Corporate Governance

Basic Concepts

We have a Corporate Governance Basic Policy that establishes policies and frameworks for achieving effective corporate governance with the aim of promoting sustainable growth of the Group and improving corporate value over the medium to long term. We constantly review our philosophy of corporate governance and work to improve it.

Furthermore, based on our Management Philosophy, we manage in a way that contributes to value creation for various stakeholders such as shareholders, customers, employees, and local communities, we are ensuring the fairness, transparency, and speed of decision-making, and we are building a corporate governance system appropriate for a regional financial group.

Corporate Governance System

We have an Audit and Supervisory Board, and its Board of Directors, auditors, and Audit and Supervisory Board are responsible for supervising management. Auditors, including independent outside auditors, audit the legality and appropriateness of the directors' execution of their duties by attending meetings of the Board of Directors and reviewing important documents, thereby fulfilling their management auditing function. In addition, independent outside directors supervise management from an independent standpoint and provide opinions and proposals to ensure the appropriateness of decision-making. We have adopted the current corporate governance system because we think that this system adequately fulfills the auditing and supervisory functions.

Composition of the Board of Directors and the Audit and Supervisory Board

In order to ensure that the Board of Directors functions most effectively and efficiently, and from the perspective of revitalizing the Board of Directors, the Articles of Incorporation stipulate that the number of directors be limited to 10. The Board of Directors is composed of a diverse range of directors with different backgrounds in expertise, experience, etc. in order to ensure that the Board of Directors as a whole has a well-balanced mix of knowledge, experience, and ability, combining internal directors familiar with the Group's operations with multiple external directors having a wealth of experience and knowledge outside the Company. Of the seven directors (six men and one woman), three are independent outside directors (as of June 21, 2022). To ensure the effectiveness of audits, the Articles of Incorporation stipulate a maximum of five Audit and Supervisory Board members, with at least half that number being outside members. Of the five Audit and Supervisory Board members (four men and one woman), three are independent outside auditors (as of June 21, 2022).

Ensuring Independence and Diversity Outside Director 3/7 Outside directors:42.8% Female executives 2/12 Female executives:16.7%

Efforts to Improve Governance

Up to and including FY2020

  • Compensation and Nomination Committee established as an internal committee of the Board of Directors.
  • Basic Corporate Governance Policy established
  • Began evaluation of the effectiveness of the Board of Directors using an external evaluation organization.

FY2021

  • Meetings of our Board of Directors and the Bank of Yokohama began to beconducted in an integrated fashion.
  • Directors and Audit and Supervisory Board members of the Company began to participate as observers in the Bank of Yokohama's Management Conference.

Board of Directors

The Board of Directors defines the scope of matters to be resolved by the Board of Directors in accordance with the rules of the Board of Directors, clarifies the scope of delegation to the Management Conference and management group, and makes important decisions on policy associated with risk compliance, as well as providing management oversight for more effective management. In addition, topics that focus on important management policies are selected as annual topics for discussion.

Evaluation of Board of Directors effectiveness

The Company evaluates the effectiveness of the overall Board of Directors annually and works to raise the effectiveness of the Board of Directors and improve its functioning by examining and implementing improvements to address identified issues.
PDCA cycle Policy on Initiatives Operation of the Board of Directors Effectiveness evaluation Recognition of issues(to be discussed by the Board of Directors)

Summary of the Results of the FY2021 Board of Directors Effectiveness Evaluation

Based on the results of the FY2020 effectiveness evaluation, Board of Directors meetings were conducted based on an awareness of generating sustainable growth and increasing corporate value in response to changes in the environment, and the Board deliberated on medium- and long-term strategies, division-specific issues in business execution, and measures to resolve those problems. In order to strengthen cooperation within the Group, Board of Directors meetings of the Company and the Bank of Yokohama are conducted in an integrated fashion to narrow the information gap between the two companies, and deliberations at Board of Directors meetings have been energized by continuing to provide more extensive explanations of proposals and information to outside directors in advance of meetings.

The evaluation is that thanks to initiatives for making improvements on the issues found in FY2020, the effectiveness of Board of Directors meetings is rising steadily and has been ensured.

Ongoing themes for improving board effectiveness

  1. Enhanced discussion of medium- to long-term strategies
  2. Raising the level of Board of Directors operations
  3. Improved monitoring functions

Evaluation method

For the FY2021 effectiveness evaluation, as described below, we used a questionnaire and interviews and held discussions on issues and future efforts to ensure the effectiveness of Board of Directors from a third-party perspective and also conducted self-evaluations.

  1. We had all the directors and auditors, who make up the Board of Directors, complete a questionnaire, which was handled by a third party to ensure objectivity and anonymity.
  2. We conducted individual interviews of directors and Audit & Supervisory Board members in order to obtain more detailed information.
  3. Having compiled the results, at the regular Board of Directors meeting held in May 2022, we discussed the challenges and future initiatives for ensuring the effectiveness of Board of Directors meetings and completed a self-evaluation.

Main evaluation items

  • Composition ofBoard of Directors
  • Operation of the Board of Directors
  • Discussions at board meetings
  • Support system for directors and corporate auditors

Audit and Supervisory Board

Audit and Supervisory Board members audit the legality and appropriateness of Board of Directors' business execution by attending important meetings, such as Board of Directors meetings, examining the state of operations and assets, reviewing documents related to important decisions, communicating with internal audit departments and group companies, and exchanging information with financial auditors, and similar parties, as stipulated in the audit policy and audit plan set by the Audit and Supervisory Board.

Management Conference

The Management Conference, which consists of representative directors, directors, and others, was established under the Board of Directors.

Based on the basic policy and management plans decided by the Board of Directors, the Management Conference discusses and decides on important business execution matters and strategies for flexible business execution within the Group, and also holds preliminary discussions on resolutions of the Board of Directors as necessary.

In addition, for important matters related to the Group's business execution, the following meetings are positioned as part of the Management Conference, and they conduct intensive deliberation on items in their respective jurisdictions.

Considerations for the Appointment of Directors and Auditors

Director

Candidates for Director are appointed by the Board of Directors after deliberation by the discretionary Compensation and Personnel Committee, based on factors such as its views on the composition of the Board of Directors. Persons satisfying the following will be appointed from among candidates for external directors.

  • A.
    Persons meeting Company criteria for independence of judgment and who are free of risk of a conflict of interest with general shareholders
  • B.
    Persons with extensive experience and knowledge in the fields such as corporate management, fiscal matters, finance, economics, accounting, taxation, and legal affairs
  • C.
    Persons who, based on their experience and expertise, can provide timely and appropriate opinions and proposals to Directors and the management team from the perspectives of promoting sustainable growth of the Group and of improving corporate value over the medium to long term.

Audit & Supervisory Board

After obtaining the consent of the Audit & Supervisory Board, candidates for Audit & Supervisory shall be appointed by the Board of Directors. Persons satisfying the following will be appointed from among candidates for external auditor.

  • A.
    Persons meeting Company criteria for independence of judgment and who are free of risk of a conflict of interest with general shareholders
  • B.
    Persons with extensive experience and knowledge in the fields such as corporate management, fiscal matters, finance, economics, accounting, taxation, and legal affairs
  • C.
    Persons expected to contribute to ensuring the sound and sustainable growth of the Group, and to enhancing its corporate value over the medium to long term by forming and expressing audit opinions in a timely and appropriate manner based on their experience and expertise in light of the fact that the appointment of such persons is mandatory from the perspective of further enhancing the neutrality and independence of the audit system

Reasons for Appointment of Outside Officers

Expertise and experience of director candidates, members of the Audit and Supervisory Board and executive officers (skills matrix)

In order to ensure the independence of the Board of Directors and the fair and transparent performance of its functions, the Company appoints outside directors independent of the Group for at least one-third of the total number of directors. The Company combines internal directors familiar with the Group's operations with outside directors with extensive experience and knowledge from outside the Company.

We believe that the expertise and experience essential to the company is in regional sales, which is indispensable in light of the business model of our subsidiary companies, which are regional financial institutions, corporate management and organizational management universally required for corporate management, legal affairs and risk management, finance and accounting, international and market operations, and ICT and digital (DX). The combination of skills of the Board of Directors as a whole, including the Audit and Supervisory Board members and executive officers who actually make up the Company's Board of Directors in addition to the directors, and the contents of each skill, are as follows.

Succession Plan

In order to promote sustainable growth and improve corporate value over the medium to long term, the Group has formulated a succession plan for top management of this company and its major subsidiaries, the Bank of Yokohama and Higashi-Nippon Bank. By implementing training programs according to the abilities, qualities, and experience of candidates, we systematically train personnel to lead future management.

The status of the formulation and operation of the plan is regularly reported to the Compensation and Personnel Committee, which is composed solely of outside directors. Outside directors not only receive reports, but also strive to improve the effectiveness of the Succession Plan by gaining a multifaceted understanding of the candidates through various meetings, interviews, and discussions, and by providing advice and recommendations to the candidates based on their extensive knowledge and experience.

Support for Outside Directors (Outside Members of Audit and Supervisory Board)

In order to enhance Board of Directors meetings, the Company provides outside directors and outside auditors with advance explanations of the agenda of the Board of Directors meetings, as well as opportunities for on-site visits to sales branches of the Group companies. In order to ensure that directors obtain information about the company in a timely and appropriate manner, a staff member is assigned to the Corporate Planning Department to assist directors in obtaining information. To ensure that audits are conducted effectively, we have a dedicated staff member in the Audit & Supervisory Office to support the audits of audit & supervisory. We also provide opportunities for directors to obtain knowledge and information, as well as advice from outside experts, so that they can fulfill their roles and responsibilities.

When outside directors and outside auditors are appointed, they are provided with the opportunity to acquire knowledge and information about the Group's management philosophy, management policies, business plans, and business structure. Furthermore, we ensure coordination between the outside directors and the Representative Director, the audit & supervisory, internal audit departments, and the financial auditors, as well as interaction between the outside directors and the directors of the Group companies.

Discussions between outside directors and investors/analysts

At the IR Day in December 2020, outside directors had an opportunity to meet with investors and analysts in order to have direct contact with the voice of the market and to understand it.

Study sessions by external experts

Study sessions were held by outside experts specializing in DX, sustainability, and institutional design in order to develop a medium-term management plan, and to improve governance. In addition, study sessions were held on overseas economic trends and the investment environment for the sake of expanding business areas utilizing strategic investments.

Visit to Bank of Yokohama and Higashi-Nippon Bank branches

In July and October 2021 and February 2022, we visitedseveral branches of the Bank of Yokohama and Higashi-Nippon Bank in order to deepen our understanding of the operations and business sites of our subsidiary banks. At sales branches, we observed business operations and held interviews and discussions with regional head office and branch managers.

Summary of the Results of the FY2020 Board of Directors Effectiveness Evaluation

Remuneration and Personnel Committee

In order to promote sustainable growth and improve corporate value over the medium to long-term, the Group has formulated a succession plan fortop management of this company and its major subsidiaries, the Bank of Yokohama, and Higashi-Nippon Bank. By implementing training programs according to the abilities, qualities, and experience of candidates, we systematically train personnel to lead future management.

Members of Remuneration and Personnel Committee

(You can swipe left or right)
Name Job title Number of meetings attended/held in FY2021 (excluding written discussions)
Chairman: Mitsuru Akiyoshi Outside Director 13 meetings/13 meetings
Committee Member: Yoshinobu Yamada Outside Director 13 meetings/13 meetings
Committee Member: Mami Yoda Outside Director 13 meetings/13 meetings

Major Deliberations for FY 2021

(Personnel Matters)

  • Group executive personnel
  • Succession plan

(Compensation matters)

  • Verification of the Executive Compensation Table based on executive compensation data by an external research organization
  • Group and subsidiary bank Executive Compensation Table
  • Policy on and evaluation etc. of short-term performance-linked remuneration
  • Valuation of Trust II in stock-based compensation

Executive Compensation System

1.Directors and Executive Officers

By a resolution of the Board of Directors, the Company has adopted a policy (hereafter referred to as the 'policy') regarding the details of remuneration of individual directors and executive officers that have concluded a contract of appointment with the Company (hereafter referred to as 'officers'). The following is a summary of that policy. The decision on this policy was made after deliberation by the Remuneration and Personnel Committee, which is comprised solely of outside directors.

(1)Basic Policy

  • The system for remuneration of officers functions as an appropriate incentive to promote sustainable growth of the Group and increase its corporate value over the medium to long-term.
  • The remuneration system should contribute to the enhancement of corporate value and shareholder value, not only in the short-term but also in the medium and long-term, while restraining excessive risk-taking.
  • Remuneration composition, remuneration composition proportions, and remuneration levels are determined through periodic comparisons and verification based on data on executive remuneration from external research organizations and objective survey data, using as benchmarks a group of companies with similar performance and business conditions to those of the Company.

(2)Compensation Composition and Details

Directors (excluding outside directors) and Executive Officers

A.Compensation composition
  • Remuneration consists of a base remuneration (fixed), a short-term performance-linked remuneration (performance-linked), and a stock remuneration (Trust I: non-performance-linked, Trust II: performance-linked).
  • The amount of basic remuneration, short-term performance-linked remuneration and stock-based remuneration is determined by position. The composition of each remuneration is 66% for basic remuneration, 17% for short-term performance-linked remuneration and 17% for stock-based remuneration (if short-term performance-linked remuneration and stock-based remuneration are paid in standard amounts).
Compensation Composition Basic salary 66% Short-term performance-linked compensation 17% Stock compensation 17%
B.Details of each compensation element
  • (a)

    Basic compensation

    • Basic remuneration is paid monthly based on role and responsibilities.
  • (b)

    Short-term performance-linked compensation

    • Short-term performance-linked compensation is an annual payment based on Company performance for the fiscal year and the individual's evaluation based on business results.
    • The benchmarks for evaluating the Company's performance are the combined net business profit of the Bank of Yokohama, Ltd., and Higashi-Nippon Bank, Ltd., which indicates the profitability of the Company's core business, and net income attributable to shareholders of the parent company, which is the final management performance. The standard amount for each role varies between 0% and 150% where the standard amount for each role is 100.
    • Individual business results mean the degree of achievement of the goals set at the beginning of the term. (About five items are set for each individual based on the department in charge, such as achievement of budget of department in charge, development status of each measure, establishment of risk management system, etc.) If the standard amount for each position is set at 100, the amount of payment will fluctuate between 70% and 130% depending on the result of the individual's evaluation. Note that the final evaluation of the Company's performance and the performance of officers based on their work performance is subject to deliberation by the Compensation and Personnel Committee.
Company performance Determined based on achievement of the individual's performance. (0% - 150%) × Individual performance Determined based on the the individual's performance.(70% - 130%) = Short-term performance-linked compensation
  • (c)

    Stock compensation

  • ‘Stock compensation’ employs a trust to issue and provide (hereinafter, ‘issue’) Company shares and cash equivalents (hereinafter, ‘Company shares’). Two types of trusts (Trust I and Trust II) have been established as follows.
  • In the event of a serious violation of the contract of appointment between the Company and an officer with respect to the officer's duties, or in the event of a sudden deterioration in business performance or a serious incident or scandal that damages corporate value, the Company may require that the officer forfeits stock delivery points (malus), returns the granted Company stock (clawback), or provides compensation.
  • 1)

    Trust I

    • Company shares etc. equivalent to the standard amount for each position will be granted etc. to each director upon their resignation.
  • 2)

    Trust II

    • The Company will defer issuance of Company stock equivalent to the amount reflecting the performance-linked coefficient applied to the standard amount by position until after completion of the medium-term management plan (three fiscal years from FY2022 to FY2024).
    • The performance-linked coefficient varies within a range of 75% to 200% depending on the degree of achievement of the performance targets of the medium-term management plan. In order to increase incentives for achieving plan targets, the indicators for evaluating the degree of achievement of the performance targets of the medium-term management plan are the following three items, which are the target indicators in the current medium-term management plan (FY2022 - 2024)The final performance-linked coefficient will be determined after deliberation by the Compensation and Human Resources Committee, based on ESG external evaluation indicators, initiatives for non-financial items in the mid-term management plan (company CO2 emission reduction rate, advancement of risk control etc.), and qualitative items.
Target indicators
  • OHR (consolidated)
  • ROE (consolidated, based on shareholder equity)
  • Common Equity Tier 1 Ratio (consolidated, Basel III finalized, fully implemented basis (excluding unrealized gains on marketable securities))
Outside Directors
A.Compensation composition
  • In view of the role in supervising the execution of business, compensation is not linked to performance, but is only the basic remuneration.
B.Compensation details
  • Basic remuneration is paid monthly based on role and responsibilities.

2. Audit & Supervisory Board

The details of remuneration etc. for auditors are determined through discussions with the auditors.

A.Compensation composition
  • In view of the role in supervising execution of business, remuneration is not linked to performance, but is only basic (fixed) remuneration.
B.Compensation details
  • To ensure neutrality and independence of auditors, remuneration is not linked to performance, but is only basic (fixed) remuneration.