Corporate Governance

We continue our efforts to further improve the transparency and supervisory function of management for stronger corporate governance in order to realize our corporate philosophy.

 

Basic Policies

In strengthening our corporate governance, our basic policies are to protect shareholder rights and ensure their equal treatment, cooperate appropriately with non-shareholder stakeholders, ensure proper information disclosure and transparency, execute the duties of the Board of Directors, and engage in dialogue with shareholders.

Corporate Governance Framework

Fuji Electric’s corporate governance framework consists of the Board of Directors, which performs the functions of management supervision and making important decisions, and the Audit & Supervisory Board, which is in charge of the management audit function. As a company employing the corporate auditor system, Fuji Electric’s Audit & Supervisory Board suitably undertakes audits of the Company’s Directors and Executive Officers and guarantees objectivity and neutrality.

To clarify the roles of management and execution, the Company has introduced an executive officer system in an effort to clarify the responsibilities of each business and improve the efficiency of business execution. The Company is endeavoring to build an effective corporate governance framework, by putting in place the Executive Committee, which deliberates and reports important management issues as an advisory organ for the Chairman and CEO and the President and COO, as well as other committees tasked with planning and promoting key business strategy issues and key external issues, such as regulatory compliance.

Corporate Governance Framework

(April 1, 2022)

 

Nomination and Remuneration Committee

Fuji Electric has established the Nomination and Remuneration Committee as the advisory body for the Board of Directors in order to enhance the Company’s corporate governance by reinforcing the fairness, transparency, and objectivity of procedures concerning the nomination of and remuneration for Directors and Audit & Supervisory Board Members.

The committee comprises at least three Directors as members, the majority of which are elected from among the Company’s Outside Directors. The chairman is elected from among the Outside Directors that sit on the committee as members.

In fiscal 2020, the Nomination and Remuneration Committee convened on two occasions to deliberate the matters and reported the results to the Board of Directors.

Appointment of Directors and Audit & Supervisory Board Members

As the policy of nominating candidates for Directors and Audit & Supervisory Board Members, the candidates are determined by considering the balance of knowledge and experience of the entire Board of Directors, diversity, and other factors

Candidates for Standing Directors are determined by considering the knowledge and experience required to implement the company’s management policies. In order to strengthen Fuji Electric’s management supervision function and ensure that important decision-making is appropriate and reasonable, candidates for Outside Directors are determined by comprehensively considering the knowledge and experience necessary for multifaceted management decision-making, including management experience at other companies, their understanding of Fuji Electric’s management, and independence from the company.

In light of our management policies and business characteristics, including “contributing to the creation of a sustainable society through our energy and environment businesses,” we have defined the knowledge and experience required for our Board of Directors in seven areas: corporate management; finance and accounting; global affairs; environment and society; R&D, technology, manufacturing, and DX; corporate governance, legal matters, and risks; and marketing and industry. Our expectations for Directors for each of these areas are as shown in the table below.

Each Director’s term of office is one year so that we maintain the management framework capable of making clear the responsibilities of management in each fiscal year and of responding quickly to changes in the business environment.

Persons familiar with the Company’s operations in general who also possess expert knowledge and experience are appointed as Standing Audit & Supervisory Board Members.
Persons equipped with the expert knowledge and experience required to undertake audits who also have an understanding of Fuji Electric’s management are appointed as Outside Audit & Supervisory Board Members. For instance, corporate managers, persons with experience as a standing auditor of a listed company, or legal experts.

Independence Criteria for Outside Officers

Fuji Electric judges the applicable candidate to be fully independent from the Company when he/she does not fall under any of the conditions listed below, in addition to the criteria for independence stipulated by domestic financial exchanges, including the Tokyo Stock Exchange.

(1) Major shareholder

A major shareholder of the Company (who owns 10% or more of the voting rights) or its executor of business.

(2) Major business partner

A business partner (consultants such as lawyers, certified public accountants, and tax accountants, as well as consulting firms such as law firms, audit firms, and tax firms) or a person executing its business whose transactions with the Company exceed 2% of the annual consolidated net sales of the Company or the other entity in the past three fiscal years.

(3) Major lender, etc.

A financial institution, other major creditor, or a person executing the business of these institutions that is indispensable for the Company’s funding and on which the Company depends to the extent that it is irreplaceable.

(4) Accounting Auditor

A certified public accountant who belongs to an auditing firm that serves as the Accounting Auditor of the Company or employee, etc. of such auditing firm.

(5) Donee

A person executing the business of an organization which receives a donation exceeding 10 million yen per year that is greater than 2% of its annual income from the Company for the past three fiscal years.

Training Policy for Directors and Audit & Supervisory Board Members

Before taking office, Standing Officers undergo compliance training, which also encompasses legal and taxation matters. They are also provided opportunities after taking office to acquire necessary knowledge on an ongoing basis.

Before taking office, Outside Officers are briefed on the state of the Company and the roles they are expected to perform. After taking office, they have the chance to deepen their understanding of the Company’s business by attending internal technology presentations and inspecting production sites.

Mr. Takaoka and Ms. Katsuta, Outside Audit & Supervisory Board Members, visiting the Kawasaki Factory

Activities of Outside Officers in Fiscal 2020

To strengthen our management supervisory and auditing functions, and to ensure the validity and appropriateness of our important decisions, the Officers play the proper roles as stated below.

Outside Directors

Name	Status of Attendance at Board of Directors Meetings Status of Attendance at Nomination and Remuneration Committee (Meetings Attended/Meetings Held)	Main Activities
Toshihito Tamba	13/13 2/2	Board of Directors Mr. Tamba offered opinions as necessary on all areas of Fuji Electric’s management, including on the following matters, based on his professional standpoint and considerable insight as a manager of listed companies. • Formulation of a business plan taking into account changes in the market environment • Appropriate ways to carry out IR activities Nomination and Remuneration Committee Mr. Tamba led the supervisory function in appointment of candidates for Directors and Audit & Supervisory Board Members and the process of determining remunerations for Directors and Audit & Supervisory Board Members from an objective and neutral standpoint.
Naoomi Tachikawa	13/13 2/2	Board of Directors Mr. Tachikawa offered opinions as necessary on all areas of Fuji Electric’s management, including on the following matters, based on his professional standpoint and considerable insight as a manager of listed companies. • Managing the progress of management plans • Managing the progress of large-scale orders Nomination and Remuneration Committee Mr. Tachikawa carried out the supervisory function in appointment of candidates for Directors and Audit & Supervisory Board Members and the process of determining remunerations for Directors and Audit & Supervisory Board Members from an objective and neutral standpoint.
Yoshitsugu Hayashi	13/13 2/2	Board of Directors Mr. Hayashi offered opinions as necessary on all areas of Fuji Electric’s management, including on the following matters, based on his professional standpoint and considerable insight about environmental engineering, a field that is closely related to the Company’s management policies. • Initiatives aimed at reducing Fuji Electric’s environmental footprint • Appropriate ways to carry out research and development Nomination and Remuneration Committee Mr. Hayashi carried out the supervisory function in appointment of candidates for Directors and Audit & Supervisory Board Members and the process of determining remunerations for Directors and Audit & Supervisory Board Members from an objective and neutral standpoint.

Outside Audit & Supervisory Board Members

Name	Status of Attendance at Board of Directors Meetings Status of Attendance at Audit & Supervisory Board Meetings (Meetings Attended/Meetings Held)	Main Activities
Tetsuo Hiramatsu	13/13 7/7	Mr. Hiramatsu confirmed and offered opinions as necessary at meetings of the Board of Directors concerning agenda items and the status of Fuji Electric’s business activities based on his extensive experience and considerable insight as a manager at financial institutions. At meetings of the Audit & Supervisory Board, he confirmed and offered opinions on the legal compliance of the overall business activities of Fuji Electric.
Hirohiko Takaoka	9/9* 5/5*	Mr. Takaoka confirmed and offered opinions as necessary at meetings of the Board of Directors concerning agenda items and the status of Fuji Electric’s business activities based on his extensive experience and considerable insight as an experienced Full-time Audit & Supervisory Board Member, etc. of listed companies. At meetings of the Audit & Supervisory Board, he confirmed and offered opinions on the legal compliance of the overall business activities of Fuji Electric.
Yuko Katsuta	9/9* 5/5*	Ms. Katsuta confirmed and offered opinions as necessary at meetings of the Board of Directors concerning agenda items and the status of Fuji Electric’s business activities based on her expert knowledge as an attorney. At meetings of the Audit & Supervisory Board, she confirmed and offered opinions on the legal compliance of the overall business activities of Fuji Electric.

*Since Mr. Hirohiko Takaoka and Ms. Yuko Katsuta newly assumed the office of Auditor at the conclusion of the 144th Ordinary General Meeting of Shareholders held on August 6, 2020, the above status on attendance at the Board of Directors and the Audit & Supervisory Board meetings refers to those meetings held after their assumption.

Remuneration for Directors and Audit & Supervisory Board Members

Process of determining remuneration

Consulted by the Board of Directors, the Nomination and Remuneration Committee discusses policies and criteria concerning remuneration as well as the details of remuneration. The Board of Directors resolves on the policy for the final decisions respecting the details of the committee’s report that the Board of Directors has received from the Committee.

The actual decision on individual remuneration amounts is left to the discretion of President and Chairman of the Board of Directors, but within the limit resolved at the General Meeting of Shareholders and with reference to the details of the committee’s report.

Policy regarding decisions on remuneration

We have established a remuneration system and remuneration levels that are deemed appropriate for their respective duties and in accordance with shareholder mandates, giving due consideration to the aims of securing and maintaining competent personnel and providing incentives for the improvement of business performance.

We routinely verify that the system and levels are appropriate or whether they need reviewing in light of changes in the operating environment or objective external data.

Evaluation of Effectiveness of the Board of Directors

We conduct the evaluation of the effectiveness of the Board of Directors with the use of a third-party survey in order to verify whether the Board of Directors is properly fulfilling its expected roles and functions and to facilitate further improvements thereof. The results of the survey are reported to the Board of Directors, and issues that require improvement going forward are shared with everyone.

The issues that have been shared based on the results of this effectiveness evaluation are addressed in turn according to a schedule clearly defined for each, so that we continue working to enhance the functions of the Board of Directors.

Opinions, Issues Raised, and Actions as a Result of the 2019Effectiveness Evaluation of the Board of Directors

Opinions and Issues Raised	Major Initiatives in Fiscal 2020
Further discussion of the medium- to long-term issues (e.g., medium-term management plan, ESG)	Discussed the following subjects: • Each segment’s business plans and strategies • Research and development strategies
Report on dialogue with institutional investors	Reported the status of IR activities, opinions and requests from analysists and institutional investors

Internal Control System

With the aim of complying with laws and regulations, managing the risk of loss, and securing the efficiency of the execution of duties, the Fuji Electric Board of Directors has determined basic policies concerning the establishment of an internal control system as stipulated in the Companies Act of Japan, and the Company discloses those policies. Fuji Electric discloses information on the implementation of its internal control system, thereby taking steps to respond promptly and accurately to the demands placed upon the Company by society.

Main Systems Based on the Internal Control System

■Compliance system

Based on systems for ensuring that Directors and employees perform their duties in a manner that is compliant with laws and the articles of incorporation, Fuji Electric has established and promotes a compliance system in order to secure the transparency and soundness of business execution.

■Risk management system

Based on regulations and other systems pertaining to managing the risk of loss, Fuji Electric has developed an appropriate risk management system in order to manage business risks in a coordinated, systematic manner. In regard to specific cross-sectional risks, the Company determines departments to put in charge of each risk, thereby establishing a risk management system.

Audit & Supervisory Board Members and Internal Audits

■Strengthening collaboration between audit functions

We ensure the effectiveness of Fuji Electric’s audit functions by reinforcing collaboration between statutory audit functions (Audit & Supervisory Board Members, Accounting Auditors) and internal audit functions (Internal Audit Office).
We will continue to strengthen this collaboration going forward, with a particular focus on project management for large-scale projects, compliance audits, and audits at overseas subsidiaries.

Main Initiatives for Strengthening Collaboration

■Audits by the Audit & Supervisory Board Members

Audit & Supervisory Board Members conduct audits in accordance with the audit policies and duties assigned and in compliance with the standards for audits established by the Audit & Supervisory Board. They report the details and results of their audits to the Audit & Supervisory Board.
In fiscal 2020, the Audit & Supervisory Board convened seven times in total. Every meeting was attended by all of the Company’s Audit & Supervisory Board Members. During the meetings, the Audit & Supervisory Board mainly reviewed audit policies and plans, the appropriateness of auditing methods and results of the Accounting Auditors, and undertook an assessment of the Accounting Auditors. It also reported on and reviewed important matters that the Standing Audit & Supervisory Board Members communicated to the Outside Audit & Supervisory Board Members.

Main tasks

• ・Attending and offering opinions at meetings of the Board of Directors, the Executive Committee, the Compliance Promotion Committee, and other important committees
• ・Reviewing documents pertaining to important resolutions
• ・Receiving explanations on the status of operational execution from Directors and internal auditing divisions
• ・Investigating the status of operations and assets at Fuji Electric, consolidated subsidiaries in Japan and overseas, and companies undertaking M&As (done remotely as necessary)

■Internal audits

Every second year, the internal auditing divisions as bodies directly under the President perform the following audits on Fuji Electric’s business divisions and subsidiaries in accordance with internal auditing standards and annual audit plans.
A total of 34 bases were audited in fiscal 2020, and many of the audits were done remotely, particularly those of overseas bases. No risks or inadequacies with the potential to seriously affect management were discovered.

Type of Audit	Main Tasks
Organizational management	Evaluating the appropriateness of management and administration (development of regulations, approval procedures, performance management, etc.)
Risk management	Evaluating the effectiveness of risk management systems and risk response
Compliance	Checking for compliance with laws and regulations based on the Fuji Electric Compliance Program and confirming legal compliance
Business execution	Evaluating the appropriateness, efficiency, and effectiveness of business execution (booking of sales and purchases, investments, cash flow, etc.)
Accounting	Evaluating the appropriateness of cost accounting and the soundness of assets and liabilities

Policy on Cross-shareholding

Fuji Electric holds listed shares as a matter of policy in order to maintain and strengthen relations with its investee companies. We will sell these cross-shareholdings when the rationality of holding them is not recognized, and even if certain rationality is recognized, we will reduce them while paying attention to the impact on management and business. In fiscal 2020, we sold multiple listed stocks we held (as of March 31, 2021, we hold 74 listed stocks).

The Board of Directors periodically evaluates the rationality of shareholding in light of whether it is necessary to maintain and strengthen relations with the investee companies and of the comparison of capital cost and return. The details of the review are disclosed.

The voting rights that come with cross-shareholding are exercised after considering all relevant factors, including whether the proposed action will help the issuing company to establish an appropriate corporate governance framework and to increase its medium- to long-term corporate value, and what impact the action will have on Fuji Electric. We also have dialogue regarding the details of the proposal, among others, with the issuing company as necessary.