Corporate Governance

Basic concept for Alfresa Group's corporate governance

As a corporate group conducting business in a field related to life and health, the Alfresa Group is determined to put the Group's principles into practice and to fulfill our responsibilities to our various stakeholders. The Group believes that the enhancement of corporate governance is fundamental to fulfilling corporate social responsibilities and to enhancing corporate value. Going forward, the Group will continue to promote initiatives in line with Japan's Corporate Governance Code, working to further increase corporate value.

From the perspective of achieving sustainable growth and long-term enhancement of corporate value, the Group regards the essence of corporate governance as being the assurance of the transparency and fairness of decision-making, the full and effective use of management resources, and the improvement of management vitality by means of rapid and resolute decision-making. Accordingly, the Group will work to enhance corporate governance in line with the following basic concepts.

1. To respect shareholders' rights and ensure equality of treatment.
2. To build good and harmonious relationships with stakeholders including shareholders.
3. To disclose corporate information appropriately and ensure transparency.
4. To build a structure that effectively utilizes outside directors and outside Audit & Supervisory Board members, ensuring the effectiveness of the Board of Directors' supervisory function of business execution.
5. To enhance internal control systems, including the assurance of the reliability of financial reporting.
6. To engage in constructive dialogue with shareholders who share the same medium- to long-term interests.

Establishment of Corporate Governance Guidelines

The Alfresa Group has established Corporate Governance Guidelines as basic principles concerning corporate governance. The purpose of these guidelines is to further enhance corporate value so that the Group can fulfill its responsibilities to customers, business partners, employees, shareholders, local communities, and other stakeholders in a manner characterized by reliability, safety and sincerity by realizing its principles in the form of Our Philosophy, Our Vision, and Our Promises.

Corporate Governance Guidelines（293KB）

Corporate Governance Structure

The Company has adopted the organizational structure of a "company with an Audit & Supervisory Board." The Audit & Supervisory Board and Audit & Supervisory Board members audit directors' performance of their duties. The Company has also introduced an executive officer system to clarify the division of supervision and business execution responsibilities. The Board of Directors assumes the responsibility of supervision, and the executive offices assume the responsibility of business execution.

Corporate Governance Report（683KB）

as of June 27, 2023

Overview of Board of Directors and Advisory Committees

Overview of Each Meeting Body

Skill Matrix for Members of the Board of Directors and the Audit & Supervisory Board

Composition of the Board of Directors

The Board of Directors consists of diverse directors with different specialized knowledge, experience, and abilities in order to effectively fulfill their roles and responsibilities. Its current size has been determined as the best for facilitating efficient and effective execution of its functions

Nomination and Appointment of Board of Directors

The Nomination and Remuneration Committee for Directors and Executive Officers selects candidates and defines the skills of directors that are necessary to realize the goals in the 22–24 Mid-term Management Plan: Leap into the Future “An Evolving Healthcare Consortium.” Below is a list of those skills.

(As of June 27, 2023)

Outside Directors and Outside Audit & Supervisory Board Members

The Company makes it a basic policy to include more than one independent outside director on the Board of Directors. Outside directors are elected from among candidates that meet not only the outside director requirements stipulated by Japan's Companies Act but also the Company's independence standards for outside directors, etc. Outside directors are elected from persons with pragmatic points of view, based on extensive corporate management experience, or are objective and professional, based on high-level insight into such areas as social and economic trends. Meanwhile, outside Audit & Supervisory Board members also meet predetermined standards in the same way as outside directors. They are elected mainly from persons who have specialist insight on legal and regulatory compliance or finance and accounting, or extensive corporate management experience and wide-ranging knowledge.

Independence Standards for Outside Directors, etc.

The Company elects candidates for Outside Directors, etc. who have high degree of independence.

1. Outside Directors, etc. must be financially independent from the Group.
   1. Outside Directors, etc. should not have received compensation (excluding remuneration to Directors, etc. paid by the Company), or monetary consideration/other properties for performed duties, transactions, etc. that exceed a certain amount directly from the Group in the past five years.
      • “Exceed a certain amount” is defined to be the amount of ¥10 million or more received in any one of the past five fiscal years.
   2. Outside Directors, etc. should not have served as Director, Officer, etc. of any one of the following entities in the past five years.
      • Major business clients who account for 2% or more of the consolidated net sales of the Group or the corporate groups, to which the candidate belongs.
      • Entities that have substantial conflicts of interest with the Group, such as the Company’s independent auditing firm, etc.
      • Entities that are the Company’s major shareholders (holding 10% or more of shares issued).
      • Entities of which the Group is the major shareholder (holding 10% or more of shares issued).
2. Outside Directors, etc. shall not be the close relatives of Directors and Audit & Supervisory Board Members of the Group.
   • “Close relatives” are defines as spouse, blood relatives within third degree of kinship, and relatives living together.
3. Furthermore, Outside Directors, etc. shall not possess any reason by which they are reasonably deemed ineligible as an independent and neutral officer.
4. Outside Directors, etc. shall ensure to satisfy the independence and neutrality criteria set forth in this Standards on an ongoing basis even after the appointment as Officer.

Remuneration for Directors and Audit & Supervisory Board Members

Remuneration, etc. to the Company’s officers is based on the standard amount for each rank of officer. In setting this standard mount, we use remuneration data from external specialist organizations as well as publicly available information to assess the remuneration level of companies in both the same and other industries. The composition of remuneration varies for Directors in charge of business execution, Directors not in charge of business execution (including Outside Directors), and Audit & Supervisory Board Members. Remuneration to Directors in charge of business execution consists of basic (fixed) remuneration, performance-linked bonuses based on the achievements of the performance targets in each fiscal year, and stock compensation, which aims to increase the motivation of Directors and other officers to achieve the medium- to long-term performance targets set forth in the 22-24 Mid-term Management Plan, and to further enhance long-term corporate value.

The Company has introduced performance-linked stock remuneration through a system utilizing an officer remuneration Board Incentive Plan (BIP) trust. However, to prepare for the event that the Company is unable to pay stock compensation under this system, it has introduced stock price-linked compensation as a substitute plan, in which compensation is paid in cash in lieu of stocks based on the same calculation method as performance-linked stock remuneration.

1. Method of Calculating Performance-Linked Remuneration

   • Method of Calculating Bonuses

     In order to ensure our values are aligned with those of shareholders, and to further motivate officers to contribute to corporate performance, the amount of bonuses paid is determined individually by multiplying the base amount by the bonus composition ratio (20%) within a range from 0% to 200%, in accordance with the degree of achievement against original targets for consolidated operating income margin and profit margin attributable to owners of the parent for each fiscal year.

   • Method of Calculating Stock Compensation

     Stock compensation serves as an incentive to increase corporate value over the long term. The number of our shares to be issued will be determined by annually granting and accumulating the base points calculated according to the amount obtained by multiplying the base amount by the stock compensation composition ratio (10%), and after the conclusion of the medium-term management plan, varying the cumulative value of the base points within the range of 0% to 200% according to the achievement level of the business performance targets in the medium-term management plan. As with bonuses, the performance indicators utilized include the consolidated operating income margin and profit margin attributable to owners of the parent, which have been positioned as key performance indicators (KPIs) for the medium-term management plan. In doing so, we aim to ensure our values are aligned with those of shareholders and to further motivate officers to contribute to corporate performance.

   • Method of Calculating Stock Price-Linked Compensation

     Stock price-linked compensation is positioned as a substitute until the introduction of stock compensation. During the medium-term management plan, it will be annually granted and accumulated using the same base points as stock compensation. After the conclusion of the medium-term management plan, stock price-linked compensation will be varied by the cumulative value of the base points within the range of 0% to 200% according to the achievement level of the business performance targets in the medium-term management plan, and the amount paid will be obtained by multiplying the stock price on a reference date set forth in the rules. As with stock compensation, the performance indicators utilized the consolidated operating income margin and profit margin attributable to owners of the parent, which have been positioned as KPIs for the medium-term management plan.

2. Method of Deciding on Remuneration, etc.

   • Method of Deciding on Remuneration

     The policy for deciding on remuneration, including the remuneration composition and standard amount, and the method for calculating remuneration are deliberated by the Nomination and Remuneration Committee for Directors and Executive Officers (a voluntary committee chaired by an outside director and comprising a majority of outside directors) and then reported to the Board of Directors, which then decided on total amount of remuneration. In addition, individual remuneration amounts, etc., for directors is decided based on the deliberations of performance evaluation results by the Nomination and Remuneration Committee for Directors and Executive Officers. Furthermore, individual amounts of remuneration, etc., for Audit & Supervisory Board members are decided through discussion among the Audit & Supervisory Board members.

Investment Securities

1. Classification Criteria and Approach

   With regard to the classification of investment securities held for purely investment purposes and investment securities held for purposes other than pure investment, those that are held entirely for the purpose of receiving profit from changes in the price of the shares or dividends pertaining to the shares are classed as investment securities held for purely investment purposes.

2. Policy and Method of Examining the Rationality of Holdings

   The Alfresa Group's policy on holding investment securities is to hold only shares that align with an important strategic purpose, such as maintaining and developing good business and collaboration relationships, or creating new business opportunities related to realizing a Healthcare Consortium, and to reduce holdings of shares that do not have such important purposes. Based on this policy, each year the Company confirms the significance of holding each investees' shares, performs a quantitative examination to determine whether the benefits and risks of holding are commensurate with the capital cost as well as a qualitative examination to determine the significance of holding over the medium- to long-term, and reports the details of examinations to the Board of Directors.