Governance Report

Foundations for Sustainable Development

Corporate Governance and Internal Controls

ISO 6.2.3 Decision-making processes and structures
GRI G4-35,G4-48,G4-39,G4-51

Basic Policy for Governance and Management Systems

Taisei Corporation (the "Company") has established this Fundamental Corporate Governance Policy*1 in order to achieve sustainable development and improvement in the mid- to long-term value of the Company and its subsidiaries and affiliates (collectively, the "Taisei Group") in accordance with the philosophy of the Taisei Group, being "to create a vibrant environment for all members of society" (the "Taisei Group Philosophy") and the so-called "Taisei Spirit", which embodies our commitment to "Active and Transparent Culture", "Value Creation" and "Evolution of Tradition."
In line with the basic policy, the Taisei Corporation has introduced a system of Executive Officers and established several Committees of the Board to allow the board (including two External Members of the Board) to give its undivided attention to important management decisions and the supervision of corporate affairs. In addition, the Audit & Supervisory Board (including four External Audit & Supervisory Board Members), operating independently of the Board and the operating divisions, works in close collaboration with the Accounting Auditors and Auditing Departments, the in-house Auditing Department to implement independent and effective audits and to strengthen the auditing system across the whole Group.

1 Formulated in November 2015

1

General Meeting of Shareholders (held on June 29, 2016)

The Company shall endeavor to dispatch the convocation notice of its General Meeting of Shareholders at least four weeks prior to the scheduled date of such General Meeting of Shareholders in order to provide its shareholders time to sufficiently consider the agenda of such General Meeting of Shareholders and exercise their voting rights appropriately. In addition, prior to dispatching each notice, the Company shall announce electronically the information relevant to such General Meeting of Shareholders through the TDnet system and its official website.

2

Members of the Board / Board (convened 13 times in FY2015)

The Board, entrusted by the shareholders, shall pursue activities for the common benefit of the Company and its shareholders, and shall be responsible for maintaining an efficient and effective corporate governance structure to facilitate the growth of the Company in a sustainable manner and improve its corporate value in the mid- to long-term.
For the purpose of fulfilling the responsibility described in the preceding paragraph, the Board shall exercise its supervisory function of the Company’s overall operating activities, thus ensuring appropriateness, fairness, and transparency for the management, and shall make decisions regarding the execution of material business decisions as provided for in the laws and regulations, the Articles of Incorporation, the Board Regulations, and the Application Standards for the Board Regulations of the Company.
Nomination of a prospective Member of the Board and election of an Executive Officer shall be determined by the Board after the completion of deliberations by the Executive Personnel Committee established within the Board.
At least two (2) of the Members of the Board shall be Independent External Members of the Board in order to ensure that the independent and objective oversight of the execution of the Board's operations may be effectively carried out.

3

Committees of the Board

For the purpose of expediting deliberations and decision-makings by the Board, the Company has established the following committees within the Board: 1) the Executive Personnel Committee responsible for deliberating on the personnel related matters of the Members of the Board and Executive Officers; 2) the Remuneration Committee responsible for deliberating on the remuneration of the Members of the Board and Executive Officers; 3) the Finance Committee responsible for deliberating on the potential acquisition and holding of significant assets; 4) the CSR Committee responsible for deliberating on matters to enhance the entire Group's CSR-based business management.

4

Audit & Supervisory Board Members / Audit & Supervisory Board (convened 14 times in FY2015)

As an entity independent of the Board and the Operating Divisions, and in accordance with the Audit Policy established by the Audit & Supervisory Board, the Audit & Supervisory Board Members audit the performance of the Member of the Board including attending the meetings of the Board and hearing of reports on business conditions from the Members of the Board.
The Audit & Supervisory Board Members and the Chief Executive Officer, the Auditing Department and the Accounting Auditors hold regular meetings to arrive at mutual understanding and to improve the effectiveness of the audits.

5

Audit & Supervisory Board Members' Department

In order to assist the Audit & Supervisory Board Members in the performance of their duties, the Audit & Supervisory Board Members' Department has been set up independently of the Board as a dedicated organization to support the Audit & Supervisory Board Members with the collection of appropriate information and other tasks.

6

Auditing Department

Based on the annual auditing plan, the Auditing Department also conducts internal audits of administrative and management systems, as well as the legality and rationality of the management of corporate affairs at all in-house departments and Group companies.

7

Accounting Auditors

The Accounting Auditors submit reports on the audit plan and the audit results to the Audit & Supervisory Board, the Accounting Department and other internal control departments as needed.
To ensure the external accounting auditors conduct fair and appropriate audits, the management of the Company, Audit & Supervisory Board Members and the Auditing Department shall have meetings on a regular and as-needed basis, and exchange their opinions with the external accounting auditors. Further, the Board shall respond appropriately if external accounting auditors detect dishonest practices and request that appropriate action be taken, or indicate errors or problems.

8

Operations Committee

We have set up a range of operations committees including the Technology Committee, the Central Safety Committee, the Environment Committee, the Risk Management Committee, and the Central Labor Affairs Committee to deliberate matters that involve consultations with the President.

9

Special Committee

We have set up the Compliance Committee chaired by an external expert as a Special Committee to respond to consultations with the President and we endeavor to reinforce the promotion of compliance.

Governance system

Promotion of Internal Controls

At Taisei Corporation, the Board has established a "Basic Policy for Development of a System for Ensuring Appropriate Business Operations"*2 and implemented a range of measures to ensure the credibility of financial reporting and systems for conducting operations in an appropriate and efficient manner as a Group.
In April 2015, the policy regarding development of the "System for Ensuring Appropriate Business Operations in the Whole Group" and the "System for Ensuring Effectiveness of the Audits by Audit & Supervisory Board Members" were put into practice based on the amendment to the Companies Act in May the same year. Through these systems, we will deliver improved risk management and compliance.

2 Formulated in May 2006. Final revision in April 2015.

Ensuring Credibility of Financial Reporting

Internal controls on financial reporting based on the Financial Instruments and Exchange Act are recognized as one of the most important issues for a corporation. We have set up the internal systems including daily monitoring to ensure the credibility of the financial reporting disclosed to the public. The effectiveness of the system is evaluated by the Audit Department and audited by KPMG AZSA LLC. The results are disclosed in the Internal Control Report and in the Audit Report of Internal Controls. We will fulfill our social responsibility as a corporation by continuing to ensure the effectiveness of these internal controls.
In order to continue to operate the internal control systems relating to financial reporting in a sound manner, we are also publishing messages from the President, implementing e-learning, and other campaigns to raise awareness among officers and employees.

Remuneration for Officers

Remuneration for the Members of the Board is determined from a comprehensive perspective that includes the scale, content, and performance of our business, as well as individual job specifications and responsibilities. Based on a resolution passed at the 146th Annual General Meeting of Shareholders on June 27, 2006, the sum total of monthly remuneration for the Members of the Board shall not exceed 70 million yen. Based on a resolution passed at the 134th Annual General Meeting of Shareholders on June 29, 1994, the sum total of monthly remuneration for Audit & Supervisory Board Members shall not exceed 12 million yen.
Further, where remuneration for the Members of the Board is concerned, the system of remuneration shall reflect performance and will be determined by the Board after deliberation by the Remuneration Committee, which carries out preliminary reviews ahead of board meetings, while remuneration for Audit & Supervisory Board Members shall be determined upon consultation with the Audit & Supervisory Board.

Amounts of remuneration and others paid to Members of the Board and Audit & Supervisory Board Member

Category Total External Members of the Board and External Audit & Supervisory Board Member
Number of Payees Amount Paid Number of Payees Amount Paid
Member of the Board 13 498 2 26
Audit & Supervisory
Board Member
8 106 4 39

Appointment of External Officers

In order to improve corporate governance, Taisei Corporation appoints six external officers (External Members of the Board and External Audit & Supervisory Board Members). All six officers meet the standards for independence determined by stock exchanges and are registered as independent officers based on the regulations for listing marketable securities on the Tokyo Stock Exchange.

Major activities of external Members of the Board and External Audit & Supervisory Board Members

Classification Name Major activities
Member of
the Board
Toru Tsuji He attended all the board meetings held in the current fiscal year. Based on the deep insights obtained from his experience as a manager in a different industry and from his neutral position and view as an external member of the board, he offered useful opinions to the Company's management in order to establish an internal control system and strengthen corporate governance.
Member of
the Board
Fumio Sudo He attended 12 out of a total of 13 board meetings held during the current fiscal year. Based on the deep insights obtained from his experience as a manager in a different industry and from his neutral position and view as an external member of the board, he offered useful opinions to the Company's management in order to establish an internal control system and strengthen corporate governance.
Audit &
Supervisory
Board
Member
Terunobu Maeda He attended all of the board meetings and audit & supervisory board meetings held during the current fiscal year. He offered his opinions as and when appropriate based on his broad knowledge of finance and accounting, and offered opinions regarding the execution of duties of audit & supervisory board member.
Audit &
Supervisory
Board
Member
Shigeru Morichi He attended 12 out of a total of 13 board meetings held in the current fiscal year and 13 of a total of 14 audit & supervisory board meetings held during the same period. He offered his opinions as and when appropriate based on the deep insights obtained from his experience as a university professor, and offered opinions regarding the execution of duties of audit & supervisory board member.
Audit &
Supervisory
Board
Member
Kiwamu Miyakoshi He attended all of the board meetings and audit & supervisory board meetings held during the current fiscal year. He offered his opinions as and when appropriate based on the deep insights obtained from his experience as a police officer, and offered opinions regarding the execution of duties of audit & supervisory board member.

KPIs

Spreading and Consolidating the Taisei Group Philosophy

  • Corporate Planning Department, Corporate Planning Office

To spread and consolidate the Group Philosophy, we have operated annual e-learning courses about the Group Philosophy since FY2011. After reconfirming the composition of the Group Philosophy in FY2015, we conducted a training course to deepen understanding of the relationship between the Group philosophy and the Corporate Governance Code. Course attendance rate was 94.1%.

Rate of implementation of e-learning regarding the Taisei Group Philosophy ・・・94.1%

Risk Management

ISO 6.2.3 Decision-making processes and structures
GRI G4-46,G4-47

Company-wide Risk Management

At Taisei Corporation, we have formulated a Risk Management Policy *1 and built systems to implement risk management across the whole company in order to respond to risk escalation following changes in the business environment.
In terms of handling risk management, we identify and select risks that influence business activities every year. Depending on their importance, we classify them into categories such as "important company-wide risk" or "risk within the jurisdiction of head office". As well as preparing countermeasures, we also implement pragmatic risk management by clarifying supervisory roles and jurisdictions among the departments.
Specifically, information on incidents and accidents with the potential to have a serious impact on the management of the corporation is centralized at the CRO *2 Secretariat. We implement effective risk management across the whole company including measures to prevent any reoccurrence by sharing this information with the Risk Management Committee and the Risk Management Council.

1 Formulated in September 2004

2 CRO: Chief Risk Management Officer

Company-wide risk management system

Initiatives for Business Continuity Planning (BCP)

Taisei Corporation has established the Policy on Business Continuity in Time of Disaster *3 to meet our responsibilities as a general construction company supporting the infrastructure for economic activities. We aim to become a company earning the trust of society by contributing to business continuity at central and local government and corporations as maintaining our business functions through Business Continuity Planning (BCP) drills.
Based on the premise for the Business Continuity Planning (BCP), we carried out the FY2015 Large-Scale Disaster Drill on November 14, 2015. The scenario for the drill assumed a large-scale earthquake occurring on a public holiday and its impact on the head office and branch locations in Japan as well as the impact on one overseas location (Taiwan).
The focus of this drill was to verify the effectiveness of external cooperation and initial training at backup locations. Based on the estimates for damage incurred in case of a large-scale earthquake published by central and local governments for all areas of Japan, the BCP drills were implemented simultaneously at the head office, all branch offices, as well as Group companies, on the assumption that each participant was afflicted in a disaster.
Specifically, where verification of the effectiveness of external cooperation is concerned, this drill marked the first time for a construction company to implement a BCP drill in cooperation with the head and branch offices of the Japan Federation of Construction Contractors (JFCC).

 
 

3 Formulated in November 2005

KPIs

Initiatives for Business Continuity Planning

  • General Affairs Department, Business Administration Division

The FY2015 Large-Scale Disaster Drill was implemented with a focus on verifying the effectiveness of external cooperation and initial training at backup locations. A total of 17,800 officers and employees at head office, 13 branch offices, and 23 Group companies participated.

Rate of participation in the Large-Scale Disaster Drill ・・・100%

Stakeholder Dialog and Information Disclosure

ISO 6.2.3 Decision-making processes and structures
GRI G4-24,G4-26

Information Disclosure Policy

To deliver sustainable development and to earn the trust of society as a corporation, it is vital to make timely and accurate disclosures to stakeholders concerning important information about corporate activities. In 2006, Taisei Corporation established the Information Disclosure Policy *1 and stated principles for ensuring appropriate information disclosure and transparency in the basic policies of corporate governance. These policies form the basis for our practice of proactive information disclosure.

Information Disclosure Policy

We recognize that the broad disclosure of important information about our corporate activities in a timely and appropriate manner contributes to our sustainable development as a business entity by both encouraging public understanding of our company and obtaining the public's proper evaluation of our activities.
To this end, we will conduct our corporate activities in accordance with the following Norms of Conduct for information disclosure.

Norms of Conduct

  1. We will disclose corporate information as required by the relevant laws and regulations. In addition, we will strive for the voluntary disclosure of other types of corporate information in a timely and appropriate manner.
  2. We will further enhance our internal systems to ensure the accurate and fair disclosure of information.
  3. We will disclose information such as announcements, timely disclosures to stock exchanges, press releases, and postings on our website and so on through the methods appropriate to the nature of the information.

1 Formulated in May 2006

Dialog with Shareholders and Investors

In order to achieve sustainable growth and improve corporate value in the medium- to long-term, Taisei Corporation engages in constructive dialog and discussions with shareholders. In November last year, we established the IR Policy*2 regarding structures and initiatives to promote constructive dialog.
To make the dialog with shareholders and investors more constructive, the opinions and content of our discussions with stakeholders in the course of everyday dialog are fed back to the management ranks.
We also strive for fair information disclosure via our website where we publish summaries of the President's speeches and the main question and answer sessions (Japanese and English) in addition to the Medium-term Business Plan and materials distributed at results briefings. We also strive to promote constructive dialog through business report briefings by the President and question answer session at the annual general meeting of shareholders, the main venue for important dialog with shareholders.
In addition, we disclose information to overseas investors in English in our annual reports and on our English website.
In order to further deepen understanding of the corporate activities at Taisei Corporation, we also intend to renew shareholder newsletter as of December and to report on key business and ESG (Environment, Society, Governance) initiatives.

IR Policy

  1. Fundamental policy for communications and meetings with shareholders and investors The IR Section is the contact point for requests for communications and meetings with shareholders and investors, and, as a general rule, an appropriate officer(s) and employee(s) selected by the officers specified in sub-section 2(1) (the "Responsible Officers") shall communicate with such shareholders and investors as appropriate. In such instances, participation of the management of the Company in any communications or meetings will be considered if it is necessary based on the nature of the request.
  2. Guidelines for the Implementation of the IR policy
    1. Nomination of and the Responsible Officers
      Chief of Business Administration Division, Member of the Board, oversees communications and meetings, and the Chief of Corporate Planning Office, supervising the Corporate Planning Department and IR Section, provides oversight support to Chief of Business Administration Division.
    2. Policies for inter-departmental cooperation of the Company to facilitate communications and meetings
      A regular liaison meeting among the IR Section, the Corporate Communication Department, the General Affairs Department, the Legal Department, the Accounting Department, and the Finance Department will be held to support the Responsible Officers.
    3. Methods of communicating with shareholders and investors other than communications and meetings
      Annual and semi-annual business result briefing meetings and IR workshops related to the release of the Mid-term Business Plan will be held.
      In addition, IR for foreign investors and the project site tours for institutional investors will be implemented, and whether other communication methods should be developed will be regularly considered.
    4. Appropriate reporting of the communications and meetings with shareholders and investors
      The IR Section will create monthly IR reports setting forth the opinions of shareholders as understood via communications and meetings with shareholders and investors, and the content of such communications and meetings. This will be reported every month to senior management executives of the Company.
      The IR Section will also report on the state of IR activities to the Board at least twice per year.
    5. Policy for the management of insider information in communications and meetings
      To ensure fair and appropriate information disclosure and prevent insider trading, the Company will not disclose in any communications or meetings, material non-public information that would affect the valuation of the Company's stock. The period commencing on the day after the close of accounts of each quarter and ending on the date when financial results are announced will be a "silent period" during which no communication or meeting regarding financial results will be conducted.

2 Formulated in November 2015

Stakeholder Engagement

ISO 6.2.3 Decision-making processes and structures
GRI G4-24,G4-26,G4-27

Engagement with Our Stakeholders

Every year since 2002, Taisei Corporation has engaged in various dialogs with the aim of considering our business activities in a new light. We strive to improve our engagement based on the issues and our relationship with stakeholders.

From August 18 to 20, 2015, we contributed to a course about private enterprise for school teachers organized by the Keizai Koho Center and we implemented a private enterprise course for elementary school teachers.

Dialog in action

Opportunities for dialog with major stakeholders

Major Stakeholder Value offered by and Responsibilities of
Taisei Corporation
Opportunities for Dialog Related pages
Clients,
End-Users

Creating a safe, secure, and comfortable society

  • Provide good-quality, safe and secure construction products and related services
  • Support customer business continuity at times of disaster
  • Provide appropriate information about construction products and related services
  • Manage customer information appropriately
  • Conduct customer satisfaction survey
  • TAISEI QUALITY activities (quality management system)
  • Publish WEB.LIBRARY.TAISEI, the Taisei information magazine, and solutions for earthquake countermeasures on Taisin Net
  • Organize step up forums on healthcare management, seminars on earthquake resistance
  • Publish TAISEI CORPORATE REPORT (annual)
  • Guidelines for Management of Customer Information
Shareholders,
investors

Improve financial health and raise corporate value

  • Raise corporate value
  • Secure stable profits and appropriate returns
  • Disclose timely and appropriate corporate information
  • Implement appropriate corporate governance and internal controls
  • General meeting of shareholders
  • Publish the Taisei Circle shareholder newsletter, the TAISEI CORPORATE REPORT, TAISEI ANNUAL REPORT, Corporate Governance Report (once a year respectively)
  • Organize results briefings (twice a year), teleconferences
Suppliers
(cooperating companies,
specialist subcontractors)

Sustainable harmony and benefit

  • Fair and impartial transaction
  • Collaborate and cooperate toward productivity, safety improvement and environmental protection
  • Improve working conditions at construction sites
  • Organize CSR Procurement briefings
  • Implement CSR Procurement monitoring (once a year)
  • Set up the Taisei Health, Safety, and Environment Cooperation Association
  • Conduct compliance training
  • Distribute the Information Security Pocket Book, the Human Rights Handbook
  • Free use of personal computer security diagnostic website
  • Taisei Occupational Health and Safety Management System (TAISEI OHSMS)
Employees

Putting my work on the map. A life of pride

  • Sustain and secure employment
  • Respect for human rights and diversity
  • Provide a pleasant working environment
  • Train and utilize human resources
  • Internal recruitment system
  • Corporate Ethics Helpline
  • Consultation desks (mental health, nursing care)
  • Implement training
  • Consultation between labor and management
  • Publish company newsletter TAISEI (four times a year)
  • Taisei Occupational Health and Safety Management System (TAISEI OHSMS)
  • Implement employee satisfaction surveys (every 2 years, 2014 evaluation result: 86.3%)
The Environment,
Future Generations

Sustainable and affluent planet

  • Measures to counter global warming
  • Effective use of resources
  • Protect biodiversity
  • Build good relations with local community
  • Pay taxes
  • Guided tours of the Technology Center and vicinity of construction sites
  • Conduct dialog
  • Cooperate with Metropolitan Tokyo, NPO research associations, and Tokyo Greenship Action (Satoyama Preservation Project)
  • Taisei Corporation Public Trust of Funds for Natural and Historic Environments
  • Operating Galerie Taisei

KPIs

Dialog with Stakeholders

  • CSR Promotion Section, Corporate Communication Department, Corporate Planning Office

In FY2015, we organized a course about private enterprise for elementary school teachers; the Co-Creation Forum, a dialog-style session between corporations, associations, individuals and employees; the Eco First Sustainable Café, an exchange between the Eco First Corporation and students who belong to environmental groups of universities. In the future, we intend to implement dialog with external experts, as well as verification and review of the importance of CSR issues.

Number of dialogs, etc. ・・・3times