SGH

Corporate Governance

Policy

The SG Holdings Group supports the concept of "Stakeholder Management" as the foundation of its management philosophy and promotes business activities which meet the expectations of our various stakeholders by 1) continuous improvement of our level of customer service, 2) stabilization and improvement of the foundation of living of our employees and their families, 3) contribution to local communities, their safety and environment through diverse business and social activities, 4) enhancement of corporate value for our shareholders and 5) equal and fair transactions with business partners. We have formulated the SG Holdings Basic Policy of Internal Control System as a statement of our internal control policies and work to strengthen all of our systems accordingly based on the firm conviction that creating a transparent management and administrative structure through strong and comprehensive corporate governance is a key requisite for realizing stakeholder management.

Basic Policy of Internal Control

Systems

*As of July 1, 2020

SG Holdings, as a pure holding company, strives to streamline the Group's management structure and achieve rapid management decision making. The Board of Directors, consisting of nine Directors, including three Outside Directors, oversees the overall management and business execution of the entire Group. SG Holdings has also introduced an Executive Officer System in order to separate the management oversight function and the business execution to ensure that authority and responsibilities are clear. In addition, the Audit & Supervisory Board has been established consisting of four Audit & Supervisory Board Members, including three Outside Audit & Supervisory Board Members, to supervise and audit management. We continually strive to strengthen the Company's business management structure and the foundations of our businesses to be prepared to respond to changes in the business environment and to manage with a high degree of transparency.

Corporate Governance Systems

Board of Directors

The Board of Directors consists of nine Directors (three of whom are Outside Directors) and holds regular meetings of the Board of Directors every month, in addition to extraordinary meetings when there are urgent matters to be decided. It is responsible for making decisions on general Group business execution and reporting on the status of management execution of the individual directors in accordance with internal rules, including the Board of Directors' Regulations and the Duty and Authority Regulations. All Audit & Supervisory Board Members attend meetings of the Board of Directors in a system enabling them to supervise the execution of business by Directors.

Audit & Supervisory Board

The Audit & Supervisory Board consists of four members (three of whom are Outside Audit & Supervisory Board Members) and holds regular meetings of the Audit & Supervisory Board every month, in addition to extraordinary meetings when necessary. Its responsibilities include reporting on business audits by the full-time Audit & Supervisory Board Member and discussing proposals to the Board of Directors in advance. Furthermore, Audit & Supervisory Board Members continually audit and supervise the business execution by Directors and attend Board of Directors meetings, stating as necessary their opinions from their perspective. In addition, the full-time Audit & Supervisory Board Member attends committees and meetings other than Board of Directors meetings as an observer in order to deepen his/her understanding of internal conditions and management, actively works to maintain an effective auditing environment and collect internal information and, moreover, continually monitors, expresses an objective opinion and provides advice in regard to the development and operation of the internal control system.

Other Committees and Meetings

Name Primary Attendees
Investment Committee SG Holdings Directors, Executive Officers, Department Managers
Budget Committee SG Holdings Directors, Executive Officers, Department Managers
Management Strategy Meetings SG Holdings Directors, Executive Officers, Department Managers and Group company presidents
Risk Management Meetings SG Holdings Directors, Executive Officers, Department Managers and Group company presidents
Administration Department Managers' Meetings SG Holdings Directors, Executive Officers, Department Managers and Group company Administration Department Managers
CSR Committee SG Holdings Directors, Executive Officers, Department Managers

*The full-time Audit & Supervisory Board Member participates as an observer in all of the above committees and meetings.

Outside officers

The Company has three Outside Directors and three Outside Audit & Supervisory Board Members. Their role is to improve the appropriateness of decisions of the Board of Directors by making the necessary comments from a specialized perspective principally on management and business strategy. Furthermore, certified public accountants with an advanced knowledge on finance and accounting and attorneys with advanced knowledge on the law are appointed as Outside Audit & Supervisory Board Members who conduct stringent auditing of the appropriateness of the decision-making and business execution of Directors from a specialized perspective while maintaining a high level of independence. The Outside Directors and Outside Audit & Supervisory Board Members have no business relationships or other interests with the Company. Furthermore, the election of Outside Directors and Outside Audit & Supervisory Board Members is determined based on the assumption that adequate independence for executing duties as outside officers from a perspective independent from the Company's management can be ensured based on their backgrounds and relationships with the Company.

Standard of Independence of Outside Officers

The Company determines the independence of Outside Directors and Outside Audit & Supervisory Board Members stipulated under the Companies Act by checking whether any of the following items apply based on the determination criteria set by Tokyo Stock Exchange, Inc., and deems them to be independent if none of the items apply.

  • A major shareholder (a person directly or indirectly holding 10% or more of voting rights) of the Company, or a business executive thereof
  • A person whose major business partner is the Group, or a business executive thereof
  • A major client of the Group, or a business executive thereof
  • A person providing professional services such as a consultant, attorney or certified public accountant who obtains a large sum of money or other financial gain from the Group other than officer remuneration
  • A person who has received the donation of a large sum of money or other financial gain from the Group, or a business executive thereof
  • A Director (excluding Outside Directors), Audit & Supervisory Board Member (excluding Outside Audit & Supervisory Board Members), Executive Officer or employee of the Group
  • A person to whom any of the items in 1 through 6 above have applied during the past three years
  • If a person to whom any of the items in 1 through 7 above applies is in an important position, the spouse and relatives within the second degree of kinship thereof
  • In addition to the preceding items, a person for whom there may be special circumstances preventing the fulfillment of duties as an independent outside officer, such as the possibility of a conflict of interest

An Audit

Audit by Audit & Supervisory Board Members

In their audit work, Audit & Supervisory Board Members attend Board of Directors meetings and other important meetings as well as conduct site visits to Group companies and business locations to ensure effective monitoring. To perform their audit functions as efficiently as possible they collaborate closely with the Company's and its subsidiaries' internal audit units and Audit & Supervisory Board Members.

Internal Audit

The Company has established the Internal Audit Department as an independent unit to conduct the Company's internal audits and pursuant to the Comprehensive Internal Audit Regulations carry out the functions required for comprehensive internal auditing of the Group to ensure the conservation of its assets and promote efficient management. The Internal Audit Department reports the results of its audits to the President and COO, and the Audit & Supervisory Board Members and provides advice, proposals and directives for improvements to the units it audits. Sagawa Express Co., Ltd. and some other Group subsidiaries also have their own internal audit units which conduct audits as appropriate in addition to audit by the Internal Audit Department of the Company.

Accounting Audit

The Company has appointed Deloitte Touche Tohmatsu LLC as its Accounting Auditor. The Company has concluded an audit agreement with it under which that firm conducts an accounting audit in accordance with an annual audit plan and the Company pays the agreed upon compensation to it. The names of the certified public accountants who performed the audit in the consolidated fiscal year under discussion are listed below.

(1) Engagement Partners of the certified public accountants (subcategory)

  • Koichiro Tsukuda, Engagement Partner
  • En Yamada, Engagement Partner
  • Hideya Sudo, Engagement Partner

(2) Auditing Persons assisting in the audit work (subcategory)

13 certified public accountants, five people who have passed the certified public accountant examination and 11 others

Officer Remuneration

Policy for Determining Remuneration

Officers' remuneration is decided by a resolution of the Board of Directors and Audit & Supervisory Board Members' remuneration is decided by deliberation of the Audit & Supervisory Board within the limit decided at a General Meeting of Shareholders and taking into account such factors as performance and economic conditions. Additionally, in order to clearly link the remuneration of Directors to share price and augment their motivation to contribute to the improvement of performance and the increase of corporate value over the mid- to long-term, starting from July 1, 2018, we introduced a company performance-linked share-based remuneration program.

Performance-linked share-based remuneration program (the "Program")

  • Total number of shares scheduled to be granted to those eligible, and scope of beneficiary rights and other rights they are eligible to receive under the Program.
(i) Personnel to which the scheme is applicable Director (excluding non-full-time directors, outside directors, and persons who do not reside in Japan; the same applies below) and Executive Officers (excluding persons who do not reside in Japan) (the "Directors, etc.")
(ii) Period to which the scheme is applicable 3 business years (however, the initial period is 4 business years)
(iii) Impact of the Company's shares under the scheme on the number of shares issued and outstanding Method of calculation and upper limit of the Company's common shares granted to Directors, etc. (including the portion paid in cash in lieu of the Company's common shares)
  • 62,500 shares per business year and 187,500 shares over each applicable period (3 business years) (However, 250,000 shares for the 4 years of the initial applicable period)
  • Of the above upper limit on the number of shares, the upper limit on the number of the Company's common shares allotted when Directors, etc. actually make contributions in kind of their monetary remuneration claims is 175,000, which is 70% of the upper limit on the number of shares for the initial applicable period. In addition, the limit is 131,250 shares for each subsequent applicable period (3 business years).
  • The percentage of the upper limit of shares granted to Directors, etc. each business year (62,500 shares) in relation to the number of shares issued and outstanding (as of March 31, 2020; after deducting treasury shares) is 0.02%.
(iv) Details of performance linkage Linked by a performance-linked coefficient determined according to the level of achievement of company performance indicators such as consolidated operating income each business year.
(v) Timing of share grants

Upon retirement as Director, etc. (including retirement due to death)

*Please see the Annual Securities Report (for the year Ended March 2020) for details.


Disclosure

The Company discloses the total amount of remuneration paid to Directors as a group, to Audit & Supervisory Board Members as a group and to outside officers as a group in its securities report and separately discloses the amount of remuneration of any individual whose total remuneration is 100 million yen or greater.

  • Total amount of remuneration, etc. by officer category, total amount by type of remuneration, etc. and number of officers subject to remuneration
Officer category Total amount of remuneration, etc.
(millions of yen)
Total amount of remuneration, etc. by type (millions of yen) Number of officers subject to remuneration
Fixed remuneration Performance-linked remuneration

Directors (excluding Outside Directors)

585

502

83

10

Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members)

20

20

-

1

Outside Directors

33

33

-

3

Outside Audit & Supervisory Board Members

35

35

-

3

  • The above information includes four Directors (including one Outside Director) who left office at the time of the conclusion of the 13th Ordinary General Meeting of Shareholders held on June 25, 2019.
  • The above performance-linked remuneration indicates the reserve provision for share-based remuneration for directors in the given fiscal year. This figure does not include reserve provision for share-based remuneration for three directors who were newly elected at the 13th Ordinary General Meeting of Shareholders held on June 25, 2019.
  • One of the Directors has received separate remuneration from Sagawa Express Co., Ltd., which is a subsidiary of the Company. The total amount of remuneration, etc. received from said subsidiary is 72 million yen.
  • Six of the Directors mentioned above have been paid a total of 9 million yen in company housing expenses in addition to the above amounts in accordance with the Company's Director Regulations.
  • Total amount of consolidated remuneration, etc. of each officer
Name Total amount of consolidated remuneration, etc.
(millions of yen)
Officer category Company category Amount of consolidated remuneration, etc. by type (millions of yen)
Fixed remuneration Performance-linked Officer bonuses

Eiichi Kuriwada

272

Director

Submitting company

238

34

-

Hideo Araki

121

Director

Submitting company

106

15

-

(Note) The persons listed are limited to those whose total amount of consolidated remuneration, etc. is 100 million yen or more.

*As of March 31, 2020

Stock

Our Thinking in Regard to the Acquisition and Holding of Shares (Cross-shareholding, etc.)

We hold shares of companies we do business with if we judge doing so necessary or reasonable from the perspective of the maintenance and development of mid- to long-term business relationships, the creation of synergies or other purposes. In exercising the voting rights of the shares held, we judge each proposal on its merits taking into consideration the rationale for our holding the stock and potential contribution to the increase of the company's value and its shareholders' profits.


Building a Responsible Management Foundation