Governance and Directors
Q-11. Regarding Proposal No. 2, in order to assess the suitability of the candidate for their assigned division, I would like to request an explanation from the representative director candidate with financial expertise about the relationship between corporate value and stock price. According to the guidelines issued by the Ministry of Economy, Trade and Industry and the Ministry of Justice (2005), and the materials published by the Ministry of Economy, Trade and Industry in 2023, it is concluded that 'enhancing corporate value is equivalent to securing shareholder interests.' Nevertheless, the current convocation notice states, 'Those who control decisions on our company's financial and business policies must understand the source of our corporate value and be able to continuously secure and enhance our corporate value "or" the common interests of shareholders,' which seems to interpret the two as separate matters. This could be read as taking the position that enhancing the common interests of shareholders is not necessary, and it appears to justify the current low market capitalization. Such wording suggests a lack of moral responsibility as a manager of a listed company and a lack of sincere commitment to resolving the issue of the price-to-book ratio falling below one.。
A-11. We take the situation of our PBR falling below 1.0 very seriously and have no intention of neglecting this issue. We believe that by achieving the goals set forth in our current medium-term management plan, we can improve our PBR, ROE, and other key indicators. The relationship between corporate value and the common interests of shareholders is an extremely important factor for our company, and we recognize that enhancing corporate value leads to securing and increasing the common interests of shareholders. The phrase "corporate value 'or' the common interests of shareholders" in the notice of convocation was not intended to distinguish between the two or to downplay either, but rather to express a comprehensive approach that values both. However, we sincerely apologize that the wording was insufficient and led to misunderstandings. We take this matter seriously and will revise the wording in future notices of convocation to ensure greater clarity and avoid any misunderstandings. Going forward, in addition to improving capital profitability (ROE) and capital efficiency, we will also strengthen our IR activities to enhance both corporate value and the common interests of shareholders, striving to achieve appropriate market evaluation. We apologize for taking your time, but would greatly appreciate your continued support as you monitor our progress.。
Q-12. Regarding Proposal No. 2, we request that the President and Representative Director candidate explain their understanding of the current structure of the finance division and their policies for strengthening it going forward. In addition to the fact that there are remarkably few candidates with financial expertise among the board members, we believe that, based on the top candidate’s past statements and the current situation regarding share price and capital efficiency, they lack the necessary expertise and qualifications to serve as a financial officer.。
A-12. Regarding the point that only two out of eight board candidates have financial expertise, as indicated in the skills matrix of the notice of convocation, it is true that only two are listed. However, there are several other members with experience in management divisions, so we do not believe there is an issue with the structure of the finance division. Furthermore, to strengthen the organization going forward, we will focus on developing talent through the promotion of employee training.。
Q-13. Regarding the composition of the board of directors, I have heard that while there are currently no financial experts among the directors, there are individuals with a financial background serving as Auditors. With such a structure, there is a concern that the executive and supervisory functions may effectively overlap, which could lead to issues in corporate governance and hinder the formulation of financial strategies and shareholder return policies. Is such a board composition appropriate? I would like to hear the opinion of Outside Director Mr. Negoro, who serves as an outside director.。
A-13. Regarding the composition of the board of directors in terms of financial expertise, a new structure has been launched this term, and the position in charge of finance is now held by a Managing Director and Representative Director with experience in the financial field. Under this structure, we believe that appropriate governance is currently being maintained. We are also in the midst of a generational transition, and will continue to consider the necessary organizational structure while keeping in mind the future direction of corporate governance.。
Q-14. Regarding Proposal No. 2, I would like the President and Representative Director candidates to specifically explain the purpose of aiming for "100 years of continuity" and how this benefits shareholders who have invested risk capital. Among the candidates, excluding the current Chairman Kimoto, five out of seven have set "100 years of continuity" as their goal, a target that was established when Chairman Kimoto assumed office in 2009. However, during his 15-year tenure, while cash and deposits increased 2.4 times and internal reserves were accumulated, sales and profits were halved, capital investment was reduced to one-third, and the stock price fell by 20%, resulting in a significant loss of corporate value. Setting "100 years of continuity" as a goal in a contractionary and equilibrium-focused manner that sacrifices shareholder interests lacks rationality as management of a listed company, contradicts the Ministry of Economy, Trade and Industry's view that enhancing corporate value equals enhancing shareholder value, and appears to lack legitimacy. Is this not the case?。
A-14. The reason for setting a goal of 100 years of continuity is to ensure stable management. We believe it is important to create an environment where each employee can feel a sense of purpose and look forward to the future, rather than working with anxiety. Furthermore, by continuing our business over the long term, we believe we can demonstrate reliability and stability to our business partners. In addition, as society increasingly demands consideration for local communities and the environment, as stated in our recent medium-term management plan, we will further strengthen our ties with local residents and fulfill our social responsibilities. For our shareholders as well, we believe that maintaining a long-term and stable business will enable us to provide stable dividends.。
Q-15. Regarding Proposal No. 2, the reason for the nomination of Candidate No. 4, Mr. Kimoto, is stated as "contributed to enhancing corporate value." However, since the current stock price (227 yen) is lower than the stock price at the time he became Chairman (233 yen), is this description appropriate? If he has indeed contributed to enhancing the sources of corporate value, what is the reason for the decline in the stock price? Given that business performance has improved and efforts have been made in IR and public relations activities, I believe there may be issues with financial policy, particularly shareholder return measures. I would like the candidate responsible for finance to respond as to whether there are any errors or falsehoods in the stated reasons for nomination.。
A-15. Regarding our shareholder composition, the number of shareholders increased from 9,854 at the end of March 2024 to 12,451 at the end of March 2025, and the number of long-term shareholders holding shares for more than three years has also risen. We interpret this as a sign of medium- to long-term understanding and expectations for our company's direction. Furthermore, the reforms that have been continuously promoted since the appointment of the President and Representative Director have been positively evaluated. Based on the above, we believe that stating "contributed to enhancing corporate value" as the reason for the nomination of Candidate No. 4, Kimoto, for Proposal No. 2 is appropriate.。
Q-16. Regarding the appointment of Chairman Kimoto, during the period when Mr. Kimoto served as President, both Net sales and profits were reduced by about half, while cash and deposits increased 2.4 times. In terms of stock price, although the Nikkei Average has risen approximately fourfold since he became President, our company’s stock has decreased by about 20%. Based on these results, the reason given for his appointment was that he "continued to enhance corporate value even after becoming Chairman," with the increase in the number of shareholders cited as a reason. Therefore, I would like to ask: Does the company consider corporate value to be equivalent to the number of shareholders? I would like to hear the opinion of the person who wrote the reasons for the appointment regarding this way of thinking.。
A-16. We do not consider the enhancement of corporate value to be solely equivalent to the number of shareholders; however, we do regard the increase in shareholders who understand and support us as one indicator that constitutes corporate value. As for the stock price, we are not satisfied with the current level. Considering that there were times in the past when it reached the upper 300-yen to 400-yen range, we recognize the need to first maintain a price above 300 yen and then aim for 400 yen. Therefore, we will steadily implement our medium-term management plan and expect to improve the situation of our PBR being below 1 within three years.。
Q-17. Regarding Proposal No. 2, I would like to ask the candidate for President and Representative Director about their awareness of achieving management goals and securing shareholder interests in relation to the recently announced 6th Medium-Term Management Plan. The previous 5th Medium-Term Management Plan collapsed in a short period, resulting in pay cuts for all executives. However, such uniform disciplinary action was seen as ambiguous in terms of responsibility, raised concerns of being harassing in nature, and was considered contradictory to our company’s philosophy of promoting 'work style reform.' There were also fears that the lingering Showa-era corporate culture was a factor in the company’s poor performance. I believe that what is truly necessary for improving shareholder value is the presence of management with the ability to achieve targets. Therefore, I would like you to answer the following questions regarding the case where the 6th Medium-Term Management Plan is not achieved.
(1) Are you prepared to hand over management to someone else who has the ability to achieve targets?
(2) Is it possible to clarify the responsible divisions and shift to a form of accountability that considers shareholder interests, such as changing the compensation of responsible executives to stock-based remuneration?。
A-17. Regarding the previous 5th Medium-Term Management Plan, due to the impact of COVID-19, there was a significant gap between the initial targets and actual results. We sincerely acknowledge the concerns raised about the pay cuts implemented for executives at that time, including the points that responsibility became unclear and that there are concerns about our organizational culture. We take your comments as important suggestions and will consider them as necessary. With that in mind, please find our responses to your questions below.
(1) With regard to the 6th Medium-Term Management Plan, I am strongly aware that achieving it is the President’s mission and the very essence of management responsibility. As the person in charge, I will fulfill my duties to the fullest.
Regarding your proposal in (2), we sincerely regard it as a valuable opinion on forms of accountability that take into account securing shareholder interests and the impact on the stock price, rather than simply reducing compensation.
We sincerely take to heart the opinions of our shareholders and, while clarifying accountability for our performance, will strive to earn your trust by steadily executing our medium-term management plan. 。
Q-18. When I inquired with the IR department about the profit and loss status of the core Digital Twin business, I was told that this information is "not disclosed." In addition, the asset allocation and target equity ratio in the medium-term management plan are also unclear, and I feel that information disclosure is insufficient. As the importance of corporate governance increases, such an attitude raises concerns about reliability. In light of Chapter 3 of the TSE Corporate Governance Code, do you believe the current disclosure stance is appropriate? Also, as an outside director, how does Director Negoro perceive this situation?。
A-18.( Shoichi Kobayashi President)
We sincerely accept your comments and will make use of them in our future actions.
(Director Tsuneo Negoro)
From my position as a supervisory body of the Board of Directors, I also receive reports regarding IR. Regarding the governance-related opinions you have raised this time,
I take them seriously and would like to use them as a reference going forward.。
Q-19. Do you think Picasso was a genius, President?。
A-19. I am very sorry, but I do not have enough knowledge about Picasso to answer.。
Q-20. This is a question for Outside Director candidate Onodera. As a listed company, we face challenges regarding our cash and deposit holdings and capital policy, but in particular, the fact that our PBR is below 1 is a significant issue. What are your thoughts on this matter? Also, will you be able to answer similar questions next year as well?。
A-20. At present, I believe that in addition to company management, it is important to value our employees and, above all, to work together with our shareholders. I believe that the company exists thanks to the support of our shareholders, so I would very much appreciate it if you would continue to ask questions next year as well. At that time, I hope to be able to share honestly how I have judged and felt during my year as an outside director.。
