Developing a Human Capital Strategy Roadmap directly linked to the long-term growth strategy

TOK, aiming to realize a sustainable future society filled with happiness based on the material issue of the pursuit of happiness by personnel, is striving for sustainable growth by developing its human capital strategy as the foundation for value creation based on the Policy on Leveraging Human Capital, which emphasizes “Never forget that business always starts with people.” In February 2024, we organized the Human Capital Strategy Roadmap to achieve the upwardly revised TOK Vision 2030 and formulated the Four Human Capital Strategies to sustain an average annual business growth of 12% through 2030. Implementation of these strategies has now begun. Specifically, to continue driving cutting-edge innovations in the semiconductor industry, which is expected to keep growing, we are focusing on “Forming a diverse talent pool” to support business expansion. We are also committed to human capital development by offering personalized career plans and expanded educational opportunities and promoting DE&I to ensure that all employees, regardless of gender or nationality, can contribute their full potential and create synergies. Additionally, we are focusing on improving engagement to maximize the effectiveness of these efforts. By fostering collaboration among highly engaged talents, we aim to provide vibrant workplaces (allowing employees to work energetically) where employees can demonstrate excellent performance and feel pride and motivation through their achievements. Guided by this roadmap and sustainability governance, the Group will continue to strive for value creation by leveraging the four earning capabilities: Human capital, which are the source of value creation, the Technology and Human connections they generate, and additionally Finance. By further building on the advanced trade-ons we have accumulated as a fine chemical manufacturer since our founding, we aim to achieve TOK Vision 2030 and continuously enhance our corporate value.

Discussions on the definition of happiness with outside directors

On the other hand, the Group has been actively discussing happiness in different forums, including discussion by the Board of Directors and the Council of Directors, to further enhance the effectiveness and clarity of the material issue of the “Pursuit of happiness by personnel” with the goal of directly contributing to improvements in the corporate value. Considering the feedback from employees in past engagement surveys and the objective perspectives of outside directors, we have concluded that happiness equals self-actualization through personal growth. By supporting individual human capital to set career goals autonomously and work hard to achieve them, our aim is to achieve voluntary, autonomous, and ambitious career development and happiness for all employees. By continuously providing an environment that consistently stimulates the voluntary and autonomous ambitions of our employees, we aim to maximize the potential of our Group’s value creation. This will, in turn, generate outcomes of greater career fulfillment and improved evaluations and compensation, which then create a powerful virtuous cycle that will drive further corporate value enhancement.

Policy on Utilizing Human Resources Since its founding, employees have been the greatest asset of the TOK Group. The Company’s human resource policy is based on the following five principles, derived from its long-held philosophy that human resources are a company asset. Never forget that business always starts with people. Any discrimination within the Company and among employees is strictly prohibited. Ensure full compliance with applicable laws and regulations, as well as fair and equal compensation. Educate personnel and promote creativity to become a company that develops innovative technologies. Ensure personnel systems are based upon performance, emphasizing and ensuring transparency.

Human Capital Strategy Roadmap

Management executives commit
to the improvement of employee engagement

It has been two years since the employee engagement indicator was introduced as a KPI in the executive remuneration system. While the awareness of aligning individual employee self-actualization with the company’s growth has begun to be established as a mission among all executives and top management, the engagement survey conducted in FY 2023 showed that employee engagement decreased by 2 points, while the environment to use employees improved by 2 points, indicating that efforts are still underway.

Also, in qualitative evaluations,

① Attachment to the culture and company backed by a frank and open-minded business culture ② Quality and customer orientation symbolized by high quality and close customer relationships ③ A decent organizational culture with a strong sense of social responsibility and high ethical standards ④ Competitive compensation, benefits, and accompanying human capital system that are significantly higher than the average in Japan

were valued as strengths, while

① Reinforcement of strategy and direction and leadership to drive the evolution of the whole company ② Measures for issues according to the organizational hierarchy, such as the whole company, departments, and divisions ③ Create an environment where employees’ abilities can be further demonstrated

were found to be necessary.

In response to these results, the Board of Directors and the Council of Directors recognized that addressing the particularly low scores for employee engagement and strategy and direction was an urgent issue. As a result, they held a discussion in November 2023 with all executives to focus on improvement measures as the main theme. During these discussions, after reviewing the engagement survey results of each department and subsidiary, assessing the progress of efforts since 2021, and deliberating on future initiatives, we decided to focus on the following six priority measures for FY 2024. At present, our focus is on each priority measure across all layers of the company, including the entire company, each department, each division, and each subsidiary.

Employee engagement enhancement measures — FY 2024/12 Policies —  Increase opportunities for management to communicate strategy and direction   Divide the company, departments, divisions, and organizational hierarchy, and implement the measures at all levels in parallel — FY 2024/12 Six Key Measures of the Human Capital Strategy — ① Personnel rotation and other measures for removing barriers among divisions and departments ② Strengthening career support ③ Enhancing education and training opportunities ④ Strengthening the creation of a culture that encourages challenges ⑤ Introducing innovative operating methods ⑥ Continuous enhancement of resources

Changes in the age structure due to the increase in recruitment of young people

 

Strengthening the sustainability of human capital by expanding the recruitment of young people

 

In particular, in the effort to enhance the quality and quantity of human capital, the shortage of talent has intensified because of the recent growth of the semiconductor industry and the shrinking labor force caused by the declining birthrate and aging population. By reinforcing young human capital through both new graduate and mid-career recruitment, we successfully improved the sustainability of our human capital in terms of both age composition and quantity. At the moment, we are continuing to focus on strengthening human capital by expanding recruitment to achieve the TOK Vision 2030

 

 

 

We plan to introduce a 65-year retirement system with maintained compensation

In the innovative field of semiconductors on the other hand, it is crucial to engage in long-term research and development spanning over ten years, alongside maintaining daily responsiveness. Given that the intellectual capital including the technology and expertise accumulated by senior personnel will generate significant value in our future business strategies, we will implement a 65-year retirement system with maintained compensation starting in 2025. This groundbreaking system maintains the same role-based salary for employees over the age o 60 as they received during their careers of active service. By fully utilizing this system, we aim to enhance our ability to address increasingly complex business and technical challenges while also ensuring the effective transfer of intellectual capital from senior to younger employees, thereby improving the overall quality of our human capital portfolio.

TOK Medium-Term Plan 2024, material issues, and initiatives toward TOK Vision 2030

Focus on further penetration of the new personnel system and Six Priority Measures

The fiscal year ended December 2023 marked the second year of the medium-term strategy to improve employee engagement and to promote people-oriented management, which wa closely linked to the material issue of the pursuit of happiness by personnel”; therefore, we focused on addressing the lack of understanding of the new personnel system identified as a challenge in the first year. To this end, we strengthened evaluator training and initiated efforts to instill the concept and details of the new personnel system into on-site management roles As a result, in the responses to the 2023 engagement survey, we observed clear improvements from the previous year, including an increase in such comments as “I have a deeper understanding of my expected role” and “I have greater satisfaction about feedback from my supervisor.” We also received such comments as “Human capital who can achieve results and fulfill their roles even at a young age can be promoted faster than with the old system. This makes me even more motivated.” In FY 2024, the final fiscal year of the Medium-Term Plan, we will concentrate on the aforementioned Six Priority Measures while further instilling the new personnel system. We will also fully support the concept that happiness equals self-actualization through personal growth for employees.

Further improving corporate value by expanding investment in human capital

The value chain of the TOK Group consists of its advanced technology and the human connections with customers and suppliers. Human capital are the source of these capabilities. By actively investing in human capital, we will promote the evolution of technology and human connections and create sustainable added value. The Group aims to create sustainable added value and enhance corporate value by actively investing in technologies that build value chains and human capital, which are the source of human connections. Most of the investment in human capital is directed to labor costs, and in the past ten years, we have continued to increase wages by about 2% to 5% every year, and education and training costs per capita have also maintained an increasing trend. In particular, we prioritized the enhancement of education and training expenses, following numerous requests for expansion in the FY 2021 engagement survey. Beyond the traditional group training of hierarchical education, we introduced an e-learning system tailored to individual needs in October 2023, which is now being actively utilized. Furthermore, we expanded our award system to further promote a culture of praise. The Mukai Technology Award, which recognizes outstanding R&D, now features a prize amount set above the competitive benchmark, and we have also introduced the TOK Shinka Award for nontechnical departments to foster motivation. In FY 2024, we expanded the award scope to include our overseas group companies as part of our efforts to strengthen global consolidated management. We are committed to creating new value as a unified group.

 

Strengthening “Form a diverse talent pool” and “DE&I” to create further innovation

As mentioned above, the Group is committed to the human capital strategy of forming a diverse talent pool and DE&I to create further innovation. Because both risks and opportunities continue to become maximized in the business environment, innovations and risk management are essential for leveraging diverse insights, values, and specialties so that the TOK Group can continue promoting its purpose of contributing to a sustainable future through chemistry. Therefore, the Group will focus on the further development of female human capital and the further evolution of the utilization of international human capital. The TOK Group achieved a record-high ratio of women in senior and middle management and a record-high ratio of women among the overall employees in the fiscal year ended December 2023 because of the effects of its continued efforts to recruit and retain female employees and to promote them to senior and middle management. The Group also achieved a record-low difference in average tenure figures for men and women. Recently, we strengthened the support for individual female employees as well as for their departments and supervisors. In August 2023, we introduced an overseas expatriate spouse accompanying leave system. In this way, we are accelerating efforts to foster a culture and create mechanisms that support greater participation of women. Moreover, the use of the male childcare leave system has accelerated over the past two years. In the fiscal year ended December 2023, the number of users increased to 24, doubling from the previous year and resulting in a user rate of 67%. We will continue to promote a work environment that makes it easy to balance work and childcare regardless of gender. In the fiscal year ended December 2023, the number and proportion of international employees temporarily decreased because of the exclusion of some overseas subsidiaries from consolidation. However, the overall trend remains upward. Additionally, the ratio of local hires in overseas management positions, which is one of our KPIs for material issues, reached a record high of 56.3%. These tendencies will continue as overseas sales increase. The Group has also continued intra-group human capital exchange for international synergies in insights and values for several years, which is to be further enhanced.

Indices related to female employee participation (Unconsolidated)*1

	2019/12	2020/12	2021/12	2022/12	2023/12
Ratio of women among new hires (%)	39.4	38.5	17.0	26.4	22.4
Ratio of women among the overall employees (%)	13	13.7	14.0	14.6	15.3
Difference in average tenure figures for men and women (years)	9.3	9.1	8.4	8.1	7.9
Ratio of women in senior and middle management (%)	3.3	3.2	3.8	4.0	4.5
Ratio of women on the Board of Directors (%)*2	7.7	7.7	7.1	10.0*2	20.0*2

*1 Tokyo Ohka Kogyo Co., Ltd. only (employees exclude those seconded from TOK to other companies and contract workers, and include people seconded from other companies to TOK)

*2 The ratio of women on the Board of Directors is as of 2024.

 

Wage difference between male and female employees(percentage of female wage to male)*1

 

	2019	2020	2021	2022	2023/12
All workers (%)	49.7	59.1	65.5	65.4	71.3
Permanent employees*2 (%)	65.5	67.4	69.4	68.2	70.0
Fixed-term employees*3 (%)	33.9	49.8	60.4	61.5	83.4

*1 Wage: Includes base salary, payment for overtime work, and bonuses but excludes retirement allowance,
commuting allowance, and other allowances.
*2 Permanent employees: Secondees exclude those seconded from TOK to other companies
but include persons seconded from other companies to TOK
*3 Fixed-term employees: Include temporary employees but exclude dispatched temp staff

Supplementary explanation concerning difference: Although there are no gender-based differences in the wage system or policies, gender disparities exist in the distribution of personnel by grade, including management positions, which has led to differences in wages. In the coming years, TOK will promote the appointment of female managers toward a KPI objective for the material issue of the ratio of women in senior and middle management with the goal of doubling the level by 2030 (vs. 2020).

Number of users of childcare-related systems (Unconsolidated)

	2019	2020	2021	2022	2023/12
Childcare leave system (number of users)	16	19	27	31	40
Shorter working hours (number of users)	13	12	16	17	24
Childcare time (number of users)	16	16	13	15	23
Childcare leave system (number of male users)	1	5	8	12	24

Number of non-Japanese employees

	2019	2020	2021	2022	2023/12
Number of non-Japanese employees (non-consolidated)	16	18	18	24	16
Number of non-Japanese employees (consolidated)	412	424	476	524	457
Ratio of non-Japanese employees (consolidated, %)	23.9	24.2	26.2	26.9	24.3

* The decrease in 2023/12 was due to the restructuring of overseas consolidated subsidiaries.

Ratio of employees with a disability

	2019	2020	2021	2022	2023/12
Ratio of employees with a disability (non-consolidated, %)	2.37	2.67	2.45	2.42	2.21

By reinvesting the fruits of growth in human capital, we will continue to turn a virtuous cycle of human resource happiness (= self-realization) and corporate value improvement

Through the series of human capital initiatives described above, the Group will continue to invest in human capital and promote the self-realization of each individual by enhancing their skills and capabilities. By addressing more complex social and technical challenges and contributing to strategic trade-ons, we aim to further enhance the value and competitiveness of our products. This will allow us to achieve further revenue growth and to enhance corporate value. By reinvesting the fruits into human capital, we will continue to create a virtuous cycle of improving the happiness (= self-realization) of each individual and enhancing corporate value. Going forward, we invite you to look forward to the enhancement of our corporate value driven by the well-being of our talent at TOK.

 

Relationship with the labor union

The Tokyo Ohka Kogyo Labor Union was formed in 1976 and belongs to UA Zensen. As of December 31, 2023, there were 1,193 members of this labor union in the Company, and 81.4% of the Company's employees are members of the labor union. Labor-management relations have been good since the labor union was formed, continuing along the path of “labor-management cooperation.” A “Central Labor-Management Council” is held once every two months to exchange opinions on the management environment and labor-management issues. In the fiscal year ending December 31, 2020, a “Labor-Management Study Committee on Personnel System” was established as a forum for labor-management discussions on a new personnel system, reemployment system, etc. The committee will meet in January 2022 to discuss the new personnel system and reemployment system. The new personnel system and reemployment system will be introduced on January 1, 2022. Furthermore, discussions regarding the extension of the retirement age were held on an ongoing basis, and labor and management reached an agreement at the end of May 2024. Currently, labor and management are cooperating to launch the “Extension of the Retirement Age to 65”, “Elder Meister System”, and “Point System Retirement Allowance System” systems on January 1, 2025.