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Corporate Governance

Basic Approach

In order to deserve the trust of our shareholders and other stakeholders, the Company’s fundamental approach to corporate governance is not just to ensure compliance with laws and regulations and our Articles of Incorporation, but also to fulfill our social responsibilities based on corporate ethics and to contribute to society while continuously improving enterprise value through efficient and transparent management. We see this as a top management priority.
The azbil Group has established its long-term targets (to achieve by FY2030) and a medium-term plan (FY2025-FY2027), whose aim is to contribute “in-series” to a sustainable society and achieve growth through providing automation-related products and services. Guided by the Group philosophy of “human-centered automation”, we will secure our own medium- and long-term development while implementing sustainable enhancement of enterprise value. At the same time, we recognize that it is corporate governance which provides the foundation for such sustainable enhancement of enterprise value, and so improving corporate governance is a key issue for management. As a company with a three-committee board structure, we are therefore working to strengthen the supervisory and auditing functions of the Board of Directors, enhance the transparency and soundness of management, and clarify responsibilities for business execution.

Azbil Corporation's report on corporate governance (full text) is available here.

Corporate Governance Report revised on 25 June, 2025(PDF/865KB)

Basic Policy for Corporate Governance

(1) Ensuring the rights and equality of shareholders
In order to ensure that shareholders’ rights are substantially secured, the Company takes appropriate measures in accordance with laws and regulations, and, giving due consideration to all shareholders including foreign shareholders and minority shareholders, is promoting the development of an environment in which shareholders can exercise their rights equally and appropriately.

(2) Cooperation with stakeholders who are not shareholders
In order to achieve sustainable growth and increase enterprise value over the medium to long term, we believe that the Company must be strongly aware of its corporate social responsibility and conduct management that is appropriate for all our stakeholders. For this purpose, we have adopted “human-centered automation” as our Group philosophy to realize safety, comfort and fulfillment in people’s lives and work and contribute to the global environment. To this end, we have instituted Guiding Principles for azbil Group Business and established the azbil Group Code of Conduct to provide specific guidelines for all officers and employees of the Company and the azbil Group. We aim to connect our Group philosophy, Guiding Principles, Code of Conduct, and management strategy, leading “in series” to a sustainable society, and to realize a balance between resolving social issues and achieving sustainable growth. In addition, to contribute “in series” to the achievement of a sustainable society, we recognize it is important to build relationships of trust not only with shareholders but with all stakeholders—including employees, business partners, customers, creditors, and local communities—as well as accelerate transformation through appropriate collaboration with multiple stakeholders, and grow sustainably. Based on this awareness, we have formulated and published our Multi-stakeholder Policy. At the same time, we endorsed and published a Partnership-building Declaration, which seeks to increase added value throughout the supply chain and build relationships of co-prosperity with business partners.
You can find the Multi-stakeholder Policy and Partnership-building Declaration on our corporate website.
Multi-stakeholder Policy (Japanese only):https://www.azbil.com/jp/csr/csr-management/multi-stakeholder_policy.html
Partnership-building Declaration (Japanese only):https://www.azbil.com/jp/csr/csr-management/partnership.html
Furthermore, regarding our human rights initiatives, we have established the azbil Group Basic Policy on Human Rights and have created a framework for human rights due diligence, which is currently being implemented. We have thoroughly examined the entire value chain of the azbil Group to identify potential human rights risks (with adverse impact), assessed their severity and likelihood of occurrence, and drawn up a human rights risk map. Based on this, we have identified as priority human rights issues those serious human rights risks that have a high likelihood of occurrence, and we are implementing measures to avert these risks. Additionally, we continually review human rights issues and our policies for addressing them, taking into consideration changes in the business environment and the results of stakeholder engagement. This initiative is discussed at the Management Meeting and reported to the Board of Directors.
With regard to the internal reporting system, we believe it is important to (a) encourage employees to use this system by dispelling any concerns that in so doing they might be put at a disadvantage, and (b) ensure that the information thus conveyed is used appropriately. We have therefore established a user-friendly reporting & consultation system—the CSR Hotline—which ensures that the information received is reported to the president & CEO, Audit Committee members, and outside directors with due consideration given to personal information.

(3) Ensuring appropriate information disclosure and transparency
The Company strives to disseminate information so as to ensure transparency and fairness in decision-making, thus realizing effective corporate governance. Specifically, in order to ensure that all stakeholders have a proper understanding of financial information—such as the Company’s financial position and business results—as well as non-financial information—such as management strategy, management planning, management issues, and information relating to risk and governance—we actively disclose information on a voluntary basis in addition to the information stipulated by law. The Company also discloses policies and procedures regarding the appointment of candidates for directors, as well as the selection and dismissal of the CEO and other senior executives, and policies for deciding on the remuneration for directors and corporate executives. We will continue to strive to increase the scope of information covered by these disclosures and ensure transparency.
In addition, we are taking appropriate measures to ensure proper audits by the independent accounting auditor: the Company provides sufficient time for audits to be conducted, arranges for the independent accounting auditor to interview the president & CEO and the officer in charge of finance on a regular basis, and continuously conducts quarterly reporting between the independent accounting auditor, the Audit Committee, and the Internal Audit Department.

(4) Responsibilities of the Board of Directors, etc.
The basic mission of the Board of Directors is to put in place an appropriate corporate governance system and to implement this so as to achieve sustainable growth for the Company and enhance its enterprise value.
The Board Rules stipulate that basic management strategy and management plans are important items for deliberation, and following discussions that are unrestricted, robust and constructive, the Board will make appropriate decisions. Moreover, to ensure transparency and fairness in management, the Company will maintain systems for timely disclosure, internal control and risk management. At the same time, the Audit Committee, in cooperation with the Internal Audit Department, will successively provide appropriate audits and opinions on management.
The Company recognizes that independent outside directors play a key role in ensuring that the Board properly fulfills its functions and responsibilities, and thus it has appointed seven independent outside directors with a broad range of experience in corporate management and supervision, as well as considerable expertise and knowledge. Drawing on their diverse backgrounds, these independent outside directors adopt a wide range of perspectives to fulfill their responsibilities, offering advice on improving enterprise value, supervising management, etc. As of June 25, 2025, the total number of directors is 10, with outside directors representing a majority. Board composition demonstrates ample diversity, including that of nationality and gender.
For the Board of Directors to effectively fulfill its roles, the Company believes that, in appointing directors, it is important to promote diversity, taking into consideration the balance of knowledge and experience, and also to ensure transparency and objectivity in the selection process. From the viewpoint of sustainable increase in enterprise value, including the realization of the medium-term plan, the Company has set out what skill sets are expected of its directors and has confirmed the requisite independence, diversity, and anticipated skills of its current Board.
Regarding succession planning for the Company’s senior management, the Nomination Committee discusses the ongoing training and selection of successors, records the results of those discussions as well as the process of deliberation, and ensures that succession planning is conducted appropriately and objectively. In addition, the chairperson of the Nomination Committee, who is an independent outside director, regularly reports on the activities of the Nomination Committee to the Board of Directors. A system is in place to ensure that sufficient time and resources are allocated to the training of candidates for succession.

(5) Responsibilities of the Statutory Committees
As a company with a three-committee board structure, the Company has established three statutory committees—namely the Nomination Committee, the Audit Committee, and the Remuneration Committee—and each committee has the responsibilities listed below. In addition, each committee member is selected from among the directors by a resolution of the Board of Directors; similarly, the chairperson is selected from among the independent outside directors by a resolution of the Board. Moreover, the committee member determined by each committee reports to the Board of Directors in a timely and appropriate manner on the content of the committee deliberations and resolutions.

（Nomination Committee）
The Nomination Committee is responsible for deciding proposals for the election/dismissal of directors to be submitted to the General Meeting of Shareholders; for selecting/dismissing candidates for members of statutory committees (Nomination, Audit, and Remuneration); for selecting/dismissing candidates for corporate executives; and for deliberating matters related to succession planning.

（Audit Committee）
The Audit Committee is responsible for auditing the execution of duties by corporate executives and directors; for preparing audit reports; for drawing up detailed proposals for the election, dismissal, or non-reappointment of the accounting auditor; and for promoting systematic auditing.

（Remuneration Committee）
The Remuneration Committee is responsible for determining policies related to the remuneration system for corporate executives and directors; for determining individual remuneration; and for deliberating on the establishment, revision, or abolition of remuneration systems as well as other matters related to executive remuneration.

(6) Dialogue with shareholders
In order to meet requirements for corporate accountability while contributing to sustainable growth and the enhancement of enterprise value over the medium to long term, the Company is working to develop and implement a system for promoting constructive dialogue with shareholders and investors.

(7) Overview of corporate governance system and reasons for adopting the system
To ensure its own medium- to long-term development, respond to the trust of all its stakeholders including its shareholders, and consistently increase enterprise value, the azbil Group sets fortifying underlying corporate governance as a management priority. Measures have included strengthening the supervisory and auditing functions of the Board of Directors, improving management transparency and soundness, and clarifying the structure of responsibility for the execution of duties.
As a company with a three-committee board structure, three statutory committees—the Nomination Committee, Audit Committee, and Remuneration Committee—have been established, each having a majority of independent outside directors and being chaired by an independent outside director. In addition, by substantially transferring business execution authority from the Board of Directors to corporate executives with clear legal responsibilities, we are clearly separating supervisory and execution functions to ensure a business execution system based on flexible and efficient decision-making, while at the same time enhancing the objective supervision of management.
Furthermore, as a company with a three-committee board structure, to ensure the effectiveness of monitoring by the Board of Directors, we have established a forum for providing information to directors and exchanging opinions with corporate executives in the form of a Liaison Meeting for Directors and Corporate Executives, and in addition, opinion-exchange meetings are held regularly among outside directors. At the same time, we are continuing our system for executive officers charged with business execution, aiming to enhance the quality and speed of decision-making.
The Board of Directors is convened monthly in principle, to discuss and consider legal issues and other important managerial matters as the highest decision-making body for management, and to provide a major direction and exercise appropriate supervision over execution in order to reflect the opinions of stakeholders. In business execution, the Management Meeting, which corporate executives and executive officers with titles attend, has been established to serve as an executive-level advisory body to assist the president & Group CEO in making decisions; in attendance is the full-time Audit Committee member to ensure the effectiveness of monitoring. The Management Meeting is held twice a month in principle as part of ongoing initiatives to strengthen business operations through prompt decision-making and strict execution.
As of June 25, 2025, the Company has appointed a total of 10 directors, including three (3) who have accumulated experience in the Company’s business, management and audits (Kiyohiro Yamamoto, Takayuki Yokota, and Hisaya Katsuta), as well as seven (7) who are independent outside directors having independence, broad experience, a wealth of expertise and knowledge, and rich diversity, including that of nationality and gender (Mitsuhiro Nagahama, Anne Ka Tse Hung, Shigeaki Yoshikawa, Tomoyasu Miura, Sachiko Ichikawa, Hiroshi Yoshida and Satoko Nakatani). Independent outside directors now form the majority of the Board of Directors. In addition to working diligently to contribute to enhancement of the Company’s enterprise value through appropriate oversight and advice during the decision-making process at Board of Directors meetings, these independent outside directors regularly exchange opinions with corporate executives through the Liaison Meeting for Directors and Corporate Executives and other opportunities.

(8) Status of Activities of the Board of Directors and each committee
＜Status of Activities of the Board of Directors＞
In FY2024, the Board of Directors met a total of 13 times. The 12 directors attended all of the meetings. Major items discussed at the Board of Directors meetings are as follows.

＜Status of Activities of the Nomination Committee, the Audit Committee, and the Remuneration Committee＞
(Nomination Committee)
As of March 31, 2025, the Nomination Committee is comprised of four (4) members, with Shigeaki Yoshikawa (Independent Outside Director) serving as the Committee chairperson, and Anne Ka Tse Hung (Independent Outside Director), Sachiko Ichikawa (Independent Outside Director), and Kiyohiro Yamamoto (Director, President & Group CEO) serving as committee members; independent outside directors comprise a majority of the Committee^*1. In FY2024, the Nomination Committee met thirteen (13) times, and the four (4) members of the Nomination Committee attended all of the meetings^*2. Items implemented and specific items for consideration by the Nomination Committee were as follows.
*1: There was no change in the composition of the Nomination Committee after the Ordinary General Meeting of Shareholders and the Board of Directors meeting on June 25, 2025.
*2: Because Sachiko Ichikawa was elected at the 102nd Ordinary General Meeting of Shareholders held on June 25, 2024, her attendance only applies to committee meetings held after her appointment.

(Audit Committee)
As of March 31, 2025, the Audit Committee is comprised of three (3) members, with Fumitoshi Sato (Independent Outside Director) serving as the Committee chairperson, Hiroshi Yoshida (Independent Outside Director) and Hisaya Katsuta (Non-executive Inside Director) serving as committee members; independent outside directors comprise a majority of the Committee^*1. Two (2) independent outside directors and one (1) non-executive inside director who is well acquainted with the Company’s businesses formulate audit plans together with the Internal Audit Department and conduct multifaceted auditing activities; the inside Audit Committee member serves on a full-time basis to enhance the effectiveness of audits by the Audit Committee. The Audit Committee chairperson Fumitoshi Sato and the Audit Committee member Hiroshi Yoshida have experience as officers in charge of accounting and finance, etc. responsible for the creation of financial statements at other operating companies over many years and thus have a wealth of knowledge concerning financial affairs and accounting. Furthermore, the Company established an Audit Committee Office, an organization dedicated to assisting the Audit Committee in its duties, with three (3) staff members (as of June 25, 2025) assigned to assist the Audit Committee in the execution of its duties.
The Audit Committee convenes in principle once a month and holds ad-hoc meetings, as necessary. In FY2024, it convened a total of 13 times and the three (3) Audit Committee members participated in all of the meetings^*2. The key audit items, points of note concerning audits, and specific audit details of the Audit Committee in FY2024 were as follows.
*1: As of the Ordinary General Meeting of Shareholders and the Board of Directors meeting on June 25, 2025, Hiroshi Yoshida (Independent Outside Director) was appointed as the Committee chairperson, and Satoko Nakatani (Independent Outside Director) and Hisaya Katsuta (Non-executive Inside Director) were appointed as committee members.
*2: Because Hiroshi Yoshida was elected at the 102nd Ordinary General Meeting of Shareholders held on June 25, 2024, his attendance only applies to committee meetings held after his appointment.

The following are details of (1) coordination with the Internal Audit Department, (2) coordination with the independent accounting auditor, and (3) Audit Committee’s evaluation of the audit firm.
(1) Coordination with the Internal Audit Department
In formulating the internal audit plan for the fiscal year, the Audit Committee closely coordinated with the Internal Audit Department. The Internal Audit Department head also attended Audit Committee meetings to share information and exchange opinions on the progress of both the Audit Committee audit and the internal audit. And continuing with an initiative started in the previous fiscal year, the Audit Committee conducted joint audits of overseas subsidiaries with the Internal Audit Department.
(2) Coordination with the independent accounting auditor
All members of the Audit Committee listened to an audit report by the independent accounting auditor, with whom they exchanged opinions; this enabled them to confirm the status of the accounting audit and the internal audit. Based on the evaluation criteria for accounting auditors established by the Audit Committee, we have evaluated the appropriateness of audits by the independent accounting auditor, the independence of the independent accounting auditor, and the quality of the audits. In addition to attending audits conducted by the independent accounting auditor, we also took into account the results of evaluations of the independent accounting auditor by the Accounting Department, Internal Control Department, and Internal Audit Department.
Moreover, regarding non-assurance services to be performed for the Company and its subsidiaries by the independent accounting auditor and network firms, the Audit Committee gave preapproval for such services after evaluating the degree of independence, referring to information provided by the independent accounting auditor, and checking with the relevant internal departments as appropriate.
In addition, throughout the fiscal year the Audit Committee conducted explanatory hearings on the progress of examination of items and content of key audit matters (KAMs), as well as the overall status of the audit.
(3) Audit Committee’s evaluation of the audit firm
The Audit Committee has established criteria for evaluation of the independent accounting auditor under three headings: (1) professional competence; (2) audit quality control system and independence; and (3) audit plan, communication, and audit activities. The Committee evaluated the accounting audits by listening to regular audit/review reports from the independent accounting auditor, listening to explanations of the independent accounting auditor’s quality control system, witnessing the independent accounting auditor’s audits, and gathering information on the independent accounting auditor from the Accounting Department and Internal Audit Department.

(Remuneration Committee)
As of March 31, 2025, the Remuneration Committee is comprised of four (4) members, with Mitsuhiro Nagahama (Independent Outside Director) serving as the Committee chairperson, Waka Fujiso (Independent Outside Director), Tomoyasu Miura (Independent Outside Director), and Takayuki Yokota (Director, Representative Corporate Executive Deputy President) serving as committee members; independent outside directors comprise a majority of the Committee*. In FY2024, the Remuneration Committee met fourteen (14) times and the four (4) Remuneration Committee members attended all of the meetings. Items implemented and specific items for consideration by the Remuneration Committee were as follows.
* As of the Ordinary General Meeting of Shareholders and the Board of Directors meeting on June 25, 2025, Mitsuhiro Nagahama (Independent Outside Director) was appointed as the committee chairperson, and Yoshiaki Yoshikawa (Independent Outside Director) and Takayuki Yokota (Director, Representative Corporate Executive Deputy President) were appointed as committee members.

(9) Appointment of director candidates, and election/dismissal of the CEO and other senior executives
a. Directors
In terms of basic qualifications, a candidate for director is to be a person with excellent character and insight who contributes to the growth of the Company and the Group as a whole and helps to enhance enterprise value. When nominating and electing candidates for director, the Nomination Committee also assesses the skills matrix and composition of the current committee, comprehensively taking into consideration diversity of the Board as a whole (nationality, gender, etc.).
b. The CEO and other senior executives
The appointment of the CEO and other senior executives (president & CEO, deputy president, and corporate executives) is decided by the Board of Directors after deliberation by the Nomination Committee, based on appointment criteria and the desired composition of the Board of Directors.
(Appointment criteria)
As the basic requirements, senior executives must have a full of understanding of the Group philosophy, deep knowledge of corporate management, wide-ranging experience both inside and outside Japan and a high level of insight into corporate governance, CSR, and compliance, as well as the ability to lead the entire Group and guide it to sustainable growth.
(Dismissal criteria)
Concerning policies and procedures for dismissing senior executives, the candidate for dismissal undergoes a fair and rigorous process of examination and deliberation by the Nomination Committee based on the following criteria. If the committee judges that the dismissal is appropriate, it is sent to the Board of Directors for approval.
Reasons for proposing dismissal include serious business problems arising from a violation of the law or the Articles of Incorporation, circumstances that make it difficult for the person to perform and continue in the job, and a reason for retirement that is stipulated by law. In deliberating the dismissal of the president and CEO, the Nomination Committee will also take into consideration declining financial results and other such quantitative data.

Corporate Governance Framework (As of June 25, 2025)

Overall Balance and Diversity of the Board of Directors

In a rapidly changing business environment, we believe that the Company needs a Board of Directors that offers diversity and provides a good overall balance of knowledge and experience that will contribute to the enhancement of enterprise value over the medium to long term. Based on this fundamental principle, as of June 25, 2025, the Board of Directors consists of three (3) directors with executive experience in the Company’s business, audit and management, and seven (7) independent outside directors with wide-ranging experience, extensive expertise and professional knowledge. Of the ten (10) directors, three (3) are women (one of whom is a foreign national). Also, we have established the skill sets expected of the directors from the viewpoint of sustainable increase in enterprise value, including the realization of the Company’s medium-term plan, and we have confirmed the independence, diversity, and anticipated skills of the entire current Board of Directors.

Skills expected of directors (skills matrix)

Improving the Effectiveness of the Board of Directors

Through conducting objective and constructive deliberations, the Company’s Board of Directors decides on such matters as management strategy, supervises their execution, and strives to enhance enterprise value over the medium to long term. A survey is carried out every year to evaluate the effectiveness of the Board of Directors in properly fulfilling its roles and responsibilities, to identify issues and points of improvement, and to indicate ways in which the Board’s effectiveness might be enhanced. In FY2024, to further ensure the objectivity of the evaluation of the Board’s effectiveness, we commissioned an appropriate, independent agency to develop survey items for the evaluation and to assess the results.
In FY2024, it was recognized that, to further enhance the Board’s effectiveness, it was important to deepen discussions on key management issues, to improve monitoring of delegated matters, to advance discussions aimed at maintaining the appropriate Board composition (or improving it), and to promote dialogue with shareholders and investors. Consequently, for this FY2024 survey, we reviewed all directors’ opinions and assessments of the following survey items: (1) the role and composition of the Board of Directors; (2) the operation of the Board of Directors; (3) the deliberations and monitoring of the Board of Directors; (4) the performance of the corporate executives and outside directors; (5) support systems, training, and communication; (6) dialogue with shareholders and investors; and (7) operations of the Nomination Committee, Audit Committee, and Remuneration Committee. Based on the above, the Board of Directors held constructive discussions on current Board effectiveness as well as issue-sharing and future steps.
The evaluation results for FY2024 indicate that the Board of Directors is of an appropriate size and composition, is properly fulfilling its role as the supervisory body of a company with a three-committee board structure, and is holding active and open discussions; that the outside directors’ understanding of the Company’s business has been enhanced through a training program; that—thanks to the Liaison Meeting for Directors and Corporate Executives, established for directors as an opportunity to gather information and exchange opinions with corporate executives, and also intensive discussions and off-site meetings—there is sufficient communication; that adopting an appropriate process for formulating the new medium-term plan has enabled the Board of Directors to function as a forum for discussing important management issues; that Board refreshment is progressing and that the appropriate composition of the Board of Directors is being maintained; that private meetings with shareholders and investors are being held and that this dialogue has progressed. It was also confirmed that the deliberation topics of the three statutory committees for nomination, audit, and remuneration are appropriate, and that the overall effectiveness of the Board of Directors is adequately ensured. Nevertheless, with discussions on the composition of the Board of Directors progressing, Board members all share an awareness of the need for reaffirming the appropriate roles of directors of a company with a three-committee board structure, as well as for deepening discussions regarding further reappraisal of the Group’s overall business portfolio and for making further improvements to the operation of the Board of Directors. In order to achieve sustainable growth and increase enterprise value over the medium to long term, the Company will continue its efforts to enhance the effectiveness of the Board of Directors.

Executive Compensation

As a company with a three-committee board structure, the Company’s Remuneration Committee, which is chaired by and composed of a majority of independent outside directors, sets policy on the determination of the individual remuneration of directors and corporate executives.

Remuneration Policy of Azbil Corporation

Guided by the azbil Group philosophy of “human-centered automation,” Azbil Corporation (“the Company”) aims, through business expansion, to continuously enhance enterprise value by making contributions that lead “in series” to a sustainable society, endeavoring to realize the well-being of society as well as Group employees, while building relationships of trust with all stakeholders.
With regard to our executive remuneration system, in order to add impetus to the realization of our long-term targets (to achieve by FY2030) and the medium-term plan (FY2025-FY2027), we will further increase the corporate executives’ awareness of the need to contribute to enhancing enterprise value and their motivation to maximize shareholder value, as well as improving our competitiveness when it comes to attracting, for management, the highly skilled human resources needed to realize our goals, while also ensuring that directors who are not responsible for business execution can share value with our shareholders. With this system, we will promote initiatives to contribute “in series” to a sustainable society.

The azbil Group philosophy

The azbil Group philosophy is to realize safety, comfort and fulfillment in people’s lives and contribute to global environmental preservation through “human-centered automation.” To achieve this

• We create value together with customers at their site.
• We pursue our unique value based on the idea of “human-centered.”
• We think towards the future and act progressively.

Basic policy regarding executive remuneration

Aiming to realize the Group philosophy, we have adopted the following basic policy for the remuneration of Company officers to motivate them not only for short-term performance but also to achieve medium- to long-term performance goals and to enhance enterprise value.

• Taking into consideration the nature of our business, remuneration should encourage awareness of the necessity to enhance enterprise value from a medium- to long-term perspective and further promote value sharing with our shareholders.
• Remuneration should help to secure talented management personnel to realize the Company’s management philosophy and achieve the medium- to long-term performance goals.
• The remuneration system should be highly independent and objective, and should enable us to fulfill our duty of accountability to stakeholders.

Remuneration levels

Remuneration levels for the Company officers (corporate executives and directors) are set by resolution of the Remuneration Committee after it has verified their appropriateness using data supplied by an external specialist agency. Also, the Committee reviews remuneration levels as necessary in response to changes in the external environment.

Remuneration structure

The remuneration structure for corporate executives (including those concurrently serving as directors; similarly hereinafter) is based on their roles and responsibilities, and consists of basic remuneration, which is a fixed monthly amount; bonuses, which are short-term incentives; and stock-based compensation*, which is a medium- to long-term incentive. In order to ensure a remuneration structure that not only motivates officers to achieve the medium- and long-term performance goals and enhance enterprise value, but also leads to increased competitiveness for attracting highly skilled human resources for management, the incentive component of remuneration has been set at a high level, so that the combined remuneration for the president & CEO has the following structure: basic remuneration 1/3, bonus (base amount) 1/3, stock-based compensation (base amount) 1/3. The remuneration structure for other corporate executives is also determined in line with this, taking into consideration their expected roles and responsibilities. The remuneration for directors (not including those concurrently serving as corporate executives; similarly hereinafter) consists of basic remuneration and stock-based compensation.

• Corporate executives
  (1) Basic remuneration
  • Basic remuneration is paid as fixed monthly monetary compensation based on the position of the officer.
  (2) Bonus
  • A bonus is paid as performance-linked monetary remuneration that takes into consideration company performance and non-financial indicators for the single fiscal year.
  • As regards financial indicators, to improve enterprise value over the medium to long term, we use sales and operating income, which are the Company’s main management indices, as key performance indicators (KPIs). The amount of the bonus will fluctuate according to the degree by which these targets have been achieved, while taking into consideration also non-financial indicators.
  • There are three non-financial indicators: employee engagement and diversity, which assess contributions toward achieving the essential goals of the azbil Group for the SDGs; and an individual evaluation, which assesses the handling of those management issues and measures that are the particular responsibility of the corporate executive as well as how much they have contributed. Based on the degree of achievement for each of these items, the Remuneration Committee determines the amount of remuneration.
  • Taking into account both financial and non-financial indicators, the final amount paid as a bonus will vary between 0% and 200%.
  • Remuneration is designed so that the higher the officer’s position, the higher the weighting of financial indicators. As an example, the KPIs and their respective evaluation weightings for the President and CEO are as follows.
  

(3) Stock-based compensation

• In principle, stock-based compensation is paid to the corporate executive following retirement from the current position, with the aim of continuous enhancement of enterprise value while sharing value with shareholders.
• A base amount for stock-based compensation is set for each position. Of this, 50% is performance-linked and 50% is not.
• As regards the performance-linked component, the evaluation is based on indicators aligned with the medium-term plan that are tracked over the same period (3 years) as the plan; this is designed to increase the incentive. As financial indicators we use relative total shareholder return (TSR)—an indicator that evaluates our TSR relative to the Tokyo Price Index (TOPIX) of the Tokyo Stock Exchange—and return on equity (ROE) to promote value sharing with shareholders. As a non-financial indicator, we use effective CO2 reduction at customers’ sites, which is one of the essential goals of the azbil Group for the SDGs. The individual’s stock-based compensation (ranging from 0% to 150%, depending on performance) is determined by the extent to which these targets have been achieved in the final year of the medium-term plan, using the specified weightings (see below).
  
  
• As a way to further encourage value sharing with shareholders, the non-performance-linked component is paid as stock-based compensation with vesting of a fixed number of shares.
• Stock-based compensation is paid through a trust-type stock compensation plan. Under this plan, points corresponding to an officer’s position are awarded annually, and Company shares equivalent to the number of points accumulated are transferred from the trust to the plan-eligible person following retirement from the current position.

Directors
(1) Basic remuneration

• Basic remuneration is paid as fixed monthly monetary compensation based on the responsibilities of the position.

(2) Stock-based compensation

• In principle, stock-based compensation is paid to the director following retirement from the current position, with the aim of continuously enhancing enterprise value while sharing value with shareholders.
• A base amount of stock-based compensation is determined, which is entirely non-performance-linked.
• Stock-based compensation is paid through a trust-type stock compensation plan. Under this plan, a certain number of points are awarded annually to those eligible, and Company shares equivalent to the number of points accumulated are transferred from the trust to the plan-eligible person following retirement from the current position.

Process for determining remuneration

• The Remuneration Committee determines the remuneration of directors and corporate executives. The majority of the members of the Remuneration Committee, including the chairperson, are outside directors, a structure that ensures objectivity and transparency. Any additional information necessary for members’ deliberations is sought from external specialist organizations.
• The Remuneration Committee has the authority to determine the details of remuneration for individual directors and corporate executives. It arrives at evaluation decisions based primarily on (1) the policy governing remuneration details for individual directors and corporate executives; (2) the details of remuneration for individual directors and corporate executives; and (3) in the case of corporate executives, the degree of achievement of both company-wide performance targets and the individual targets set for each corporate executive for the purpose of determining performance-based remuneration.
• In the event of a substantial change in the external environment of the Company, the Remuneration Committee, after carefully deliberating on the appropriateness of the target values and calculation methods used for determining performance-linked remuneration, may take exceptional measures.

Forfeiture and return of remuneration (malus and clawback)

• If the financial results for a previous fiscal year are revised retrospectively, or if serious misconduct or a serious violation has occurred, the Company can deny the officer(s) responsible the incentive component of remuneration (malus), and may demand the return of the compensation already paid to them (clawback). The compensation subject to such malus or clawback may include, in whole or in part, bonuses already paid or yet to be paid, points accrued under the stock-based compensation plan prior to the transfer of Company shares, and Company shares that have already been transferred to the officer(s) in question.

Disclosure policy

• In accordance with our disclosure policy and applicable laws and regulations, details of the executive remuneration system are compiled and disclosed promptly and appropriately through the annual Securities Report, reference materials for the General Meeting of Shareholders, the Business Report, the Corporate Governance Report, the company website, etc. The Company also implements a policy of active engagement with shareholders and investors.

*For non-residents of Japan, the Company plans to pay in cash in an amount equivalent to stock-based compensation.

Total amount of remuneration for officers in FY2024

Contribution of Outside Directors

In addition to the requirements for independent officers stipulated by the Tokyo Stock Exchange, we follow criteria for independence that we have formulated when appointing outside officers as prescribed by the Companies Act. Candidates deemed capable of providing constructive suggestions and accurate observations and advice concerning the company’s business and the improvement of enterprise value in the medium and long terms are appointed as outside directors. Our outside directors, from their diverse perspectives, are active in asking questions and giving suggestions at Board of Directors meetings, thereby contributing to sustainable corporate growth and the enhancement of enterprise value over the medium and long terms.

Reasons for Appointing Outside Directors and Their Attendance Record in FY2024

Mitsuhiro Nagahama

He possesses broad knowledge and extensive experience in corporate management, financial/securities sectors and global business, as he has successively served in important posts at financial institutions. In 2015, he assumed the post of outside Audit & Supervisory Board member of the Company, and since 2019 as an outside director he has not only supervised business execution, but also proactively offered opinions to enhance management transparency from the perspective of the capital markets and based on a global perspective. In these ways, he fulfills such appropriate roles as supervising and giving advice on business execution.

Attendance record : Board of Directors meetings 13 of 13

Anne Ka Tse Hung

She worked at an international law office as a partner attorney, and supported the conclusion of agreements for the international transactions of Japanese companies, in addition to overseas corporate matters. As such, she is familiar with Japanese business customs, and possesses knowledge in the industry to which the Company belongs. She assumed the post of outside director of the Company in 2020, and she draws on her expert knowledge of international business not only to supervise business execution, but also to proactively offer opinions based on her global perspective, advising on such topics as a business growth and her approach to investment for medium- and long-term growth. In these ways, she fulfills such appropriate roles as supervising and giving advice on business execution.

Attendance record : Board of Directors meetings 13 of 13

Shigeaki Yoshikawa

He has held key positions in a general trading company with global operations, and has broad knowledge and abundant experience regarding overseas business development and business portfolio strategies, as well as experience in corporate management, etc. at a think-tank consulting firm. He assumed the post of outside director of the Company in 2022, and—based on his extensive experience and insight into overseas business, as well as his knowledge of marketing and sales—has proactively offered his opinions regarding the Company’s international business strategies, approach to business strategies for medium- to long-term growth and human resource development. In these ways, he fulfills such appropriate roles as supervising and giving advice on business execution.

Attendance record : Board of Directors meetings 13 of 13

Tomoyasu Miura

He has held key positions at a think-tank consulting firm and possesses knowledge and experience of a wide range of fields, such as IT, technology innovation, and new business creation, as well as abundant experience in development of management human resources at a public interest incorporated foundation. He assumed the post of outside director of the Company in 2022, and has proactively offered his opinions from the perspectives of business strategies, including consideration of technological aspects, for the Company’s medium- to long-term growth, and of human resource development, based on his abundant knowledge of the IT and technology domains, his experience of new business creation, and his experience of human resource development. In these ways, he fulfills such appropriate roles as supervising and giving advice on business execution.

Attendance record : Board of Directors meetings 13 of 13

Sachiko Ichikawa

She has a global perspective, extensive experience, broad knowledge and expertise as an attorney (in Japan and in New York State, the U.S.) and as a U.S. certified public accountant. Moreover, she has served as an outside officer at other listed companies, primarily in the manufacturing industry, and has excellent insights concerning the ideal form of corporate governance and company management. She assumed the post of outside director of the Company in 2024, and she proactively offers opinions based on her abundant and specialist knowledge and experience related to legal affairs and accounting, along with her insights in areas such as corporate governance and compliance. In these ways, she fulfills such appropriate roles as supervising and giving advice on business execution

Attendance record : Board of Directors meetings 10 of 10^*
*Because she was elected at the 102nd Ordinary General Meeting of Shareholders held on June 25, 2024, her attendance only applies to Board of Directors meetings held after her appointment.

Hiroshi Yoshida

He has held key positions at a globally operating listed chemical manufacturer. He has broad knowledge related to finance and accounting, abundant experience in management planning and strategy formulation in the manufacturing industry, and experience as both a corporate executive and an audit & supervisory board member. He assumed the post of outside director of the Company in 2024, and he proactively offers opinions based on his wealth of specialist knowledge related to finance and accounting in addition to his extensive experience in management planning and strategy formulation in the manufacturing industry. In these ways, he fulfills such appropriate roles as supervising and giving advice on business execution

Attendance record : Board of Directors meetings 10 of 10^*
*Because he was elected at the 102nd Ordinary General Meeting of Shareholders held on June 25, 2024, his attendance only applies to Board of Directors meetings held after his appointment.

Satoko Nakatani

She, as a partner at an audit corporation, has been engaged in the auditing of a range of business types, mostly related to manufacturing and has been in charge of advisory services for various accounting systems and other matters. In addition, as a certified public accountant, she has broad knowledge and expertise in finance and accounting and extensive experience in auditing operations, etc. The Company believes that as an outside director of the Company, she will leverage her broad knowledge and expertise and her extensive experience related to finance and accounting to not only provide supervision of the business execution at the Board of Directors but also offer objective suggestions, advice, and so forth from a wide range of perspectives to enhance the transparency of management.

Attendance record : Board of Directors meetings -/-^*
*She was elected at the 103rd Ordinary General Meeting of Shareholders held on June 25, 2025.

Comment by an Outside Director

Azbil corporate governance, present and future