Basic Policy

SMS Group Corporate Governance Basic Approach

Corporate Governance Report (Last update: June 18, 2021)

Based on the mission of SMS and its subsidiaries (hereinafter the “Group”): “We aim to improve the quality of life by providing information infrastructure for an aging society” (hereinafter the “Group Mission”), the Company strives to achieve sustainable growth and increase its corporate value over the long term by providing value to all stakeholders including shareholders, customers, business partners, employees, and local communities. The markets for medical care, elderly care, healthcare, and senior life, which are the business domains of the Company, are growing at an accelerating pace and changing rapidly. Therefore, it is crucial that the Company makes swift and decisive management decisions. At the same time, it is essential to build a sound management system with transparency and fairness that earns the trust of all stakeholders.

Corporate governance is a framework for achieving transparent, fair, swift, and decisive decision-making of management. The Company believes that it is important to ensure effective corporate governance in order to realize the Group Mission and increase its corporate value over the long term. Based on this recognition, the Company will achieve effective corporate governance in accordance with the following basic policies.

(1) Ensuring Rights of and Equality among Shareholders

(i) Ensuring Rights of Shareholders

The Company discloses information in a timely and appropriate manner and strives to improve the environment in which shareholders can exert their rights, in order to ensure the substantial equality among all shareholders including minority and/or foreign shareholders and the appropriate exercise of their rights.

(ii) General Shareholders Meetings

The Company believes that a General Shareholders Meeting is an opportunity for constructive dialogue with shareholders. To enable shareholders to exercise their voting rights appropriately, the Company provides convocation notices with accurate information needed for voting and posts them on its website before the dispatch. The Company sets the date of the Annual General Shareholders Meeting to avoid the peak days (the days on which many listed companies hold their annual general shareholders meetings), in an attempt to encourage as many shareholders as possible to attend.

(iii) Capital Policy

The Company believes it is essential to contribute to shareholder value by achieving sustainable growth and increasing its corporate value over the long term. The Company aims to achieve continuous growth in net income, maintaining higher ROE than its cost of equity by efficiently utilizing its limited management resources. As huge business opportunities are emerging in the market related to an aging society where the Company operates, the Company will use its profits for the investments necessary for the sustainable growth and the long-term enhancement of corporate value. Therefore, the Company’s basic policy for dividend is to place the priority on growth investments, while taking the financial conditions into account when determining dividend payouts to its shareholders.

Capital policies that may affect the rights of existing shareholders, such as large-scale capital increases, shall be conducted through appropriate procedures based on a thorough consideration on its necessity and rationality so as not to unduly harm the rights of shareholders.

(iv) Cross-Shareholdings

The Company does not hold any listed shares under a so-called “cross-shareholdings” structure. The Company will not hold such shares if it is not possible to reasonably explain that such shares will lead to long-term enhancement of corporate value after comprehensive considerations of factors including consistency with the Group's strategy, synergy effects, and risks.

(v) Anti-Takeover Measures

The Company believes that achieving sustainable growth and long-term enhancement of corporate value and building good relationships with shareholders and investors through IR activities will lead to defend against hostile takeovers. Therefore, the Company has not adopted any anti-takeover measures.

(vi) Related Party Transaction

The Company conducts all transactions through the necessary screening and approval process depending on the transaction scale and significance in accordance with internal regulations.

Any transaction which may cause conflicts of interest is subject to the prior approval of the Board of Directors and is required to be reported to the Board after it is carried out.

Related party transactions are conducted by taking into account the general terms and conditions of transactions in the market and the status of such transactions is monitored in order to prevent any disadvantages to the Company. The Company discloses related party transactions in the annual securities report and non-consolidated financial statements attached to the convocation notice for the General Shareholders Meeting.

(2) Appropriate Cooperation with Stakeholders Other Than Shareholders

As stated in the Group Mission, the Company aims to continue contributing to society through its business activities. To this end, it is essential to build good relationships and cooperate with all stakeholders including not only shareholders but also customers, business partners, employees, and local communities. The Company's basic stance toward each stakeholder is as follows.

  • For customers: The Company provides values to customers (operators, workers and end users) through its information-based services.
  • For business partners: The Company builds sound coexistence relationships with business partners by procuring products and services of appropriate quality at appropriate prices.
  • For employees: The Company provides employees with various growth opportunities through the sustainable growth of its business and aims for mutual development between the Company and employees.
  • For local communities: The Company contributes to the sustainable development of local communities by solving various social issues that arise in an aging society through its business activities.

(3) Ensuring Appropriate Information Disclosure and Transparency

The Company believes that it is the responsibility of a listed company to disclose information appropriately on a timely basis and sufficiently fulfill its accountability. In addition to ensuring disclosures in compliance with relevant laws and regulations including the Companies Act, the Financial Instruments and Exchange Act, and the rules of the Tokyo Stock Exchange, the Company discloses information that may affect the investment decisions of shareholders and investors, in a timely and appropriate manner.

(4) Responsibilities of the Board of Directors

As the Company operates its business in the market that are growing at an accelerating pace and changing rapidly, it is necessary to build a management system that enables swift and decisive decisions of management in a timely and appropriate manner in order to realize the Group Mission and increase its corporate value over the long term. Therefore, the Company has adopted an organization form of a company with an Audit and Supervisory Committee and has delegated the authority for business execution from the Board of Directors to the Representative Director and President (hereinafter the “CEO”) and other Directors to encourage swift and decisive decision-making. The Board of Directors focuses on substantial discussions regarding management strategies and management issues from a broader perspective as well as an enhancement of its supervisory function over business execution. At the Audit and Supervisory Committee, the Committee members who have the voting rights of the Board of Directors (all are Independent Outside Directors) conduct audits to improve the effectiveness of audit and supervision. In addition, the Company has established the Nomination and Remuneration Advisory Committee to ensure objectivity, fairness, and transparency in the nomination of Director candidates, the appointment/dismissal of the senior management, and the decision of remuneration for Directors who are not the Audit and Supervisory Committee members. In order to realize the most appropriate composition of the Board of Directors suitable for a rapidly changing business environment, the Company has set the policy for nomination of Director candidates that requires candidates of Director for a deep understanding of the Company's business along with a wealth of experience and broad insight in areas such as finance, accounting, legal affairs, and/or corporate management, regardless of age, gender, or nationality. Specifically, the Company aims to achieve diversity among the members of the Board of Directors, in terms of their backgrounds, areas of expertise, and international experience. In addition, for Outside Directors who are the Audit and Supervisory Committee members, the Company aims to achieve diversity in terms of tenure to harmonize the experience of long-serving Directors with the fresh perspectives brought by new Directors. The Company believes that the above system enables the Directors to fulfill their duties, thereby the Company will realize the Group Mission and increase its corporate value over the long term.

(5) Dialogue with Shareholders

The Company recognizes that it is essential to engage in constructive dialogue with shareholders and investors with a long-term perspective in order to realize the Group Mission and increase its corporate value over the long term. Therefore, the Director of Corporate Management supervises dialogue with shareholders, and the policy of the dialogue is decided in cooperation with the CEO. The CEO explains the management strategies and the business conditions at quarterly results briefings and actively participates in IR interviews.