Corporate Governance

Corporate Governance System

The Company has adopted the governance structure of a Company with an Audit and Supervisory Committee and has set the percentage for outside directors on its Board of Directors at one-third or more.
The Board of Directors meets regularly every month as a management-related decision-making body to formulate management policy and strategy for the entire Group and supervise the execution of its business, and consists of eight directors who are not members of the Audit and Supervisory Committee (including two outside directors) and three directors who are members of the Audit and Supervisory Committee (including two outside directors).In addition, one standing Audit and Supervisory Committee member is selected by resolution of the Audit and Supervisory Committee.Two outside directors with management experience at listed companies are appointed as outside directors who are not members of the Audit and Supervisory Committee, and one lawyer and one certified public accountant are appointed as outside directors who are members of the Audit and Supervisory Committee.
In addition, we are seeking to further enhance corporate governance by using the executive officer system introduced in July 2019 to strengthen the supervisory function of the Board of Directors through a progressive separation of management and supervision from business execution.
The Audit and Supervisory Committee supervises and audits the execution of duties by directors (excluding directors who are Audit and Supervisory Committee members) fairly through the active exchange of opinions between directors with sufficient internal knowledge and outside directors with extensive experience and knowledge from outside the company.
Additionally, Hoshizaki has established a Compliance and Risk Management Committee comprising directors and other relevant personnel to promote risk management to the Group and more sharing of information, as well as to make decisions regarding quick responses to risks and measures to avoid and mitigate their manifestation.
In addition, we voluntarily established the Nomination and Compensation Committee on January 20, 2022, with the purposes of strengthening the fairness, transparency, and objectivity of procedures related to the nomination and compensation of directors and executive officers, and further enhancing the corporate governance system. The Chairman of the Committee is an independent outside director, and the Committee members include the President-director, the Board Chairperson and all other independent outside directors, with the majority being independent outside directors.

Reason for selecting the corporate governance structure

Hoshizaki has adopted the governance structure of a Company with an Audit and Supervisory Committee in the belief that granting voting rights at the meetings of the Board of Directors to several highly independent outside Directors who are Audit & Supervisory Committee Members will strengthen the supervisory function over the Board of Directors as well as further enhance its corporate governance.

Members of each organization

(Note) ○ indicates membership.

Corporate governance structure

Status of Outside Directors

Hoshizaki appoints corporate managers with abundant experience and deep insight in overall business management as Directors (excluding Directors who are Audit & Supervisory Committee Members), and talent capable of leveraging their perspectives based on their high level of expertise and abundant experience and knowledge as attorney-at-law and certified public accountant, in the company’s audits and monitoring its management from an objective and neutral standpoint as outside Directors who are Audit & Supervisory Committee Members. The outside Directors are independent of the members of management involved in business execution and are designated and notified as independent officers to the Tokyo Stock Exchange and the Nagoya Stock Exchange, as they are deemed to have no risk of conflicts of interest with general shareholders.

Based on the independence criteria of the Tokyo Stock Exchange forming Hoshizaki’s independence criteria, Hoshizaki selects people who are expected to enhance the Board of Directors’ supervisory function and to contribute to lively discussions at the Board as its outside Directors.

The two outside Directors who are Audit & Supervisory Committee Members attend various meetings including those of the Board of Directors, the Audit & Supervisory Committee, and the Compliance and Risk Management Committee. They also share information and coordinate with the standing Audit & Supervisory Committee Member and the internal control divisions, while periodically holding meetings of the Audit & Supervisory Committee with the Internal Audit Office and the Accounting Auditor to enhance mutual cooperation.

Evaluation of the Effectiveness of the Board of Directors

Hoshizaki has taken, throughout FY2021, measures to address various issues identified in the previous FY during the process of an effectiveness evaluation of the entire Board of Directors. We also conducted a 25-question questionnaire to all 10 directors (3 of them are independent outside directors) including directors who are also the Audit and Supervisory Committee members. The questionnaire covered the following six categories: (1) Effectiveness of discussion and examination of the board of directors, (2) Effectiveness of the supervisory function of the board of directors, (3) Whether the board of directors serves as a sound place for discussing sustainable growth of the Company, (4) Effectiveness of the environmental improvement status of the board of directors, (5) Effectiveness of responses to shareholders and stakeholders, and (6) Effectiveness regarding the composition of the board of directors.
As a result of deliberation by the Board of Directors based on the results of the above, it was determined that the effectiveness of the Board of Directors in FY2021 had been ensured. We will address the issues identified through this effectiveness evaluation for future improvement.

Status of Audits

Status of audits of the Audit & Supervisory Committee

Hoshizaki is audited via an Audit and Supervisory Committee comprised of three directors who are members of the Audit and Supervisory Committee (two of whom are outside directors).Outside Director Shigeru Motomatsu, who is a member of the Audit and Supervisory Committee, is a qualified attorney-at-law and has a wealth of experience and knowledge in legal affairs.
Outside Director Satoe Tsuge, who is also a member of the Audit and Supervisory Committee, is a certified public accountant and has extensive experience and knowledge in finance and accounting.
The Audit and Supervisory Committee exchanges information and collaborates on compliance and risk management through meetings of the Board of Directors and the Compliance and Risk Management Committee, and exchanges information and collaborates with the Internal Audit Office and the Accounting Auditor as necessary with respect to the results of audits of internal controls concerning financial reporting to ensure and improve the effectiveness of internal controls.
Furthermore, Hoshizaki appoints standing Audit and Supervisory Committee members by resolution of the Audit and Supervisory Committee, and these standing Audit and Supervisory Committee members attend important meetings, receive reports from directors and employees on matters related to the execution of their duties, request explanations as necessary, inspect important approval documents, etc., and investigate the status of operations and assets at the head office and major business locations.
With respect to subsidiaries, in order to prevent the spread of COVID-19, in accordance with national and prefectural government policies and requests, committee members are endeavoring to use information and communications technology and other methods that do not involve direct visits or face-to-face meetings to exchange information and come to mutual understanding with subsidiary directors, corporate auditors and other personnel, but where appropriate, they visit subsidiaries to investigate the actual state of their business and receive business reports.
The following table shows information on Audit and Supervisory Committee meetings held and attendance of individual Audit and Supervisory Committee members during the relevant fiscal year.

Status of internal audits

Hoshizaki has established an Internal Audit Office as an organization that audits the entire Group and reports directly to the President.

The Internal Audit Office enhances mutual cooperation with the Audit & Supervisory Committee and the Accounting Auditor by exchanging information, as necessary, including regular meetings on the yearly schedule and business reports, in order to ensure and improve the effectiveness of internal controls.

Compensation for Directors

Policy, etc., Relating to Determining the Amount of Remuneration, etc., for Executives or the Methods for its Calculation

At the Board of Directors meeting on January 20, 2022, Hoshizaki resolved to reform the compensation system for directors (excluding directors who are Audit and Supervisory Committee members); the director compensation in FY2022 onward will be determined after consultation with, and reporting from, the voluntary "Nomination and Compensation Committee” chaired by an independent outside director.
The Nomination and Compensation Committee held a deliberation in its March 2022 meeting on the compensation of directors for FY2022.

It was also determined, regarding the "Basic Policy on Director/Officer Compensation” that details compensation items for individual directors/officers, the ratio will generally be of 7:2:1, respectively for basic (fixed) compensation, variable (performance-linked) compensation, and transfer-restricted stock (non-monetary) compensation. The ratio was decided based on four principles: (1) the compensation should contribute to the sustainable growth of the Company and the enhancement of corporate value, (2) the compensation system should be transparent and fair, as well as accountable to the relevant stakeholders including shareholders and employees, (3) the compensation should be linked to corporate performance and aimed at company-wide optimization, and (4) the compensation level should be appropriate to secure an excellent management team. The details of the decided policy on compensation items for individual directors are as below in items (a) - (e).

a. Policy on basic compensation

Hoshizaki provides to its directors/officers basic (fixed) compensation every month in money and at a fixed amount according to their position, for their qualities and abilities required to fulfill the responsibilities as a director/officer.

b. Policy on variable (performance-linked) compensation, etc.

Hoshizaki's variable (performance-linked) compensation aims to be corporate-optimal and to promote the achievement of performance targets and the sustainable improvement of corporate value. Three performance indicators, (1) consolidated operating profit for the previous FY, (2) financial and non-financial targets according to the scope of responsibility of directors, and (3) other qualitative assessments that are set to be consistent with the medium-term management targets, and based on the achievement level, the variable compensation is paid in money. Hoshizaki has adopted a scheme for “fixation of variable compensation”, and the portion is paid every month in a monetary form based on the degree of achievement of (1) to (3).

c. Policy on non-monetary compensation, etc.

Hoshizaki’s non-monetary compensation is determined and provided at a certain timing every year as transfer-restricted stock compensation based on the position and role of directors, with the purpose of providing incentives for sustainable corporate value improvement and sharing of shareholder value.

d. Policy on the ratio of compensation, etc.

Hoshizaki’s compensation for its directors (excluding those who are Audit and Supervisory Committee members as well as those who are outside directors) consists of three components of basic (fixed) compensation, variable (performance-linked) compensation, and transfer-restricted stock (non-monetary) compensation, generally at the ratio of 7: 2:1. Directors who are Audit and Supervisory Committee members, as well as outside directors, are paid only basic (fixed) compensation.

e. Policy on delegation of decisions regarding compensation etc.

Individual compensation is decided by the president and representative director based on the rules, after deliberation by the voluntary Nomination and Compensation Committee (including outside directors), in order to strengthen fairness, transparency and objectivity, and to enhance corporate governance.

Total Amount of Remuneration, etc., by Executive Type, Total Amount of Remuneration, etc., by Type, and Number of Eligible Executives

(FY2021 Actual)

Dialogue with Shareholders

Hoshizaki is aware of the importance of proactively holding dialogue with its shareholders and investors, so that their opinions and requests are reflected in management, encouraging corporate growth toward achieving sustained growth and the long-term improvement of corporate value.

Basic IR policy and method of disclosure

The Hoshizaki Group engages in IR activities to inform shareholders and investors of information necessary for their investment decisions in a fair and timely manner. The information published by the Hoshizaki Group is disclosed using methods such as registration with TDnet* and posting on the Hoshizaki Group's IR website. We strive for fairness in the information we publish and even also disclose information that does not fall under the Timely Disclosure Rules using appropriate methods aligned with their intent. Furthermore, in light of the increase in the ratio of non-Japanese shareholders, since the second quarter of the scal year ending December 2019, we have been disclosing nancial statements, nancial brieng materials (summarized versions), convocation notices in English and have also created an English-language website.

Communication with institutional and individual investors

Hoshizaki holds quarterly financial results briefings as an opportunity for institutional investors to hear an explanation of our performance (actual and forecasts) and management strategies, of which the second and fourth quarters are directly from the president (who is also representative director). In addition, management and IR representatives hold individual meetings, and also attend various briefings organized by securities companies. Due to the spread of COVID-19, from March 2020, financial results briefings and individual meetings have in principle been held via telephone or the web.