Messages from Outside Directors

[ Image ] Messages from Outside Directors

Message from the Chairperson of the Nominating Committee

I emphasize leadership for the purpose of building upon the strengths Yamaha has fostered thus far while also propelling it to create new value outside of the domain of its existing businesses.

[ Image ] Hiromichi Shinohara Independent Outside Director

Hiromichi Shinohara Independent Outside Director

Career Summary

Mr. Hiromichi Shinohara has served as head of Research and Development Planning and executive vice president at major Japanese telecommunications and ICT company NIPPON TELEGRAPH AND TELEPHONE CORPORATION (NTT), before being appointed Chairman of the Board. He assumed his current position as Outside Director of Yamaha Corporation in June 2021.

Major Concurrent Position

  • Outside Director of Mizuho Financial Group, Inc.

Nomination of Director Candidates with Specialized Expertise

The Nominating Committee is responsible for formulating the proposals for appointment and dismissal of directors submitted for approval at the General Shareholders’ Meeting as well as the proposals for managerial assignments presented to the Board of Directors. The committee is comprised of three directors as well as President Takuya Nakata. I assumed the position of chairperson of this committee in June 2023.

Also in June 2023, we welcomed Naho Ebata, a new outside director who was appointed following approval at the General Shareholders’ Meeting to fill the spot of Taku Fukui, who resigned from his position as outside director after holding it for six years. Just like Mr. Fukui, Ms. Ebata is a legal expert. She was appointed based on her specialized expertise pertaining to intellectual property management, which will be vital to Yamaha’s growth strategies going forward. Although the decision to appoint Ms. Ebata was purely based on her expertise, it is worth mentioning that the addition of a second female director is also beneficial in terms of improving the gender balance of the Board of Directors.

Focus as Chairperson on Sharing of Opinions among Members

In the Nominating Committee, our duties include evaluating managerial candidates and overseeing plans for cultivating candidates and their implementation. It is important that we don’t just perform these duties by ourselves on an individual basis, but rather that we go about our duties while sharing opinions with other committee members, as this can help us notice things that we may not have otherwise realized. This is why I, in my capacity as chairperson, focus on stimulating brisk discussion among members.

We have judged that the Company’s systems for appointing and dismissing directors and other members of management, as well as how these systems are actually implemented, to be appropriate at this point in time. Nevertheless, the requirements of managers need to change with the times, the operating environment, and a company’s growth stage. For this reason, I aim to lead the committee in examining candidate screening criteria and other aspects of the appointment and dismissal process from a variety of perspectives.

Expectations for a Leader to Draw Out Team Strength and Inspire Autonomy

To give us a better idea of the type of people that managerial candidates are, Yamaha has the Nominating Committee interview candidates when it is time to decide on promotions for important management positions, which take place once a year. We also have regular lunches with members of the Board of Directors to build upon our relationship.

When it comes to determining the candidates who should fill management posts in the future, such as president, we place emphasis on whether the candidates have the skills and experience necessary to lead in the future, when Yamaha will be pressed to create a completely different type of value, in addition to the skills needed to manage existing businesses. It is also important to recognize that, no matter how skilled a leader is, there is a limit to what they can accomplish alone. The Analects of Confucius profess that “When you know a thing, to hold that you know it; and when you do not know a thing, to allow that you do not know it; —this is knowledge.” Taking this verse to heart, I expect a leader to understand their own inadequacies and to be able to compensate for these by drawing out the strength of their team. I also hope to identify candidates for important management positions who are capable of inspiring the autonomy of their colleagues and subordinates.

Message from the Chairperson of the Audit Committee

I aspire to contribute to the ongoing improvement of Yamaha’s corporate value by focusing on the decisions made by management and the value judgment process that leads to those decisions.

[ Image ] Mikio Fujitsuka Independent Outside Director

Mikio Fujitsuka Independent Outside Director

Career Summary

Mr. Mikio Fujitsuka has held positions as General Manager of the Corporate Planning Division and CFO at Komatsu Ltd., a major Japanese global construction equipment manufacturer, and also took part in management as an Executive Vice President and Representative Director. He has been serving as an Outside Director of the Company since June 2019.

Major Concurrent Position

  • Outside Director of NSK Ltd.

Focus on Priorities in Value Judgments

I believe that the ultimate role of the Audit Committee is to confirm whether directors, executive officers, and other members of management are making the necessary decisions and whether they are fulfilling their responsibilities in executing these decisions. It is also important for us to look at the standards used in those decisions and the accuracy of the priorities for value judgments that lead to those decisions.

Management is a constant string of decisions, and that means that there is a lot to the role of the Audit Committee. A large number of the things we audit are reoccurring matters that need to be checked every year, such as financial disclosures. In addition to such standard audit items, we assess what priority audit items should be added each year based on management conditions, and these items are incorporated into annual audit plans.

Trust Indispensable to Effective Group Governance

The Audit Committee is currently comprised of myself and two other outside directors. I feel that we make for a balanced membership in terms of having diverse perspectives based on our differing backgrounds and expertise.

I also have praise for the reinforcements that have been implemented to Yamaha’s internal auditing team. The auditing staff of the Internal Auditing Division has been enhanced in terms of both total members and the skills of these members, which were improved through acquisition of necessary auditing qualifications and other means. Yamaha has thereby assembled an auditing team that is capable of accommodating a wider range of auditing tasks. Moreover, audit officers, a position established in April 2020, have been working closely with the Audit Committee. The audit officers participate in meetings of the Managing Council and other import internal meetings, where they question management to get to the bottom of issues that we would have likely brought up if we had been there. Reports on the response from management are then submitted to the Audit Committee.

Yamaha is also strengthening Group governance. The Company has 58 consolidated subsidiaries, 44 of which are located outside of Japan. It is, of course, important to entrench Companywide policies as recognized rules. At the same time, ensuring effective corporate governance requires trust between the corporate administration, sales, and production departments of the Company headquarters and the subsidiaries they engage with. If rules are to be enforced, the headquarters in Japan cannot simply point out issues in a one-sided manner; subsidiaries also need to be encouraged to actively report any issues that may arise.

Swift Decision-Making Required to Seize Growth Opportunities

In fiscal 2024, I want to pay extra attention to the speed at which decisions are made and executed. Yamaha generates more than 70% of its revenue in overseas markets. Seizing growth opportunities in such overseas markets will require that management be swift in decision-making. I will therefore be looking for elements of internal rules that might delay decision-making as I go about my auditing duties. I also intend to work with the Internal Auditing Division to develop procedures for appropriate auditing of progress toward non-financial targets, which need to be gauged on a timetable that is different from that used for financial targets.

Message from the Chairperson of the Compensation Committee

We are always examining Yamaha’s compensation systems and comparing them against global best practices in search of systems that will support ongoing growth that lives up to shareholder expectations.

[ Image ] Paul Candland Independent Outside Director

Paul Candland Independent Outside Director

Career Summary

Prior to assuming his current position in June 2019, Mr. Paul Candland was involved in management at the global entertainment conglomerate led by The Walt Disney Company as representative director and president of The Walt Disney Company (Japan) Ltd. and later president of The Walt Disney Company, Asia.

Major Concurrent Position

  • Managing Director of PMC Partners Co., Ltd.
  • Outside Director of Dentsu Group Inc.

Phased Process of Ongoing Governance Reinforcement

Since its establishment in 2017, the Compensation Committee has been chaired by an internal director. That is, until I was appointed to this position in June 2023. This decision seems like the natural next step for the Yamaha Group’s phased process of ongoing governance reinforcement, especially considering that having outside directors chair such committees is viewed as a global best practice.

As one facet of our efforts to further reinforce governance, we revised the compensation systems for internal directors, executive officers, and operating officers in fiscal 2023. The compensation systems for these individuals are comprised of fixed compensation, performance-linked bonuses, and restricted stock compensation. The revision entailed the introduction of non-financial targets and corporate value targets alongside the prior financial targets used to evaluate performance in relation to the restricted stock compensation system. The goal of non-financial targets is to communicate, both inside and outside of the organization, that Yamaha is pursuing improvements in true corporate value, and to ensure that the new compensation systems line up with Yamaha’s strategies, given that the medium-term management plan sets non-financial targets. Meanwhile, the corporate value targets are meant to provide officers with greater motivation to align their motives with the interests of shareholders.

However, I also recognize that we cannot properly assess performance by looking only at a single year’s figures for nonfinancial targets, such as those pertaining to sustainability or human capital management. The same could be said with regard to new businesses for creating future value. This is why we chose to adopt a restricted stock compensation system, as opposed to short-term incentives. This type of system is suited to evaluating performance from a long-term perspective.

Compensation Systems Encouraging Appropriate Risk Taking

There are two tasks that I think the Compensation Committee will need to prioritize in fiscal 2024. The first will be to determine whether the aforementioned new compensation systems are functioning as intended and whether they are congruent with Yamaha’s directives and business strategies. We will take a flexible approach toward revising systems if we find that they do not properly coincide with the Company’s goals and strategies.

The second task will be to examine the compensation systems of other global companies exhibiting excellence in management and assess whether aspects of these systems should be adopted by Yamaha. The compensation systems generally viewed as best practices for global companies include frameworks for encouraging appropriate risk taking. This is accomplished through means such as incorporating restricted stock compensation or stock option systems. As the chairperson of the Compensation Committee, it is my goal to raise the level of Yamaha’s compensation systems and their implementation to those of global best practices. I specifically aim to create the ideal compensation systems for Yamaha that will allow the Company to take appropriate risks in today’s volatile competitive landscape and thereby achieve ongoing growth that lives up to shareholder expectations.