Corporate Governance

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We have inserted our basic views of corporate governance, and our governance report.

Corporate Governance Basic Policy of Sumitomo Heavy Industries, Ltd. ("SHI")

Chapter 1 General Provisions

Purpose and business principles

Article 1
  1. 1Under the Sumitomo's business philosophy, SHI has set the following purpose and business principles and, based thereon, shall conduct its management in consideration of value creation for all stakeholders, and shall strive to improve the SHI Group's corporate value over the medium- to long-term.
(1)Purpose
Enhance society and those within it with compassion through our ownership and vision
  
(2)Business Principles

Corporate Mission Statement

  • We will aim to become a machinery manufacturer that continues to provide excellent products and services to the world.
  • With integrity being a key principle in the Group, we will contribute towards society by gaining high respect and confidence from all stakeholders.

Our Values

Customer First
We exceed customer expectations by providing sophisticated efficient products and services, giving the utmost consideration to their needs and requirements.
Embrace Changes
We will continue to drive and embrace changes without accepting the status quo.
Commitment to Technology and Innovation
We are passionate about contributing to society by further developing our unique, in-house technologies.
Respect People
We will nurture an organizational climate that fosters mutual respect, tolerance and learning for growth.

Basic views on corporate governance

Article 2
  1. 1SHI shall make efforts to enhance its corporate governance, aiming to establish an efficient and highly transparent management structure, in order to increase the SHI Group's corporate value and further enhance its reputation among and trustfulness of all stakeholders.

Chapter 2 Securing the Rights and Equal Treatment of Shareholders

Securing the equal treatment of shareholders

Article 3
  1. 1SHI shall treat all shareholders equally in practice according to the feature and number of each shareholder's owned shares. Through means such as clearly setting procedures regarding the exercise of shareholder rights, SHI shall establish an environment where shareholders, including minority shareholders, may exercise their rights appropriately.

General Meeting of Shareholders

Article 4
  1. 1To enable shareholders to ensure they have sufficient time to consider the proposals of a General Meeting of Shareholders, SHI shall send notices on the calling of the General Meeting of Shareholders at least three weeks before the meeting date and disclose the calling notice (including its English translation) by electronic means on TDnet or SHI's website without delay after the day on which the Board of Directors' resolution is made concerning the calling of the General Meeting of Shareholders.
  2. 2SHI shall participate in the Electronic Voting Platform provided by the Tokyo Stock Exchange thereby ensuring convenience for institutional investors in exercising voting rights and communications with beneficial shareholders.
  3. 3Regarding a proposal against which a considerable number of opposing votes are cast among the proposals approved at a General Meeting of Shareholders, SHI shall, at a Board of Directors meeting, analyze the reasons behind the opposition and why there were many opposing votes, and endeavor to understand the shareholders' intentions. As necessary, SHI shall also take appropriate actions in response, such as having dialogue with shareholders.

Basic strategy for capital policy

Article 5
  1. 1SHI's goal shall be to have the return on invested capital (ROIC) of each business owned by SHI always exceed the capital cost in order to realize an improvement of shareholder value. To realize this goal, SHI shall not only concentrate its management resources on highly competitive businesses, but also proceed with the constant reform of its business structure to create new values by combining the knowhow, skills, and technological abilities of each business.
  2. 2As the basis for implementing the means to achieve the goal outlined in the preceding paragraph, SHI shall maintain a sound financial structure that supports the sustainable growth of the businesses owned by SHI.
  3. 3SHI shall deem strategic investment leading to improvements in shareholder value, and the implementation of appropriate returns to shareholders as two of the most important management tasks, and endeavor to strongly perform such tasks.

Strategic shareholdings

Article 6
  1. 1While SHI considers the task of improving asset efficiency to be important, from the viewpoint of establishing and maintaining stable and long-term transaction relationships and facilitating and strengthening business tie-ups and cooperative business development, among other matters, SHI may hold shares that it considers necessary to promote the businesses it owns as strategic shareholdings.
  2. 2SHI shall annually review the significance, compare between benefits or earnings, such as dividends, and capital costs, and examine risks of each strategic shareholding at a Board of Directors meeting. SHI shall proceed to sell shares for which the rationality of its strategic shareholding is not confirmed.
  3. 3SHI shall appropriately exercise the voting rights of its strategic shareholdings by judging whether such exercise of the voting rights will contribute to the improvement of the corporate value over the long-term of the SHI Group and the company shares which SHI holds as strategic shareholdings by confirming whether such companies' capital policies could cause dilution or proposals submitted by such companies could harm corporate value, among others.

Related party transactions

Article 7
  1. 1When SHI conducts a transaction involving a conflict of interest with a director, and when SHI conducts with a corporate auditor, executive officer or main shareholder who holds shares of 10% or more of SHI's total voting rights an important transaction that could harm the common interests of shareholders, SHI shall, in accordance with the company rules, seek prior approval for such transaction at a Board of Directors meeting and report to the Board of Directors the result of such transaction.

Chapter 3 Appropriate Cooperation with Stakeholders Other Than Shareholders

Ethics code

Article 8
  1. 1SHI shall establish an Ethics Code as a code of conduct to be complied with by all employees.
  2. 2SHI shall distribute a Compliance Manual to all employees as specific conduct guidelines for each business activity and offer compliance training to ensure that the issue of compliance is understood by all employees.
  3. 3SHI shall conduct an annual awareness survey on compliance with all employees to further improve the compliance awareness of each employee and to discover any problems with employees and SHI at an early stage and respond appropriately. SHI shall report the survey results and improvement and response measures to its Compliance Committee and Board of Directors.

Whistleblowing

Article 9
  1. 1SHI shall establish a whistleblowing system, with contact persons including SHI's corporate auditors, as a point of contact for reports on instances of violation and potential violation of laws and regulations and corporate ethics, shall promote the use of this system, and shall endeavor to discover such problems at an early stage.
  2. 2SHI shall stipulate in the Sumitomo Heavy Industries Ethical Hotline Regulations that no information provider will be treated unfavorably for whistleblowing and shall make sure that this policy is known throughout the company.

Ensuring diversity in the company, including active participation of women

Article 10
  1. 1For the SHI Group’s sustainable growth, SHI shall seek employees from a broad range of people regardless of nationality, gender and form of recruitment, and promote their utilization by appointing them to managerial positions.
  2. 2SHI shall promote diversity management, aiming for an active organization that comprises diverse human resources and where individual employees may work actively and manifest their abilities.
  3. 3For the purpose of encouraging the active participation of women, SHI shall continue to make efforts for, among other initiatives, a reform of awareness, the improvement of the work environment, the development of scopes of work, the expansion of opportunities for the participation of women and the appointment of women, and the promotion of work-life balance, including the establishment of a work-life balance support program, in the SHI Group.

Chapter 4 Ensuring Appropriate Information Disclosure and Transparency

Basic policy on information disclosure

Article 11
  1. 1To maintain and develop relationships of trust with all stakeholders, SHI shall disclose important information concerning the SHI Group timely and appropriately, focusing on transparency, fairness, and continuity.
  2. 2SHI shall establish a Timely Disclosure Judgement Committee with the officer in charge of investor relations and public relations taking charge, and shall disclose information promptly pursuant to relevant laws and regulations, such as the Financial Instruments and Exchange Act, and the rules decided by the Tokyo Stock Exchange, among others.
  3. 3SHI shall not only disclose information based on relevant laws and regulations and the rules decided by the Tokyo Stock Exchange, among others, but also actively and fairly disclose information that SHI has considered useful to deepen stakeholders' understanding about the SHI Group's management policy and business.
  4. 4SHI shall disclose and provide necessary information in its disclosure documents in English.

Chapter 5 Responsibilities of the Board of Directors, etc.

Section 1: Roles and Responsibilities of the Board of Directors

Roles and responsibilities of the Board of Directors

Article 12
  1. 1SHI's Board of Directors and senior management officials shall recognize the Medium-Term Management Plan, which includes SHI's specific target figures for sales, operating profit, ROIC, total return ratio, and the like, as one of their commitments to shareholders, and make their utmost efforts to realize the plan. When the plan are not realized, SHI's Board of Directors and senior management officials shall analyze the reasons for this, provide an explanation to shareholders of the same, and then reflect such analysis in SHI's plans for the terms thereafter.
  2. 2SHI's Board of Directors shall introduce an executive officer system to establish an environment that enables the prompt and resolute execution of business. By ensuring that important and risky management tasks are to be reported as appropriate from the management team at Board of Directors meetings, the Board of Directors shall perform highly effective supervision of the management team and directors.
  3. 3SHI's Board of Directors shall appropriately establish an internal control system and risk management system based on the Companies Act and other relevant laws and regulations, and the Board of Directors shall appropriately supervise the operation by receiving reports on their annual plan and operational status from the internal control division, giving necessary instructions and utilizing the internal audit division.
  4. 4SHI’s Board of Directors shall formulate a basic policy on sustainability from the viewpoint of improving corporate value over the medium- to long-term, and shall further consider addressing positively and proactively the sustainability issues, such as taking care of climate change and other global environmental issues, respect of human rights, fair and appropriate treatment of the workforce including caring for their health and working environment, fair and reasonable transactions with business partners, and crisis management for natural disasters.
  5. 5In order for the Board of Directors to fulfill its functions, SHI shall establish a system in which the internal audit division appropriately reports directly to the Board of Directors.

The scope of the matters delegated to executive officers

Article 13
  1. 1Regarding matters that are set as resolution matters of the Board of Directors under laws and regulations, and matters specified as important matters to be decided for management by the regulations of the Board of Directors, SHI shall decide such matters by resolution at Board of Directors meetings.
  2. 2Regarding decisions on business execution other than the matters specified in the preceding paragraph, SHI's Board of Directors shall delegate such decisions to the president and other executive officers and clearly specify the scope of such delegation in the decision-making authority regulations.

Cooperation of the management team with outside directors and the accounting auditor

Article 14
  1. 1Based on the audit plans prepared by the accounting auditor, SHI’s accounting division shall confirm that sufficient audit time is secured to enable high-quality audits.
  2. 2SHI shall offer opportunities for discussions between the accounting auditor and the management team, including the president, and shall establish a structure where standing corporate auditors can, as appropriate, exchange opinions with the accounting auditor and outside directors and, as necessary, share the details of such opinions with the accounting auditor or outside directors. SHI shall thereby ensure sufficient cooperation between the accounting auditor and directors necessary for appropriate audits.

Section 2: Effectiveness of the Board of Directors

Composition of the Board of Directors

Article 15
  1. 1The number of SHI's directors shall be no more than 12, the maximum number stipulated in its Articles of Incorporation. The board shall comprise an appropriate number of directors so that substantial discussions at Board of Directors meetings are ensured, and for which director diversity is considered.
  2. 2As part of establishing a governance structure for the SHI Group's sustainable growth and improvement of its corporate value over the medium- to long-term, SHI shall appoint at least one third of its directors as outside directors who satisfy the Independence Standards for Outside Officers stipulated in Article 28 of this basic policy to strengthen the Board of Directors' management supervision function.
  3. 3Under the Corporate Mission Statement “We will aim to become a machinery manufacturer that continues to provide excellent products and services to the world” and “With integrity being a key principle in the Group, we will contribute towards society by gaining high respect and confidence from all stakeholders,” for the SHI Group’s sustainable growth and improvement of corporate value over the medium- to long-term, in the composition of the Board of Directors, SHI shall consider each director’s expertise and experience (including management and business experience, and experience of global business), as well as the diversity.

Policies on and procedures for nominating director candidates

Article 16
  1. 1SHI's director candidates shall be nominated from those who satisfy the matters specified in each of the following items:
    1. 1a person who has excellent character, insights, and abilities, as well as a great sense of ethics;
    2. 2a person who has the capability to view the overall management system of SHI, the intrinsic sense of risks, and extensive knowledge on management; and
    3. 3a person who may understand and embody the Sumitomo's business philosophy and the SHI Group's business principles, among others.
  2. 2In nominating director candidates, SHI shall consider the balance of the expertise and experience (including management and business experience and experience in developing global business) of each director candidate, and diversity, among other factors, to be able to realize effective corporate governance by the Board of Directors as a whole.
  3. 3Inside director candidates shall be nominated also in consideration of their association with SHI's management strategy and business scope, and their past experience in management, business, and their specialized areas, among other fields.
  4. 4Outside director candidates shall be nominated in consideration of not only their role to supervise SHI's management independently from the management team and appropriately reflect stakeholders' viewpoints, but also of their abundant experience as a manager or extensive knowledge on management, among other factors.
  5. 5Director candidates shall be evaluated and determined at a Board of Directors meeting following examination by and reporting of the Nomination Committee, an advisory body to the Board of Directors.

Policies on and procedures for appointing executive officers

Article 17
  1. 1SHI's executive officers shall be appointed from those who satisfy the matters specified in each of the following items:
    1. 1a person who has excellent character, insights, and abilities, as well as a great sense of ethics;
    2. 2a person who has the capability to view the overall management system of SHI, the intrinsic sense of risks, and extensive knowledge on management; and
    3. 3a person who may understand and embody the Sumitomo's business philosophy and the SHI Group's business principles, among others.
  2. 2Executive officers shall be appointed from those in charge of business execution (including those who undertake such a responsibility as an assistant), such as SHI's president, a general manager of SHI's main business, the president of a main group company, and a general manager of a main division at SHI's headquarters.
  3. 3Executive officer candidates shall be reported to the Nomination Committee, an advisory body to the Board of Directors, and after receiving necessary advice, the executive officers shall be appointed or dismissed after deliberation at a Board of Directors meeting.

Policies on determining the remuneration of officers

Article 18
  1. 1SHI defines the policies on determining the remuneration of officers as provided in Exhibit 1[PDF:75KB] to establish a remuneration system that contributes to SHI Group’s sustainable growth, the improvement of its corporate value and value sharing with shareholders, and set an appropriate remuneration standard for the officers.

Concurrent officer positions at other listed companies

Article 19
  1. 1In reference documents for a General Meeting of Shareholders and in a business report, SHI shall disclose every year where its directors, corporate auditors, and their candidates are serving concurrently as an officer at another listed company, and other important details concerning jobs they concurrently have.

Active deliberation at the Board of Directors

Article 20
  1. 1SHI's Board of Directors shall determine its annual meeting schedule well in advance of the meeting dates and determine matters of deliberation in advance of each meeting.
  2. 2SHI's Board of Directors meetings shall be held once a month in principle, and the number of matters for deliberation for each meeting shall be fixed at an appropriate number to enable sufficient deliberation.
  3. 3SHI's Board of Directors shall endeavor to ensure sufficient deliberation time for proposals that should be given plenty of deliberation time through means such as allowing for a proposal to be deliberated on multiple times.

Information gathering and support structure of directors

Article 21
  1. 1SHI shall endeavor to distribute to directors materials for Board of Directors meetings well in advance of the meeting date.
  2. 2SHI shall endeavor to provide directors with sufficient information by providing them with necessary materials as appropriate at the Executive and Operating Officers Committee, the Management Strategy Committee, the Budget Deliberation Committee, and other important committees, and in individual reports, among other methods.
  3. 3SHI's outside directors shall gather necessary information on matters of deliberation of a Board of Directors meeting and other important matters through means such as attending the Executive and Operating Officers Committee. They shall receive explanations in advance from the management team about particularly important matters among the matters of deliberation of the Board of Directors, and then attend a Board of Directors meeting.

Evaluation of effectiveness of the Board of Directors

Article 22
  1. 1SHI’s Board of Directors shall evaluate its effectiveness and disclose a summary of the results of the evaluation on an annual basis in order to ensure and improve the effectiveness of the Board of Directors.

Section 3: Roles and Responsibilities of Corporate Auditors and the Board of Corporate Auditors

Roles and Responsibilities of Corporate Auditors and the Board of Corporate Auditors

Article 23
  1. 1SHI's Board of Corporate Auditors shall comprise outside corporate auditors and standing corporate auditors. Outside corporate auditors shall fulfill their responsibilities as a corporate auditor by taking advantage of their strong independence.
  2. 2SHI's outside auditors shall take advantage of their great specialized knowledge and abundant experience in various fields, while its standing corporate auditors shall take advantage of their specialized knowledge and abundant experience regarding SHI's management. Both shall perform highly effective audits and actively express their opinions to the management team at Board of Director meetings and the Executive and Operating Officers Committee, among others.
  3. 3SHI's corporate auditors shall hold an Information Meeting of Corporate Auditors and Outside Directors regularly, aiming to share information and exchange opinions with outside directors and deepen their cooperation.
  4. 4In order for the Board of Corporate Auditors to fulfill its functions, SHI shall establish a system in which the internal audit division appropriately reports directly to the Board of Corporate Auditors.

Policies on and procedures for nominating corporate auditor candidates

Article 24
  1. 1SHI's corporate auditor candidates (including substitute corporate auditor candidates; the same will apply hereinafter) shall be nominated from those who satisfy the matters specified in each of the following items and who have the ability to make appropriate judgements from an independent and objective standpoint:
    1. 1a person who has excellent character, insights, and abilities, as well as a great sense of ethics;
    2. 2a person who has the capability to view the overall management system of SHI, the intrinsic sense of risks, and extensive knowledge on management; and
    3. 3a person who may understand and embody the Sumitomo's business philosophy and the SHI Group's business principles, among others.
  2. 2In nominating corporate auditor candidates, SHI shall consider the balance of the expertise and experience (including management and business experience) of each corporate auditor candidate, and diversity, among other factors, to be able to realize effective audits by the Board of Corporate Auditors. In addition, SHI shall nominate at least one candidate who has appropriate knowledge on finance and accounting.
  3. 3Inside corporate auditor candidates shall be nominated also in consideration of their understanding about SHI's management strategy, management, and business.
  4. 4Outside corporate auditor candidates shall be nominated also in consideration of their abundant experience as a manager and extensive knowledge on finance, accounting, and legal affairs, among other areas.
  5. 5Corporate auditor candidates shall be evaluated and determined at a Board of Directors meeting following examination by and reporting of the Nomination Committee, an advisory body to the Board of Directors, and consent from the Board of Corporate Auditors.

Information gathering and support structure of corporate auditors

Article 25
  1. 1SHI's corporate auditors shall actively gather information necessary for the execution of their duties through means such as attending important meetings, such as Board of Directors meetings, gathering opinions from directors, executive officers, and the like, inspecting important documents, visiting offices, subsidiaries, and the like for audits, and cooperating with the accounting auditor, the supervisory division of SHI's headquarters, and corporate auditors of affiliated companies.
  2. 2SHI's standing corporate auditors shall confirm cases concerning important decision-making in advance through means such as attending the Management Strategy Committee, and shall provide information to and exchange opinions with outside corporate auditors regarding such cases as necessary.
  3. 3SHI's corporate auditors shall seek opinions as necessary from external experts such as lawyers.
  4. 4SHI shall establish a division to assist corporate auditors and place full-time staff for corporate auditors in order to support corporate auditors' activities and provide information smoothly to corporate auditors.

Appointment and evaluation standards of the accounting auditor

Article 26
  1. 1SHI's Board of Corporate Auditors shall formulate and operate the standards for the appointment and evaluation of the accounting auditor to appropriately appoint and evaluate an accounting auditor candidate.
  2. 2SHI's Board of Corporate Auditors shall confirm that the accounting auditor has the required independence and expertise, based on reports on the implementation of audits from the accounting auditor and opinions from the executive division.

Cooperation between corporate auditors and the accounting auditor

Article 27
  1. 1SHI's corporate auditors shall ensure sufficient cooperation with the accounting auditor necessary for appropriate audits by receiving reports, such as audits of financial statements, audits of internal control, and quarterly reviews, among other reports, from the accounting auditor, and exchanging opinions at Board of Corporate Auditors meetings.

Section 4: Outside Officers

Independence standards for outside officers

Article 28
  1. 1SHI shall establish Independence Standards for Outside Officers, as provided in Exhibit 2[PDF:91KB], to secure the practical independence of those who will serve as outside directors and outside corporate auditors.

Specific Outside Director

Article 29
  1. 1SHI's outside directors shall appoint one of the outside directors as a Specific Outside Director by mutual election as a liaison with the management team, corporate auditors, and the Board of Corporate Auditors.

Meeting of outside officers

Article 30
  1. 1SHI shall hold a meeting with only members who are outside directors and outside corporate auditors at least twice a year to offer them an opportunity to freely exchange information and share their understandings from an independent and objective standpoint regarding SHI's business and corporate governance matters, among other matters.

Section 5: The Nomination Committee and the Compensation Committee

The Nomination Committee and the Compensation Committee

Article 31
  1. 1SHI’s Board of Directors shall, in order to strengthen its independence and objectivity and ensure the transparency of the management, establish as its advisory bodies a Nomination Committee and a Compensation Committee chaired by an independent outside director, having the majority of the directors in each committee be outside directors and outside corporate auditors.
  2. 2The Nomination Committee shall deliberate and report regarding the nomination of director and corporate auditor candidates, the dismissal of directors and corporate auditors, the appointment and removal of the representative director and directors with managerial positions, and the succession plan for the CEO and other top executives, upon an inquiry from the Board of Directors. When deliberating and reporting, the Nomination Committee shall confirm execution of business of SHI by the CEO and other top executives, among others.
  3. 3The Compensation Committee shall deliberate and report regarding the remuneration system and standards of directors and executive officers, among other matters, upon an inquiry from the Board of Directors.

Section 6: Training for Directors and Corporate Auditors

Training for directors and corporate auditors

Article 32
  1. 1SHI shall provide its directors and corporate auditors with opportunities for the training necessary to fulfill their important roles and responsibilities in SHI's corporate governance at SHI's expense before and at the time when they assume their positions. Further, SHI shall continue to provide such opportunities after they assume their positions to improve and renew the knowledge and capability of them.
  2. 2As opportunities for the training outlined in the preceding paragraph, SHI shall provide its directors and corporate auditors with necessary and useful knowledge, information, and the like on management, such as matters on the quality of directors and corporate auditors, on legal affairs under the Companies Act and the like, on compliance, and on corporate governance.
  3. 3SHI shall provide its outside directors and outside corporate auditors with an explanation necessary for them to understand the Sumitomo's business philosophy, the SHI Group's business principles and management strategy, and its business situation, among other matters, when they assume their positions. For the SHI Group's main business, SHI shall offer opportunities to its outside directors and outside corporate auditors to visit factories and have relevant officers provide such an explanation, among other actions.
  4. 4SHI's Board of Directors shall confirm whether the provision of training opportunities for directors, corporate auditors and the like is being conducted appropriately.

Chapter 6 Dialogue with Shareholders

Policies on constructive dialogue with shareholders

Article 33
  1. 1For the purpose of promoting SHI's dialogue with its investors, including shareholders, SHI shall establish Policies on Constructive Dialogue with Shareholders, as provided in Exhibit 3[PDF:58KB].

(Supplementary Provisions)

  1. 1This basic policy will come into effect on November 27, 2015.
  2. 2Any revision or abolition of this basic policy shall be decided by resolution at a Board of Directors meeting. However, the president may make minor amendments.
  3. 3Prior to April 1, 2025, in Exhibit 1, “operating income, operating income ratio, and ROIC” as the indicators related to the division’s performance-linked basic remuneration shall be read as “net sales, operating income, and operating income ratio”.
  • Effective from November 27, 2015
  • As revised on October 1, 2024

Inquiry of Investor Relations

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Phone

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+81-(0)3-6737-2332

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0120-782-031

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