Corporate
Governance

Fundamental Thought Process Related to Corporate Governance

At this company, we consider corporate governance to be a disciplined management structure that maximizes performance for stockholders from medium- to long-term perspective.
Also, we consider corporations to be members of society, and for this reason we believe it is our mission to manage our business in a sincere an open way, abiding by all laws and ordinances with sufficient discipline and ethics to the development of fairness and safety in the local society.
With the above as our fundamental thinking on this issue, we have established supervisory functions to ensure promptness in our decision-making as well as fairness and efficiency in the execution of our operations. In addition, efforts such as our internal conformity systems strive to minimize risks which could cause major damage to our corporate value, and we are also proactively carrying out other initiatives for this purpose.

Characteristics of the Company’s Corporate Governance System

The Company has a Board of Auditors and accounting auditors. Furthermore, in addition to strengthening the corporate governance system, the Company is operated via governance structure which is led by the Board of Directors, with cooperation from organizations including the Board of Auditors, the Internal Auditing Division, and accounting auditors.

(Reasons why principles of the Corporate Governance Code are not implemented)

(Supplementary Principle 1-2-4)

At the General Meeting of Shareholders, the Company has already approved the exercise of voting rights via the internet and has begun using platform for electronically exercising voting rights. Currently, the Company does not provide an English translation of the convocation notice. However, we will consider an English translation while considering factors such as the future shareholder composition and expenses incurred for translation.

(Supplementary Principle 4-1-2)

Currently, the Company publishes the business plan for each business year; however, we do not disclose the medium-term business plan. The Company seeks to achieve business innovation and to achieve sustainable growth. Therefore, even if we have formulated a medium-term business plan and published numerical targets, we believe that said numerical values have limited effectiveness. Rather, we do not publish a medium-term business plan because we believe that the disclosure of numerical targets could cause shareholders and investors to make judgments which are in contrast to intentions of the Company. Conversely, regarding the difference between the single-year business plan and the actual figures, we discuss appropriate measures through monitoring at the Board of Directors and the meetings composed of management executives, and then incorporate the measures in our future business development. Based on this series of processes, we explain our business plans and future business development to shareholders and investors at financial results briefings and other channels.

(Supplementary Principle 4-1-3)

At this time, the Company has not defined a clear succession plan for the Chief Executive Officer (CEO); however, opinions are being exchanged with each director at meetings of the Board of Directors. In the future, if the need for a successor plan arises, the Board of Directors will select a CEO from among recognized successor candidates by considering each candidate’s character, insight, and achievements.

(Disclosure based on each principle of the Corporate Governance Code)

(Principle 1-4: Cross-shareholdings)

The company’s basic policy is not to own cross-shareholdings. At this time, the Company does not own any listed shares as cross-shareholdings.

(Principle 1-7: Transactions between related parties)

Competitive transactions by directors and transactions involving conflicts of interest between directors and companies require a resolution by the Board of Directors based on applicable laws and on the Board of Directors Regulations.

(Principle 3-1: Enhancement of information disclosure)

  1. The Company’s management philosophy and management strategy are listed on our website. With regard to the business plan, the earnings forecast for each fiscal year is announced at the financial results briefing.
  2. The basic concept of corporate governance is described in “6. Corporate Governance Status” in the Securities Report.
  3. The policy for determining the compensation of directors is described in the “Disclosure of Policy for Determining the Amount of Compensation and Calculation Method (in relation to Compensation of Directors)” section of the Corporate Governance Report. Compensation of executive officers is determined by the Board of Directors in accordance with the Executive Officer Regulations.
  4. From among candidates for director or auditor, the most qualified candidate is appropriately selected based on a comprehensive consideration of factors including experience, insight, expertise, and career by the Nomination and Compensation Committee (consisting of the President and independent outside directors), a voluntary advisory body to the Board of Directors. After the resolution is passed by the Board of Directors, the selection is put before the General Meeting of Shareholders.
  5. The reasons for the selection and nomination of candidates for directors and auditors, as well as the career background of candidates, are listed in the convocation notice of the General Meeting of Shareholders. The appointment and dismissal of executive officers is resolved by the Board of Directors in accordance with the Executive Officer Regulations, taking into account business expertise, management execution ability, innovation, and leadership. At the time of appointment or dismissal, the reasons for the appointment and dismissal are fully explained at the Board of Directors.

(Supplementary Principle 4-1-1)

In addition to the matters stipulated in applicable laws and the Articles of Incorporation, the details of the resolutions of the Board of Directors are stipulated in the Board of Directors Regulations. With respect to important matters other than those resolved by the Board of Directors, standards for decision-making authority are defined in the Management Committee Regulations and the Business Authority Regulations, and decisions are made promptly.

(Principle 4-8)

The Company has appointed two outside directors and nominated two outside directors as independent officers. In summary, two of the four directors are outside directors.

(Principle 4-9: Criteria for Judging the Independence of Independent Outside Directors and Attributes of Independent Outside Directors)

The Company deliberates the independence of outside directors at meetings of the Board of Directors based on standards in accordance with the independence standards of the Tokyo Stock Exchange, and selects candidates for independent outside directors.

(Supplementary Principle 4-11-1)

The Articles of Incorporation stipulate that the Company shall have no more than eight directors. The Company's Board of Directors is composed of four directors (including two outside directors) who are human resources possessing diverse knowledge and experience, and possessing the knowledge and ability to innovatively create medium- to long-term corporate value. The Company shall maintain an appropriate size of the Board of Directors to ensure the most efficient functioning of decision-making and supervision of overall management. For internal directors, the Company appoints human resources who possess a high level of expertise in the Company's business and are able to accurately and fairly supervise overall management. For outside directors, the Company appoints human resources who possess a wide range of knowledge necessary for management and a high level of insight in specific fields, and who have the qualities to provide accurate and fair supervision from an objective perspective independent of business execution.

(Supplementary Principle 4-11-2)

Concurrent appointment as officers of other listed corporations for the directors and auditors of the Company shall be within a reasonable scope. Furthermore, the status of important concurrent positions is disclosed annually in the convocation notice of the General Meeting of Shareholders and the Securities Report.

(Supplementary Principle 4-11-3)

The Company evaluated the effectiveness of the Board of Directors as follows with the aim of enhancing the effectiveness and functionality of the Board of Directors as a whole.

  1. Evaluation process
    As a voluntary advisory body to the Board of Directors, the Board of Directors Effectiveness Evaluation Committee (hereinafter, “the Committee”) consisting of independent officers was established to evaluate the effectiveness of the Board of Directors. The Committee shared evaluation results and issues with the Board of Directors, and confirmed future initiatives.
    (Evaluation method)
    • The Committee will analyze and evaluate the following evaluation items by exchanging opinions, and will summarize the issues requiring future action.
    • At a meeting of the Board of Directors, the Committee will share its analysis/evaluation results and identified issues with the Board of Directors, and decisions will be made on future initiatives.
    (Evaluation items)
    • Operation and decision-making process of the Board of Directors
    • Size and structure of the Board of Directors
    • Enhancement of deliberations by the Board of Directors
  2. Overview of evaluation results
    Based on the evaluation process described above, the Board of Directors has generally been operating and functioning appropriately in terms of the operation and decision-making process of the Board of Directors, size and structure of the Board of Directors, and enhancement of deliberations by the Board of Directors. It is the Committee’s opinion that the effectiveness of the entire Board of Directors has been ensured.
    Furthermore, there have been steady reforms for periodic reporting on deliberations for the medium- to long-term direction of each business, as well as on the status of corporate governance, including overseas corporations. These items were identified as themes by the Committee during evaluation of effectiveness in the previous fiscal year. It is the Committee’s opinion that effectiveness in FY2020 was valid.
    Through continued evaluation of effectiveness, the Board of Directors will work to further improve functionality, and to construct an even more complete and optimal corporate governance system.

(Supplementary Principle 4-14-2)

In response to requests by directors and auditors, the Company shall provide directors and auditors with the opportunity to acquire knowledge necessary for their duties, with the aim of enabling them to fully engage in management oversight and auditing functions. In such cases, the Company shall pay for the costs associated with knowledge acquisition.

(Principle 5-1: Policy related to constructive dialogue with shareholders)

  1. Basic policy regarding general dialogue with shareholders:
    In order to contribute to the sustainable growth of the Company and the enhancement of corporate value over the medium- to long-term, the Company promotes constructive dialogue with shareholders to a reasonable extent. The director in charge of IR oversees the general dialogue with shareholders and works to enhance dialogue by assigning IR personnel to the IR Division and working with related departments such as general affairs, accounting, and legal affairs in the Administration Division. The Company comprehensively considers the wishes and interests of shareholders and investors, and holds individual meetings and telephone conference calls as necessary. Moreover, the Company takes other measures to enhance dialogue. For example, the Company holds financial results briefings every six months, at which management team explains the Company’s financial situation and management policy to shareholders and investors.
  2. Dialogue methods other than individual meetings:
    In addition to holding biannual financial results briefings for institutional investors, the Company uses a website to disclose summary of financial results, financial results briefing materials, monthly sales status, and other information.
  3. Feedback measures:
    Information on IR activities, related feedback, and the status of changes in shareholders is reported as necessary to management team and the Board of Directors, and is shared with directors and auditors.
  4. Measures for management of insider information:
    The period from the day after the end of each quarterly account settlement until the disclosure of the financial report is stipulated as a silent period. During this period, the Company refrains from commenting on financial results. Furthermore, the Company constantly pays attention to the management of insider information when engaging in dialogue with shareholders, investors, and analysts.
    Our basic policy regarding overall dialogue with shareholders is listed in the Disclosure Policy on our homepage.

Current Corporate Governance System Chart

The corporate governance system chart at this company is shown below.

Current Corporate Governance System Chart

Outside Directors

The Company has appointed two outside directors, Noboru Kotani and Jiro Kokuryo. Kotani contributes to management of the Company by using his experience and insight gained as an executive of a listed company. Kokuryo has worked at a major telecommunications company and is a scholar with a wide range of insight on management and IT. Based on his experience, Kokuryo has been appointed as an outside director with the expectation that he will monitor overall management of the Company, make management proposals, and exercise his voting rights at the Board of Directors.

Independent Officers

The Company has designated two outside directors (Noboru Kotani, Jiro Kokuryo) and two outside auditor (Tsuguya Ota, Tetsuya Oi) as independent officers.

Policy Related to System Development/Initiatives for Promoting Constructive Dialogue with Shareholders

In order to contribute to the sustainable growth of the Company and the enhancement of corporate value over the medium- to long-term, the Company promotes constructive dialogue with shareholders to a reasonable extent. The director in charge of IR oversees the general dialogue with shareholders and works to enhance dialogue by assigning IR personnel to the IR Division and working with related departments such as general affairs, accounting, and legal affairs in the Administration Division. The Company comprehensively considers the wishes and interests of shareholders and investors, and holds individual meetings and telephone conference calls as necessary. Moreover, the Company takes other measures to enhance dialogue. For example, the Company holds financial results briefings every six months, at which management team explains the Company’s financial situation and management policy to shareholders and investors.

(Status of officer attendance at meetings of the Board of Directors)

Ordinary meetings of the Board of Directors are held once per month. Additional meetings are also held as necessary. The Board of Directors makes decisions and supervises the execution of business from a broad perspective. In addition to matters stipulated in laws and regulations, the Articles of Incorporation and the Board of Directors Regulations, a wide range of matters are reported, discussed, and resolved. Auditors also attend meetings of the Board of Directors in order to audit the execution of business by directors.

Status of attendance (number of meetings attended ÷ number of meetings held; (attendance rate)) at meetings of the Board of Directors in FY2020 (September 1, 2019 to August 31, 2020)

President Hitoshi Tanaka 15 out of 15 (100%)
Director Yutaka Nakamura 15 out of 15 (100%)
Outside Director Noboru Kotani 15 out of 15 (100%)
Outside Director Jiro Kokuryo 12 out of 15 (80%)
Outside Auditor Masatoshi Arimura -
Outside Auditor Tsuguya Ota 14 out of 14 (100%)
Outside Auditor Tetsuya Oi 13 out of 14 (93%)

Note: Outside Auditor Masatoshi Arimura takes office in November, 2020.

Concept and Overview of Officer Compensation

In order to ensure transparency and objectivity in regards to compensation for the management team of the Company, comprehensive consideration is given to factors including the scope of responsibility, performance, and degree of contribution, and a compensation amount is set based on deliberation by the Nomination and Compensation Committee (consisting of the President and outside directors), a voluntary advisory body to the Board of Directors, within the limits of compensation as set by resolution of the General Meeting of Shareholders.

Anti-Takeover Measures

At this time, the Company does not plan to introduce specific anti-takeover measures.

Policy Regarding Cross-Shareholding

The company’s basic policy is not to own cross-shareholdings. At this time, the Company does not own any listed shares as cross-shareholdings.

Basic Policy Regarding Internal Controls

  1. System for ensuring that directors and employees perform their duties in compliance with applicable laws and the Articles of Incorporation
    1. The Company's concept of compliance is based on the JINS Group Code of Ethical Conduct, which has been established to ensure that all officers and employees working at the Company are proactively refining and improving their organizations, as well as proactively resolving issues from the perspectives of ethics and compliance with laws. This will enable the Company to build trust and obtain high evaluation from the market.
    2. The Company has established a Compliance Committee as an organization to guarantee the management philosophy and the Code of Ethical Conduct. Furthermore, the Company develops compliance systems by educating officers and employees so that each individual can act in accordance with the concept of compliance. The status of compliance activities is reported from the Compliance Committee to directors and auditors as necessary. The Internal Auditing Division, which serves as an internal audit department, regularly audits the status of compliance implementation at each department.
    3. The Company has established a contact point for receiving reports from workers, etc., as well as a Compliance Hotline for responding to consultation on matters such as confirming possible violations of laws and regulations, within the Compliance Committee and external specialized institutions. Through these measures, the Company works to discover and correct inappropriate behavior at an early stage. The Company has stipulated that the contents of all whistleblowing reports are kept confidential and whistleblowers are not subjected to any unfair treatment.
    4. Based on internal rules, the Internal Auditing Division periodically conducts internal audits on the overall status of operations; specifically, the status of compliance with laws and regulations, the Articles of Incorporation, and internal rules, as well as the appropriateness of procedures for executing duties and of business contents. The Internal Auditing Division then reports the results of said audits to the President and auditors.
    5. All executives and employees must comply with the Guidelines for Code of Ethics. In the Guidelines for Code of Ethics, the Company declares its resolute response to anti-social forces which threaten social order, its disassociation with illegal acts and anti-social acts, and its prohibition of all benefits for anti-social forces. The Company works to eliminate all relationships with anti-social forces.
  2. System for storing and managing information related to the execution of duties by directors
    In accordance with the Document Management Regulations, the Company records, stores, and manages information related to the execution of duties by directors in documents or electromagnetic media (hereinafter, “Documents, etc. ”). The Document Management Regulations define the scope of documents to be stored, the storage period, the storage location, and other elements of the system for storing and managing Documents, etc. Directors and auditors shall be able to view these Documents, etc., at any time.
  3. Regulations and other systems for managing the risk of loss
    1. The Company shall stipulate basic policies and systems regarding business risk management in the Risk Management Regulations, and shall develop and construct a risk management system in accordance with the Regulations.
    2. The Company recognizes credit risks, administrative risks, system risks, compliance risks, information-related risks, and other types of risks as business risks, and shall develop and review internal rules and manuals to deal with individual risks.
    3. In the risk management system, the General Affairs and Human Resources Group of the Administrative Division serves as the responsible department for a Risk Management Committee which is chaired by the President. The Risk Management Committee implements risk management which is integrated with internal controls, while the Internal Auditing Division audits the status of progress. Furthermore, in the event that a serious situation occurs in business activities, the Company shall respond promptly and establish a system to minimize loss and damage.
    4. In addition to the above, in order to ensure business continuity in the case of the following risks, the Company shall establish Management Risk Countermeasure Guidelines and develop a risk management system.
      1. Risk of serious losses due to disasters and accidents such as earthquakes, floods, and fires
      2. Risk of serious interference with production and sales activities due to improper execution of business by officers and employees
      3. Risk of serious damage due to incorrect functioning of core IT systems
      4. Other risks deemed as critical by the Board of Directors
  4. System to ensure that directors execute their duties efficiently
    The Company will formulate a medium-term business plan and a single-year business plan in order to define a company-wide future vision in response to changes in the business environment. In order to achieve business plan and business plan, the Company shall clarify the authority and duties of directors, and shall improve the efficiency of execution of duties.
    In addition, by implementing an executive officer system, the Company shall strive to strengthen the supervisory function of directors through delegation of authority for executing certain business operations. Furthermore, an executive committee meeting, which consists of executive officers and is chaired by the President, will be held under the Board of Directors. The executive officers meeting shall engage in advance deliberations for enhancing discussions at the Board of Directors. Also, within the extent of authority delegated by the Board of Directors, the executive officers meeting shall deliberate and make decisions on the execution of the Company’s business and implementation of measures.
  5. System to ensure the appropriateness of business in the corporate group consisting of the Company and affiliates
    1. The Company strives to grow and prosper the overall business of the Group, which consists of the Company and its subsidiaries and affiliates (hereinafter, subsidiaries and affiliates are collectively referred to as “Affiliates”). Accordingly, the Company shall define the Affiliates Management Regulations for developing and constructing systems for efficient execution of business at Affiliates.
    2. In accordance with the Affiliates Management Regulations, the person in charge and the supervisory department shall manage and provide guidance to Affiliates through prior consultation, reporting, and meetings.
    3. Affiliates with a high degree of importance for the Group's business performance give periodic reports on management results and other important matters, at a management liaison conference which is attended by the Company’s full-time directors, full-time auditors, executive officers, and management team from the applicable Affiliates.
    4. In accordance with the Risk Management Regulations, the Company develops and constructs a risk management system implemented throughout the Group. Furthermore, in the event of disasters and accidents, at Affiliates as stipulated in the Management Risk Response Guidelines, the Company shall promptly establish a countermeasure headquarters and take necessary actions.
    5. The Company shall apply the JINS Group Code of Ethical Conduct and the Guidelines for Code of Ethics to all officers and employees of the Company and Affiliates, and shall ensure that all applicable individuals are aware of the ethical codes.
    6. The Internal Auditing Division shall periodically audit the status of operations at Affiliates.
  6. Matters relating to employees in the event that an auditor requests assignment of that employee for assistance in duties
    If an auditor requests the assignment of an employee for assisting in the operation of the Board of Auditors or in the execution of other duties (hereinafter, “Assistant to Corporate Auditor”), an Assistant to Corporate Auditor shall be promptly assigned after consulting with the auditor.
  7. Matters related to the independence of Assistant to Corporate Auditor from directors and matters related to ensuring the effectiveness of instructions from auditors
    1. Consent shall be obtained in advance from the auditor in regards to the transfer or personnel evaluation of an Assistant to Corporate Auditor.
    2. An Assistant to Corporate Auditor who has received an order necessary for auditing work from an auditor shall possess the authority to view documents, enter the audit site, etc., within the scope necessary to perform the duties of the Assistant to Corporate Auditor.
  8. System for directors and employees to report to auditors and other systems related to reporting to auditors
    1. Directors and other executives shall periodically report the status for execution of their duties to auditors. In addition to legal matters, directors shall immediately report to auditors on the details of decisions that may have a significant impact on finance and business.
    2. An employee shall be able to report directly to auditors in regards to facts, etc., that may cause significant damage to the Company.
    3. From among matters communicated to the whistleblowing contact point, the person in charge of the Compliance Hotline shall be able to directly communicate with auditors in regards to matters related to the duties of directors.
    4. Auditors shall attend meetings of the Compliance Committee, which deliberates and reviews the contents of reports to the whistleblowing contact point, reports on the status of response, and measures for preventing reoccurrence.
  9. System for directors and employees of Affiliates to report to auditors
    1. Similar to the directors and employees of the Company, the directors, auditors and employees of Affiliates shall promptly report to auditors of the Company if any facts that have a significant impact on each company occur or are likely to occur.
    2. As necessary, auditors of the Company shall be able to request reports on the contents of business execution from directors and employees of Affiliates, and reports on the status of audits from auditors of Affiliates.
    3. The Company shall establish a system to ensure that persons who have reported to auditors as stipulated in articles 8 and 9 do not incur unfavorable treatment at the Company or Affiliates because of the report.
  10. Matters related to the procedures for prepaying or redeeming expenses arising from execution of duties by auditors, as well as policies related to the processing of expenses or obligations arising from the performance of such duties
    When an auditor requests advance payment of expenses for the execution of duties per Article 388 of the Companies Act, the Company shall promptly process the request.
  11. Other systems to ensure that audits by auditors are conducted effectively
    1. Directors and employees of the Company and directors, auditors, and employees of Affiliates shall actively cooperate with audits by auditors of the Company, report on the status of business operations, and disclose materials related to their duties.
    2. Auditors shall periodically exchange opinions with the President in order to exchange information and confirm the status of business execution.
    3. Based on necessary consultation with accounting auditors, lawyers, or other external experts, auditors shall propose important improvements to the Board of Directors.
  12. System to ensure the reliability of financial reports
    In order to ensure the reliability of financial reports and to effectively and appropriately submit internal control reports as stipulated in the Financial Instruments and Exchange Act, the Company shall act under the direction of the President to maintain and operate an internal control system for financial reports, and shall work to evaluate and improve said system.

Business Risks

The following are examples of business risks that could have a significant impact on the investment decisions of investors. Please note that the forward-looking statements are based on determinations made by the Group as of the end of August 2020, and that the following examples do not cover all risks related to investments in the stock of the Company.

  1. Legal regulations
    The above risks include risks related to regulations on the provisions of Article 17 of the Medical Practitioners Act, regulations on the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices, the Act on the Protection of Personal Information, and the Product Liability Act (PL Act).
  2. Business environment risks
    The above risks include risks related to the maturation of the domestic market for vision-correction eyeglasses, the spread and emergence of alternative products and services, natural disasters, The fashion of the infectious disease, and information security.
  3. Changes in the financial environment
    The above risks include risks related to fluctuations in interest rate conditions, changes in the funding environment, and the effects of exchange rate fluctuations.
  4. Risks related to the business model of the Group
    The above risks include risks related to the emergence of competitors; significant changes in the social, economic, and political situation in China; store opening policy; security deposits, guarantee deposits, etc.; securing and developing human resources; intellectual property rights; overseas expansion; and impairment loss of fixed assets.

Implementation Status of Measures Related to Shareholders and Other Interested Parties

Initiatives for revitalizing
the General Meeting of
Shareholders and facilitate
the exercise of voting
rights
Since the 27th Ordinary General Meeting of Shareholders in 2014, we have adopted an electromagnetic method for exercising voting rights.
Since the 27th Ordinary General Meeting of Shareholders in 2014, we have participated in the Electronic Voting Platform operated by ICJ, Inc.
IR activities Briefing sessions for analysts and institutional investors are held twice a year, once after the announcement of full-year financial results and once after the announcement of second quarter financial results. The briefing materials are immediately posted on the Company’s IR website.
https://jinsholdings.com/jp/en/ir/library/explanationdata/
The following URL of the Company’s website lists financial information, timely disclosure information, securities reports, financial results briefing materials, materials from the General Meeting of Shareholders, etc.
https://jinsholdings.com/jp/en/ir/
A dedicated department and individual are placed in charge of IR activities.
Initiatives for respecting
the position of
stakeholders
The Company has established Insider Trading Prevention Regulations designed to collect and analyze company information that should be disclosed in a timely and comprehensive manner, to make appropriate disclosures in compliance with rules for timely disclosure, the Financial Instruments and Exchange Act, and other related laws, and to prevent the leakage of important information and illegal insider transactions.
Since 2013, in order to support and promote entrepreneurship in Gunma Prefecture where the Company was founded, we have sponsored the Gunma Innovation Award, which is presented to commend entrepreneurs in cooperation with local newspapers and local companies that support the purpose of the award.
Furthermore, in order to revitalize the city of Maebashi, we established the Taiyo no Kai (Sun Association) together with companies that have head offices and main bases in Maebashi. Every year, we donate 1% of our net profit (minimum of 1 million yen) to invest in businesses that contribute to the development of Maebashi.
We also collect and recycle eyeglasses that are no longer used.