Governance
Basic views on corporate governance
Our corporate philosophy since foundation is "Inventing for your success, inventing for the future." We are striving to increase our enterprise value in the mid to long term by establishing a solid relationship with customers globally and continuously developing advanced products that contribute to the progress of society. We recognize that the efforts to enhance corporate governance are essential to meet the expectations of shareholders and all other stakeholders since higher transparency, soundness, and efficiency in management will help us achieve a more competitive edge and, ultimately, sustainable growth.
1. Corporate Governance Structure
(a) Reason why we have the corporate governance structure described in (b) below
Because of the scale of business and the number of employees we have and because of the track record of successful audits by Audit & Supervisory Board Members, we have chosen to retain the structure of a company with an audit & supervisory board. Based on the basic philosophy of corporate governance, we have taken measures to enhance transparency and sound management. For example, we have appointed Outside Directors to the Board of Directors in addition to having Outside Members on the Audit & Supervisory Board. We have also adopted the corporate governance structure described below in accordance with our basic policy on the establishment of internal control system.
(b) Corporate governance structure
Corporate Governance Structure Diagram
Directors, Board of Directors, and other executive bodies
The Board of Directors performs the duties set forth by laws and regulations and by the Articles of Incorporation, resolves on matters of importance for the Company, such as the adoption of business plans, and supervises each Director's execution of duties. The term of the office of Director is one (1) year. This allows us to ensure that Directors account for their performance in each fiscal year and that our management structure can quickly adapt to a changing business environment. A regular meeting of the Board of Directors is held once a month to make swift management decisions. If necessary, a special meeting may be held to discuss and resolve on matters of importance.
We introduced the Office of Executive Officers on September 28, 2022, with the resolution of the General Meeting of Shareholders held on the same day. The purpose of this was to: (1) enhance the Company's governance by clarifying the division of roles between the Board of Directors, which is responsible for decision-making and management oversight, and Management Meeting, which is responsible for the execution of duties, (2) enhance the decision-making and management oversight functions of the Board of Directors by having a smaller number of Board members and a higher ratio of Outside Directors, and (3) conduct the execution of duties more quickly and respond to changing business environment more promptly and flexibly by making necessary transfers and updates of authorities in order to achieve higher corporate value in a sustainable manner.
As an advisory body for the President & Chief Executive Officer that deliberates and decides on matters of importance concerning the execution of duties, we have put in place an institution called Management Meeting, which convenes once a month. The purpose is to assist proper decision-making and to build a consensus on the execution of duties. The right of Audit & Supervisory Board Members and Outside Directors to attend Management Meeting and state opinions is guaranteed under the rules of Management Meeting so that there is no lack of supervision over management decisions.
The Company has a Nomination and Compensation Committee that is tasked to advise on the following: the nomination of the President, Directors, and Executive Officers; the evaluation of individual Executive Directors and Executive Officers; making promotions and/or pay increases; declining renominations or making demotions; selecting candidates and training successors; confirming the method used for calculating the compensation of Directors and the appropriateness of the compensation. The Committee members consist of all four Outside Directors, the Director and Chairman & Executive Officer, the Director and Vice Chairman & Executive Officer, and the Representative Director and President & Chief Executive Officer. The chair of the Committee is selected from the Outside Directors. Because all our Outside Directors are independent Outside Directors, the majority of the members serving on the Nomination and Compensation Committee are independent Outside Directors. The Nomination and Compensation Committee convened seven times in the previous fiscal year (the fiscal year ended June 30, 2024), and on each occasion all of the Committee members were in attendance.
Audit & Supervisory Board and its members
The Audit & Supervisory Board is currently comprised of four Members, including two Outside Members. In addition to its duties under law and the Articles of Incorporation of the Company, the Audit & Supervisory Board is responsible for establishing its audit policy, audit plans, and audit procedures, for reporting the status of audit by each member, and for forming an opinion from the result of audit. A regular meeting is held once a month and a special meeting may be held as necessary.
Skill Matrix
In light of our corporate strategies, we believe our Directors and Audit & Supervisory Board Members should possess knowledge, experience, and skills in the areas of "corporate management", "R&D and production", "sales", "global business", "human capital and sustainability", "finance and accounting", and "legal affairs and risk management". The specific areas of knowledge, experience, and skills we expect from each Director and the Audit & Supervisory Board Member are summarized in the matrix below. Please note, however, that these are not necessarily all the areas in which they possess knowledge, experience, and skills.
| Corporate management | R&D and production | Sales | Global business | Human capital and sustainability | Finance and accounting | Legal affairs and risk management | ||
|---|---|---|---|---|---|---|---|---|
| Directors | Tetsuya Sendoda | ● | ● | ● | ||||
| Osamu Okabayashi | ● | ● | ● | ● | ||||
| Haruhiko Kusunose | ● | ● | ● | ● | ||||
| Atsushi Tajima | ● | ● | ||||||
| Koji Mihara1 | ● | ● | ● | ● | ||||
| Yoshiko Iwata1 | ● | ● | ● | ● | ||||
| Miyuki Ishiguro1 | ● | ● | ||||||
| Takashi Yuri1 | ● | ● | ● | ● | ||||
| Audit and Supervisory Board Members | Masakatsu Asano | ● | ● | |||||
| Koichi Asami | ● | ● | ● | |||||
| Eiichi Izumo2 | ● | ● | ||||||
| Ayumi Michi2 | ● | ● | ||||||
- 1.Independent outside director
- 2.Independent outside member of the audit and supervisory board
Independence Criteria for Outside Directors and Outside Audit & Supervisory Board Members
We judge independence based on the following criteria when nominating a candidate for Outside Director or Outside Audit & Supervisory Board Member:
- 1Relationship with Lasertec Corporation
The candidate is not serving or has no history of serving as an executive (executive director or employee) of Lasertec or its affiliates in the last 10 years.
- 2Relationship with major shareholder
The candidate is not a major shareholder owning 10% or more voting shares (or, if the major shareholder is a company, not an executive of it).
- 3Relationship with major trading partner
The candidate is not an executive of a major trading partner of Lasertec or any of those listed below and has no history of serving as an executive of a major trading partner of Lasertec or any of those listed below in the last 10 years.
- A major trading partner of Lasertec: a company with whom we recorded a volume of trade worth 5% or more of our consolidated sales in each of the last 3 years.
- A company whose major trading partner is Lasertec: a company whose trading volume with Lasertec is worth 5% or more of its consolidated sales in each of the last 3 years.
- A major creditor of Lasertec: a financial institution whose average annual lending to Lasertec is more than 2% of our total assets.
- 4Relationship with professional service provider (attorney, CPA, consultant, and others)
The candidate is not an attorney, certified public accountant, consultant, or any other professional who earns 10 million yen or more from us annually as monetary or any other compensation, except for the compensation for serving as a member of the Board of Lasertec.
- 5Relationship with financial auditor
The candidate is not a representative partner or partner of our financial auditor.
- 6Relationship with organization receiving donation or assistance from us
The candidate is not an officer or employee of an organization that receives more than 10 million yen from us annually in donation or assistance.
- 7Kinship
The candidate is not a spouse or a relative within the second degree of kinship of an executive (excluding an insignificant one) of Lasertec or its affiliates.
Liability Limitation Agreement
In compliance with Article 427 Paragraph 1 of the Companies Act of Japan and the Articles of Incorporation, the Company has entered into a liability limitation agreement with each Outside Director and with each Outside Audit & Supervisory Board Member to limit their liability for damages under Article 423 Paragraph 1 of the Companies Act. In this agreement, the limit of liability is set at the minimum amount required by law for Outside Directors and Outside Audit & Supervisory Board Members who perform duties in good faith and without gross negligence.
(c) Basic policy on the establishment of internal control system and the status of establishment
I. Internal control system that ensures proper conduct of business
Pursuant to the Companies Act of Japan and the Ordinance for Enforcement of Companies Act, we establish internal controls to ensure that the execution of duties by Directors complies with laws, regulations, and the Articles of Incorporation and to ensure that the Company executes business properly as a stock corporation.
- 1The Board of Directors discusses matters of importance regarding the Company's management at its monthly meetings and special meetings in accordance with laws, regulations, and the Articles of Incorporation.
- 2Audit & Supervisory Board Members and Outside Directors are guaranteed the right to attend Management Meeting, an advisory body for the President & Chief Executive Officer, and state opinions on items on the agenda under our Management Meeting rules.
- 3In addition to audits mandated by laws, the department in charge of internal auditing conducts internal audits pursuant to our internal audit rules and reports its findings directly to the President & Chief Executive Officer. If the findings call for corrective actions, the President & Chief Executive Officer directs the manager of the relevant department(s) to take the actions and report the result to him.
- 4Pursuant to our own compliance rules, we take the following measures for overall compliance management: designate an officer in charge of compliance and risk management matters; clearly state our basic compliance policy; elucidate the basic obligations of Directors and Others and employees upon their encounter with compliance issues; establish the principles and code of conduct that Directors and Others and employees should follow as a guideline of fair judgment and action when performing duties; establish a systematic compliance management structure; and enhance our whistleblower protection system. We will make sure that these measures are implemented properly through the activities of the Risk Management & Compliance Committee.
- 5We plan and provide training for employees about the laws, internal rules, and others that they should abide by to keep them well informed of compliance.
- 6We keep updating our internal controls on matters related directly or indirectly to accounting and financial reporting to prevent mistakes and misconduct that may jeopardize the integrity of our financial reports.
- 1We keep proper records of decision-making and reporting related to Directors' execution of duties by taking the minutes of the Board of Directors meetings and Management Meeting in accordance with our rules on these meetings and archiving them for a legally or internally mandated period. We keep records of other decision-making by documenting them on our internal forms and archiving them for an internally mandated period.
- 2We prepare, maintain, store, and dispose of business documents in accordance with our document administration rules. We keep documents in good order and make them available for review by Directors and Audit & Supervisory Board Members and for auditing by the Financial Auditor.
- 3We protect important information assets such as documents, digital records, and information systems in accordance with our information security rules.
- 1At the time of business planning and budget making, we properly assess the risks that may be incurred in operation. At monthly Board of Directors meetings and Management Meeting, we discuss and decide on appropriate actions as necessary. We invest financial resources properly in accordance with our accounting rules and report the status of investment to the Board of Directors regularly.
- 2In accordance with our Group Risk Management Policy and the Company's risk management rules, we establish a Risk Management & Compliance Committee to engage in group-wide risk management. Resolutions adopted by the Risk Management & Compliance Committee will be reported to the Board of Directors.
- 3We make a proper crisis response in the event of natural disaster, epidemic, or any other case of force majeure causing losses of corporate assets or dangers to personnel by promptly forming a crisis response team headed by the President & Chief Executive Officer, gathering information on the extent of losses, and taking measures to contain and minimize losses in accordance with our risk management rules.
- 1We appoint Outside Directors to the Board of Directors to enhance the decision-making and oversight functions of the Board. At the same time, we give more responsibilities to Executive Directors (Directors concurrently serving as Executive Officers) to streamline our decision-making process so that we can respond quickly to changes in the business environment and achieve sustainable growth.
- 2We clearly define the scope of responsibility for each department in accordance with our rules concerning organization and the division of authority and duties. We also define responsibility and authority for each position in accordance with our executive authority and approval procedure rules to operate business efficiently and effectively.
- 1We appoint a manager in charge of the oversight of subsidiary administration in accordance with our subsidiary administration rules. This oversight manager oversees the administration of each subsidiary, and the Directors and Others of each subsidiary conduct its operations under the guidance of the oversight manager and in cooperation with other relevant departments as necessary. In this manner, we ensure that the subsidiaries execute their duties efficiently.
- 2Important matters listed in our subsidiary administration rules shall be referred to the Company for final approval after receiving approval from either the subsidiary's board of directors or its representative officer.
- 3Pursuant to the Group Compliance Management Policy and our own compliance rules, we put in place a system where the officer in charge of compliance and risk management matters advises and monitors the Directors and Others and employees of subsidiaries to ensure that their performance of duties complies with laws and regulations and with the Company's Articles of Incorporation, and where it is implemented properly through the activities of the Risk Management & Compliance Committee. In addition, the whistleblower protection system of the Company applies to all of its subsidiaries.
- 4In addition to audits mandated by laws, the department in charge of internal auditing conducts on-site inspections of subsidiaries pursuant to our internal audit rules and reports its findings directly to the President & Chief Executive Officer. If the findings call for corrective actions, the President & Chief Executive Officer directs each of those in charge of the matter at the subsidiary to take the actions and report the result to him.
- 1We provide an assistant to Audit & Supervisory Board Members in a timely manner upon receiving a request from them. Prior consent of the Audit & Supervisory Board is required for the appointment, replacement, and appraisal of the assistant.
- 2Audit & Supervisory Board Members are free to give audit-related instructions to the assistant. The assistant will not be obliged to follow the order of Directors or Executive Officers that contradict the instructions of Audit & Supervisory Board Members.
- 1If a Directors and Others or employee of the Company or its subsidiaries find a matter where serious damage has been or may have been made to the Company or if he/she witnesses an illegal act or misconduct of a Director, officer, or employee, he/she must report it to the Audit & Supervisory Board immediately.
- 2Audit & Supervisory Board Members attend Board of Directors meetings and other important meetings of the Company, including Management Meeting, to stay informed of decision-making processes and the status of operations related to important matters. They are authorized to review documents related to important management decisions and request a report, as necessary, from Directors and Others, officers, and employees of the Company or its subsidiaries on their execution of duties.
- 3The whistleblower protection provided in the Company's compliance management rules applies to the act of whistleblowing to Audit & Supervisory Board Members. No Director and Others, officer, or employee of the Company or its subsidiaries will be dismissed, have his/her employment contract terminated, or be treated unfavorably in any manner for his/her act of whistleblowing.
The Company sets aside a budget for the execution of duties by Audit & Supervisory Board Members. When there is a request for payment, including advance payment, concerning expenses or debts incurred by Audit & Supervisory Board Members for their execution of duties, it will be paid in a timely manner.
- 1Audit & Supervisory Board Members meet with the President & Chief Executive Officer regularly to exchange opinions and maintain proper communication to perform audits effectively.
- 2Audit & Supervisory Board Members coordinate with the Financial Auditor and the department in charge of internal auditing and maintain proper communication to perform audits effectively.
II. Basic principles for exclusion of anti-social forces and establishment of internal controls for this purpose
We have adopted the following basic principles for the exclusion of anti-social forces and established internal controls for this purpose to ensure proper business conduct:
- 1We are resolved to have no relationship with any anti-social forces that pose a threat to the safety and order of society. Our officers and employees are prohibited from making use of, paying, supporting, aiding, or having a relationship of any kind with such forces and with individuals and groups associated with such forces.
- 2The department in charge of general affairs is tasked to handle matters related to anti-social forces and take necessary actions with assistance from attorneys and police.
- (1)In case we are approached by an anti-social force, we will contact the police and other authorities immediately. We will stand firmly against their demand, respond as an organization, and act lawfully.
- (2)We are and will be a member of the league of corporate defense against anti-social forces to keep us informed of the current situation and ready to respond to an unexpected encounter.
2. Risk Management
The Group has established the Risk Management and Compliance Committee, chaired by the officer in charge of risk management and compliance, that is responsible for risk management, including identifying, assessing, responding to, and monitoring major risks, so that we can respond to external changes in our environment and to ensure the success of the Company's corporate strategy.
We assign a person with the task of implementing the necessary preparations and measures for each potential risk, including natural disasters, infectious diseases, overseas conflicts, and information security systems. We conduct periodic reviews of these and make updates and improvements to our Business Continuity Plan (BCP) to ensure that, even if any of these risks were to materialize, we can minimize the impacts on our business operations and continue to meet the obligations that we have to our customers.
3. Status of Internal Audit and Audit by Audit & Supervisory Board Members
Status of audit by Audit & Supervisory Board Members
The Audit & Supervisory Board is currently comprised of four Members including two Outside Members. In addition to its duties under law and the Articles of Incorporation of the Company, the Audit & Supervisory Board is responsible for establishing its audit policy, audit plans, and audit procedures, for reporting the status of audit by each member, and for forming an opinion from the result of audit. A regular meeting is held once a month and a special meeting may be held as necessary.
Audit & Supervisory Board Members are engaged in fair and strict audits while gathering information and promoting a good audit environment through communication with Directors and the department in charge of internal auditing, in accordance with audit policy, audit plan, and other decisions by the Audit & Supervisory Board. For example, they attend the Board of Directors meeting and Management Meeting, actively participate in other meetings, hear briefings on the status of execution of duties by Directors and Others, review documents of important decision making and others, examine the status of business operation and assets, and conduct the oversight and review of the internal control system.
Audit & Supervisory Board Members receive an annual audit plan from the Financial Auditor at the beginning of each fiscal year and have regular meetings with the Financial Auditor to exchange opinions. They also receive briefings on the results of quarterly and year-end financial audits and actively exchange opinions and information to conduct effective audits.
Status of internal audit
The department in charge of internal auditing is engaged in internal audits of the Company's day-to-day operation based on its own annual audit plan in accordance with the Company's internal audit rules and reports its findings directly to the President & Chief Executive Officer. It is working closely with the Audit & Supervisory Board to make its internal audits effective in identifying issues and proposing corrective actions. The department in charge of internal auditing exchanges opinions with Audit & Supervisory Board Members regularly to keep them informed of the results of internal audits.