Roundtable Discussion between Outside Directors

Roundtable Discussion between Outside Directors

A roundtable discussion between Outside Directors Haruko Nozaki, Miharu Koezuka, and Machiko Miyai was held following their renewed appointment in June 2022. Details are presented as follows.

How do you see your expected role as an Outside Director?

NozakiI have spent my career focusing mainly on human resources, promoting education and diversity, and developing the next generation. When approached to serve as an Outside Director, discussions revolved largely around the need to position diversity as an engine for the Company’s growth. Looking beyond the simple task of increasing the number of female directors, the goal was to promote diversity in earnest in the broadest possible terms. With this in mind, I recognize that one expected role is to promote diversity across the Group as a whole.

KoezukaIn addition to my previous work experience, I have held several positions in management across a diverse range of industries. Over this career, I was also involved in the restructuring of a loss-making company. Drawing on this track record, I see my role as contributing to the enhancement of the Group’s corporate value.

MiyaiMy background is in management as a business operator. I have also served as a researcher in science-related fields. With management experience in the consumer goods sector, an area that differs considerably from the Group’s business field, I intend to offer my opinions and suggestions from an entirely new perspective.

What is your impression of SEKISUI CHEMICAL Group’s Board of Directors? Can you provide us with details of your input and any comments made.

MiyaiThe Board recently deliberated on the issue of corporate branding. I put forward suggestions regarding which brands, including logos and company names, that should be communicated externally to enhance corporate value, and the way in which branding should be pursued. I also mentioned the need to reorganize the Group’s brands, including SEKISUI HEIM.

NozakiI have recommended that the Group take definitive steps to invest in its people. While detailed explanations are provided prior to each Board of Directors’ meeting, I also believe that a great deal could be learned from the comments of the chairperson on a wide range of relevant matters, including the leadup and background behind each agenda item.

KoezukaThe chairperson manages each meeting agenda extremely well and fosters an atmosphere in which it is easy to express opinions. I would suggest that various other supplementary forums, including off-site meetings where Outside Directors could freely exchange opinions independent from the Board would further deepen and improve the efficacy of discussions.

MiyaiThe effectiveness of the Board of Directors is already at a high level. I agree with Ms. Koezuka that the chairperson's ability to manage each meeting agenda is excellent. Other companies have indeed established forums for independent outside directors to meet on a regular basis, and I have also suggested that the Company consider implementing a similar initiative.

NozakiBoard meetings are generally conducted on a question-and-answer basis between Outside and Inside Directors. It is difficult to envisage how different divisional companies deliberated on an agenda item prior to its consideration by the Board of Directors. I therefore believe that the opinions, comments, and perspectives of each divisional company are integral to improving the effectiveness of the Board of Directors.

How do you evaluate the Group’s Long-term Vision and Medium-term Management Plan, Drive 2.0?

MiyaiI think highly of the Group’s decision to place ESG at the heart of its management, and the way in which it has drawn up a growth scenario and outlined its direction toward 2030. Meanwhile, I believe there are still issues to be addressed from an implementation perspective. I recognize the need for further discussion, including by Outside Directors.

KoezukaI agree. In addition to the issue of implementation, the Group should also consider how to develop the human resources necessary to carry out its Vision and Medium-term Management Plan. Human resource development is a major issue not only for domestic, but also for overseas companies. I believe that human resource development will become increasingly important and is a topic that required further deliberation.

NozakiOver and above their specifics, I am impressed by the steps taken to instill the Vision and Plan across the Group as a whole. In addition to the many opportunities for cooperation that extend beyond the boundaries of each company, I recognize the value in leveraging the benefits of a conglomerate. Coupled with deliberations and dialogue that include the president, SEKISUI CHEMICAL Group’s conglomerate status allows it to incorporate diverse perspectives and the best practices of divisional companies.

KoezukaYes, that’s true. Another advantage of its conglomerate status is the ability to flexibly uncover new seeds as times change.

MiyaiTo avoid conglomerate discounting, it is imperative that SEKISUI CHEMICAL Group strengthen its head office function and its ability to put forward a concrete cross-sectional Group-wide strategy that includes the creation of synergies between divisional companies.

KoezukaThere is clearly a need to keep a balanced grip on the head office function while strengthening each divisional company.

NozakiIf corporate headquarters assumes a dominant role, the planning function stands alone and implementation falls by the wayside. For this reason, balance is of the utmost importance. Given the various seeds in its possession, I believe that the Group can properly demonstrate its value as a conglomerate if it can show examples of how a single seed can generate as many businesses as the number of companies.

KoezukaThe allocation of capital, including human capital, is key.

MiyaiI couldn’t agree more. The importance of each divisional company as a source of revenue is clear. For this reason, I believe this overall strategy is critical in achieving sustainable growth over the long term.

What are your thoughts on M&As as a way to invest in growth?

KoezukaM&As are a useful tool in pursuing growth opportunities overseas. I recognize that the Board of Directors must carefully scrutinize and discuss the expected contribution to earnings from an M&A as well as the post-acquisition governance structure, after clarifying the objectives, including whether the M&A will compensate for those areas that the Company finds difficult to pursue on its own, or whether the M&A will help expand the Group’s global market share.

NozakiM&As subsequently facilitate the acquisition of human resources well versed in particular technologies and markets. In addition to securing human resources from outside the Group through M&As, it is important that SEKISUI CHEMICAL Group retains key personnel while strengthening the human resource structure and systems necessary to welcome external acquisitions.

MiyaiAs a key component of its future growth, SEKISUI CHEMICAL Group must not lose sight of the importance of sustainability. Given the difference in corporate cultures, generating synergies across a wide-ranging base will require a certain amount of time. It is vital, therefore, that the Group put in place a robust governance structure while taking into consideration this time frame.

KoezukaShould the Group fail to clarify its purpose for entering into an M&A, including whether its actions are defensive or offensive in nature, or is unable to convey its ongoing intent, it runs the risk of hindering the inflow of information. Meanwhile, in numerous cases, management of many successful companies have taken the initiative to search for target companies. Determining whether an M&A can be concluded at an acceptable price is also of significant importance.

SEKISUI CHEMICAL Group has set the goal of accelerating its overseas growth under its Long-term Vision. What are your thoughts on the Group’s global governance?

KoezukaIn addition to establishing a global governance structure and systems that encompass a robust auditing function, the quality of global governance is determined by the degree to which management and responsible departments are able to communicate with overseas subsidiaries. Looking at the successful practice of global governance at other companies, a common feature is the close-knit ties among managers. With this in mind, I believe that global governance must work in tandem with communication.

MiyaiI agree. Communication is essential to sound global governance. Moreover, I believe that a mechanism through which regional headquarters could more closely coordinate with the Group’s head office would also be effective.

NozakiWhen I think of the governance function, applying the brakes comes immediately to mind. However, the need to work toward a common goal based on mutual respect is of equal importance. At the same time, bringing together multiple overseas subsidiaries to deliberate on a common topic, and engaging in one-to-many as opposed to one-to-one discussions, will in my opinion help generate a sense of positive competition and further promote governance.

How would you rate the Group’s sustainability?

MiyaiI recognize the Group’s efforts to proactively address climate change from an early stage. As it faces growing demand to combat not only Scope 3, but also Scope 4 emissions, however, the challenge will become how to continuously respond in a detailed and appropriate manner. Commenting further, SEKISUI CHEMICAL Group should also more vigorously communicate details of its initiatives.

KoezukaYes, that’s correct. I sometimes feel that it is a waste, given the Group’s technological capabilities.

NozakiAs far as human capital is concerned, I believe that SEKISUI CHEMICAL Group is committed to its human resources and cares greatly about its people. There is little to criticize in the newly revised human resources system. The atmosphere within the Company is warm, and one could argue excessively neat and tidy. My feelings are that SEKISUI CHEMICAL Group could bring greater joy to its employees with a more free-flowing and spontaneous approach.

KoezukaDX is an essential tool in becoming a sustainable company. As an issue that must be tackled by more than just the DX team, each and every department must remain acutely aware of DX from both the growth investment and operational efficiency perspectives. Based on the aforementioned, it is imperative that the Group develop DX human resources who can readily define these requirements.

MiyaiSociety’s expectations toward human rights are also increasing. SEKISUI CHEMICAL Group has positioned human rights as a key theme under its Medium-term Management Plan. Despite its labor-intensive nature, it is a high-risk theme that must be firmly addressed.

KoezukaRecognizing that what we may see as common sense could be considered inappropriate across the rest of the world, I have suggested the Group promote human rights while adopting global companies as a benchmark as its ventures outside Japan.

NozakiMany foreign nationals are currently working at a number of the Group’s sites. It would be prudent for the Group to first uncover human rights issues at each of these sites and to take excellent care of its people.

Promoting the empowerment of women has become an urgent issue in Japan of late. Under what circumstances do you believe the empowerment of women will no longer be considered a goal?

KoezukaJust as there are major, minor, and development leagues in professional baseball, companies must maintain a sound female employee base. Through their failure to adequately hire women for career-track positions in the past, Japanese companies are responsible for the current lack of qualified female personnel and weak female employee pool. Taking the aforementioned into consideration, it is vital that Japan’s corporate sector tackle this issue with the utmost urgency. Energies must be directed toward hiring a growing number of women while eliminating the gender gap. SEKISUI CHEMICAL Group must look closely at whether it has a system in place that allows women to continue working regardless of their lifestyle choices, including marriage and childbirth. Drawing on hearings with women, the Company must establish a system that accurately reflects prevailing conditions. This is an absolute minimum, but on the bright side should enhance the Company’s appeal as a place to join and work. Turning to the corporate sector as a whole, companies must take note of the steps they need to take now and what they need to prepare for in the future.

MiyaiWhile I often hear talk that a ratio of 30% no longer constitutes a statistic minority, I believe that the ratio of women in decision-making positions must not fall below 30% as an absolute minimum. While the number of women is not the be-all and end-all, I have noticed that the atmosphere of meetings changes when the number of female executives increases.

NozakiIn addition to the inclusion of a wide range of women, irrespective of age, in the decision-making process, I would like to see the Group provide opportunities to younger male employees. A process that provides all employees with the same opportunities and start line is essential in the development of human resources who can excel. To date, women have not received the same opportunities at the start of their careers. It is therefore important that women are invited to the table from the outset. Women who are seeking to pursue a career should be welcomed with open arms. It would be impressive if SEKISUI CHEMICAL Group could take a leading role in these efforts. With each of the aforementioned in mind, I believe the true goal should be to eliminate the need for people to refer to the era of women’s empowerment.

What are your expectations toward SEKISUI CHEMICAL Group and your thoughts on the challenges that need to be overcome?

MiyaiI highly commend SEKISUI CHEMICAL Group’s for its efforts to position ESG at the center of its management activities. Having said this, however, I am concerned that the Company is becoming a little defensive in its posture toward addressing ESG concerns. I would, for example, like to see the Company adopt a more vigorous approach toward the environmental issue of climate change. I would hope that it will transition from defense to offense in a manner that exceeds the demands of society. This includes proactively investing in human capital even if it takes time to secure a return on that investment. SEKISUI CHEMICAL Group is an extremely earnest company. Nevertheless, I would call on the Company to adopt a more aggressive approach within a free and flexible atmosphere.

NozakiAs a company that is distinguished by its technological capabilities, I would hope that SEKISUI CHEMICAL Group is excited by its ability to create new industries. Looking beyond its role as an incubator within the Company, I would call on SEKISUI CHEMICAL Group to invest in young entrepreneurs and venture companies for the benefit of Japan and the rest of the world. In doing so, I am confident that the Company will attract a more diverse range of human resources.

KoezukaSEKISUI CHEMICAL Group is currently working diligently to address a challenge-based agenda. Drawing on its underlying abundant technology development and operating capabilities and such attributes as its robust motivation, I am confident that the Company will overcome each challenge simply by allowing each and every employee to express his or her opinion freely. A company’s growth is dependent upon the collective strength of its employees. Should SEKISUI CHEMICAL Group create a culture in which each individual is more confident in promoting his or her initiatives, I believe there would be no need to identify the employee challenge action rate as a KPI. I would hope that SEKISUI CHEMICAL Group will grow as a global company while increasing corporate and shareholder value.