Corporate Governance: Basic Principles

Basic Policies

Initiatives to Strengthen Corporate Governance

Basic Policies on Constructive Dialogue with Shareholders

Seiko Group Corporation (the "Company") promotes constructive dialogue with its shareholders and investors (the "Shareholders") so as to support sustainable growth and increase corporate value over the medium to long-term based on the following policies:

• President of the Company supervises efforts toward realization of constructive dialogue with the Shareholders, and Directors in charge of IR and General Affairs promote such efforts.
• IR Department and General Affairs Department shall be responsible for sharing information periodically with associated departments such as Accounting and Public Relations Departments in order to promote constructive dialogue with the Shareholders.
• In addition to holding regular meetings, as a means for communication with the Shareholders, the Company strives to enhance dialogue with the Shareholders by implementing following measures.
  • The Company regards general meeting of shareholders as an important opportunity for dialogue with the Shareholders. The Company shall make clear information disclosure when delivering notice of ordinary general meeting of shareholders and shall provide comprehensive answers and explanations in response to questions raised by the Shareholders at the meetings.
  • The Company participates in IR conferences held by securities companies and hold meetings for analysts to explain its mid-term management plan, progress of such plan, the financial results of the Company, and the status of its overall business activities.
  • The Company strives to enhance information disclosure to the Shareholders on its website, in its notice of the general meeting of shareholders, and in its annual reports published to the Shareholders.
• IR Department and General Affairs Department shall periodically report opinions, evaluations and questions received from the Shareholders to management meetings, and share such information with the senior management of the Company.
• In a dialogue with the Shareholders, the Company shall manage insider information appropriately according to its Prevention of Insider Trading Rules and disclose information in a fair manner in accordance with its IR policy.

Corporate Governance Structure

As the holding company, the Company clarifies the management responsibilities in each business and develops an organizational structure for accelerating management decision-making, enhancing the function of business execution and strengthening the management oversight function.

The Board of Directors continually ascertains the circumstances of the operating companies and receives explanations when necessary, as well as carries out quick and appropriate decision-making. The Company holds a Strategic Conference for Management comprising full-time Directors and Executive Officers (Senior Vice Presidents) of the Company for the purpose of working to share the management policy and management information of the Group and discussing medium-to long-term business strategies.

Corporate Governance Structure

Evaluation of the Effectiveness of the Board of Directors

As part of efforts to strengthen and promote the corporate governance system, the Company has evaluated the effectiveness of the Board of Directors, based on its Basic Principle of Corporate Governance. The following is a summary of the results of the evaluation.

Analysis and Evaluation Methods

All Directors and Corporate Auditors were asked to fill out a questionnaire regarding the effectiveness of the Board of Directors, and replies were collected from all of them. The responses received were aggregated and analyzed by an outside consultant while ensuring anonymity.
The questionnaire was prepared based on initiatives and discussions on the Company’s corporate governance to date, and the evaluation items 1 to 5 as below were set.

The analysis was conducted by the external consultant based on the above process and content, and the results were reported to the Board of Directors. By using them as a reference, the Board of Directors conducted an evaluation of its effectiveness and confirmed future measures.

Summary of Evaluation Results

According to the results of the evaluation above, it was confirmed that the Board of Directors of the Company was functioning properly and its effectiveness had mostly been assured. As for the issues raised in the previous fiscal year, due to taking the following measures, improvements to issues were confirmed.

Future Initiatives

Based on the results of the above self-evaluation, opinions that call for “further shortening of time spent on giving explanations and enhancing time for deliberation at Board of Directors meetings” were observed, and the Company has decided to set these as new issues to be addressed in the future. In addition, as a result of measures in response to issue (1) in the previous fiscal year, it was confirmed that further strengthening of overseas IR activities is necessary, and the Company has decided to set “further strengthening of overseas IR activities” as an issue to be addressed in the future.
The Company will strive to further strengthen its corporate governance system by addressing the above issues.

Support system for Directors and Corporate Auditors

The Company deliberates on, mediates, and provides monetary support for the necessary preparation and guidance, such as seminars conducted by outside organizations, for Directors and Corporate Auditors, at the time of their appointment and thereafter, in order for them to acquire the knowledge and information needed to fulfill their roles and responsibilities. As part of providing information to Outside Directors and Outside Corporate Auditors, the Company invites them to attend inspection tours of an exhibition of watches which proposes a collection of new products and examples of merchandise on display at stores and to visit customer watch retailers, as well as its business locations, and holds Independent Outside Officers’ Opinion Exchange Meetings.

Compensation for Officers

Compensation Ratio of Each Type

With regard to the compensation ratio of each type for Executive Directors and Executive Officers (Senior Vice Presidents), the level of peer companies shall be considered so that it will be an appropriate ratio as an incentive to contribute to the enhancement of the corporate value of the Company. After being deliberated on by the Corporate Governance Committee, a majority of the members of which are independent outside officers, as an advisory body for the Board of Directors, the said policy shall be determined at the Board of Directors based on the deliberations. The guideline for the compensation ratio of each type shall be shown on the right (when the performance achievement ratio and the payment ratio based on qualitative evaluations are 100%):

Appointment and Dismissal of Senior Management and Nomination of Candidates for Directors and Corporate Auditors

The Company believes that it is essential that candidates for senior management, Directors and Corporate Auditors have the character and knowledge suitable for their respective duties. Based on this concept, in the appointment of senior management and the nomination of candidates for internal Directors, comprehensive consideration is given from the standpoint of appointing the right person for the right position, so that talent is appointed in a well-balanced manner to cover functions of the Company as a holding company as well as the Group’s business fields, while ensuring accurate and timely decision-making.

In the nomination of candidates for internal Corporate Auditors, comprehensive consideration is given from the standpoint of whether the candidate possesses knowledge of the Group’s businesses as well as insight regarding finance, accounting and legal affairs, and whether the candidate can contribute to ensuring the soundness of management.
In the nomination of candidates for Outside Directors, comprehensive consideration is given from the standpoint of whether the candidate possesses abundant experience and high degree of knowledge of corporate management and specific fields.
In the nomination of candidates for Outside Corporate Auditors, comprehensive consideration is given from the standpoint of whether the candidate possesses insight regarding finance, accounting and legal affairs, as well as abundant experience and high degree of knowledge of specific fields.

Based on the above policy, the Board of Directors determines the candidates proposed by the Representative Directors, upon deliberation by the Corporate Governance Committee, the majority of which comprises independent Outside Officers. In addition, with regard to the dismissal of senior management, in situations in which dismissal standards determined by the Board of Directors apply, such as when senior management is not fully fulfilling his or her function in light of evaluations including the Company’s performance, the Corporate Governance Committee conducts deliberations in a timely manner, and the Board of Directors, based on the results of such deliberations, determines the dismissal of senior management.

Cross-Shareholdings

From the perspective of improving the corporate value of the Group in the mid- to long-term, the Company has a policy to reduce shares that are deemed not to have a significance of holding them, taking comprehensively into consideration the Company’s management strategy, business relationships with clients, and the benefits and risks, etc., associated with holding in view of its capital cost.

The Company’s Board of Directors verifies each year the rationale for the holding of all listed shares held in cross-shareholding by the Group through examination of the importance of the issuer as a business partner and benefits and risks of shareholding in light of capital costs and other factors. Most recently, an individual verification was conducted at the meeting of the Board of Directors held in August 2024. With regard to certain shares, which were determined to be lacking in significance or rationale for continued holding, the Company proceeds with discussions toward their disposal.

Based on the above policy on cross-shareholdings, the Company sold two stocks among the shares held by its subsidiaries in the fiscal year 2023.

Standards for Exercising Voting Rights on Cross-Shareholdings

With regard to the exercise of voting rights on cross-shareholdings, the Company exercises its voting rights, upon fully respecting management policies and strategies, etc. of the issuing company, by comprehensively determining on whether the proposal contributes to the sustained growth and the mid-to long-term enhancement of corporate value of the issuing company, and whether or not it undermines shareholder value, among other factors. In addition, in making such decisions for particularly important proposals, the Company holds dialogue with the issuing company, as necessary. The proposals deemed important by the Company are as follows.

Internal Control System

The Company, in accordance with its basic policy on the internal control system, has established a Group-wide internal control system, including the Group’s business management, corporate ethics, compliance with laws and regulations, risk management and internal audits. Furthermore, the Company monitors the operation status of internal controls and periodically reports the results to the Board of Directors.