves any reviewed items as we strive to develop and operate more effective internal control systems.
In addition to establishing and operating our reporting hotline for employees to report and consult directly on compliance issues that may develop into crisis events, we have created multiple reporting routes and established a system for conveying necessary information to the Group’s governance bodies.

  •  * Toyo Tire Corporation
Internal control system

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
  • IR meetings Targets: Shareholder, Investor

Main resources for promoting activities (2023)

  • Total executive compensation (2023)
  • Directors (10): 264 million yen *Maximum annual limit: 450 million yen
  • Audit & Supervisory Board members (6): 65 million yen *Maximum annual limit: 80 million yen
  •  * The above numbers of executives and total compensation include a total compensation of 69 million yen for eight outside officers (outside directors and outside Audit & Supervisory Board members).
  •  * The above figures also include compensation for two directors and an outside Audit & Supervisory Board member who left in fiscal 2023.
  •  * The total amount of compensation above includes an 85 million yen provision for officers’ bonuses allocated in 2023.
  •  * The total amount of compensation for directors above includes a 10 million yen compensation for the purpose of granting transfer-restricted shares.

Corporate governance

Instilling our philosophy

Since establishing our philosophy in 2017, we have been working on ways to instill it in our executives and employees so that it forms the central core of their work.
Our philosophy puts into words the thoughts and beliefs that we value as a Group. It is structured with our Company Philosophy as the overarching concept that embodies our valued founding spirit that we shall continue carrying forward into the future. This is followed by Our Mission that defines our purpose within society, and then Our Vision that details the company we aim to be in order to achieve this purpose. Finally, the philosophy sets forth Our Fundamental Values as the foundation for ideas that we expect both our executives and employees to value equally.
We have also clearly indicated in our new Medium-term ’21 Plan, announced in February 2021, that the management plan itself was created to fulfill the company’s purpose of realizing this philosophy.
To continuously instill our philosophy in employees, we include a lecture on it in all initial internal training programs. Training for general managers includes case studies to understand the importance of promoting visions and strategies linked to our philosophy in workplaces, as well as group work where participants introduce how the philosophy is being instilled in their departments. These training sessions have become a valuable opportunity to improve awareness of instilling our philosophy by sharing issues and initiatives from other departments.
In follow-up training for new employees after their first year in the company, we have created opportunities for them to look back at their own duties and consider how they can embody our philosophy through their work. We have also recorded lectures on the background behind why we established our philosophy and the history of the company, which are stored in the video archive on the company intranet for viewing by both new graduate employees and mid-career employees.
Moving forward, we will continue creating opportunities such as group work for employees in different positions and at different levels to consider how they can embody our philosophy in their workplaces.

Board of Directors’ initiatives

The Board of Directors comprises eight directors (including four outside directors) and is responsible for deciding important matters such as management policies, targets and strategies, and overseeing the directors’ performance of their duties. In 2023, the Board met 17 times including ad hoc meetings. Outside directors attend Board meetings and other important meetings, where they actively engage in discussions and provide their opinions, and monitor and supervise the Company’s management.
The Board of Directors also receives regular reports on important risks to the Company’s management that have been debated in and reported to the Executive Committee and the Sustainability Committee in order to oversee risk management and assess its effectiveness.

Assessing the effectiveness of the Board

As part of our effort to promote sustainable growth and improve corporate value in the medium to long term, we have been conducting an annual analysis and assessment of the operation, composition and activities of the Board of Directors since 2017, with the aim of improving the Board’s functionality. In order to ensure fairness, we use a third-party body to aggregate and evaluate survey results.
The main changes made this year are the assessment criteria. In previous years, the key focus areas were the composition and operation of the Board and the substantiveness of the discussions at Board meetings. This year, we have added questions related to sustainability, a new perspective required to ensure sound corporate governance.

Overview of assessment

Assessment subject Self-assessment by directors and auditors, with third-party evaluation
Methodology Questionnaire (18 questions)
Questionnaire design Five-point scale scoring with comment field for each question
Assessment criteria
  1. 1 Composition and operation of Board of Directors

    2. → Board size, composition, operational status, quality of information provided, etc.

  2. 2 Management strategy & management planning

    3. →Discussions during the development stage, decision-making on strategic directions, level of contribution, etc.

  3. 3 Risk management

    4. →Oversight of management, sustainability actions based on risks and opportunities, etc.

  4. 4 Overall assessment

Assessment process

Previous year Around December Review assessment methodology
This year Early February Survey directors and auditors
Early March Aggregation and feedback of evaluation results by third-party body
Late March Report to Board of Directors and consider next course of action

Overview of FY2023 assessment results and next course of action

Most of the assessment results have been positive, and improvements have been made in areas where issues were raised in the last year, which suggest that the Board of Directors as a whole is functioning effectively. The third-party evaluation has also confirmed that our Board of Directors is functioning properly in general, and that it is structured in a way that assures effectiveness.
Among the assessment criteria, management supervision was once again highly evaluated. Since improvements have also been made to issues, we believe that the effectiveness of the Board of Directors as a whole has been ensured. Improving the quality and timing of information provision to ensure time to review information before meetings is an ongoing issue. While we received positive feedback on the quality of the information we provide in response to the improvements we made to optimize the volume of information, we believe that further improvements are necessary, including further enhancements to information. With regard to the timing of information provision, although we make sure we distribute materials in advance, we will consider distributing materials even earlier and will review the mechanism we use to provide information, so that we can provide it as quickly as possible and ensure Board members have sufficient time to consider important matters before meetings.
With regard to the newly added questions on sustainability initiatives, our current initiatives and stance were positively evaluated, to some extent. However, we recognize the need to integrate initiatives for a number of topics into our business and instill them throughout the organization. We will expand opportunities for deliberation at Board meetings and consider appropriate responses while keeping a close eye on trends around the world.

Nomination & Compensation Committee

We have established a Nomination & Compensation Committee as an advisory body to the Board of Directors to strengthen the independence, objectivity and accountability of the Board with respect to the appointment and compensation of directors, and to further enhance our corporate governance system.
The Nomination & Compensation Committee meets twice each year to discuss the appointment, compensation and removal of directors, and to give advice, recommendations and reports to the Board of Directors. The Committee comprises three members elected by resolution of the Board of Directors, with outside directors forming a majority on the Committee.

Audit & Supervisory Board

The Audit & Supervisory Board comprises five members including three outside directors and reports on, discusses and resolves on important matters concerning auditing.
The members of the Audit & Supervisory Board attend the meetings of the Board of Directors and the Executive Committee as well as other important meetings, where they raise issues as required, check whether the Company’s business is executed appropriately, and improve the effectiveness of audits.

Engaging in dialogue with shareholders and investors

Toyo Tire Corporation holds an annual General Meeting of Shareholders, and quarterly financial results briefings. Top management conveys its opinions on performance trends, business environments and future outlook for the Group to institutional investors and securities analysts when we announce interim and full-year business results. In addition to these activities, we also seek to promote understanding of Group strategy by creating multiple opportunities for the company president and other senior executives to engage in a dialogue on the issues that interest institutional investors and securities analysts, and providing quarterly opportunities (individual interviews) for investors to communicate and ask questions of IR staff. We also respond proactively to dialogue requests from institutional investors around the world either in the form of individual interviews or conferences.
In 2023, senior executives held eight engagement sessions (with a total of 89 people from 82 companies), and IR team members held individual interviews with 348 shareholders and investors from 231 companies. Financial results briefings are held by conference calls, whereas individual interviews are conducted online or face-to-face, providing flexibility in our communication with investors. Besides these occasions, we also hold presentations and other events for institutional investors and securities analysts to help them gain a deeper understanding of our business activities and strengths as a company.

Enhancing our communication Tools

We are working to improve the way we convey corporate results and various other materials and the way we display information on our IR website in order to disseminate comprehensive management information on Group business strategy, targets, current initiatives and other matters in a prompt and readily understandable manner. We publish an integrated report every year as a tool to help institutional investors and our many other stakeholders around the world understand and gain interest in the Group.

Sustainability