Corporate Governance

Message from the Chairman

Here is a message from Chairman and Representative Director Yasushi Kinoshita.

Message from the Chairman

Basic Position on Corporate Governance

DBJ is governed by the Development Bank of Japan Inc. Act (the DBJ Act) in accordance with the following objective.

Article 1

Development Bank of Japan Inc. (hereinafter referred to as the “Corporation”) shall be a joint-stock company (kabushiki-kaisha) whose objective is to contribute to the smooth supply of funds to those needing long-term business funds, as well as to the sophistication of financial functions.

DBJ is working to enhance its unique governance system in addition to usual management supervision as a company with a board of directors and company auditors (Audit & Supervisory Board), through a business model built upon features such as integrated investments and loans and proper execution of the preceding objective, in order to raise the value of tangible and intangible management resources to be invested and to realize sustainable management that aims for both economic and social value.

Specifically, the 2015 revisions to the DBJ Act established Special Investment Operations and obligatory measures to be considered, requiring that DBJ conduct its operations in a manner that does not obstruct appropriate competitive relations with other entities, in particular, applying these requirements to the Advisory Board, made up of outside experts and outside members of the Board of Directors, and the Special Investment Operations Monitoring Board, composed of outside experts, which function as advisory bodies to the Board of Directors. These bodies provide advice on DBJ’s overall management and deliberate and evaluate business results, including consistency with the policy objectives of Special Investment Operations, ensuring that appropriate competitive relations are maintained with private financial institutions.

DBJ’s Corporate Governance System

Institutional design configuration A company with a board of directors and company auditors
(Audit & Supervisory Board)
Number of members of the Board of Directors 10
 Of whom are outside members of the Board of Director 2
Number of Board of Directors’ meetings in fiscal 2018 13
Number of Audit & Supervisory Board members 5
 Of whom are outside Audit & Supervisory Board members 3
Number of Audit & Supervisory Board meetings in fiscal 2018 16
Adoption of executive officer system Yes
Accounting auditor Deloitte Touche Tohmatsu LLC
Overview of DBJ's Corporate Governance System

Audit & Supervisory Board Members, Audit & Supervisory Board

The Audit & Supervisory Board comprises five members. The Companies Act prescribes that a majority of Audit & Supervisory Board members be outside members (in DBJ’s case, three of the five). DBJ offices contribute three members (two members proper to DBJ and one an outside member).
Also, DBJ has created the Audit & Supervisory Board Office, which under the board’s direction, assists board members, including outside members, in performing their duties. The Audit & Supervisory Board and Audit & Supervisory Board members audit the execution of duties by members of the Board of Directors, based on their audit policy and audit plans.
Audit & Supervisory Board members attend Board of Directors’ and other important meetings and may query the execution of business by members of the Board of Directors, peruse documents, and conduct branch audits.

Advisory Bodies to the Board of Directors

In pursuit of sustainability management and DBJ’s corporate objectives, the following committees have been established as advisory bodies to the Board of Directors for the purpose of maintaining transparency in management and to reflect the knowledge of outside experts.

Operations Audit Committee

The Board of Directors has established the Operations Audit Committee, delegating to this body the authority to deliberate important matters related to internal audits. This committee met four times during the fiscal year ended March 31, 2019.

Compensation Committee

The Compensation Committee, the majority of which consists of outside executives, considers the type of executive compensation structure that befits DBJ from the standpoint of ensuring transparency and objectivity regarding compensation.

Personnel Evaluation Committee

The Personnel Evaluation Committee, composed of outside members of the Board of Directors and other outside experts, evaluates personnel proposals on the selection of members of the Board of Directors and Audit & Supervisory Board members.

Advisory Board

Since DBJ’s establishment as a joint-stock company in October 2008, the Advisory Board has been in place as an advisory body to advise the Executive Committee, providing advice on overall management. Revisions in 2015 to the DBJ Act stipulate for an indefinite period obligatory measures to be considered, in particular, requiring that DBJ conduct its operations in a manner that would not obstruct appropriate competitive relations with other entities. Accordingly, this board is positioned anew as an advisory body to the Board of Directors. As one of its roles, even more than before, the Advisory Board is tasked with deliberating and evaluating important affairs related to ensuring that appropriate competitive relations are maintained with private financial institutions.
This board convened twice during the fiscal year ended March 31, 2019. This board is composed of the following outside members of the Board of Directors and outside experts in fields including manufacturing, infrastructure, regional communities, and finance.

Special Investment Operations Monitoring Board

One of the measures of the 2015 revisions to the DBJ Act was in regard to Special Investment Operations. The act stipulates the establishment of a Special Investment Operations Monitoring Board as an advisory body to the Board of Directors. This monitoring board is tasked with deliberating projects and evaluating their performance in terms of appropriateness against policy objectives and with emboldening private-sector enterprises and complementing their operations while maintaining appropriate competitive relations. This board, whose members include outside experts in fields such as manufacturing, infrastructure, regional communities, and finance, convened twice during the fiscal year ended March 31, 2019.
Moreover, in order to examine whether appropriate competitive relations with other entities are being maintained, roundtable discussions are held regularly with the Japanese Bankers Association, the Regional Banks Association of Japan, and the Second Association of Regional Banks, including these entities’ private financial institution members. Each group met twice in fiscal 2019, for a total of six meetings. Disputes and opinions raised in these meetings are reported to and deliberated by the Advisory Board and the Special Investment Operations Monitoring Board.

Executive Committee

The Board of Directors has vested in the Executive Committee decision-making authority regarding the execution of business. Accordingly, the Executive Committee makes important management decisions. The committee met 27 times during the fiscal year ended March 31, 2019.

Committees under the Executive Committee

Name Role
ALM & Risk Management Committee This committee deliberates and makes decisions pertaining to portfolio Risk Management and asset–liability management.
General Risk Management Committee This committee deliberates and makes decisions on important items related to operational Risk Management, system Risk Management, legal compliance, responses to antisocial forces, client protection management, and other important items.
Committee on Investment and Loan Decisions This committee handles, deliberates, and makes decisions related to investments and loans, overseas business strategy, and operations and management conditions.
New Operation Screening Committee This committee deliberates and makes decisions on the commencement of initiatives involving new businesses.
Advisory Panel on Investments and Loans This panel handles the advance deliberation on and monitoring of investments and loans as well as deliberations on overseas business strategy and operations and management conditions.
Sustainability Committee This committee deliberates on items related to both economic and social value as well as dialogue with stakeholders.

DBJ established the Sustainability Committee, which has operated since fiscal 2017 onward, as part of efforts to contribute to a sustainable society, in accordance with the DBJ Group’s Policy on Sustainability (please refer to page 65). This committee approaches important social issues from an ESG perspective and incorporates this attitude into business activities, including investments and loans as well as asset management.
The committee met three times during the fiscal year ended March 31, 2019.

Internal Control System Basic Policy

DBJ has established the following internal controls to ensure operational soundness, with the Board of Audit, Ministry of Finance, Financial Services Agency, and other institutions also conducting examinations of overall management.

Status of Internal Control System

In accordance with the Companies Act, the Board of Directors has established an internal control system under the Internal Control System Basic Policy. Specifically, this system is designed to determine the status of legal compliance, Risk Management, and internal audits, as well as other items of importance to management. The internal control system is designed to confirm applicable regulations and the status of their implementation in various departments.

The full text of the Internal Control System Basic Policy is available on the DBJ website.

Matters Requiring Authorization of Competent Minister

The DBJ Act prescribes matters for which Minister of Finance authorization is required. Major items requiring such authorization are as follows:

  • Appointment and dismissal of representative members of the Board of Directors and Audit & Supervisory Board members
  • Amendments to Articles of Incorporation
  • Disposition of surplus funds; Mergers, corporate splits, and dissolutions; Basic policy on business plans, redemption plans, and fund procurement

Internal Audits

DBJ has established the Internal Audit Department under the direct supervision of the president of DBJ and independent of other operating departments. The department conducts inspections to ensure the appropriateness and effectiveness of internal controls, including overall operational compliance and Risk Management, and performs evaluations and recommends improvements. The Operations Audit Committee deliberates and decides audit plans, audit reports, and other important matters related to internal audits, and this information is reported to the Board of Directors. As of June 27, 2019, 20 people belonged to the Internal Audit Department.

Accounting Audits

DBJ has in place an agreement whereby Deloitte Touche Tohmatsu LLC conducts accounting audits as its accounting auditor.

Three-Pronged Auditing Approach

DBJ’s Audit & Supervisory Board members, the Internal Audit Department, and the accounting auditor periodically and as necessary exchange opinions and information, and communicate in an effort to ensure effective and appropriate audits.

Compliance

DBJ recognizes compliance as one of its most important management issues. As basic policies to ensure that the execution of duties by executives and regular employees complies with laws and regulations and the Articles of Incorporation, we have formulated a corporate philosophy, a Basic Compliance Policy, and other compliance-related regulations. In addition to its basic regulations on compliance, DBJ has created and provided notice throughout the organization of a Compliance Manual and a compliance program. We seek to thoroughly implement the compliance activities outlined below.

Compliance Principles

DBJ has formulated the compliance principles indicated below as part of its creation of compliance regulations.

  1. (1)
    DBJ’s executives and employees are keenly aware of DBJ’s social mission and responsibilities as a public-sector bank and recognize that illegal acts or improper business operations harm the reputation of DBJ and interfere significantly with DBJ’s ability to fulfill its objectives under the new DBJ Act. We also realize DBJ’s need to always conduct activities appropriately and in compliance with the law.
  2. (2)
    DBJ’s executives and employees are well aware that DBJ must conduct its businesses legally and appropriately and be responsible for explaining its actions to the general public.
  3. (3)
    DBJ refuses all advances from antisocial forces and cooperates with police and other related institutions to prevent any sort of relationship with such elements.

Compliance System

DBJ has established the Legal Affairs & Compliance Department to take overall responsibility for planning, preparing, and adjusting compliance activities. In addition, DBJ has established the General Risk Management Committee to reflect on legal compliance matters, determine the extent of compliance, and deliberate on improvements to DBJ’s internal system. One specific initiative is the establishment of a compliance hotline.
The objective of this internal reporting system is to swiftly identify and resolve any legal violations. DBJ has also prepared Conflicts of Interest Management Regulations as a basic policy in addition to systems to manage conflicts of interest.

Client Protection Management Basic Policy / Declaration on Personal Information Protection / Policy for Managing Conflicts of Interest

The establishment and maintenance of systems for client protection management and the protection of personal information are vital because doing so protects the people who use the financial institution’s systems and raises their level of convenience. DBJ recognizes the extreme importance of such systems from the standpoint of operational soundness and appropriateness. DBJ has formulated a Client Protection Management Basic Policy to ensure strict compliance with laws and regulations, protect the interests of its clients, and raise the level of client convenience. We have also created internal regulations based on this policy, which we employ in briefings to raise in-house awareness.

We have incorporated a declaration on our policies into our Declaration on Personal Information Protection.

DBJ is a registered financial institution under the Financial Instruments and Exchange Act. In accordance with this act and the Cabinet Office Ordinance on Financial Instruments Business, etc., DBJ has drawn up a policy introduced for the management of conflicts of interest and provides an overview of the publicly announced policy.

Click here for details

Policy on Sustainability

The DBJ Group formulated the Policy on Sustainability in 2017 in order to facilitate the creation of both economic value and social value while engaging in dialogue with stakeholders and effecting continuous improvement in the value creation process.

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Responses to Japan's Stewardship Code

In August 2014, DBJ stated its acceptance of the Principles for Responsible Institutional Investors (Japan’s Stewardship Code) (the “Code”). Under the Code, stewardship responsibilities refer to the responsibilities to enhance the medium- to long-term investment returns for clients and beneficiaries by improving and fostering investee enterprises’ corporate value and sustainable growth through constructive “purposeful dialogue” (engagement), based on an in-depth understanding of the investee enterprises and their business environments.
DBJ recognizes that, in addition to operational selection and focus and the realization of growth strategies, calls for corporate governance are growing. Recognizing the importance of the meaning of equity, in our equity investments we support the longterm advancement of the investee enterprises that are our clients, taking particular note of their social responsibilities. When making investments, we endeavor to gain an in-depth understanding of investee enterprises, their business environments, and their management teams’ intention and to share with investee enterprises in their long-term strategies. After investing, we leverage our networks and strengths in information, industry research, and financing technologies to provide total financing solutions that address the issues they face. Through dialogue with investee enterprises, we work to realize their long-term development and maximize their corporate value over the long term.

DBJ believes that its investment operations have been conducted in close affinity with the spirit of the Code. In providing risk capital and knowledge, we consider the appropriate fulfillment of stewardship responsibilities by institutional investors to be of service from the perspective of working with diverse financial players to ensure the smooth formulation of financial and capital markets. Accordingly, we are in agreement with the meaning of the principles provided in the Code.

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Executive Compensation

DBJ’s Compensation Committee is an advisory body to the Board of Directors. It deliberates on the compensation structure for members of the Board of Directors and evaluates the propriety of the compensation structure for the company. The majority of its members are outside executives.

DBJ takes the following basic approach to executive compensation.

  • Compensation should reflect social trends in regard to executive pay.
  • Compensation should provide motivation for initiatives aimed at realizing economic and social value during each fiscal year and in the medium to long term.

In accordance with this approach, DBJ provides compensation to its executives in four forms: basic compensation, allowances, executive bonuses, and executive retirement benefits.

  1. (1)
    Basic compensation is paid monthly in an amount based on the executive’s position.
  2. (2)
    Allowances are paid monthly in an amount commensurate with the executive’s position.
  3. (3)
    Executive bonuses are distributed after taking into consideration the performance of each member of the Board of Directors in carrying out their duties during the fiscal year. Bonuses comprise a standard amount based on the position of the member of the Board of Directors plus an amount that reflects progress toward fiscal year targets set by DBJ.
  4. (4)
    Executive retirement benefits are paid out upon retirement in an amount reflecting successful service over the longer term.

Below is a description of the compensation structure for members of the Board of Directors.
Compensation for full-time members of the Board of Directors consists of basic compensation, allowances, executive bonuses, and executive retirement benefits. To maintain their independence, part-time members of the Board of Directors receive basic compensation alone.
Compensation for full-time Audit & Supervisory Board members comprises basic compensation, allowances, and executive retirement benefits. Compensation for part-time Audit & Supervisory Board members consists solely of basic compensation.
The amount of compensation paid to members of the Board of Directors is determined after deliberation by the Board of Directors, within the maximum amount approved at the General Meeting of Shareholders following discussions by the Compensation Committee. Compensation amounts are based on the position and responsibilities of each member of the Board of Directors, with due consideration given to social trends, DBJ’s financial performance, and other standards balanced against employee salaries. The amount of compensation paid to Audit & Supervisory Board members is also determined after deliberation by the Audit & Supervisory Board members within the scope of the maximum amount approved at the General Meeting of Shareholders.
The Compensation Committee was established in 2008 to ensure transparency and objectivity in the process for determining compensation, and a majority of members of the Compensation Committee comprises outside executives. This composition allows independent outside executives to be involved and give relevant advice.

Message from Outside Members of the Board of Directors

Here is a message from an outside member of our Board of Directors.

Message from Outside Members of the Board of Directors