Reinforcement of Corporate Governance

“K” LINE is developing and strengthening its corporate governance and risk management structures to fulfill its social responsibility and its commitment to its shareholders and stakeholders, and to achieve sustainable growth. While thoroughly enforcing its corporate ethics across the entire Group, “K” LINE will continue developing an organic and effective governance framework, strengthening its earning and financial structures, and enhancing its corporate value.

Under the “Japan’s Corporate Governance Code” formulated by Tokyo Stock Exchange, Inc., we are enhancing our corporate governance structure and formulating Kawasaki Kisen Kaisha, Ltd. CORPORATE GOVERNANCE GUIDELINES to clarify our approach and management policy.

In line of our Corporate Governance Guidelines, the Criteria for Independence of outside directors is prescribed as below:

For details of its corporate governance, please refer to the Corporate Governance Report submitted to the Tokyo Stock Exchange where the Company’s stock is listed.

( September 11, 2024 )

The Board of Directors and the Audit & Supervisory Board construct, apply, and monitor the corporate governance system, and several committees and other offices contribute to enhancing the system.

“K” LINE has promoted the active development of its governance structure by connecting the sustainable increase of corporate value with corporate governance reform, such as the appointment of several people as outside directors in 2009. We will continue to enhance internal discussions regarding the governance structure and steadily deepen governance reforms.

The Board of Directors is an organ of the Company that meets at least once a month and determines fundamental management policies, matters required by laws and regulations, and other important management-related matters, as well as supervises the execution of duties by directors. Five of the 8 directors are outside directors (of whom, Four are independent outside directors). Audit & Supervisory Board members also attend Board of Directors’ meetings.

• Long-Term Management Vision and Medium-Term Management Plan

• Capital Policy　(Business Investment Plan/Shareholders Return Policy, etc.)

• Business Strategy (Businesses that play a leading role in growth/Expansion of new business domains, etc)

• Functional strategy（Human resources/Organization, Digital Transformation, etc.）　

• Corporate governance (Board Evaluation/Officer’s Remuneration, Composition of the Board, etc.)

• Group governance

To achieve the medium-term management plan, the Company’s Board of Directors shall consist of a variety of individuals, including those with experience in managing corporations and other large organizations and those with expertise in the operational, technical, financial, and other aspects of the shipping industry. This is to ensure constructive discussions and supervision based on diverse backgrounds and knowledge. The Company shall give extra consideration to such diversity when selecting candidates for directors and Audit & Supervisory Board members. 
Please see the skill matrix below for a list of the expertise and knowledge of each director.

In addition to the requirements stipulated in the Companies Act, “K” LINE has established specific criteria relating to independence for the appointment of outside officers and outside Audit & Supervisory Board members for the purpose of electing them. The criteria are as follows.

As “K” LINE believes an effective corporate governance function is essential for sustainable growth and the enhancement of corporate value over the medium to long term, the Board of Directors analyzes and evaluates the Board’s effectiveness each year, with the results disclosed in a timely and appropriate manner.
Please refer to the following for the latest results.

The Nomination Advisory Committee is composed of all independent outside directors, the chairperson of the Board, and the president & CEO, while the chairperson of the Board is appointed from among the outside directors through mutual election among themselves. The committee conducts deliberations on the reasonableness of proposals for the appointment or dismissal of the Company’s officers upon consultation with the Board of Directors.

Under Article 12 of the Group's CORPORATE GOVERNANCE GUIDELINES formulated in 2015, “the Board of Directors shall cause the Nomination Advisory Committee to deliberate on the draft version formulated each fiscal year by the incumbent president & CEO for the plan for his/her successor, receive the results of said deliberation, and confirm the reasonableness of the draft version.” At the Nomination Advisory Committee, which focuses on independent outside directors and has an independent outside director as chairperson, we strive to sustainably increase corporate value by discussing the succession plan for the next president & CEO.

The Remuneration Advisory Committee is composed of all independent outside directors, the chairperson of the Board, and the president & CEO, while the chairperson of the Board is appointed from among the outside directors through mutual election among themselves. The committee conducts deliberations on the institutional design of the officers’ remuneration system and the level of officers’ remuneration upon consultation with the Board of Directors.

The Nomination Advisory Committee and the Remuneration Advisory Committee are membered by a majority of outside directors designated as independent directors.

Remuneration for executive directors shall be appropriate, fair, and balanced so as to reflect the Company’s medium- to long-term business performance and the latent risks borne by said executive directors and to further enhance their willingness and motivation to bring about the Company’s sustainable growth and maximize its corporate value. In addition, the remuneration for outside directors shall reflect the amount of time devoted to the Company’s business, and the responsibilities borne by them, and shall not include business performance-linked factors.
The institutional design and level of remuneration shall be deliberated on, resolved, and recommended to the Board of Directors by the Remuneration Advisory Committee pursuant to the aforementioned policies. The Board of Directors shall respect the recommendations of the Remuneration Advisory Committee, and the representative director, president & CEO shall ultimately determine the amount to be paid to each director.

The Company’s Board of Directors determines remuneration levels for executives in consideration of the recommendations of the Remuneration Advisory Committee, which deliberates the structure and level of compensation and reports its counsel to the Board. Director remuneration comprises (i) a monthly remuneration (monetary), (ii) short-term performance-based remuneration (monetary),and (iii) medium- to long-term performance-based remuneration (stock). The medium- to long-term performance-based remuneration (stock) is mainly linked to the Company’s total shareholder return (TSR) to improve effectiveness and strengthen incentives for directors to target medium- and long-term growth in corporate value, while aiming to align our values more closely to those of shareholders. An overview of the remuneration system is as follows. 

For information on remuneration amounts for each fiscal year, please refer to Governance Data.

The Audit & Supervisory Board formulates and implements audit policies and plans, and undertakes to conduct efficient, expeditious auditing. As an independent organ, the Audit & Supervisory Board audits the execution of duties by the directors through attendance at meetings of the Board of Directors and other important meetings and the inspection of important decision-making documents. “K” LINE assigns dedicated staff as assistants to the Audit & Supervisory Board members. 

The Management Conference functions as a system to help the president & CEO and/or their representatives make decisions, through lively discussion. The conferences are held every week, attended by the chairperson of the Board of Directors, senior managing executive officers and above, unit supervising executive officers, the executive officers in charge of corporate planning, finance, and accounting, and members of the Audit & Supervisory Board.

Executive Officers’ Meetings are held once a month in principle, attended by all executive officers, including those concurrently serving as directors, and Audit & Supervisory Board members, where progress of business executions (including monthly performance) and decision matters are reported and discussed.

Meetings of the Investment Committee, consisting of executive officers in charge of corporate planning and finance, and other executive officers and general managers appointed by the president & CEO, are held periodically to deliberate on basic plans and important initiatives for maximizing investment effects, while taking the Company’s investment capacity into consideration. The committee also monitors past investment effects and considers the termination or cessation of such investments.

From April 2016, we introduced the Unit Supervisory System and established unit supervising executive officers to further improve the efficiency of and reinforce the system for business execution.
  Under the Unit Supervisory System, which falls under the direction of the president & CEO, as a head of business execution, seven unit supervising executive officers who control and supervise multiple business departments or administration departments have been placed. Under the control of each unit supervising executive officer, responsible executive officers and executive officers in charge of each department have been placed. Each unit is as follows.

• Dry Bulk Carriers Unit

• Energy Transportation Business Unit

• Product Logistics Business Unit (Car Carriers)

• Product Logistics Business Unit (Logistics, Port, Short Sea and Coastal Business and Affiliated Business)

• Containerships Business Unit

•CFO Unit (Corporate Planning, Research, Finance, Accounting, Taxation, Corporate Sustainability, Environment Management, IR and Communication)

• General Affairs, Human Resources, Legal, Corporate Legal Risk & Compliance Unit

• Marine Sector Unit

• Advanced Technology, Ship Technical, GHG Reduction Strategy Unit

•Digitalization Strategy Unit

The Company has established the following procedures with respect to related party transactions, and finds that management is capable of supervising such transactions based on such procedures.
(1) The Regulations on Decision-Making Standards stipulate that the Company is to refer matters to be addressed by and seek prior approval from the Board of Directors with respect to certain matters irrespective of monetary amount, such as: transactions with major shareholders whose holdings account for more than 10% of the Company’s voting rights or transactions between the Company and its directors; transactions conducted by a director with the Company for a third party; transactions involving a conflict of interest; and debt guarantees of directors made by the Company. The Regulations on Decision-Making Standards also stipulate that key developments must be reported to the Board of Directors subsequent to having carried out a transaction. As such, the Board of Directors supervises appropriateness of transactions.
(2) The Company shall treat all of its shareholders impartially, and accordingly must not make special considerations for specific shareholders.
(3) The Company shall determine the presence or absence of related-party transactions upon submission of confirmation documents for all of the Company’s officers each fiscal term, and shall furthermore verify transaction details if related-party transactions have taken place.

In accordance with the “K” LINE Corporate Governance Guidelines, the Board of Directors carefully examines cross-shareholdings of listed shares at least once per year to verify the purpose, economic rationale, and appropriateness of individual holdings. In examining economic rationale, the Board will consider liquidating shares if returns from the holdings have fallen below the cost of shareholders’ equity in a given fiscal year. The Company has been reducing cross-shareholdings, and as of March 31, 2024, the number of cross-shareholdings of listed shares was three.

 When exercising the voting rights as to the Cross-Shareholdings, the Company shall fully examine whether or not the relevant propositions would contribute to the enhancement of the Company’s corporate value, hold dialogues with issuing entities as needed, and shall determine whether it would vote for or against the said propositions.

The Board of Directors is responsible for establishing the internal control system, evaluating its effectiveness, and ensuring that it functions properly. In addition, through monitoring and verifying the status of the internal control system, the Internal Audit Group plays a role in supporting the Board of Directors in carrying out its responsibilities for the development, maintenance, and enhancement of the internal control system. Audit & Supervisory Board members oversee the processes by which directors establish the internal control system and confirm that it is functioning effectively. Further, while respecting the autonomy of each of the Group companies, “K” LINE supports and supervises the establishment and effective management of internal control systems within each of these Group companies to ensure that activities conducted across all Group companies are appropriate.

To ensure proper business operations of “K” LINE Group companies, we have established the Charter of Conduct for “K” LINE Group Companies as a keystone for both corporate governance and compliance of the entire Group. Based on this Charter, each Group company has established its own Implementation Guideline for the Charter of Conduct. 

Ernst & Young ShinNihon LLC

Note: The audit contract between the Company and the accounting auditor does not classify the remuneration amounts separately for audits pursuant to the Companies Act and for audits pursuant to the Financial Instruments and Exchange Act, partially given the impracticality of deriving such classifications. Therefore, the amount listed in 1) is not classified in this way.  Of the Company’s principal subsidiaries, etc., accounting auditors other than the accounting auditor of the Company audit documents relating to accounts of “K” LINE BULK SHIPPING (UK) LIMITED, “K” LINE LNG SHIPPING (UK) LIMITED, “K” LINE PTE LTD., and OCEAN NETWORK EXPRESS PTE. LTD

The Audit & Supervisory Board obtained necessary materials and received reports from directors, the related internal departments, and the accounting auditor, and after conducting the necessary verification and deliberations on whether the content  of audit plans conducted by the accounting auditor, the execution status of the accounting auditor’s duty, and the basis for  calculation of estimates for their remuneration, etc., are appropriate, the Board gave the consent provided for in Article 399, Paragraph 1, of the Companies Act.

No items to report

If deemed necessary by the Audit & Supervisory Board in cases such as where an accounting auditor has difficulty in the execution of their duties, the Audit & Supervisory Board shall determine the content of a proposition regarding the dismissal or non-reappointment of the accounting auditor to be submitted to the General Meeting of Shareholders. If circumstances involving an accounting auditor are deemed to fall under any of the items of Article 340, Paragraph 1, of the Companies Act, the accounting auditor shall be dismissed subject to unanimous approval by the Audit & Supervisory Board. In any such case, an Audit & Supervisory Board member designated by the Audit & Supervisory Board shall report the dismissal of the accounting auditor and the grounds for dismissal at the first General Meeting of Shareholders to be convened after the dismissal.

The internal audit of “K” LINE is carried out by the Internal Audit Group, which has eight full-time employees. They audit the execution of duties for “K” LINE and the “K” LINE Group, in terms of internal control, such as enhancing the effectiveness and efficiency of operations, improving the trustworthiness of financial information, and ensuring compliance. Audit & Supervisory Board members, the Audit & Supervisory Board, and the Internal Audit Group regularly and irregularly exchange information regarding details of audits and auditing firms that act as accounting auditors. They maintain close contact and exchange opinions regarding the results of the audit, the status of internal control as understood by the auditing firm, and risk evaluations.The Internal Audit Group periodically provides audit reports to the president & CEO and Audit & Supervisory Board members.