Corporate Governance

Basic Philosophy on Corporate Governance

Makita believes that the most important issue is to achieve unending development together with its various stakeholders. In order to achieve this, we have established a Management policy / Quality policy and are working to strengthen and enhance our corporate governance. From this perspective, we will work to maintain and improve the fairness and transparency of our management by striving to enhance management transparency and management checking functions, as well as proactively and promptly disclosing information.

Overview of the Corporate Governance Structure

Principal organizational structures

Proportion of Outside Directors in each organization

• Internal
• Outside
• Men
• Women

• The numbers in parentheses above show the proportion of women.

Board of Directors

A regular meeting of the Board of Directors shall be held once a month and extraordinary meetings shall be held whenever necessary. The Board of Directors, as the decision-making body for management, decides on important management matters, including decisions on management policies and business plans, the conclusion of important agreements, and the establishment of subsidiaries in accordance with the Regulations of the Board of Directors, in addition to matters stipulated by laws and regulations and the Articles of Incorporation, and supervises the execution of operations. Outside Directors are appointed from among those who have a wealth of experience and broad insight in corporate management and those who have a wealth of experience and insight in various fields, including finance, accounting and legal affairs. They are responsible for strengthening corporate governance by providing opinions as appropriate from an independent perspective with no risk of conflict of interest with general shareholders. At present, the Board of Directors consists of 15 members, five of whom are Outside Directors with a high degree of independence. In addition, at the conclusion of the 109th Ordinary General Meeting of Shareholders held in June 2021, Makita has transitioned to a Company with an Audit & Supervisory Committee in order to strengthen the supervisory function of the Board of Directors. Moreover, we have established the Nomination and Compensation Committee with Independent Outside Directors as the majority of members and chair in order to ensure objectivity, transparency, and fairness in procedures related to nomination and compensation of Directors, etc. (excluding Directors who are Audit & Supervisory Committee Members), thereby striving to enhance our corporate governance system.

Diversity of the Board of Directors

Directors of the Company, regardless of age, gender, or nationality, shall be appointed from among those who can contribute to the enhancement of its corporate value. We have appointed Internal Directors (excluding Director who is Audit & Supervisory Committee Member) who have the ability to formulate and execute management strategies based on their own experience and insight, Outside Directors (excluding Directors who are Audit & Supervisory Committee Members) who have a wealth of experience and broad insight in corporate management, and Directors who are Audit & Supervisory Committee Members who have internal and external work experience and a wealth of experience and insight in various fields, including finance, accounting and legal affairs. Moreover, a number of Directors with overseas experience are in office. In addition, at the 111 th Ordinary General Meeting of Shareholders held in June 2023, a female outside director (Audit & Supervisory Committee Member) was elected. We, therefore, believe that the Board of Directors as a whole is functioning as an effective organization that ensures an appropriate balance and diversity of knowledge, experience and ability. In order to further increase diversity, we hope to increase the number of female workers in management positions who will be candidates for Directors in the future.

We are working to increase the number of female managers at Makita (not-consolidated) to 3.0% or more (10 people or more) by FYE2030.

We also believe that the current Board of Directors is of an appropriate size to enable prompt decision-making.

Evaluation of effectiveness of the Board of Directors

Makita conducts an annual self-evaluation questionnaire for each Director on the effectiveness of the Board of Directors. The results of analyzing the FYE2022 effectiveness evaluation indicated that the Board of Directors generally functions appropriately from the perspective of its composition, operation, supervisory function, and response to shareholders and stakeholders, and that the effectiveness of Makita’s Board of Directors is ensured.

On the other hand, we thought that there is room for improvement with regard to the advance distribution (delivery) of deliberation materials and advance explanations for meetings of the Board of Directors, so we worked on the further improvement of effectiveness by bringing forward the distribution of deliberation materials and expanding advance explanations by the secretariat of the Board of Directors to Outside Directors.

Skill matrix of Directors

The composition and expertise of the Board of Directors are as follows. Please also see Directors and Corporate Officers Page for the career summaries, etc., of each Director.

Nomination and Compensation Committee

Chairperson

Members

• Mr. Akira Kodama, an outside director (Standing Audit & Supervisory Committee Member), retired at the conclusion of the 111th Ordinary General Meeting of Shareholders held in June 2023.
  Mr. Shoji Inoue, an outside director (Audit & Supervisory Committee Member), became a member of the committee on the same day.

Audit & Supervisory Committee

A regular meeting of the Audit & Supervisory Committee shall be held once a month and as and when necessary. The Audit & Supervisory Committee audits and supervises the execution of duties by the Directors and investigates the status of business and assets by attending important meetings and hearing reports, in accordance with the established audit policy and allocation of duties. Furthermore, the Audit & Supervisory Committee appropriately exercises its right to express its opinions regarding the nomination and compensation of Directors (excluding Directors who are Audit & Supervisory Committee Members). The Audit & Supervisory Committee consists of four Directors who are Audit & Supervisory Committee Members, including three Independent Outside Directors, and is independent of the management team. In order to strengthen the effectiveness of auditing and supervisory functions, one Standing Audit & Supervisory Committee Members have been selected. Three Outside Directors who are part-time Audit & Supervisory Committee Members have many years of experience and expertise as an attorney at law and a certified public accountant, respectively. Accordingly, Makita believes that they are capable of performing highly specialized auditing work from an independent perspective. In addition, the Audit & Supervisory Committee works to cooperate with the Accounting Auditors and the Internal Audit Division by receiving audit reports and other reports from them, as needed. With the objective of helping audits by the Audit & Supervisory Committee function smoothly, Makita established the Audit & Supervisory Committee Staff Office, whose dedicated staff members support the work of the Committee.

Corporate Officers

In accordance with internal regulations, judgments and decisions related to the execution of operations below a certain scale are delegated to the Representative Director and the respective Directors in charge. In addition, Makita has introduced the Corporate Officer System in order to promote swift execution of group strategies and strengthen systems for the execution of operation, thereby striving to make the business operation flexible and efficient. As of July 2023, Makita has 17 Corporate Officers, and three of these Corporate Officers are non-Japanese.

Accounting Audits

Makita has appointed KPMG AZSA LLC as its Accounting Auditor. The certified public accountants who performed the accounting audit for Makita in FYE2023 are Mr. Atsushi Fukui and Mr. Ryosuke Okado of KPMG AZSA LLC, and the number of years of continuous auditing is seven years or less. The assistants for the audit work are 12 certified public accountants, and 21 others.

Schematic Diagram of Makita's Corporate Governance Structure (as of June 28, 2023)

Policy and Decision-making Process for the Appointment of Directors

The Board of Directors of Makita strives to have a well-balanced mix of knowledge, experience, and ability as a whole, to achieve both diversity and appropriate size, and to have a ratio of Independent Outside Directors of at least one-third.

We believe that it is necessary to appoint as Internal Directors (excluding Directors who are Audit & Supervisory Committee Members) those who have the ability to formulate and execute management strategies based on their own experience and insight, including a wealth of experience in Makita’s operations, and as Outside Directors (excluding Directors who are Audit & Supervisory Committee Members) those who have a wealth of experience and broad insight in corporate management. We also believe that it is necessary for Directors who are Audit & Supervisory Committee Members to be appointed from among those who have internal and external work experience and a wealth of experience and insight in various fields, including finance, accounting and legal affairs, and that at least one of them is required to have a wealth of experience and insight in finance, accounting and other fields.

Makita has established the Nomination and Compensation Committee for the purpose of ensuring objectivity, transparency, and fairness in procedures related to the nomination and other matters concerning Directors, etc. (excluding Directors who are Audit & Supervisory Committee Members), as well as further enhancing the corporate governance system, by obtaining appropriate involvement and advice from Independent Outside Directors. The Board of Directors consults with the Nomination and Compensation Committee regarding the policy on the nomination of Directors, etc. (excluding Directors who are Audit & Supervisory Committee Members) and matters related to the appointment of Directors, etc. (excluding Directors who are Audit & Supervisory Committee Members), and decides on candidates based on the advice from the Nomination and Compensation Committee. With respect to Directors who are Audit & Supervisory Committee Members, candidates are determined by a resolution of the Board of Directors after obtaining the consent of the Audit & Supervisory Committee.

In the event that a Director (excluding a Director who is an Audit & Supervisory Committee Member) violates the criteria for dismissal set by the Board of Directors, such as an act that is suspected to be unfair, unjust or treacherous, the Board of Directors will consult with the Nomination and Compensation Committee regarding the dismissal of the relevant Director. Based on the advice from the Nomination and Compensation Committee, the Board of Directors will decide to submit a proposal for the dismissal of the relevant Director to the General Meeting of Shareholders.

Outside Director

Makita provided notice on Mr. Masahiro Sugino, Mr. Takahiro Iwase, Mr. Shoji Inoue, Mr. Koji Nishikawa and Ms. Ayumi Ujihara to the Tokyo Stock Exchange and Nagoya Stock Exchange as being independent directors appointed Makita, in accordance with the rules and regulations of each exchange.
The Board of Directors met 12 times, the Audit & Supervisory Committee met 14 times, Ms. Ayumi Ujihara was newly appointed at the 111th Ordinary General Meeting of Shareholders held on June 28, 2023.

Compensation for Directors

Total amount of compensation (FYE2023)

Compensation for Directors (Excluding Directors who are Audit & Supervisory Committee Members)

The Board of Directors, after consultation with and receiving advice from the Nomination and Compensation Committee, determines the decision-making policy on the details of individual compensation for Directors (excluding Directors who are Audit & Supervisory Committee Members). The compensation for Directors (excluding Directors who are Audit & Supervisory Committee Members) consists of monthly compensation, bonuses and restricted shares compensation, and for the purpose of providing sound incentives for improving the corporate value over the medium- to long-term, Makita appropriately determines the proportion of the monthly compensation, bonuses and restricted shares compensation.

Monthly compensation

The amount of monthly compensation for each Director (excluding Directors who are Audit & Supervisory Committee Members) is determined by the Nomination and Compensation Committee under the authority delegated by a resolution of the Board of Directors, based on performance, positions, increase of employee salary and other factors, within the scope of the maximum amount of compensation resolved by the General Meeting of Shareholders.

Bonuses

Bonuses are paid to Directors, excluding Directors who are Audit & Supervisory Committee Members and Outside Directors, and linked to consolidated business result in order to motivate them to improve such business result. For the purpose of management of Makita in a manner favorable to shareholders, just as in the case of dividend payment, bonuses are based on the profit attributable to owners of the parent per share (Basic) after certain adjustments reflecting special circumstances. After consultation with and receiving advice from the Nomination and Compensation Committee, the Board of Directors determines the total amount of bonuses to be paid to Directors based on a certain formula and submits the total amount of bonuses to the General Meeting of Shareholders. The allocation of bonuses to each Director is determined by the Nomination and Compensation Committee under the authority delegated by a resolution of the Board of Directors, based on performance, positions and other factors. Bonuses to Directors are paid at a certain time each year.

Restricted shares compensation

Restricted shares compensation is introduced to Directors (excluding Directors who are Audit & Supervisory Committee Members and Outside Directors) in order to allow them to share the risks and benefits of stock price fluctuations with shareholders to a greater extent and further enhance their motivation to contribute to improving the stock price and the corporate value of Makita. The allotment of restricted shares to each Director is decided based on position, etc. at the Board of Directors after consultation with and receiving advice from the Nomination and Compensation Committee. Restricted shares are granted at a certain time each year.

Compensation to Directors who are Audit & Supervisory Committee Members

Full amount of the compensation to Directors who are Audit & Supervisory Committee Members is fixed so that their independence from the management can be secured and the specific amount for each of them is decided through discussions among the Directors who are Audit & Supervisory Committee Members.