Mazda respects the principles of Japan’s Corporate Governance Code, formulated by Tokyo Stock Exchange, Inc., and works to maintain strong relationships with its stakeholders, including shareholders, customers, suppliers, local communities, and its employees. By doing so, the Company strives to sustain growth and enhance its corporate value over the medium and long term through transparent, fair, prompt, and decisive decision-making and to continue to enhance its corporate governance. The Company’s business environment is undergoing rapid changes. In order to enable faster business decision-making, further enhance discussion of management strategies, and strengthen supervisory functions of the Board of Directors, the Company has adopted the company with audit and supervisory committee structure described in the Companies Act of Japan. Based on this structure, the Company maintains legally mandated governance organizations including the general meeting of shareholders, the Board of Directors, and the Audit & Supervisory Committee. Furthermore, to raise the transparency of the processes behind the nomination and selection of officers and the remuneration decision-making process, the Company established the Officer Lineup & Remuneration Advisory Committee as an advisory body to the Board of Directors.
CORPORATE GOVERNANCE
Basic Approach
Relevant Documents
Frameworks
Corporate Governance Framework
Board of Directors
The Company’s Board of Directors deliberates and makes decisions on important operational execution matters, such as management strategy and basic management policies, and supervises the execution of duties by individual directors. In addition, to facilitate quick and flexible decision-making, based on the Articles of Incorporation a substantial part of decision-making regarding important operational execution matters will be delegated to management, and executive officers including and below the president to whom authority has been delegated based on the Company’s rules of administrative authority will make decisions regarding these matters. The Board of Directors is made up of 14 directors, six of whom are highly independent outside directors. The Board of Directors generally meets once per month.
【Major Matters Discussed in FY March 2024 】
- Management policies and progress management leading up to 2030
- Phased electrification scenarios based on trends and other conditions specific to each market, and collaboration for electrification
- Plan for business activities in Japan to achieve carbon neutrality by FY March 2031
- Approach to issues around sustainability, development of the Group’s human rights policy, and action plan for human rights due diligence
- Status of operation of systems for internal control and risk management
Audit & Supervisory Committee
The Company’s Audit & Supervisory Committee audits the Board of Directors’ decision-making process, the execution of duties by directors, the implementation of internal control systems through the execution of voting rights at Board of Directors’ meetings, and the execution of the right to state opinions on the personnel changes and remuneration of directors (excluding directors who are Audit & Supervisory Committee members) at the general meeting of shareholders. The committee is made up of five members, four of whom are highly independent outside directors. To ensure the effectiveness of audits, one full-time Audit & Supervisory Committee member has been appointed.
【Major Matters Discussed in FY March 2024】
- Audit policy, high-priority initiatives, audit plan, work assignment, and audit methods for effective functioning of audit activities
- Strengthening the mechanisms and means to reflect the opinions of outside directors based on multifaceted perspectives and outside viewpoints in audits while striving to enhance the opportunities to provide outside directors with information, as well as the nature of such information
- Checking and enhancing the execution of duties (including the formulation and progress of management strategy matters) by directors (excluding directors who are Audit & Supervisory Committee members), executive officers, general managers of major departments, and management of subsidiaries and affiliates
- Cooperation with the internal audit department and accounting auditor auditors as an organizational audit
- The appropriateness of audit by the accounting auditors based on quarterly reviews and reports by the accounting auditors, the selection and dismissal of the accounting auditors, and remuneration for the accounting auditors
Accounting Auditors
Accounting audits are conducted by KPMG AZSA LLC. The certified public accountants who conducted the Company’s accounting audits are Hiroshi Tawara, Koji Yoshida, and Kazumi Kanehara. Those assisting with the Company’s accounting audits include 13 certified public accountants and 38 others, five of whom have passed the certified public accountant examination.
Executive Officers
Mazda has introduced an executive officer system. By separating the execution and management functions, Mazda seeks to enhance the effectiveness of the Board of Directors as an oversight organization. In addition, decision-making is expedited through expanded discussion by the Board of Directors and by delegating authority to executive officers. In this way, the Company is working to further managerial efficiency.
Officer Lineup & Remuneration Advisory Committee
The Company has established the Officer Lineup & Remuneration Advisory Committee, made up of three representative directors and six outside directors, as an advisory body to the Board of Directors. The committee reports to the Board of Directors the results of its deliberation on matters such as officer lineup and policies regarding the selection and training of directors as well as remuneration payment policies and the remuneration system and processes based on those policies, which contribute to the Company’s sustainable growth and to the raising of corporate value in the medium and long term.
【Major Matters Discussed in FY March 2024】
- Appropriateness of the composition of directors and executive officers to ensure the diversity and skills mix required to achieve management policy goals (executive personnel changes effective April 1, 2024, and executive personnel changes effective June 25, 2024)
- Appropriateness of remuneration amount for directors and executive officers to confirm conformity with the policies on determining details of individual remuneration for directors (excluding directors who are Audit & Supervisory Committee members) and compare with the remuneration levels of the benchmark companies whose size and line of business are similar to those of the Company, etc.
- Review of the remuneration system for directors (excluding directors who are Audit & Supervisory Committee members and outside directors), executive officers, and fellows (introduction of restricted stock remuneration and the performance share unit remuneration, changes in remuneration composition rates, and identification of performance indicators for performance-based restricted stock remuneration)
Cooperation among Parties Responsible for Auditing
The Audit & Supervisory Committee regularly meets with the accounting auditors and hears explanations of their audit plans, audit issues, and results. The Audit & Supervisory Committee also provides necessary information on its audit plans and the status and result of audits. In this way, information is exchanged in both directions and the Company is working to strengthen this close cooperation. Also, some audits, such as physical inspections of inventories and securities, are conducted jointly by the Audit & Supervisory Committee and the accounting auditors. In addition, the Audit & Supervisory Committee regularly holds meetings with the group of the accounting auditors and internal audit department and with the group of the internal audit department and the departments in charge of promoting internal and financial control. The Audit & Supervisory Committee receives reports from the internal audit department on the plans for and results of internal audits of the Company and the Group companies. It also receives reports from the departments in charge of promoting internal and financial control on plans for efforts to enhance internal and financial control in the Company and the Group companies and the status of these efforts. In addition, the Audit & Supervisory Committee provides information acquired in the process of conducting its audits or conveys requests from its perspective as the Audit & Supervisory Committee, making for two-way exchange of information.
Board of Directors
Skills Matrix of the Board of Directors
As the business environment surrounding the Company rapidly changes, Mazda believes that the Board of Directors must have an appropriate balance in knowledge, experience, and competence and also be diverse in composition to effectively fulfill its roles and responsibilities for the Company’s sustainable growth and the raising of corporate value in the medium and long term.
Organizational Affiliation （As of June 30, 2024)
Board of Directors (including members of Audit & Supervisory Committee) |
Number | 14 (Inside directors: 8, Outside directors: 6), including 2 female directors and 1 foreign-national director |
|---|---|---|
| Ratio of Outside Directors | 42.9% | |
| Ratio of Female Directors | 14.3% | |
| Audit & Supervisory Committee | Number | 5 (Inside directors: 1, Outside directors: 4), including 1 female director |
Officer Lineup & Remuneration Advisory Committee |
Number | 9 (Inside directors: 3, Outside directors: 6), including 2 female directors and 1 foreign-national director |
| Ratio of Outside Directors | 66.7% |
Outside Directors
Mazda selects outside directors with independent standpoints to strengthen the oversight function of the Board of Directors and improve the transparency of management. Outside directors are judged to be sufficiently independent when they meet the Company’s criteria for determining the independence of outside officers.
Criteria for Determining the Independence of Outside Officers and Reasons for Appointment
Support System for Outside Directors
Mazda provides explanations of matters to be brought before the Board of Directors as necessary so that outside directors can freely state their opinions at Board meetings and so that outside directors can easily participate in decision-making. The Company also arranges for outside officers to interview executive officers and provides opportunities for them to inspect facilities and participate in events both inside and outside the Company. Audit & Supervisory Committee members (full-time) offer observations based on information they have acquired or opinions they have formed through their attendance at important internal meetings or through their audit activities. The departments concerned work together to provide information based on the opinions of the outside directors and to support them.
Analysis and Evaluation of the Effectiveness of the Board of Directors
Mazda analyzes and evaluates the effectiveness of the Board of Directors in order to steadily advance measures for the further enhancement of its effectiveness. Information on the processes of the analyses and evaluations conducted in FY March 2024 as well as the results is provided below.
【Method of Analysis and Evaluation 】
Using a survey form prepared by the secretariat for the Board of Directors, all directors conducted a self-evaluation of the Board of Directors’ effectiveness. Based on the survey results, the directors analyzed the current situation and discussed improvements, this year focusing particularly on matters identified as ongoing issues. Subsequent discussions were then held at Board of Directors’ meetings to define the principles to pursue and the approach to adopt.
【Details of Analyses and Evaluations 】
The analyses and evaluations primarily covered the membership of the Board of Directors; deliberations on business strategies, compliance, internal control, and other topics; provision of information (the amount of information, materials, explanations, and support for outside directors) and involvement in deliberations.
【Overview of results】
It was found that the directors are appropriately involved in determining the Company’s business strategy and other matters and share details of these, that the outside directors express their opinions from an independent perspective after gaining an understanding of the Company’s situation through briefings on resolutions beforehand and other forms of support, and that oversight on the execution of operations has been ensured. It was also confirmed that discussions at Board of Directors’ meetings have become livelier and that directors have a strong awareness and expectations regarding further improvements in the effectiveness of the Board of Directors.
Furthermore, as there has been progress in delegation of the Board of Directors’ authorities to representative directors within the appropriate scope under the Company’s Articles of Incorporation, improvement in the speed of decision-making and improvement in the productivity of discussions resulting from securing ample discussion time were confirmed.
At the same time, as the surrounding business environment continues to change drastically, and the outlook remains uncertain, the directors again clarified and shared their understanding of the functions and roles of the Board of Directors and discussed how agenda items should be selected and the processes required for deliberation. Through the discussion, all directors confirmed that important matters such as the management strategy should be brought up in a timely manner and decisions made after thorough discussion, and that it is necessary to continue to strengthen the monitoring of the progress of the management strategy and related specific initiatives from various perspectives. The directors also recognized the need to share information and hold discussions among themselves at an early stage to enable them to consider the opinions of outside directors amid rapid changes in the external environment.
Executive Remuneration
In June 2024, a revision was instituted to the remuneration systems for directors (excluding directors who are Audit & Supervisory Committee members and outside directors), executive officers, and fellows. This revision was designed to heighten motivation for pursuing medium- to long-term improvements in corporate value by increasing the degree to which officers share the benefits and risks of share price fluctuations with shareholders. Remuneration is comprised of basic remuneration, performance-based monetary remuneration, and restricted stock remuneration.* The ratios of these different forms of remuneration are set to be around the levels described below when all of the targets of the medium-term management plan and the targets for all of the performance indicators defined for performance share units are accomplished. Directors who are Audit & Supervisory Committee members and outside directors receive a fixed amount of basic remuneration only, considering their independence from the execution of operations.
* Restricted stock remuneration is comprised of restricted stock that is not linked to performance and performance share units that are linked to performance.
Structure of remuneration for directors
| Remuneration category | Details | Performance indicators |
|---|---|---|
| Basic remuneration | Fixed-sum payments based on the director’s position and responsibilities | ― |
| Performance-based monetary remuneration | Payments based on the director’s position and responsibilities that are adjusted in accordance with the degree of progress toward the initially announced performance forecasts for defined performance indicators Payments based on personal evaluations that reflect the degree of accomplishment of targets set for each individual |
■Consolidated net sales ■Net income attributable to owners of the parent |
| Restricted stock compensation | Number of shares issued based on standard value set in accordance with the director’s position and responsibilities | ― |
| Performance-based performance share units | Number of units allocated equivalent to the base amount (1 unit = 1 share equivalent) based on the director’s position and responsibilities and used to determine the number of shares to be issued based on whether the target for each performance indicator was achieved after the performance evaluation period (one fiscal year in which the unit grant date falls) | ■Return on equity ■Employee engagement* ■Customer focus enhancement* ■Greenhouse gas emission reduction |
* Employee engagement and customer focus enhancement are measured based on rates of positive responses in regard to relevant questions on employee awareness surveys.
Executive remuneration amounts in FY March 2024
Cross-Shareholdings
(1) Policy on cross-shareholdings
Taking into overall consideration the business strategy, the necessity of business activities such as maintaining and strengthening business dealings, and the comparison of benefits and risks of cross-shareholding with the cost of capital, the Company will have cross-shareholdings when it will lead to the raising of corporate value over the medium and long term. If the purpose of cross-shareholdings is judged to have diminished, the Company will aim to reduce cross-shareholdings, including the selling of shares based on the relevant company’s circumstances, etc.
(2) Verification by the Board of Directors
Every year at a Board of Directors’ meeting, the Company will individually verify the appropriateness of its cross-shareholdings according to the above policy.
(3) Basic policy on exercise of voting rights
When exercising its right to vote for cross-shareholdings, the Company will comprehensively evaluate whether or not matters that have come up for a vote will contribute to raising the corporate value, etc., of the Company and companies in which the Company holds shares over the medium and long term; the Company will then decide whether to vote for or against any proposals.
Group Governance
To achieve comprehensive development of business, sustainable and stable growth, and proper governance as a group, Mazda has established and disseminated the Group Company Management Regulations to all its Group companies. In the Mazda Group, each Group company has established a corporate governance framework in accordance with the Regulations as well as the laws and regulations of each country and region, with the aim of enhancing cooperation between Mazda and the Group companies.
Group Companies in Japan
Group companies in Japan appoint corporate auditors to audit the execution of duties by directors. Through the Group Audit & Supervisory Board Members’ Meetings attended by Mazda’s Audit & Supervisory Committee members and full-time auditors from large Mazda Group companies and by having staff from Mazda’s internal audit department concurrently serve as auditors of the Group companies, Mazda aims not only to reinforce governance frameworks at Group companies but also to strengthen ties between Mazda and Group companies.
Overseas Group Companies
Many overseas Group companies hold meetings of the Audit Committee.* Members participating in these meetings are executives and internal audit departments of each overseas Group company, Mazda’s executives and internal audit department, and the department in charge of each Group company. They enhance each Group company’s internal control by discussing and exchanging opinions on activities related to internal control. Mazda further provides appropriate guidance and support to other overseas Group companies, to improve their internal control-related initiatives.
* Committees are set and operated independently for each overseas group company for the purpose of gathering information and exchanging opinions on internal control.
Internal Auditing
Conduct Internal Audits
The internal audit departments of Mazda and its Group companies collaboratively conduct internal audits for the purpose of ensuring sound and efficient management. The Mazda Group Basic Internal Audit Regulations were established, which define basic and common matters concerning internal auditing, such as the role, mission, organizational position, and scope of activities. In accordance with the Regulations, Mazda’s internal audit department holds regular meetings with and training sessions online for the internal audit departments of Group companies in Japan and overseas. In addition, the department also conducts various tasks, such as approval of the internal audit plans of Group companies, receipt of their internal audit reports and follow-up of their improvement activities, thereby ensuring consistency of auditing policies across the Group and gathering audit-related information.
Also, Mazda’s internal audit department evaluates the functions of auditing departments of Group companies and supports their activities with the aim of strengthening the internal audit departments of the respective Group companies. Mazda’s internal audit department is staffed with individuals holding Certified Internal Auditor (CIA), Certified Information System Auditor (CISA), and other qualifications. Members of the department are constantly encouraged to improve their auditing skills, acquire specialized qualifications, and participate in outside training programs and internal workshops.
Internal Auditing Frameworks for Group Companies
At Group companies that possess their own internal audit departments, these departments conduct internal audits independently or through collaboration with the internal audit department of Mazda Corporation. For other Group companies, the internal audit department of Mazda Corporation performs audits. To ensure quality audits, the internal audit department of Mazda Corporation offers advice regarding the annual audit plans for and results of audits performed by the internal audit departments of Group companies and provides audit-related information to support these audits.
System Auditing
The internal audit department of Mazda Corporation and the internal audit departments of overseas Group companies conduct audits on overall IT control concerning financial reports and IT security for individual operations and systems with the aim of reducing IT-related risks.
Internal Controls
Mazda has established the Mazda Corporate Ethics Code of Conduct, which states action guidelines for employees, and other guidelines on financial controls and other matters. Based on these guidelines, each department develops rules, procedures, manuals, etc., to promote the establishment of internal controls. In the Mazda Group, in line with the affiliates’ administration rules, each Group company is supported in employee education and system construction by Mazda’s related department. All Group companies thus collaborate with each other in facilitating the establishment of Groupwide internal controls.
Mazda Internal Controls
Internal Controls Self-Diagnosis
In 1998, Mazda initiated a system of self-diagnosis of internal controls for the purpose of disseminating awareness concerning internal controls. Currently, self-diagnosis is carried out at almost all Mazda Group companies in Japan and overseas. This system enables the supervisors and persons in charge of actually developing and operating the processes and mechanisms, as opposed to third parties such as internal audit departments or auditing companies, to evaluate internal controls using a defined checklist. Through this system, Mazda’s departments and Mazda Group companies are able to identify inadequacies in internal controls and take actions to improve them.
Implementation of Internal Controls Signoff System
In FY March 2007, Mazda introduced a signoff system in which the senior management of each department and each Group company ensures internal controls by “signing off” after confirming the status and issues of its organization’s internal controls through auditing and self-diagnosis. In FY March 2010, a new system of quarterly reporting was implemented whereby inadequacies found are reported to Mazda’s internal audit department on a quarterly basis for the purpose of early discovery of inadequacies at departments and Group companies. For each inadequacy reported, the deadline and responsible person for improvement are specified to facilitate speedy improvement.