We think of corporate governance as a mechanism that ensures sound, efficient management to provide stakeholders with sustainable, medium- to long-term profits. Based on this idea, we strive to ensure management decisions are made promptly, and work to clarify the management responsibility and responsibility for executing operations. At the same time, we take initiatives for strengthening the management’s monitoring function, compliance, risk management, and internal control system under our Board of Directors and Audit & Supervisory Board, whose members include highly independent outside officers.
Compliance with the Corporate Governance Code
We complies with every principle of Japan's Corporate Governance Code.
The Company has established the following items regarding strategic shareholdings.
(1) Policy on strategic shareholdings
Each year, the Board of Directors comprehensively discusses the Company’s strategic shareholdings, including aspects such as the necessity of maintaining or enhancing transactional and other relationships with the investee company, whether the benefit of holding the shares is commensurate with the capital cost, and whether such holdings will contribute to increases in the Company’s corporate value over the medium to long-term. If no rationality for holding the shares can be confirmed, then the shares are sold, while also giving consideration to the impact on the market and other pertinent matters.
(2) Policy on the exercise of voting rights on strategic shareholdings
Before exercising its voting rights, the Company comprehensively determines whether it approves or rejects each of the proposals, giving adequate weight to the management policies, strategies, and other aspects of the investee company and confirming such factors as whether the proposals would comply with the Company’s holding policy and whether they would contribute to increasing the investee company’s corporate value over the medium to long-term and its shareholder returns.
Policy and Procedures in the Nomination of Officer Candidates
Nominations of director candidates and audit & supervisory board member candidates are explained in advance to the independent outside directors. Then, after receiving appropriate advice from the independent outside directors and the contents of the Nomination and Remuneration Advisory Committee’s deliberation, the Board of Directors passes a resolution. The candidates are then proposed at the General Meeting of Shareholders. Nominations of Audit & Supervisory Board member candidates are approved by Audit & Supervisory Board in advance.
|Directors||We operate business activities globally in diverse fields, including chemicals, performance materials, agricultural chemicals, and pharmaceuticals. In nominating candidates for our directors, we consider the balance between knowledge, experience, capabilities, and other elements of the overall Board of Directors and its diversity to ensure that our directors can make decisions regarding the business activities in diverse fields, including chemicals, performance materials, agricultural chemicals, and pharmaceuticals, and supervise the execution of operations in an appropriate and flexible manner. The candidates to be nominated shall also be physically and mentally healthy, have excellent personalities and aspirations, and have a high level of insight and ethics.
Human resources who have expertise, knowledge and other capacities in each business field such as corporate planning, personnel, finance & accounting, research and development, production technology, environment, safety & quality assurance and others.
Human resources who are capable of giving opinions proactively, raising questions and giving advice on growth strategies, the enhancement of governance and other issues from the viewpoints of various stakeholders and society.
|Audit & Supervisory Board Members||Human resources with a wide range of experience and knowledge in specialized fields including finance, accounting, and legal affairs who are capable of giving opinions and advice to the management from a fair and neutral standpoint, in addition to auditing the execution of operations.|
Reasons for Appointment of Outside Officer and their attendance
|Name||Reason for appointment||Attendance at the Board of Directors meetings in FY2020 (Number of attendance / Number of meetings held)|
Appointed in June
|We believe that Mr. OHE has reflected his extensive experience, including his experience of outside director at several companies and expertise as attorney-at-law in our corporate management with objective and neutral standing-point, and will continue to fulfill the duties appropriately.||11/11|
Appointed in June
|After having served as director of Hitachi High-Tech Corporation, Mr. OBAYASHI serves as Honorary Consultant for the same company. As an executive of a corporate group that develops a variety of businesses globally, we believe that his extensive experience and broad insight can be reflected in our corporate management from an external perspective from an objective and neutral standing-point.||11/11|
Appointed in June
|Mr. KATAOKA has been engaged in research involving the application of nanotechnologies in the fields of biomedical engineering and biomaterial engineering for many years and is currently serving as the Director General of Innovation Center of NanoMedicine, Kawasaki Institute of Industrial Promotion. We believe that his expertise as doctor of engineering, abundant experience, and wide-ranging knowledge can be reflected in our corporate management from an external perspective from an objective and neutral standing-point.||10/10|
Appointed in June
|Ms. NAKAGAWA Miyuki worked for many years as a prosecutor in the Tokyo District Public Prosecutors Office and the Tokyo High Public Prosecutors Office and she has abundant practical experience in legal circles. We believe that her expertise as legal profession, abundant experience, and wide-ranging knowledge can be reflected in our corporate management from an external perspective from an objective and neutral standing-point.||-|
|Name||Reason for appointment||Attendance at the Board of Directors meetings, etc. in FY2020 (Number of attendance / Number of meetings held)|
|Outside Audit & Supervisory Board Members||SUZUKI Norihiro
Appointed in June
|Mr. SUZUKI has a wide range of knowledge, including extensive experience and finance expertise those are cultivated through many years of business at financial institutions. We believe that he has reflected his knowledge in our corporate audit with objective and neutral standing-point, and will continue to fulfill the duties appropriately.||Board of Directors meetings: 11/11
Audit & Supervisory Board’s meetings: 11/11
Appointed in June
|Mr. TAKEMOTO has a wide range of knowledge, including extensive experience and finance expertise those are cultivated through many years of business at financial institutions. We believe that he has reflected his knowledge in our corporate audit with objective and neutral standing-point, and will continue to fulfill the duties appropriately.||Board of Directors meetings: 11/11
Audit & Supervisory Board’s meetings: 11/11
Appointed in June
|Mr. KATAYAMA has an extensive experience including the experience of outside director/auditor at several companies and expertise as attorney-at-law. We believe that he has reflected his knowledge in our corporate audit and will continue to fulfill the duties appropriately.||Board of Directors meetings: 11/11
Audit & Supervisory Board’s meetings: 11/11
Independence Standards for Independent Outside Directors
The Company’s independence standards for Outside Officers are as follows:
The Company’s independent Outside Officers (Directors and Audit & Supervisory Board Members) and independent Outside Officer candidates fulfill the Companies Act’s requirements for Outside Officers, as well as the following independence standards.
(1) Not being an executive (a person who executes business; hereinafter, the same) of the Company or its subsidiaries, nor having been an executive of the Company or its subsidiaries for the past 10 years (if however, a non-executive director or audit & supervisory board member of the Company or its subsidiaries at some point in the past 10 years, the 10 years prior to being appointed to that role)
(2) Not being one of the Company’s major shareholders (a shareholder with 10% or more of voting rights) or an executive thereof
(3) Not being an executive of a corporation of which the Company is a major shareholder (a shareholder with 10% or more of voting rights)
(4) Not being a major client or supplier (a client or supplier from whom the value of average payments for transactions to the Company or its subsidiaries over the past 3 fiscal years exceeds 2% of the average annual consolidated net sales of the Company over the past 3 fiscal years) of the Company or its subsidiaries or an executive thereof
(5) Not being a party whose major client or supplier is the Company or its subsidiaries (a party to whom the value of average payments for transactions by the Company or its subsidiaries over the past 3 fiscal years exceeds 2% of the average annual consolidated net sales of that party over the past 3 fiscal years), or an executive thereof
(6) Not being an executive of a major financial institution with which the Company has borrowings (a financial institution from whom the average amount of the Company’s consolidated fiscal-year-end balance of borrowings over the past 3 fiscal years exceeds 2% of the Company’s average annual consolidated fiscal-year-end total assets over the past 3 fiscal years) nor having been an executive thereof for the past 3 years
(7) Not being an attorney, certified public accountant, certified public tax accountant, other consultant, researcher or educator in receipt from the Company of a large amount of monetary consideration or other property (an average annual amount over the past 3 fiscal years of over ¥10 million for individuals or, in the event the recipient is a corporation or other organization that said individual is affiliated with or retained by, of an amount in excess of 2% of that organization’s average annual total revenues over the past 3 fiscal years) other than Director or Audit & Supervisory Board Member remuneration
(8) Not being a close relative (spouse, person within the second degree of kinship or relative living together) of an executive (limited to key personnel) of the Company or its subsidiaries
(9) In addition to items (1) through (8) above, being such person as the Board of Directors determines to be a person whose independence as an independent Outside Officer is unquestionable and for whom there is no rationally determined risk of a conflict of interest with the general shareholders of the Company.
Policy on Determination of Officers' Remuneration
1. Basic policy
In determining remunerations for our Directors, we, the Company, maintain, as our fundamental principle, the remuneration structure that encourages the Directors to contribute to increasing operating performance on a continuing basis over the medium-to-long-term and toward enhancing the overall value of the Group in line with the Company’s management policy; thereby, meeting our shareholders’ expectations. Under the principle, we make it our basic approach to set the appropriate level of remunerations, taking into account such factors as the management environment, operating performance, and consistency with payments and benefits for our employees.
Specifically, the Directors' remuneration package shall consist of monetary remuneration (base remuneration and performance-related one) and performance-linked stock compensation. The monetary remuneration is divided into the base remuneration and the performance-related one determined according to several factors, including the fluctuation of our employees’ bonuses to be decided holistically considering various circumstances. However, in the light of their roles and independence from the Company, the Outside Directors’ remuneration package shall be simply the base remuneration as monetary payment, not containing the performance-linked stock compensation.
As for the performance-linked stock compensation, it is aimed to raise the Directors’ consciousness for improving the Company’s operating performance over the medium-to-long-term and contributing to the enhancement of corporate value by clarifying the linkage between the Company’s performance and its stock price, and by having them share with our shareholders not only the benefits of an increase but also the risk of a decrease in the stock price.
2. Policy on determining the respective amounts of monetary remuneration (base remuneration and performance-related one) for individual Directors (including rules on determining the time or the conditions of payment)
The base remuneration of monetary one for a Director shall be an annual fixed pay. It shall be determined according to his/her title, duties, and holistically considering the level of other companies’ directors’ payments, the Company’s operational performance, and the level of our employees’ salaries.
Also, the performance-related remuneration shall be an annual fixed pay. It shall be determined according to several factors, including the fluctuation of our employees’ bonuses to be decided holistically considering various circumstances.
The above annual monetary remuneration for individual Directors shall be decided to fall, when totaling, within the limits of the total amount of the Directors’ remunerations determined by resolution of a general meeting of shareholders and will be paid to each Director every month in twelve installments.
3. Policy on determining details of performance-linked stock compensation, the breakdown of performance indicators, and the methodology to calculate the amount or the number of evaluation points for performance measurement (including rules on determining the time or the conditions for giving the stock compensation)
As for the performance-linked stock compensation for the Directors, every fiscal year, the Company shall compute a specific number of evaluation points for each Director by multiplying (i) his/her title point depending on the job title which he/she has assumed during the execution of duties by (ii) the performance measurement index showing the achievement of the performance targets consisting of income attributable to owners of our parent company (year-on-year rate of change and the average rate of change over the last three years), EBITDA (year-on-year rate of change), ROE (actual results for the current fiscal year), as well as the comparison of rates of year-on-year volatility with respect to the Company’s stock price and TOPIX, provide that the above evaluation points to be given to the Directors shall be up to the limit determined by the resolution of a general shareholders’ meeting. The above evaluation points shall be accumulated until the retirement of each Director, respectively. At the same time, the Company shall contribute a specific amount of cash to the Board Benefit Trust as its funds up to the limit determined by resolution of a general shareholders’ meeting. Upon the retirement of a Director, the Company shall vest him/her a specific number of the Company’s stock equivalent to the number of his/her accumulated evaluation points. When a Director retires for the expiration of his/her term of office, he/she will be given the Company’s stock equivalent to about 75% of the accumulated evaluation points and the remaining approximately 25% in cash (which sum is computed at the current price of the Company’s stock at the time of his/her retirement).
The performance indicators and their targets, which are the basis of granting evaluation points, shall be reset each time of formulating the Company’s medium-term management plan to align with the said plan. The Company shall determine those indicators and targets by the Board of Directors’ resolution based on advice from the Nomination and Remuneration Advisory Committee.
4. Policy on determining the proportion of monetary remuneration and performance-linked stock compensation to the total remunerations for individual Directors
For the proportion of each of the Directors’ remuneration types (except for Outside Directors), the Nomination and Remuneration Advisory Committee shall deliberate based on the remuneration levels in the industry using the data of other companies in similar business sizes as the Company as well as related business types and categories as a benchmark. The Board of Directors and the Representative Director who is delegated from the board shall respect the Nomination and Remuneration Advisory Committee's proposal and determine details of remunerations for individual Directors within the respective limits of each remuneration type suggested in the proposal.
The approximate proportion of the respective remuneration types shall be reset each time of formulating the Company’s medium-term management plan and determined by the Board of Directors’ resolution based on a proposal from the Nomination and Remuneration Advisory Committee. The following proportion is currently effective as fixed when formulating the ongoing medium-term management plan commenced in the fiscal year 2019.
The proportion of the base remuneration (monetary remuneration), the performance-related remuneration (monetary remuneration), and the performance-linked stock compensation to the total remunerations shall be 68:25:7. (where the achievement of the performance indicators' targets is 100%).
5. Matters regarding the delegation of a decision on details of remunerations for individual Directors
For the monetary remuneration (base remuneration and performance-related one) for individual Directors, the Representative Director will be delegated the authority to decide the breakdown based on the Board of Directors' resolution. Specifically, the Representative Director will be authorized to determine the specific amounts of base remuneration and performance-related one for each Director. The Representative Director will prepare a draft on those respective amounts. To ensure the appropriate execution of the authority by the Representative Director, the Board of Directors shall seek and receive advice or comments from the Nomination and Remuneration Advisory Committee. The Representative Director delegated as above shall respect the said advice to make his/her decision.
6. Other matters regarding the process to determine details of remunerations for individual Directors
The Company has established the Nomination and Remuneration Advisory Committee as an advisory body to the Board of Directors. Accordingly, the Company shall ask the Nomination and Remuneration Advisory Committee to deliberate and advise on the establishment, amendment, or abolishment of any existing policy regarding the Directors’ remunerations and the determination of the Directors’ monetary remuneration, to ensure the appropriateness of the remuneration levels as well as objectivity and transparency of the decision-making process. The Nomination and Remuneration Advisory Committee shall consist of three committee members or more to be appointed by resolution of the Board of Directors, and independent Outside Directors shall form its simple majority.
Our Corporate Governance System
Execution and supervision of operations
By introducing a system with executive officers, we clarify the management’s function of prompt decision-making and supervision and the function of executing operations, thereby strengthening both. We also strive to improve management’s capabilities to develop and execute our management strategies. In addition, we have set a one-year term for each director and executive officer, thereby clarifying the management responsibility and the responsibility for executing operations.
Board of Directors
Our board meets monthly in principle, to resolve important management matters. It also supervises the execution of operations by directors and executive officers. We ensure that important management matters are determined through careful deliberations at the Board of Directors meetings or management meetings in our efforts to eliminate or reduce business risks. In addition, the details of decisions made at the management meetings and the results of business executions based on decisions made at the Board of Directors meetings, etc. are reported to the Board of Directors to enhance the supervising function of the Board of Directors meeting. We further strive to ensure and improve effectiveness in execution of roles and responsibilities of the Board of Directors by conducting the effectiveness evaluation on the overall Board of Directors every fiscal year.
Audit & Supervisory Board
We have established the Audit & Supervisory Board. In accordance with auditing plans formulated by the Audit & Supervisory Board, the Audit & Supervisory Board members audit the execution of directors’ operation by participating in the Board of Directors meetings and other important meetings, and by regularly visiting each division / department of the Head Office and plant / laboratory to exchange opinions.
We have appointed the Yaesu Audit Company as our accounting auditor. They audit at the end of each fiscal year, and during the fiscal year when necessary.
We have the Internal Audit Department, which conducts fair and independent internal audits targeting the group companies. The department reports the internal audit results to the President & COO and to the directors in charge, as well as to the Board of Directors. The department also shares information with our accounting auditor and the Audit & Supervisory Board members and coordinates with them, mainly through exchanges of opinion.
Support for Outside Directors and Audit & Supervisory Board Members
The Corporate Planning Department supports outside directors by giving them prior explanations of the contents of the agenda and other matters to be discussed at the Board of Directors meetings, and serves as a contact for inquiries. For outside Audit & Supervisory Board members, we have appointed audit assistants in response to requests from them. Audit assistants are employees who help outside Audit & Supervisory Board members fulfill their duties efficiently and smoothly. They serve as coordinators for holding internal audits, Audit & Supervisory Board’s meetings, and other meetings, help outside Audit & Supervisory Board members conduct audits, and collect and provide information to them.
Nomination and Remuneration Advisory Committee
We have established under the Board of Directors a Nomination and Remuneration Advisory Committee mostly consisting of independent outside directors for the purpose of strengthening the Board of Directors’ independence, objectivity and accountability in relation to matters such as the nomination and remuneration of Directors and further strengthening corporate governance. In response to the Board of Directors’ request for consultation, the Committee shall deliberate the matters such as the nominations of director candidates and Audit & Supervisory Board member candidates, the appointment of senior management, the plans for successors of senior management, and the remuneration of directors, and report the contents of their deliberations to the Board of Directors.
Relationships between our corporate organizations and internal control, etc.
|Male||People||2 (2)||2 (2)||3 (3)||3 (3)|
|Total||People||2 (2)||2 (2)||3 (3)||3 (3)|
|Ratio of independent outside directors (Actual)||%||22||25||33||33|
|Ratio of independent outside directors (Target)||%||-||33||33||33|
|Ratio of female directors||%||0||0||0||0|
|Audit & Supervisory Board members||Inside Audit & Supervisory Board members||Male||People||1||1||1||1|
|Outside Audit & Supervisory Board members
|Male||People||3 (1)||3 (1)||3 (2)||3 (3)|
|Total||People||3 (1)||3 (1)||3 (2)||3 (3)|
|Altogether||People||4 (1)||4 (1)||4 (2)||4 (3)|
|Ratio of independent outside Audit & Supervisory Board members||%||25||25||50||75|
|Ratio of female Audit & Supervisory Board members||%||0||0||0||0|
- Data is as of after the General Meeting of Shareholders held in June of each year.
Number of Major Meetings and Attendances※
|Board of Directors meeting||Times||12||12||12||11|
|Attendance of directors at Board of Directors meetings||%||99.1||100||99.0||96.0|
|Attendance of Audit & Supervisory Board members at Board of Directors meetings||%||100||97.9||100||100|
|Audit & Supervisory Board’s meeting||Times||12||12||12||11|
|Attendance of outside Audit & Supervisory Board members at Audit & Supervisory Board’s meetings||%||100||97.9||100||100|
- Data from April to March of each fiscal year
(excluding outside directors)
|Number of officers※1||People||9||8||6||7|
|Audit & Supervisory Board members (excluding outside Audit & Supervisory Board members)||Remuneration||Million yen||27||27||28||28|
|Number of officers※1||People||1||1||2||1|
|Outside officers||Remuneration||Million yen||80||80||88||94|
|Number of officers※1||People||6||5||6||7|
- 1 Above number of Directors and Audit & Supervisory Board Members, remuneration , etc. include remunerations for officers who resigned at the close of General Meeting of Shareholders. There are no officer’s remuneration, etc. received by outside officers from our subsidiaries.
- 2 Due to rounding off figures, there are places where the sums for each item do not match the total.
Analysis and Evaluation of the Effectiveness of the Overall Board of Directors (Effectiveness Evaluation of Boards)
We perform analysis and evaluation (the “Effectiveness Evaluation”) every year to see if the Board of Directors has fulfilled its roles and responsibilities and carry out a third-party evaluation every several years using an external organization that holds no relationships of interest with us in order to ensure neutrality and objectivity.
We conducted the third-party evaluation in the fiscal year 2020, and based on the results of the Effectiveness Evaluation implemented with the third-party evaluation, including the questionnaire responses, we had an internal opinion-exchange meeting in April 2021. The meeting was attended by all independent Officers consisting of three Outside Directors and three Outside Audit & Supervisory Board Members (including two full-time members), the Chairman & CEO, the President & COO, and the Senior Executive Vice President. They discussed, analyzed, and evaluated issues and necessary measures, and those results were further discussed and confirmed at the Board of Directors held in May 2021.
As a result of the Effectiveness Evaluation for fiscal year 2020, it was concluded that our Board of Directors was generally operating appropriately overall from the perspective of carrying out its primary roles and responsibilities and that the effectiveness of the Board of Directors was ensured as improvement measures were taken with regard to issues identified in the previous Effectiveness Evaluation for the fiscal year 2019.
Through the discussions made as above, we recognized the following issues to address for further enhancing the effectiveness of the Board of Directors and determined to work on improvements.
- (1)To promote deeper discussions at the Board of Directors with regard to the Company’s directions, strategies, business portfolio, development of new business fields, and risks. When discussing on the medium and long-term directions, the Board of Directors provides its members with a forum for “free discussion” to exchange their opinions from various viewpoints.
- (2)When discussing on medium to long-term issues, the Board of Directors facilitates a debate about our sustainability, relating to our management strategies and from the viewpoints of risks and opportunities.
- (3)To consider how to set appropriate agenda to enable the Board of Directors to focus on the discussion on material matters over the medium to long term.
- (4)To make further efforts to deepen Outside Directors’ understandings of our business and management strategies and to use opportunities for briefings and discussions other than the Board of Directors.
- (5)To discuss at the Nomination and Remuneration Advisory Committee about the Board of Directors itself, for example, what the Board of Directors is supposed to be, what roles Inside Directors should take, what kind of person (in terms of gender, nationality, expertise, etc.) should be appointed as an Inside Director, and what is the balanced ratio of Inside Directors and Outside Directors to the whole Board of Directors.
- (6)To discuss at the Nomination and Remuneration Advisory Committee how to share the information with the Board of Directors.