What Kyokuto needs to improve regarding its Corporate Governance | 極東貿易への株主提案に関する特集サイト
極東貿易
If our proposals are approved and Kyokuto continues 100% payout ratio, the estimated share price is;
>JPY 4,000(*)
*Calculation based on dividend yield. Please find the detail of calculation in “our shareholder proposals”.

What Kyokuto needs to improve regarding its Corporate Governance

It is a serious problem that Kyokuto holds large amount of investment securities. On the other hand, Kyokuto makes commendable efforts recently to improve its corporate governance structure. We hope these efforts work effectively.

  • ■ In March 2018, Kyokuto established an optional nomination committee and remuneration committee (hereinafter referred to as “the committee”).
  • ■ On the same day, Kyokuto announced to grant shares with restriction on transfer to managements as share-based payment.

Independent outside directors

As a further improvement of Kyokuto’s corporate governance, the committee members should be secured as “independent” outside directors.
On the surface, the majority of the members in the committee are independent outside directors. In realty there are some independent outside directors who are not truly “independent”.



Overview of the committees

# of member # of internal director # of outside director
optional
nomination
committee
4 1 3
optional
remuneration
committee
5 2 3

(source:Corporate Governance Report as of 1st April 2019)



An advisor of Ishikawajima-harima Heavy Industries Corporation (security code 7013, hereinafter referred to as “IHI”) who is ex. CEO / Chairman of IHI is appointed as an independent outside director of Kyokuto. No specific figures are disclosed but Kyokuto has business relationships with IHI such as purchasing electronic equipment, selling auto control system etc. Also, IHI’s employee pension trust is the second largest shareholder of Kyokuto.
Although the ex. CEO / Chairman of IHI will retire in coming June, Kyokuto announced to propose a new IHI related person who is an ex. executive vice-president of IHI as an outside director. Kyokuto has not defined whether he is “independent” outside director or not, but in any case, we argue that an outside director should be secured his independency.

The role of independent outside directors is to participate in the decision making process of the board, representing minority shareholders’ interests.
As Kyokuto has business relationships with IHI and you cannot expect the “independency” of the director above, it is reasonable to treat the director as a part-time director. It will improve Kyokuto’s corporate governance to appoint another “truly” independent outside director.

Also, there is an independent outside director in Audit and Supervisory Committee whose period in office is quite long. According to our voting policy, we judge an outside auditor or outside director whose period in office is longer than 8 years is not secured his “independency”.

At the AGM in 2019, we hope to have candidates for independent outside directors who are truly “independent”.

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This website is for AGM in 2019. Please find our latest proposal in 2020 here.

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