The Sekisui Chemical Group Has Put in Place Its Own Corporate Governance System That Reflects Its Division Company Structure

Basic PhilosophyImprove corporate value by enhancing transparency and fairness in management

To maximize corporate value, the Sekisui Chemical Group has built its management structure based on a system of three division companies. Believing that increasing the transparency and fairness of management and pursuing swift decision-making are important to continually increasing corporate value amid a changing business environment, we implement a variety of efforts related to corporate governance.

Corporate Governance System

Corporate Governance System

* Note: Please refer toSee Open with New Windowthe Corporate Governance for details.the Corporate Governance Report for details.


Strengthening the Business Execution FunctionExecutive Committee Established to Serve as the Top Decision-making Body in Each Division Company

Together with assigning to each division company operating officers specializing in business execution, an Executive Committee has been established to serve as the top decision-making body in each division company. As such, a broad range of authority has been transferred from the Board of Directors to the Executive Committee.

The Board of Directors strives to achieve continual improvements in corporate value as an organization responsible for decisions on basic policies of the Sekisui Chemical Group’s management as well as high-level management decision-making and supervision of business execution.

Nomination of Outside Directors

To ensure the independence of its outside directors, Sekisui Chemical's rules regarding outside directors stipulate that persons affiliated with major shareholders and major suppliers cannot be nominated as candidates for outside director.

In 2016, Kunio Ishizuka and Yutaka Kase were both designated independent board members based on the definition set by the Tokyo Stock Exchange. Mr. Ishizuka attended fifteen meetings of board directors out of seventeen Board of Directors meetings. Mr. Kase, who has assumed the office since June 28, 2016, attended all thirteen meetings of board directors held since then.

Messrs. Ishizuka and Kase play an important role in enhancing the Company’s corporate governance. To this end, Mr. Ishizuka gives advice to the Company by utilizing his experience and knowledge as a management executive at the forefront of the retail and service industries, while Mr. Kase has abundant experience and past achievements regarding global corporate management and business strategy, which were developed as a corporate manager of a general trading company.

  • Operating officer system (term: one year)
  • Early issue of notices of annual general meetings of shareholders
  • Exercise of voting rights electronically in annual general meetings of shareholders
  • Formulation of rules on corporate information disclosure


Policies Concerning the Internal Control SystemThe Sekisui Chemical Group working in unison to develop an internal control system

The Company's directors, operating officers, and employees observe high standards of business ethics. At the same time, Sekisui Chemical places the upmost emphasis on complying with all pertinent statutory and regulatory requirements in Japan and overseas as well as international and in-house rules. Priority is also placed on transparent and fair transactions, and strictly adhering to commonly held principles and corporate ethics.

In addition, reaffirming the importance of an internal control and risk management system, the Company is advancing a variety of measures aimed at enhancing internal regulations necessary for risk management. Among these initiatives, Sekisui Chemical is upgrading and expanding internal audits as well as setting up a department to carry out crisis management measures. The Company is also undertaking risk-related training programs and awareness-raising activities.


Status of the Internal Control SystemImplementation of system updates and measures to establish the Internal Control System

  • Introduced Division Company system and Executive Officer system, established Executive Committee to serve as the top decision-making body in each division company
  • Instituted Corporate Activity Guidelines based on the Group Philosophy
  • Established CSR Committee, headed by the President
  • Established Compliance Subcommittee under CSR Committee
  • Continued operation of the S.C.A.N. (Sekisui Compliance Assist Network) Whistle-blowing Program
  • Formulated the Sekisui Chemical Group Compliance Manual
  • Identified significant risks while collecting and evaluating risk information in a centralized/complete manner based on the SEKISUI CHEMICAL GROUP Risk Management Guidelines
  • Formulated crisis management guidelines for the Sekisui Chemical Group to be prepared for significant risks
  • Stored and managed information concerning the execution of duties by directors and executive officers in accordance with document management rules
  • Recently established an overseas umbrella organization to enhance the ability of local companies located overseas to implement corporate initiatives


Compliance with the Corporate Governance CodePutting in place 「the Sekisui Corporate Governance Principles」

The Sekisui Chemical Group sets forth as the basic policy for corporate governance the promotion of sustainable corporate growth and the increase of corporate value over the medium/long term.

In addition, the Company has established and disclosed the Sekisui Corporate Governance Principles for the purpose of further evolving the initiatives of the Group to improve its corporate governance and communicating our corporate governance approach and initiatives to our stakeholders.

In addition to the above Principles, the status of the Company's initiatives and its approach with respect to all 73 items of the Corporate Governance Code consisting of the General Principles, Principles and Supplementary Principles have been summarized and disclosed in the form of the Initiatives to Each of Principles of the Corporate Governance Code.

The Sekisui Chemical Group will enhance the transparency/fairness of management, pursue prompt decision-making, and continue to fulfill the expectations of stakeholders through the creation of social value.

* Corporate Governance Code:
A set of codified principles that layout specific policies toward corporate governance and a code of conduct that publicly listed companies should be expected to observe. Major nations outside Japan began adopting a corporate governance code from the 1990s. A corporate governance code was first introduced in Japan by the Financial Services Agency and the Tokyo Stock Exchange in March 2015 and took effect from June 2015.



Compensation SystemEstablished a Nominating and Remuneration Advisory Committee

Sekisui Chemical has established an optional advisory committee on nominations and remuneration policies as a complementary function to the Board of Directors, and for the purpose of enhancing fairness and transparency.

The Nomination and Remuneration Advisory Committee deliberates and makes recommendations to the of Directors on important management issues as necessary, in addition to the nomination of senior executives including Representative Directors and other directors, etc. and adequacy of the system and the level of remuneration for the directors. The Committee consists of 5 members, the majority of which must be independent outside officers and the chairperson of which must be elected from among the independent outside officers.


Director CompensationCompensation determined based on performance-linked compensation system

The remuneration, etc., for Directors of Sekisui Chemical consists of basic remuneration, bonus and share-based compensation (excluding Outside Directors), whereas the remuneration for Kansayaku consists of base remuneration and bonus (excluding Outside Kansayaku).

The basic remuneration is provided in a flat amount commensurate with the roles and responsibilities of each Director within the limit of the officers’ remuneration allowance. Directors are obliged to allocate a certain amount of the base remuneration to purchase the shares of the Company through the Officers Stock Ownership Plan with the aim of enhancing management awareness of placing an emphasis on the stock price.

The bonus represents the performance-based remuneration, the amount of which is determined based on the payment standards linked to the business performance of the Company and each divisional company, the dividend policy and ROE (return on equity).

The share-based compensation plan, which was newly introduced in fiscal 2016, is an incentive plan aimed at further raising motivation to contribute to the improvement of mid- and long-term business performance and improve the Group’s corporate value, under which the number of shares to be granted is determined in accordance with the position of Directors (excluding Outside Directors). Said plan has a structure enabling Directors to receive a benefit at the time of retirement for the results for which they contributed to enhancing the Company’s mid- and long-term corporate value in the form of the Company’s shares reflecting such enhancement in share value, thereby enhancing the link with mid- and long-term shareholders’ value.

  • Director Compensation in Fiscal 2016
  • (millions of yen)
Classification Basic remuneration Bonus Stock-based compensation Stock options Total
Number of people Monetary total Number of people Monetary total Number of people Recorded as expenses Number of people Recorded as expenses Number of people Monetary total
Directors 11 332 8 191 8 65 10 9 11 598
including external directors 3 24 2 1 3 25
Corporate Auditors 7 78 2 14 7 92
including external corporate auditors 3 28 3 28
  1. As listed above, the number of eligible officers includes 1 Outside Director and 2 Kansayaku who retired at the closing of the 94th Annual General Meeting of Shareholders held on June 28, 2016.
2. The aforementioned amount paid to Directors does not include the portion of employee’s salary (including bonus) amounting to 115 million yen for Directors who concurrently serve as employees.
3. New stock option grants were discontinued following the shift to a stock-based compensation system from June 2016, but the amount stock option grants will be recorded as necessary accounting expenses for fiscal 2016.



Major OrganizationsOrganizations in which the Sekisui Chemical Group Participates

The Japanese Society for Quality Control

Japan Chemical Industry Association.

Kansai Chemical Industry Association.

Japan Prefabricated Construction Suppliers and Manufacturers Association


DonationsDonations to Political Organizations

Donations to political organizations in 2014-16 made by Sekisui Chemical (parent) are as follows.