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MarketScreener Homepage  >  Equities  >  Tokyo Stock Exchange  >  Komatsu Ltd.    6301   JP3304200003

KOMATSU LTD.

(6301)
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Komatsu : Corporate Governance (234 KB)

08/31/2020 | 04:34am EST

Resolution of ESG Issues

Corporate Governance

Komatsu's Business Model

Komatsu's Growth Strategies

Resolution of ESG Issues

Corporate Profile

through Growth Strategies

Basic Stance on Corporate Governance

To become a company which enjoys more trust from shareholders and all other stakeholders, the Company is working to strengthen corporate governance, improve management efficiency, advocate corporate ethics and ensure sound management on a group-wide basis.To further improve the transparency of management for its shareholders and investors, the Company discloses information in a fair and timely manner and actively engages in investor relations' activities by holding meetings with shareholders and investors.

Activities of the Board of Directors

The Company holds Board of Directors' meetings periodically at least once every month. The Board of Directors deliberates and makes resolutions on important matters, determines management policies of Komatsu, and rigorously controls and supervises the execution of duties by all members of the executive management team including Representative Directors. Of the eight (8) Directors on the Board, three (3) are Outside Directors to ensure transparent

and objective management.

To promote efficient management of the Board of Directors, the Company has established a Strategy Review Committee consisting of

Senior Executive Officers and senior

managers.

Based on the reviews

of the Committee, Executive Officers

and senior

managers execute

their duties within the authority delegated by the Board of Directors.

Corporate Governance Framework

At the Company, the Board of Directors is positioned as the core of corporate governance, and to improve the effectiveness of discussions at meetings of the Board of Directors, the Company has worked to put in place a system to ensure thorough discussions of important management matters and prompt decision making, and reform their operational aspect. Having introduced the Executive

Officer (Shikko Yakuin) System in 1999, the Company has separated management decision making and supervisory functions from executive functions to the extent permitted by laws and regulations, and while appointing both Outside Directors and Outside Audit & Supervisory Board Members, limits the Board of Directors to a small number of members.

Characteristics of Komatsu's Board of Directors

  • Monthly reports from the CEO (recent important items and other topics)
  • Monthly reports from the CFO (performance, order trends, borrowings, etc.)
  • Annual proposal plans and follow-up

• Multiple discussions on important items (deliberation resolution)

  • Business reports to Board of Directors covering nearly 100% of sales-generating activities
  • Proactive expression of opinions by Audit & Supervisory Board Members in addition to Directors
  • Opportunities for free discussion at Board of Directors meetings

Board of Directors Meeting Attendance and Agenda Item Numbers in FY2019 (April 1, 2019-March 31, 2020)

Outside Directors

100%

Attendance

Outside Audit &

100%

Supervisory members

Agenda item

Reports

45

Deliberations,

numbers

28

Resolutions

Free discussion

2 times

Corporate Governance of the Company (As of June 30, 2020)

Figures in represent the number of meetings in FY2019.

General Meeting of Shareholders

Elect / Discharge

Elect / Discharge

Elect / Discharge

15

Audit

15

Audit &

times

times

Audit reports

Accounting Auditors

Supervisory Board

Office of

(Audit corporation)

(Standing 2 / Outside 3)

Corporate

Board of Directors

Recommend

Human Resource

3

Auditors' Staff

(Standing 5 / Outside 3)

Collaboration

Advisory Committee

times

Audit

Advise / Suggest

Recommend

Compensation Advisory

1

International

Committee

time

Advisory Board

Elect / Discharge /

Report / Submission

Supervise

Executive Functions

President and CEO

Major Committees

Internal

Auditing

Product Safety Committee

Dept.

Strategy Review Committee

Compliance Committee

Risk Management Committee

Export Control Committee

Komatsu Group's Global Operations

Internal audit

Earth Environment Committee

Executive Officers and Global Officers 60

CSR Committee

• Japan 32

Disclosure Committee

• Global 28 (including 19 foreign nationals)

Evaluation of the Effectiveness of the Board of Directors

The Company is working to improve the effectiveness of the Board of Directors and performs annual evaluations and analyses of the effectiveness of the Board of Directors for this reason.

Evaluation Process

Survey

Collection of survey

Discussion among

Report of discussion

After discussion by the Board of

results from all Directors

Outside Directors and

results, evaluation and

Directors on the method to be used

and Audit & Supervisory

Outside Audit &

analysis of effectiveness,

for FY2019 evaluation, based on the

Board Members

Supervisory Board

and discussion of the

method applied in the previous year

and the results thereof, the Company

Members based on

matters for improvement

conducted a survey out of consider-

survey responses

at meeting of the Board

ation for the nature of an effective

of Directors

Board of Directors.

Composition of the Board of Directors

Structure through which important matters are reported,

Survey Topics:

Contents of agendas

proposed, and followed up

Straightforward and meaningful

Succession plans for CEO

discussions

Other items

Provision of information and presentation of

agendas by executives

Collaboration

Decide on the details of the items including election and discharge / Confirm suitability or independency of the Accounting Auditors

Recommend

Audit reports

Outline of the the Results

The assessment shows a generally high level of achievement for each item and confirms that there were no serious problems concerning the effectiveness. The Company received excellent evaluations for factors, such as the following: the timely sharing of issues, problems, and other information provided in monthly reports by the President himself in Board meetings, the fact that Board members discussed the directions of overall business multiple times from a

variety of viewpoints, and the fact that Board members followed up the conditions of resolutions which were regularly reported.

With respect to the conducting of Board meetings, there were a few suggestions for improvement. The Company will make those improvements and work to make the Board of Directors further effective in the future.

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45

Resolution of ESG Issues

Corporate Governance

Komatsu's Business Model

Komatsu's Growth Strategies

Resolution of ESG Issues

Corporate Profile

through Growth Strategies

Major Activities of Outside Directors and

Outside Audit & Supervisory Board Members in FY2019

Corporate Governance Reforms

The Company has proceeded to implement reforms to its corporate governance system in order to ensure effective and adequate performance of matters related to decision making, management and supervision, such as separation of corporate management from business execution, enhancement of corporate management deci-

supplement executive functions, the Company established the International Advisory Board (IAB) in 1995. Through the IAB, the Company aims to secure objective advice and suggestions from experts from Japan and abroad about how to function as a global company by exchanging opinions and holding discussions. Going for-

Outside Directors

Masayuki Oku

Mitoji Yabunaka

Makoto Kigawa

Major Career

Major Career

Major Career

Representative Director of Sumitomo

Vice-Minister for Foreign Affairs

Representative Director at bothYamato

Mitsui Banking Corporation

Holdings Co., Ltd. andYamatoTransport

Co., Ltd.

sion making by the Board of Directors, strict management and supervision of business execution, measures undertaken by Outside Directors to improve transparency and objectivity of management, and measures undertaken by the Audit & Supervisory Board to appropriately audit Directors' execution of duties. As a means to

ward, the Company will pursue increases to the effectiveness of the Board of Directors while appointing Outside Directors to ensure transparency and soundness and promoting openness and accountability in management.

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Mr. Masayuki Oku previously served as Representative Director of Sumitomo Mitsui Banking Corporation. During the fiscal year ended March 31, 2020, based on his rich experience in the business world, he provided comments at the meetings of the Board of Directors concerning such issues as product and service demand trends, busi-

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Mr. Mitoji Yabunaka previously served as Vice- Minister for Foreign Affairs. During the fiscal year ended March 31, 2020, based on his standpoint as a specialist in international affairs, he provided comments at the meetings of the Board of Directors concerning such issues as market conditions in the Asian region, development of emerging markets and

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Mr. Makoto Kigawa previously served as Representative Director at both Yamato Holdings Co., Ltd. and Yamato Transport Co., Ltd. During the fiscal year ended March 31, 2020, based on his rich experience in the business world, he provided comments at the meetings of Board of Directors concerning such issues as the utilization of new

Board of Directors

1999:

2003:

2005:

2017:

28 members

8 members

8 members

10 members

8 members

ness strategy and utilization of AI. In addition, he was a member of the Company's Human Resource Advisory Committee and the Compensation Advisory Committee.

environmental measures. In addition, he was a member of the Company's Human Resource Advisory Committee.

technologies, information disclosure policies and ICT strategies using platforms. In addition, he was a member of the Company's Human Resource Advisory Committee.

(0 Outside Directors)

(1 Outside Director)

(2 Outside Directors)

(3 Outside Directors)

(3 Outside Directors)

Audit & Supervisory Board

Audit & Supervisory Board (1994)

1999:

3 members

1994: 4 members

2006: 5 members

(1 Outside Audit &

(2 Outside Audit & Supervisory Board Members)

(3 Outside Audit & Supervisory Board Members)

Outside Audit & Supervisory Board Members

Hirohide Yamaguchi

Eiko Shinotsuka

Major Career

Major Career

Deputy Governor of the Bank of Japan

Professor Emeritus, Ochanomizu

University, Commissioner, National

Personnel Authority, Member of the Bank

of Japan's Policy Board

Kotaro Ohno

Major Career

Prosecutor-General, Special Counsel, Mori Hamada & Matsumoto

Supervisory

Board Member)

Other organizations and systems

Executive Officer System (1999)

Global officers (2016)

Compensation Advisory Committee (1999) 4 outside members, 1 standing member

Human Resource Advisory Committee (2015)

3 outside members, 2 standing members

International Advisory Board (1995) 3-4domestic and overseas experts

Hitech & Innovation International

Advisory Board (2015) 4-6overseas experts

Compliance Committee (2001)

Members of senior management and labor representatives

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Meeting of the Audit & Supervisory Board 100%

(15 meetings out of the 15 meetings held)

Mr. Hirohide Yamaguchi previously served as Deputy Governor of the Bank of Japan. During the fiscal year ended March 31, 2020, based on his professional standpoint, he provided comments at the meetings of the Audit & Supervisory Board and the meetings of the Board of Directors concerning such issues as M&A risks, inventory management and audit systems. In addition, he was a member of the Company's Compensation Advisory Committee.

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Meeting of the Audit & Supervisory Board 100%

(15 meetings out of the 15 meetings held)

Ms. Eiko Shinotsuka possesses wide-ranging knowledge and experience in fields such as economics, labor relations and law. During the fiscal year ended March 31, 2020, based on her professional stand- point, she provided comments at the meetings of the Audit & Supervisory Board and the meetings of the Board of Directors concerning such issues as the compliance system, securing and utilizing human resources, and mental care for employees. In addition, she was a member of the Company's Compensation Advisory Committee.

Attendance to the Meetings

Meeting of the Board of Directors 100%

(15 meetings out of the 15 meetings held)

Meeting of the Audit & Supervisory Board 100%

(15 meetings out of the 15 meetings held)

Mr. Kotaro Ohno possesses rich experience in the legal profession. During the fiscal year ended March 31, 2020, based on his professional standpoint, he provided comments at the meetings of the Audit & Supervisory Board and the meetings of the Board of Directors concerning such issues as legal compli- ance, internal reporting system and risk manage- ment. In addition, he was an observer of the Company's Compliance Committee.

Internal

Composition of Directors and Audit & Supervisory Board Members (As of June 30, 2020)

Introduction of New Outside Directors

In conjunction with the resignation of Masayuki Oku and Mitoji Yabunaka, the following two new directors were appointed at the General Meeting of Shareholders held in June 2020.

Outside

Internal

Outside

Internal

3

5

3

Audit &

2

Directors

Supervisory

Of whom,

Of whom,

Of whom,

Board

non-Japanese

women

women

Members

1

1

1

New

Takeshi Kunibe

New

Arthur M. Mitchell

Takeshi Kunibe has considerable knowledge and rich experience in the business world, including the field of finance and in group company management, etc., having served successively as Representative Director, President and Chief Executive Officer of SMBC, as well as Representative Director and President, Director President and Representative Executive Officer, and Chairman of the Board of SMFG.

Utilizing this knowledge and experience, his recommendations concerning the overall management of the Company are expected to contribute to sustaining and improving transparency and soundness of management as well as enhancing corporate governance. Therefore, the Company appointed him as an Outside Director.

Mr. Arthur M. Mitchell has worked for many years as a New York state attorney and foreign law attorney in Japan, and has considerable knowledge and rich experience in the field of international legal affairs.

Utilizing this knowledge and experience, his recommendations concerning the overall management of the Company are expected to contribute to the mitigation and avoidance of risk in the Company's global business operations, and to the enhancement of the Company's medium- and long-term corporate value. Therefore, the Company appointed him as an Outside Director.

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Resolution of ESG Issues

Corporate Governance

Activities of Advisory Committees

Komatsu's Business Model

Komatsu's Growth Strategies

Resolution of ESG Issues

Corporate Profile

through Growth Strategies

Remuneration Systems

Committee Name

Human Resource Advisory Committee

Compensation Advisory Committee

Chairperson

Outside Director (Masayuki Oku)

External expert (Advisor: Tsuguoki Fujinuma, The Japanese

Institute of Certified Public Accountants)

1 external expert (Advisor: Tsuguoki Fujinuma, The

3 Outside Directors

Japanese Institute of Certified Public Accountants)

Members

(Masayuki Oku, Mitoji Yabunaka, Makoto Kigawa)

1 Outside Director (Masayuki Oku)

Chairperson of the Board

2 Outside Audit & Supervisory Board Members

President

(Hirohide Yamaguchi, Eiko Shinotsuka)

Chairperson of the Board

Selection of next President and deliberation, resolution, and

Deliberation, resolution, and reporting to the Board of Directors

Purpose

reporting to the Board of Directors on human resource

and Audit & Supervisory Board on remuneration systems for

development methods, succession plans, and appointment

Directors, Audit & Supervisory Board Members, and Executive

and dismissal of Directors

Officers to ensure objectivity and transparency

Meetings in FY2019

3

1

• Selection and cultivation of candidates for next President

• Proposal of Directors and Audit & Supervisory Board

• Monthly compensation levels for Directors and Audit &

Agenda items in

Members for FY2020

Supervisory Board Members in FY2020

•Terms of Directors and Audit & Supervisory Board Members

• Performance-based remuneration for Directors for FY2019

FY2019

• Composition of Outside Directors

(projections)

• Concurrent positions held by Chairman of the Board and

• Evaluation methods for the mid-term management plan

In an effort to maintain an objective and transparent remuneration system, the policy and levels of remuneration for Directors and Audit

  • Supervisory Board Members of the Company are deliberated by the Compensation Advisory Committee. Taking its reports and recommen- dations into consideration, the remuneration for Directors is deter- mined by the Board of Directors, and the remuneration for Audit & Supervisory Board Members is determined by discussions by the Audit & Supervisory Board Members, respectively, within the range previously determined by resolution of the General Meeting of Shareholders. With regards to remuneration levels, their comparison by position at other key, globally active manufacturers in Japan is made by the Compensation Advisory Committee and is reflected in its reports and recommendations. The remuneration for Directors exclud- ing the Outside Directors (hereinafter "Internal Director") comprises basic remuneration (fixed remuneration) and performance-based remuneration linked to the Company's consolidated performance for a

single fiscal year (bonus in cash and the Stock-Based Remuneration A) as well as the performance-based remuneration (Stock-Based Remuneration B) that will reflect the degree of achievement of the targets raised in the mid-term management plan, so that it will further contribute to the enhancement of the medium- and long-term corporate value of the Company, by linking the remuneration. The remuneration for Outside Directors only consists of basic remuneration (fixed remuneration) designed to support their role to make recommendations with respect to the overall management of the Company as a member of the Board of Directors. Furthermore, the remuneration for Audit & Supervisory Board Members only consists of basic remuneration (fixed remuneration) designed to support their independent position with authority to audit the execution of duties by Directors without getting fettered by the movements of corporate performance of the Company. The retirement allowance system for Directors and Audit & Supervisory Board Members was terminated as of June 2007.

Outside Directors, etc.

Composition of Remuneration of Directors and Audit & Supervisory Board Members

Succession Plans

One of the items contained in the Code of Conduct for Leadership/ Top Management that has been described in the KOMATSU Way since its establishment in 2006 is "continue to think about your succession plan."

In order to ensure that Komatsu's management values are transmitted to the next generation, the basic requirements for candidates for the position of President are discussed and clearly defined by the Human Resource Advisory Committee. In addition, successors for

important domestic and overseas positions up to and including that of the President are decided through the annual implementation of succession plans (see chart below).

Selected successors are assigned to challenging tasks and granted even larger roles in the organization to systematically develop them in an environment that encourages the pursuit of mutual growth.

Basic Remuneration

Performance-Based Remuneration for a SingleYear

Performance-Based Remuneration

Linked to Performance of Mid-Term

Internal

(Fixed Remuneration)

(Monthly Remuneration x 0-24 months)

Management Plan

(Monthly Remuneration x 0-3 months)

Directors

Monthly remuneration x 12 months

Bonus in Cash

Stock-Based Remuneration A

Stock-Based

(1/3, in principle)

Remuneration B

(2/3, in principle)*

Restricted Stocks

Restricted Stocks

Outside

Basic Remuneration

(Fixed Remuneration)

Directors

Not influenced by Company performance

and Audits

Monthly remuneration x 12 months

* The upper limit for Bonus in Cash is set at 12 months' worth of monthly remuneration; the remainder of bonuses is to be paid as Stock-Based Remuneration A.

Performance-Based Remuneration Linked to Performance of Mid-Term Management Plan

Overview of Succession Plans

Results Feedback

Succession Plans

Evaluation and Selection of

Human Resource Relocations

Successors

and Cultivation

Oversight of

Implementation Process

Board of Directors

Human Resource Advisory Committee

Key Points for Cultivating Leadership/Top Management Successors

  1. Foster willpower necessary to overcome challenges by having candidates experience extremely difficult situations
  2. Nurture organizational operation capabilities needed to unite parties with differing interests
  3. Cultivate compliance awareness to prevent misconduct

The Company will pay Internal Directors the equivalent of a three-month portion of monthly remuneration every fiscal year as remuneration linked to the period of the Company's Mid-Term Management Plan by granting restricted stock as stock-based remuneration (Stock-Based Remuneration B). In deciding Stock-Based Remuneration B, after the expiry of the period of the mid-term management plan, the number of shares on which to lift transfer restrictions (within range of 0-100%) will be decided based on the achievement of the management targets of the Mid-Term Management Plan presented in the following table and as a general rule, the restriction of transfer on the shares will be lifted after three years from delivery.

Management Indicators and Management Targets in Mid-Term Management Plan (FY2019-FY2021)

Management Indicator

ManagementTarget

Growth

• Sales growth rate

• Growth rate above the industry's average*1

Profitability

• Operating income ratio

• Industry's top-level operating income ratio*1

Efficiency

• ROE

• ROE of 10% or higher

Financial position

• Net debt-to-equity ratio*2

• Industry's top-level financial position

Retail finance business

• ROA

• ROA 1.5% to 2.0%

• Net debt-to-equity ratio*2

• 5.0 or under for net debt-to-equity ratio*2

• Reduction of environmental impact

• CO2 emissions: Decrease by 50% in 2030 from 2010

ESG

Renewable energy use: Increase to 50% of total energy use in 2030

• Evaluation by external organizations

• Selected for DJSI*3 (World & Asia Pacific) and for CDP*4 A-list (Climate Changes and Water Risk), etc.

• Keep a fair balance between investment for growth and shareholder return

Shareholder return

• Consolidated payout ratio

(including stock buybacks), while placing main priority on investment

• Set the goal of a consolidated payout ratio of 40% or higher

*1 Relative comparison with domestic and foreign major competitors in the same industry.

*2 Net debt-to-equity ratio = (Interest-bearing debt - Cash and cash equivalents - Time deposits) / Shareholders'equity of the Company *3 Dow Jones Sustainability Indices: SRI indices generated by S&P Dow Jones of the United States and RobecoSAM of Switzerland.

*4 International non-profit organization which advocates the reduction of greenhouse gas emissions and protection of water resources and forests by companies and governments.

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49

Resolution of ESG Issues

Corporate Governance

Major Executive Committees

Committee Name (Committees indicated

Purpose

Meeting Frequency

with an asterisk [*] are chaired by the President.)

Product Safety Committee

Effective promotion of Companywide product safety activities based on basic

2 times a year and

product safety policies defined in product safety regulations

when necessary

Compliance Committee*

Discussion on and decision and execution of policies and important measures pertaining to

2 times a year and

group-wide compliance

when necessary

Risk Management

Primarily discussion and approval of group-wide risk management tasks and risk

1 time a year and when

Committee

countermeasures

necessary

Export Control Committee

Discussion on and decision and execution of policies and important measures regarding group-

1 time a year and when

wide export control (trade security management)

necessary

Earth Environment

Formulation of group-wide environmental measures and discussion of progress to

1 time a year

Committee*

facilitate promotion of environmental preservation throughout the Group

CSR Committee*

Discussion on and decision and execution of group-wide CSR policies and important

1 time a year

measures and activities

Discussion and assessment to facilitate accurate information disclosure as required by the

4 times a year and

Disclosure Committee

Financial Instruments and Exchange Act and submission of recommendations to internal

when necessary

information­

control representatives regarding judgments on material developments

KOMATSU Way

Discussion on and decision and execution of policies and important measures regarding human

resources, labor affairs, education and human resource development, the KOMATSU Way, total

2 times a year

Committee*

quality management, employee benefits, and occupational health and safety management for

the Company and the Group

Appointments of Advisors of the International Advisory Board

TOPICS

Komatsu established the IAB back in 1995 for the Board of Directors to incorporate, from external experts,

objective advice and suggestions concerning management and operations of Komatsu as a global company.

The IAB has met a total of 35 times in the conventional and new organizations combined. In April 2020,

Komatsu is going to start the 8th the session of the IAB for Management of the IAB with the following new

advisors. The term of service for each advisor is set at three years as a general rule.

Komatsu will continue to incorporate advice and suggestions from IAB members with expertise in global business, further improve management and strengthen its corporate governance in order to enhance its corporate value.

Name

Current Position and Brief Background

2018-Present

Chairman of the Board, Elanco Animal Health

2015-Present

Board of Directors, Edgewell Personal Care Company

R. David Hoover

2009-2018

Board of Directors, Eli Lilly and Company

2000-2015

Board of Directors, Energizer Holdings, Inc.

1996-2013

Board of Directors, Ball Corporation (Chairman, 2002-2013)

2015-Present

Vice President Commissioner of PT Adaro Power

Kusmayanto Kadiman

2010-Present

President Commissioner of BFI Finance

2004-2009

The State Minister for Research and Technology of the Republic of Indonesia

2001-2004

President of Bandung Institute of Technology (ITB)

2006-Present

Chairman of the Board of Directors, F-Secure Corporation

Risto Siilasmaa

(He is the founder of F-Secure Corporation.)

2012-May, 2020

Chairman of the Board of Directors, Nokia Corporation

2010-Present

Visiting Professor, Ritsumeikan University

Mitoji Yabunaka

2014-June, 2020

Outside Director, Komatsu Ltd.

2008-2010

Vice Minister, Ministry of Foreign Affairs

Komatsu's Business Model

Komatsu's Growth Strategies

Resolution of ESG Issues

Corporate Profile

through Growth Strategies

Stakeholder Engagement

In order to gain more trust from all stakeholders, the Company is strengthening corporate governance and top management is practicing direct engagement with stakeholders.

Corporate Value = Total Sum of Trust Given to Us by Society and All Stakeholders

Share information on the Komatsu Group's vision and

Provide as many opportunities for engagement as

the issues it faces (employees, suppliers, distributors)

Society

possible and practice proper information disclosure

to facilitate understanding of Komatsu

Distributors

Suppliers

Employees

Customers

Shareholders

Investors and

Mass media

Communities

Analysts

Distributor

Midori-kai

Meetings with

Visits from top

General Meeting of

Visits to investors

Interviews

Meetings with

meetings

General

the president

management

Shareholders

worldwide

mayors,

meetings with

Shareholder meetings

Analysts meetings

governors, etc.

management

Financial results

briefings

Direct Communication by Top Management

Major Investor Relations Activities in FY2019

To further improve the transparency of management for our shareholders and investors, we disclose information in a fair and timely manner and actively engage in investor relations activities by holding meetings with shareholders and investors.

For Institutional Investors

For Shareholders and

Homepage

Individual Investors

Financial results briefings (4 times)

Shareholder meetings (2 times)

Financial information

Small meetings (7 times)

Factory tours for shareholders (10 times)

• Financial results briefings

Business briefings (2 times)

Individual investor meetings (7 times)

• Sales and profits gains reports

Business site tours (1 time)

Gifts of appreciation for long-term

• Quarterly reports, etc.

Overseas investor relations activities

shareholders

Web interviews with the president (4 times)

(5 times; approx. 70 companies)

* Certain tours and briefings have been cancelled

KOMATSU REPORT, etc.

Individual meetings (over 240)

as a result of the global COVID-19 pandemic.

Engagement Topics

Komatsu holds meetings with institutional investors and securities analysts to deepen their understanding of the Company.

Date

Meeting Name

Attendants

Contents

September 18, 2019

Investors

39

(1)

Komatsu business development in Africa and (2) Komatsu's digital transformation strategy

Meeting

December 11, 2019

(1)

Solving ESG issues in the new mid-term management plan, (2) KOMATSU REPORT 2019 /

ESG Meeting

40

corporate governance, and (3) KOMATSU REPORT 2019 / Komatsu's social contribution

activities

WEB

For materials from meetings held in FY2019, please refer to Komatsu's corporate website:

https://home.komatsu/en/ir/library/results/1203311_1764.html

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ESGResolutionの課題解決 of ESG Issues

Corporate Governance

Risk Management

Komatsu's Business Model

Komatsu's Growth Strategies

Resolution of ESG Issues

Corporate Profile

through Growth Strategies

Establishing a business continuity plan (BCP) and providing training

Basic Principles and Structure for Risk Management

Komatsu has established business continuity plans (BCPs) for individ-

swift decisions by senior management should a disaster strike.

In addition to the basic policy for risk management to ensure business continuity and stable development, Komatsu has established Risk Management Rules to correctly recognize and manage risks.

Komatsu has established a Risk Management Committee to devise relevant policies for the entire Group, review the risk management system, and evaluate and improve upon response measures in place for each risk, as well as to take control of risks when they arise. The committee regularly reports on its deliberations and

We are developing risk reporting lines, preparing related manuals and making other efforts to further improve the risk management system of the entire Group, including overseas subsidiaries.

We have reflected climate change risks in this system for management.

ual bases and conducts initial response training drills to prepare primarily for earthquakes. At production bases, we implement measures to reinforce the seismic resistance of structures and production equipment while implementing countermeasures to safeguard against water and wind damage from concentrated heavy rains and other weather events in order to minimize the impacts of increasingly more severe natural disasters. Moreover, the disaster response reporting chains and standards for frontline sites have been clarified to facilitate

We are focused on not only strengthening the BCPs of Komatsu Group but also on strengthening the supply chain system through support of our business partners. Recent initiatives to this effect have included holding nationwide seminars on initial disaster responses and hazard map use led by experts on these subjects. Several partners were invited to take part in these seminars.

Going forward, we will continue to promote and enhance our Groupwide BCP initiatives.

activities to the board of directors.

Komatsu will establish an emergency headquarters when

serious risks occur and implement appropriate measures to minimize damage.

Recent Natural Disasters and Response Measures

1995

2007

2011

2018

2019

Great Hanshin Earthquake

Chuetsu Offshore Earthquake

Great East Japan Earthquake

Heavy Rain in West Japan

Typhoon Hagibis

• Initial response manual devel-

• Business continuity manual

• Group-wide deployment of

• Reconfirmation of natural disaster risks and coun-

termeasure development

opment for ensuring safety

development

response measures

• Improvement of BCP implementation procedures at

• Preparation of disaster

• Preparation of BCPs for

• Installation of equipment and

response manuals

specific bases

communications infrastructure

Komatsu Group and business partners

• Formulation of risk-related

• Establishment of headquar-

• Establishment of base-specific

• Improvement of BCP implementation procedures at

individual bases

regulations

ters BCP drill regulations

BCP drill regulations

• Establishment of BCPs for business partners regulations

Risks Surrounding the Company

Risk Management System

Board of Directors

Hazard Risk

Report as

Risks of natural disasters and other

Review

needed

regularly

President

Report

disasters caused by external

regularly

factors

ManagementRiskforManualBasic

RulesManagementRisk

Risk Management Committee​

Operational Risk

(When serious risks are exposed:

Emergency Headquarters)

Inherent risks associated with cor-

Risk Management Committee

porate activities such as the viola-

tion of laws and scandals

Executive Office

(Administration Department)

Strategy Risk

Primary division responsible for each risk​

• Identify and review risk recognitions

Risks related to the significant

• Perform activities to prevent risks and minimize

change of social situations and

their effects

business uncertainties

•Take action when a risk is exposed

Each division and each Group company​

Financial Risk

Expert committees

Risks related to finance including

• Product Safety Committee

• Compliance Committee

fluctuations in interest rates and

• Export Control Committee

• CSR Committee

stock prices

• Earth Environment Committee, etc.

Response to the COVID-19 Pandemic

With the safety and health of our customers, partner companies, people in local communities, and our employees and their families set as our priority, the Komatsu Group is striving to prevent the spread of the COVID-19 pandemic based on the government policies in each country.

To fulfill our responsibilities to customers involved in businesses that support social infrastructure (essential businesses), we have continued to supply products, parts, and services to our customers while thoroughly taking measures to prevent infection.

In the middle of March, we determined that we had entered the Infection and Pandemic phase, a management item in the Basic Manual for Risk Management, and set up an emergency

Management of

Government

the physical

Avoid the

Hygiene

policy

condition of

three C's

measures

employees

headquarters with our president as its Chairperson. Since the state of emergency was declared in Japan in April, we have carried out remote meetings almost every day that include the president, internal directors, and the heads of functions to share the latest information about the situation at the global level and determine the correct actions to take. In addition, the president has also regularly reported this information and these actions to the board of directors.

We have posted news releases on our website to keep all stakeholders updated on the status of our mask donation and other support activities, our global production activities, and other matters as needed. We will continue to exercise accountability toward stakeholders through timely and appropriate information disclosure going forward.

Measures appropriate to the phase and local situation

Safety and security of employees

Sustainable measures

Compliance

The Company shall establish the "Compliance Committee" as

establishment of the Compliance Department. Through all of these,

Response to Climate Change

Komatsu to oversee compliance, and the Committee regularly reports its reviews and activities to the Board of Directors. The Company shall also establish a system to ensure all Directors and employees thorough compliance to business rules as well as laws and regulations through a variety of measures, including the provision of"Komatsu Code of Worldwide Business Conduct," appointment of the Executive Officer in charge of compliance, and

we work to supervise, educate and train Directors, Audit & Supervisory Board Members and employees.

In addition, the Company shall establish the internal reporting system where those who are discretely reporting questionable actions in light of laws and regulations and business rules will not be given any disadvantageous treatment.

Approximately 90% of the CO2 emissions associated with Komatsu Group's operations are attributable to product operation. Accordingly, we have the potential help mitigate climate change by providing low- carbon products and solutions. However, if efforts to deliver such offerings do not conform to the regulatory requirements of the relevant countries or with the demands of markets, we will risk suffering future impacts to our earnings. For this reason, Komatsu has set the goal of halving the CO2 emissions from product

operation by 2030, and R&D activities are being advanced toward the accomplishment of this goal (response to transition risks). Meanwhile, the rise in natural disasters associated with climate change is creating risks of damages to the Company and its supply chain. We are therefore taking steps to identify the water-related risks threatening the Company and its supply chain while instituting BCP drills and other measures to mitigate these risks (response to physical risks).

52

53

Disclaimer

Komatsu Ltd. published this content on 30 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 August 2020 08:34:12 UTC


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