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TDK's corporate governance policies
[Establishment of systems for ensuring the execution of duties by Directors complies with laws and ordinances and the Articles of Incorporation, and systems prescribed by the applicable Ordinance of the Ministry of Justice for ensuring the properness of operations of a stock company] |
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Systems for ensuring the execution of duties by Directors complies with laws and ordinances, and the Articles of Incorporation: |
TDK Corporation (“TDK”) was established in 1935 as the world’s first company to commercialize a magnetic material called ferrite. In the ensuing years, TDK has increased corporate value through the development of a variety of products of value and originality to society, based on the founding spirit “Contribute to culture and industry through creativity” as its Corporate Motto. In addition, in the “TDK Code of Ethics,” TDK has clearly stated its understanding that corporations exist in society with the support of various stakeholders, including shareholders, customers, suppliers, employees and communities, etc. The same Code states that TDK respects the rights of all stakeholders; and that it complies with social norms, including laws and regulations, as a good corporate citizen. All members of the TDK Group behave in strict compliance with the corporate standards of business conduct prescribed by the TDK Code of Ethics.
TDK aims to achieve its management targets and further improve corporate value through the creation of products while adhering to its founding spirit. At the same time, TDK strives to foster a sound corporate culture and sincerely conduct business activities, always aware of its place as a member of society. Moreover, TDK will fulfill its accountability to all stakeholders through comprehensive, appropriate, timely and impartial disclosure of appropriate information.
As mentioned above, TDK sincerely and devotedly seeks to achieve its management philosophy, and to maintain the following effective and orderly corporate governance systems to continue to ensure soundness, compliance and transparency in its business operations.
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Adoption of the Company Auditor System and Strengthening the Supervisory Function:
TDK has adopted the Company Auditor System pursuant to the Companies Act of Japan and has appointed three independent outside Company Auditors who have no conflicts of interest to constitute a majority of the five Company Auditors, in order to enhance the supervision of management.
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| (2) |
Strengthening the Function of the Board of Directors and Holding Directors More Accountable:
TDK has a small number of Directors (seven) to expedite management decision-making. At the same time, TDK has appointed three outside Directors who have no conflict of interest in order to enhance the supervision of management. In addition, the Directors’ terms of office is set at one year to give shareholders an opportunity to cast votes of confidence regarding Directors’ performance every business year.
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| (3) |
Adoption of Corporate Officer System for Expeditious Business Execution:
TDK has adopted a Corporate Officer system that separates the management decision-making and Director supervisory functions of the Board of Directors from the execution of business. Corporate Officers are in charge of business execution and carrying out decisions by the Board of Directors, thereby expediting business execution in line with management decisions.
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| (4) |
Establishment of Advisory Bodies to the Board of Directors (Business Ethics & CSR Committee, Disclosure Advisory Committee, and Compensation Advisory Committee, and Nominating Advisory Committee):
The aim of the Business Ethics & CSR Committee is to ensure compliance with corporate ethics and improve awareness of corporate social responsibility (CSR). To achieve this aim, the Directors, Company Auditors, Corporate Officers and all other members of the TDK Group are made fully conversant with the TDK Corporate Motto and Corporate Principle ( “Vision” “Courage” and “Trust” ) as TDK’s management philosophy, and the TDK Code of Ethics, which stipulates concrete standards and guidelines for compliance with all laws, regulations and social norms.
The Disclosure Advisory Committee reviews and examines important corporate information and disclosure materials required for investment decisions by shareholders and investors, to ensure that TDK conducts comprehensive, appropriate, timely and impartial disclosure in accordance with various laws and regulations regarding securities transactions and the rules and regulations of the stock exchanges where TDK’s shares are listed.
The Compensation Advisory Committee, chaired by an outside Director of TDK, examines the level of remuneration and remuneration system pertaining to Directors and Corporate Officers, as well as presidents and qualifying executive officers of principal TDK subsidiaries. It also verifies whether such remuneration is reasonable in light of the transparency of the remuneration decision-making process, corporate business results, individual performance, and the general standards of other companies.
Nominating Advisory Committee, also chaired by an outside Director of TDK, contributes to ensure appropriateness of the appointment of Directors, Company Auditors and Corporate Officers as well as to ensure transparency in such appointment processes by deliberating certain expected requirements regarding such appointment of Directors, Company Auditors and Corporate Officers and recommending candidates who meet such expected requirements.
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Under the foregoing corporate systems, the Company Auditors with supervisory functions over management ensure soundness, compliance and transparency in TDK’s conduct of its business operations by executing their duties pursuant to the Regulation of the Board of Company Auditors and the Code of Company Auditors Auditing Standards, and by auditing whether the Directors’ performance is appropriate as well as in compliance with laws and regulations and the Articles of Incorporation.
Similarly, Directors in charge of management decision-making and supervision of business execution ensure soundness, compliance and transparency in TDK’s conduct of its business operations by executing their duties pursuant to the Regulations of the Directors’ Business and the Regulations of the Board of Directors established in accordance with laws and regulations and the Articles of Incorporation. Corporate Officers who are in charge of business execution ensure soundness, compliance and transparency in TDK’s conduct of its business operations by executing their duties pursuant to the Regulations of the Corporate Officers’ Business and the Executive Committee Regulations.
TDK has established the following system to ensure compliance with all applicable securities and exchange laws and other similar laws and regulations of any country, as well as the rules and regulations of each stock exchange where TDK’s shares are listed (hereinafter collectively referred to as the “Securities Regulations”).
| (i) |
TDK will collect, record, analyze, process, summarize and report all the information required to be disclosed under the Securities Regulations and has established an internal control system and other procedures to warrant timely information disclosures within the deadlines stipulated by the Securities Regulations.
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| (ii) |
TDK has established a system to ensure that TDK has procedures designed so as to obtain reasonable assurance that all transactions are properly authorized, that its assets are protected from unauthorized or improper use, and that all trading activities are appropriately recorded and reported for the purpose of enabling TDK to prepare financial statements in accordance with applicable accounting standards.
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| (iii) |
TDK will ensure that the above-mentioned management system is in compliance with the requirements of the Securities Regulations with respect to corporate governance systems.
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System under which information regarding execution of business by Directors shall be maintained and controlled: |
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The President, who is responsible for the business execution of TDK, has established Document Control Regulations, which are applicable to the TDK Group and provide basic rules for the storage and control of information.
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Regulations and other systems for managing the risk of losses: |
With respect to overall corporate risks, TDK has established the Corporate Risk Management Committee, which is chaired by a Corporate Officer appointed in accordance with internal rules, under the direct control of the Executive Committee to promote enterprise risk management (“ERM”) across TDK. Meanwhile, the Crisis Management Committee plays a central role in providing responses to unexpected events (risks). Furthermore, corporate regulations, bylaws, guidelines and departmental guidelines provide for operating rules for specific risks, including legal, financial, IT-related, disasters and environmental risks. These risks are managed by managers in charge of the particular areas of operation on a daily basis.
The Company Auditors and the Management Review & Support Department, an internal audit organization, monitor the implementation of risk countermeasures and give advice and provide support to minimize risks. In addition, TDK receives advice from outside legal counsel from time to time regarding risks associated with its corporate activities.
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System for ensuring Directors execute their duties efficiently: |
TDK has a small number of Directors and has adopted the Corporate Officer system so as to facilitate quick and efficient management decision making by Directors.
At the same time, policies and measures with respect to business execution, such as development, manufacturing, marketing and financing of the TDK Group, are deliberated by the Executive Committee, which consists of Corporate Officers in senior positions ranking at or above the level of not lower than Senior Vice President and other Corporate Officers designated by the President. All Corporate Officers perform their duties expeditiously pursuant to the decisions made by the Executive Committee. TDK ensures efficient management via proposals to the Board of Directors and regular reports from Corporate Officers to the Executive Committee.
In addition, TDK establishes medium-term management targets shared by all members of the TDK Group and strives to make them fully understand those objectives. TDK also establishes systems that enable it to quickly gather and understand the targets and implementation plans of all divisions, as well as their progress by using IT systems.
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System for ensuring employees’ performance of duties is in compliance with laws and regulations, and the Articles of Incorporation: |
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TDK strives to ensure that all Directors, Company Auditors, Corporate Officers and employees in the TDK Group are fully conversant with the corporate philosophy, TDK Code of Ethics and Corporate Standards of Business Conduct, in order to achieve improved soundness, compliance and transparency of management, and ensure the business execution of every TDK member complies with laws and regulations, as well as TDK’s Articles of Incorporation. Furthermore, TDK has established a corporate ethics management system under the Business Ethics & CSR Committee to regularly monitor and investigate the enforcement of and compliance with the TDK Code of Ethics by the TDK Group worldwide. A consultation office (with help lines) also enables employees to directly report any information and opinion concerning compliance within the TDK Group.
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System for ensuring optimum business execution by the corporate group consisting of the subject company, its parent company and subsidiaries: |
Each Director, Corporate Officer and executive officer strives to ensure optimum business operations by making decisions in observance of the TDK Code of Ethics, job authority regulations for the entire TDK Group and applicable corporate regulations, in order to maintain soundness, compliance and transparency in business operations and to achieve the business targets of TDK and the TDK Group.
The Company Auditors audit, on a regular basis, the conditions of business operations of each division of TDK and the TDK Group, by auditing divisions, examining important documents and attending important meetings. In addition, the Management Review & Support Department audits and supports, on a regular basis, each division of TDK and the TDK Group in order to promote consistency of the business operations and management policies, and efficiency.
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Matters relating to employees when Company Auditors request full-time support for their duties: |
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The Company Auditors Office, consisting of designated full-time employees who do not perform any business execution duties, shall assist the Company Auditors.
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Matters regarding the independence of employees in the preceding item from Directors: |
The Company Auditors shall directly evaluate the performance of the employees in the Company Auditors Office, and any transfer or official reprimand of these employees shall be determined pursuant to the operating rules of the Company subject to consent of the Company Auditors.
Any employee who has been instructed or ordered by a Company Auditor in connection with audit duties shall not be subject to any Director’s instruction or order with respect to said Company Auditor’s instruction or order.
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System for ensuring Directors or employees report to Company Auditors and for ensuring other reports to Company Auditors: |
Minutes of the Management Committee and other meetings are sent immediately to the Company Auditors, and information regarding business execution by Corporate Officers and the TDK Group’s approach to management policies and targets is also provided. Furthermore, Company Auditors attend important meetings, including meetings of the Business Plan Review Meeting, and receive explanations directly from Corporate Officers, as necessary. Moreover, management reports prepared by each business division executing business operations are submitted to Company Auditors, who also confirm progress with business execution across the Company in relation to such reports.
Company Auditors examine meeting minutes and other information regarding the activities of the Business Ethics & CSR Committee, the Risk Management Committee and other committees and receive explanations directly from Corporate Officers involved in such committees depending on the project, enabling Company Auditors to confirm the overall status of corporate activities.
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System for ensuring Company Auditors conduct audits effectively: |
The Company Auditors and the Board of Company Auditors meet with the Representative Directors on a regular basis to confirm management policies, exchange opinions on pressing issues of the TDK Group, risks and important matters from the perspective of Company Auditors’ audits. These meetings also deepen mutual understanding between the Company Auditors and the Representative Directors.
Furthermore, the Company Auditors and the Management Review & Support Department meet regularly and also receive regular audit reports from the Accounting Auditors. Through the sharing of information regarding initial audit plans and results, Company Auditors conduct efficient audits.
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The TDK Code of Ethics can be found on TDK's website at http://www.tdk.co.jp/teaaa01/aaa06000.htm. The TDK Code of Ethics provides concrete standards and guidelines for compliance with all laws, regulations and social norms, to be followed by every director, company auditor, corporate officer and employee of TDK and its consolidated subsidiaries in conducting business.
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