Our management actively engages in investor relations (IR) and shareholder relations (SR) activities to contribute to our sustainable growth and increase corporate value over the medium to long term.
For IR activities, in addition to quarterly earnings conferences, the CEO and each company's executive appear at Medium-term Management Plan announcement and IR Day events to share our business strategies and growth story. Simultaneous interpretation and subtitles are used to broadcast briefings in Japanese and English in an effort to provide fair disclosures to overseas investors. The IR Department, which was established under the direct control of the CEO, also supplements explanations as appropriate through individual interviews and regularly reports opinions from investors to management and the Board of Directors so that feedback can be of use in management. In addition, we actively participate in IR and ESG conferences in Japan and overseas and encourage dialogue with capital markets through the cooperation of company executives and the IR Department to gain a deeper understanding of the Group. In fiscal year 2022, we received a Best IR Award from Japan Investor Relations Association and were selected as a "Most Honored Company" by Institutional Investor magazine in the U.S. for the seventh consecutive years.
As a part of our SR activities, company executives play a central role in constructive dialogue with our major investors and proxy advisory firms. In addition to explaining the Shareholders’ Meeting agenda in advance, we engage in repeated dialogue throughout the year on a wide range of topics including corporate governance, our policies about sustainability-related initiatives, the environment, human rights, and diversity and deepen mutual understanding.
To encourage active discussion and facilitate smooth and efficient voting at Shareholders’ Meetings, we send convocation notices at an early stage, and also post notices in both Japanese and English on our website prior to sending notices and take other measures to provide information to shareholders in a timely manner. In addition, we analyze the results of the exercise of voting rights, report to the Board of Directors, and use the results to further enhance engagement with investors.
Corporate Governance
- Corporate Governance System
- Establishment of the Director Compensation System
- Evaluating the Effectiveness of the Board of Directors
- Skills Matrix
- Engagement with Capital Markets
Corporate Governance System
Tokyo Electron regards building corporate governance structures as important for achieving success in global competition, realizing sustainable growth. To that end, we have built a structure for utilizing to the maximum the worldwide resources we possess and have worked to incorporate a wide range of opinions to strengthen our management foundation and technology base, establishing a governance structure capable of ensuring that we attain global-level earnings power. We established the Corporate Governance Guidelines* and outlined the corporate governance structures that we have developed and reinforced ahead of other companies.
Further Development of Corporate Governance
We use the Audit & Supervisory Board System, which consists of a Board of Directors and an Audit & Supervisory Board, and have achieved effective governance based on the supervision of management by the Audit & Supervisory Board.
In April 2022, we transited to the Prime Market of the Tokyo Stock Exchange and took the following actions reinforcing corporate governance to respond to the expectations of capital markets including compliance with the Corporate Governance Code and to enhance corporate value even further.
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①Changed the composition of the Board of Directors to three inside directors and three outside directors ②Appointed a majority of outside directors to the Nomination Committee and Compensation Committee,including their respective chairpersons ③Introduced a Corporate Officers system, under which corporate officers, as the highest decision-making body on the executive side of the Group, are responsible for the entire Group management and business execution ④Established the Corporate Officers Meeting and appropriately delegated authority from the Board of Directors to the executive side to conduct prompt decision-making and agile operational execution ⑤Corporate officers attend Board of Directors meetings and apply the details of Board deliberations to business execution in an appropriate and speedy manner |
By establishing a Board of Directors that performs its supervisory functions and a robust business execution system in the semiconductor production equipment industry, where technological innovation is rapid and market changes are active, we will further promote growth-oriented group management on a global basis, expand short-, medium- and long-term profit and achieve continuous corporate value enhancement.
Changes in Corporate Governance (Since CY1998)
Corporate Governance Framework
| Nomination Committee | Composition | One inside director and two outside directors |
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| Chairperson | Outside director | |
| Number of Meetings | 12 in FY2022 | |
| Deliberation Topics | Appointment and dismissal of corporate directors and the CEO, candidates of independent outside directors, status of successor development, other topics |
| Compensation Committee | Composition | One inside director and two outside directors |
|---|---|---|
| Chairperson | Outside director | |
| Number of Meetings | 10 in FY2022 | |
| Deliberation Topics | Policies concerning determination of individual compensation for corporate directors and others and the details of compensation, compensation of individual remuneration, etc. of representative directors, other topics |
| Board of Directors | Composition | Three inside directors and three outside directors Corporate officers also attend meetings to give explanations and reports, etc. |
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| Chairperson | Inside director (non-executive) | |
| Number of Meetings | 12 in FY2022 |
| Audit & Supervisory Board | Composition | Two full-time Audit & Supervisory Board Members and three outside Audit & Supervisory Board members |
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| Chairperson | Full-time Audit & Supervisory Board member | |
| Number of Meeting | 9 in FY2022 |
| Corporate Officers Meeting | The highest decision-making body on the executive side; established in June 2022 | ||
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| Composition | Six corporate officers Inside directors who are not corporate officers and inside Audit & Supervisory Board members also participate |
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| Chairperson | CEO | ||
| Meeting Frequency | Once a month in principle | ||
| CSS (Corporate Senior Staff) |
Reviews progress management and implementation of management plans from a global perspective | |
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| Composition | Executive officers, management executives of overseas subsidiaries and others | |
| Meeting Frequency | Once a quarterly | |
| Committees on the Executive Side | Business Ethics Committee |
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| Sustainability Committee |
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| Risk Management Committee |
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Establishment of the Director Compensation System
Basic Policy on Director Compensation
The entire Group emphasizes the following points in its basic policies on compensation for corporate directors and Audit & Supervisory Board members.
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1. Levels and plans for compensation to secure highly competent management personnel with global competitiveness 2. High linkage with business performance in the short term and medium-and-long term increase of corporate value aimed at sustainable growth 3. Securement of transparency and fairness in the decision process of compensation and appropriateness of compensation |
Role of the Compensation Committee
To secure transparency and fairness in management and the appropriateness of compensation, the Compensation Committee, which is chaired by an independent outside director, utilizes advice from an external expert who attends all meetings, compares compensation levels with companies in Japan and overseas and analyzes the latest trends and best practices in Japan and overseas (such as reflecting ESG in compensation). The committee then proposes to the Board of Directors a compensation system that is the most appropriate for the Group and individual compensation amounts for the representative directors based on the basic policies on compensation.
Overview of Compensation
The table below provides an overview of the composition of compensation and policies and decision-making for each type of compensation.
| Type of Compensation | Recipient | Overview of Compensation | |||
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| Inside Directors | Outside Directors | Audit & Supervisory Board Members | |||
| Fixed Basic Compensation | ○ | ○ | ○ |
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| Annual Performance-linked Compensation | Cash Bonuses | ○ | ー | ー |
Net income attributable to owners of parent and consolidated ROE are adopted, and the results of comparisons of operating margin and operating margin growth ratio with competitors are reflected on the amount of payment (Individual performance evaluation items) Contribution to short- and medium-term management strategy targets including ESG |
| Stock Compensation-based Stock Options | ○ | ー | ー | ||
| Medium-term Performance-linked Compensation | Performance Share (stock-based compensation) | ○ | ー | ー |
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| Non-performance-linked Compensation | Restricted Stock Units (stock-based compensation) | ー | ○ | ー |
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Advanced Initiatives Relating to Director Compensation
■Advanced Initiatives Relating to Director Compensation
We have established the Shareholding Guidelines (effective July 1, 2021) to further ensure that management’s interests align with those of stakeholders in pursuit of sustainable enhancement of corporate value. We have set targets for management to hold Company shares equal to the following within five years after the effective date of the guidelines or appointment.
| Directors | Goals | |
|---|---|---|
| CEO | Fixed basic compensation (annual amount) |
3 times |
| Inside Directors, Corporate Officers | 2 times | |
| Outside Directors | 1 times | |
| Executive Officers | 1 times | |
■Clawback Policy
We have enacted a clawback policy (effective July 1, 2021) whereby we can demand a refund of annual performance-linked compensation and medium-term performance-linked compensation if financial figures are found to be in need of major correction due primarily to the willful misconduct of an executive director or corporate officer.
The amount of compensation subject to refund is the excess portion of the performance-linked compensation received in the fiscal year in which such misconduct was found as well as the three preceding fiscal years.
Evaluating the Effectiveness of the Board of Directors
Overview of Evaluations of Effectiveness
To further enhance our governance and the effectiveness of the Board of Directors, we have conducted annual evaluations of the effectiveness of the Board since fiscal year 2016 and have disclosed summaries of the results. Since fiscal year 2019, we have used external experts as a third-party organization to verify the status of initiatives relating to issues identified in the preceding fiscal year, identify future issues and work toward continuous improvement.
■Evaluation of the Effectiveness of the Board of Directors for FY2022
Scope of Evaluation: Board of Directors Overall (including details of the activities of the Nomination Committee and Compensation Committee)
Process
Evaluation Items: The main evaluation items for evaluating effectiveness are as follows.
－Size and composition of the Board of Directors －Operational status of the Board of Directors |
■FY2022 Initiatives
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Reinforcement of continuous deliberation concerning medium- to long-term management strategies
- Two off-site meetings were held for in-depth discussions on growth strategies, Medium-term Management Plan, the future governance system and other issues.
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Promoting diversity and developing and appointing global human resources
- Initiatives and the status of disclosure regarding human capital are reported to the Board of Directors, and with respect to diversity, the Board discusses, sets and discloses targets for the ratio of female managers and implement specific measures
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Reinforcement of the internal audit system and collaboration between the Internal Audit Department and the Board of Directors
- The status of implementation of internal audits is reported to the Board of Directors. Also, risk-based audits are conducted pursuant to the audit map.
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Enhancement of information sharing by the Nomination Committee and the Compensation Committee with the Board of Directors
- The status of activities of the Compensation Committee, discussion points concerning review of compensation systems, the status of progress of successor development plan and other matters are reported to the Board of Directors
■Overview of FY2022 Evaluation Results
We recognize that the Board of Directors appropriately performs its roles and obligations, generally with a high level of effectiveness, and the Board, including the Nomination Committee and the Compensation Committee, functions effectively (the analysis and evaluation by external experts resulted in a similarly high evaluation).
■Future Initiatives
Based on the results of the most recent evaluation, we will continuously take action regarding the following items and work to enhance effectiveness even further.
| (1)Measures to enhance the effectiveness of the Board of Directors in the 60th fiscal year | |
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| (2)Continuous deliberation by the Board of Directors to achieve growth over the medium to long term and continuously enhance corporate value | |
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| (3)Investigate optimal information sharing among members of the Board of Directors and with the voluntary committees | |
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Main Topics for the Board of Directors and Off-site Meetings in FY2022
| CEO |
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Medium- to long-term growth strategies |
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Risks |
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Governance |
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Skills Matrix
We define Product Competitiveness, Customer Responsiveness, Higher Productivity and Management Foundation, which supports our overall business activities, as material issues.
We will address priority themes relating to each material issue and achieve expansion of medium- to long-term profit and continuous corporate value enhancement by each corporate director and Audit & Supervisory Board member demonstrating their skills in global business, governance, sustainability and in particular, the areas listed below.
Definition of Expected Skills
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Corporate Management
- Experience of corporate management (experience serving as a representative director or chairperson/president)
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Semiconductor/FPD
- Knowledge of semiconductor/FPD-related industries
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Manufacturing/Development
- Knowledge/experience in manufacturing and development at Tokyo Electron and other manufacturers
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Sales/Marketing
- Knowledge/experience in sales and marketing at Tokyo Electron and other manufacturers
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Finance, Accounting/Engagement with Capital Markets
- Knowledge in financial accounting and M&A, or knowledge/experience in engagement with capital markets
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Legal Affairs/Risk Management
- Knowledge in legal affairs, compliance and risk management
Diversity of Board Members
Expected Skills of Corporate Directors and Audit & Supervisory Board Members
Independence and Diversity of Corporate Directors
Change in Independent Outside Directors
Engagement with Capital Markets
