Corporate Governance Report
as of April 17,2024
1.Basic Approach
Basic Policy
1.Basic Approach to Corporate Governance
"Creating happiness and prosperity, together with people and with society. To achieve this goal, the DyDo Group will continue to embrace new challenges in a dynamic way."
Our corporate philosophy inspires us in our ongoing quest to ensure proper, upstanding business practices and rigid compliance with relevant laws and regulations. It motivates us to constantly improve management efficiency and transparency, and to promote the group’s mutual benefits with all of our stakeholders, including our customers, our employees, our business partners, our communities, and our shareholders. It is the very cornerstone of our corporate governance, which is geared toward generating sustainable growth and improving corporate value over the medium- to long-term.
Our core business is Domestic Beverage Business and, as approximately 90% of those sales come from vending machines in the local community, it is fair to say that our products are familiar parts of consumers’ everyday lives. Moreover, our operations are conducted under a "fabless management" system, which means we have no plants of our own and instead outsource work in close cooperation with producers and distributors nationwide to make and deliver products. We concentrate our resources on more specific roles, such as product planning and development, and vending machine operations. We have one of the industry's premier vending machine networks around Japan, which are maintained by DyDo Group employees and the DyDo Vending Partner Association (vending machine operators that handle DyDo products). It is a rather unique business model that depends on the trust of our stakeholders. As such, we believe "happiness and prosperity together with people and society as a whole" is more than just a nice phrase for a corporate philosophy—it is our duty, and the overriding objective of our business activities. To that end, our "dynamic efforts" are founded on a bedrock of corporate governance, a steadfast platform of transparent, fair, swift, and bold decision-making. Moreover, we continually work to improve that foundation in order to contribute to the benefit of our shareholders.
2.How We Put the Japan’s Corporate Governance Code
(1) Securing the rights and Equal Treatment of Shareholders
At the DyDo Group, our corporate philosophy guides us to work in close partnership with a broad range of stakeholders. For instance, we endeavor to effectively secure the rights of our shareholders, and to prepare an environment in which they can exercise those rights appropriately.
(2) Appropriate Cooperation with Stakeholders Other Than Shareholders
We are keenly aware that our efforts to generate sustainable growth and improve corporate value over the medium- to long-term (as enshrined in our corporate philosophy) are reliant on the valuable resources and contributions of a broad spectrum of stakeholders, including our customers, our employees, our business partners, and our communities. Moreover, we are proud to work in close partnership with our stakeholders, and we proactively incorporate their feedback into the running of the DyDo Group. The executives and board of directors are charged with leading the creation and maintenance of a corporate culture that demands respect for the rights and positions of stakeholders and firm adherence to corporate ethics.
(3) Ensuring Appropriate Information Disclosure and Transparency
In line with our policy of transparency, fairness, and long-term focus, we provide shareholders, investors, and all other stakeholders the information they need to make informed decisions. This includes information on our companies’ finances, business performance, management strategies and issues, risks, and other matters relating to governance. Indeed, we consider our legal obligation to disclose pertinent information promptly and appropriately to be a serious matter. In addition, however, we are also eager to publish information that encourages correct understanding of the DyDo Group to the furthest possible extent.
(4) Responsibilities of the Board
The board of directors seeks to discharge its responsibility and accountability to shareholders by pursuing a three-pronged strategy for consistent improvement of the group’s earning power and capital efficiency so as to achieve sustainable growth and improve corporate value over the medium- to long-term. Those three facets are: 1) set the direction for implementation of the group’s corporate strategy; 2) establish a platform for executives to take calculated risks; and 3) institute effective, independent, and objective oversight of executives and directors.
(5) Dialogue with Shareholders
Constructive dialogue with shareholders is an integral part of our IR strategy, which is geared toward our goal of sustainable growth and improved corporate value over the medium- to long-term. Such communication not only fosters correct understanding of the DyDo Group, but it also generates valuable feedback that serves as a frank appraisal of our true trustworthiness and corporate value.
2.Reasons for Selecting the Current Corporate Governance System
We consider transparency, fairness, and equitability in decision-making to be integral factors in ensuring the effectiveness of our corporate governance. To that end, we elected to adopt “company with auditors” status under Japanese corporate law, which essentially means that we appoint corporate auditors who have the authority to audit the directors’ execution of their duties. Three of our four corporate auditors are independent of the company (three of which are independent outside corporate auditors), which underscores our dedication to maintaining robust, objective oversight. Additionally, we appointed two independent directors in April 2014 in order to bring an outside perspective to the Company’s management and further strengthen the Board’s oversight of directors’ execution of their responsibilities. As of April 16,2024, four of the Board’s seven positions are held by outside individuals, reflecting the Board’s commitment to heightening the accountability of the Company’s executive leadership and further improving transparency. We are also making progress on appointing outside directors with diverse backgrounds in line with the development of management strategy and changes in society.
In addition, we adopted an executive officer system in March 2012. By delegating the authority and responsibility for discrete parts of the organization to executive officers, not only are we able to keep abreast of changes in the market environment, but we can also maintain a clearer line to customer and stakeholder feedback, which can then be reflected in our business management.
3.Outline of Our Current Corporate Governance System
The Board of Directors, which holds regular meetings once a month and extraordinary meetings as necessary, deliberates and makes decisions about important matters related to the Company’s operations and oversees Group companies’ operations. Four of its seven seats are occupied by outside directors (as of April 14,2023), whose function is to offer advice concerning the Company’s management and to provide oversight from an independent perspective. Four corporate auditors, including three outside corporate auditors, one of whom is a woman, attend meetings of the Board of Directors.
In addition, the Management Meeting, whose membership consists of full-time directors and corporate officers, meets regularly to deliberate important matters and to support prompt decision-making by the president and Board of Directors.
The Kansayaku Board consists of one full-time corporate auditor and three outside corporate auditors (as of April 16, 2021). In addition to attending important company meetings, including Board of Directors meetings, its members solicit information about the status of operations from leaders of the Group’s various organizational entities and oversee the manner in which directors carry out their obligations and responsibilities.
In keeping with the provisions of Article 427 Paragraph 1 of the Companies Act, our outside directors and outside corporate auditors have entered into contracts with the Company to limit their liability as stipulated by Article 423 Paragraph 1 of the Act. The limits imposed on their liability by these contracts conform to the amounts stipulated by applicable laws and regulations. Those limits are valid only in the event that the outside director or outside corporate auditor in question exhibits good will in the performance of his or her obligations and responsibilities and does not engage in serious negligence.
We have chosen KPMG Azsa LLG as our accounting auditor to provide advice and guidance concerning the legality and suitability of the Company’s accounting and internal controls.
As of April 16,2024
| Organizational structure | Company with Board of Corporate Auditors | Corporate officer system | YES |
|---|---|---|---|
| Number of directors as defined in the Articles of Incorporation | 7 or fewer | Number of auditors as defined in the Articles of Incorporation | 4 or fewer |
| Term of directors as defined in the Articles of Incorporation | 1 year | Term of auditors as defined in the Articles of Incorporation | 4 years |
| Number of directors | 7 (of which 4 are independent outside directors) | Number of auditors | 4 (of which 3 are outside auditors) |
| Directors | Auditors | Corporate Officers | Presidents of Major Subsidiaries*1 | Roles | |
|---|---|---|---|---|---|
| Board of Directors | ● | ● | ●*2 | • Discusses/decides management strategy and other important matters • Oversees execution of the duties of directors, and execution of the operations of each group company |
|
| Board of Corporate Auditors | ● | • Receives reports, discusses, and makes decisions on important matters relating to auditing • Audits execution of the duties of directors |
|||
| Management Committee | ○ | ○ | ● | • Formulates policy and plans for overall execution of management, and carries out tasks including investigations, research, planning, management, communication, and coordination | |
| Nominating and Compensation Committee | • Provide advice from independent outside directors and auditors in an appropriate manner, particularly when considering important matters such as the nomination and compensation of top management and directors. | ||||
| Group Risk Management Committee | ○ | ○ | ● | ● | • Identifies and evaluates company-wide risks, and formulates countermeasures • Conducts checks and improvement of overall risk management |
| Group Sustainability Committee | ○ | ○ | ● | ● | • Considers and approves the Group’s overall sustainability management policy and important sustainability issues (materiality) • Adopts the companywide sustainability program and issues instructions for improvements |
| Advisory Board | • Formed the Advisory Board (established as a discretionary measure), which includes outside experts and will advise the president, giving evaluations and suggestions for matters requiring a high level of expertise |
| Directors | Auditors | Corporate Officers | Presidents of Major Subsidiaries*1 | Roles |
|---|---|---|---|---|
| Board of Directors | ||||
| ● | ● | ●*2 | • Discusses/decides management strategy and other important matters • Oversees execution of the duties of directors, and execution of the operations of each group company |
|
| Board of Corporate Auditors | ||||
| ● | • Receives reports, discusses, and makes decisions on important matters relating to auditing • Audits execution of the duties of directors |
|||
| Management Committee | ||||
| ○ | ○ | ● | • Formulates policy and plans for overall execution of management, and carries out tasks including investigations, research, planning, management, communication, and coordination | |
| Nominating and Compensation Committee | ||||
| • Provide advice in an appropriate manner, particularly when considering important matters such as the nomination and compensation of top management and directors. | ||||
| Group Liaison Meeting | ||||
| ○ | ○ | ● | ● | • Shares important matters in the group • Carries out tasks such as reporting the management situation from each subsidiary |
| Group Risk Management Committee | ||||
| ○ | ○ | ● | ● | • Identifies and evaluates company-wide risks, and formulates countermeasures • Conducts checks and improvement of overall risk management |
| Group ESG Committee | ||||
| ○ | ○ | ● | ● | • Investigates and approves the group’s overall ESG management • Decides on, and directs improvements to, the group-wide ESG program |
| Advisory Board | ||||
| • Formed the Advisory Board (established as a discretionary measure), which includes outside experts and will advise the president, giving evaluations and suggestions for matters requiring a high level of expertise | ||||
● All persons concerned attended
○Only full-time members attended
*1 DyDo DRINCO, DAIDO Yakuhin, Tarami
*2 Corporate officers who are not also directors participate as observers
4. Corporate Governance System
