Corporate Governance

Basic Stance

The first item in our Corporate Philosophy is “corporate growth while fulfilling our responsibilities in harmony with society as a good corporate citizen,” and we are promoting sustainable corporate activities through rigorous adherence to corporate ethics. We believe it is important to maintain and further improve the efficiency, fairness, and transparency of management, and we aim to enhance corporate governance based on five specific items: (1) ensure shareholders’ rights and equality; (2) ensure appropriate cooperation with stakeholders other than shareholders; (3) ensure appropriate information disclosure and transparency; (4) appropriate execution of the roles and responsibilities of the Board of Directors; and (5) constructive dialogue with shareholders. We have also established a basic stance on compliance and risk management, and are implementing activities accordingly.

Response to the Corporate Governance Code

Toyota Boshoku has determined that it is in compliance with all principles of the Corporate Governance Code. Please refer to our Corporate Governance Report (provided in Japanese only), which was submitted to the Tokyo Stock Exchange.

Corporate Governance System

Toyota Boshoku has appointed five internal directors and four outside directors with extensive experience and broad insight. Through their supervisory function, the outside directors serve to ensure the legality and appropriateness of decision-making by the Board of Directors and the execution of duties by directors.
The four persons appointed as outside directors satisfy the requirements for independent directors as stipulated by the Financial Instruments Exchange. They have been designated as independent directors of the Company because it has been determined that there is no risk of conflicts of interest with general shareholders.
In addition, we have adopted a corporate auditor system, in which a five-person structure that includes three outside Audit & Supervisory Board members audits the management of directors.
Audit & Supervisory Board members audit the business execution of directors, as well as the business and financial condition of subsidiaries in and outside Japan. Such initiatives, including assigning dedicated staff to the Audit & Supervisory Board Office, help strengthen the functions of the Audit & Supervisory Board.
The three persons appointed as outside Audit & Supervisory Board members satisfy the requirements for independent auditors as stipulated by the Financial Instruments Exchange. They have been designated as independent auditors of the Company because it has been determined that there is no risk of conflicts of interest with general shareholders.
The Management Advisory Council was established as a forum for the candid exchange of opinions related to such matters as management issues, appointment and dismissal of management, nomination of candidates for director and Audit & Supervisory Board member, and compensation for management and directors.

System diagram of corporate governance (as of June 11, 2025)

Initiatives to strengthen corporate governance

Ratio of outside officers

1. Board of Directors

Number of meetings held in FY2025: 13

The Board of Directors convenes at least once a month, and as the management decision-making body, decides on important management matters such as legal matters, corporate hoshin (policy), business plans and capital investment plans, and also monitors business execution.
The Board of Directors is chaired by the Chairman.
Items that should be submitted to the Board of Directors are stipulated in rules of the Board of Directors, and other items are delegated to the President, Chief Officers, Center Chiefs, etc. in accordance with the Authorization Policy.

Main discussions at the Board of Directors in FY2025

2. Audit & Supervisory Board member, Audit & Supervisory Board

Number of meetings held in FY2025: 14

The Audit & Supervisory Board consists of two standing Audit & Supervisory Board members and three outside Audit & Supervisory Board members, and the lead standing member serves as Chair of the Audit & Supervisory Board.
The main items discussed by the Audit & Supervisory Board include the selection of standing Audit & Supervisory Board members, audit policy and audit implementation plans, status of development and operation of internal control system, appropriateness of audit method performed by accounting auditors and the results thereof, and the preparation of audit reports.
We evaluate the effectiveness of the Audit & Supervisory Board in order to contribute to the enhancement of corporate value over the medium to long term. In fiscal 2025, questionnaires and interviews were conducted with all members of the Audit & Supervisory Board and Board of Directors, including those from outside the company. We are striving to improve the effectiveness of the Audit & Supervisory Board by recognizing issues that the Board should address in the future and working to address those issues, through measures such as analyzing content and obtaining evaluative opinions.
With regard to the activities of Audit & Supervisory Board members, they conduct audits of internal divisions and group companies inside and outside Japan based on the audit policy and annual plans, communicate with directors, etc., attend the Board of Directors, Corporate Planning Meeting and other important meetings, inspect important documents, etc., and exchange information with the internal auditing department and accounting auditors.

Main discussions at Audit & Supervisory Board in FY2025 (excluding audit reports)

3. Management Advisory Council

Number of meetings held in FY2025: 3

To incorporate independent perspectives, the Management Advisory Council is composed of four outside directors (Akihiro Koyama, Junko Shiokawa, Takafumi Seto, Yasuhiko Yamazaki), along with two internal directors (Chairman Shuhei Toyoda and President Masayoshi Shirayanagi). The chair of the Management Advisory Council is the Chairman.
The Management Advisory Council, as an advisory body to the Board of Directors, deliberates on important corporate strategies and issues, the selection and dismissal of management, compensation, succession planning and other matters, and has the authority to determine the amount of individual compensation for directors upon resolution by the Board of Directors.
Furthermore, the regulations of the Management Advisory Council established in December 2018 stipulate the members of the Management Advisory Council and the content of its agenda.

Main discussions at Management Advisory Council in FY2025

Business Execution System

Toyota Boshoku adopts an organization consisting of six units (Corporate Operation, Research & Development, Functional Collaboration, Production, Special Duties, and Regional Business). We have introduced a Chief Officer System to ensure cross-functional cooperation, and have assigned Center Chiefs, etc. so as to clarify roles, responsibilities, and authority, simplify the decision-making process, and make quick management decisions.
The Corporate Planning Meeting is held twice a month to ascertain the status of implementation of the above, share information on important management issues, and make decisions, while the Corporate Strategy Meeting is held as necessary to deliberate and set the direction for company-wide corporate strategies, as well as products and regional strategies. In this way, as well as ensuring thorough deliberation on issues prior to submission to the Board of Directors, we strive to quicken our response to management challenges. In addition, we have established the Corporate Management Meeting, where information is shared among internal directors, standing Audit & Supervisory Board members, Chief Officers, Center Chiefs, etc., as well as various committees and meeting bodies, so as to enhance deliberations on individual matters and regularly monitor and follow-up on the status of business execution based on policies decided by the Board of Directors.

Roles of various meeting bodies

Support Structure for Outside Directors and Audit & Supervisory Board Members

Internal directors and standing Audit & Supervisory Board members provide explanations about required knowledge pertaining to areas such as the Company’s businesses, financial affairs and organizations when outside directors and outside Audit & Supervisory Board members assume office. The Company also sends materials of the Board of Directors and Audit & Supervisory Board beforehand to outside directors and outside Audit & Supervisory Board members and provides them with prior explanations on the important matters of agenda items submitted to the Board of Directors. Furthermore, outside directors and Audit & Supervisory Board members are provided with reports on the progress of global hoshin (policy), and plans are made for them to tour plants and offices. The Company has assigned dedicated staff to the Audit & Supervisory Board Office as part of a structure for supporting the day-to-day auditing activities of standing Audit & Supervisory Board members. They also support the auditing activities of outside Audit & Supervisory Board members through the operation of the Audit & Supervisory Board.

Evaluation Results of the Effectiveness of the Board of Directors

Toyota Boshoku analyzes and evaluates the effectiveness of the Board of Directors as follows.

1. Method

• (1) The officer in charge of the administrative office of the Board of Directors conducts a questionnaire and interviews with all directors and Audit & Supervisory Board members, including outside members, in February.
• (2) The evaluation results and the improvement measures for issues are summarized and reported to the Board of Directors in March for discussion.

2. Overview of fiscal 2025 evaluation results

• (1) We have been enhancing strategic themes in the Board of Directors, such as new business strategy, human resource strategy, and intellectual property strategy. To further enhance the provision of information to outside officers, in addition to the pre-Board meeting briefings and plant and facility visits carried out to date, an informal meeting was held after the Board meeting for Board members to freely exchange opinions and discuss medium- to long-term corporate strategy. In addition, we have made improvements, such as holding roundtable meetings for outside officers, providing an opportunity for communication among outside officers. As a result, the evaluation has shown that the effectiveness of the Board of Directors in making important management decisions and supervising business execution has been ensured and improved
• (2) On the other hand, opinions were expressed including requests for regular progress reports on important subjects and comprehensive risk information in Board of Directors meeting materials
• (3) In addition, there were requests for improvement, such as more detailed reports at Board of Directors meetings regarding responses to opinions and concerns raised by shareholders and investors

3. Improvement measures

Toyota Boshoku will strive to make the following improvements to ensure even greater effectiveness of the Board of Directors.

• (1) Develop an annual plan of regular progress reports
  Systematically confirm important matters for which regular progress reports are stipulated by the Board of Directors, by incorporating them into the annual agenda schedule of the Board of Directors
• (2) Promote dialogue with stakeholders
  Enhance dialogue with stakeholders by discussing stakeholder opinions and concerns at Board of Directors meetings and formulating action plans to address them
• (3) Enhance support for outside officers
  In addition to continuing to utilize an informal meeting as a forum for discussing medium- to long-term strategy, we will strive to deepen understanding of the Company among outside officers by encouraging free and open discussions on themes proposed by outside officers

Policy for Deciding the Amount of Officers’ Compensation and the Calculation Method

The “Policy for deciding the amount of compensation for Directors and Operating Officers” is resolved by the Board of Directors.

1. Basic approach

In order to realize a compensation system that is highly linked to the Company’s business performance, the following are reflected in part of the compensation structure:

• 1) we set the disparity between positions reasonably in light of the roles and responsibilities, and
• 2) grant stock-based compensation under the transfer-restricted stock compensation plan to directors other than outside directors.

In addition, in order to reflect annual performance and efforts to improve medium-term corporate value in compensation (bonus),

• 3) the Company’s uniform annual performance and the degree of achievement of annual hoshin (policy) by each individual for the single year, and
• 4) evaluation of medium-term corporate value enhancement in terms of the enhancement of social value and economic value.

2. Approach to the level of compensation

For the level of compensation, we select companies listed on the Prime Market of the Tokyo Stock Exchange for benchmarking, based on their corporate size, consolidated revenue, consolidated operating profit, and number of company members and we confirm the appropriateness of compensation amounts while also incorporating the results of external compensation survey organizations.

3. Directors’ compensation

Annual compensation for directors is limited to 600 million yen (including 70 million yen for outside directors), as resolved at the Ordinary General Meeting of Shareholders held on June 17, 2020. The number of directors as of the close of this Ordinary General Meeting of Shareholders was nine, including four outside directors.
Please see the table below, “Structure of Directors’ Compensation,” for details on the types of compensation, payment criteria, and the structure of compensation.

Structure of Directors’ Compensation

• Consolidated operating profit for the fiscal year ended March 31, 2025 was 42.3 billion yen.
• From fiscal 2023, the evaluation indicator for social value enhancement has been changed from a CSR evaluation score to an ESG evaluation score for CSV activities. Of the 24 main indicators that make up the ESG evaluation score, 3 are related to climate change. Specifically, Plant GHG emissions reduction ratio, SCOPE3 Emission reduction rate, and Renewable energy introduction ratio.
  Please see "ESG KPIs: Targets and Results" for details.
• Net assets for the fiscal year ended March 31, 2025 were 490.0 billion yen, and the ESG evaluation score was 3.6 points (out of 5.0 points).

4. Compensation for outside directors

Outside directors are paid only fixed monthly compensation as they are expected to fulfill their roles and responsibilities from a standpoint completely independent of business execution.

5. Compensation for Audit & Supervisory Board members

Audit & Supervisory Board members are paid only fixed monthly compensation and there is no variable factor based on performance. Compensation for Audit & Supervisory Board members is determined through discussion among the Audit & Supervisory Board members within the limit of compensation set by resolution of the Ordinary General Meeting of Shareholders held on June 14, 2022 (not to exceed 130 million yen per year; the number of Audit & Supervisory Board members as of the close of this Ordinary General Meeting of Shareholders was four).

6. Procedures for determining compensation, etc.

In order to ensure the appropriateness of the level and amount of compensation and transparency in the decision-making process, the decision on specific individual compensation payments based on the policy for deciding the amount of compensation is entrusted to the Management Advisory Council, which is composed of four independent outside directors, Chairman (the Chair of the Council), and the President.
The process is set forth in the Board of Directors Rules and the Management Advisory Council Rules, and since the amount of compensation for each individual director is determined through established procedures, the Board of Directors believes that the details thereof are in line with the policy for deciding the amount of compensation.

7. Transfer-restricted stock compensation

The Board of Directors is scheduled to decide on the specific payment period and allocation using the stock compensation limit (within 100 million yen per year and within 100,000 shares per year) defined at the General Meeting of Shareholders held on June 17, 2020.

Total amount of compensation, etc. for directors and Audit & Supervisory Board members (April 2024–March 2025)

• The above compensation includes two directors who retired as of the close of the 99th Ordinary General Meeting of Shareholders held on June 12, 2024.
• The number of persons to whom performance-linked compensation (bonuses) and stock compensation (transfer-restricted stock) will be paid is five directors (excluding outside directors).

Policy and Procedure for Appointing and Dismissing Management, and Nominating Candidates for Director and Audit & Supervisory Board Member

The appointment and dismissal of management and the nomination of candidates for director and Audit & Supervisory Board member are discussed and deliberated by the Management Advisory Council before the Board of Directors makes a resolution. Our policy for the appointment of management and the nomination of director candidates is based on a comprehensive review from the perspective of having the right people in the right places, so that accurate and prompt decisions can be made while taking into consideration the extent to which they have the skills required for execution and oversight.
The policy on nomination of candidates for Audit & Supervisory Board member involves a comprehensive examination of whether the person has knowledge regarding finance and accounting, a general understanding of the Company’s business and diverse perspectives on corporate management.
The policy on nomination of candidates for outside director and Audit & Supervisory Board member involves a comprehensive examination of the requirements for externality stipulated in the Companies Act and the independence criteria established by the Financial Instruments Exchange, and whether the person has extensive experience and broad insight.

Skill matrix of Director and Audit & Supervisory Board member (as of June 11, 2025)

Reasons for election of outside officers

• Director Yasuhiko Yamazaki was nominated as outside directors at the 99th Ordinary General Meeting of Shareholders, held on June 12, 2024
• Audit & Supervisory Board member Yoshito Fujikawa was nominated as an outside Audit & Board member at the 99th Ordinary General Meeting of Shareholders, held on June 12, 2024

Developing the Next Generation of Executive Management Candidates

As part of the development of successors for executive management, candidates are discussed by succession committees (GSCT^*1 and GSC^*2). In addition, we hold training programs for managers and executive candidates to improve the skills and abilities required for management. Moreover, we select and develop young talent who will be the future leaders of the Toyota Boshoku group.

• Global Succession Committee by Top Executives: Executive management successor development committee comprising members at the Operating Officer level and above
• Global Succession Committee: Global key post (presidents of business sites, director, division general manager, etc.) successor development committee comprising members at the regional CEO and Toyota Boshoku Operating Officer level and above

Human Resources Development : Development of Executive Management Successors