Corporate Governance Basic Policies
The SEKISUI CHEMICAL Group sets forth as its basic policy for corporate governance the promotion of sustainable corporate growth and the increase of corporate value. To realize this, the Group will enhance the transparency/fairness of management, pursue prompt decision-making, and continue to fulfill the expectations of "customers," "shareholders," "employees," "business partners," and "local communities and the environment," the five major categories of stakeholders that the Group values most, through the creation of value to society, as declared in the Corporate Philosophy.
SEKISUI Corporate Governance Principles
The Company has established and disclosed the SEKISUI Corporate Governance Principles for the purpose of further evolving its corporate governance initiatives 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 78 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.
Corporate Governance Systems
As an organizational structure under the Companies Act, the Company has chosen to be a company with Audit and Supervisory Board. Under the Divisional Company Organization System, the Company has adopted the Executive Officer System in order to clearly distinguish the business execution function from the decision-making function in management.
Initiatives Taken to Enhance Corporate Governance
|2001||Divisional Company Organization System introduced|
|2008||Executive Officer system introduced
Outside Director system introduced, two independent management executives invited to serve as Outside Directors
|2015||Independence standards of Outside Directors formulated|
|2016||Nomination and Remuneration Advisory Committee (chaired by Outside Director) established|
|2018||Number of Outside Directors increased by one, change to three outside director system|
Corporate Governance System Chart
Board of Directors
Roles and Responsibilities of the Board of Directors
Positioned as the body responsible for decision-making concerning the Company's fundamental policies and upper-level management issues as well as for supervising the execution of business, the Board of Directors has in place a highly effective supervisory system for Directors by appointing three sufficiently experienced Outside Directors to ensure transparency in management and fairness in business decisions and operations.
Composition of the Board of Directors
The number of Directors shall not exceed 15, and two or more of them shall be Outside Directors.
The Board of Directors of the Company shall consist of Directors who are of excellent character, have insight and high moral standards in addition to knowledge, experience, and competence. In addition, Audit and Supervisory Board Members, including Outside Audit and Supervisory Board Members, shall attend the meetings of the Board of Directors.
The Company ensures diversity among board members and keeps the number of Directors at an optimal level for appropriate decision-making that is commensurate with the business domain and size. The presidents of the divisional companies, who are the top management of each business and senior corporate officers with significant experience and strong expertise, are appointed as inside Directors. Together with the independent Outside Directors, who have broad knowledge and experience, and Audit and Supervisory Board Members with strong expertise, the presidents of the divisional companies effectively perform the roles and responsibilities of the Board of Directors and maintain a balance with respect to diversity, optimal size, and capabilities.
|Name||Position in the Company||Number of Years
(At the closing of the Annual General Meeting of Shareholders held on June 20, 2019)
|Number of Attendance of the Board of Directors Meetings of the Company (Fiscal 2018)||Number of Attendance of the Audit and Supervisory Board Meetings of the Company (Fiscal 2018)||Nominating and Remuneration Advisory Committee|
|Teiji Koge||President and Representative Director
Chief Executive Officer
(17 out of 17)
|Keita Kato||Representative Director
Senior Managing Executive Officer
(17 out of 17)
Managing Executive Officer
(17 out of 17)
Managing Executive Officer
(17 out of 17)
Managing Executive Officer
Managing Executive Officer
|Yutaka Kase||Independent Outside Director||3 years||100%
(17 out of 17)
|Hiroshi Oeda||Independent Outside Director||1 year||100%
(13 out of 13)
|Yoko Ishikura||Independent Outside Director||―||―||―||●|
|Moritoshi Naganuma||Corporate Audit and Supervisory Board Member||2 years||100％
（17 out of 17）
（18 out of 18）
|Yuichi Hamabe||Corporate Audit and Supervisory Board Member||3 years||100%
(17 out of 17)
(18 out of 18)
|Tetsuo Ozawa||Independent Outside Audit and Supervisory Board Member||5 years||100%
(17 out of 17)
(18 out of 18)
|Kazuyuki Suzuki||Independent Outside Audit and Supervisory Board Member||4 years||100%
(17 out of 17)
(18 out of 18)
|Ryoko Shimizu||Independent Outside Audit and Supervisory Board Member||―||―||―|
|Name||Directors’ and Audit and Supervisory Board Members’ Outstanding Expertise, Experience and Capabilities|
|Corporate Management / Management Strategy||Financial Affairs / Accounting||Legal Affairs||Quality Control||Human and Labor Administration / Human Resources Development||International Mindset||Research & Development|
* The list above does not reflect the full range of expertise possessed by the Directors and Audit and Supervisory Board Members.
About the Age-group Composition of Corporate Officers
|Under 30||30～39||40～49||50～59||60 or older|
|Number of Officers by Age||Men||0||0||0||4||4|
* As of the end of the General Meeting of Shareholders held on June 20, 2019.
The Company appoints to the Board three Outside Directors with verified independence from the Company who contribute to the enhancement of corporate value by providing oversight and advice based on their extensive administrative experience and specialized knowledge gained in backgrounds different to those of the Company. Based on their diverse and objective perspectives, the Outside Directors provide counsel especially on priority management issues, such as global development strategy, business model revisions, and the strengthening of ESG management.
Yutaka Kase, Outside Director
Mr. Kase is taking office of Advisor of Sojitz Corporation. Mr. Kase has provided advice with respect to the business management of the Company and supervised business execution appropriately by leveraging his abundant experience and past achievements regarding global corporate management and business strategy fostered through his position as a corporate manager of a general trading company. Therefore, the Company has judged that he would be able to contribute to further enhancing the corporate value of the SEKISUI CHEMICAL Group and thus appointed him as Director.
Hiroshi Oeda, Outside Director
Mr. Oeda is taking office of Corporate Special Advisor of Nisshin Seifun Group Inc. As Mr. Oeda has been a management executive of the largest milling company in Japan, the Company expects him to provide advice with respect to the business management of the Company and supervise business execution appropriately by leveraging his abundant experience and skill regarding global corporate management, business strategies and M&A activities fostered through his positions. Therefore, the Company has judged that he would be able to contribute to enhancing the corporate value of the SEKISUI CHEMICAL Group and thus appointed him as Director.
Yoko Ishikura, Outside Director
Ms. Ishikura is the Professor Emeritus of Hitotsubashi University. Ms. Ishikura has advanced academic expertise in international politics/economics and international corporate strategy, and is well-versed in corporate management through her experience as outside director at multiple global enterprises. Furthermore, she has been actively involved in diversity management and promotion of greater participation of women, which are areas being addressed by the Group. Therefore, the Company has judged that she would be able to contribute to enhancing the corporate value of the Company and thus appointed her as Director.
Assessment Relating to the Board’s Effectiveness
The Company evaluates the effectiveness of the Board of Directors every year.
Having set an appropriate agenda, the Board of Directors engages in sufficient discussion with opinions and recommendations actively provided by Directors (including Outside Directors) and Audit and Supervisory Board Members. The Company has therefore determined that the current Board of Directors is contributing to enhancing the corporate value of the Group and functioning properly.
In fiscal 2018, the Board of Directors thoroughly deliberated important management issues such as growth strategies, including R&D, M&A, investment, and large new businesses, and fundamental strategies, including work style reform and CS & quality. The Board also ensured that adequate time was provided to sufficiently discuss these issues and active participation and opinions and recommendations were actively provided by both outside and inside Directors as well as Audit and Supervisory Board Members.
The Nomination and Remuneration Advisory Committee made recommendations to the Board of Directors on such matters as Director nominations, individual performance, and remuneration levels. The Nomination and Remuneration Advisory Committee met nine times, including to discuss the plan for the president’s succession, the composition and effectiveness of the Board of Directors, and initiatives for strengthening governance.
In fiscal 2019, the Company will further enhance deliberations on important management issues and ensure fairness and transparency in the Company’s management by making what the Board of Directors deem to be appropriate decisions.
Collective Knowledge of Highest Governance Body
To enable the Outside Directors to enhance deliberations at Board of Directors’ meetings, the Company continuously provides opportunities for them to deepen their understanding of the Group’s businesses. This is done, for example, by the prior distribution of materials for Board of Directors’ meetings and explanations given beforehand by the executive officer in charge of the secretariat, orientation visits at the time Outside Directors are appointed, and inspections of business sites several times a year. To further enhance the effectiveness of management supervision by Outside Directors, the Company is making improvements to the deliberations that take place at the Nomination and Remuneration Advisory Committee, where the majority of the members are Outside Directors, and facilitating their dialog with Audit and Supervisory Board Members and corporate auditors. From the point of view of succession planning, the Company is strengthening contacts between current management and next-generation management candidates, for example by having Outside Directors give lectures at Executive Officers Liaison Meetings that are held on a quarterly basis and providing opportunities for Directors, Audit and Supervisory Board Members and Executive Officers to meet when the new management system is inaugurated following the Annual General Meeting of Shareholders.
Business Site Visits
To deepen their understanding of the Company and the characteristics of the Group's wide-ranging businesses, Outside Directors conduct business site visits every year. In fiscal 2018, Outside Directors visited a Heim Museum development, which the Housing Company is focusing on rolling out nationwide, and the Group’s growth domain, SEKISUI MEDICAL CO., LTD.
Consultations with Stakeholders on Economic, Environmental and Social Topics
At the quarterly Executive Officers Liaison Meetings, the sharing of earnings announcements is combined with invited speakers from outside the company, so that stakeholders obtain the latest information on economic and social trends that are directly linked to management issues.
Fiscal 2018 Executive Officers Liaison Meeting Lecture Topics
●2025 – The Year Decoded As Third Super Economy Golden Cycle
●Purpose and Methods of Company-conducted Fraud Investigations
●Toward Execution of Strategic M&A
●Cyber Security Trends and Enhancement Measures
Nominating and Remuneration Advisory Committee
The Company has established an optional advisory committee concerning nomination and remuneration to further enhance the fairness and transparency of management.
The Nomination and Remuneration Advisory Committee deliberates matters related to enhancing the effectiveness of the Board of Directors, including the nomination and non-reappointment of senior executives, including representative directors, the nomination of candidates for Director, and the system of remuneration and levels of remuneration for Directors. The Committee also discusses the commissioning of and dealings with advisors or executive advisors, including former representative directors and presidents, and submits recommendations and advice to the Board of Directors. The Nomination and Remuneration Advisory Committee comprises five members, the majority of whom are independent Outside Directors. The Chairperson is elected from the independent Outside Directors.
Remuneration and Other Compensation for Officers
1. Policy regarding determination of remuneration and other compensation
(1) Basic policy
The remuneration system policy for officers of the Company is defined as follows in keeping with the corporate philosophy of the Group.・The policy should contribute to continuous growth and medium- to long-term improvement of corporate value for the Group
・Officers of the Company should share value with shareholders and increase their awareness of shareholder-focused management
・The remuneration policy should be highly-connected to business performance, providing motivation for officers of the Company to achieve management plan goals
・The policy should provide a framework and baseline which enables the Company to acquire and keep on staff with a diverse variety of management talent in order to increase the competitiveness of the Group
(2) Remuneration mindset
Remuneration and other compensation for executive directors of the Company is made up of basic remuneration, bonuses, and stock options. For Outside Directors and Audit and Supervisory Board Members, remuneration is made up of basic remuneration only.
< Basic Remuneration >
Basic remuneration within the framework of officer remuneration is a fixed payment determined by the roles and responsibilities of each Director. For executive directors, a portion of the basic remuneration is required to be used for the purpose of the Company’s stock through the Officers Stock Ownership Plan, increasing the emphasis on and awareness of stock prices in management.
< Bonuses >
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, ROE (return on equity), and dividend policy.
< Share-based compensation >
The share-based compensation 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.
2. Determination Process for Officer Remuneration and Other Compensation
In order to achieve the goals of the officer remuneration system, the Company has established a Nomination and Remuneration Advisory Committee as an advisory organization to the Board of Directors. This committee deliberates on the structure and levels of Director remuneration and verifies the validity of remuneration for individuals, carrying out these processes with objectivity and transparency.
< Overview of Nomination and Remuneration Advisory Committee Activities >
- This committee is convened by the chairperson (an Outside Director).
- The agenda items of this committee are introduced by the committee members, and the secretariat compiles them and presents them to the chairperson.
- The deliberation results of this committee are reported to the Board of Directors by the chairperson.
- The Board of Directors carries out final policy determination, respecting the report of this committee. In addition, the Directors and members of this committee must carry out these decisions from the perspective of whether or not they contribute to the corporate value of the Company and providing benefit to shareholders. Decisions must never have the goal of providing individual benefit to the Directors or committee members themselves, management ranks, or any other third party.
Officer Remuneration in Fiscal 2018
(Amount: Millions of yen)
|Basic remuneration||Bonus||Share-based compensation||Total|
|Number of eligible officers (persons)||Amount||Number of eligible officers (persons)||Amount||Number of eligible officers (persons)||Amount||Number of eligible officers (persons)||Amount|
|(Of which Outside Directors)||3||33||－||－||－||－||3||33|
|Audit and Supervisory Board Members||5||85||－||－||－||－||5||85|
|(Of which Outside Audit and Supervisory Board Members)||3||28||－||－||－||－||3||28|
1. The number of eligible officers includes one Director who retired at the closing of the 96th Annual General Meeting of Shareholders held on June 27, 2018.
2. The amount paid to officers does not include the portion of employee’s salary (including bonus) amounting to 134 million yen for Directors who concurrently serve as employees.
⇒Notice of Convocation of the Annual General Meeting of Shareholders
Director Company Stock Ownership Guidelines
In addition to having introduced, for Directors (excluding Outside Directors) and divisional company Executive Officers, a share-based compensation plan to further raise motivation to contribute to the improvement of mid- and long-term business performance and improve the Group's corporate value, the Company has established "Company Stock Ownership Guidelines" for those who are holding more than a certain number of shares.
Executive Officer System and Executive Committee
To maximize corporate value, the Company has built its management structure based on the Divisional Company Organization System. Together with assigning to each divisional company Executive Officers specializing in business execution, an Executive Committee has been established to serve as the top decision-making body in each divisional company. Executive Committee members, whose term of office is deemed to be for one year, are appointed by resolution of the Board of Directors.
By transferring authority to the divisional companies, the Board of Directors strives to achieve continual improvements in corporate value as an organization responsible for decisions on basic policies of Sekisui Chemical Group’s management as well as high-level management decision-making and supervision of business execution.
Approach to Appointment of Audit and Supervisory Board Members
The Company is working to appoint talented people who possess exceptional corporate management as well as finance and accounting knowledge to Audit and Supervisory Board Member positions.
In fiscal 2019, a total of five Audit and Supervisory Board Members, consisting of two full-time Corporate Audit and Supervisory Board Members and three part-time Outside Audit and Supervisory Board Members, were appointed. For the two Corporate Audit and Supervisory Board Member positions, the Company appointed the former heads of the Corporate Audit Department and Corporate Finance & Accounting Department. One of the Outside Audit and Supervisory Board Members appointed is Ms. Ryoko Shimizu, who possesses experience as a certified public accountant and from having worked for an auditing company.
Internal Control System
In May 2006, the Board of Directors resolved to adopt a fundamental policy regarding the establishment of an internal control system for ensuring the appropriateness of the Group’s business activities.
Based on the Corporate Activity Guidelines set forth in accordance with the Group corporate philosophy, the Company seeks to realize collaborative interaction concerning the supervision, directives, and communications of SEKISUI CHEMICAL Group (the Company and its subsidiaries), and SEKISUI CHEMICAL’s duties include providing guidance and counsel, and undertaking evaluations of all SEKISUI CHEMICAL Group members to ensure that their business activities are being conducted in an appropriate manner.
To further strengthen the Group’s compliance activities, the CSR Committee, chaired by the president, deliberates the Fundamental Compliance Policies, which are subject to approval by the Board of Directors. In addition, the Compliance Sub-committee supervises compliance activities Group-wide, and conducts activities to highlight the importance of compliance as a fundamental aspect of our corporate culture.
SEKISUI CHEMICAL maintains a companywide risk management structure for integrated management of measures to prevent risk events from occurring (risk management) and to respond with risk events occur (crisis management). The Risk Management Group of the Human Resources Department maintains and refines the risk management structure and disseminates information to all Directors, Executive Officers, and employees of the Company and the Group companies.
In fiscal 2018, 173 task forces are working to reduce and eliminate risk by analyzing and assessing conditions and implementing risk management measures followed by periodic reviews and implementation of the PDCA cycle of risk management for ongoing improvement. The Risk Management Group addresses risk expediently and systematically, reports to each subcommittee of the CSR Committee, and considers measures for implementation throughout the Company.
Crisis management activities are carried out following SEKISUI CHEMICAL Group Crisis Management Guidelines. Risk management officers of each department regularly hold crisis management liaison meetings to research incidents and reinforce practices.
The Company’s overseas crisis management activities are overseen by the Global Crisis Management Office and Regional Crisis Management Responsibility in each of the Company’s nine regions in line with SEKISUI CHEMICAL Group Global Crisis Management Guidelines.
Information Disclosure and Communication with Stakeholders
In order to deepen mutual trust with all of our shareholders, we believe it is important not only to actively disclose information in a timely and appropriate manner, but also to enhance two-way communications with our shareholders. To steadily put this belief into practice throughout the Group, we established the “Principle of Corporate Information Disclosure” in December 2005 and simultaneously, beefed up our internal information disclosure framework. For instance, we have set up the “Corporate Information Disclosure Regulations” which specify the content and system of disclosure. In order to pursue this principle further, that is to actively disclose more information, since fiscal 2006 we have been holding meetings with the staff who are responsible for information disclosure at the respective divisions.
In SEKISUI CHEMICAL Group, the Investor Relations Group within the Business Strategy Department is working hard to strengthen two-way communications with our shareholders and investors, not only by disclosing financial statements in a timely and appropriate manner but also by actively reflecting our shareholders’ voice in our management. For example, we hold quarterly briefings on financial results where our management explains these figures. Also, we pay heed to the voice of capital markets by holding one-on-one meetings with analysts and investors.
To ensure information is provided in a fair manner, the Group posts its financial statements and results briefings on the Company website in Japanese and English simultaneously and additionally provides audio recordings of the briefing and a transcript of the question and answer session.