YKK GROUP

ORGANIZATIONAL GOVERNANCE

The YKK Group has created a foundation for fulfilling its corporate social responsibilities and is engaged in activities with the aim of enhancing its corporate value.

Corporate Governance

Basic Policy related to Corporate Governance

The philosophy of the YKK Group (YKK Corporation [the Company] and its affiliated companies) in conducting its corporate activities is based on the spirit of the "Cycle of Goodness," which means, "No one prospers without rendering benefit to others." Embracing this philosophy, the YKK Group centers all of its management activities on the principle of consistent fairness in "seeking corporate value of higher significance": the vision that expresses the mission, direction, and consistency of the Group's management. The Group, aligning its operations with this vision, strives to enhance its corporate governance system in an effort to further enrich its corporate value.
The Company's basic approach to corporate governance involves several organizations and systems. The Board of Directors serves to make decisions on important matters, such as the Company's management policy, and serve an oversight function. The Audit & Supervisory Board, meanwhile, is the Company's auditing organization. The final component of the Company's basic approach is the Officer System, a framework that helps the Company promote the execution of business and operations.

Company Bodies

YKK, which uses the Audit & Supervisory Board System, implemented structural management reforms in June 1999 by reforming its Board of Directors and implementing the Officer System in order to separate management and execution and thereby enable the faster execution of business and operations.

  1. (a)

    Directors and the Board of Directors

    • In addition to performing the roles stipulated in the Company Act, the Board of Directors sets forth management policies, allocates management resources, and oversees execution of operations by Officers.

    • The Articles of Incorporation stipulate that the Company shall have no more than 10 Directors, each serving terms of one year, in order to ensure that the Directors make sound decisions through active, thorough discussions.

    • To further strengthen its consolidated management, the Company restructured the Board of Directors in June 2003 by electing executive vice presidents from YKK AP Inc., the Fastening Products Group, and other organizations as members of the Board of Directors. In an effort to make its consolidated management even stronger, the Company elects internal directors with a view to global business management and its Six-Region Global Structure. The Company has also appointed two outside directors since June 2007, aiming to bolster corporate governance and draw on the advisory and supervisory skills that their extensive insight and experience provide.

    • While Directors devote their energies toward optimizing operations Group-wide, Officers focus on achieving departmental targets by assuming responsibility for and authority over executing individual business and operations in accordance with the policies that the Board of Directors have resolved.

    • In April 2004, recognizing that operating a corporate pension fund represented an important management issue for the Company as a parent company, the Company appointed a Director to take charge of pension policies.

    • In April 2005, the Group appointed a Chief Financial Officer (CFO) and Chief Risk Management Officer (CRO) to further enhance its consolidated management.

    • The Company enhances the procedures for providing information to Directors, such as having the General Administration Department offer outside directors advance explanations on Board agenda items, in order to ensure that the Board of Directors can deliberate on issues in a more efficient, active manner.

    • The Company's Articles of Incorporation stipulate that resolutions on elections of Directors shall be by majority vote, where shareholders holding at least one-third of all shareholders' voting rights are present. The Articles of Incorporation also stipulate that resolutions on the elections of Directors shall not be made by cumulative votes.

  2. (b)

    Implementation of the Group Officer System

    • The YKK Group promotes Global Business Management via the Fastening Products Group and AP Group (which represent the Group's core businesses) and the Machinery and Engineering Group (which helps ensure integrated production by the core businesses). The YKK Group also engages in Regional Management involving six geographical regions, including Japan. Under its consolidated management structure, the YKK Group began supplementing the traditional Officer System in April 2004 by electing Group Officers from among the operating officers at core Group companies and the regional headquarters in the Six-Region Global Structure, etc., as a means of further enhancing its corporate value.

  3. (c)

    Establishment of the Advisory Board

    • The Advisory Board, in place since July 2001, gathers insights from outside experts to help the Chairman, President, and relevant Directors address general management matters and important management issues.

Internal Control

I.Internal control systems related to the performance of operations by the YKK Group

  1. (a)

    System for ensuring that the execution of duties by Directors and employees of the Company and its subsidiary companies complies with laws, regulations, and the Articles of Incorporation

    • The Company's Directors adhere to the Board of Directors regulations, comply with regulations pertaining to the performance of Director duties, and execute operations appropriately in accordance with the principle of the separation of duties.

    • The Company has appointed a Compliance Director and established a Corporate Legal and Compliance Group under the Officer in charge of compliance. These parties work with the external compliance advisors to maintain a compliance system for the YKK Group. The Compliance Director reports to the Company's other Directors and the Audit & Supervisory Board Members on the development of the compliance structure and compliance with laws, regulations, and the Articles of Incorporation, among other items.

    • In addition to the above compliance structure, the Company has established a Compliance Committee to implement appropriate compliance-promotion activities from the perspective of business management. The Compliance Committee discusses the status of compliance program operations, responses to compliance issues, and recent legal trends.

    • The Company's Directors regularly participate in compliance training programs by lawyers and other professionals. They also submit written oaths pledging to comply with laws and regulations in performing their duties as Directors.

    • In April 2013, the YKK Group established the YKK Global Criteria of Compliance (YGCC) as compliance benchmarks for Group companies to develop and implement appropriate, effective compliance programs in a steady fashion. The companies continue to maintain and operate compliance structures accordingly.
      YKK Group companies are also striving to maintain and bolster their compliance structures by conducting regular evaluations and implementing improvement activities in accordance with compliance benchmarks.

    • In January 2006, the YKK Group whistleblowing system went into operation as a means of preventing violations, etc., of laws, regulations, and internal regulations and protecting whistleblowers.

    • YKK Group companies in Japan have worked to build internal systems and safeguard against associating with antisocial forces by establishing regulations, assigning responsibilities to departments, reviewing contractual clauses, and forging collaborative relationships with the police and other outside institutions and related organizations.

    • The Internal Audit Department conducts internal audits of YKK Group companies in terms of legal conformance, reasonableness, and other conditions in accordance with the audit plan for the corresponding fiscal year. The Department also reports to the Chairman, President, Board of Directors, and others on the results of its audits as necessary.

  2. (b)

    System for storing and controlling information related to the execution of duties by Directors of the Company

    • The Company, in line with its document control regulations, information security regulations, and other internal regulations, sets specific periods for retaining important documents (including electronic records) and implements appropriate document control.

    • The Company keeps accurate minutes of important meetings, such as meetings of the Board of Directors and Management Committee, to keep accurate records of proceedings, results, and important statements, etc. The relevant departments retain and control said minutes in an appropriate fashion under the terms of the regulations for the corresponding meetings.

  3. (c)

    Regulations and other systems for addressing the risk of losses by the YKK Group

    • In April 2005, the Company appointed its Chief Risk Management Officer (CRO) and established its Quality Committee, Foreign Trade Control Committee, Crisis Management Committee, Technical Asset Management Committee, and Information Security Committee to promote YKK Group-wide risk management. The CRO and the Committees continue to develop and apply appropriate regulations.

    • In April 2005, the Company appointed its Chief Financial Officer (CFO) to implement appropriate control over financial risks in accordance with the YKK Group's basic policies on financial risk management. To address investment risk, the Company established an Investment Council in February 2006 with the CFO serving as the Committee chair. The Committee serves to help build a structure for ensuring appropriate control over investment risk in the YKK Group. The CFO has also been responsible for operating and promoting internal controls pertaining to financial reports since April 2008.

    • The Company has laid out procedures for responding to risk in the YKK Group through the creation of the Guidelines for Addressing Risks, which call for swift, appropriate action.

  4. (d)

    System for ensuring that the execution of duties by Directors of the Company and its subsidiary companies is efficient and effective

    • In June 1999, the Company introduced the Officer System to ensure the faster execution of business and operations via the separation of management and execution. While Directors devote their energies toward optimizing operations Group-wide, Officers assume responsibility for and authority over executing individual business and operations in accordance with the policies that the Board of Directors has resolved.

    • In July 2003, the Company established its Management Committee to improve the efficiency of deliberations by the Board of Directors. The Directors hold thorough discussions on the YKK Group management philosophy, management policies, management strategies, and important matters for resolution by the Board of Directors, etc., before reaching official resolutions.

    • The Company's Environmental Policy Board, which operates under the Management Committee, determines the environmental policies and measures for the YKK Group and oversees the promotion of environmental policies across the Group.

  5. (e)

    System for reporting matters regarding the execution of duties by directors of subsidiary companies to the Company and other systems for ensuring appropriate business operations at the Company and throughout the YKK Group

    • Under its consolidated management structure, the Company appoints Group Officers from among important subsidiary companies in Japan (core companies) and regional headquarters, etc., in the Six-Region Global Structure and implements a management and supervision system to ensure appropriate subsidiary operations with the regional headquarters serving as branch offices of the YKK Corporation Headquarters.

    • In accordance with the Board of Directors regulations, the Company's Board of Directors makes resolutions on important matters pertaining to the operations of subsidiary companies.

    • The Company appropriately monitors the management performance and financial status of its subsidiary companies by having the Board of Directors receive monthly consolidated performance reports from the Director in charge.

II.Matters regarding the performance of duties by the Audit & Supervisory Board Members

  1. (a)

    Matters pertaining to employees that the Company's Audit & Supervisory Board Members request for assisting Audit & Supervisory Board Members in fulfilling their duties, the independence of said employees from the Company's Directors, and ensuring the effectiveness of Audit & Supervisory Board Members' instructions to said employees

    • The Company's Audit & Supervisory Board Secretariat, which began operations as of April 1, 2007, assigns staff to assist Audit & Supervisory Board Members in fulfilling their duties on an exclusive basis.

    • The transfer and evaluation of employees of the Audit & Supervisory Board Secretariat require the agreement of the Company's Audit & Supervisory Board Members.

  2. (b)

    System for reporting to the Company's Audit & Supervisory Board Members by the Company's Directors, the Company's employees, subsidiary companies' directors, Audit & Supervisory Board Members, employees, and individuals who have received reports from said parties and other systems pertaining to reports to the Company's Audit & Supervisory Board Members

    • The Company's Audit & Supervisory Board Members receive timely reports on the execution of the Company's and subsidiary companies' primary business and the status of the development of the internal control system. If a significant matter with a material impact on the Company comes to light, the relevant party promptly reports to the Company's Audit & Supervisory Board Members.

    • The Company's Audit & Supervisory Board Members also serve concurrently as the Audit & Supervisory Board Members of important subsidiary companies in Japan (core companies). The Audit & Supervisory Board Members and departments in charge of internal audits for subsidiary companies in Japan also report to the Company's Audit & Supervisory Board Members regarding necessary matters on a regular basis or upon the request of the Company's Audit & Supervisory Board Members.

    • If a material violation of a law or regulation comes to light via the whistleblowing system, the "YKK Group Whistleblowing System Secretariat" reports to the Company's Audit & Supervisory Board Members on the corresponding details and investigation results.

  3. (c)

    Systems for ensuring that whistleblowers who report matters as described in the preceding Item are not subject to disadvantageous treatment as a result of said reporting

    • The Company prohibits the disadvantageous treatment of individuals who report to the Audit & Supervisory Board Members as a result of said reporting.

  4. (d)

    Procedures for prepaying or reimbursing expenses arising from the execution of duties by the Company's Audit & Supervisory Board Members and other matters regarding policies pertaining to the processing of expenses or obligations arising from the execution of said duties

    • In cases where the Company's Audit & Supervisory Board Members request the Company to prepay, etc., expenses arising from their execution of duties under the provisions of Article 388 of the Company Act, the Company shall, upon deliberations by the department in charge, promptly process said expenses or obligations, except in cases where the Company deems the expenses or obligations pertaining to said request to be unnecessary for the execution of duties by the corresponding Audit & Supervisory Board Members.

  5. (e)

    Other systems for ensuring that the Company's Audit & Supervisory Board Members effectively implement audits

    • In addition to attending meetings of the Company's Board of Directors, the Company's Audit & Supervisory Board Members may attend meetings of Officers and other important meetings.

    • The Company's Chairman of the Board of Directors and President regularly exchange opinions with the Company's Audit & Supervisory Board Members.

    • The Company's Internal Audit Department, etc., helps improve the effectiveness of the audits by the Company's Audit & Supervisory Board Members by reporting to the Audit & Supervisory Board Members on its activities on a timely basis and taking other steps to enhance coordination.

Risk Management

Basic Policy related to Risk Management

The YKK Group appoints a Chief Risk Management Officer (CRO) and clearly states its risk management policy. At the same time, it has established Quality Committee, Foreign Trade Control Committee, Crisis Management Committee, Technical Asset Management Committee, and Information Security Committee and develops and operates related regulations in order to promote risk management.

YKK Group Risk Management Policy

To promote risk management Group-wide and enhance corporate value by proactively controlling risk levels, preventing various corporate risks, and reducing or avoiding human, material and other losses of managerial resources, as well as keeping to a minimum the damages and losses incurred during emergencies.


Risk Management Structure

Risk Management Structure

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