This document has been translated from the Japanese original, as submitted to the Tokyo Stock Exchange, for reference purposes only. in the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. DyDo Group Holdings, Inc. assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.
CORPORATE GOVERNANCE |
DyDo Group Holdings, Inc. |
Last update: April 18, 2022
DyDo Group Holdings, Inc.
Tomiya Takamatsu, President
Inquiries: Corporate Communication Department
Share code: 2590https://www.dydo-ghd.co.jp/en/
This document describes the Company's approach to corporate governance.
I. Basic approach to corporate governance, capital structure, corporate attributes, and other general information
1. Basic Approach
Taking into consideration the provisions and spirit of the Corporate Governance Code issued by the Tokyo Stock Exchange, we have formulated a Basic Approach to Corporate Governance that our basic approach and policies in the area of corporate governance in order to facilitate sustained growth and improve our corporate value over the medium and long term.
[Basic Policy]
1. Basic Approach to Corporate Governance
"Creating happiness and prosperity, together with people and with society. To achieve this goal, the DyDo Group will continue to embrace new challenges in a dynamic way."
Our corporate philosophy inspires us in our ongoing quest to ensure proper, upstanding business practices and rigid compliance with relevant laws and regulations. It motivates us to constantly improve management efficiency and transparency, and to promote the group's mutual benefits with all of our stakeholders, including our customers, our employees, our business partners, our communities, and our shareholders. It is the very cornerstone of our corporate governance, which is geared toward generating sustainable growth and improving corporate value over the medium- to long-term.
[DyDo Group Philosophy]
Creating happiness and prosperity, together with people and with society. To achieve this goal, the DyDo Group will continue to embrace new challenges in a dynamic way.
[DyDo Group Vision]
Together with our customers.
With our high-quality products, we will offer our customers excitement and enhanced wellness, with distinctive delicious flavors that only DyDo can.
Together with society.
Bringing together all DyDo's resources in the entire Group's product development and corporate activities, we will help build a rich and vibrant society.
Together with the next generation.
We will create a "DyDo Standard" for the next generation that transcends national borders and conventional frameworks.
Together with our people.
We will tirelessly embrace the "DyDo Challenge" of bringing happiness to all whose lives are touched by the DyDo Group.
The core business of the DyDo Group is Domestic Beverage Business, and considering the fact that approximately 80% of our sales for this segment come from vending machines in the local community, it is fair to say that our soft drink products are a familiar part of consumers' everyday lives. Moreover, our operations are conducted under a "fabless management" system, which means we have no plants of our own and instead work in close cooperation with producers and distributors nationwide, to whom we outsource the manufacture and delivery of our products. We concentrate our resources on more specific roles, such as product planning and development, and vending machine operations. We have one of the industry's most extensive networks of vending machines, which are maintained by DyDo Group employees and the "Kyoeikai" (special vending machine operators that handle DyDo products). It is a rather unique model that depends on the trust of our stakeholders. As such, we believe "happiness and prosperity together with people and society as a whole" is more than just a nice phrase for a corporate philosophy-it is our duty, and the overriding objective of our business activities. To that end, our "dynamic efforts" are founded on bedrock of corporate governance, a steadfast platform of transparent, fair, swift, and bold decision-making. Moreover, we continually work to improve that foundation in order to contribute to the benefit of our shareholders.
2. How We Put the Japan's Corporate Governance Code
(1) Securing the rights and Equal Treatment of Shareholders
At the DyDo Group, our corporate philosophy guides us to work in close partnership with a broad range of stakeholders. For instance, we endeavor to effectively secure the rights of our shareholders, and to prepare an environment in which they can exercise those rights appropriately.
(2) Appropriate Cooperation with Stakeholders Other Than Shareholders
We are keenly aware that our efforts to generate sustainable growth and improve corporate value over the medium- to long-term (as enshrined in our corporate philosophy) are reliant on the valuable resources and contributions of a broad spectrum of stakeholders, including our customers, our employees, our business partners, and our communities. Moreover, we are proud to work in close partnership with our stakeholders, and we proactively incorporate their feedback into the running of the DyDo Group. The executives and board of directors are charged with leading the creation and maintenance of a corporate culture that demands respect for the rights and positions of stakeholders and firm adherence to corporate ethics.
(3) Ensuring Appropriate Information Disclosure and Transparency
In line with our policy of transparency, fairness, and long-term focus, we provide shareholders, investors, and all other stakeholders the information they need to make informed decisions. This includes information on our companies' finances, business performance, management strategies and issues, risks, and other matters relating to governance. Indeed, we consider our legal obligation to disclose pertinent information promptly and appropriately to be a serious matter. In addition, however, we are also eager to publish information that encourages correct understanding of the DyDo Group to the furthest possible extent.
(4) Responsibilities of the Board
The board of directors seeks to discharge its responsibility and accountability to shareholders by pursuing a three-pronged strategy for consistent improvement of the group's earning power and capital efficiency so as to achieve sustainable growth and improve corporate value over the medium- to long-term. Those three facets are: 1) set the direction for implementation of the group's corporate strategy; 2) establish a platform for executives to take calculated risks; and 3) institute effective, independent, and objective oversight of executives and directors.
(5) Dialogue with Shareholders
Constructive dialogue with shareholders is an integral part of our IR strategy, which is geared toward our goal of sustainable growth and improved corporate value over the medium- to long-term. Such communication not only fosters correct understanding of the DyDo Group, but it also generates valuable feedback that serves as a frank appraisal of our true trustworthiness and corporate value.
[Reasons for not implementing certain principles of Japan's Corporate Governance Code]
Supplementary Principle 1.2.5
Treatment of institutional investors who own shares in the name of a trust bank (shintaku ginko) and/or custodial institutions and express a wish in advance to exercise their voting rights at the General Meeting of Shareholders
Because voting rights at the General Meeting of Shareholders are held by entities that are included in or registered on the list of shareholders as of the date of record, we do not allow institutional investors who own shares in the name of a trust bank or other institution to attend, exercise their voting rights at, or pose questions at the General Meeting of Shareholders.
Due to the large number of administrative issues associated with implementation of this principle, we have decided to study it in the future after clarifying future trends.
Principle 1.4
Cross-Shareholdings
We annually assess whether or not to hold each individual cross-shareholding.
The results of the most recent assessment, which was conducted at the February 15, 2022, meeting of the Board of Directors with regard to conditions as of January 20, 2022, confirmed the Company's policy of continuing to hold some shares that can be expected to help increase the Company's value over the medium and long term but considering selling or otherwise disposing of others.
With regard to "methods for specifically assessing whether or not the purpose of, and the benefits and risks from, holding each individual cross-shareholding is appropriate and covers the company's cost of capital," as required by this principle, the Board of Directors recognizes this as an issue requiring further discussion.
Principle 1.4.1
Response to Cross-Shareholder Indication of Intent to Sell
When cross-shareholders indicate their intention to sell their shares, we do not hinder the sale of the cross-held shares by, for instance, implying a possible reduction of business transactions.
However, in cases where parties which are cross-shareholders for the purpose of business cooperation indicate their intention to sell their shares, we recognize the need to consider revising cooperative relations based on economic rationality.
Principle 2.6
Roles of Corporate Pension Funds as Asset Owners
Because the management of corporate pension funds impacts stable asset formation for employees and our own financial standing, we ensure that potential conflicts of interest between pension fund beneficiaries and our company are appropriately managed by entrusting fund operation to a management institution and by receiving regular reports on the status of fund management and stewardship activities.
However, with regard to the involvement of human resources and operational practices, as required by this principle and including recruiting or assigning outside qualified persons, discussion of this issue will be revisited in the future as warranted based on careful monitoring of developments.
Supplementary Principle 4.1.3
Proactive engagement in the establishment and implementation of a succession plan for the CEO and other top executives, and appropriate oversight of the systematic development of succession candidates
Since assuming the position in April 2014, Tomiya Takamatsu, the Company's president, has demonstrated strong leadership by managing the company with rapid, decisive decision-making in line with its medium- and long-term management posture based on the perspective of all stakeholders and in keeping with the newly formulated Group Philosophy and Group Vision.
Although we do not currently have a specific succession plan for positions such as president, werecognize that the cultivation of corporate officers and management positions that support the Company's executive team is an important priority, and we launched DyDo Innovation Academy, a long-term training program for mid-level employees, in order to cultivate and identify the next generation of leaders who will be responsible for driving the organization's sustained growth going forward. We are working to foster problem-solving skills, strengthen leadership, and facilitate management literacy through a combination of off- and on-the-job training.
For the future, the Board of Directors will appropriately supervise the implementation of initiatives aimed at medium and long term improvement in corporate value, including a strategic development plan for the next generation of corporate officers and managers.
Supplementary Principle 4.8.2
Election of a head independent outside director
Four of the seven positions on our Board of Directors are occupied by independent outside directors, but we do not elect a head independent outside director.
In addition to the support offered to outside directors by the Board of Directors Secretariat to facilitate clear communication and coordination with the rest of the Company's executive team, we foster collaboration with auditors and the Kansayaku Board by means of such measures as regular meetings that are attended exclusively by independent external officers.
[Disclosures in accordance with the principles of Japan's Corporate Governance Code]
Principle 1.3
Basic Strategy for Capital Policy
The Group's basic policy is to pursue stable and robust financial management in order to secure stable profits and improve its corporate value so that it can realize sustained growth over the medium and long term. The Group's funds are concentrated in its holding company, and it strives to maintain financial soundness and to practice stable management by allocating those funds in an appropriate manner. In addition to carrying out strategic business investments geared to drive future growth, we will work going forwards to maintain and build a sound, balanced financial base for the Group's operations, including by returning profits to shareholders in an appropriate manner over the medium and long term, while accumulating sufficient equity to cover unexpected risks and other contingencies.
Our basic policy concerning the allocation of profits is to continue to pay stable dividends while considering the balance between the internal reserves necessary for sustained growth and shareholder returns. With regard to internal reserves, we believe that shareholders' joint interests are best served by giving priority to strategic business investments that will generate sustained profit growth and capital efficiency.
Principle 1.4 Cross-Shareholdings
(Policy and approach on reduction of cross-shareholdings)
We may establish strategic stakes in important stakeholders such as business partners or companies with which we have entered into operational alliances in keeping with a basic approach of achieving sustained growth and increasing corporate value over the medium and long term while pursuing mutually beneficial relationships with stakeholders.
Examples include situations where we stand to gain stable and sustained cash flow by maintaining a good relationship over the medium and long term because a partner can offer a large number of favorable vending machine locations, or where an operational alliance would contribute to efforts to increase corporate value over the medium and long term. We clearly identify the purpose of each new stake and then regularly verify its status following acquisition, and if it is determined that stable and ongoing cash flows and improved corporate value in the medium and long term cannot be expected, reductions are performed via sale of shares or some other, appropriate method.
(Content of assessment of whether or not to hold each individual cross-shareholding)
The company assesses the suitability of cross-shareholding on a regular basis once each year.
The results of the most recent assessment, which was conducted at the February 15, 2022, meeting of the Board of Directors with regard to conditions as of January 20, 2022, confirmed the Company's policy of continuing to hold some shares that can be expected to help increase the Company's value over the medium and long term but considering selling or otherwise disposing of others.
As of January 20, 2022, the balance for equity investments obtained for the purpose of holding, excluding net investments, was 10,387 million yen (9,096 million yen on January 20, 2021), with the primary cause of the decrease being fluctuations in the value of the underlying shares. Also, as of January 20, 2022, the number of listed companies for which equity investments have been obtained for the purpose of holding, excluding net investments, was 29 (32 on January 20, 2021), which is a decrease of three companies compared with the previous year. This is due to the sale of some shares after verification at a meeting of the Board of Directors on February 15, 2021.
(Standard on exercising voting rights deriving from cross-shareholdings)
Voting rights deriving from cross-shareholdings are exercised on a case-by-case basis following an investigation of whether this decision will damage our corporate value.
Principle 1.7
Related Party Transactions
To prevent directors, auditors, corporate officers, and other company officials and major shareholders from abusing their positions by engaging in transactions that harm the interests of the Company or its shareholders, competition and conflict of interest transactions with officers and corporations that are substantially controlled by officers must be deliberated and decided by the Board of Directors. In addition, affected officers may not participate in those deliberations and decisions.
Investigations to identify any transactions with directors, corporate auditors, or their close relatives are documented, and any results including material information, are reported to the Board of Directors.
Furthermore, the Company discloses transactions between related parties in accordance with the Companies Act, the Financial Instruments and Exchange Act, and rules imposed by the Tokyo Stock Exchange.
Supplementary Principle 2.4.1
Approach to Securing Diversity within the Company and Status of Related Initiatives
(Approach to securing diversity through appointing core personnel, etc., independent, measurable targets, and status toward their achievement)
The Group works to cultivate a corporate culture that encourages employees to embrace challenges as a way to spur its growth as well as their own in keeping with its Group Philosophy ("Creating happiness and prosperity, together with people and with society. To achieve this goal, the DyDo Group will continue to embrace new challenges in a dynamic way."). We are also strengthening our personnel management system from the three perspectives of securing human capital, fostering the development of human resources, and assigning and transferring human resources.
Society is changing as a result of the COVID-19 pandemic and this is causing dramatic shifts in the business environment. For us to provide value to customers and society, and to achieve sustainable growth, it is extremely important that we secure and train personnel who will support innovation, and put in place an internal environment that supports that. With this awareness, we are actively pressing forward with employing and promoting outside experts who have the high degree of specialization needed to work on the three basic policies outlined in Group Mission 2030-innovation in the Domestic Beverage Business, expansion of our business overseas, and development of a second major source of revenue in non-beverage businesses.
As an example of an initiative to assign and promote core personnel, designed to train and root out the managers that will form DyDo's next generation, we are implementing a long-term training program for employees in middle management-DyDo Innovation Academy. The program, which combines off- and on-the-job training, gives participants the skills to resolves problems and issues, strengthens their leadership abilities, and improves their management literacy.
In recent years, we have also made concrete efforts to appoint more female managers. We have set ourselves the following goals: raising the proportion of female managers from the current figure of approximately 10% (as of January 2022) to 15% or higher by 2030 in DyDo DRINCO, the Group's core business, and 10% or higher by 2030 at the Group's major subsidiaries (DAIDO Yakuhin and Tarami).
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