The Company aims to make everyone involved in Hirata content and to contribute to society through technology. To achieve this, we believe that it is essential to build and effectively operate a management system that enables transparent, fair, prompt, and resolute decision-making. We will thus work to strengthen corporate governance as one of our most important tasks.

As a company that targets the global marketplace, Hirata Corporation has promoted sound and effective management activities with an emphasis on corporate governance to fulfill its social responsibilities. Hirata is thus working to enhance its compliance system, continuously strengthen its business competitiveness, and further improve its corporate value.
From the standpoint that a company is an entity that bears public, public interest, and social responsibilities, Hirata believes that the maintenance of good relations with all stakeholders will lead to improved shareholder value over the long term.

To improve the effectiveness of its Board of Directors’ meetings, the Company has evaluations of their effectiveness conducted by a third-party organization. Based on the results from the evaluations, the issues are shared and countermeasures discussed at Board of Directors’ meetings.

In addition to the above, the Nomination and Compensation Advisory Committee was consulted on previous matters, such as the nomination and compensation of director candidates, and newly consulted concerning the size and composition of the Board of Directors and approaches to succession planning.
Based on the results of the effectiveness evaluations and analyses of the status of compliance with the Corporate Governance Code, we will continue to make ongoing efforts to further improve the effectiveness of the Board of Directors in the years to come.

For the Board of Directors to fulfill its responsibilities of “realizing sustainable growth” and “supervising business execution,” the Company has defined the key skills and areas of experience required of its directors—corporate management, industry knowledge, technology/research and development, global, risk management, finance and accounting, and ESG—and aims to maintain a Board of Directors that is well-balanced in terms of its composition.

To ensure transparency and fairness in the nomination of both director candidates and executive officers, the Nomination and Compensation Advisory Committee, in which independent outside directors form the majority, deliberates the criteria and policies for nominating the candidates as well as candidate nomination proposals. The results of those deliberations are reported to the Board of Directors, which makes the decisions after receiving reports from the Nomination and Compensation Advisory Committee on the basis of the candidates’ knowledge, experience, ability, performance evaluations and other factors.

Concerning the Audit and Supervisory Board member candidates, after having obtained the consent of the Audit and Supervisory Board, those with the knowledge, experience, and skills necessary to perform their duties as corporate auditors will be selected as Audit and Supervisory Board member candidates. Those candidates to be proposed at the Annual General Meeting of Shareholders are determined by resolution of the Board of Directors.

If a director or executive officer breaks the law or acts in a manner contrary to the Articles of Incorporation or internal regulations, or should it be recognized that there is a difficulty to perform duties properly due to physical or mental breakdown or a lack of ability, in such cases the Board of Directors will consider dismissal after having received a report from the Nomination and Compensation Advisory Committee.

When new directors and executive officers are appointed, they are provided with opportunities to attend training sessions, including on compliance, that are geared toward newly appointed directors. The Company will also provide them with opportunities to acquire the necessary knowledge on an ongoing basis even after having taken office.
We are also working to deepen outside directors’ understanding of the Company by providing them with information and explanations about Hirata and by visiting our production sites. We also assist outside officers in fulfilling their roles by holding preliminary briefings for them prior to Board of Directors’ meetings and by providing opportunities for interviews with key executive officers and employees.

The Company’s decision-making policy with regard to executive compensation and associated matters is decided upon by the Board of Directors. The main basic policies are as follows:

• To achieve sustainable growth and increase corporate value over the medium to long term, directors’ compensation shall involve a system that functions as an incentive and at an appropriate level based on position and responsibility.

• Specifically, in addition to their basic compensation, executive directors will receive executive bonuses and stock compensation as performance-linked compensation, the ratios of which shall be approximately 1:0.5:0.3 (if performance indicator targets are achieved).

• Outside directors who are primarily responsible for supervisory functions shall receive only basic compensation.

The Board of Directors entrusts the representative director and president with specific decisions regarding individual compensation for directors. 
To ensure that delegated authority is properly exercised, the Board of Directors consults with the Nomination and Compensation Advisory Committee on the drafting of individual compensation amounts. That report having been obtained, the representative director and president makes decisions based on its content.

Intended to raise awareness of improving performance each fiscal year, the bonuses in performance-linked compensation shall be regarded as cash compensation that reflects performance indicators. Such bonuses are calculated in accordance with the level of achievement of the consolidated ROE targets for each fiscal year.

By sharing the profits and the risks of stock price fluctuations with shareholders, stock compensation is intended to raise awareness of contributing to improving medium- to long-term business performance and increasing corporate value. Stock compensation shall be paid via a stock delivery trust mechanism. For each fiscal year, points are awarded according to position and length of tenure of office as well as according to the level of achievement of the target values for evaluation indicators (consolidated ROE and consolidated operating income ratio) in the settlement of accounts. At the time of retirement, stock equivalent to points shall be delivered.

The performance indicators and their target values for the performance-linked compensation are reviewed based on recommendations from the Nomination and Compensation Advisory Committee depending on changes in the business environment and other factors.