Suntory Beverage & Food Limited Corporate Governance Policy
April 1, 2020
This policy sets out the basic corporate governance framework of Suntory Beverage & Food Limited (the Company).
The Company strives to enhance corporate governance in order to maintain good relationships with shareholders, other investors, and other stakeholders (customers, local communities, business partners and employees, etc.) and to allow us to fulfill our corporate social responsibilities. The Company’s Board of Directors will review this policy regularly on an ongoing basis, and work toward the creative evolution of our corporate governance to enhance corporate value.
As a member of the Suntory Group, the Company shares its corporate philosophy, founding spirit, and Group Management Policy with its parent company Suntory Holdings Limited (Suntory Holdings) and respective Suntory Group companies, and furthermore aims to effectively use its business resources in a manner that involves organically facilitating cooperation within the Group to the extent possible. The Company also engages in risk management activities on a Group-wide basis.
Whereas we believe such measures will greatly help ensure that we serve the interests of our stakeholders overall, on the other hand we recognize that as a listed company we must address important management issues in terms of maintaining our independence and safeguarding the interests of shareholders other than the parent company.
While pursuing Group synergies to such ends, we work to make our own decisions in securing business resources that act as the source of our corporate value, such as our brands, human resources, key assets and information, and to establish and operate a framework for addressing concerns regarding shareholder conflict of interest.
1. Promise and Vision
Below we set forth the Company’s “Promise” (to society) and “Vision.”
Mizu To Ikiru
Water is the source of all the lives on the planet
We promise and declare to society that we make our living with water.
We embrace nature, enrich our society
and encourage our people to take on new challenges.
Enrich our drinking-experiences to be
more natural, healthy, convenient, and fulfilling,
by leading the next drinks revolution
Water is the source of all the lives. Neither mankind nor any creature on this planet can live without water. “Mizu to Ikiru” is our Promise to society that we “make our living with water.” It means that we promise to embrace nature, enrich people’s lives and society, and we continue to take on challenges to pioneer new frontiers of values.
Our consumers’ needs constantly change with the times. Their needs also differ depending on the country or region. To meet the diverse needs of our consumers across the world, we offer “full line-up” of categories, pack types and sizes, and easy and reliable “availability” of drinks whenever and wherever. In addition, we evolve values of drinks by utilizing our own strengths in creating “Natural & Healthy” and “Unique and Premium.” We provide our consumers with enriched drinking-experiences they have never experienced before by striving to make them more natural, healthy, convenient and fulfilling.
To realize our vision, we stay in tune with each of the daily changing markets through our “empowering Gemba” philosophy of empowering our people locally to create new value through ideas and research originated from thoroughly consumer centric approaches. In addition, our people, with their diverse careers and individualities, practice the Suntory founding spirit, “Yatte Minahare” to continually offer value to society and keep ourselves full of vitality.
Each day, we boldly move forward together as a Group to realize the dreams of becoming a world-leading next-generation global beverage company by pioneering a fulfilling beverage culture.
2. Code of conduct
To implement the philosophy described in “Section 1. Promise and Vision,” compliance with laws and regulations as well as social ethics shall be the standard of business conduct for all Directors, executive officers and employees of the Group based on the Suntory Group Code of Business Ethics.
One ethical principle described in the Suntory Group Code of Business Ethics is to accept the existence of diverse values when carrying out business activities. The Suntory Group places great importance on the spirit of taking on new challenges as exemplified by our motto “Yatte Minahare–Go for it!” As a Suntory Group member, the Company works to build an organization where unique characteristics and individuality can thrive, strives to diversify the attributes of its Directors, executive officers and employees, and promotes an environment which makes the best use of these attributes and individuality, believing such promotion of diversity to be an important element in continuing to create new values.
4. Appropriate information disclosure
The Company discloses financial information such as its financial position and business performance as well as nonfinancial information such as corporate strategy, management issues, risks and corporate governance in accordance with laws and regulations. The Company also strives to proactively disclose information other than that mandated by laws and regulations.
5. Dividend policy
The Company believes its prioritization of strategic investments as well as capital expenditures for sustainable revenue growth and increasing the value of its business will benefit its shareholders. In addition, the Company views an appropriate shareholder return as one of its core management principles. While giving due consideration to providing a stable return and maintaining robust internal reserves for the future, the Company intends to pursue a comprehensive shareholder return policy that also takes into account its business results and future funding needs.
Specifically, the Company aims to stably increase dividends on the basis of profit growth with a targeted consolidated payout ratio of 30% or more of profit for the year attributable to owners of the Company. Looking to the medium and long term, the Company will also consider increasing the payout ratio depending on such factors as its need for funds and progress in profit growth.
6. General Meetings of Shareholders
- The Company recognizes that a General Meeting of Shareholders is an opportunity for constructive dialogue with our shareholders. At these meetings, it is our basic policy to provide sufficient explanation to shareholders, including a question-and-answer session, about the business conditions, the issues that need addressing, the details of proposals on the agenda, among other information.
- So our shareholders have sufficient time to deliberate the proposals being put forward at a General Meeting of Shareholders, the Company dispatches a convocation notice no later than three weeks before the meeting date. We also post the details of the convocation notice on our website prior to dispatching the notice. Similarly, we post an English translation of the convocation notice on our website no later than three weeks before the meeting date. The Company also discloses other information required for shareholders to make appropriate decisions at the meeting as needed.
- When the Company determines the dates for General Meetings of Shareholders, it considers whether there is sufficient time for Directors serving on the Audit and Supervisory Committee (Audit and Supervisory Committee Members) and the Accounting Auditor to conduct an effective audit. It also considers whether there is a meeting place available which would enable the participation of a large number of shareholders.
- The Company offers shareholders the opportunity to exercise their voting rights via the internet, etc. The Company also participates in the Electronic Voting Platform which facilitates voting by institutional investors and overseas investors.
- For shareholders unable to attend a General Meeting of Shareholders, the Company posts presentation materials used in business reports that were explained at the meeting venue on the Company’s website for a certain period promptly after the conclusion of the meeting.
- Institutional investors whose shares are held in the name of trust banks, etc. should give advance notice if they wish to vote at the General Meeting of Shareholders. It is necessary to confirm that they are beneficial shareholders of the Company and avoid voting by the nominee shareholders as well. We will determine beforehand whether it is possible for the shareholders to attend the meeting after discussions with the nominee shareholders.
7. Ensuring shareholders' rights
- To ensure shareholders’ rights, the Company shall create an environment wherein those rights may be exercised.
- Details about ensuring opportunities for shareholders to exercise their voting rights are listed in “Section 6. General Meetings of Shareholders.”
- The Company recognizes that it must take steps to safeguard the interests of shareholders other than its parent company Suntory Holdings. As one initiative to such ends, the Company closely monitors the exercise of voting rights by its shareholders other than the parent company, and furthermore when shareholders other than Suntory Holdings cast a considerable number of votes against a company proposal which nonetheless passes at a General Meeting of Shareholders, the Company will analyze the reasons for the large proportion of votes against and disclose the results of this analysis to the shareholders.
- When there is a proposal to delegate some of the items to be resolved at the General Meeting of Shareholders to the Board of Directors, the Board of Directors will sincerely discuss whether the Company is appropriately structured for the proposal.
- The Company will ensure the equality of all shareholders and act with consideration toward minority shareholders. We will also give due consideration to the exercise of minority shareholders’ recognized rights.
8. Communication with shareholders
- The Financial Planning and Analysis Department is responsible for communication between the Company and its shareholders.
- The Financial Planning and Analysis Department will take the appropriate course of action for communication with shareholders upon discussions with the Representative Director, President & Chief Executive Officer and officers in charge of Corporate Strategy Division.
- The investor relations division, the finance & accounting division, the legal affairs division and the public relations division hold regular internal meetings. They exchange opinions from their own professional viewpoints about the disclosure and explanation of results, cooperate regarding necessary actions, and support dialogue with shareholders.
- The Company undertakes activities to enhance shareholders’ understanding of its corporate strategy and business conditions through financial results briefings, reports for shareholders and the disclosure of information on the Company’s website, etc.
- The Board of Directors actively reviews the Company’s corporate strategy and other matters at board meetings following financial results briefings in light of the views expressed by shareholders and analysts.
- As a rule, the Company conducts a survey of its beneficial shareholders twice a year and as otherwise necessary to obtain a firm understanding of the share ownership composition.
9. Role of the Board of Directors
- The Company has chosen to be incorporated as a company with an Audit and Supervisory Committee for its corporate governance structure. The aim of this decision is to improve the effectiveness of auditing and supervisory functions through the auditing performed by Audit and Supervisory Committee Members, who have the right to vote at board meetings, as well as to improve the effectiveness of internal controls through the implementation of auditing that utilizes the internal audit division.
- The Company’s articles of incorporation state that the Company may delegate all or part of a decision regarding the execution of important duties to a Director upon a resolution of the Board of Directors. This aims at enabling wide-ranging and practical discussions regarding corporate strategy, medium- and long-term plans, and management issues at board meetings that include Outside Directors. This should facilitate the implementation of corporate strategy and the achievement of management targets. Moreover, by having individual business actions decided in line with the Company’s internal regulations, the Company aims to speed up decision making and strengthen the audit function of the Board of Directors. The Company has determined that important business actions including M&A, organizational restructuring, and major asset acquisitions and disposals are to be decided by the Board of Directors. However, individual business decisions as a rule are delegated to the management team including the Representative Director, President & Chief Executive Officer. The regulations of the Board of Directors and Company’s internal regulations clarify the distinctions among these.
- The Company has well-defined the areas of responsibility for Executive Directors and executive officers under board resolutions and the Company’s internal regulations. Further, the Company has made a clear distinction between responsibilities of its own Executive Directors and executive officers and those of representative Directors, CEOs and other managing Directors and executive officers in the domestic and overseas Group companies. Thus, we manage the Group taking full advantage of each individual’s knowledge and experience.
- The Company’s articles of incorporation state that the number of Directors should be 20 or less (among these, five or less should be Audit and Supervisory Committee Members). To ensure substantive and lively discussion at the board meetings, the Company believes the appropriate number of Directors shall be ten to 15. At present we have nine Directors (among these, three are Audit and Supervisory Committee Members). The term of office for Directors is one year with respect to Directors other than those serving on Audit and Supervisory Committee, during which time Directors are to flexibly endeavor to build an optimal management structure in response to changes in the business environment. Meanwhile, the term of office for Audit and Supervisory Committee Members is two years, during which time they shall endeavor to carry out effective audits. Moreover, the Company has a policy of selecting Directors with superior character and knowledge, regardless of whether they are from inside or outside the Company, and selecting Outside Directors who possess abundant track records and experience, and professional insight. We will endeavor to improve the effectiveness of the Board of Directors so that these individuals can participate in formulating the Company’s corporate strategy and overseeing the execution of business based on such insight and experience. For further details, refer to “Section 10. Nomination and remuneration, etc. of Directors.”
- Given that the Company considers one of the major duties of its Board of Directors to be that of safeguarding the interests of shareholders other than its parent company Suntory Holdings, the Board of Directors has established a system for appropriately carrying out transactions between the Suntory Group including Suntory Holdings, and it oversees operations in that regard. For specific details on that system, refer to “Section 15. Transactions with the Suntory Group.” In its selection of Outside Directors, the Company maintains a policy of placing emphasis on the notion of ensuring independence from the parent company Suntory Holdings, and currently has three Outside Directors who are independent of the parent company.
- In principle, the Company dispatches materials used in board meetings to each Director no later than three business days before the date of the meeting. Further, as a rule the board secretariat explains to each Outside Director individually details of proposals and the business conditions which form the background to such proposals ahead of the board meeting. Through these explanations ahead of time, we will work to improve the understanding of Outside Directors and make deliberations active at the board meeting.
- If an Outside Director needs a matter explained, the board secretariat or the Director or division in charge will explain the matter to him or her. In this manner, the Company provides Outside Directors necessary and sufficient information regarding the Company’s business and proposals.
- The Company creates opportunities for Outside Directors to exchange opinions with each other on a regular basis.
- The Company makes efforts to provide Directors with sufficient knowledge to execute their duties such as by providing the Board of Directors with lectures held by external lecturers. Furthermore, with the aim of deepening their knowledge about the Group’s business and issues that it faces, from time to time the Company explains to Outside Directors about our business and issues, and conducts site inspections at its facilities. In July 2019, a board meeting was held at the Suntory Minami Alps Hakushu Water Plant. In part this involved reporting on improvement activities and personnel measures at the Company’s production sites, carrying out a facility inspection, and engaging in active exchanges of opinions among Directors.
- The Board of Directors holds regular meetings once a month and extraordinary meetings as the need arises. In 2019, there were 13 board meetings at which various matters concerning management issues and the execution of business were actively discussed, including the medium-term plan, corporate governance, and human resources strategy.
- Once a year, the Company requires all Directors to conduct self-evaluation on the effectiveness of the Board of Directors and works on further improving the effectiveness of the Board of Directors. In 2019, in addition to assessing the effectiveness of the Board of Directors over the year 2019 and the suitability of its operations, the Company administered a questionnaire survey requiring a signed response, such that involved all Directors with content pertaining to proposed policy for managing the Board of Directors in 2020. The survey results indicated that the Board of Directors has been operating effectively and furthermore has been actively engaging in deliberations on matters that include medium- and long-term corporate strategy and management issues. Based on the results of the questionnaire, at the board meeting held in January 2020, the Directors discussed the medium- and long-term corporate strategy and management issues deserving of prioritized deliberation in 2020, as well as the deliberation schedule.
10. Nomination and remuneration, etc. of Directors
- Of its own volition, the Company has established a human resources committee (hereinafter in this section, the committee). The committee exercises its authority in a manner that places due consideration on concerns regarding shareholder conflict of interest in order to continuously ensure effectiveness of the management structure tasked with facilitating the Company’s sustainable growth.
- The committee’s membership is to consist of the Director, Chairman of the Board, the Director, President & Chief Executive Officer, the Director in charge of the human resources division, and an individual designated by the Director, Chairman of the Board (including Outside Directors), and Outside Directors must constitute at least half of its membership. The committee currently consists of six members: the Director, Chairman of the Board, three Outside Directors, the Representative Director, President & Chief Executive Officer, and the Director in charge of the human resources division.
- The committee deliberates on proposals for selection of candidates for Directors or dismissal of Directors and the levels and criteria of remuneration for Directors (excluding Audit and Supervisory Committee Members), and report to the Board of Directors about its appropriateness. In addition, the committee also deliberates on the status of formulating and administering succession planning with respect to candidates for the CEO and Outside Director, and report such matters to the Board of Directors. The Company strives to improve corporate value through its cooperation with the Suntory Group. This involves closely consulting with the parent company Suntory Holdings regarding matters such as proposals for selection of candidates for Directors or dismissal of Directors, their remuneration levels and so forth. Meanwhile, through the committee’s deliberations and reporting, the Company aims to ensure objectivity and independence from the parent company, and maximize returns for all shareholders.
- When deliberating proposals for selection of candidates for Directors or dismissal of Directors, the committee considers the following factors:
・ Qualification as a Director: whether the candidate appropriately exercises his or her duty of care and duty of loyalty when conducting business, and whether he or she has the qualities to contribute to the Company’s sustainable profit growth and improve corporate value. ・ Qualification as an Executive Director: whether he or she is familiar with the Group businesses and possesses the ability to appropriately manage the Group business. ・ Qualification as an Outside Director: whether he or she possesses the ability to utilize insight and experience gained from various specialist fields to formulate the Company’s corporate strategy and oversee the execution of business. Also, whether he or she possesses the ability to carry out functions of management oversight from the perspective of maximizing returns for all shareholders, in a manner whereby he or she maintains independence from the parent company Suntory Holdings, in addition to maintaining independence from the management team of the Company.
- The Board of Directors nominates candidates to be selected or Directors to be dismissed based on the content of the report from the committee while also considering the experience, knowledge and performance evaluation of such candidates for Directors. In addition, when proposing selection or dismissal of a candidate for Director at the General Meeting of Shareholders, the Company explains the reasons for their selection or dismissal in the notice of convocation. Please review the tables in the Notices of Convocation of the 11th Ordinary General Meeting of Shareholders.
Notice of Convocation of the 11th Ordinary General Meeting of Shareholders
- Remuneration, etc. for the Company’s Directors shall be structured at levels commensurate with their role and responsibilities in a manner that motivates them to improve the Company’s performance and corporate value and secures outstanding personnel.
Remuneration, etc. for the Executive Directors consists of fixed compensation (monthly) and performance-based compensation (annually). Remuneration, etc. for non-executive Directors shall only consist of fixed compensation (monthly). However, full-time Audit and Supervisory Committee members shall be paid, in addition to fixed compensation, a performance-based compensation (annually) as remuneration, etc. in consideration of the contribution to the Company’s performance.
The level of fixed compensation shall be set depending on responsibilities.
The performance-based compensation, for which the key performance indicator is consolidated operating income (excluding one-time income and expenses), is calculated by multiplying the amount on the performance-based compensation calculation table set according to the individual’s responsibilities by a performance coefficient, where that performance coefficient is calculated by multiplying the achievement percentage of the targeted consolidated operating income (excluding one-time income and expenses) by the benchmark consolidated operating income (excluding one-time income and expenses).
The Company chose consolidated operating income (excluding one-time income and expenses) as the key performance indicator because in the Group, importance is placed on consolidated operating income (excluding one-time income and expenses) as an indicator that reflects the results of continuous business activities and because it will incentivize the recipients to improve the Company’s performance and corporate value. Note that the Company has not disclosed the targets and actual results of consolidated operating income (excluding one-time income and expenses) for fiscal 2019, but the forecast and actual results for consolidated operating income, which form the bases of those amounts, are \110,000 million and 113,948 million, respectively.
In addition, the Company does not have a retirement allowance system or a stock option system.
- The maximum remuneration limit for Directors (excluding Audit and Supervisory Committee Members) is an annual amount not exceeding ¥1,000 million (of which a maximum amount of ¥100 million shall be paid to Outside Directors; providing, however, not including the employee portion of salaries of Directors who are concurrently employees), which was passed by resolution at the Ordinary General Meeting of Shareholders held on March 27, 2015. The maximum remuneration limit for Audit and Supervisory Committee Members is an annual amount not exceeding ¥150 million, which was passed by resolution at said Ordinary General Meeting of Shareholders. Note that at the conclusion of said Ordinary General Meeting of Shareholders, the number of Directors (excluding Audit and Supervisory Committee Members) was eight (including one Outside Director) and the number of Directors serving on the Audit and Supervisory Committee was three (including two Outside Directors).
- During the period from the date following the 10th Ordinary General Meeting of Shareholders until April 1, 2020, the committee meeting was held seven times during which deliberations encompassed matters such as qualities desired of the CEO and Outside Directors along with the status of formulating and administering succession planning, proposals for Director candidates, and levels and criteria of remuneration for Directors.
- The human resources division selects candidates for senior management including the prospective CEO and conducts systematic training for them. Furthermore, the division reports on the status of training and future training plans to the Board of Directors, and ensures sustainability of the management structure.
11. Independent Outside Directors
- The Company believes that an Outside Director must be independent from the management team of the Company and the parent company Suntory Holdings in order for him or her to fulfill the duties of an Outside Director. Accordingly, the Company views Outside Directors as lacking independence if they fall under one or more of the categories below.
・ The relevant Outside Director is currently or has in the past (within the last ten years) been an executive officer of the Company, its subsidiaries, parent company or fellow subsidiaries, or a non-executive director of the parent company. ・ A close relative (of first or second degree) of the relevant Outside Director is currently or has in the past (within the last ten years) been a key business executive of the Company, its subsidiaries, parent company or fellow subsidiaries, or a non-executive director of the parent company. ・ A company where the relevant Outside Director currently serves as an executive officer has transactions with the Company, its subsidiaries, parent company or fellow subsidiaries and the monetary amount of such transactions was greater than 2% of consolidated revenue for any of the company where the relevant Outside Director serves, the Group or the Suntory Group in the past three business years. ・ The relevant Outside Director has, as an expert or consultant in the field of law, accounting, or tax, received remuneration of over ¥10 million directly from the Company, its subsidiaries, parent company or fellow subsidiaries in the past three business years. This excludes remuneration as a Director of the Company and remuneration paid to the organization or business to which the relevant Outside Director belongs. ・ A nonprofit organization of which the relevant Outside Director is an executive officer has received donations from the Company, its subsidiaries, parent company or fellow subsidiaries of over ¥10 million and this amount exceeded 2% of the relevant organization’ s total business income in the past three business years.
- At present, three of the Company’s nine Directors are Outside Directors, and all Outside Directors of the Company do not fall into the categories listed in (1) and are viewed as independent from the management team of the Company and from its parent company as well. In addition, the Company has reported to the Tokyo Stock Exchange that all of the three Outside Directors as independent officers.
- The Company recognizes the usefulness of Independent Outside Directors, and judges them to be beneficial for enhancing corporate governance by stimulating discussions at the board meetings through their questions and opinions, by enabling appropriate decision-making and oversight through the provision of their perspectives from a variety of viewpoints, and by safeguarding the interests of shareholders other than the parent company Suntory Holdings. The Company will continually strive to ensure that the Independent Outside Directors comprise more than one third of the Company’s Directors.
- The Company believes that if Outside Directors concurrently serve as Directors or officers of other firms, the number of such posts he/she holds should be suitably limited to such that enables the individual to devote the necessary time and effort to discharge his/her duties and responsibilities as a Director of the Company appropriately.
The Company will disclose important concurrent positions in the attached Business Report in the Notice of Convocation of the Ordinary General Meeting of Shareholders.
12. Audit and Supervisory Committee and Audit and Supervisory Committee Members
- With the aim of improving the effectiveness of auditing and supervisory functions through the auditing performed by Audit and Supervisory Committee Members, who have the right to vote at board meetings, as well as improving the effectiveness of internal controls through the implementation of auditing that utilizes the internal audit division, the Company has chosen to be incorporated as a company with an Audit and Supervisory Committee for its corporate governance structure.
- Audit and Supervisory Committee Members who serve as Outside Directors constitute a majority of the committee’s members. The Audit and Supervisory Committee performs audits on Directors’ performance of duties and other general performance of duties relating to the Group’s management, in accordance with the internal control system.
- In order to strengthen the auditing and supervisory functions of the Audit and Supervisory Committee, the Company collects information from Directors (excluding Audit and Supervisory Committee Members) and shares information at important meetings. Also, with the aim of ensuring ample cooperation between the internal audit division and the Audit and Supervisory Committee, the Company has a policy of selecting one full-time Audit and Supervisory Committee Member. At present, the Company has selected Kozo Chiji as the full-time Audit and Supervisory Committee Member. He has the experience of having been engaged in the management of Suntory Group companies, especially in the area of finance and accounting as Managing Executive Officer and Chief Operating Officer, finance & accounting division of Suntory Holdings until March 2016 and possesses a considerable amount of expertise related to finance and accounting.
- In 2019, thirteen meetings of the Audit and Supervisory Committee were held. The main items of agenda at the Audit and Supervisory Committee meetings were formulation of audit implementation plans, discussion of important audit items, status on establishment and operation of internal control systems, evaluation of the Accounting Auditor, preliminary discussion on agenda items of the Board of Directors meetings, and so forth.
- The Company has established the Group Audit Committee whose membership consists of Audit and Supervisory Committee Members, officers in charge of the corporate strategy division, and officers in charge of the administration division. We will establish an environment conducive to collecting information and auditing by facilitating communication with the audit division, managing Directors and executive officers.
- The full-time Audit and Supervisory Committee Member attends meetings of the Risk Management Committee, Quality Assurance Committee, Sustainability Committee and other important meetings, and strives to collect information and establishes an audit environment.
13. Accounting Auditor
- The Company has a policy of selecting as its Accounting Auditor an audit corporation which is able to use a network of member firms that operates in many countries and regions and can conduct high-quality audits. At present, the Company has selected Deloitte Touche Tohmatsu LLC as its Accounting Auditor. The Accounting Auditor provides advice and instructions to the Company from a third-party standpoint regarding the appropriateness and legal compliance of the Company’s accounts and related internal control systems.
- The Company ensures that the Accounting Auditor has ample time to prepare a high-quality audit, and that the auditor is able to have direct discussions with the Company’s management team as well as the cooperation of the Audit and Supervisory Committee and the internal audit division. For details, please refer to the Company’s internal control system basic policy.
> Basic Policy on Establishing Internal Control Systems
- The Audit and Supervisory Committee formulates criteria for evaluation and selection of the Accounting Auditor. During the process for reselecting the Accounting Auditor, in accordance with these criteria, Audit and Supervisory Committee confirms the Accounting Auditor’s audit quality, appropriateness of remuneration level, independence, and expertise, through reports submitted by the accounting division and Accounting Auditor, and makes a decision on the selection after comprehensively considering those results. The Audit and Supervisory Committee has established the “Policy Regarding Decisions of Dismissal or Non-reappointment of Accounting Auditor.” These decision policy is set forth below.
If the Company’s Audit and Supervisory Committee deems that any circumstance stipulated in any item of Article 340, Paragraph 1 of the Companies Act of Japan applies to the Accounting Auditor, the Accounting Auditor will be dismissed based on the unanimous approval of all Audit and Supervisory Committee Members. In such situations, an Audit and Supervisory Committee Member selected by the Committee shall report to the first General Meeting of Shareholders convened after the dismissal both the fact of the dismissal and the reasons for the dismissal.
The Company’s Audit and Supervisory Committee shall, if it is recognized that on consideration of the Accounting Auditor’s performance of their duties and the Company’s audit system etc. there is a need for a change in Accounting Auditor, decide on the content of a proposal to submit to the general meeting of shareholders regarding the dismissal or the non-reappointment of the Accounting Auditor.
- In 2020, the Audit and Supervisory Committee received reports from the accounting division and Accounting Auditor regarding the auditing structure and activities of the Accounting Auditor in line with the criteria for evaluation and selection of the Accounting Auditor. It evaluated the Accounting Auditor’s audit quality and appropriateness of remuneration level, and confirmed their independence and expertise. As a result of this evaluation, the Audit and Supervisory Committee decided that the Accounting Auditor would be reselected for fiscal 2020.
14. Shares owned by the Group
- The Group owns shares of some of its counterparties as cross-shareholdings to strengthen business relationships. When looking to newly acquire shares of counterparties, the finance division and any departments (or companies) controlling transactions will give consideration to the current and future profitability of the target company. Moreover, the judgment of whether or not it is appropriate to acquire the aforementioned shares will be made from the viewpoint of whether or not the strengthening of business relationship with the target company will contribute to the maintenance and improvement of the Group’s corporate value.
- With respect to the shares of counterparties owned by the Group, the Company’s finance division performs an annual examination of each of the relevant securities, whereby it confirms with any departments (or companies) that are controlling transactions with said counterparties about the status of transactions etc. including the initial purpose of acquiring the shares, the current amount of business transactions and the nature of the business transactions. If there are shares the ownership of which does not match the initial purpose of the share acquisition, the ownership of these shares will be reduced by sale etc. Inspections are carried out in the board meeting once a year about shares of counterparties owned by the Group, detailing such securities, the purpose and the rationale of their holdings.
- With regard to exercising its voting rights on the cross-shareholdings, the Group exercises such voting rights appropriately based on a judgment on whether the contents of the proposal will maintain and improve the corporate value of the Group, and add shareholder value. The Group arrives at such judgment by arranging for any departments (or companies) controlling transactions to hold discussions with target company and for specialist departments such as the finance division or the legal affairs division to carry out verification. The Group will not exercise voting rights in the affirmative for proposals that impair the Group’s corporate value or shareholders value regardless of whether they are company proposals or shareholder proposals.
15. Transactions with the Suntory Group
- Transactions between the Suntory Group including Suntory Holdings (excluding the transactions within the Group) are examined beforehand by the departments conducting the transactions, and as necessary by the Company’s legal affairs division and accounting division to confirm the necessity of transactions, and the appropriateness of their terms and conditions, and decision-making process, taking into consideration the perspective of independence from Suntory Holdings. The decisions regarding transactions deemed to be particularly important are taken after sufficient deliberation by the Board of Directors including several Independent Outside Directors in respect to the necessity and appropriateness of the said transactions. Meanwhile upon carrying out a transaction deemed to be particularly important, the status of such transaction is reported to the Board of Directors and is subject to confirmation thereof. In regard to a transaction with the Suntory Group that is scheduled to be conducted in fiscal 2020, it was deliberated upon at a board meeting and approved after being deemed necessary and appropriate.
- In addition to deliberation beforehand, as necessary the legal affairs division, accounting division, internal audit division, and the Board of Directors conduct a post-transaction check on details of the transaction and whether it was based on the contents of the deliberation. Also, the Audit and Supervisory Committee conducts an audit to ensure the soundness and appropriateness of the transaction with the Suntory Group.
16. Transactions with the Directors of the Company
- In the event of a transaction involving conflict of interest between the Company and its Directors, prior to executing such transaction, the Board of Directors and Audit and Supervisory Committee are to make a decision upon deliberating the necessity of the transaction and the appropriateness of its terms and conditions, and decision-making process. Subsequently a post-transaction check is to be conducted.
17. Internal controls and risk management
- With a basic approach regarding internal control systems having been established by the Board of Directors, the Company will strive to ensure that its business operations are appropriately carried out in accordance with such policy.
- Premised on shared aspirations embodied by the Suntory Group’s corporate philosophy of “To Create Harmony with People and Nature,” the Group shall stand committed to respecting the rules of civil society and placing utmost importance on the organization and corporate culture that prioritize compliance on the basis of the Group’s awareness of itself as a global corporate citizen. Accordingly, each and every one of the Directors, Executive Officers, employees and others of the Group shall make decisions for the organization and carry out business activities in line with social ethics, commensurate with the Group’s position as a corporate citizen.
- In order to implement the corporate philosophy mentioned above, all Directors, Executive Officers, employees and others of the Group shall maintain the standard of business conduct that involve complying with laws and regulations and social ethics based on the Code of Business Ethics of the Suntory Group.
- The Company has established the Risk Management Committee, the Quality Assurance Committee, and the Sustainability Committee. The Risk Management Committee takes on the role of promoting the risk management activities of the entire Group. The Committee identifies the Group’s risks, designs countermeasures for these risks, and verifies the progress of responding to these risks. The Quality Assurance Committee is in charge of promoting quality assurance activities for the entire Group. The Committee identifies issues pertaining to the Group in terms of quality assurance, works to develop countermeasures, and confirms the progress of responding to such quality assurance issues. The Sustainability Committee is responsible for promoting sustainability management of the entire Group, and will formulate and promote strategies that contribute to sustainable development of society and business.
- The Group has established an internal audit division which conducts audits of the Group to ensure business operations are being conducted in an appropriate manner. The internal audit division has a number of personnel transferred from the finance & accounting division who possess insight in finance and accounting.
- The status of compliance with the Group’s aforementioned code of conduct is reported to the Board of Directors on a regular basis upon having administered the questionnaire survey on corporate culture and workplace environment, including the status of compliance with the code of conduct. In 2019, the Company again distributed to the domestic employees a questionnaire survey on corporate culture and workplace environment, including the status of compliance with this code of conduct, and reported the findings of this survey to the Board of Directors.
- The Company has established three channels for whistleblowing as follows.
1. Division in charge of compliance (via telephone or email) 2. Through external channels including a law firm and other providers of services to receive whistleblower disclosures (via telephone or email) 3. Through the Audit and Supervisory Committee (via email)
18. Management of corporate pension fund
- The Company, together with Suntory Holdings, has adopted the Suntory Pension Fund.
- A board of representatives, board of governors, and asset management committee have been set up for the Suntory Pension Fund. The board of representatives carries out reviews of the appropriateness and rationale of the investment products selected by the asset management committee, and makes the final decision on what investment products are to be invested in. The asset management committee selects the investment products and checks the status of the asset management portfolio.
- The composition of membership of the board of representatives and asset management committee includes persons possessing expert knowledge relating to the management of reserve funds, and this includes those who are or were responsible for the finance division of the Company and Suntory Holdings.
- The investment products purchased by the Suntory Pension Fund are selected from the perspective of securing income on a long-term and stable basis. After such products have been purchased, the asset management status of investment products is checked each month and a report concerning the administration and asset management of investment products is received from the institution managing the investment products each quarter.
The chart of the SBF’s corporate governance system