Through these means, the Mitsui Chemicals Group recognizes that it is better placed to achieve sustainable growth and increased corporate value over the medium to long term.
Accordingly, Mitsui Chemicals positions efforts to upgrade and expand its corporate governance as a key management issue and will persevere with the efforts outlined above.
Our Approach to Corporate Governance
Through these means, the Mitsui Chemicals Group recognizes that it is better placed to achieve sustainable growth and increased corporate value over the medium to long term.
Publicly released since the fiscal year ended March 31, 2016, the Mitsui Chemicals Group Corporate Governance Guidelines outline the Group's fundamental policies and efforts in relation to corporate governance.
History of Corporate Governance Reforms
We have continuously instituted reforms since the founding of the Mitsui Chemicals with the aim of raising the effectiveness of our corporate governance to an even higher level.
Corporate Governance Framework
At the Mitsui Chemicals, the Board of Directors including Outside Member of the board independent of business execution makes material management decisions and supervises the execution of duties by each member of the board and the duties of other executive officers, etc. As a company with a Board of Corporate Auditors, the status of each member of the board’s performance of his or her duties is audited by the corporate auditors and the Board of Corporate Auditors independently from the Board of Directors.
Within this framework, the Company strives to realize smooth and efficient management, undertaking initiatives aimed at, for example, clarifying official authority and decision-making procedures in light of Company rules, clarifying management supervision and business execution roles by introducing an executive officer system, ensuring that important matters are referred to the Management Committee for discussion, and ensuring a broad range of perspectives inform strategic discussions undertaken at the Group-wide Strategy Commitee. In addition, as part of its internal control system the Company’s corporate auditors conduct audits to ensure the propriety of business operations while the Internal Control Division works to ensure sound risk management.
*● Number of meetings held in fiscal 2022.
*In fiscal 2023, we abolished the Risk & Compliance Committee and established the Risk Management Committee and Compliance Management Committee.
Corporate Auditor System and the Status of Audits
As being independent from the Board of Directors, corporate auditors have conducted audits on such matters as the directors’ performance of duties, internal corporate control, business performance, and financial status through such means pursuant to law and ordinance as requesting reports on MCI’s businesses, exercising its authority in the election and dismissal of accounting auditors, and investigating the status of operations and assets. Precisely, the full-time corporate auditors attend not only the meetings of the Board of Directors but important meetings of MCI such as Management Committee, have regular meetings with the president and others to exchange opinions and officially receive and check the final-decision documents of executive directors and records of important meetings. Furthermore, the three outside corporate auditors periodically exchange opinions with the president and others, and auditor audits are attended by three outside corporate auditors, as necessary, who make statements based on their extensive experience and broad knowledge. Outside Corporate Auditor SHINBO Katsuyoshi has been widely experienced as an attorney for many years and has extensive knowledge and insights on compliance and risk management.
Outside Corporate Auditor GOTOH Yasuko has been widely experienced as a manager and CFO of a listed company and has extensive knowledge and insights on finance and accounting. Outside Corporate Auditor ONO Junshi has been widely experienced as a certified public accountant for many years and has extensive knowledge and insights on finance and accounting. The Board of Corporate Auditors met on 17 occasions in fiscal year of 2022, with particular audit focus on the following matters:
- initiatives to achieve VISION 2030
- ESG key issues, initiatives, and stance
- status of risk management and the status of the development and operation of the Whistleblowing System
Furthermore, meetings of the Board of Corporate Auditors are, in principle, held once a month, and attendance and key matters for consideration for each corporate auditor in fiscal 2021 are as follows.
|Name||Attendance||Key matters for consideration|
|the full-time corporate auditors||KUBO Masaharu||17／17||In addition to matters related to the operational status stated above in the “Corporate Governance Framework,” matters such as the construction of internal control systems and their operational status, the status of directors’ performance of duties, and the assessment of and whether or not to re-elect accounting auditors are being considered.|
|the outside corporate auditors||SHINBO Katsuyoshi||16／17|
MCI has established the Internal Control Division as an internal organization consisting of nineteen members. Based on the yearly audit plan discussed and formulated in advance at Management Committee, the division audits the accounts and business of the Mitsui Chemicals Group, including affiliated companies, and reports the results to the Management Committee.
Furthermore, corporate auditors also exchange opinions with accounting auditors and the Internal Control Division regarding annual audit plans and audit results, and coordinate with one another and conduct audits, whilst ensuring that their respective auditing activities remain independent.
When necessary, MCI’s corporate auditors conduct audits of affiliated companies based on the results of audits by the Internal Control Division and each company’s corporate auditors, and they also exchange information and otherwise coordinate with each company’s corporate auditors.
Evaluation of the Effectiveness of the Board of Directors
Initiatives implemented since fiscal 2016 with the aim of strengthening management oversight functions by discussing medium- to long-term business strategies and large-scale M&As from an intermediate stage and providing advice to executive directors.
|Measures taken in fiscal 2022|
（1）Enhancement of the monitoring
MCI has enhanced opportunities for monitoring important matters such as execution of duties status report, PMI status of M&A projects, VISION 2030 progress, and non-financial KPIs.
（2）Enhancement of risk management
A new risk management system is being established that improves MCI’s risk management by comprehensively identifying and prioritizing key risks across the Group, commencing operations in fiscal year of 2023. In establishing this system, discussions were held at Company-wide Strategy Committee meetings and briefings in advance to share the system with members of the Board of Directors.
（3）Explanations to outside members of the board and outside corporate auditors in advance
On important matters, to ensure adequate discussion, arrangements such as briefings in advance on several occasions and deliberations after discussions were made. In addition, in order to realize more realistic, substantive discussions, activities such as site visits by Outside Members of the board were also conducted.
|Evaluation results and future initiatives|
The directors’ and corporate auditors’ self-evaluation scores of fiscal 2022 were on a par with those of the previous fiscal year on the whole. The company has also confirmed that progress for the improvement has been accelerated by having taken measures aligned with the objective of reinforcing the supervisory functions of the Board of Directors, and accordingly finds that the effectiveness of the Board of Directors is sufficiently ensured, as being carried on from the previous fiscal year.
（1）Realizing more effective management of the Board of Directors in response to the increase in and diversification of projects in line with progress on VISION 2030
（2）Monitoring the Board of Directors involvement in and operation of the newly established risk management system
（3）Enhancing communication between shareholders/investors and Outside Members of the board
The Company strives to review and implement necessary measures as appropriate to enhance the oversight functions of the Board of Directors in light of the results of the annual effectiveness evaluations.
Compensation for Directors and Corporate Auditors
Compensation Structure（Members of the board and Executive Officers）
To create a compensation structure that is easy to understand and strengthen governance, the existing fixed compensation is divided into three portions. The structure is composed of fixed compensation (representation portion + supervision portion + execution portion) + bonus + restricted stock compensation. The execution portion of the fixed compensation and bonus and restricted stock compensation are the remuneration for execution. For example, for a Representative Director, Member of the Board, and Senior Managing Executive Officer; a Member of the Board and Senior Managing Executive Officer; and a Senior Managing Executive Officer, the differences in the compensation items are the representation and supervision portions, while the execution portion of the fixed compensation, bonuses, and restricted stock compensation are the same amount.
Percentages of basic compensation and incentives for directors (excluding outside directors) in fiscal 2022
This will be paid as a fixed monthly amount. The execution, supervision, and representation portions of the existing fixed compensation are separated to strengthen governance. The amount paid for the execution portion differs according to each position. The amounts paid for the supervision and representation portions are uniformly the same regardless of position, and are set based on MCI’s approach to representation and supervision, and data from an external research organization.
The overview of the Bonus System is as described in the following table. Compared to previous years, the Company implemented (1) "Revision of Formula (Calculation)." (2) "Introduction of Evaluation of Non-financial Indicators," and (3) "Introduction of Maximum and Minimum Profit Limits in relation to Bonus Payments."
Restricted Stock-Based Compensation
The restricted stock-based compensation shall be monetary compensation claims for the grant of restricted stock, the overview of which is as described in the following table. Compared to previous years, the Company implemented (1) "Revision of Formula (Calculation)." (2) "Introduction of ROE (Return on Equity Attributable to Owners of the Company) and TSR (Total Shareholder Return) as evaluation indicators," (3) "Introduction of Maximum and Minimum Profit Limits in relation to Restricted Stock-based Compensation Payments," and (4) "Revision of the Period of Restriction on Transfer of Shares."
|Overview of the Restricted Stock-based Compensation System|
|Definition||Medium- to long-term incentive compensation to encourage increased corporate and shareholder value|
|Formula||（（ Net income attributable to owners of the parent × coefficient ）× ROE evaluation coefficient）× coefficient by position × TSR evaluation coefficient|
Since the purpose of restricted stock-based compensation is to promote a shared awareness of profits with shareholders aimed at enhancing corporate and shareholder value, net income attributable to owners of the parent, which is a key indicator in the VISION 2030 and is linked to shareholder profits, is used as the indicator.
|Coefficient||If net income attributable to owners of the parent exceeds the FY2025 target of ¥110 billion, the coefficient will be increased in order to more strongly motivate the Directors and executive officers to achieve the VISION 2030 target of ¥140 billion.|
・ This is introduced with the aim of efficiently improving return on capital.
・ The evaluation period is one fiscal year (from April to March of the following year), and the level of achievement of the budget for each fiscal year is evaluated. The evaluation is on a three-point scale, and the evaluation coefficient ranges from 110% to 90%.
【 Formula 】
ROE budget achievement rate = ROE budget value × 100
・ This is introduced with the aim of improving overall corporate and shareholder value, including stock price, in addition to business performance.
・ The evaluation period is one fiscal year (April to March of the following year), and the Company’s TSR is evaluated relative to the TSR of the “JPX-Nikkei Index 400 including dividends,” which is the target for comparison. The evaluation is on a seven-point scale, and the evaluation coefficient ranges from 130% to 70%.
【 Formula 】
The Company’s TSR = Average closing price of the stock for each
|Upper and Lower Profit Limit||
From the perspective of compensation governance, and taking into account the control of excessive compensation payments compared to benchmarks and the responsibility to pay dividends to shareholders, the upper and lower profit limits for restricted stockbased compensation are as follows. (The upper profit limit is the amount of profit at which the restricted stock-based compensation amount reaches its maximum, and the lower profit limit is the amount of profit at which the restricted stock-based compensation accrues)
・ Upper profit limit: Net income attributable to owners of the parent of ¥200 billion (set based on the VISION 2030 target)
・ Lower profit limit: Net income attributable to owners of the parent of ¥22 billion (set based on DOE*)
* Ratio of distribution of equity attributable to owners of the parent company
|Period of Restriction on Transfer||Until the time of retirement or resignation from the position of an officer or employee of the Company predetermined by the Board of Directors such as member of the Board, Corporate Auditor, Executive Officer, Chief Senior Director, Senior Director, Councillor, Advisor, Senior Advisor, or employee of the Company, or any other similar position (hereinafter “Position of Restriction on Transfer”),|
|Conditions of Payment||From the perspective of compensation governance, restricted stock-based compensation shall not be paid if the net income attributable to owners of the parent is below the lower limit set based on the dividend on equity attributable to owners of the parent company (DOE).|
|Time of Payment||Once a year|
Total Compensation for Fiscal 2021
The figures in the table above include amounts paid to two members of the board and one corporate auditor who retired as of the close of the Annual General Meeting of Shareholders for the Company’s 25th Business Term held on June 24, 2022 covering the period from April 1, 2022 through to the date of retirement.
Figures in parentheses are included in the figures in the line above.
Capability of the Board of Directors as a Whole and Views on Diversity
- The number of directors of Mitsui Chemicals will be 12 or less, as stipulated in the Articles of Incorporation, and the appropriate number within said limit will be decided when necessary with due consideration given to the authority delegated to each executive officer and the need to streamline decision making in response to business expansion. In principle, Mitsui Chemicals will select multiple individuals from outside the Company, including corporate managers, academics, and legal professionals, to serve as independent outside directors in order to benefit from opinions informed by their rich experience and insight when, for example, formulating management policies as well as to increase oversight effectiveness with regard to director operations.
- Mitsui Chemicals’ selection of executive directors will take into consideration the specific characteristics of each business and disregard such factors as gender, race, nationality to ensure that the body of executive directors possesses balanced business experience in such vital areas as business planning, operations, production and technology, research and development, accounting and finance, human resources and, general and legal affairs.
Outside Directors and Outside Corporate Auditors
Mitsui Chemicals believes that management’s accountability and transparency is best served by obtaining opinions from independent outside directors and corporate auditors at meetings of the Board of Directors. The Company also believes that appropriate decision making at meetings of the Board of Directors is made possible by obtaining advice from persons with specialized knowledge.
To ensure that these objectives are achieved, the content of materials presented at Board of Directors meetings is explained to outside directors and outside corporate auditors in advance. In addition, the Company provides newly elected outside directors and outside corporate auditors with opportunities to deepen their understanding of the Company’s business. These opportunities include explanations of the Company’s business activities and tours of business locations.
When selecting candidates for outside directors and outside corporate auditors, the Company considers each individual based on the selection criteria set out in the Company’s Corporate Governance Guidelines. Moreover, all the outside directors and outside corporate auditors of the Company not only satisfy the selection criteria but also meet the criteria for independence set by the financial instruments exchange and the Independence Standards for Independent Outside Directors and Independent Outside Corporate Auditors provided as an Appendix to the Company’s Corporate Governance Guidelines. All the outside directors and outside corporate auditors also put themselves in the position of a stakeholder, and provide beneficial and candid advice regarding improving the corporate value of the Mitsui Chemicals Group. As outside directors and outside corporate auditors have no risk of a conflict of interest with general shareholders, even from a practical standpoint, the Company regularly submits a notice to the Tokyo Stock Exchange to this effect stating that all its outside directors and outside corporate auditors are independent officers. Furthermore, there are no special interests between the Company and any of its outside directors and outside corporate auditors.
Major Activities of Outside Members of the board and Attendance at Meetings of the Board of Directors and Board of Auditors（FY2022）
|Major Activities of the Board of Directors and Board of Auditors||Attendance at Meetings of the Board of|
Directors and Board of Auditors
|Board of Directors|
(Total Number of
Meetings Held: 16)
|Board of Auditors|
(Total Number of
Meetings Held: 17)
|YOSHIMARU Yukiko||She primarily speaks about sound and efficient corporate management from the point of view of one concerned with the validity of business execution and globalization based on her experience as an executive at other companies, such as one who promotes diversity, and her extensive international experience.||13/13||–|
|MABUCHI Akira||He primarily speaks about sound and efficient corporate management from the point of view of one concerned with the validity of business execution while taking proactive measures to identify issues and risks based on his extensive experience as a corporate manager and his in-depth knowledge about the mobility field.||13/13||–|
|MIMURA Takayoshi||He primarily speaks about sound and efficient corporate management from the point of view of one concerned with the validity of business execution while taking proactive measures to identify issues and risks based on his extensive experience as a corporate manager, his experience as chairman of the industry association, and his in-depth knowledge about the healthcare field.||11/11|
|Outside Corporate Auditors|
|SHINBO Katsuyoshi||He speaks about sound and efficient corporate management from the perspective of one concerned with ensuring that the execution of the Company’s business is appropriate based on his specialist knowledge and extensive experience not only as a lawyer but also as an outside officer of other companies.||12/13||16/17|
|TOKUDA Shozo||He has a wealth of experience serving as a certified public accountant as well as an auditor for other companies; hence, he speaks about sound and efficient corporate management from the perspective of one concerned with ensuring that the execution of the Company’s business is appropriate based on his extensive, all-round knowledge and experience in management.||13/13||17/17|
|FUJITSUKA Mikio||He speaks about sound and efficient corporate management from the perspective of one concerned with ensuring that the execution of the Company’s business is appropriate and improving the management supervision function of the Company’s Board of Directors based on his wealth of experience serving as management and a CFO at listed companies as well as an outside officer of other companies.||13/13||17/17|