Shimizu manages the company based on the principles contained in our corporate credo, The Analects and the Abacus. We strive to manage the company in a timely, highly efficient, transparent, and lawful manner to achieve sustained growth and increase corporate value over the medium and long term, while also earning a greater degree of trust from all our shareholders, investors, and all other stakeholders, including customers, employees, and local communities. We do so by fulfilling our social responsibilities through business activities.
To achieve this, we have separated the management strategy and decision-making function from the business execution function, and have established a structure that enables the Board of Directors and Audit & Supervisory Board to appropriately supervise and audit the performance of each of these functions. Our basic policy on corporate governance is for our directors, executive officers, Audit & Supervisory Board members, and employees to implement compliance management based on the highest ethical standards.
Corporate Governance Structure of Shimizu Corporation
Overview of the Corporate Governance Structure
Shimizu has adopted the structure of a company with an Audit & Supervisory Board. We have limited the number of directors and introduced an executive officer system to clearly separate the management strategy, decision-making, and oversight functions from the business execution function. We have established a system for supervising and overseeing management from an objective and neutral perspective by taking steps to encourage energetic debate at Board of Directors meetings, and by electing independent outside directors and outside Audit & Supervisory Board members. The concrete structure and implementation status are detailed below.
- One-third or more of the Board of Directors elected are outside directors to strengthen management supervision function, and to promote more energetic debate by the Board of Directors.
- Outside directors and other non-executive directors and outside Audit & Supervisory Board members use their extensive experience and sophisticated insight based on their individual career histories to oversee and supervise management and provide necessary advice as appropriate.
- The Company established a structure mainly consisting of the head office administrative departments to provide timely information and other materials to assist outside directors and other non-executive directors in performing their management supervisory duties (including tours of offices, job sites, etc.).
- The relevant divisions provide guidance on the Company in general, description of its businesses, and other relevant information to new outside directors and outside Audit & Supervisory Board members.
- Audit & Supervisory Board members audit all duties performed by directors from a fair and impartial perspective.
- The Audit & Supervisory Board Members Office was established as the dedicated organization to support Audit & Supervisory Board members. This office secures the necessary support staff to enable more effective audits by Audit & Supervisory Board members.
- Audit & Supervisory Board members improve the effectiveness of management supervision by attending important meetings and obtaining sufficient information from officers and employees without delay.
- When a Board of Directors meeting is held, the Board of Directors administrative office and other divisions provide explanations in advance to the outside directors, non-executive directors, and Audit & Supervisory Board members.
- Outside directors and other non-executive directors regularly exchange opinions with the chairman and president. They also exchange opinions with outside Audit & Supervisory Board members.
- Regular Outside Officers Meetings are held for outside directors and outside Audit & Supervisory Board members, and regular Outside Directors and Audit & Supervisory Board Members Meetings are held for outside directors and all Audit & Supervisory Board members to facilitate the exchange of opinions.
Main Governing Bodies Established by Shimizu (including discretionary committees and other meeting formats)
Board of Directors
The Board of Directors holds meetings once a month as a rule, and as needed. It makes decisions on matters specified in laws and regulations and the Articles of Incorporation as well as other important matters, and supervises the execution of duties. The Articles of Incorporation specifies 12 as the maximum number of directors. These directors consist of executive directors who are highly knowledgeable in each area of Shimizu’s business and non-executive directors, some of whom are outside directors with extensive expertise and experience in their respective specialties. The Chairman and Representative Director serves as the chair of the Board of Directors.
［Names and Titles of Members］ (11 as of date of submission)
|Chair||Yoichi Miyamoto(Chairman of the Board and Representative Director)|
|Members||Internal Directors Executive||Executive||Kazuyuki Inoue, Hiroshi Fujimura, Kentaro Ikeda, Takeshi Sekiguchi, Yoshiki Higashi|
|Outside Directors||Tamotsu Iwamoto, Junichi Kawada, Mayumi Tamura, Yumiko Jozuka|
(Main Agenda Items)
Election of directors; organizational reform; establishment, revision or repeal of company regulations; formulation and supervision of management policies and strategies; monitoring of progress and growth strategies of each business; risk management; sustainability matters such as climate change and human resources development; feedback on dialogue with investors; reduction of securities holdings; and revision of the standards for referral to the Board of Directors.
Audit & Supervisory Board
The Audit & Supervisory Board meets once a month as a rule, and additionally as necessary. It makes decisions on audit policy, audit plans, auditing methods, and other important audit matters, and deliberates on necessary matters concerning audits. The Articles of Incorporation sets the number of Audit & Supervisory Board members at a maximum of five, including three outside Audit & Supervisory Board members. The chair of the Audit & Supervisory Board is an Audit & Supervisory Board member chosen through discussion by the Audit & Supervisory Board.
［Names and Titles of Members］ (five as of date of submission)
|Chair||Hideto Watanabe (standing)|
|Members||Audit & Supervisory Board Member (standing)||Koichi Matsuoka|
|Audit & Supervisory Board Member (part-time)||Kaoru Ishikawa, Toshie Ikenaga, Ko Shikata (all outside Audit & Supervisory Board members)|
Nomination & Compensation Committee
Shimizu has established a Nomination & Compensation Committee to ensure fairness and transparency in the selection, dismissal, evaluation, and compensation of directors, Audit & Supervisory Board members, and executive officers. The members of this committee consist of five non-executive directors (four outside directors and one non-executive internal director) and one executive director. The committee is chaired by a non-executive director elected every year from among the members.
［Names and Titles of Members］ (six as of date of submission)
|Chair||Noriaki Shimizu (non-executive internal director)|
|Members||Outside Directors||Tamotsu Iwamoto, Junichi Kawada, Mayumi Tamura, Yumiko Jozuka|
|Internal Director||Kazuyuki Inoue (President and Representative Director)|
(Main Agenda Items)
Creation of personnel appointments for and individual evaluations of directors and executive officers, total amount and individual bonuses for officers, individual monthly compensation for the next fiscal year, succession plans, and review of related regulations.
Risk Management Committee
Our Risk Management Committee ascertains and analyzes risks that would have a serious impact on our corporate group, which consists of Shimizu and its subsidiaries. It also determines key items of risk management, and follows up and reports to the Board of Directors. The President and Representative Director serves as the chair of the committee and one standing Audit & Supervisory Board member also attends committee meetings.
［Names and Titles of Members］ (13 as of date of submission)
|Chair||Kazuyuki Inoue (President and Representative Director)|
|Members||Hiroshi Fujimura, Kentaro Ikeda, Toru Yamaji, Yoshito Tsutsumi, Takao Haneda, Yoshiki Higashi, Akira Yamazaki, Nobuyoshi Kikuchi, Michiho Yamaguchi, Manager of Digital Strategy Office, General Manager of Audit Dept., Hideto Watanabe (standing Audit & Supervisory Board Member)|
Committee on Corporate Ethics
Shimizu has established the Committee on Corporate Ethics to determine company-wide policies on strict compliance with corporate ethics, laws and regulations, and deploy and follow up on compliance. The committee is also tasked with collecting all information on serious incidents involving wrongdoing as well examining ways to prevent incidents and recurrence and issuing directions to accomplish that. The President and Representative Director serves as the chair of the committee. One full-time Audit & Supervisory Board member and one outside expert (an attorney) also attend committee meetings.
［Names and Titles of Members］ (18 as of date of submission)
|Chair||Kazuyuki Inoue (President and Representative Director)|
|Members||Hiroshi Fujimura, Kentaro Ikeda, Toru Yamaji, Yoshito Tsutsumi, Takeshi Sekiguchi, Takao Haneda, Yoshiki Higashi, Hiroshi Murata, Nobuyoshi Kikuchi, Michiho Yamaguchi, General Manager of Legal Affairs Dept., General Manager of General Affairs Dept. and Manager of Corporate Ethics Help-Line Office, Manager of Group Companies Strategy Office, General Manager of Audit Dept., Senior General Manager of Business Development & Marketing Headquarters, Koichi Matsuoka (standing Audit & Supervisory Board Member), outside experts (attorneys)|
Executive Officers Council
Shimizu has established an Executive Officers Council to communicate important matters and policies decided by the Board of Directors to executive officers and provide instructions to them. The President and Representative Director serves as the chair of this council and members consist of executive directors (other than the chair) and executive officers. One full-time Audit & Supervisory Board member also attends council meetings.
Evaluating the Effectiveness of the Board of Directors
Our Board of Directors evaluates the overall effectiveness of the Board of Directors once a year.
A summary of the evaluation method and results for fiscal 2022 are provided below:
All directors and Audit & Supervisory Board members complete a survey (including anonymous entries and open answers). A self-analysis is performed through discussion by all directors and all Audit & Supervisory Board members at Board of Directors meetings, based on an analysis by a third party (attorney).
|Period covered||April 2022 to March 2023|
|Dates performed||Board of Directors meetings on March 8, March 29, and April 26, 2023
*Performed ahead of schedule starting this time for disclosure ahead of Shareholders’ Meeting.
|Main items evaluated||Board of Directors composition/operations, management strategy/management supervision function, corporate ethics/risk management, response to sustainability issues, process of determining nomination/compensation, human resource development, communication between outside directors and management, dialogue with shareholders/investors, etc.|
Summary of Evaluation Results
Conclusion: The Shimizu Board of Directors evaluated and determined the Board of Directors as a whole to be operating effectively.
Status of response to issues indicated in the last evaluation of effectiveness in FY2021 (covering January 2021 to March 2022)
Steady efforts to resolve issues were confirmed to have resulted in improvement. The Board will continue to work on further improvement.
- Enhancement of discussions on management strategy topics
→Expanded opportunities for discussion of management strategy topics by transferring some authority to the executive side through the revision of the standards for referral.
- Further promotion of communication between outside directors, outside Audit & Supervisory Board members, and management and establishment of opportunities for dialogue between outside directors and front line employees
Established a new forum for exchanging opinions with other executive directors (vice president and senior managing officers) in addition to the traditional meetings with the chairman and president for the exchange of opinions between outside directors, outside Audit & Supervisory Board members, and management.
Held a meeting to exchange opinions between outside directors and employees at the Hokuriku Branch where the founder was born.
- Promotion of discussion on the ideal governance structure, including the roles of the Board of Directors and Nomination & Compensation Committee and organizational design
Shared the status of activities by the Nomination & Compensation Committee with directors and Audit & Supervisory Board Members who are not members of the committee.
- Enhancement of reporting to the Board of Directors on measures to address risk
Expanded reporting to the Board of Directors on the activities of the Risk Management Committee. (Measures to address risk and status of initiatives)
- Exchange of opinions on human resource development (including successor education) and promotion of discussion on human resources strategies linked to management strategy
Attended human capital management workshop (for all directors) with an outside lecturer and engaged in discussion.
Clearly indicated the importance of human resources development in the basic policy of the FY2023 management plan. Established the Human Resources Strategy Department at the Head Office under the direct control of the President in April 2023 to accelerate the establishment and execution of human resources strategies linked to management strategies. (Resolutions passed for each at the Board of Directors)
Main issues to consider indicated in the current evaluation of effectiveness
- Further enhancement of the management supervision function of the Board of Directors
Enhancement of discussions in the fields of sustainability and ESG (climate change measures, human resources strategy, etc.)
Expansion of opportunities for management and outside directors to exchange opinions on management strategy (including use of forums other than board meetings) and enhancement of monitoring of progress on the Mid-Term Management Plan
Enhancement of management information provision to outside directors and outside Audit & Supervisory Board members
- Further promotion of communication between outside directors, outside Audit & Supervisory Board members and management (ongoing)
Shimizu will operate the PDCA cycle based on the results from evaluating the effectiveness of the Board of Directors and strive for improvement. We will aim to achieve even greater effectiveness in Board of Directors meetings and an even higher level of governance.
Election of Outside Directors and Outside Audit & Supervisory Board Members
as of June 29, 2023
Standards regarding the Independence of Outside Officers (outside directors and outside auditors)
Support Structure for Outside Officers (outside directors and outside Audit & Supervisory Board members)
Shimizu has established a system to provide information to facilitate supervision of management by outside directors and other non-executive directors in performing their duties. The administration departments in the head office play the main role in providing this information in a timely manner. The Corporate Auditor’s Office was established as a dedicated organization to support Audit & Supervisory Board members. A sufficient number of staff members have been secured to assist outside Audit & Supervisory Board members. When a Board of Directors meeting is held, materials are distributed in advance and the Board of Directors administrative office and other divisions provide explanations in advance to the outside directors and the outside Audit & Supervisory Board members.
Directors, Audit & Supervisory Board Members, and Executive Officers
Policy on Determining Officer Compensation
Director and executive officer compensation consists of a base salary which is paid monthly and performance-linked bonuses. Shimizu has established a Nomination & Compensation Committee, which consists of a majority of outside directors and is chaired by a non-executive director, to ensure fair and transparent evaluation and compensation of directors and officers through deliberation by the committee based on the resolution of the Board of Directors.
Non-executive directors, including outside directors, and Audit & Supervisory Board members are only paid a monthly salary to enhance the management supervisory function.
Rules on the Compensation of Officers specifying the policy on determining the compensation of each director were approved at the Board of Directors meeting held on February 24, 2021. A summary description of the policy on determination is provided below.
Policy on Basic Compensation
A maximum total of 90 million yen a month in director compensation as base monthly salary was established at the 117th Annual General Meeting of Shareholders held on June 27, 2019. Compensation of outside directors is capped at 10 million yen of the amount noted above.
A maximum total limit of 13 million yen a month in Audit & Supervisory Board member compensation was established at the 89th Annual General Meeting of Shareholders held on June 27, 1991 and the compensation is determined through discussion by the Audit & Supervisory Board.
Policy on Performance-linked Compensation
Out of the compensation paid to directors of the Company, bonuses, which are performance-linked compensation, are limited to an annual amount of 500 million yen based on the resolution of the 118th Ordinary General Meeting of Shareholders held on June 26, 2020. The Nomination & Compensation Committee deliberates and determines whether or not to pay such bonuses and the amount to be paid.
Actual consolidated net income (net income attributable to shareholders of the Corporation), used as the indicator for determining bonuses, was 49,057 million yen for the fiscal year ended March 31, 2023, compared to the goal of 51,500 million yen. Actual consolidated ordinary income was 56,546 million yen, compared to the fiscal year goal of 70,000 million yen.
(Method of calculating individual performance-linked compensation ［bonuses］)
Consolidated performance*1 x performance coefficient*2 x rank index*3 x individual evaluation coefficient*4 = Individual bonus*5
- *1. Consolidated net income (net income attributable to shareholders of the Corporation)
- *2. The Nomination & Compensation Committee determines the performance coefficient, considering the degree of achievement compared to the initial forecast for consolidated operating income and consolidated net income, as well as factors such as orders received, financial KPIs from the Mid-Term Management Plan, the status of achievement of non-financial KPIs, and the performance outlook for the following fiscal year.
・Financial KPIs (ROE, ratio of Owners' equity attributable to shareholders of the Corporation, debt to equity ratio, and dividend payout ratio)
・Non-financial KPIs (productivity improvement rate in construction business, CO2 reduction rate in construction business, employee satisfaction scores, and number of serious legal violations)
- *3. Coefficient set by rank
- *4. Executive directors set targets for each officer after interviewing them at the beginning and end of the fiscal year and evaluate their performance by the degree of achievement, and the individual evaluation coefficient is determined after the Nomination & Compensation Committee reviews the evaluation. (Evaluation coefficient is set between 65% and 135%)
In addition to short-term performance evaluations set for each individual, we perform multifaceted evaluations that include the degree of contribution to achieving the targets of the Mid-Term Management Plan, efforts to strengthen the management foundation, contributions to the SDGs, and evaluations from a human resources perspective.
Director evaluations are determined only by the non-executive directors on the Nomination & Compensation Committee.
- *5. An amount equivalent to 20% of the performance-linked bonus is granted as compensation for acquiring Shimizu shares to give directors greater shared value with shareholders and to enhance corporate value over the medium and long term. The share-based compensation for each director is contributed to the officers’ stock ownership plan and is used to acquire Shimizu shares. Directors must also hold the shares acquired while employed by Shimizu and for a certain period of time after leaving the company.
Matters concerning delegation of decisions on compensation, etc.
Shimizu has established a Nomination & Compensation Committee which consists of a majority of outside directors and is chaired by a non-executive director, to ensure fair and transparent evaluation and compensation of directors and officers through deliberation by the committee based on the resolution of the Board of Directors.
The Nomination & Compensation Committee (which met seven times during the fiscal year) reviewed compensation for fiscal year ended March 31, 2023 and discussed the base monthly salary and the amount to be paid as bonuses for each director according to the evaluation of the performance of each director, based on the Rules on Officer Compensation. The committee determined the compensation to be in line with policy determined by the Board of Directors.
Director and Audit & Supervisory Board Member Compensation
Shimizu holds shares of business partners as securities holdings primarily to “strengthen and maintain the relationships with business partners” when necessary from the viewpoint of sales policy. The Board of Directors determines whether to acquire major securities holdings and takes the benefits to Shimizu, acquisition cost, risk of share price changes, and other factors into collective consideration in making such decisions. The Board of Directors examines the necessity of securities holdings for individual stocks each year, taking into collective consideration the economic rationality of such holdings including cost, risk, and sales benefits. The Company will reduce securities holdings in stages to promote the effective utilization of capital, after first verifying whether it is necessary to hold the stock and confirming the relationship of trust with the business partner.
Reduction in Number of Stocks Held
In fiscal 2022, we sold shares of 21 listed stocks (including partial sales), and the amount came to 26.3 billion yen. From fiscal 2018 to fiscal 2022, we reduced our holdings in 62 listed stocks (including partial sales), and the amount came to 87.9 billion yen. As a result, the number of listed stocks held decreased from 187 at the beginning of FY2018 to 143 as of March 31, 2023.
We aim to reduce the balance of securities holdings to less than 20% of consolidated net assets by the end of FY2026 and expect to sell about 30 billion yen of securities holdings in FY2023.
Internal Control System Establishment
We have established a Basic Policy on Establishing a System of Internal Controls based on the Companies Act.
Internal Control System Status
Shimizu has established a system of internal controls and the Board of Directors makes decisions on the Basic Policy on Establishing a System of Internal Controls to ensure proper operation of the company.
An overview of the operational status of internal control systems in fiscal 2022 is provided below.
|Risk Management System||
|Systems to Ensure Proper Operation of the Shimizu Group||
|System for Ensuring Effectiveness of Audits by Auditors||
Code of Corporate Ethics and Conduct and Internal Corporate Structure
Code of Corporate Ethics and Conduct
Shimizu has adopted The Analects and the Abacus, which contains the teachings of Eiichi Shibusawa, as our corporate credo. We base our business activities on the conviction that our company’s business will always prosper if we pursue ethics and economic gain simultaneously, or in other words, if we do good work that delights the community and our customers and is grounded in a strong sense of ethics. In this era of strong demand for corporate social responsibility, we have established the Code of Corporate Ethics and Conduct to ensure that all officers and employees thoroughly understand The Analects and the Abacus and demonstrate it in their daily actions. We are committed to enforcing corporate ethics, including compliance with laws and regulations.
Establishment of Internal Corporate Structure
Shimizu provides education and training to ensure strict implementation and practical operation of the Code of Corporate Ethics and Conduct by officers and employees. We have also appointed an officer in charge of corporate ethics, established a Committee on Corporate Ethics, the Corporate Ethics Office, the Corporate Ethics Help-Line Office, and an internal whistleblowing system.
Proper Management of Personal Information
Internal Whistleblowing System
We established an internal whistleblowing system to detect bribery and corruption, accounting fraud, and other compliance issues that could occur as early as possible and take corrective steps.
Initiatives Aimed at Strengthening Compliance
We implement various measures that will help cultivate an ethical mindset and contribute to strict compliance among Group officers and employees, so that they put the spirit of our corporate credo, The Analects and the Abacus, into practice in their actions.
Top management will lead by example in cultivating an ethical mindset and strict compliance.
- Corporate ethics training for executive management (including management of Group companies)
- Compliance e-learning training (including Compliance with the Anti- monopoly Act)
Make sure that everyone understands the code of conduct on bidding for construction projects (mainly for Shimizu and construction-related subsidiaries)
We conduct training and interviews for officers and employees to ensure thorough awareness of the code of conduct as well as interviews by outside attorneys and other experts as necessary on a case-by-case basis.