We are focused on strengthening our corporate governance to enhance our sustainable growth and improve our medium- and long-term corporate value.

Corporate Governance

Approach and Governance System

To drive sustainable growth and enhance corporate value over the medium and long terms, the GS Yuasa Group is committed to establishing an organization and systems that enable fast, efficient responses to a changing business environment. At the same time, our basic policy on corporate governance is to make every effort to thoroughly implement and strengthen compliance and improve the soundness and transparency of management.

A new governance structure began in fiscal 2017 based on this philosophy. GS Yuasa Corporation, the holding company, is responsible for formulating management strategies for all of the Group's businesses, as well as management for the entire Group and oversight of the Group's business execution. GS Yuasa International Ltd., the Group's core operating company, is the key decision making body for business execution, consolidating and strengthening business execution and making swift business-related decisions.

The Board of Directors makes quick, effective decisions by prioritizing strategic decision making and supervisory functions for management policy. In addition, increasing the number of independent outside directors helps reinforce monitoring.

Governance Structure

Governance Structure

Evaluating the Effectiveness of the Board of Directors

The effectiveness of the Board of Directors has been evaluated once a year since fiscal 2016. All directors and corporate auditors fill out a questionnaire on the structure, management, agenda and duties of the board. As a result of analysis and evaluation of the content, it has been deemed that the Board of Directors is operating effectively. In fiscal 2017, however, opinions were also stated to the effect that the follow-up of important agenda items was inadequate and discussion of medium- and long-term management plans needed deepening. Therefore, we have resolved to issue regular reports on matters designated as requiring progress reports, review the compilation process for medium- and long-term management plans, issue regular progress reports after compilation, and implement appropriate analysis and response. Going forward, we will continue to assess the effectiveness of the Board of Directors and strive to make further improvements.

Reasons for Appointing Internal Directors

To provide control over the Group as the holding company, GS Yuasa Corporation applies a balanced approach to appointing directors who possess knowledge and experience covering the business and functions of the entire Group and the necessary aptitude and competence to ensure speedy decision making.

At present there are no female directors, but GS Yuasa positively recruits female graduates and promotes measures to encourage women to be active at work, including next-generation training, and the ratio of women in managerial positions is gradually increasing.

Policy on the Independence of Outside Directors

Candidates selected as outside directors must meet the requirements for independence set out in the Companies Act and possess the experience and insight to objectively and fairly judge the legality and appropriateness of the execution of the company's duties from the shareholders' perspective without being limited by being in charge of business implementation. Also, we believe in the importance of employing people who are outwardly independent and use the Tokyo Stock Exchange's independence standards as their reference.

Remuneration of Directors

Remuneration paid to directors and auditors in fiscal 2017 is shown below./p>

Total Amount of Remuneration, Etc. by Category

CategoryTotal amount of remuneration, etc.
(Million of yen)
Number of applicable persons
Directors
(excluding outside directors)
20911
Auditors
(excluding outside auditors)
112
Outside directors/auditors516

Record of Attendance by Outside Directors at Board of Directors and Auditor Meetings

The record of attendance by outside directors at meetings of the Board of Directors and auditors in fiscal 2017 is shown below.

Record of Attendance by Outside Directors at Board of Director and Auditor Meetings

NamesBoard of DirectorsAuditor Meeting
No. of attendances /No. of meetingsNo. of attendances /No. of meetings
Hirofumi Onishi,
Outside Director
18 / 18-
Ikuo Otani,
Outside Director
13 / 13-
Shinji Ochiai,
Outside Full-time Auditor
18 / 1815 / 15
Katsuya Ohara,
Outside Full-time Auditor
18 / 1815 / 15
Tsukasa Fujii,
Outside Part-time Auditor
13 / 1310 / 10

Internal Control System

To strengthen the management foundation, the GS Yuasa Group has improved the system and relevant rules to ensure the maintenance of ethical business practices based on the Companies Act. This system includes mechanisms to ensure effective auditing, information management, and risk management throughout the Group.

To comply with the internal control reporting system required under the Financial Instruments and Exchange Law, we are maintaining an internal control system and financial reporting mechanisms to meet all requirements.

Our international subsidiaries and other consolidated Group companies evaluate the status of the improvement and implementation of internal controls. Following external audits, reports on these internal controls are publicly disclosed.

Risk Management

Basic Approach

The GS Yuasa Group believes that risk management is essential for the lasting growth of the company.As our basic approach, the Group thinks that the following two points are important so that crises stemming from the escalation of risks do not exert a serious impact on the Group or on society in general.First, by predicting and understanding risks and adopting appropriate preliminary measures, the escalation of risks (outbreak of crises) can be prevented. Second, effective measures can be taken beforehand so that even if a crisis does occur, the loss is kept to a minimum.Based on this approach, to properly promote risk management, our Group has formulated risk management rules that stipulate the responsibilities of employees and our risk management promotion setup.

Risk Management Based on Risk Management Sheets

In accordance with the risk management rules, each department assesses risk every month using a risk management sheet. On this form, the department first fills in the measures it is taking as a basic response to mitigate the risks it has identified and to avoid any critical events as well as the policies to minimize loss if a critical event does occur. Each department confirms the status of implementation of these measures and related polices each month. The department also fills in the details of any critical events that occurred, as well as a summary of the response and the investigation into the cause and measures to prevent a reoccurrence. These preventive measures are fed back into the "basic response" and the status of implementation is checked each month to provide a framework that ensures that similar events do not happen again.

The risk management sheets produced by the departments are compiled at the divisional level with the director in charge of the division verifying and assessing the status of response through the Risk Management committee. The deliberations by the committees are summarized and then fed back to each department as part of a mechanism to improve the effectiveness of risk management.

Risk Management Sheet

Risk Management Sheet

Risk Management under the Group Risk Management Committee

The Group Risk Management Committee, headed by the president and consisting of the chairs of departmental Risk Management Committees, holds semiannual meetings to promote groupwide risk management and to encourage the sharing of key information related to risk management. The Risk Management Committee confirms that the appropriate risk management measures have been implemented and the committee chairs report on progress in this area. We also actively exchange opinions and share information on the different styles of risk management.

Risk Management Structure

Risk Management Structure

System for Dealing with Crises

To prepare for the possibility that a risk materializes, we have established a system that includes an emergency contact network to swiftly implement crisis management. If a serious crisis occurs, members of the Group Risk Management Committee will be appointed to organize a crisis management headquarters, under the president, to minimize corporate losses. The system we have set up enables us to implement an effective response swiftly and with appropriate care.

Compliance with Laws, etc.

Basic Philosophy on Promoting Compliance

By training our personnel according to our philosophy of "Innovation and Growth" while manifesting our commitment to society and preserving the global environment, we are ensuring that all employees are guided in their behavior focusing on compliance with laws, company regulations and ethical standards.

Multifaceted activities with innovative methods are being used to promote compliance and ensure that the different themes cover all levels of employees. When promoting compliance, it is also essential to establish rules and a structure to follow, as well as a strong sense of commitment. In this spirit, we adopted Compliance Promotion Regulations in line with the Compliance Declaration made by the president. The GS Yuasa Corporate Ethical Standards cover the ten items that all employees must support and the corporate ethical behavior guidelines that outline responses to specific situations. Other activities are aimed at enhancing awareness by getting every employee to think about what he or she should do for compliance.

Compliance Manual

We distribute a compliance manual to all employees that includes company regulations related to compliance. The ten-item Code of Conduct includes commentary in a Q&A format, innovative ways to promote understanding with content based on actual practices, an introduction to the GS Yuasa Group corporate ethics hotline, the Group's internal whistleblower system and an emergency contact system for use in a crisis.

Workplace Meetings on Compliance

Workplace meetings on compliance have been conducted for six consecutive years since 2012. The purpose of these meetings is to improve employee awareness of compliance. The meetings, including active exchanges of opinion, were held at 441 workplaces in fiscal 2017 with 96% of the sites commenting that the activities were effective. Many topics were covered, including respect for human rights, prevention of inappropriate conduct, management of working hours, harassment, occupational health and safety, waste management, product safety, handling of confidential information and subcontracting laws. The meetings use educational materials made by the division in charge on each topic and including content related to the circumstances of the Group. We intend to continue running these meetings and upgrading the content to ensure that it is both up-to-date and educational.

GS Yuasa Group Corporate Ethics Hotline

We established GS Yuasa Group corporate ethics hotline regulations and set up a corporate ethics hotline. Accessible both internally and externally, the hotline enables employees, temporary workers, business partners and others to provide information anonymously if they become aware of behavior by a Group employee that violates the law or company regulations or is unethical or otherwise inappropriate or any matter that is at risk of becoming a violation. In fiscal 2017, six reports were made including one case of harassment. We conduct inquiries and take appropriate action, on these matters, while remaining committed to protecting whistleblowers.

Number of reports to the GS Yuasa Group corporate ethics hotline
20135
20143
20158
20165
20176

Elimination of Antisocial Elements

In our Corporate Ethical Standards, our Group clearly states its policy of "not having any relations whatsoever with antisocial elements and resolutely confronting any unreasonable demands, etc." And in our Corporate Ethical Behavior Guidelines, we specifically stipulate "prohibition of the provision of benefits," "elimination of antisocial elements," and a "firm response." Our employees are made fully aware of these standards and guidelines.

Information Security

Efforts to Ensure Information Security

Our Group places importance on global efforts to ensure information security. Through the regular monitoring of communications by an outside security service, the introduction of an illegal connection detection system and other measures, we endeavor to prevent illegal access to our in-house network and forestall damage. To prevent the outflow of confidential information, we conduct the encryption of personal computer data taken outside the company and promote awareness-raising activities so that employees follow our procedures for the management of information system use, including the distribution of an information security handbook and the implementation of e-learning. Furthermore, based on Japanese security standards, we conduct surveys of security measures in overseas Group companies and give guidance to address vulnerabilities.

Intellectual Property

Efforts to Ensure the Protection of Intellectual Property

We see intellectual property, the result of technological development, as one of our important assets. Our basic policy is to protect our outstanding technology through aggressive patent applications and to maintain the trust of our customers by eliminating imitation products. Every year we file about 300 patent applications; in fiscal 2017 the number was 343.