Corporate Governance
Basic Philosophy
We at the KONOIKE Group believe that meeting our social responsibility is an important part of our mission. We strive to build corporate value as we build relationships of trust with society in the practice of our corporate philosophy and to pursue innovation at the foundations of our society that creates unique value, driven by respect for humanity and relationships of trust.
Driven by this philosophy, we use our business activities to build positive relationships with our stakeholders as we engage in responsive, efficient, sound, fair, and transparent business practices. To this end, we continue to strengthen our supervisory functions and provide information disclosure, introducing new measures as necessary.
Structure
Corporate Governance Improvement Timeline
Composition of the Board of Directors
To distinguish clearly between management oversight and business execution, three of the five members of the board of directors are external directors, while two of the four members of the audit & supervisory board are external members. Further, we have filed notice with the Tokyo Stock Exchange for four of these five external officers to be designated as independent directors. In June 2019, we established the Human Resources and Compensation Committee, an elective advisory committee to the board of directors, and we will work toward further strengthening our corporate governance.
Skills Matrix
Human Resources and Compensation Committee
Activities in FY3/2024
The committee met a total of nine times at the direction of the board of directors. The committee discussed appointments and compensation of directors, Audit & Supervisory Board members, and executive officers, reporting on the discussions to the board.
The Human Resources and Compensation Committee consists of two independent external directors, one external director, and one internal director, making a total of four members (as of March 31, 2024). Although only half of the members are independent outside directors, we believe that the independence and objectivity of the committee is still ensured because the chairperson is an independent outside director.
Officer Compensation System
1.Basic Policy
We have established the following basic policy to ensure our officer compensation system supports our Corporate Philosophy (Our Mission), which reads, “We pursue innovation at the foundations of our society that creates unique value, driven by respect for humanity and relationships of trust.”
- The director compensation system must contribute to realizing the Corporate Philosophy (Our Mission)
- The director compensation system must aid in recruiting and retaining a talented management team intent on achieving our 2030 Vision
- The director compensation system must encourage a constant spirit of ambition to go beyond expectations
- The director compensation system must be designed to link compensation closely to corporate earnings
- The director compensation system must continue to pay compensation linked to share prices over the medium to long term
- The director compensation system must be designed to guarantee fairness and transparency, ensuring that officers are accountable to employees, shareholders, and other stakeholders
2.Determination of Compensation
The board of directors decides the amount of compensation given to each director based on the findings of the Human Resources and Compensation Committee. The amount of compensation given to each full-time Audit & Supervisory Board member is decided by discussion among members of the Audit & Supervisory Board. Specific amounts are based on compensation limits approved by the general meeting of shareholders and take into account company earnings, compensation levels at other companies, employee salaries, etc.
| Position | Total Compensation (Millions of Yen) | Total Compensation Amount by Type (Millions of Yen) | Number of Eligible Officers | ||
|---|---|---|---|---|---|
| Basic Compensation | Performance-Linked Compensation (Bonuses) | Non-Monetary Compensation (Restricted Stock) | |||
| Directors | 188 | 105 | 65 | 17 | 5 |
| (External Directors, Included) | (37) | (37) | (ー) | (ー) | (3) |
| Audit & Supervisory Board Members | 70 | 70 | ー | ー | 4 |
| (External Audit & Supervisory Board Members, Included) | (22) | (22) | (ー) | (ー) | (2) |
| Total | 258 | 175 | 65 | 17 | 9 |
| (External Officers, Included) | (59) | (59) | (ー) | (ー) | (5) |
- The amount of compensation for directors does not include employee salaries of directors who concurrently serve as employees.
Evaluating the Effectiveness of the Board of Directors
Since FY3/2016, our board of directors has conducted an annual evaluation of the composition and operation of the board, board deliberation content, and support systems. We have worked to strengthen the functions of the board to ensure a sustained increase in corporate value for the KONOIKE Group.
Evaluation Method
| Evaluator | Self-Evaluation by Board of Directors and Audit & Supervisory Board Members |
|---|---|
| Evaluation Method | Questionnaire Format |
| Response Format | Non-Anonymous |
| Evaluation Items | Evaluation and Additional Comments on Following Items
|
Evaluation Process
- Questionnaire to All Members of Board of Directors and Audit & Supervisory Board Members
- Aggregation by the Secretariat
- Self-Evaluation by Board of Directors Based on Questionnaire Results
- Exploration Based on Evaluation Results
Overview of FY3/2024 Evaluation Results
The composition of the board of directors has been evaluated as appropriate in terms of the overall number of directors and the balance between the number of inside and outside directors.
While time allocation for deliberations and reporting improved, concerns were raised about the need to dedicate more time to discussions on long-term strategies and management issues.
Evaluations also noted insufficient board analyses, evaluations, and discussions of targets and detailed measures to address stagnant market valuations, falling short of the Tokyo Stock Exchange's call for capital cost- and stock price-conscious management.
Going Forward
In light of the results above, we are considering improvements to the following items.
- Enhancing discussion on strategy at board of director meetings
- Continuing efforts to foster active debates, exchange of opinions, and improving the quality of discussions within the board of directors
- Reviewing evaluation methods for the effectiveness of the board of directors to incorporate more objective perspectives
Activities in FY3/2024
Major Agenda Items
The board of directors met 18 times in FY3/2024. The following are items on the agendas at meetings.
- Establishing, amending, and abolishing various rules
- Organizational changes
- Important business plans
- Matters related to M&A
- Matters related to the general meeting of shareholders (e.g., deciding what matters to discuss during general meeting of shareholders)
- Matters related to stocks
- Disclosures (public announcements of company information)
- Purchasing, leasing, and other means of securing buildings, nonbuilding structures, and land (e.g., in relation to establishing new bases of operations)
- Appointments of executive officers
- Matters related to finance (e.g., matters related to long-term loans payable and short-term loans payable)
- Matters related to affiliates
- Other important matters related to management
Main Items on Agenda for Discussion
The board of directors met in May 2023 and discussed the results of a questionnaire regarding their own effectiveness as a board. At that meeting, items were set for discussion at future board meetings on important management issues.
- Monitoring Management Indicators
The KONOIKE Group set financial targets in our medium-term management plan (FY3/2023–FY3/2025). These targets include ¥332,000 million in net sales, ¥16,000 million in operating income, and an ROE of 8%. Non-financial environmental targets include a 20% reduction in CO2 emissions (compared to FY3/2019). Targets relating to our people include promoting talent development based on management strategies and improving employee engagement. For technology, we strive to advance technological innovation and digital transformation (DX) to achieve automation and labor savings, while improving work environments in a constant pursuit of safety.
We analyze management plans from the perspectives of growth, capital productivity, and cost of capital to enhance corporate value. The Group also regularly reviews and checks progress toward these objectives, emphasizing our ESG factors of environment, people, and technology.
- Non-Financial Targets (People, Technology)
The KONOIKE Group recognizes the critical importance of investing in non-financial capital to achieve sustainable growth in corporate value.
Given the structure of our business, we view strengthening human capital as a vital driver of value creation. We view our employees as an essential capital for generating value, rather than viewing them solely as a cost. Employees are an inseparable link between management strategy, human resource policies, and talent development. We actively recruit and develop talent aligned with business strategies, adopt flexible and strategic personnel allocation, enhance training and education programs, and improve employee benefits. In this way, we strive to enhance sustainable corporate value.
We are committed to achieving our 2030 Vision of people, leveraging technology to reach for new heights through technological innovations and digital transformation (DX) to automate processes, reduce labor, and improve workplace safety. The KONOIKE Group technological capital encompasses not only advanced and digital technologies, but also a broad range of intangible assets, including employees and analog technologies (continuous improvement activities, creating safe environments, and quality.) We aim to transform tacit knowledge of master craftsmanship into shared organizational assets, strengthen our adaptability to change, elevate safety and security standards, strengthen next-generation business creation capabilities, and drive innovation toward creating a sustainable societal infrastructure. Both people and technology are sources of competitiveness and value creation. To this end, we strive to leverage new technologies to advance workplace safety and efficiency while fostering more creative work environments.
- Discussions on Business Strategy With Shareholders and Investors
The KONOIKE Group receives and discusses IR feedback on an ongoing basis as part of our PDCA cycle for IR activities. Using this feedback, we reevaluate management strategies from an investor’s perspective. We are dedicated to implementing and advancing ROIC management to promote capital efficiency. These initiatives are recognized as pioneering efforts within the logistics industry.
We also share key insights from engagement with investors on strengthening human and technical capital management, diversity initiatives, and other non-financial capital.
We incorporate the knowledge gained through these discussions into our management practices, driving transformation and enhancing corporate value for the Group.
- Discussions on Monitoring Investment
As part of our medium-term management plan’s financial policy, we prioritize disciplined investments toward growth, ongoing improvement in corporate value, and stable shareholder returns. The board of directors reviews profits from new investment projects launched in the past four fiscal years, monitors the performance of prior investments, and discusses the direction of future initiatives. Discussions have focused on projects that have significantly deviated from initial business plans, including multifaceted discussions on the need to revisit project strategies in the context of strategy, the cost of capital, and establishing investment criteria, Areas of improvement in the investment PDCA cycle were identified through these discussions. The board of directors continues to monitor profit progress and align investment strategies with overall business objectives.
- Next Generation Project
We launched the Next-Generation Project as part of our 2030 Vision, people, leveraging technology to reach for new heights. The main objective of this project is to develop software-based solutions that utilize data to support improvement activities and decision-making at logistics sites, for use in both sales and internal use. This project takes place in Germany and Japan in collaboration with the European software engineering company that develop the core software solution. We report project activities to the board of directors regularly, advancing the project based on focused feedback from external directors and audit & supervisory board members.
Training Future Leaders
Human resource development is a core component of sustainable growth for the KONOIKE Group. The president, directors (serving concurrently as managing executive officers), and executive general managers (executive officer level) meet once every month at the Executive General Manager Steering Committee to share information about operational execution. Executive general managers, through discourse and discussion with directors, seek to cultivate their perspectives as managers. We also hold forums as needed as a part of our efforts to further enhance our human resources foundation. Here, members exchange opinions about strategies, philosophies, and other areas related to the KONOIKE Group, leading to a desire to launch new businesses and expand existing domains. Individuals regarded as next-generation managers, including headquarters office managers and branch managers, build relationships of mutual trust in their daily work. We sponsor internal seminars to bring next-generation managers and above to share our Corporate Philosophy and behavioral guidelines. In this way, we pass on the experience and expertise necessary for management without interruption between generations.
Strategic Shareholdings
1. Basic Policy
Konoike Transport Co., Ltd. holds stock strategically to enhance our corporate value over the medium to long term. We do this by working to sustain and strengthen trade relationships with the customers who are vital to our business, as partnerships are key to Konoike Transport Co., Ltd. business activities across a range of areas.
Each year, the board of directors regularly verifies the appropriateness of holdings of individual strategic stocks. The board considers whether the risks and benefits of holding these shares are commensurate with the accompanying cost of capital. If the board determines that holding a stock is not rational, the Group sells said stock to reduce strategic holdings.
2. Criteria for Exercising Voting Rights
Konoike Transport Co., Ltd. does not make uniform decisions on policies when exercising voting rights for strategically held stocks. Rather, we consider and decide each case separately from perspectives that include sustainable growth and improvement in medium- to long-term value of the Company in question. We never approve resolutions that would be harmful to shareholder value.
Reducing Strategic Shareholdings
Risk Management
Basic Policies for Risk Management
The KONOIKE Group established the Risk Management Regulations and Crisis Management Standards as the basic policies of the Group to reduce risks that may have a significant impact on corporate management. Through these policies, we also aim to establish a crisis management system that can respond quickly and appropriately in the event of an emergency.
Risk Management System
Based on the aforementioned Risk Management Regulations, the KONOIKE Group identified risks with the potential to harm corporate value and defines them as follows.
- The risk of poor strategic decision-making that could interfere with KONOIKE Group efforts to grow, resolve sustainability issues, and enhance our corporate value in the future
- The risk of insufficient legal compliance, inadequate initiatives on management issues, or other matters that could interfere with the sound development of existing business activities or operations, or which could damage current corporate value
Our approach to managing these risks is based on prevention and containment. We work to maintain our current corporate value and enhance corporate value in the future by preventing incidents or issues and fulfilling our social responsibility.
The Risk Management Subcommittee, chaired by the officer in charge of risk management, meets quarterly to check on risk countermeasures and monitor the status of initiatives that focus on priority risks selected based on a risk map. The subcommittee also conducts other activities aimed at risk reduction.
Crisis Management System
We define a crisis as any situation that threatens the survival or business continuity of the KONOIKE Group, whether such a situation is caused by internal or external factors, arises suddenly, or is a result of poor management. We define crisis management as an emergency response, recovery activities, or business continuity activities in response to a crisis.
We have built a system capable of responding appropriately and rapidly to events, one example of which is the aforementioned Crisis Management Standards. We prepare various manuals for ready use in case of natural disaster.
The Crisis Management Committee convenes in the event of risks such as large-scale natural disasters, including huge earthquakes and pandemics, that make it difficult to continue business operations. The committee is headed by the individual serving as Representative Director, Chairman, President, and Chief Executive Officer. If we determine the presence of a real emergency, we set up a command center to deal with the situation. In addition to the system establishment, we also conduct disaster-preparedness drills for setting up a task force, safety and confirmation drills, and other exercises. These drills enable us to sharpen our ability to respond to emergencies and minimize damage. The KONOIKE Group has also accumulated experience in emergency response to natural disasters such as earthquakes and typhoons through our history of providing emergency support for social infrastructure through logistics, medical care, and airport operations. We intend to leverage our knowledge to actively contribute to the support of disaster-stricken areas in the event of a disaster.
KONOIKE Group Risk Assessment
Risk assessment is our first step in the risk management process. In risk management, the KONOIKE Group focuses on analysis and evaluation to determine the current status of risks.
These efforts are an important process in risk management, aiming to collect basic data for decision-making, such as the exploration and prioritization of countermeasures. Risk assessments are conducted by the Risk Management Subcommittee under the supervision of the Sustainability Committee. For priority countermeasure risks identified in the risk assessment, we determine the departments with jurisdiction over leading specific countermeasure implementation and improvements.
The Risk Management Subcommittee is responsible for monitoring the status of initiatives in these departments. 
Evaluation in Risk Assessment
Analysis of Likelihood of Occurrence
Impact Analysis
