Outline of Corporate Governance

Interview with an Outside Director Outline of Corporate Governance Governance Committee Director Compensation System Management Replacement Cycle Appointment Guideline for Outside Directors Business Risk Compliance

Unique Features of the Daito Group’s Governance System

Corporate Governance Basic Policy

To maximize the corporate value of the Daito Group and for our shareholders and all other stakeholders, our basic policy on corporate governance is making our management more efficient and transparent.

To do so, we have separated management’s decision-making and supervisory framework from the work execution and establishing a framework that enables rapid and efficient management and execution. We also work to achieve highly transparent management through the participation of outside directors and Audit and Supervisory Board members.

Nominating and Remuneration Committees

The Company conducts mutual assessments of the business execution and management oversight of executive directors, mainly through the Nominating and Remuneration Committees headed by a lead independent outside director and includes all outside directors. In addition to the mutual assessments by executive directors, fair and transparent evaluations of directors are based on the results of mutual assessments and interviews with each executive director conducted by the Nominating and Remuneration Committees.

The results of the mutual assessments of executive directors are reflected in the formulation of management structure for the next period, the selection of candidates for directors, basic compensation for directors (excluding outside directors), and bonuses and stock-based compensation.

Governance Committee

The Company have established a "Governance Committee" headed by a lead independent outside director and includes all outside directors and Audit & Supervisory Board members. The Governance Committee focuses on assessing the effectiveness of the Board of Directors and corporate governance.

Mandatory retirement at age 60 for directors

The Company has established a mandatory retirement system for directors, with 60 being the mandatory retirement age for directors. Directors retire from the execution of business at the end of March of the fiscal year in which they turn 60 years old. They retire at the conclusion of the General Shareholders’ Meeting held in the following June.

Based on a framework designed to encourage the rejuvenation of management, after retirement as a director or retirement from the Company under this system, directors cannot remain connected with the Daito Group as a consultant or advisor or assume any similar or other role.

History of Daito Group‘s Corporate Governance Structure

Management Structure

Management Structure

The Company has introduced an executive officer system for the purpose of separating the Board of Directors as the management’s decision-making and supervisory framework from work execution.

In addition, the Company has enabled rapid decision-making by dividing business areas into the Construction Business Headquarters, the Real Estate Business Headquarters, the Corporate Management Headquarters, and the New Core Business Headquarters and assigning the Chief Operating Officer with the highest level of authority in each business area from among the Board of Directors, by entrusting the Executive Management Meeting with decision-making authority over business execution as necessary, and by having the Board of Directors decide on important management issues.

Management Structure

Board of Directors

The Board of Directors is includes directors with expertise in the individual business fields of the Company and the Daito Group, as well as outside directors, including lawyers and experienced business owners, with expertise in their respective areas of specialization. They are responsible for deciding on matters of law and by the Articles of Incorporation, as well as other items important to the Company and Group companies, and for receiving reports from individual directors on the status of business execution.

Audit and Supervisory Board

Made up of certified public accountants, lawyers and others with expertise in specialized fields, the Audit and Supervisory Board is responsible for monitoring the execution of business by the directors in accordance with the audit policy, and for reporting, discussing, and deciding on important audit-related matters. A standing Audit and Supervisory Board member is also selected, and attends meetings of the Board of Directors as well as the Executive Management Meeting and other meetings important for business execution.

Evaluation of the Board of Directors

In the third quarter of each year, the Company conducts interviews with and mutual assessments of representative directors, outside directors and outside Audit and Supervisory Board members, mainly through the Governance Committee. Verifying the results of those mutual assessments by the Governance Committee enables the Company to analyze and evaluate the effectiveness of the Board of Directors.

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