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.
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
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.
Revision of Executive Compensation System
Mitsui Chemicals has decided to introduce a restricted stock compensation plan under which it will provide compensation to the Company’s Directors (excluding Outside Directors; hereinafter, the “eligible Directors”), granting them restricted stock with the aim of furnishing an incentive to work toward sustainable improvement in the Company’s corporate value while simultaneously promoting the concept of shared value with the Company’s shareholders. An overview of the restricted stock compensation plan is available on the Company’s website. The Company also grants the same restricted stock to Executive Officers and Chief Senior Directors as well.
- Introduction of Restricted Stock Compensation Plan and Revision of Compensation Amount for Directors
Reference: Comparison of the Previous and Current Systems
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.
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 three 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 three 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 three 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 three representative directors including the president, who serves as chair, and six outside directors)
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.
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
Aiming for the sustainable growth and the development of both society and the Mitsui Chemicals Group, we are working to raise corporate value by engaging in dialog with all stakeholders and resolving social challenges along the three axes of economy, environment, and society. To that end, the Corporate Sustainability Committee (chaired by the president) deliberates on policies, strategies and plans and then obtains the approval of the Management Committee. In fiscal 2016, the Corporate Sustainability Committee held two meetings.
- Risk & Compliance Committee
The Risk & Compliance Committee (chaired by a director) 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 a director) 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 a measure of their independence from the Board of Directors, corporate auditors conduct audits of directors and the performance of their duties as well as audits of such wide-ranging matters as internal corporate control, business performance, and the Group’s financial status. Pursuant to relevant laws and ordinances, corporate auditors therefore request reports on the Company’s businesses, exercise their authority in the election and dismissal of accounting auditors, and investigate the status of operations and assets. Specifically, corporate auditors attend not only the meetings of the Board of Directors but also Management Committee and other important meetings, 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, they conduct corporate auditor audits at the Group’s major places of business and affiliated companies in Japan and overseas as well as confirm the status of business execution. Each outside auditor is charged with the responsibility of auditing the operations of the Group from an objective and independent perspective based on extensive experience in his or her field.
With regard to financial audits, the Company has appointed Ernst & Young ShinNihon LLC as its accounting auditor. This firm independently conducts financial audits in accordance with the Companies Act and the Financial Instruments and Exchange Act. This firm also conducts audits of the internal control system in relation to financial reporting.
The Internal Control Division was established as an internal organization that conducts accounting and business audits of the Group, including affiliates. The Internal Control Division reports to the Management Committee the results of audits that are based on annual audit plans discussed in advance by the Management Committee and instituted.
Corporate auditors, the accounting auditor, and the Internal Control Division 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.
Evaluation of the Effectiveness of the Board of Directors
In principle, the Mitsui Chemicals analyzes and evaluates the effectiveness of the Board of Directors every year in accordance with “3. Structure and Operation of the Board of Directors,” Section 1, Chapter 4 (4) of the Company’s Corporate Governance Guidelines, by such methods as self-evaluation performed by respective directors.
Based on evaluation survey results for fiscal 2015, the Company took steps to increase the Board of Directors’ supervisory functions by (1) raising agenda criteria, (2) expanding reporting items, (3) introducing items for deliberation, and (4) increasing the number of outside directors.
Taking these measures into account, the Company conducted its fiscal 2016 survey of all directors and corporate auditors in early February 2017. Based on the survey results, a report together with the outcome of an early March meeting consisting only of outside directors and outside corporate auditors were presented at the end of March to a meeting of the Board of Directors where future challenges and measures were discussed.
The Company has confirmed that as a result of the measures implemented in fiscal 2016, the Board of Directors has improved overall in line with its increased supervisory functions. On the other hand, the Company has confirmed and shared with all concerned parties as a future issue the need for a management review in order to further expand the number of items introduced for deliberation as compared with fiscal 2016 as well as to enhance the Board of Directors’ deliberations.
The Company will review and implement necessary measures as appropriate to reinforce the supervisory functions of the Board of Directors based on the result of the annual evaluation of effectiveness.
Total 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.
Compensation for directors (excluding outside directors) comprises monthly compensation (a fixed amount) and bonuses. The proportion of compensation comprising bonuses is set at a level considered appropriate as an incentive for the sustained growth of Mitsui Chemicals.
Compensation for outside directors and corporate auditors solely comprises monthly compensation (a fixed amount), the level of which is established with reference to third-party surveys regarding compensation for corporate managers in Japan and other information.
Total Compensation for Fiscal 2016
|Classification||Number of Persons Receiving Payment||Amounts Paid (Millions of Yen)||Outside Officers|
|Number of Persons Receiving Payment||Amounts Paid (Millions of Yen)|
|Members of the Board||12||372||4||32|
Notes: 1. The amount of Board of Directors compensation of under ¥60 million per month was approved at the 8th General Meeting of Shareholders held on June 28, 2005.
2. The amount of corporate auditor compensation of under ¥11 million per month was approved at the 8th General Meeting of Shareholders held on June 28, 2005.
3. The figures in the table above include amounts paid to four 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 19th Business Term held on June 24, 2016, covering the period from April 2016 through to the date of retirement.
4. Moreover, the following scheduled bonus amounts to be paid to members of the board are on the agenda for the Annual General Meeting of Shareholders for the Company’s 20th Business Term to be held on June 27, 2017.
Five members of the board in office as of March 31, 2017: ¥92 million
Three members of the board retired at the conclusion of the Annual General Meeting of Shareholders for the Company’s 19th Business Term on June 24, 2016 (amount from April 2016 to the date of retirement): ¥14 million.
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 or 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
|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: 11)
|Board of Auditors|
(Total Number of Meetings Held: 15)
|Yukiko Kuroda※||Director Yukiko Kuroda 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 executive officer and consultant at other companies.||11/11||-|
|Hajime Bada※||Director Hajime Bada 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.||9/9|
(All nine meetings held after his appointment)
|Hiromi Tokuda※||Director Hiromi Tokuda primarily speaks about sound and efficient corporate management from the point of view of one concerned with the validity of business execution and strategy based on his extensive experience related to the Mobility domain, which is a main focus of the Company.||9/9|
(All nine meetings held after his appointment)
|Outside Corporate Auditors|
|Hiromu Matsuda※||Auditor Hiromu Matsuda has been involved for many years in financial institution management and has experience serving 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.||11/11||13/15|
|Osamu Sekine※||Auditor Osamu Sekine 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 in the legal profession but also as an outside officer of other companies.||11/11||15/15|
|Hiroki Nishio※||Hiroki Nishio 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, Mr. Nishio advocates sound and efficient corporate management with a view to ensuring that the Company’s business is executed in an appropriate manner and improving the profitability and stability of business.||11/11||15/15|
※Independent Officer specified under the regulations of the Tokyo Stock Exchange
In addition, Auditor Hiromu Matsuda resigned his position as of the end of the 20th General Meeting of Shareholders held on June 27, 2017.