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Corporate Governance

Basic Approach

In order for Isuzu to continuously increase revenues and enhance corporate value through its corporate activities, the Company believes that it is essential to establish a corporate governance system that provides a framework for regulating such activities.
Furthermore, we believe that the fundamental purpose of corporate governance is to respect the perspectives of, and build constructive relationships with, all of our stakeholders, and to that end we endeavor to ensure fairness and transparency in our corporate affairs through timely and appropriate disclosure of important information. In particular, we believe that a key element of corporate governance is to develop an internal structure and environment that protects the rights and interests of all stakeholders and ensures equality among stakeholders.

Management Structure

Isuzu is a company with an Audit and Supervisory Committee, and we have established a Board of Directors and an Audit and Supervisory Committee as statutory meeting structures to resolve, supervise, and audit the execution of major business activities. In addition to these statutory meeting structures, we have established a Management Meeting to deliberate on important policies and plans, conduct business management, and oversee other overall business activities. We also have various advisory bodies and meeting structures to facilitate supervision and decision-making on business execution.
The outline of our corporate governance structure is as follows (as of June 26, 2024).

Corporate Governance Structure

Board of Directors

The Board of Directors lives up to the mandates and confidence of shareholders and, for the purpose of consistently enhancing our corporate value, makes important decisions and conducts supervision on issues that concern our business management. In principle, the Board of Directors holds regular monthly meetings and may convene extraordinary meetings as needed to deliberate and make decisions on necessary matters. Currently, the Board of Directors consists of 14 directors. The Chairman of the Board of Directors is Masanori Katayama, who serves as the Chairman and CEO. Of the 14 directors, 6 are Independent Outside Directors.

Audit and Supervisory Committee

The Audit and Supervisory Committee follows the audit plan that it established, and audits and supervises the Board of Directors' decision making and directors' execution of business.
The current Audit and Supervisory Committee is composed of five members. To strengthen the auditing and supervisory functions of the Audit and Supervisory Committee Members and to enable them to collect information daily, share information at important internal meetings, and fully cooperate with the accounting auditors and the internal audit division, three members have been selected as Standing Audit and Supervisory Committee Member. The Chairman of the Committee is Makoto Anayama, an outside director who serves as a Standing Audit and Supervisory Committee Member. Of the five directors who are Audit and Supervisory Committee Members, three are independent outside directors.
All five directors who are Audit and Supervisory Committee Members are designated Audit and Supervisory Committee Members.

Nomination and Remuneration Committee

In addition to the statutory organizations mentioned above, Isuzu has established a voluntary Nomination and Remuneration Committee, an arbitrary organization on corporate governance that is designed to enhance the independence, transparency, and objectivity of the Board of Directors' functions related to nominating officer candidates, selecting executive management, and determining officer remuneration. The committee is chaired by an outside director.
Isuzu's Nomination and Remuneration Committee consists of five members, including two Inside Directors and three Outside Directors. The Chairman of the Committee is Mitsuyoshi Shibata, an Outside Director, who deliberates on and provides recommendations on the matters referred by the Board of Directors.

Executive Officer System and Management Meeting

By separating supervision and business execution, Isuzu is building a rapid decision-making and execution system through improvements in the deliberations in the Board of Directors, the supervisory organization, and the proper transfer of power from the Board of Directors. We also have executive officers and executives to take responsibility for a rapid decision-making and execution structure and for business execution in the areas of their assignment.
Additionally, Isuzu has established a Management Meeting composed of Masanori Katayama, the Chairman and CEO; Shinsuke Minami, the President and COO; and various EVPs and division heads.

The meeting is chaired by Masanori Katayama, the Chairman and CEO, and deliberates and makes decisions on matters related to business management and execution within the scope of authority delegated by the Board of Directors.

CxO System

To enhance corporate value across the entire Group, Isuzu has established the following CxO (Chief Officer for each field) positions with the goals of improving expertise in response to increasingly complex issues, accelerating management speed, and strengthening governance.

  • CEO (Chief Executive Officer)
  • COO (Chief Operating Officer)
  • CMzO (Chief Monozukuri Officer)
  • CSO (Chief Strategy Officer)
  • Group CFO (Chief Financial Officer)
  • Group CRMO (Chief Risk Management Officer)

Initiatives

Governance - related Initiatives Themes

As corporate governance has been strengthened in Japan in recent years, Isuzu has endeavored to reform its governance. We will remain committed to strengthening our governance and enhancing our corporate value.

Term 115th 116th 117th 118th 119th 120th 121th 122th 123th
Year Ended March 2017 March 2018 March 2019 March 2020 March 2021 March 2022 March 2023 March 2024 March 2025
Outside Directors
(Women)		 2 (0) 2 (0) 2 (0) 2 (0) 2 (1) 5 (2) 5 (2) 5 (2) 6 (2)
Officer Compensation Introduced performance-linked stock-based compensation system Decide the upper limit of the annual amount of Directors' bonuses Added non-financial indicators (GHG emissions) to the performance metrics in the performance-linked stock-based compensation system
Advisory Committee Establishment of Nomination and Remuneration Committee Changed the Chairperson of the Nomination and Remuneration Committee to an independent outside director
Separation of Execution and Supervision Revise approval standards and rules Shift to a company with Audit and Supervisory Committee Appoint CCO Appoint CEO and COO Appoint CMzO and CSO
Appoint CxOs Delegate important decision-making on the execution of company business to directors
Improving the Functioning of the Board of directors Launch the effectiveness assessment Ratio independent of outside directors: 1/3 or more Increased the number of independent outside directors
Setting the agenda for management strategy
Creation of Skills Matrix
Initiation of Institutional Shareholder Engagement

Board Effectiveness Assessment

Isuzu conducts an annual evaluation and analysis of the effectiveness of the Board of Directors to improve its operations. The following is a summary of the evaluation and analysis for FY2024 (ended March 31, 2024).

  1. Process of analysis and evaluation for fiscal year 2023
    Isuzu conducted an evaluation based on the issues identified in last year's Board of Directors' effectiveness assessment, focusing on continuously monitoring the Board's strengths and the progress in resolving those issues.
    Questionnaires targeting all directors and interviews conducted by a third-party organization were carried out and the results were analyzed. Additionally, countermeasures for the issues identified through the analysis were devised, and a report was presented to the Board of Directors in April 2024 for evaluation and confirmation of future initiatives.
  2. Summary of evaluation results (strengths)
    Isuzu's Board of Directors evaluated and confirmed the following three points as strengths.
    1) The composition of the Board of Directors is effective, backed by directors with diverse backgrounds. 2) The Board of Directors is working steadily and with a sense of speed on measures for improvement in its operation, the building of a risk management system by the Group CRMO, and other matters identified as issues. 3) Advance explanations, etc., to the directors, including outside directors, are functioning effectively for effective discussions at meetings of the Board of Directors, and their sufficiency has been secured.
  3. Summary of evaluation results (challenges)
    Isuzu's Board of Directors identified the following three points as challenges to enhance the Board's monitoring function.
    1) Facilitation of discussions by the Board of Directors centered on the corporate philosophy and medium- to long-term management plans 2) Enhancement of reporting on internal control status, including the risk management structure. 3) Enhanced discussion of cost-of-capital strategies and business portfolios.
  4. Major issues in FY2023 and progress of initiatives for FY2024
    Major issues in FY2023 Status of Initiatives for FY2024
    (1)Appropriate agenda setting and the facilitation of discussions
    • Topics related to the corporate philosophy and Medium-to Long-Term Business Plan increased, and discussions took place that will contribute to monitoring from a medium- to long-term perspective.
    • We will enhance discussions further by setting a systematic agenda throughout the year, such as setting an annual schedule.
    (2)Enhancement of reporting on the state of internal controls, including risk management systems
    • Executive-side monitoring functions were improved, including the strengthening of risk management systems and functions by the Group CRMO, and in increase in the frequency of risk-related reporting.
    • We will continue to strengthen preventive risk initiatives and collaboration between the Board of Directors and the Group CRMO.
    (3)Sharing of the opinions of each stakeholder with the Board of Directors
    • The opinions of investors obtained through IR/SR and ESG interviews are reported to the Board of Directors as appropriate.
    • The content and frequency of reporting will be enhanced further.
    (4)Enhancement of discussions on capital efficiency/ the business portfolio
    • Discussions on capital and financial strategies were advanced by holding discussions on the acquisition of treasury stock and financial strategies linked to the formulation of the Medium-term business plan.
    • Discussions on capital cost/ the business portfolio will be enhanced further.

Officers' Remuneration

Basic Principles

The following are Isuzu's basic principles on remuneration for directors and executive officers.

  1. Contribute to sustained growth of Isuzu and enhancement of its corporate value, and facilitate the sharing of value with shareholders.
  2. Remuneration should be at the level necessary and appropriate for securing and keeping talented human resources with due consideration to the economic environment, market trends and the levels of remuneration in other companies.
  3. The amount of remuneration should reflect the performance of the Company and the individual as well as his/her job responsibilities and positions.
  4. The process for deciding remuneration should be objective, impartial and transparent.
  5. Our officer remuneration system and the amounts of payment to officers should be periodically reviewed whenever the Medium-Term management plan is updated and with consideration of factors such as the economic environment, the levels and systems of remuneration for officers in other companies and the status of Isuzu's use of the system.

Remuneration for Directors (excluding Audit and Supervisory Committee Member and outside directors)

Remuneration for directors (excluding the directors that are Audit and Supervisory Committee Member and outside directors) includes basic compensation, bonuses linked with the degree of achievement of the single-year consolidated performance target and the amount of remuneration that is based on the performance-linked stock compensation plan linked with the degree of achievement of the management indexes aimed within the period of a Medium-Term management plan aimed at enhancing sustainable corporate value.

Methods for evaluating each officer's performance and deciding the officers' bonuses and the performance-linked stock compensation plan go through a procedure of consultation and provides opinions to the optional Nomination and Remuneration Committee, of which independent outside directors occupy the majority. In this procedure, the CEO fulfills his accountability and thereby secures the objectivity and impartiality of remuneration for officers.

Details of Remuneration and Non-monetary compensation Basic compensation Decided on the basis of the standard amounts that is predetermined for different positions and the evaluation of individuals' performance.
Performance linked compensation Bonus
  • Linked to the degree to which targets for consolidated net sales, consolidated operating income, and net income attributable to owners of parent company
  • We set a performance-linked coefficient that shows the degree of achievement at between 0 and 200% in a comparison between each of these performance indicators for a single year with the target, and determine bonuses by multiplying this coefficient by the ratio of basic remuneration and mentioned above, which is the base bonus amount for the respective position. (Chairman and CEO: 0.70, President and COO, Vice President, CMzO, and CSO: 0.50, other executives: 0.40)
Share-based compensation
  • Linked with the degree of achievement of the target during the period of a Medium-term management plan.
  • The performance-linked coefficient is calculated between 0 and 240.0% by weighting the degree of achievement against the target values for consolidated net sales, consolidated operating income, consolidated return on equity (ROE), and GHG emissions reduction*1 at a ratio of 30%:30%:30%:10%, and then multiplying by the coefficient related to the degree of growth in shareholder value, etc.*2.
    We determine the points to be granted based on the base amount by position that serves as the basis for basic remuneration, the composition ratio (Chairman and CEO: 0.70, President and COO, Senior Executive Vice President, CMzO, and CSO: 0.50, other executives: 0.30), and the assumed stock price*3.
    1. *1GHG reduction target for FY2027: 12% reduction (compared to FY2014)
    2. *2Determined on the basis of the result of comparison between Isuzu's total shareholder return (TSR) and the growth rate of TOPIX (dividends included) during the relevant period
    3. *3The average of the closing price of regular transactions of Isuzu shares in TSE on each day of the month before the month during which the relevant period started, with the exception of the days on which no transaction was closed (truncated to the closest whole number).
Method for deciding the proportion Basic compensation: Bonuses: Share-based compensation (Assuming that the performance target is fully achieved)
(Chairman and CEO) 1.00: 0.70: 0.70
(President and COO, Vice President, CMzO, and CSO) 1.00: 0.50: 0.50
(Other executives) 1.00: 0.40: 0.30
Policy regarding the time of payment Basic compensation Monthly compensation (1/12 of basic compensation is paid monthly)
Bonus Paid in July after the degree of achievement of the single-year (individual/Company) performance target is determined.
Share-based compensation After the end of the target period, payment is made around July. (For directors who resign before the end of the target period, payment will be made after their resignation.)
Procedure for deciding re-entrustment Basic compensation Evaluation of individuals' performances is re-entrusted to the CEO after the Board of Directors' resolutions.
Bonuses and share-based compensation Automatically calculated on the basis of the degree of achievement of the target, standard amount and coefficients. The amounts depend solely on the Company's performance and thus involve no scope for discretion.

Remuneration for Outside Directors

Remuneration for outside directors consists of basic compensation only, in view of their roles and independence. Each director receives the fixed amount only and the remuneration involves no fluctuation that may result from performance evaluation and so on.

Compensation for Directors Who Are Also Audit and Supervisory Committee Member

The amount of remuneration for directors who are Audit and Supervisory Committee Member consists of basic compensation only, in view of their roles and independence. It is decided through discussion by the directors who are members of Audit and Supervisory Committee Member with consideration of factors such as the number of directors, economic environment, market trends and the levels of remuneration in other companies, within the range of the upper limit approved at the General Shareholders Meeting.

Total Remuneration Amounts and Other Payments to Directors

Classification Total amount of compensation (million yen) Amount of remuneration, etc. by type (million yen) Number of eligible officers
Basic compensation Bonus Remuneration based on the performance-linked stock compensation plan,etc. Non-monetary compensation
Directors (excluding Audit and Supervisory Committee Member and outside directors) 766 364 179 222 222 6
Audit and Supervisory Committee Members (excluding outside directors) 68 68 - - - 3
Outside officer 94 94 - - - 6
  1. *This figure includes two directors who retired at the conclusion of the 121st General Shareholders Meeting held on June 28, 2023.

Approach to Cross-shareholdings

Isuzu believes that holding its business partners' shares on the assumption of long-term transactions is an effective means of building a stable relationship and should lead to the enhancement of its corporate value over the medium- to long-terms. To confirm the reasonability of holding business partners' shares, the Board of Directors annually performs an examination from two different aspects: it conducts a quantitative evaluation of each issue in terms of criteria such as whether the benefit of holding the shares at least equals the capital cost, and a qualitative evaluation of the significance of the shareholding, among other aspects.
Consequently, any shares that we no longer see a reason to hold will be swiftly reduced.
In executing our voting rights as a shareholder, we respect, as a shareholder with individual trade relations, the aims and intentions of the proposals and resolutions submitted from share issuer. If we see a risk of damaging a share issuer's value during the process of a dialogue with the share issuer or examination of a resolution; however, we will request the withdrawal or review of the resolution and will take action for each resolution, which may involve abstaining from the right to execute our voting rights.

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