Corporate Governance

DENSO recognizes the establishment of corporate governance as a priority initiative for achieving sustainable long-term increases in corporate value in a rapidly changing global market. Based on its Basic Policies on Corporate Governance, DENSO has adopted a corporate auditor system under which it has established the General Meeting of Shareholders, Board of Directors, Audit & Supervisory Board, and Accounting Auditors as statutory bodies. In addition to these legal functions, the Company has established various governance-related frameworks. At the same time, the Company shares information and conducts dialogues regarding its business conditions with its shareholders and other investors on an ongoing basis, thereby implementing sound, efficient, and transparent management.

DENSO is working to evolve its corporate governance and enhance strategic discussions Companywide to realize sustainable increases in corporate value.
Taking into account all of the principles of the Corporate Governance Code, DENSO discloses in its Corporate Governance Report its promoting sustainability and efforts to ensure diversity in core personnel. Going forward, we will continue to implement sound, efficient, and transparent management including through the significant reduction of cross-shareholdings.

Corporate Governance System and Principal Organizations

DENSO has adopted a corporate auditor system under which it has established the General Meeting of Shareholders, Board of Directors, Audit & Supervisory Board, and Accounting Auditors as statutory bodies. Through a president, executive vice presidents, and a corporate officer system that separates and clarifies the roles between members of the Board, who are responsible for management (decision-making and supervision), and senior executive officers, who are responsible for the execution of business operations, DENSO CORPORATION is streamlining the number of members of the Board and is realizing swift decision-making and business operations.
Under this system, depending on the circumstances, members of the Board serve concurrently as president, executive vice president, and senior executive officer to ensure that the Board maintains an overall balance of knowledge, experience, and ability. DENSO CORPORATION sets the term of office for members of the Board at one year, with the aim of building a flexible management structure that responds to changes in the management environment and further clarifying management responsibility during the business year.

Reason for Selecting Our Current Corporate Governance System

DENSO has been discussing and examining the optimal organizational structure to achieve effective corporate governance. By delegating authority from the Board of Directors as much as possible, we have been able to expedite decision-making. Additionally, the Audit & Supervisory Board, which maintains independence from the Board of Directors, has achieved high audit governance through strong collaboration with the internal audit department. Therefore, at present, DENSO has adopted a company with audit and supervisory board structure.

The Board of Directors resolves matters stipulated by laws and regulations, as well as matters of importance to the Company’s decision-making. As much as possible, the Board delegates authority to those in charge of business execution. This approach simultaneously accelerates execution and enables the Board to spend more time deliberating on management policies and strategies.
Resolutions must be approved by a majority of the members present at a Board of Directors’ meeting, and the meeting itself must be attended by a majority of members of the Board. We have been enhancing our support structure for the outside officers to ensure the productive and efficient operation of the Board of Directors when making resolutions. Further, before a Board meeting is convened, materials are distributed beforehand and the agenda is explained in detail beforehand, and opinions and approval are received from any members of the Board who are unable to attend on the day of the Board meeting.

In early March of each year, DENSO has all members of the Board participate in a survey of the effectiveness of the Board of Directors. With a view to obtaining the frank opinions of members of the Board regarding issues and areas requiring improvement, interviews with inside officers are held, and outside officers discuss these matters at the Independent Officer Meeting, based on the outcome of the quantitative assessment in the survey.
Issues and areas identified as requiring improvement and improvement action plans are reported to and discussed by the Board of Directors, followed by improvement activities that are implemented beginning in late May. Each year, a plan–do–check–act (PDCA) cycle is implemented to enhance the effectiveness of the Board of Directors.

Management Oversight Function of the Audit & Supervisory Board

As well as attending meetings of the Board of Directors and other important meetings, Audit & Supervisory Board members convene meetings of the Audit & Supervisory Board once a month, in principle. The Audit & Supervisory Board comprises five Audit & Supervisory Board members, three of whom are outside Audit & Supervisory Board members.
At meetings of the Audit & Supervisory Board, resolutions on legally required matters are approved and exchanges of opinions are held with members of the Board, members of the senior management team, members of the Internal Audit Department, and Accounting Auditors regarding the Company’s sustained growth and the medium- to long-term enhancement of corporate value. Also, the Audit & Supervisory Board fulfills its management oversight function through audits of the execution of duties by members of the Board and of the operations and financial position of the Group as a whole.
Pursuant with internal regulations, the Internal Audit Department conducts internal audits on the legality, appropriateness, and efficiency of the Company’s operations. Based on the issues identified by these audits, each department of the Company establishes and subsequently enhances operational control and management systems.

DENSO separates the functions of the Board of Directors, which conducts management oversight, and the executive directors, who handle business execution. As bodies for deliberating important matters pertaining to business execution, DENSO has established the Management Strategy Meeting and the Management Deliberation Meeting. These two bodies, three when including the Board of Directors, are positioned as executive committees.

Requirements for Members of the Board and Audit & Supervisory Board Members and Our Approach to Diversity

The members of the Board and the Audit & Supervisory Board is decided with due consideration paid to the balance of diversity (including nationality and gender), experience, capabilities, and specialization to ensure precise and prompt decision-making.
For Board member candidates, DENSO nominates individuals who are well-versed in managing the Company’s various businesses and effective at addressing urgent issues, and who can contribute to the formulation of management strategies aimed at enhancing corporate value over the medium to long term, as well as the accurate and effective supervision of management. Similarly, for Audit & Supervisory Board member candidates, DENSO nominates individuals with knowledge in business management, finance, accounting, and legal affairs etc., who can contribute to the appropriate auditing of management.

Experience and Specializations of Members of the Board and Audit & Supervisory Board Members (Skill Matrix)

The skills (experience and specializations) required by members of the Board of Directors are decided while considering whether such skills are helpful in attaining objectives, such as medium- to long-term business strategies, policies, and targets. More specifically, DENSO has set out 9 types from three perspectives: “the skills necessary to create the social value our company aspires to achieve”,” the skills required for effective oversight of management” and ”the core skills that underpin our competitiveness”. The experience and specializations of the Board of Directors as a whole are disclosed in the form of a skill matrix. We intend to revise these requirements to reflect future changes in business strategy and the business environment.

The areas of specialization that the Company expects each member to demonstrate (up to a maximum of five areas) are as shown below.
Note: This does not represent all the areas of experience and specialization of each person.

The president and relevant directors listen to opinions based on various perspectives and select suitable candidates to serve as a member of the Board, comprehensively taking into account their background, personality, insight, and other factors. The Executive Nomination and Remuneration Council, which is chaired by an independent outside director and also has a majority of independent outside directors serving as its members, then holds debate on these candidates and lists the candidates for selection for the current fiscal year.
Directors are selected based on an informal resolution by the Board of Directors and deliberation at the General Meeting of Shareholders.
Audit & Supervisory Board members are selected based on an informal resolution by the Board of Directors and deliberation at the General Meeting of Shareholders, with the consent of the Audit & Supervisory Board.

DENSO has established the Executive Nomination and Remuneration Council to increase fairness and transparency from an impartial standpoint when making important decisions regarding the nomination and remuneration of executives. This committee is chaired by an independent outside Board member, with independent outside Board members constituting the majority of its members.
The Executive Nomination and Remuneration Council convened a total of 8 times in fiscal 2026 with 100% attendance by its members.

DENSO regards president & CEO succession planning as one of its most important management tasks. The Executive Nomination and Remuneration Council, of which a majority of the members and the chair are independent outside Board members, leads the search for the next president based on a highly objective and transparent process.
The Executive Nomination and Remuneration Council establishes requirements that reflect the type of senior management sought by DENSO. In searching for an optimal successor, the council conducts ongoing discussions based on a diverse range of information concerning the candidates. Such information is obtained from parties inside and outside the Company and includes past achievements, employment histories, and assessments of suitability for management positions. In addition, for CxO positions and below, DENSO identifies candidates for the succession of key core management posts inside and outside Japan and grooms these candidates from medium- and long-term perspectives.

DENSO determines executive compensation based on the following basic policy；

The compensation system for members of the Board (excluding non-executive members of the Board and outside Board members) at DENSO consists of basic compensation as fixed compensation, as well as bonuses and share-based compensation as performance-linked compensation. Compensation for non-executive members of the Board and outside Board members consists of only basic compensation (fixed amount) from the standpoint of ensuring impartiality.
Compensation for Audit & Supervisory Board members also comprises only basic compensation (fixed amount), in light of their roles and responsibilities as auditors in charge of compliance audits.
The level of compensation for members of the Board and Audit & Supervisory Board members is set at the median level at comparable companies while also referencing levels at major manufacturers of similar scale in similar sectors and business models as DENSO, based on board member compensation survey data compiled by external research institutions each year.

The level of compensation for members of the Board and Audit & Supervisory Board members is set at the median level for comparable companies while also referencing levels at major manufacturers of similar scale in similar sectors and business models as DENSO, based on board member compensation survey data compiled by external research institutions each year.

To establish linkage with corporate performance and to incentivize members of the Board to enhance corporate performance and sustain growth, a performance-linked compensation amount is calculated by reflecting a corporate performance evaluation and an individual performance assessment—which is based on an evaluation of the business results and achievements of the individual and their medium- to long-term initiatives—in a position-specific basic compensation amount. Depending on corporate performance and individual performance, the performance-linked compensation amount fluctuates in a range that is between 0% and 150% of the basic compensation amount.

Connected with corporate strategies that are aimed at enhancing DENSO’s corporate value, corporate performance evaluation indicators comprise consolidated operating profit, ROIC, and sustainability score. The score weighting and evaluation method for each evaluation indicator are shown below. Further, targets for each fiscal year, the basis of these evaluations, are set each year based on medium- to long-term objectives.

Evaluation Weights and Methods for Company Performance Indicators

Share-based compensation will be provided through share-based plan utilizing a trust, namely the Board Benefit Trust–Restricted Stock (BBT-RS). Under this plan, which is performance-linked share-based compensation plan, the Company will grant to the executive, through a trust, company shares and monetary payments equivalent to the market value of such shares. Share-based compensation is paid in the form of restricted shares, and the restriction on transfer is removed when the officer retires, in principle.

In the event of a restatement of financial results or the occurrence of material misconduct or compliance violations, the Company may, by resolution of the Executive Nomination and Remuneration Council, reduce or forfeit the right to receive performance-linked compensation, namely bonuses and share-based compensation, or demand the return of compensation already paid.

The Board of Directors has passed a resolution on the total amount of compensation for fiscal 2024, which is within the scope of compensation established by a resolution of the General Meeting of Shareholders. The Board has also passed a resolution to entrust decisions on individual compensation amounts to the Executive Nomination and Remuneration Council. This council determines individual compensation based on consideration of the officer compensation system, corporate performance, the responsibilities and achievements of the member of the Board, and conformance with the Board-approved policy on determining compensation.
In addition, with respect to compensation for Audit & Supervisory Board Members, the Company will consult with and obtain agreement from the Audit & Supervisory Board Members based on the matters deliberated by the Executive Nomination and Remuneration Council, within the scope of compensation approved by a resolution of the General Meeting of Shareholders.

With the aim of fair and efficient business operations, DENSO formulated “the DENSO Basic Policies for Internal Control”. We have stipulated basic policies for control, various rules, and systems in areas that form the basis of our management such as “the Code of Conduct”, management systems, risk management, and compliance.
We make revisions and changes when necessary after undertaking regularly scheduled annual verifications of the status of implementation.

To bolster the Board of Directors’ effectiveness, each year DENSO interviews participants, look back on results, and consider plans for improvement. DENSO also surveys each committee and deliberating body, including the Management Deliberation Meeting, asking participants to reflect back on the past year. These surveys provide feedback to the secretariat, which DENSO incorporates into our improvements.
Through ongoing improvements, DENSO will continue working to enhance its corporate governance.