Discussion between Outside Directors and CFO
Discussion between Outside Directors and CFO

* Each affiliation is from the time when the article was created.

Realizing effective governance and initiatives for future growth

Free and open discussions during Board meetings

Kubo

Even prior to the establishment of Mitsui Chemicals in 1997 we had welcomed outside directors into the Company with the aim of enlivening meetings of the Board of Directors. I’d first like to hear from you, our outside directors, about how you view the Company’s Board meetings.

Kuroda

My impression of Board meetings at Mitsui Chemicals is that they are always conducive to free and open discussion and the exchange of opinions. There is also a really diverse mix of outside directors and corporate auditors, which enables us to make remarks from multiple viewpoints.
The internal directors kindly explain some hard-to-understand Company matters in detail and at times take issue with our opinions, which I think points to healthy Board meeting discussions. It’s really valuable that internal directors earnestly listen to the opinions of outside directors.
Furthermore, even though all of the outside directors do not necessarily possess extensive knowledge of the chemical industry, we are really thankful for being given advance briefings on matters some of us are not familiar with, opportunities to learn about the Company’s businesses, and even chances to visit some business sites.

Bada

I feel that discussions at Mitsui Chemicals’ Board of Directors meetings are focused on plans and projects that require a long-term perspective, particularly those with a high degree of importance.
Outside directors are required to voice their opinions as a third party, but at the same time, it’s becoming more necessary that they make comments with a complete understanding of the project in question. For this reason, I don’t think they can keep up with discussions if they have no knowledge of actual operations. It’s been three years since I assumed the role of outside director and I’ve been able to visit various production sites during the period. I’ve been to nearly all the domestic plants and major overseas bases mainly in Europe, the US, and Southeast Asia. I originally worked in the steel industry, so I thought I would have a good understanding of how plants operate, but I soon discovered after visiting them that plants in the chemical industry are completely different from those in the steel industry.
In this sense, I highly appreciate how Mitsui Chemicals provides thoughtful explanations to its outside directors so we get a better understanding of how it does business.

Kubo

Director Yoshimaru, you will start attending Board meetings from fiscal 2019 as a newly appointed outside director. In light of your experience so far as an executive officer and as an outside director at other companies, I’d like to hear your thoughts on what kind of meeting body the Board of Directors should be.

Yoshimaru

I think various examinations are carried out in advance so as to proceed difficult discussions at Board of Directors meetings on the assumption that important decisions are to be made. Still, the Board cannot avoid a clash of opinions. And I believe, such conflicting views are what matters most for the Board to best reach its conclusions drawing upon the opinions of highly experienced outside directors with different perspectives. Progress thereafter should then be monitored accordingly. I hope to contribute to this process as much as possible.
Another point I’d like to make is that during Board meeting discussions, it may be extremely worthwhile to hear the opinions from internal directors on the business areas they are not in charge of.
As we face historical inflection points and continue to undergo various changes, I look forward to seeing what opinions and contributions I can bring to Board meetings.

Kubo

Much focus recently has been on the role of outside directors in terms of their involvement in matters related to top management personnel affairs and executive compensation. I’d like to hear the thoughts of our Director Kuroda, about the Company’s two Advisory Committees tasked with addressing agenda items related to human resources and compensation, as a member of those Committees.

Kuroda

While both Committees are positioned as advisory bodies, the Company ensures a scheme where decisions cannot be made solely by the president. For example, the Human Resource Advisory Committee is comprised entirely of outside directors, with the president being the only exception, and realizes comprehensive discussions about extremely important personnel matters. I think the two Committees deliver an advanced level of corporate governance in the sense that the discussions that take place there are quite substantive despite their advisory role.

Unceasing reforms to improve Board effectiveness

Kubo

Next, I’d like to ask some questions about the Board’s effectiveness evaluation process. Every year at Mitsui Chemicals we evaluate the effectiveness of the Board of Directors. The process involves all directors and corporate auditors taking a survey and then only outside directors and outside corporate auditors engaging in discussions based on the survey results. The results are then discussed by the Board. And recently the Board of Directors at Mitsui Chemicals has been assessed by an external body to determine whether it is functioning effectively. Through this assessment process, we are trying to visualize in which areas our Board excels compared to other companies and what kind of issues need addressing.
We have again conducted this effectiveness evaluation for fiscal 2018 and are pushing ahead with some reforms, but I’d like to hear your opinions on the Board’s effectiveness mainly with respect to agenda items of the meeting only among outside directors and outside corporate auditors and the reform process implemented thus far.

Kuroda

Comparison scores are given as part of the effectiveness evaluation conducted by an external agency. In most categories, Mitsui Chemicals has obtained higher scores than other companies. Instead of slipping into self-complacency, however, the Company always looks to change things that need changing and takes steps to make improvements every year. I think this is a really wonderful aspect of the Company.
One area that has been improved is agenda submissions standards. These are the rules on agenda items, which determine what topics should be discussed at Board meetings. As a result, our Board meetings now focus more on high-priority and strategically important matters.
Furthermore, because I assumed my role immediately prior to the announcement of the current Long-Term Business Plan, agenda items at Board meetings at that time were mostly focused on the preparation of the plan, but I get the impression that recent discussions have been concerned more with day-to-day operations. Given that a medium- to long-term perspective is essential to management decision-making, I mentioned in the effectiveness evaluation survey that even when we discuss operational issues, we should also be looking at how they should be in the positioning of the Long-Term Business Plan. And as quickly as the other day, an agenda item related to this issue was included and discussed in the meeting of the Board of Directors.

Bada

While the effectiveness evaluations are carried out every year, I get the feeling that the opinions of outside directors and outside corporate auditors are being properly addressed. During the effectiveness evaluation meeting only among outside directors and outside corporate auditors, we asked if we could be informed about what was actually discussed during internal Management Committee meetings, including the kinds of questions and counterviews that arose. The Company was quick to accommodate our request.
If I was to speak my mind about the current agenda items, Mitsui Chemicals has various acquisition deals and large-scale overseas projects, but they appear to be somewhat behind schedule under their original plans. I think the evaluation and analysis needs to be carried out thoroughly for the future.

Embracing challenges that surpass customer imagination

Kubo

In changing our point of view slightly, I’d like to hear your thoughts about the corporate culture at Mitsui Chemicals.
As outside directors, you all not only participate in the discussions at the meetings of the Board of Directors, but also visit our affiliated companies and business sites and engage in conversation with employees in the field. Given this, please tell us what you think the Company’s strengths are, as well as the areas in which we can improve.

Bada

Looking at Mitsui Chemicals from the outside, my impression is that the Company is trustworthy, takes things seriously, and does things the proper way. The Company has a long history behind it, and when visiting regional business sites, I get the feeling that the local residents think of the Company as a leading enterprise in town and that the employees are working with pride to meet their expectations. I think this is a great asset for the Company.
On the other hand, considering that Japanese corporate culture can sometimes be intolerant of outsiders, I think the Company needs to pay more attention to diversity.
In fact, after seeing so many corporate scandals occurring in recent years, I think a company’s foundation should be built on integrity. A company that causes problems has a problem with integrity, in my opinion. In this sense, I hold Mitsui Chemicals in high regard because I feel that all of its employees, from top to bottom, possess a great deal of sincerity.

Kuroda

We can also see that in the Company’s operation of Board of Directors meetings. If issues are ever pointed out, the Company willingly resolves and rectifies them. I think this degree of sincerity is entrenched right throughout Mitsui Chemicals.
As for the Company’s business operations, some major restructuring took place about a year after I assumed my role as an outside director and the Company shifted from being a product-oriented organization to one that is more customer-focused. As a result of these organizational reforms, I feel that the culture within the Company has been gradually changing to the extent that products are being produced in response to external requests and customer demand.
By melding together the ability to listen to its customers and a framework for honestly and seriously addressing problems, I think Mitsui Chemicals can become a corporation that satisfies customers’ needs at a very high level in the future.
At the same time, this is rather my expectation and not a challenge, I hope the Company is going to develop astonishing and inspiring products that far exceed user expectations. To achieve this, I would like to see the Company go out on a limb on some occasions to take risks and embrace the challenge of doing something totally radical. I have heard that such challenging ideas are being floated in the new business development divisions, so I look forward to see what happens in the future.

Kubo

Director Yoshimaru, we are fortunate enough to welcome you as our outside director, and I’d like to hear what kind of expectations you have for the Mitsui Chemicals Group.

Yoshimaru

I had a fine impression of the Company before assuming my position in the sense that the Company possessing the infrastructure and materials is building the foundations of modern society, so to speak. At the same time, however, I understand that being in possession of infrastructure and materials makes business much more complex.
One shareholder made a remark with expectation during the General Meeting of Shareholders that the Company could significantly transform its operations if it developed materials never seen before, such as plant-derived plastics.
Naturally, it is important that the Company presents various customer-driven applications, but on a much greater level, I expect and believe Mitsui Chemicals is a corporation that can develop materials to help solve the challenges of society.

Expecting Mitsui Chemicals to play a leading role in solving social issues

Kubo

The SDGs and ESG are often talked about when it comes to social challenges. No matter what the industry is, companies are now required to contribute to solving the challenges of society through their business activities.
As such, I think the chemical industry has enormous potential to contribute to solving social challenges with new technologies and products.
May I ask what you think about Mitsui Chemicals’ current initiatives on ESG and the outlook for the future?

Kuroda

This is an interesting topic, even on a personal level. We can certainly expect new materials to be developed and utilized in various industries to greatly help solve environmental issues, for example, and this is without doubt a role that I think Mitsui Chemicals can fulfill.
Although the Company is engaged in a number of businesses related to solving social challenges, I’d like to see it pick up the pace of its initiatives even more. Mitsui Chemicals has developed its Blue Value™ and Rose Value™ products, both of which seek to solve social challenges. But on top of the environmental issues that the Blue Value™ products focus on, the Company has many businesses in which the Rose Value™ products can also make contributions, for example, by addressing the problem of food provisions and issues associated with an aging society.
Instead of taking action in response to what users and customers point out, I’d like to see all Company employees be more attentive to what issues need addressing and what social challenges need solving. By doing so, the Company can take the initiative ahead in formulating the necessary measures.

Bada

In recent years it has gradually become clear just how serious the various problems of microplastics have become.
Solving the problems of microplastics is exceedingly difficult because we are not really sure where the particles floating in the world’s oceans have come from.
Simply cleaning up what is currently flowing into the seas without a clear view of the bigger picture of how to solve this issue probably isn’t the answer. I think developing new products is one key role Mitsui Chemicals can play as a chemical company in order to find a breakthrough for this problem.
Furthermore, this problem cannot be solved by just one company. Given that President Tannowa currently serves as Chairman of the Japan Chemical Industry Association, I’d also like to ask that the industry works together with the government to formulate a policy in order to identify what needs to be done.
Up until now, most solution proposals for major global issues have come out of Europe, which include the SDGs, but for this issue, I hope that Japan and Mitsui Chemicals can lead the way in coming up with sophisticated solutions.

Yoshimaru

I have heard that Mitsui Chemicals will set up a new production site in the Netherlands so I think we will begin to see more of those activities in Europe where so many environmentally-friendly countries are located. I hope that Mitsui Chemicals can lead the way in the region with its initiatives.

Kubo

Thank you everyone for your opinions. As you have all alluded to, social challenges can be viewed as risks, but I also think they present major business opportunities if we can contribute our own solutions. For example, increasing the weighting of Blue Value™ and Rose Value™ products will lead to profit growth. Going forward, we intend to implement a wide range of initiatives like this.

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