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

The Company has 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. The Company has adopted the current corporate governance system because it thinks 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 no more than 10. In order to ensure the independence of the Board of Directors and to demonstrate that it functions fairly and transparently, the Company appoints a number of outside directors who maintain views that are independent from the Group, making up at least one-third of the members. By combining internal directors who are familiar with the Group's business with outside directors with extensive experience and knowledge outside the Company and giving the Board of Directors diverse members with different backgrounds of specialist knowledge and experience, different, the group ensures a good balance of knowledge, experience and skills on the Board of Directors. As of June 21, 2023, of the eight directors (seven men and one woman), three are independent outside directors. To ensure the effectiveness of audits, the Articles of Incorporation stipulate that the Audit & Supervisory Board has no more than five members, with at least half being outside members. As of June 21, 2023, of the five Audit & Supervisory Board members (four men and one woman), three are independent from the outside.

Specialization and experience of directors, Audit & Supervisory Board members, and executive officers (skill matrix)

We believe that the specific expertise and experience required by the Company are in Regional Sales, which is indispensable in light of the business model of our subsidiary companies, which are regional financial institutions, and in Corporate Management and Organizational Operations, in Legal Affairs and Risk Management, and in Finance and Accounting, which are universally required for corporate management, and in International and Market Operations, and ICT and Digital Transformation (DX), which require higher levels of specific expertise in order to respond to changes in the business environment. The combination of skills of the Board of Directors as a whole, including the Audit & Supervisory Board members and executive officers who actually make up the Company's Board of Directors in addition to the directors, and details of the skills of each, are as follows.

Efforts to Improve Governance

FY2016

  • Compensation and Personnel Committee established as an internal committee of the Board of Directors.

FY2017

  • Basic Corporate Governance Policy established.
  • Stock compensation for directors etc. shifted from stock option compensation to a stock compensation system utilizing a trust.

FY2018

  • Evaluation of the effectiveness of the Board of Directors using an external evaluation organization started.

FY2021

  • Skill Matrix Disclosure
  • Integrated meetings of the Boards of Directors of the Company and of the Bank of Yokohama started.
  • Directors and Audit and Supervisory Board members of the Company began to participate as observers in Bank of Yokohama management conferences.

FY2022

  • Integrated management conferences of the Company and the Bank of Yokohama started.
  • Directors and Audit and Supervisory Board members of the Company began to participate as observers in Higashi-Nippon Bank management conferences.

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, in order to enhance strategic discussions at Board of Directors meetings, we establish “annual themes” focusing on strategies for increasing corporate value over the medium to long term.

Points Discussed at Board of Directors Meetings (FY2022)

(1)Management Plan

  • Group Management Policy
  • Overall Group Budget
  • Group Capital Plan
  • Group Human Resources Strategy

(2)Items related to sustainability

  • Revision of Sector Policies
  • Issues and Policies for Human Capital Disclosures
  • Engagement Strategies for a Net Zero Investment and Loan Portfolio

(3)Items related to corporate governance

  • Risk Appetite Statement
  • Evaluation of effectiveness of Board of Directors

(4)Risk and compliance matters

  • Internal audits and compliance programs
  • Risk management policy

FY2022 Topics (Results)

2022

  • May:Direction of Capital Utilization to Increase Corporate Value
  • July:Direction of Regional Bank Platform and System Strategies
  • August:Direction of International Strategy
  • October:Direction of Medium- to Long-Term Securities Operations
  • November:Follow-up on Progress of the Medium-Term Management Plan and Direction of Group Business to Increase Corporate Value
  • December:Discussion Points and Direction for Higher-Level Risk Appetite Framework, Group Human Resources Strategy

2023

  • January:Direction for the 2023 Risk Appetite Statement
  • February:Marketing with Next-Generation Apps and Data Utilization, and Direction of Securities Operations in FY2023

Evaluation of Board of Directors effectiveness

The Company works for continuous improvement in the effectiveness of the Board of Directors by sharing and discussing issues to be addressed and enhancements to be made based on the results of the annual analysis and self-assessment of the effectiveness of the Board of Directors as a whole.

Evaluation method

Our effectiveness assessment is based on questionnaires and interviews from the perspective of utilizing third party viewpoints, the results of which are tabulated and analyzed, before the self-assessment is conducted. The specific assessment method is as follows.

  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. Interviews were conducted with each director and Audit & Supervisory Board member in order to confirm and gather specific opinions on the results of the questionnaire.
  3. After compiling and analyzing the results of 1 and 2 above, the Board of Directors deliberates on and shares about whether the Board of Directors as a whole is effective in light of the roles and responsibilities it should fulfill, and conducts a self-assessment.

Main evaluation items

  • Composition of Board of Directors
  • Operation of the Board of Directors
  • Discussions at board meetings
  • Support system for directors and members of Audit & Supervisory Board

Summary of the Results of the FY2022 Board of Directors Effectiveness Assessment

For FY2022, in light of the roles and responsibilities to be fulfilled by the Board of Directors, we set the themes of “1. Strengthening discussion of medium- to long-term strategies to enhance corporate value, “2. Enhancing Board of Directors' Management and Making It More Efficient”, and “3. Improving Monitoring Functions”, and the Board of Directors conducted and shared a self-assessment that “the Board of Directors as a whole continued to be generally effective in FY2022” as a result of efforts to improve its effectiveness.

For FY2023, in addition to the themes that had been addressed up to FY2022, we added the theme “4. Enhancement of Stakeholder Communication”. We will work to further improve the effectiveness of the Board of Directors in order to promote sustainable corporate growth and enhance corporate value over the medium to long term.

For more information on our Board of Directors Effectiveness Assessment, please see our Corporate Governance Report.

Themes for action to improve the effectiveness of the Board of Directors in FY2023

  1. Strengthening discussions of medium- to long-term strategies
  2. Raising the level of Board of Directors operations
  3. Improving monitoring functions
  4. Strengthening stakeholder communication

Audit and Supervisory Board

Audit & Supervisory Board members audit the legality and appropriateness of Board of Directors' business execution by attending important meetings, such as Board of Directors meetings, by examining the state of operations and assets, by reviewing documents related to important decisions, and also by communicating with internal audit and supervisory departments and group companies, and by exchanging information with accounting auditors and similar parties, as stipulated in the audit policy and audit plan set by the Audit & Supervisory Board. In FY2022, we mainly focused on the “Status of initiatives aimed at sustainable growth and raising of corporate value over the medium to long term”, the “Status of development and operations of the Group's internal control systems” and the “Status of operation of the Risk Appetite Framework” as key monitoring items.

Audit & Supervisory Board members interview executives and employees of the Company and its subsidiaries, visit sales branches of subsidiaries, summarize their findings, and report them to the Board of Directors. In addition, while discussing key audit matters (KAMs) with the accounting auditors, they receive reports on the status of their audits.

Main Topics of Audit & Supervisory Board Meetings (FY2022)

Matters to be resolved
Audit policy of Audit & Supervisory Board members (including key audit items), audit plan and methods, assignment of audit work, reappointment of accounting auditors, audit report drafts, etc.
Matters to be reported
Audit & Supervisory Board monthly activity reports, management meeting reports, Risk Management Department regular reports, Audit Department regular reports, accounting auditor reports, etc.

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 meetings listed on the right are positioned as part of the Management Conference, and these meetings conduct intensive deliberation on items within their respective jurisdictions.

Considerations for the Appointment of Directors and Audit & Supervisory Board Members

Directors

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

  • A.
    Persons who meet the Company's criteria for independence and who have no risk of a conflict of interest with general shareholders
  • B.
    Persons with extensive experience and extensive knowledge in the fields of corporate management, fiscal affairs, finance, economics, accounting, taxation, legal affairs, etc.
  • C.
    Persons who, based on their experience and expertise, can provide timely and appropriate views and proposals to directors and the management team from the perspective of promoting sustainable growth of the Group and raising medium- to long-term corporate value

Audit & Supervisory Board Member

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 items are appointed from among candidates for outside Audit & Supervisory Board Members.

  • A.
    Persons who meet the Company's criteria for independence and who have no risk of a conflict of interest with general shareholders
  • B.
    Persons with extensive experience and extensive knowledge in the fields of corporate management, fiscal affairs, finance, economics, accounting, taxation, legal affairs, etc.
  • C.
    Persons who can be expected to contribute to securing 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 own experience and views, given that the appointment of such persons is mandatory in order to further strengthen the neutrality and independence of the audit system

Reasons for Appointment of Outside Officers

Succession Plan

In order to promote sustainable growth and to raise corporate value over the medium to long term, the Group has formulated a Succession Plan for top management of the 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 Directors and Audit & Supervisory Board Members

In order to enhance Board of Directors meetings, the Company provides outside directors and outside members of the Audit & Supervisory Board with advance explanations of the agenda of the Board of Directors meetings, as well as opportunities for onsite 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 audits by the Audit & Supervisory board. 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 members of the Audit & Supervisory Board 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 work for coordination between the outside directors and the representative director, the Audit & Supervisory Board members, internal audit departments, and accounting auditors, as well as for interchange between the outside directors and the directors of the Group companies.

Discussions between outside directors and investors/analysts.

At our Investor Relations Day in February 2023, outside directors had an opportunity to meet with investors and analysts in order to directly hear and understand voices from the market.

Study sessions by outside experts

In order to enhance Board of Directors deliberations and improve governance, study sessions were held by outside experts, focusing on themes related to digital/IT, sustainability, and open innovation. In addition, we held study sessions on trends in new businesses of other companies in the industry with the aim of expanding our business areas utilizing strategic investments.

Visits to Bank of Yokohama and Higashi-Nippon Bank branches

In July and October 2022 and February 2023, we visited several 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.

Compensation and Personnel Committee

For the purpose of ensuring objectivity and transparency in compensation and personnel matters of directors and executive officers (hereinafter, "Officers"), a Compensation and Personnel Committee consisting solely of outside directors has been established as a voluntary mechanism. The Compensation and Personnel Committee performs the functions of both a nominating committee and a compensation committee.

Overview of the Compensation and Personnel Committee

Composition/Independence: Composed solely of outside directors selected by resolution of the Board of Directors (hereinafter referred to as "Committee Members"). In order to ensure the independence of the Compensation and Personnel Committee, all Committee Members must be independent outside directors. The Chairperson of this Committee shall be elected by the Committee Members from among themselves. In principle, the President shall provide explanations to the Committee, and if necessary, persons other than the Committee Members designated by the Chairperson may be allowed to attend the meeting and their reports or opinions to be heard.
Authority and Role: Discussion on compensation and personnel matters for directors of the Company and its subsidiaries. The Committee shall deliberate on and decide the following matters.
1 Compensation of the Company's Officers
(1)Details of the Company's compensation structure according to position
(2)Individual compensation amounts based on the Company's position-specific compensation table (excluding performance-linked compensation)
(3)Amount of compensation linked to the Company's performance
(4)Performance evaluation of the Company's executive directors and executive officers
(5)Evaluation of the achievement of performance targets for the Company's medium- and long-term incentive compensation
(6)Establishment, revision, or abolition of systems related to compensation for officers of the Company
(7)Other matters deemed necessary by the Chairperson
2 Compensation of officers of subsidiaries
(1)Details of subsidiaries' tables of compensation according to position
(2)Amount of compensation linked to the subsidiary's performance
(3)Evaluation of the achievement of performance targets for the subsidiary's medium- and long-term incentive compensation
(4)Establishment, revision, or abolition of systems related to the compensation for officers of subsidiaries
(5)Other matters deemed necessary by the Chairperson
3 Personnel matters regarding officers of the Company and its subsidiaries
(1)Appointment and dismissal of candidates for directors of the Company, and dismissal of directors, and selection and dismissal of executive directors, representative directors, and the President and Executive Officer of the Company
(2)Selection and dismissal of the president of a subsidiary
(3)Other matters deemed necessary by the Chairperson
Frequency of meetings: As necessary.
Secretariat: Office of the Secretary, Corporate Planning Department

Members of Compensation and Personnel Committee

Name Job title Number of meetings attended/held in FY2022 (excluding written discussions)
Chair: Mitsuru Akiyoshi Outside Director 15/15
Board Member: Yoshinobu Yamada Outside Director 15/15
Board Member: Mami Yoda Outside Director 15/15

Major Deliberations for FY 2022

(Matters related to personnel)

  • Group executive personnel
  • Succession Plan Operation and Status

(Matters related to remuneration)

  • Verification of the Executive Compensation Table by an external research organization based on executive compensation data
  • Group and Subsidiary Bank Executive Compensation Table
  • Medium- to Long-Term Executive Compensation
  • Review of Stock Acquisition and Ownership Guidelines
  • Policy on and evaluation etc. of compensation linked to short-term performance

Executive Compensation System

1.Directors

The Company has adopted by resolution of the Board of Directors a policy ('the Policy') concerning decisions on the details of remuneration etc. for individual directors. The outline of the document is as follows. This policy was decided on after deliberation by the Compensation and Personnel Committee, which is comprised solely of outside directors.

(1)Basic policy

  • The compensation system for directors is to function as an appropriate incentive to promote the sustainable growth of the Group and increase its corporate value over the medium to long term, while minimizing excessive risk-taking.
  • Compensation composition, compensation composition proportions, and compensation levels are determined through periodic comparisons and verification based on data on executive compensation from external research organizations and objective survey data, using as benchmarks a group of companies with performance and business conditions similar to those of the Company.

(2)Compensation Composition and Details

Directors (excluding non-executive directors and outside directors)

A. Compensation composition
  • Compensation consists of base compensation (fixed), short-term-performance-linked compensation (performance-linked), and stock compensation (Trust I: not performance-linked, Trust II: performance-linked).
  • The amount of basic compensation, short-term-performance-linked compensation and stock compensation is determined by position. The composition of the different compensation items is 66% for basic compensation, 17% for short-term performance-linked compensation and 17% for stock compensation (when short-term performance-linked compensation and stock compensation are paid in standard amounts).
Compensation Composition Basic compensation 66% Short-term performance-linked compensation 17% Stock compensation 17%
B. Details of each compensation item
  • (a)

    Basic compensation

    • Basic compensation 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 the Company's performance and evaluation of personal performance for the fiscal year.
    • The indicators used to evaluate company performance are “core net business profit (the total for the Group's banks)”, which indicates the profitability of the core business, and “profit attributable to owners of parent”, which is the final operating result. The base amount for each position is determined in accordance with the evaluation of company performance. The base amount for each position ranges from 0% to 150% of the standard amount for the position.
    • Personal performance is evaluated based on the degree of achievement of targets set at the beginning of each fiscal year. (Roughly five items are set for each person based on the department in charge, such as achievement of budget, development of each measure, and establishment of the risk management system.) The amount of pay for each position varies from 70% to 130% of the standard amount for the position, in accordance with the evaluation of the individual. Note that the final evaluation of the performance of the Company and of individual officers is subject to deliberation by the Compensation and Personnel Committee.
  • (c)

    Stock compensation

  • “Stock compensation” is a program in which Company shares and an amount equivalent to the cash proceeds from the conversion of the Company's shares (hereinafter, “Company shares etc.”) are issued and paid (hereinafter, “issued etc.”) to the trust.). 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 are accumulated monthly and deferred until the retirement of each officer.
  • 2)

    Trust II

    • Company shares etc. equivalent to the standard amount for each position are accumulated monthly and deferred until the end of the medium-term management plan and Company shares etc. equivalent to the amount reflecting the performancelinked coefficient are issued etc.
    • The performance-linked coefficient fluctuates within the range between 75% and 200% depending on the degree of achievement of performance targets in the medium-term management plan. In order to increase incentives to achieve the goals of the medium-term management plan, the following three target indicators in the medium-term management plan (FY2022- FY2024) are the financial indicators used to determine the performance-linked coefficient. The final performancelinked coefficient is determined after deliberation by the Compensation and Personnel Committee, with additions and subtractions within the range of -15% to +30% based on ESG external evaluation indicators, the status of efforts to address non-financial items in the Medium-term Management Plan, and qualitative matters. However, the final performance-linked coefficient to be determined shall not exceed a maximum of 200% or a minimum of 75%.
Financial Indicators
  • ROE (consolidated basis, based on shareholders' equity (average of beginning and ending balances))
  • OHR (consolidated basis)
  • Common Equity Tier 1 capital ratio (consolidated basis, Basel III finalized, fully implemented basis (excluding valuation difference on available-for-sale securities))
ESG Evaluation
Assessment Index
FTSE Overall ESG Score, MSCI ESG Ratings
Non-financial Indicators
Non-Executive Directors/Outside Directors
A. Compensation composition
  • In view of the role in supervising execution of business, their compensation is not linked to performance, but is only basic (fixed) compensation.
B. Compensation details
  • Basic compensation is paid monthly based on role and responsibilities.

2. Audit & Supervisory Board Member

The details of compensation etc. for Audit & Supervisory Board members are determined through discussions with them.

A. Compensation composition
  • To ensure neutrality and independence of Audit & Supervisory Board members, compensation is not linked to performance, but is only basic (fixed) compensation.
B. Compensation details
  • Basic compensation is paid monthly based on role and responsibilities.