Roundtable Discussion: Chairman of the Board, Outside Director, and YKK Outside Director.
The Chairman of the Board and Two Outside Directors Discuss the Implementation of Governance Essential for Corporate Growth

In recent years, with the business environment changing rapidly, I felt uneasy about whether YKK AP was on the right track. In 2009, when I was appointed as the head of the Business Division, Mr. Ono, who is joining us today, advised me to take the top spot in market share and become the price leader. With his guidance, I was able to move forward without hesitation. We have grown in size to become a leading company in the industry, but the situation today is very different from what it was back then. The Japanese market is saturated, with the number of new housing starts on a downward trend, and profits are almost negligible due to soaring material prices. With the number of essential requirements placed upon businesses continuing to grow, I felt that we needed outside expertise to help us identify new directions.

Ms. Inoue is well versed in manufacturing and has extensive auditing experience. Another factor in her selection was her ability to provide accurate advice as YKK AP strengthens its internal control systems. With the appointment of our first outside director, I feel that we have gained a diverse range of perspectives on the Board of Directors.

Thank you very much. I have worked for a commercial vehicle manufacturer for 42 years, where I was responsible for human resources, finance, and internal auditing. What I realized as I gained experience in my career was that while it is easy to come up with ideas on paper, it is difficult to apply them in real life. At meetings of YKK AP’s Board of Directors, I try to convey my opinions while considering the basis for on-site decisions and business processes in as specific terms as possible.

I have been serving as an outside director at YKK since 2007, and at YKK, outside directors and outside members of the Audit & Supervisory Board are very active in expressing their opinions. There is an organizational culture of listening carefully to what people on the outside have to say, and I believe that this can also extend to YKK AP. It is my hope that incorporating the opinions of outside directors will enable the company to achieve further growth.

The YKK Nomination and Compensation Committee is an advisory body to the Board of Directors that is primarily responsible for personnel matters relating to directors, Audit & Supervisory Board members, vice presidents, and specialized officers of YKK and YKK AP, as well as the design of the compensation system for corporate officers. It may be fairly unusual for a non-listed company to establish a nomination and compensation committee. Fairness is at the core of the management principles established by Tadahiro Yoshida, YKK AP’s founder and corporate advisor, and fairness is also incorporated into the company’s employee evaluation system as a standard of conduct. The fact that we are not listed on the stock exchange means that it is even more important to make decisions fairly and ensure transparency in the decision-making process. This belief is deeply rooted in the entire YKK Group. YKK AP has not established its own committee because it intends to ensure effective governance by maintaining a consistent perspective across the entire group.

I believe that people’s capabilities are greatly influenced by their feelings. In human resources, we place great importance on how employees and stakeholders feel.
Furthermore, I believe that misconduct occurs when people are mentally drained and the opportunity to make such mistakes arises. It is the company’s responsibility to make sure that nobody is presented with these opportunities. Therefore, in our audits, I place emphasis on whether there are any deficiencies in the internal control systems for business processes.

Last fiscal year, Ms. Inoue asked us to confirm whether we had standards and regulations regarding misconduct, and YKK AP believes that these were insufficient. We became keenly aware that there was a lack of mechanisms to prevent impulsive behavior.

In large organizations, establishing standards and regulations helps prevent mistakes. I believe that it is also the responsibility of the Board of Directors to prevent employees from becoming unhappy.

Previously, the Board of Directors mostly had reports and resolutions on the same day, but following advice from an outside member of the Audit & Supervisory Board that discussion is important and that members of the Audit & Supervisory Board observe the discussion process, we have been setting aside time for discussion since FY2023.

We make sure to discuss major items over at least two meetings of the Board of Directors, and then make a resolution at the third meeting. The exchange of opinions during the discussions is very lively, and I myself also ask many questions.

The outside members of the Audit & Supervisory Board also taught us the "etiquette" of what to focus on and what to prepare for the resolution. Ms. Inoue also frequently requested additional materials and asked questions. I have been reminded of the importance of ensuring sufficient time for discussion, and I feel that the attitudes of the company’s inside directors are gradually changing.

I believe that bringing in an outside perspective has been important in terms of ensuring proper procedures are followed and that active discussion takes place.

What has changed most of all is the topics of discussion. When only inside directors were attending meetings, discussions tended to be little more than continuations of what had been spoken about in business meetings. Now, it has become a forum to consider what is important for the company while also paying attention to risks and compliance. Regardless of whether a company is listed or not, I believe that this kind of governance system and its further strengthening are essential for a company’s growth.

We have not yet been able to adapt to the recent surge in material prices. Although we have expanded our business areas and reviewed our personnel allocation, we still have much to do in terms of pursuing productivity and efficiency. We spent a great deal of time discussing our policy of shifting our focus to the high-margin remodeling sector and pursuing added value, as well as passing on price increases to customers and expanding into new regions.

There was also discussion about the importance of investing in people. In order to achieve what is set out in the 7th Mid-term Management Plan, it is important to enhance the capabilities of our employees and maintain their motivation.

I feel that the management style is very aggressive. The company takes appropriate risks in terms of both regions and businesses, and is expanding its value chain.

I believe that YKK AP should not only take the top market share, but also become the undisputed leader. Only by pulling ahead of our competitors can we reap the benefits. YKK’s fastening business has grown by expanding applications for fasteners. Similarly, YKK AP has gained market share in Japan and expanded overseas, broadening the scope of its business from windows to related housing fixtures. If you capture the market and value the trust your customers place in you, profits will naturally follow.

That’s exactly right. We have also spoken about the need to differentiate ourselves from the competition at the Board of Directors. Naturally, simply protecting our existing businesses is not enough to secure our future. We are currently at a turning point and are exploring what steps to take next.

When considering individual proposals, I feel that discussions would be more thorough if the approach of always referring back to the overall portfolio was shared among the Board of Directors. YKK AP has its figures for each business neatly laid out, so by assessing the current state of affairs and where we want to be, we can determine how much capital to invest where, which should lead to greater precision in terms of the management strategy and human resources strategy needed to achieve these goals. In order to further improve effectiveness, I think it would be a good idea to seek external evaluation.

I have examined numerous companies, and I believe that YKK’s governance is more than adequate. However, with so much time devoted to immediate issues, I feel that there is not enough time to discuss medium- to long-term issues. We are working to strengthen corporate governance through effectiveness evaluations by external expert organizations regarding the form of the Board of Directors itself and the scope of its discussions. How about YKK AP?

The lack of time for discussion regarding the medium- to long-term is also an issue at YKK AP. We will also need to reexamine the state of the company’s governance and the matters discussed at meetings of the Board of Directors. We plan to evaluate the effectiveness of the Board of Directors in the 7th Mid-term Management Plan, but first we will work to improve ourselves by broadening our outlook and adopting a long-term perspective.