BALAJI recognizes that a company will last forever and be sound with “strict preciseness” and the corruption of an organization and downfall of a company start from a lack of “transparency”. Based on this basic principle of strict preciseness and transparency, BALAJI has established a governance system (internal control system), and is striving to fulfill its responsibilities to stakeholders, including customers, employees, shareholders, suppliers, and local communities, and to achieve sustainable growth as a company.
As we are surrounded by a very rapidly changing business environment, unless the Board of Directors understands accurate information about customer and market trends, service status, etc., the Board will not be able to make appropriate decisions. Due to these circumstances, in principle, the directors other than outside directors maintain involvement in operations themselves, acquire accurate information, and mutually share such information among member of the Board of Directors, in order for them to properly monitor the execution of our business. We have chosen to be a company with a board of auditors, while having such monitoring function of the Board.
In addition, an optional Nomination and Remuneration Committee has been established to ensure objectivity and transparency of procedures regarding the nomination and remuneration of Directors.
There are four Outside Directors and three Outside Audit & Supervisory Board Members. The Outside Directors and Outside Audit & Supervisory Board Members provide advice, as necessary, based on their wide respective ranges of experience and knowledge.
With regard to Independent Outside Directors and Outside Audit & Supervisory Board Members, BALAJI nominates candidates who do not have any certain interest in the Company, and who can be expected to make frank comments without hesitation at Board of Directors meetings, etc. Furthermore, in order to ensure such real independence, as minimum requirements, candidates must meet each of the following conditions.
For remuneration of directors, we determine an amount of remuneration of inside directors, basically based on their positions, that consists of performance-based remuneration and fixed remuneration, and an appropriate amount of fixed remuneration of outside directors from the standpoint of ensuring independence, which are both determined by resolution of the Board of Directors to the extent approved at the shareholders’ meeting.
1) Fixed annual aggregate ceiling amount of ¥1 billion
2) Variable aggregate ceiling amount, which is set at the consolidated net profit of each half year multiplied by 1/25 of the dividend payout ratio (%). (It should be noted, however, that the variable amount for the first half of the fiscal year shall be paid in the second half of the relevant fiscal year and that for the second half shall be paid in the first half of the following fiscal year.)
Note: The payout ratio (%) shall be calculated in accordance with the following formula for each half year:
Payout ratio for the first half of the fiscal year (April to September) = Amount of interim dividend per share for said period ÷ Consolidated net income per share for said period × 100
Payout ratio for the second half of the fiscal year (October to March next year) = Amount of year-end dividend per share for said fiscal year ÷ (Consolidated net income per share for said fiscal year – consolidated net income per share for first half of said fiscal year) × 100
Based on the above, the ratio of performance-based remuneration to fixed remuneration paid to directors (excluding outside directors) for fiscal 2018 was approximately 2 to 1.
As regards the evaluation of the effectiveness of the Board of Directors meetings, we continued to perform a survey after 2018 fiscal year of all directors and auditors who constitute the Board of Directors in 2019 fiscal year.
As a result thereof, we confirmed that the evaluation was still high from 2018 fiscal year for there being an atmosphere in which opinions can be stated frankly, and for there being discussions in a flexible manner from a multilateral point of view. Through these evaluation, it has been confirmed that the Board of Directors meetings are sufficiently effective.