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Special Feature on Corporate Governance - Annual Report 2017

A look at the special feature on corporate governance

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Two companies with the same DNA are enhancing brand value to make
the Yamaha brand shine even more brightly around the world and in new business areas.

Takuya Nakata
Outside Director,
Yamaha Motor Co., Ltd.
(President and Representative Executive Officer, Yamaha Corporation)

dialogue

Hiroyuki Yanagi
Chairman and Representative Director,
Yamaha Motor Co., Ltd.
(Outside Director, Yamaha Corporation)

Yamaha Motor is working to strengthen its corporate governance as the foundation for continuous enhancement of corporate value. Chairman Hiroyuki Yanagi and Outside Director Takuya Nakata discuss their thinking about the two companies’ joint use of the Yamaha brand and cross-shareholding, and what needs to be done to make the companies’ corporate governance even stronger.

Q What is the significance and what are the benefits of the joint use of the Yamaha brand?

Yanagi Yamaha Motor and Yamaha Corporation are both companies with the Yamaha brand. Based on the concept of protecting the brand and enhancing brand value, the two companies have established the Yamaha Brand Charter and Joint Brand Regulations. At the core of the charter is “delivering exceptional value and experiences that enrich the lives of everyone who comes into contact with Yamaha.” A Joint Brand Committee serves as a venue where top management of the two companies can meet and discuss whether both companies are carrying out their work in accordance with the charter, and see what more can be done in terms of cooperation to enhance the Yamaha brand even further. The continuous growth of Yamaha’s brand value is the primary objective of the two companies’ cooperation. We are constantly thinking about how to remove negative factors that could damage brand value and how to maximize positive factors.

Nakata There are other examples of two companies using the same brand, but I don’t know of any other cases where the companies involved share a common sense of purpose so closely. Because both companies share the same origin, it is in our common DNA to pursue highly distinctive products as a matter of course. Based on the concept of lifetime value, I am certain that we will be able to work even more closely together to form a long, deep relationship with customers and enhance Yamaha’s brand value even further.

Yanagi The Yamaha brand overall provides unique products in a wide range of fields, from vehicles to musical instruments. Our companies are also very unique in that we provide value throughout our customers’ lifetimes, from childhood to adulthood. For example, traffic safety programs we offer for children in various places in India have educational events that involve music. And in the ASEAN region, we hold musical events together with motorcycle races for young people. These activities, which effectively combine the two companies’ businesses, meaningfully convey the appeal of the Yamaha brand across generations. By pursuing joint businesses that address the various stages of our customers’ life cycles, I hope to make the Yamaha brand even more valuable.

Nakata At a global exhibition of musical instruments in North America, we also used part of the space to exhibit motorcycles, and customers who saw this reacted favorably, saying, “Just like Yamaha.” Yamaha Motor is ahead of Yamaha Corporation in terms of international expansion, and is providing important infrastructure with products like motorcycles and outboard motors. The brand recognition and trust of these attractive, high-quality products create very significant synergies that we are able to use as we expand globally. In addition, the two companies’ design divisions have worked together on concept models, which have been recognized by the global design world as products that express each company’s uniqueness with a natural, subtle beauty.

Q Please tell us about the most important aspects of your serving as Outside Directors of each other’s companies and cross-shareholding.

Yanagi Serving concurrently as Outside Directors and cross-shareholding make both companies more influential in a positive way. I consider the important thing about the two companies’ relationship to be, more than functioning as a mutual check on each other, promoting a sense of challenge for both companies to grow while remaining healthy and dynamic. The Yamaha Brand Charter also uses the phrases “determination to pursue continuous evolution” and “challenge and creative ingenuity,” and both companies are constantly thinking about whether they are maintaining an environment that creates truly Yamaha experiences, and providing appropriate advice.

Nakata I believe the true significance of cross-shareholding is the mutual commitment to the two businesses in a healthy way. If the other business grows, our own business gets a corresponding boost, and this makes the brand shine even more brightly.

A change is occurring in employee motivation regarding brand value enhancement at both companies, and I see this as a major synergy from the joint use of the Yamaha brand.

Q What roles do you play and what do you bear in mind as Outside Directors of each other’s companies?

Yanagi The Yamaha brand expresses our passion for enabling customers to experience Kando. When I listen to various reports as a member of Yamaha Corporation’s Board of Directors, I consider my role to be to examine whether products are being made with passion, whether quality is being pursued to its utmost, and whether innovation is occurring. I also express my opinions without reservation. The mission of both companies is to embody the common brand, and the monthly meetings of the Board of Directors are where we confirm this mission together.

Nakata Yamaha Motor’s Board of Directors discusses how to enable customers to understand the Yamaha brand and what else can be done in this area. I feel that the bar for passion is set very high at Yamaha Motor. From my position as an Outside Director, therefore, I consider it important that I calmly look at the activities being undertaken and give advice accordingly. I find it very stimulating personally when I see individual members of Yamaha Motor’s Board of Directors communicate to outside the Company in various aspects, and I strive to instill this passion in our employees at Yamaha Corporation. In addition, the commitment and close communication between the senior management of the two companies through venues like the Board of Directors and the Joint Brand Committee have led to self-initiated communication among employees at all levels. A change is occurring in employee motivation regarding brand value enhancement at both companies, and I see this as a major synergy from the joint use of the Yamaha brand.

The mission of both companies is to embody the common brand, and the monthly meetings of the Board of Directors are where we confirm this mission together.

Q What issues exist with regard to corporate governance at the two companies, and what is your vision going forward?

Nakata I view corporate governance as how a person in a top position at a company thinks, and how people in management positions and executive positions commit to that way of thinking. In 2017, Yamaha Corporation became a “Company with Committees.” One of the benefits of this has been a reduction in the number of items brought before the Board of Directors, which has allowed the Board to have more active, in-depth deliberations. Since this change, I feel even more strongly that the important thing for management is to look very closely at what is essential for growth, and to act quickly to move in that direction. The enthusiasm and imagination of Yamaha Motor’s employees are superb, and the Company pushes into new areas without reservations. It is also important, however, to closely examine the associated risks from an objective perspective, without impeding this forward momentum. I believe that we as Directors need to understand both sides of this equation.

Yanagi I think that the direction and depth of passion are vectors of emotion and logic. Balanced, strong passion is not possible if management leans too far toward emotion or toward logic. As Mr. Nakata has pointed out, Yamaha Motor employees tend to be inclined toward emotion, but there is no question that a management culture that encourages the pursuit of new challenges and free and open-minded deliberation has been the driving force behind the creation of a variety of original products over the past 60 years. In addition, going forward, I want Yamaha Motor to be a company in which management and employees feel close to each other. By stressing the importance of management and employees being as one in the Company systems, structures and management’s mindset, I hope to maintain an organizational culture that supports swift decision-making and high product quality. The main issue facing the Company over the next 10 years is how to generate the next ¥1 trillion. Under the current Medium-Term Management Plan, various measures are being implemented as the groundwork for new business fields, and I hope to accelerate and begin to see concrete results in these areas under the next Medium-Term Management Plan. This will also make it important to have a structure in which management and employees feel that they are working closely together, to be able to lay the groundwork for and cultivate successive businesses while keeping a close eye on those businesses’ prospects for the future.

Nakata Yamaha Corporation has also outlined a growth strategy in its current NEXT STAGE 12 Medium-Term Management Plan, which focuses on increasing profitability. I believe we still have room to increase our brand value in the musical instrument and music markets. Musical instruments and audio equipment are rooted in the senses, and a price cannot be put on sensitivity. Our objective is to compress the brand to create a premium brand image. Yamaha Motor’s direction is a bit different, but we are the same in terms of aiming even higher. To achieve this, we both need to do things differently than other companies. My challenge is to create new value in areas based on music and sound.

Yanagi It looks like there are many things we can still do together. I look forward to that.

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