- Please refer to the Corporate Governance Report for details on the status of corporate governance at the Company.
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Corporate Governance Report （Jul 31,2026）
（798KB）
The Air Water Group believes that conducting fair business activities, using general common sense, and gaining trust from all stakeholders is essential for continuous business growth and the maximizing of enterprise value. We also view that enhancement of corporate governance, including an internal control system, is the most important management issue for gaining stakeholder trust and fulfilling corporate social responsibility. Air Water is working to strengthen its corporate governance by constructing a fully functioning management structure for appropriate management decision-making and the proper and swift execution of business based thereon, with supervision and monitoring, while securing management transparency through wide-range information disclosure.
The Company’s Board of Directors makes important management decisions and supervises the execution of business operations, and as a company with an Audit and Supervisory Board, our corporate auditors audit the directors’ performance of duties by attending the Board of Directors meetings and other important meetings.
To restructure the Company'’s Board of Directors to ensure that its oversight function is effective, the Board has adopted a policy to transition to a structure where outside directors constitute a majority by reducing the number of inside directors by one and increasing the number of outside directors by one. Under this policy, the Board consists of a total of eight members: three inside directors (none of whom are women), and five outside directors (including two women), for a total of eight members. In addition to matters stipulated by law or the Company'’s Articles of Incorporation, the Board makes decisions and reports on important matters concerning the Group'’s management and business operations, and fulfills the functions of mutual supervision and monitoring among the directors. Furthermore, the Company has appointed 5 outside directors who provide useful advice to the Company’s management from an objective outsider’s perspective, thereby strengthening the management supervisory function.
The term of office of directors is one year so we can flexibly build an optimal management structure in a rapidly changing business environment and further clarify the management responsibilities of directors for each fiscal year.
As an organization that supports right and prompt decision-making in the Group’s extensive business areas, the Corporate Management Committee, which is composed of inside directors and managers of each business division, meets once a month in principle. The Committee conducts prior deliberates on matters to be discussed at the Board of Directors meetings from a broad and diverse perspective, and also deliberates on important matters related to the execution of the Group’s business operations.
The Company’s Audit & Supervisory Board consists of 3 inside corporate auditors (including 1 female corporate auditor) and 3 outside corporate auditors (no female corporate auditors), totaling 6 members. The Company is committed to strengthening the monitoring and supervisory functions of management by receiving useful advice, etc. on its audit from the 3 outside corporate auditors from an objective outsider’s perspective. In accordance with the audit policy, audit standards, and so on established by the Audit & Supervisory Board, corporate auditors are striving to grasp and monitor the status of management execution by attending the Board of Directors meetings and other important meetings. They also monitor and verify the status of the development and operation of internal control systems, including internal control over financial reporting, to ensure that the execution of duties by directors is in compliance with laws, regulations, and the Articles of Incorporation, and that the Company’s business is being executed appropriately. Additionally, corporate auditors regularly receive explanations from the Accounting Auditor and the Internal Auditing Office regarding the status and results of their audits, and exchange information and opinions with them.
Regarding internal audit, the Internal Auditing Office (16 members as of April 1, 2026) periodically audits the status of compliance with laws and regulations, as well as the appropriateness and validity of business process of the Group. The Internal Auditing Office also serves as the department in charge of the evaluation of effectiveness of the construction and operation status of the internal control system to ensure the reliability and appropriateness of financial reporting.
The Company also has the Risk Management and Compliance Department (10 members as of April 1, 2026)) as a dedicated department that manages and controls compliance, security and disaster prevention, environmental protection, food safety, etc. across the Group.
If any fact that may have a significant impact on the Company’s management is confirmed through each internal audit, the Company has a system in place to report it to its corporate auditors and representative directors as appropriate. In addition, the Corporate Management Committee and the Board of Directors receive regular reports twice a year on the results of operational audits and compliance issues.
With regard to accounting audits, Air Water has concluded an auditing agreement with KPMG AZSA LLC, and this firm carries out the audits.
| Number of Directors Stipulated in Articles of Incorporation | 20 |
| Directors’ Term of Office Stipulated in Articles of Incorporation | 1 year |
| Chairperson of the Board | President |
| Number of Directors | 8 |
| Election of Outside Directors | Elected |
| Number of Outside Directors | 5 |
| Number of Independent Directors | 5 |
We appoint as independent outside directors individuals who meet requirements and criteria stipulated in the Companies Act and by financial instrument exchanges and who meet the Judgment Criteria for the Independence of Outside Officers, which has been established by resolution of the Board of Directors. In addition, in selecting candidates for independent outside director positions, the company puts emphasis on a high level of expertise and extensive experience that make possible honest and constructive recommendations and opinions with respect to the company’s management.
Air Water Inc. determines that Outside Directors and Outside Auditors (hereinafter collectively referred to as “Outside Officers”) or Outside Officer candidates are sufficiently independent of the Company if they do not fall under any of the following items:
- An executive of the Company and its subsidiary (hereinafter collectively referred to as “Group”) 1 or a person who was an executive of the Group in the past ten (10) years;
- A person who was a non-executive director or auditor of the Group in the past ten (10) years and had served as executive of the Group in the past ten (10) years before being appointed as non-executive director;
- A person 2 or an executive of an entity for which the major business partner is the Group;
- An person 3 or an executive of an entity who is the major business partner for the Group;
- The major shareholder of the Company (a person who directly or indirectly holds more than or equal to 10% of the voting right of the total number of voting rights; the same shall apply hereinafter) or the executive thereof;
- An executive of an entity of which the Company is the major shareholder;
- A person who belongs to an audit corporation that is the accounting auditor of the Group;
- An attorney, a certified public accountant, a certified public tax accountant, or consultants etc. who receives a large amount 4 of money and other property benefits other than executive compensation from the Group (if the entity receiving property is an organization, such as a corporation and an association, a person belonging to the organization);
- An person or an executive of an entity who receives a large amount 4 of donations or grants from the Group;
- In the case where an executive of the Group serves as Outside Officer of another company, an executive of such another company or its parent or subsidiary company;
- A person who has fallen under any of ［3］ to［10］above in the past three (3) years; or
- In the case where a person who falls under any of［1］to ［11］above is an important executive 5, the person’s spouse or relative within the second degree of kinship.
However, if there are sufficient reasons to determine that an Outside Officer is unable to fulfill his or her duty as an independent officer even though he or she does not fall under any of the items above, such Outside Officer may not be appointed as independent officer.
Yuko Haga
In addition to her expertise as a researcher of corporate strategy, including M&A and corporate governance, Ms. Yuko Haga possesses extensive experience and deep insight gained as a management consultant, and has served as an outside director at several companies. We believe that by leveraging this experience and insight to provide valuable advice on the Company’s overall management, she is well suited to serve as an Outside Director of the Company.
Additionally, she does not fall under any of the items that may create conflict of interest with general shareholders stipulated by the Tokyo Stock Exchange and satisfies the “Criteria for Independence of Outside Officers” (see “[Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members] Other Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members”) stipulated by the Company. Considering the above, the Company appointed her as an independent director.
Rochelle Kopp
Ms. Rochelle Kopp possesses a deep cross-cultural understanding and a global perspective, as well as extensive experience and deep insight gained as a management consultant in both Japan and the United States. She has
served as an outside director at several companies. We believe she will be able to apply this expertise to the Company’s management and therefore consider her wellsuited to serve as an Outside Director of the Company.
Additionally, she does not fall under any of the items that may create conflict of interest with general shareholders stipulated by the Tokyo Stock Exchange and satisfies the “Criteria for Independence of Outside Officers” (see “[Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members] Other Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members”) stipulated by the Company. Considering the above, the Company appointed her as an independent director.
Mikihiko Kato
Mr. Mikihiko Kato has extensive experience in global finance and management, having served as Controller and CFO of a U.S. subsidiary of NGK SPARK PLUG CO., LTD. (currently Niterra Co., Ltd.), and as President of a Brazilian subsidiary, where he was responsible for managing overseas operations. He has also been involved in the formulation and promotion of management strategies at that company’s head office, and has experience in management oversight as a director and full-time Audit and Supervisory Committee Member. We believe he can apply this experience to the Company’s management and have determined that he is well-suited to serve as an outside director. Additionally, he does not fall under any of the items that may create conflict of interest with general shareholders stipulated by the Tokyo Stock Exchange and satisfies the "Criteria for Independence of Outside Officers" (see “[Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members] Other Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members”) stipulated by the Company. Considering the above, the Company appointed him as an independent director.
Mitsutoshi Matsushita
Mr. Mitsutoshi Matsushita possesses extensive experience and deep insight as a lawyer well-versed in corporate legal affairs. Having served as an outside officer at multiple companies, he also possesses sufficient expertise in supervision of corporate management. We believe that he can apply this expertise to the Company’s management, and have therefore determined that he is well-suited to serve as an outside director. Additionally, he does not fall under any of the items that may create conflict of interest with general shareholders stipulated by the Tokyo Stock Exchange and satisfies the “Criteria for Independence of Outside Officers” (see “[Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members] Other Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members”) stipulated by the Company. Considering the above, the Company appointed him as an independent director.
Shinichi Kawasaki
Mr. Shinichi Kawasaki has a proven track record of consistently driving initiatives from research and development through to implementation and commercialization. At Osaka Gas Co., Ltd., he was engaged in R&D and commercialization in the gas, energy, and materials sectors at the New Technology Laboratories and other divisions. He subsequently played a central role in shaping technical strategy as Director of the Energy Technology Laboratories. Furthermore, as Representative Director and President of KRI Co., Ltd., he has a proven track record of leading the organization from both technical and managerial perspectives. We believe he can apply this experience to the Company’s management, and have
therefore determined that he is well-suited to serve as an outside director. Additionally, he does not fall under any of the items that may create conflict of interest with general shareholders stipulated by the Tokyo Stock Exchange and satisfies the “Criteria for Independence of Outside Officers” (see “[Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members] Other Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members”) stipulated by the Company. Considering the above, the Company appointed him as an independent director.
| Status of establishment of Board of Auditors | Established |
| Number of Auditors in Articles of Incorporation | 6 |
| Number of Auditors | 6 |
| Status of appointment of Outside Auditors | Appointed |
| Number of Outside Auditors | 3 |
| Number of Outside Auditors who are appointed as independent officer | 3 |
Atsushi Hayashi
Mr. Atsushi Hayashi has abundant experience and deep insight as a judge and lawyer and based on which he fully performs the auditing function as we expect by making useful suggestions and proposals to ensure the appropriateness of business execution in the Company. We believe that he is qualified to serve as an outside corporate auditor of the Company.
Additionally, he does not fall under any of the items that may create conflict of interest with general shareholders stipulated by the Tokyo Stock Exchange and satisfies the “Criteria for Independence of Outside Officers” (see “[Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members] Other Matters Concerning Independent Directors and Independent Audit and Supervisory Board Members”) stipulated by the Company. Considering the above, the Company appointed him as an independent officer.
Atsushi Iwasaki
In addition to his many years of practical auditing experience at an audit firm as a certified public accountant, Mr. Atsushi Iwasaki has served as an outside auditor and outside director at several companies, giving him extensive experience and a high level of specialized knowledge in finance, accounting, and internal control. He also possesses experience and insight gained as the head of a certified public accounting firm. He is expected to utilize this knowledge and experience to provide useful observations and recommendations to ensure the appropriateness of the Company’s business operations, and we have therefore determined that he is well-suited to serve as an outside auditor of the Company. Additionally, he does not fall under any of the items that may create conflict of interest with general shareholders stipulated by the Tokyo Stock Exchange and satisfies the “Criteria for Independence of Outside Officers” (see Section 4. “Supplementary Explanation”) stipulated by the Company.
Considering the above, the Company appointed him as an independent director.
Tateshi Higuchi
Mr. Tateshi Higuchi has been involved in police administration for many years, holding key positions at administrative agencies and other organizations, and has a proven track record of serving as an outside auditor and outside director at multiple companies.
We believe he is well-suited to serve as an outside auditor of the Company, as we expect him to draw on this knowledge and experience to provide useful observations and recommendations to ensure the appropriateness of the Company’s business operations. Additionally, he does not fall under any of the items that may create conflict of interest with general shareholders stipulated by the Tokyo Stock Exchange and satisfies the “Criteria for Independence of Outside Officers” (see Section 4. “Supplementary Explanation”) stipulated by the Company.
Considering the above, the Company appointed him as an independent director.
For outside directors, the Secretariat of the Board of Directors (corporate secretary function) distributes materials related to agenda items and reports to be submitted to the Board in advance, and provides advance explanations of their content as necessary. To enable the Board of Directors to effectively exercise its supervisory function and to enrich discussions on management strategy, the Secretariat also provides necessary information (such as materials submitted to and minutes of key executive meetings, including the Executive Committee and budget meetings; information regarding executive management’s basic policies and strategies for budget formulation; progress on business plans; risk information; the effectiveness of internal controls related to financial reporting; and risk information concerning financial statements).
Corporate information and materials that are requested by outside corporate auditors or deemed necessary to be shared among corporate auditors are mainly communicated or submitted to outside corporate auditors by standing statutory auditors.
Furthermore, we have appointed audit assistants (attached to auditors and dedicated staff) to strengthen our internal information gathering capabilities and expand functions that support the identification of issues.
The Company’s Board of Directors has created a skills matrix consisting of seven basic areas of experience and skills covering the Company’s various functions and business domains: (1) corporate management and management strategy; (2) finance and accounting; (3) risk management, legal affairs, and compliance; (4) technology and R&D; (5) human capital management; (6) ESG (environment, social, and governance) and sustainability; and (7) global operations. From the perspective of putting the right person in the right position to ensure accurate and prompt decision-making, the Company appoints corporate directors who are well-versed in the Group’s operations, as well as independent outside directors with extensive experience and expertise from outside the Company—including those with management experience at other companies, and attorneys—to form the majority of the Board. In this way, we strive to ensure that the overall balance and diversity of the Board of Directors are maintained in a manner that is optimal for the Company.
The skills matrix of our directors and corporate auditors are disclosed in the reference materials of Notice of Convocation to the General Meeting of Shareholders. (https://www.awi.co.jp/en/ir/stock/investor.html)
- The maximum amount of remuneration for Directors and Auditors shall be as follows:
（1）The maximum amount of remuneration for directors was resolved at the 22nd Annual General Meeting of Shareholders held on June 28, 2022, to be 1,130 million yen or less per year (including 80 million yen or less for outside directors) (not including employee salaries of directors who also serve as employees.). As of the close of this Annual General Meeting of Shareholders, the number of directors was 11 (including 4 outside directors).
（2）Aside from the maximum amount of remuneration for directors stated in (1) above, the 19th Annual General Meeting of Shareholders held on June 26, 2019 resolved that the stock-based remuneration to be paid to directors (excluding outside directors) should not be more than 100 million yen per year and the number of shares not more than 125,000 shares per year. As of the close of this Annual General Meeting of Shareholders, the number of directors (excluding outside directors) was 18.
（3）The maximum amount of remuneration for corporate auditors was resolved at the 25th Annual General Meeting of Shareholders held on June 26, 2025 to be 120 million yen per year. As of the close of this Annual General Meeting of Shareholders, the number of corporate auditors was 5. - Matters concerning the policy for determining the amount of remuneration, etc. of directors and the calculation method thereof
Based on the resolution of the Board of Directors, the Company has set a basic policy to build a remuneration system for its directors that functions sufficiently as an incentive for each director to play a maximum role in his/her duties and enables to attract and retain excellent human resources for the continuous improvement of its corporate value. Under this policy, remuneration of each director shall be determined at an appropriate level in light of his/her role, responsibility, and business performance. Specifically, directors’ remuneration consists of base remuneration as fixed remuneration, performance-linked remuneration, and stock-based remuneration (excluding outside directors).
Base remuneration is a monthly fixed remuneration, and is determined by taking into comprehensive consideration of the Company’s business lineup and various fundamentals of the management environment, other companies’ standards in terms of position and duties, the Company’s business performance, and employee’s pay standard.
Performance-linked remuneration shall be cash remuneration that reflects performance indicators as a short-term incentive to achieve business targets for each fiscal year. The Company pays an amount calculated based on the achievement percentage against consolidated sales revenue, operating profit, each division’s targets (divisional operating profit and mission), etc. for each fiscal year, as a bonus at a designated time each year. Target performance indicators and their values are set to be consistent with the management plan at the time the plan is formulated, and are reviewed as needed to reflect changing circumstances.
As non-monetary rewards shall be paid in the form of restricted stock. The Company’s common shares are issued after a designated period during which the transfer is restricted, for the purpose of promoting efforts to enhance corporate value over the medium to long term and further pursuit of value sharing with shareholders.
The restricted stock shall be the Company’s common shares issued every year, in principle, and the number of which is determined according to the grantee’s position after a transfer restriction agreement (a restricted stock allotment agreement) is concluded between the Company and the grantee. In order to realize the sharing of shareholder value over the medium to long term, the transfer restriction period starts from the share issuance date and ends on the date when a director retires or resigns both the offices of director and any other position specified by the Board of Directors of the Company.
Regarding the composition of corporate directors’ compensation, taking into account its appropriateness relative to the compensation ranges of other companies in the same industry or of similar size, the Company has established the breakdown of basic remuneration, performance-based remuneration, and non-monetary compensation, as described in [Disclosure Based on the Principles of the Corporate Governance Code], [Principle 3-1] (Enhancement of information disclosure), (iii) Policies and procedures for determining remuneration of senior management and directors. The compensation for outside directors and Audit & Supervisory Board Members consists solely of base remuneration. Furthermore, the amount of compensation for each Audit & Supervisory Board Member is determined through consultation among the Audit & Supervisory Board Members, within the total compensation limit established by resolution of the General Meeting of Shareholders. -
Matters concerning delegation of decisions on the content of individual directors’ remuneration, etc.
The total amount of individual compensation, etc., for each corporate director is determined by the Board of Directors based on a proposal prepared by the Nomination and Compensation Committee—a voluntary advisory body to the Board of Directors—following thorough deliberation, within the scope of compensation limit previously approved by a resolution of the General Meeting of Shareholders. The specific timing and allocation of payments to each director shall be determined based on a draft prepared by the Nomination and Compensation Committee and approved by the Board of Directors. The scope of such authority shall be the amount of base remuneration and bonus and the number of shares of restricted stock for each director.
The reason for delegating these authorities is that this approach is best suited to ensuring objectivity and transparency regarding nominations and compensation within the Board of Directors.
The details of remuneration, etc. for each individual director for the current fiscal year were determined considering the above, and the Board of Directors believes that such details are in line with the policy for determining remuneration resolved by the Board of Directors.
Air Water Inc. has set the following basic policy on the establishment of systems to ensure the appropriateness of operations of the Company and its subsidiaries. Under the systems established based on this basic policy, the Company is striving to ensure the appropriateness and efficiency of operations executed by itself and its subsidiaries.
- a. As the basis of the compliance system, the Company shall establish the “Air Water Group Code of Ethical Conduct” as a code of conduct for the Group’s officers and employees to comply with laws and regulations and to respect social ethics in their activities, provide training and raise the awareness of social ethics and legal compliance, and develop rules regarding legal compliance.
- b. The “Risk Management and Compliance Department,” an organization under the direct control of Representative Directors, shall be established as a controlling department to centrally manage compliance issues within the Group. The department shall appoint a responsible person from among directors or executive officers, etc. In addition, the “Compliance Committee” shall be established as a body to discuss important compliance-related matters, and a “Whistleblower System” shall be established and operated for officers and employees of the Group to report directly to the Risk Management and Compliance Department and outside attorneys, etc., and consult with them when they become aware of any conduct that raises compliance concerns, without having to go through ordinary reporting lines.
- c. Directors shall report on the execution of their duties at the Board of Directors meetings held regularly or as necessary and supervise the execution of one another’s duties. In addition, corporate auditors shall attend meetings of the Board of Directors and other important meetings in accordance with the auditing standards for corporate auditors established by the Audit & Supervisory Board, and conduct audits of business execution by directors through examinations of the business execution in the Group including its subsidiaries.
- d. The “Internal Auditing Office,” an internal audit department, shall conduct internal audits to ensure the compliance of the Group’s business activities with internal regulations and laws and regulations, etc., in accordance with the internal audit regulations and internal audit plan. Furthermore, a system shall be established to report the results of internal audits to Representative Directors and Audit & Supervisory Board Members.
- e. With respect to compliance with the Antimonopoly Law, the Group shall regularly receive advice from outside experts, continuously provide its officers and employees with training regarding the Antimonopoly Law, and thoroughly control contacts with other companies in the same industry. The Risk Management and Compliance Department shall regularly monitor the Group’s operation of internal rules and regulations concerning compliance with the Antimonopoly Law as well as the status of compliance with such rules and regulations.
Information on the execution of duties by directors, such as minutes of the Board of Directors meetings and approval documents, shall be recorded in documents or electromagnetic media, and shall be stored and managed appropriately and securely in accordance with the internal rules for document management. Additionally, a system shall be put in place to immediately submit such documents, etc. when requested by a director, corporate auditor, or Internal Audit Department for inspection.
- a. For risks related to compliance, safety and disaster prevention, and environmental preservation, which are recognized as particularly important in the Group’s business activities, the Risk Management and Compliance Department shall serve as the controlling department in managing such risks across the Group.
- b. For individual risks related to information security, quality control, intellectual property, and contracts, the Company shall establish a department in charge of each of these risks, establish internal rules, prepare manuals, provide training, and manage such risks within the Group through preliminary reviews and approval systems.
- c. The Company shall periodically hold a Risk Management Review Meeting, with the Risk Management and Compliance Department as secretariat, to grasp the state of risk management and promote the strengthening of risk management within the Group.
- d. In the event of the occurrence of a risk that is likely to have a significant impact on its business activities, the Company shall immediately establish a Crisis Management Committee within the Company in accordance with the “Crisis Management Regulations” to promptly and appropriately address the risk that has occurred.
- a. The Company shall specify the division of duties and decision-making authority in the Organizational Regulations and the Regulations on Administrative Authority to ensure proper and efficient execution of duties, and clarify the authority and responsibilities of each director and executive officer, etc. A system according to the above shall be established at its subsidiaries as well.
- b. The Company shall expedite decision-making and clarify responsibilities for business execution in a wide range of businesses and business areas by delegating authority to executive officers, etc., appointed by the Board of Directors. In order to build a flexible management structure that can quickly respond to changes in the business environment, the terms of office of directors and executive officers, etc. shall be one year, respectively.
- c. We will introduce a Business Unit system, under which the heads of each business unit shall be delegated the authority to execute the business and business divisions and centers shall be established under Business Unit to be responsible for the consolidated business results, including those of related subsidiaries.
- d. The Board of Directors shall formulate a medium-term management plan and set major management goals based on the plan. Along with that, the Board shall set business strategies and profit plans for each fiscal year by business unit, business division, and subsidiary, and manage the results on a monthly basis to ensure the efficient execution of duties by directors.
- a. Corporate auditors and the “Internal Auditing Office,” which is an internal audit department, shall periodically conduct audits of subsidiaries in cooperation with the Audit & Supervisory Board Members of those subsidiaries to ensure the appropriateness of business execution within the Group.
- b. The Company shall have its subsidiaries ensure the appropriateness of business execution and the effectiveness of supervisory function by, in principle, dispatching its director(s) and corporate auditor(s).
- c. In the Affiliated Companies Regulations, the Company shall clearly specify the departments in charge of each subsidiary as well as the matters that each subsidiary should report to and request prior approval from the Company, and establish a reporting system from subsidiaries to the Company. Certain important matters relating to subsidiaries shall also be deliberated at the Company’s Board of Directors meetings.
- d. Pursuant to the Financial Instruments and Exchange Act, in order to ensure the reliability and appropriateness of the Group’s financial reporting, the Company shall formulate a basic plan to establish an internal control system for financial reporting, and based on this plan, establish and appropriately operate an internal control system that facilitates effective and appropriate evaluation.
The Company shall assign employees to assist the duties of corporate auditors. Such employees shall follow the instructions and orders of the corporate auditors without following the chain of command in the execution of business, and the appointment, transfer, appraisal, etc. of such employees shall be determined with the prior consent of the Audit & Supervisory Board.
- a. The Company shall put in place a system whereby corporate auditors can attend the Board of Directors meetings and other important meetings in order to gain a detailed understanding of important decision-making processes and the state of business execution, inspect approval documents and other documents related to business execution at any time, and request reports from directors and employees on the state of execution of their duties as needed.
- b. Directors and employees shall promptly report to corporate auditors or the Audit & Supervisory Board, in addition to legally required matters, on the facts that may have a significant impact on the management of the Group, the implementation status of internal audits, and the state of execution of duties reporting of which was requested in the course of audit.
- c. Directors and employees of the Group who report to the Company’s corporate auditors shall not receive detrimental treatment by reason of such reporting.
When a corporate auditor requests prepayment or indemnification of expenses incurred in the performance of his/her duties, the Company shall promptly process the request, except in cases where such expenses or debts are not deemed necessary for the corporate auditor’s execution of duties.
To ensure the effectiveness of audits, the Company shall establish a system for corporate auditors to regularly exchange opinions with representative directors, Accounting Auditor, Internal Audit Department, and corporate auditors of subsidiaries, and exchange audit opinions and information.
The above provisions are based on a resolution of the Company’s Board of Directors valid through the end of March 2026.
Following the discovery of inappropriate accounting practices within the Group and the Tokyo Stock Exchange’s designation of the Company as a “Special Caution Stock,” we have formulated recurrence prevention measures centered on four pillars: “Reform of Corporate Culture,” “Governance Reform,” “Rebuilding of the Management Infrastructure and Internal Control,” and “Review of Group-wide Strategy (Business Portfolio).” The Company will work as a unified Group to implement the recurrence prevention measures centered on the four pillars mentioned above, and will make every effort to enhance the transparency and soundness of management and restore public trust. We will implement these measures with unwavering determination and continuously monitor and disclose their progress and effectiveness.
Furthermore, as stated in the “Notice Concerning the Policy for Formulation of an Improvement Plan” disclosed on May 29, 2026, the Company plans to make a timely disclosure of the improvement plan and status report in late July 2026 (scheduled).
Based on the content of that report, the Company also plans to decide on a new framework to ensure the proper execution of business through a resolution of the Board of Directors.
In the “Air Water Group Code of Ethical Conduct,” the Company clearly declares its policy to take a resolute attitude against antisocial forces that pose a threat to the order and safety of civil society and to have no relations with such forces.
Additionally, as the controlling department in charge of measures to cut off relationship with antisocial forces, the department in charge of general affairs is building close cooperative relationships with outside professional organizations such as attorneys and police, collects information on antisocial forces, and, as necessary, call attention to relevant departments within the Group, and provides education on how to deal with such forces.
<Policy on cross-held shares>
Air Water Inc. holds cross-held shares to maintain and expand relationships with customers and create business opportunities. Whether or not to newly acquire and continuously hold cross-held shares is decided by considering how the business relationships with invested companies and cooperative relationships with them, such as alliance and collaboration, contribute to the medium- to long-term enhancement of the Group’s corporate value.
We have a policy of continuously reducing these holdings, taking into consideration the risk of stock price fluctuations, holding costs, capital efficiency, and other factors.
<Verification of cross-held shares>
Air Water closely examines if the benefits and risks associated with each cross-held shareholding match our capital cost and fit the purpose of holding such shares and contribute to the Group’s corporate value in the medium to long term. This is verified at the board of directors on an annual basis. We conduct a review and sell or reduce the number of shares of which holding is not considered as meaningful or reasonable.
For holdings where significance and rationality cannot be confirmed, we proceed with reduction through sales and other means as appropriate, taking into consideration the circumstances of the Company, stock prices, market trends, and other factors. In FY2025, as in the previous year, we continued to sell some of its shares.
<Criteria for exercising voting right for cross-held shares>
As for exercise of voting right for cross-held shares, Air Water determines whether to approve or disapprove each proposal by considering if such proposal contributes to sustainable growth and medium- to long-term enhancement of corporate value of the invested company and does not damage the share value of our Group.
We recognize that, in order to achieve sustainable growth and enhance corporate value over the medium to long term, it is essential to build long-term relationships of trust with shareholders and investors by disclosing accurate information on our management, finance, etc. to them in a timely and fair manner and by engaging in constructive dialogue with them.
The Finance and IR Department , the department in charge of investor relations, plays a central role in organic cooperation with related departments within the Company to provide appropriate information and set up opportunities for dialogue with the management suitable for the purpose and content of the interview.
In addition to the general meeting of shareholders, we also provide other opportunities for dialogue including facility tours for shareholders, and for analysts and institutional investors, medium-term management plan briefings attended by representative directors and quarterly financial results briefings. We also hold plant tours, small meetings, and visits to overseas institutional investors from time to time. For a record of our IR activities, please visit our website (https://www.awi.co.jp/en/ir.html).
Opinions and concerns about the Company’s management obtained through dialogue with shareholders and investors are reported to the representative directors and other senior management as necessary.
When holding dialogue with shareholders and investors, the Company has set a “quiet period” during which it refrains from dialogue with shareholders and investors prior to the announcement of financial results. Moreover, the Company has adopted strict measures to prevent the leakage of insider information.
Our subsidiary, Ci Medical Co., Ltd. (unlisted), is the parent company of its subsidiary, Shirahato Co., Ltd. (listed on the TSE Standard Market). We consider a parent-subsidiary listing to be a valid option when it can maximize the corporate value of the entire group, including subsidiaries, provided that the subsidiary’s unique corporate culture and managerial autonomy are maintained and the rights of minority shareholders are respected—particularly given the benefits such as securing the creditworthiness of business partners.
Furthermore, there are no significant personnel relationships, such as the concurrent holding of executive positions, between the Company and Shirahato Co., Ltd.
