Our Approach to Corporate Governance

The Mitsui Chemicals Group is constantly engaged in business activities to realize its Corporate Vision, which comprises a Corporate Mission and a Corporate Target. The Group recognizes efforts to achieve effective corporate governance as part of the process that will allow us to:

  • Maintain and develop trusting relationships with its shareholders and all other diverse stakeholders of the Mitsui Chemicals Group, and
  • Create a framework that can execute transparent, fair, timely, and decisive decision making.

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.

Corporate Vision

Corporate Mission

Contribute broadly to society by providing high-quality products and services to customers through innovations and the creation of materials, while keeping in harmony with the global environment.

【Five social contribution areas】

  • Promoting human well-being
  • Contributing to the value of shareholders’ investments
  • Increasing customer satisfaction
  • Contributing to local communities
  • Promoting the happiness and fulfillment of employees

Corporate Target

Constantly pursuing innovation and growth to become a chemical group with an undisputed global presence

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.

History of Corporate Governance Reforms

Corporate Governance Framework

The Board of Directors of the Mitsui Chemicals makes key management decisions and oversees the operations of each individual director, and, as a company with a board of corporate auditors, the status of each director’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.

Corporate Governance Framework

General Meeting of Shareholders

The General Meeting of Shareholders makes important decisions as the supreme decision-making body of the Company while being a valuable venue for direct and constructive dialogue with shareholders.

Board of Directors: eight (including 3 Independent outside directors)

The Board of Directors decides business strategies, business plans, and all other important matters related to management. The Board also oversees the overall management of the Group through reporting on such matters as the performance and duties of individual directors, important operations of subsidiaries and affiliates, and the implementation status of compliance and risk management systems by the Company and its subsidiaries and affiliates.
Moreover, the Board of Directors deliberates important corporate management policies from the intermediate stage and takes steps to reinforce management supervisory functions by providing advice to executives.

Board of Corporate Auditors: five (including 3 Independent outside auditors)

Corporate auditors conduct audits on such matters as the directors’ performance of duties in accordance with audit policies and plans established by the Board of Corporate Auditors.
Corporate auditors, the accounting auditor, and the Internal Control Division (Mitsui Chemicals’ internal audit department) mutually cooperate to conduct audits by reporting each annual plan, audit results, and all other relevant information by exchanging opinions and information among themselves while taking into account the independence of each audit.

HR Advisory Committee (composed of the president, who serves as chair, and the chairman and 3 independent outside directors)

To ensure the transparency and the validity of executive officer appointments, the Company has established the HR Advisory Committee as a consultative body of the Board of Directors as well as a mechanism to determine the system for proposing executive officer candidates.

Executive Compensation Advisory Committee (composed of the 3 representive directors including chairman, who serves as chair, and 3 independent outside directors and 3 independent outside auditors)

To ensure the transparency of performance evaluations and the validity of the compensation levels, the Company has established the Executive Compensation Advisory Committee as a consultative body of the Board of Directors as well as a mechanism to determine the system of executive compensation and evaluate the performance of directors.

Management Committee

To ensure appropriate and efficient decision making, the Company has established the Management Committee to review items that need to be discussed in advance of being put on the agenda of Board of Directors meetings and to deliberate on important matters related to business execution.

Group-wide Strategy Committee

The Company has established the Group-wide Strategy Committee to deliberate on strategy from a Company-wide perspective related to management and ­operational issues.

Corporate Governance-related Committees

The Company has established various types of committees to assist in enhancing its corporate governance.

  • Corporate Sustainability Committee
    The Corporate Sustainability Committee deliberates on the MCI Group’s groupwide policies, strategies, and plans for promoting ESG. We are aiming for the sustainable development of both society as a whole and the MCI Group. To that end, we are addressing the ESG-related challenges identified in the sustainable development goals (SDGs) and elsewhere by seeking out business opportunities in order to resolve issues through its business activities, as well as recognizing and tackling future risks for the MCI Group, and fulfilling its social responsibility as a company.
  • Risk & Compliance Committee
    The Risk & Compliance Committee (chaired by the executive officer in charge) was established as a separate entity from the Corporate Sustainability Committee in order to put in place specific policies, strategies, and plans in the areas of risk management and regulatory compliance. Based on Mitsui Chemicals Group Risk Management System, the Risk & Compliance Committee works to quickly identify risks and prevent them from materializing. To that end, the Committee, identifies and analyzes key risks regarding fiscal year targets for each Group company or division and steadily implements measures in accordance with PDCA cycles. In fiscal 2016, the Risk & Compliance Committee held two meetings.
    Important policies, strategies and plans proposed by the Risk & Compliance Committee are approved by the Management Committee.
  • Responsible Care Committee
    Responsible Care (RC) activities span the entire life cycle of each chemical product, from development and manufacturing to transport, use, consumption and disposal, and are aimed at protecting the environment, ensuring process safety and disaster prevention, chemical safety, and maintaining occupational health and quality. To that end, the Company has established the Responsible Care Committee (chaired by the executive officer in charge) as a separate entity from the Corporate Sustainability Committee. The Responsible Care Committee deliberates on policies, strategies, plans and evaluates the performance of RC-related activities. In fiscal 2016, the Committee convened three meetings. Important policies, strategies and plans proposed by the Responsible Care Committee are approved by the 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 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. In addition, the 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 Katsuyoshi Shinbo has been widely experienced as an attorney for many years and has extensive knowledge and insights on compliance and risk management. Outside Corporate Auditor Shozo Tokuda has been widely experienced from affairs as a certified public accountant for many years and has extensive knowledge and insights on finance and accounting. Outside Corporate Auditor Mikio Fujitsuka has been widely experienced as a manager and CFO of a listed company and has extensive knowledge and insights on finance and accounting.
MCI has established the Internal Control Division as an internal organization consisting of fourteen 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

The Company’s Board of Directors strives to improve its meetings by analyzing and evaluating the effectiveness of the Board as a whole every year using such methods as self-evaluations performed by directors and corporate auditors, and discussions only among outside directors and outside corporate auditors.

*Discussion items
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 2018

(1)Determining discussion items

Determined the specific approach for selecting topics for discussion items in order for the Board of Directors to engage in preliminary discussions on matters such as medium- to long-term business strategies and large-scale M&As.

(2)Broadening report items

Added dialogue with institutional investors as a report item.

(3)Improving advance briefings

Improved advance briefings to outside directors and outside corporate auditors, including the expansion and improvement of materials provided in advance and provision of feedback to their comments and questions raised at the advance briefings sessions.

Evaluation results and future initiatives

The director and corporate auditor self-evaluation scores in fiscal 2018 exceeded those of the previous fiscal year overall. The Company has also confirmed that the Board of Directors has been improved and invigorated by implementing measures to enhance its oversight functions and concludes that its effectiveness is fully sufficient, as was the case in the previous fiscal year.

Future challenges

(1)Further broaden discussions on medium- to long-term business strategies (review the Board’s standards for agenda submissions and meeting frequency, etc.)

(2)Enhance discussions on capital costs

(3)Further improve advance briefings

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

Mitsui Chemicals’ basic policies regarding the determination of compensation for directors (excluding outside directors) are as follows.

  • Compensation is commensurate with the authority delegated to the individual by the Company’s management and will be tied to the growth and performance improvement of the Mitsui Chemicals Group.
  • Compensation schemes are devised to reflect both corporate performance and the performance of the individual director.
  • Compensation for those in higher positions more strongly reflects their contributions to medium- and long-term ­corporate growth.
  • We ensure transparency and maintain accountability to our shareholders and other related parties regarding the determination of compensation for directors.

Structure of compensation for directors and corporate auditors

Compensation for directors (excluding outside directors) will be comprised of basic compensation, bonuses and stock compensation. The compensation is structured as follows. In addition, MCI increases the proportion of bonuses and stock compensation in accordance with improvement in business performance. Compensation for outside directors and corporate auditors will be comprised solely of basic compensation.

Percentages of basic compensation and incentives for directors (excluding outside directors) in fiscal 2018

Fiscal 2017 Ratio of Directors’ Basic Compensation to Incentives (excluding outside directors)

Basic compensation (fixed amount)

Basic compensation is a monthly fixed amount of compensation and determined in accordance with the director’s title, with consideration given to compensation levels of other companies (particularly manufacturers of similar type and size) as stated by one or more surveys conducted by specialized outside institutions.

Bonuses

Bonuses are set from the perspective of corporate performance, with consideration given to compensation levels of other companies (particularly manufacturers of similar type and size). Mitsui Chemicals links its bonus to business performance with the aim of providing greater incentive to achieve earnings targets across the entire Group. The base bonus amount is calculated using a formula where operating income acts as a benchmark of such business performance. In addition, when determining the bonus amount for each individual, the Group takes into account how the individual’s performance evaluation corresponds with the level of achievement of the initially set earnings targets across the entire Group.

a)Formula for base bonus amount
Operating income × Coefficient × Director-title-specific index
b)Determining bonus amount for each individual

The amount of bonus depends partially on the extent to which earnings targets across the entire Group have been achieved. It is calculated based on the formula and is also determined by taking the following into consideration.

  • Consolidated profit attributable to owners of parent
  • Retained earnings brought forward
  • Dividends

Stock compensation

Stock compensation provides medium- to long-term incentive to work toward sustainable improvement of MCI’s corporate value, and also promotes the concept of achieving shared value with MCI’s shareholders. The stock compensation is in the form of specified restricted stock with a three to five year transfer restriction period. MCI’s total levels of compensation also encompassing basic compensation and bonuses are set at levels equivalent to those of other companies (particularly manufacturers of similar type and size).
Stock compensation will be reduced or otherwise unpaid in the event of a serious compliance violation, major accident or other such incident that would adversely affect MCI and its operations.

Total Compensation for Fiscal 2018

Classification Total
Compensation
(Millions of yen)
Total Compensation by Type (Millions of yen) Number of
Persons
Applicable
Basic
Compensation
BonusesStock
Compensation
Members of the Board
(excluding outside directors)
371 253 77 59 6
 Tsutomu Tannowa (117) (70) (27) (20)
Corporate auditors
(excluding outside auditors)
64 64 3
Outside directors and outside corporate auditors 75 75 6
Total 509 373 77 59 15

Notes: 1. The figures in the table above include amounts paid to one director and one corporate auditor who retired as of the close of the Annual General Meeting of Shareholders for the Company’s 21st Business Term held on June 26, 2018, covering the period from April 1, 2018 through to the date of retirement.

2. 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 Directors and Attendance at Meetings of the Board of Directors and Board of Auditors(FY2018)

Major Activities of the Board of Directors and Board of AuditorsAttendance at Meetings of the Board of
Directors and Board of Auditors
Board of Directors
(Total Number of
Meetings Held: 11)
Board of Auditors
(Total Number of
Meetings Held: 15)
Outside Directors
Yukiko KurodaShe primarily speaks about sound and efficient corporate management from the point of view of one concerned with the validity of business execution and corporate social responsibility based on her extensive experience as a corporate manager and as an outside officer and consultant at other companies.11/11
Hajime BadaHe primarily speaks about sound and efficient corporate management from the point of view of one concerned with the validity of business execution and the intrinsic nature of the Mitsui Chemicals Group based on his extensive experience as a corporate manager and president of an industry organization.10/11
Hiromi TokudaHe primarily speaks about sound and efficient corporate management from the point of view of one concerned with the validity of business execution strategy based on his extensive experience related to the Mobility domain, which is a main focus of the Company.11/11
Outside Corporate Auditors
Hiroki NishioHe has been involved in the management of financial institutions as well as private sector companies for many years and has experience serving as an outside officer of other companies. Based on his all-round knowledge and experience in management, he advocates sound and efficient corporate management with a view to ensuring that the Company’s business is executed in an appropriate manner as well as improving the profitability and stability of the business.11/1115/15
Katsuyoshi ShinboHe 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.11/1114/15
Shozo TokudaHe 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.11/1115/15
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