Corporate Governance Initiatives
Last Update : Sep 30, 2020
SEKISUI CHEMICAL Group sets forth as the basic policy for corporate governance the promotion of sustainable growth and the increase of corporate value over the medium and long terms. 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 emphasizes, through the creation of value for society, as declared in the Corporate Philosophy.
SEKISUI Corporate Governance Principles
SEKISUI CHEMICAL Group 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, are summarized and disclosed in the form of the Initiatives to Each of Principles of the Corporate Governance Code.
Initiatives Taken to Enhance Corporate Governance
As an organizational structure under the Companies Act, SEKISUI CHEMICAL Group has chosen to be a company with Audit and Supervisory Board. Under the Divisional Company Organization System, we have adopted the Executive Officer System in order to clearly distinguish the business execution function from the decision-making function in management so we can rapidly adapt to changes in business conditions.
Corporate Governance System (As of June 23, 2020)
Board of Directors
The Board of Directors is positioned as the body responsible for decision-making concerning SEKISUI CHEMICAL Group’s fundamental policies and upper-level management issues as well as for supervising the execution of business. The Board 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.
The number of Directors shall not exceed 15, and two or more of them shall be Outside Directors. The Board of Directors of SEKISUI CHEMICAL Group 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. As a non-executive director, the Chairman has served as chair from when a new president was appointed in March in 2020.
SEKISUI CHEMICAL Group 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, Audit and Supervisory Board Members with strong expertise effectively perform the roles and responsibilities of the Board of Directors and maintain a balance with respect to diversity, optimal size, and capabilities.
Composition of the Board of Directors (As of June 23, 2020)
- *1 Policy Committee is held once a month in order to deliberate on important management policies, strategic items, and proposals to be presented to the Board of Directors.
- *2 The blue circle indicates the chairman or committee chairman.
- *3 The name of the CSR Committee was changed to the Sustainability Committee from fiscal 2020.
- *4 The list above does not reflect the full range of expertise possessed by the Directors and Audit and Supervisory Board Members
SEKISUI CHEMICAL Group appoints to the Board three Outside Directors with verified independence 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 SEKISUI CHEMICAL Group. 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.
The ratio of Independent Outside Directors to total Board of Directors members will be reviewed as appropriate, taking into account any expansion in the scale or scope of SEKISUI CHEMICAL Group’s business, as well as the overall environment in which it operates.
Assessment Relating to the Board’s Effectiveness
SEKISUI CHEMICAL Group 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 & Supervisory Board Members. SEKISUI CHEMICAL Group has therefore determined that the current Board of Directors is contributing to enhancing its corporate value and is functioning properly.
In fiscal 2019, the Board of Directors thoroughly deliberated important management issues such as its Long-term Vision, new Medium-term Management Plan, growth strategies, including R&D, M&A, investment, and large new businesses, and fundamental strategies, including work-style reform, digital transformation, 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 as well as Audit and Supervisory Board member nominations, individual performance, and remuneration levels. The Nomination and Remuneration Advisory Committee met six 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 2020, SEKISUI CHEMICAL Group will further enhance deliberations on important management issues and ensure fairness and transparency in its management by making what the Board of Directors deem to be appropriate decisions.
Execution of Duties by the Board of Directors
With the goal of ensuring efficiency in the execution of its duties, the Board of Directors met 17 times in fiscal 2019. Important matters relating to SEKISUI CHEMICAL Group’s management policy and management strategy are discussed at meetings of the Policy Committee, of which internal Directors are members. Following deliberation, matters are passed to the Board of Directors, where the final decisions are made.
Execution of Duties by the Audit & Supervisory Board
The Audit & Supervisory Board confirms the status of maintenance and operation of the internal controls system through the attendance of Board of Directors and other meetings, as well as by investigating related departments, including those at Group companies, and confirming approval documents for important matters. Alongside the implementation of on-site audits, the effectiveness of the audits has been improved through the regular exchange of information with internal audit departments and accounting auditors. With the goal of facilitating the exchange of information, SEKISUI CHEMICAL Group held 18 meetings of the Audit & Supervisory Board in fiscal 2019. Meetings with affiliate corporate auditors are also held with the goal of improving cooperation and raising overall audit quality. Moreover, the Company exchanged opinions with Outside Directors.
Support for and Collaboration with Directors and Audit and Supervisory Board Members
To enable the Outside Directors to enhance deliberations at Board of Directors’ meetings, SEKISUI CHEMICAL Group 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, SEKISUI CHEMICAL Group 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 dialogue with Audit & Supervisory Board Members and corporate auditors. From the point of view of succession planning, SEKISUI CHEMICAL Group 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 & Supervisory Board Members and Executive Officers to meet when the new management system is inaugurated following the Annual General Meeting of Shareholders.
Outside Directors Conduct Business Site Visits
To deepen their understanding of SEKISUI CHEMICAL Group and the characteristics of our wide-ranging businesses, Outside Directors conduct business site visits every year. In fiscal 2019, Outside Directors visited the Kinki site of Sekisui Heim Industry Co., Ltd., which is advancing innovation in manufacturing at the Housing Company, and the headquarters Tsukuba Office, which is engaging in new technology development with a view to commercialization.
Nominating and Remuneration Advisory Committee
SEKISUI CHEMICAL Group has established an optional advisory committee concerning nomination and remuneration to complement the functions of the Board of Directors as well as 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 six members, the majority of whom are independent Outside Directors. The Chairperson is elected from the independent Outside Directors.
Policy and Procedures concerning the Appointment and Dismissal of Directors and Audit and Supervisory Board Members
SEKISUI CHEMICAL Group nominates candidates for the Board of Directors who are of excellent character, and have insight and high moral standards in addition to knowledge, experience, and competence. In order to ensure fairness and transparency in Board of Directors nominations, deliberations are held by the Nominating and Remuneration Advisory Committee, with opinions then reported to the Board of Directors, where the decision on candidates will be made.
At least one of the Audit & Supervisory Board Members shall be an individual who has knowledge and expertise in corporate finance and accounting and at least one other shall be an individual who has knowledge and expertise in legal affairs.
Succession planning for the SEKISUI CHEMICAL Group’s President
Supervision and planning for SEKISUI CHEMICAL Group President’s successor is conducted in appropriate consideration of its management principles and strategies. To enhance the objectivity, timeliness, and transparency of the procedures, the Nomination and Remuneration Advisory Committee deliberates on the eligibility of a candidate for the office of President over an appropriate period of time, and makes recommendations to the Board of Directors, which then makes a final decision regarding succession.
Remuneration and Other Compensation for Directors
(1) Policy regarding determination of remuneration and other compensation
- ①Basic policy
The remuneration system policy for Directors of SEKISUI CHEMICAL Group is defined as follows in keeping with its corporate philosophy.
- The policy should contribute to continuous growth and medium- to long-term improvement of corporate value
- Directors of SEKISUI CHEMICAL Group 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 Directors of SEKISUI CHEMICAL Group to achieve management plan goals
- The policy should provide a framework and baseline which enables SEKISUI CHEMICAL Group to acquire and keep on staff with a diverse variety of management talent in order to increase competitiveness
- ②Remuneration Mindset
- Remuneration and other compensation for executive directors of SEKISUI CHEMICAL Group 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.
(2) Determination Process for Director Remuneration and Other Compensation
In order to achieve the goals of the Director remuneration system, SEKISUI CHEMICAL Group 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 SEKISUI CHEMICAL Group and provide 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.
Director Remuneration Details
(3) Director Remuneration in Fiscal 2019
1. The number of eligible directors includes four directors and one Audit and Supervisory Board member who retired at the closing of the 97th Annual General Meeting of Shareholders held on June 20, 2019.
- 2. The amount paid to directors does not include the portion of employee’s salary (including bonus) amounting to 46 million yen for directors who concurrently serve as employees.
Ratio of performance-based and fixed remuneration for directors* (fiscal 2019)
- * Excludes Outside Directors and the portion of employee’s salary for Directors who concurrently serve as employees
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 medium- and long-term business performance and improve SEKISUI CHEMICAL Group’s corporate value, we have 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, SEKISUI CHEMICAL Group 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.
Basic Policy on Cross-Shareholdings and Criteria for the Exercise of Voting Rights
(1) Basic policy on cross-shareholdings
SEKISUI CHEMICAL Group may strategically hold shares of the other publicly-listed companies, to a limited extent, that are important business partners provided that it made the judgment on such holdings to be beneficial for the purpose of maximizing its medium to long-term enhancement of corporate value as well as that of business partners. Strategic rationale shall be reviewed in an appropriate and timely manner and SEKISUI CHEMICAL Group will reduce those holdings without sufficient strategic benefits or inconsistent with its capital policies.
(2) Verification of the necessity of cross-shareholdings
SEKISUI CHEMICAL Group conducted an assessment of the individual holdings in accordance with the aforementioned basic policy to examine specific benefits by such share-holdings (listed companies) and consistency with the risk-benefit evaluation of such individual holdings over the cost-of-capital and other factors, and made a judgment for appropriateness of holding them at the Board meeting held on June 11, 2019. The total number of shareholdings of listed companies was 28 as of the end of March, 2020, compared with 28 holdings as of the end of March, 2019 as a result of new acquisition of one holding and disposition of one holding during FY2019.
- Number of cross-held stocks, Number of Cross-held Stocks Recorded in the Balance Sheet, and Total Balance Sheet Amount
(3) Criteria for the exercise of voting rights concerning cross-shareholdings
SEKISUI CHEMICAL Group exercises voting rights at shareholder meetings of the share-holding companies in accordance with the specific standards with respect to its established voting rights to reflect perspectives of connecting the medium- to long-term enhancement of its corporate value with the corporate value enhancement of the above companies based on strategic position of such holding and dialogue and so forth with them, thereby performing its monitoring function as a shareholder. As to the exercise of voting rights, SEKISUI CHEMICAL Group applies a judgment standard, considering significance of agendas proposed by companies (including special resolution items), business performance (equity ratio, profit/loss condition) in their current fiscal year, and their business sustainability. SEKISUI CHEMICAL Group then makes the final comprehensive decision on proposals based on dialogue with the said companies.
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 build relationships of trust with its five stakeholders-customers, shareholders, employees, business partners as well as local communities and the environment-SEKISUI CHEMICAL Group considers that it is important to improve corporate value through constructive dialogue. Positioning its stakeholders as partners in improving corporate value, having constructive dialogue with them, assessing their expectations and requests as well as resolving society-wide issues together with them, leads to great opportunities for SEKISUI CHEMICAL Group. We will create a relationship of mutual prosperity with our stakeholders while continuing to promote sustainable growth.
Promoting Constructive Dialogue with Stakeholders
The various assessments and opinions of all stakeholders are reported to the CSR Committee (renamed the Sustainability Committee in fiscal 2020), which is chaired by the Company president and is composed of directors, among others, and the Company strives to adequately reflect these views in its activities.
In fiscal 2019, we received a variety of assessments and opinions through interactions such as “CAT (Customer And Top)” meeting (fiscal 2019: held 189 times, 1,413 participants) held as a way for housing sales company executives to hear customer feedback directly, communication with customers at the Eco Pro event we participate in every year, interviews with investors and investigative organizations, and direct communication between employees and top management at the “Town Hall Style Meeting with President” event.
Distribute Value to Stakeholders
SEKISUI CHEMICAL Group calculates distribution status for each stakeholder based on its financial statements, using GRI and other accounting standards as a reference. We will accelerate CSR by quantifying, visualizing and assessing the business and social value brought about by engagement with our stakeholders.
Distribute Value to Stakeholders (FY2019)
Dialogues with Employees
Believing that dialogue between management and employees is essential in resolving the problems faced by the Company as well as work-related issues, SEKISUI CHEMICAL Group has been providing opportunities for employees to have direct communication with top management since fiscal 2002. In fiscal 2019, SEKISUI CHEMICAL Group held “Town Hall Style Meeting with President,” in which employees and management leaders were able to exchange views, for employees at our 13 Group companies in Thailand. Participating employees actively exchanged their views on “fusion,” a subject in the Medium-Term Management Plan (fiscal 2017-2019). The President and other participating executives spoke directly with the local employees based on several of their various recommendations and proposals, including measures for improving productivity through collaboration between local Group companies and new business models that fuse the management resources of each company. The details of these meeting dialogues have been shared with each company and measures to realize these are underway. Going forward, we will hold these meetings in Europe, North America, and other areas, and will work to increase opportunities for Group employees throughout the world to have direct communication with top management.
“Town Hall Style Meeting with President” held in Thailand
Promoting Dialogue with Our Shareholders and Investors
SEKISUI CHEMICAL Group believes it is important to actively disclose information in a timely and appropriate manner. On the SEKISUI CHEMICAL website, we established the “Corporate Information Disclosure Regulations,” which specify the content and system of disclosure as part of our effort to strengthen our internal information disclosure framework, based on the “Principle of Corporate Information Disclosure.” Taking full consideration of fair disclosure, SEKISUI CHEMICAL Group posts its financial statements and results briefings on its website in Japanese and English simultaneously and also provides recordings of the briefing and a transcript of the question and answer sessions.
With its business domains so diverse, SEKISUI CHEMICAL Group believes it is important to give clear explanations of its actions to individuals to ensure that the Group’s overall business characteristics and CSR initiatives are sufficiently and correctly understood. For example, in addition to quarterly results briefings held by management, the Company actively promotes individual meetings with institutional investors and sell-side analysts, briefings aimed at individual investors, and management briefings for all our shareholders.
We view “active engagement between investors and management” as one of our keys points for focus, and are actively promoting constructive dialogue with investors and shareholders, with the feedback from such reflected in our management efforts. The Company was praised for this proactive approach to IR and received the “IR Excellent Company Special Award” from the Japan Investor Relations Association in November 2019.
We intend to continue to focus on the voice of the capital markets moving forward, and will promote measures aimed at bolstering corporate value and ensuring sustainable growth.
Online breefing session for the management plan
IR Special Award (received November 2019)