Corporate Governance and Tax Matters

Basic Policy

We strive to maintain solid corporate governance in order to maximize our corporate value by sustaining growth through appropriate cooperation with our shareholders and other stakeholders.

Structure

In conjunction with our establishment of an Audit and Supervisory Committee, THK instituted a non-mandatory Nomination Advisory Committee and a Remuneration Advisory Committee, each with an outside director majority, to ensure further transparency and fairness in management personnel and remuneration.
In addition, through our executive officer system, we have strengthened the auditing functions of the Board of Directors in addition to bringing greater speed and efficiency to management-related decision-making and the management of corporate affairs.

Board of Directors

THK’s Board of Directors comprises a total of eight directors— including two outside directors—who are not members of the Audit and Supervisory Committee in addition to three outside directors who are Audit and Supervisory Committee members. The Board of Directors makes decisions on important matters of general management and carries out the oversight of directors and executive officers in the execution of their duties.
THK’s five outside directors, whose independence meets the evaluation criteria stipulated by the Tokyo Stock Exchange and THK, possess specialized professional knowledge and qualifications related to corporate accounting and general management. Accounting for over a third of our directors overall, they have further enhanced management neutrality, legality, and validity while improving the board’s management oversight function.

Audit and Supervisory Committee

Comprising three outside directors who are Audit and Supervisory Committee members, the Audit and Supervisory Committee utilizes the internal control system to audit and supervise directors and executive officers with regard to the current status of the execution of their duties. The committee enhances the effectiveness of audits through its partnerships with an accounting auditor, the Internal Audit Department, and the Risk Management Department, which maintains and implements internal controls.
Additionally, an Audit and Supervisory Committee Secretariat has been established to assist in the smooth functioning of the committee by supporting its members and their work. The secretariat follows the instructions of the Audit and Supervisory Committee, coordinates with each department, and conveys instructions to the Internal Audit Department and the Risk Management Department.

Nomination Advisory Committee and Remuneration Advisory Committee

The Nomination Advisory Committee and Remuneration Advisory Committee are each composed of three directors, two of which are outside directors. This is in accordance with the rules for both committees, which stipulate that outside directors must make up more than half of the members and that each must also be chaired by an outside director.
As advisory bodies to the Board of Directors, both committees review and deliberate on director candidates and remuneration proposals, and they propose the content and outcomes of those deliberations to the Board of Directors. The Board of Directors conducts its own deliberations based on their proposals before deciding on a resolution.

Executive Officer System

By introducing the executive officer system, we have endeavored to accelerate decision-making and operational execution in addition to improving the management oversight function of the Board of Directors and clarifying roles and responsibilities relating to the management of corporate affairs.
THK has established both a Board of Executive Officers, attended by directors and executive officers, and a Global Management Strategy Meeting, attended by members of the Board of Executive Officers in addition to those in charge of each division, department, and affiliate company. These serve as forums for directors, executive officers, and other members of management to collaborate to share information across the Group and improve our corporate governance.
To clarify the roles and responsibilities of executive officers relating to the management of corporate affairs, an executive officer’s term in office is deemed to be one year.

Evaluating the Effectiveness of the Board of Directors

We conduct an annual survey on the capabilities of the Board of Directors in order to ensure its effectiveness and improve its performance.
In 2024, a third-party organization conducted the survey and interviews with each director.

Background of the 2024 Evaluation

• ・THK has determined that developing our corporate governance to promote management that emphasizes profitability and capital efficiency, in accordance with basic policy, requires specialized, objective evaluation of the effectiveness of each of our activities.
• ・In 2024, we enlisted a third-party organization to evaluate the effectiveness of the Board of Directors in an effort to deepen its substantive deliberations and translate these into increased corporate value.

Overview of the 2024 Evaluation

2024 Evaluation Process

2024 Results and Policy Responses

Executive Compensation

Basic Policy

It is our basic policy that the remuneration structure for directors (excluding directors who are Audit and Supervisory Committee members and outside directors) will be tied to shareholder interests in order to ensure that such compensation functions effectively as a continued incentive to improve corporate value, and decisions on remuneration for individual directors are based on an appropriate standard in consideration of their duties.

Base Salaries

Base salaries are determined based on the results of the previous fiscal year, with the combined sum of director salaries not to exceed ¥1.2 billion. Directors are evaluated based on their individual duties and both their current and expected contributions, and their base salaries are accordingly determined and allotted from the aforementioned collective sum.
The annual base salaries of outside directors must remain under ¥120 million, and the amount is determined based on compensation standards for companies of a similar size, industry, and type of business.

Performance-Based Incentives

The upper limit for performance-based incentives is the sum of 3% of the profit for the year attributable to owners of the parent for that period plus 3% of the average value of the profit for the year attributable to owners of the parent for the past four years, including the current fiscal year, which is factored in to level out the variances in the demand trends for our business when determining the total amount of compensation for each fiscal year. Each director is evaluated, and their compensation is determined within that limit in consideration of their duties and degree of contribution.
Performance-based incentives are not provided to outside directors.

Restricted Stocks

As an incentive to continuously improve THK’s corporate value, restricted stocks are provided to directors (excluding directors who are Audit and Supervisory Committee members and outside directors). In order to align the interests of directors with those of shareholders, these stocks may not be transferred except under specific circumstances, and when such conditions are met, they will be allocated as common stocks, which are subject to restrictions such as being allotted without contribution.
Furthermore, based on a resolution by THK’s Board of Directors, the annual sum when combined with the base salary shall not exceed ¥1.2 billion (no more than ¥120 million of which may go to outside directors), and no more than 270,000 common shares may be allocated to directors (excluding directors who are Audit and Supervisory Committee members and outside directors).

Compensation Structure Policy

Based on a clear outline of business results and role-specific performance and responsibilities, base salaries are reevaluated on an annual basis and factor in company performance. Taking this amount into consideration, the ratio between base salary and performance-based incentives is then determined based on the performance during the current fiscal year, performance during the past four years, and contributions to overall management. The number of restricted stocks is calculated at around 5% of the sum of the applicable directors’ base salaries at the beginning.

2025 and Beyond

To further incentivize contributions to increased corporate value, THK is reducing the proportion of director compensation accounted for by base salary and increasing the proportion composed of performance-based incentives, compensation tied to ROE, and long-term incentives in the form of restricted stocks.

Participation in Board of Director and Committee Meetings

1 Toshihiro Teramachi, Junji Shimomaki, and Masaaki Kainosho resigned on March 15, 2025.

2 Akihiro Teramachi resigned from these committees on November 12, 2024, having participated once in each for the year.

Skill Matrix

Tax Matters

Basic Policy

The THK Group appropriately files tax returns and pays taxes in accordance with both international tax regulations and the laws of each country and region in which it does business.

Tax Risks

In addition to closely reviewing any transaction that may incur tax risks, we handle such matters appropriately by seeking advice from outside experts and consulting with the relevant tax authorities. Furthermore, we seek to control tax risks by utilizing advance pricing agreements (APA).

Our Relationship with Tax Authorities

The THK Group strives to maintain a relationship of trust with tax authorities by disclosing required information in good faith.

Ensuring Transparency

The THK Group appropriately discloses information in accordance with each country's laws and disclosure standards. Furthermore, we submit a Master File as well as a Country-by-Country Report in accordance with Japanese tax rules.