Hitachi Construction Machinery

Global

Corporate Governance

Basic policies on corporate governance

As a member of the Hitachi Group, Hitachi Construction Machinery Group shares Hitachi, Ltd.’s “Vision”, the Hitachi Founding Spirit and states our Codes of Conduct in line with them. We position our Codes of Conduct as the basic policies on corporate governance.

Basic Concept

We firmly recognize that we should act not only to improve our business performance but also to serve as a useful corporate citizen in society. Our commitment to fair and transparent corporate behavior underpins our corporate governance. We believe this commitment will in turn lead to greater corporate value and improved shareholder value.

We have adopted a corporate organizational system of a company with nominating committee, etc. as defined in Article 2, Paragraph 12 of the Companies Act, with the aim of ensuring fair and transparent management while building an operational system that facilitates the prompt and sound execution of management strategy. We have greatly strengthened our system of corporate governance through this separation of management oversight from business operations.

In addition, the Hitachi Construction Machinery Group’s own Code of Conduct, based on that of the Hitachi Group, guides our basic policy for corporate governance as one of the Hitachi Group companies, and serves as the foundation for the Hitachi brand and our CSR activities. We will foster the Hitachi Group’s common values and share the same understanding of our corporate social responsibilities.

Corporate governance system

Hitachi Construction Machinery Group has adopted a corporate organizational system based on a structure for company with nominating committee, etc., as defined in the Companies Act, with the aims of ensuring highly fair and transparent management while building an operational system that facilitates the prompt and sound execution of management strategy. We have greatly strengthened our system of corporate governance through this separation of management oversight from business execution. The Board of Directors comprises ten (10) Directors, of which four (4) are Outside Directors (two (2) male and two (2) female). The Representative Executive Officer and Executive Officers, who are authorized to do so by the Board of Directors, have the right to make decisions on business execution and execute work in accordance with the Company’s basic management policies. The Board of Directors decides the responsibilities and duties of the Executive Officers, matters regarding supervision and authority, and the mutual relationships among the Executive Officers. An Executive Committee (convening twice a month, in principle), comprising all the Executive Officers has been established as a consultative organ for the Representative Executive Officer and President in making business decisions. The Executive Committee exercises control regarding important matters related to the management of the company’s operations.

Ensuring constant independence from the parent company

There are ten (10) Directors in Hitachi Construction Machinery, of which Hideaki Takahashi, the Chairman of the board, concurrently serves as Senior Adviser of Hitachi, Ltd., and Yoshinori Hosoya, a Director, also serves as the COO of Social Infrastructure Systems business unit, Hitachi, Ltd. As a result, the parent company is able to exert influence on decisions on our management policy through the views expressed by these Directors at Board meetings. Nevertheless, the other eight (8) Directors do not serve concurrently in executive or other positions at Hitachi, Ltd. and there are four (4) Outside Directors who have been reported to the Tokyo Stock Exchange as independent officers. Therefore, we are in a position to be able to make our own management decisions. Also, terms and conditions of transactions with Hitachi, Ltd. and its group companies are determined reasonably based on mutual discussions referencing market prices and other factors.

Corporate governance system

Policy on determining the amount of compensation, etc. for directors and executive officers

1. Method for determination of policies
Our Compensation Committee sets forth the policy on the determination of the amount of compensation for the company’s respective Directors and Executive Officers pursuant to the provision of the Companies Act applicable to companies with nominating committees, etc.

2. Policy Overview
(1) Matters relating to both Directors and Executive Officers
Compensation will be commensurate with the scope and range of our company’s business, the ability required of, and the responsibilities and risks to be borne by, Directors and Executive Officers, taking into consideration package at other companies.

(2) Matters relating to Directors
Compensation for Directors consists of a monthly salary and year-end allowance.

  • A monthly salary is determined by making additions reflecting committees to which the employee belongs and his or her position to the base salary on a full-time or part-time basis.
  • The year-end allowance shall be, in principle, paid at the amount multiplying the amount of basic salary by a certain factor. However, the amount may be reduced depending on operating results of the Company. In case of Directors who also serve as Executive Officers, compensation as a Director is not paid.

(3) Matter relating to Executive Officers
Compensation for Executive Officers consists of a monthly salary and performance-linked compensation.

  • A standard yearly compensation is set in accordance with societal standards by taking into account the scope and range of our company’s business, the abilities required of, and the responsibilities and risks to be borne by Executive Officers.
  • Monthly salaries are set to standard amounts according to job positions.
  • The standard sum for performance-based compensation is roughly 40% of standard annual income for the Chairman and President. For other Executive Officers it is roughly 30% of annual income. It is determined within a certain range depending on the company performance and achievement of individual roles.
  • For foreign Executive Officers, standard annual income is set according to the benchmarks of salary levels of the country in question from the view point of retaining capable personnel, taking into account the competitiveness of the salary.

Directors and Executive Officers (as of June 28, 2021)

Directors

髙橋 秀明 取締役会長

Chairman of the Board
Hideaki Takahashi

岡 俊子 社外取締役

Outside Director
Toshiko Oka

Outside Director
Kazushige Okuhara

菊地 麻緒子 社外取締役

Outside Director
Maoko Kikuchi

Outside Director
Haruyuki Toyama

Director
Tetsuo Katsurayama

塩嶋 慶一郎 取締役

Director
Keiichiro Shiojima

Director
Michifumi Tabuchi

Director
Kotaro Hirano

細矢 良智 取締役

Director
Yoshinori Hosoya

Executive Officers

Representative Executive Officer, President, Executive Officer and Director Kotaro Hirano
Representative Executive Officer, Executive Vice President, Executive Officer and Director Michifumi Tabuchi
Executive Vice President and Executive Officer Yasushi Ochiai
Senior Vice President and Executive Officer Sonosuke Ishii
Senior Vice President and Executive Officer Naoyoshi Yamada
Vice President and Executive Officer Yusuke Kajita
Vice President and Executive Officer Masafumi Senzaki
Vice President and Executive Officer Seishi Toyoshima
Vice President and Executive Officer Hideshi Fukumoto
Executive Officer Moriaki Kadoya
Executive Officer and Director Keiichiro Shiojima
Executive Officer Seimei Toonishi
Executive Officer Kazunori Nakamura
Executive Officer Masaaki Hirose
Executive Officer Eiji Fukunishi
Executive Officer Hidehiko Matsui
Executive Officer Satoshi Yamanobe
Executive Officer David Harvey
Executive Officer Sandeep Singh

Reasons for appointing Outside Directors (independent executives)

We have appointed Toshiko Oka as Outside Director so that she can provide advice on our company’s overall management and supervise the execution of duties by Executive Officers from an independent position, utilizing her extensive experience as the top executive of a consulting company, knowledge and deep insight on M&A. Ms. Oka is a constituent member of the Audit Committee.

We have appointed Kazunari Okuhara as Outside Director so that he can provide advice on our company’s overall management and supervise the execution of duties by Executive Officers from an independent position, utilizing his extensive experience as the top executive of a global company, knowledge and deep insight on personnel and labor policy.
Mr. Okuhara is a constituent member of the Nominating Committee, Compensation Committee and Audit Committee.

We have appointed Maoko Kikuchi as Outside Director so that she will be able to provide advice on our company’s overall management and supervise the execution of duties by Executive Officers from an independent position, utilizing her extensive experience and knowledge that she has cultivated to date as legal expert, and also high insight from experience as a manager/auditor. Ms. Kikuchi is a constituent member of the Nominating Committee and Audit Committee.

We have appointed Haruyuki Toyama as Outside Director so that he can provide advice on our company’s overall management and supervise the execution of duties by Executive Officers from an independent position, utilizing the extensive experience and knowledge in the fields of monetary affairs and finance that he has cultivated to date.
Mr. Toyama is a constituent member of the Nominating Committee, Compensation Committee and Audit Committee.

  • The Nominating Committee has the authority, etc. to determine proposals submitted to the shareholder’s meetings for the election and dismissal of the Directors. The Nominating Committee comprises 5 persons in total: Chairman of the Board Hideaki Takahashi, who is the chair, 3 Outside Directors made up of Kazushige Okuhara, Maoko Kikuchi and Haruyuki Toyama and President and Executive Officer Kotaro Hirano.
  • The Compensation Committee has the authority, etc. to determine compensation for respective Directors and Executive Officers. The Compensation Committee comprises 3 persons in total: President and Executive Officer Kotaro Hirano, who is the chair, and 2 Outside Directors made up of Kazushige Okuhara and Haruyuki Toyama.
  • The Audit Committee has the authority to audit of the execution of duties of Directors and Executive Officers and to determine proposals submitted to the shareholder’s meeting for the election and dismissal, etc. of accounting auditors. The Audit Committee comprises 6 persons in total: Director Tetsuo Katsurayama, who is the chair, 4 Outside Directors made up of Toshiko Oka, Kazushige Okuhara, Maoko Kikuchi, Haruyuki Toyama, and Director Yoshinori Hosoya.

We set targets to make Outside Directors more than one third (1/3) of the total number of Directors, and two (2) or more female or foreign Directors in the final year of the current mid-term management plan, FY2022, As of June 28, 2021, there are four (4) Outside Directors of ten (10) Directors, and two (2) of the ten (10) Directors are female, and each of these targets has been cleared.

Corporate Governance Guidelines

Ensuring tax transparency

In January 2016, the Hitachi Group established regulations on tax related matters covering the entire Group. In accordance with these regulations, the Hitachi Construction Machinery Group carries out tax risk management to address the globalization of its operations. Within our securities report, we disclosure corporate tax and other tax obligations for the Hitachi Construction Machinery Group and also disclose information on factors behind variance with the effective statutory tax rate to ensure full tax transparency.

The Hitachi Construction Machinery Group we continue to implement these measures to fulfill its tax obligations with a focus on fairness in all of the regions where we conduct business and comply with the spirit and tax laws applied in those countries and regions.

Hitachi Construction Machinery Group Rules for Global Tax Management
  1. Group companies strictly comply with all relevant laws and implement tax management when pursuing their business activities, bearing in mind such international tax-compliance standards as the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations of the Organization for Economic Co-operation and Development (OECD※1), as well as that body’s Action Plan on Base Erosion and Profit Shifting (BEPS※2).
  2. Group companies effectively, continually, and proactively manage tax-related issues as socially responsible organizations, while maintaining Hitachi brand value and seeking to maximize shareholder value.
  3. Group companies build sincere and positive relations of trust with the tax authorities in the regions where the companies do business, and strive to maintain and develop those relations.

※1OECD : Organization for Economic Co-operation and Development
※2BEPS : Base Erosion and Profit Shifting

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