Mitsubishi Materials Corporation

Corporate Governance

Basic Approach

We have, based on the corporate philosophy of the Group, vision, values, code of conduct, mission and the Basic Policy on Corporate Governance* by the Board of Directors, developed trust with all stakeholders related to the Company and its subsidiaries (hereinafter, the "Group"), such as shareholders and investors as well as employees, customers, client or supplier companies, creditors and local communities, and also develop our corporate governance.

Among the governance systems under the Companies Act, we have chosen to be a Company with a Nomination Committee, and by separating supervision and execution, will strengthen the Board of Directors' management supervisory functions, improve the transparency and fairness of management and accelerate business execution and decision making.

We acknowledge the enhancement of corporate governance to be one of the most important management issues, and continuously make efforts to improve our corporate governance.

* We have prepared the "Basic Policy on Corporate Governance," as a compilation of the basic approach to and framework of corporate governance.

Basic Policy on Corporate Governance (June 28, 2022) (PDF:147KB)

Corporate Governance Report (June 28, 2022) (PDF:689KB)

Corporate Governance System

Overview of Corporate Governance

Among the governance systems under the Companies Act, we have chosen to be a Company with a Nomination Committee, and by separating supervision and execution, will strengthen the Board of Directors' management supervisory functions, improve the transparency and fairness of management and accelerate business execution and decision making.

As the Group is an integrated business entity supplying basic materials and elements indispensable to the world, and is involved in recycling business and renewable energy business, we adopted an in-house company system so as to facilitate and appropriately execute business operations.


The functions and duties of the Board of Directors shall be as follows:

  • - Upon delegation by shareholders, the Board of Directors shall indicate the direction of its management and make an effort to enhance the Group's medium- to long-term corporate value by, for example, engaging in freewheeling and constructive discussion on management policies and management reforms;
  • - The Board of Directors shall determine matters that may have a serious impact on management, such as management policies and management reforms, in accordance with the provisions of laws, the Articles of Incorporation and the Board of Directors Rules;
  • - The Board of Directors shall accelerate decision-making in business execution by delegating the authority over business execution to an appropriate extent to Executive Officers in accordance with the provisions of the Board of Directors Rules, etc. so that Executive Officers may assume the responsibility and authority to make decisions and execute business in response to changes in the business environment; and
  • - The state of Group governance and the progress of the execution of duties, including the progress of the management strategy, shall be reported by Executive Officers to and supervised by the Board of Directors on a periodic basis.
  • - The Board of Directors is comprised of 10 Directors (including seven (7) Outside Directors), and the Chairman of the Board of Directors is performed by the Chairman of the Company.

(Nomination Committee)
The Nomination Committee determines the policy for the nomination of candidates for Director, the content of proposals, etc. concerning the election and dismissal of Directors to be submitted to General Meetings of Shareholders. In addition to this, the Nomination Committee reviews and responds to inquiries from the Board of Directors concerning the election and dismissal, etc. of Executive Officers. Furthermore, in order to develop human resources who will lead the next generation of management, the Nomination Committee deliberates on successor candidates for the Chief Executive Officer together with the development plans, and supervises to ensure the development of successor candidates is performed appropriately.
Majority of the Nomination Committee members shall be Independent Outside Directors, and the Chairperson shall be performed by an Independent Outside Director. As of the date of submission, the Nomination Committee is comprised of five (5) Directors (including four (4) Outside Directors), and the Chairperson is Mariko Tokuno (Independent Outside Director).

(Audit Committee)
The Audit Committee audits the legality and validity of duties performed by Directors and Executive Officers, via audits either using internal control systems or directly by the Audit Committee member selected by the Audit committee.
Majority of the Audit Committee members shall be Independent Outside Directors, and the Chairperson shall be performed by an Independent Outside Director.
The Audit Committee also elects one (1) full time Member of the Audit Committee in order to improve the effectiveness of audits conducted by the Audit Committee.
As of the date of submission, the Audit Committee is comprised of five (5) Directors (including four (4) Outside Directors), and the Chairperson is Tatsuo Wakabayashi (Independent Outside Director).

(Remuneration Committee)
The Remuneration Committee establishes policies for determining individual remuneration for Directors and Executive Officers, and determines the individual remuneration to be received by Directors and Executive Officers based on such policies.
Majority of the Remuneration Committee members shall be Independent Outside Directors, and the Chairperson shall be performed by an Independent Outside Director. As of the date of submission, the Remuneration Committee is comprised of five (5) Directors (including four (4) Outside Directors), and the Chairperson is Hikaru Sugi (Independent Outside Director).

(Sustainability Committee)
The Sustainability Committee shall review policies on sustainability issues and others after being consulted by the Board of Directors, and report the details to the Board.
Majority of the Sustainability Committee members shall be Independent Outside Directors, and the Chairperson shall be performed by an Independent Outside Director. Currently, the Sustainability Committee is comprised of eight (8) Directors (including seven (7) Outside Directors), and the Chairperson is Koji Igarashi (Independent Outside Director).

(Executive Officer)
Executive Officers execute business in accordance with the prescribed segregation of duties, based on the delegation of authority from the Board of Directors.
The Company has 10 Executive Officers, of which the Chief Executive Officer Naoki Ono, and the Executive Vice President and Executive Officer Yasunobu Suzuki, are elected as Representative Executive Officers upon the decision of the Board of Directors.

(Strategic Management Committee)
Following the delegation of authority from the Board of Directors, the Strategic Management Committee reviews and determines important matters concerning the management of the entire Group. The Strategic Management Committee consists of the Chief Executive Officer and the Executive Officers in charge of each department of the Strategic Headquarters. The Chief Executive Officer serves as the chairperson of the committee.

Overview of Corporate Governance

(a) Policy for Nomination of Candidates for Director
Our basic approach to the structure of the Board of Directors, which fulfills the roles of determining the direction of management and exercising supervision over the progress of business execution, is to ensure that it comprises a diverse range of human resources with different expert knowledge, experience, and other qualities. In particular, the Nomination Committee will consider candidates for Outside Director to ensure that they comprise individuals who possess experience and knowledge in corporate management (business similar to or different from the Group's business, etc.) and organizational management, and individuals who possess broad and advanced expert knowledge and extensive experience in relation to finance and accounting, legal affairs, production engineering, research and development, sales and marketing, or international relations, etc.
In light of the basic policy on the structure mentioned above, the Nomination Committee will nominate and select individuals who satisfy the following requirements as candidates for Director, regardless of individual attributes concerning gender, nationality and race, etc.:

  • - An individual of exceptional insight and character;
  • - An individual with a strong sense of ethics and a law-abiding spirit; and
  • - An individual who can properly fulfill his or her duties concerning the exercise of supervision over the management of the Company and the determination of the direction of management.

Further, with respect to candidates for Independent Outside Director, the Nomination Committee will nominate and select individuals who satisfy the following requirement in addition to the above requirements:

  • - An individual who has no material interest in the Group and who can remain independent. The specific selection of personnel shall be decided after deliberation by the Nomination Committee.

Provided that the Company considers that an Outside Director is not independent if he or she falls under any of the conditions listed below in addition to meeting the standards for independence established by Tokyo Stock Exchange, Inc.

1. An individual who falls under or has fallen under any of items (1) or (2) below, either presently or in the past:

  1. (1) An executive or non-executive Director of the Company; or
  2. (2) An executive or non-executive Director of the Company's subsidiary.

2. An individual who falls under any of items (1) through (5) below:

  1. (1) An executive of a client or supplier company of the Company, whose value of transactions amounted to 2% or more of the consolidated net sales of the Company or the client or supplier company as of the end of the previous fiscal year;
  2. (2) A person who received, as a professional or consultant, etc., consideration of not less than 10 million yen from the Company in the previous fiscal year, excluding his/her consideration as a Director;
  3. (3) An executive of an organization that received a donation of not less than 10 million yen from the Company in the previous fiscal year;
  4. (4) A shareholder who directly or indirectly holds at least 10% of the total number of voting rights of the Company or an executive of such shareholder; or
  5. (5) The Company's Accounting Auditor or its employee, etc.

3. An individual who has fallen under any of items (1) to (5) of 2 above at any time in the past three (3) years:

4. A close relative of any of the persons listed in item (1) or (2) of 1 above, items (1) to (5) of 2 above, or 3 above (excluding unimportant persons); or

5. A person who has served as the Company's Outside Director for a period of more than eight (8) years.


(b) Policy for Election and Dismissal of Executive Officers
In electing Executive Officers responsible for the execution of business tasks, the Nomination Committee will elect individuals who satisfy the following requirements, regardless of individual attributes concerning gender, nationality and race, etc.:

  • - An individual of exceptional insight and character;
  • - An individual with a strong sense of ethics and a law-abiding spirit; and
  • - An individual well-versed in management and the business activities of the Group.

In relation to the election process, the Chief Executive Officer will first draft a proposal for the election of Executive Officers after consulting with relevant officers as necessary. The Chief Executive Officer will then submit a proposal for the election of Executive Officers to the Board of Directors based on the deliberations and responses to inquiries at a Nomination Committee meeting, and Executive Officers will be elected by resolution of the Board of Directors based on a comprehensive review of the candidates' personal history, achievements, specialist knowledge, and other capabilities.
In addition, if any event occurs that makes an Executive Officer highly ineligible in light of these standards, the Executive Officer shall be dismissed by resolution of the Board of Directors following a review by the Nomination Committee.

Analysis and evaluation of the effectiveness of the Board of Directors

The Company analyzes and evaluates the effectiveness of the Board of Directors based on the evaluation by each Director on an annual basis. In FY2022, the effectiveness of the Board of Directors was evaluated using a third-party organization. The evaluation method and a summary of the results are outlined below.

  1. Method of analysis/evaluation
    1. (1) Evaluation process
      • ・September 2021 / The materials and minutes of the Company's Board of Directors meetings were disclosed to the third-party organization.
      • ・October 2021 / The third-party organization conducted a preliminary interview with the Chairman of the Board of Directors and the Chief Executive Officer regarding the current status of the Board of Directors.
      • ・November 2021 / A questionnaire prepared in consultation with the third-party organization was distributed to all 10 Directors and anonymous responses were retrieved.
      • ・December 2021 / Based on the results of the questionnaire, the third-party organization conducted individual interviews with all 10 Directors on important matters concerning the Board of Directors.
      • ・February and March 2022 / Given the report from the third-party organization on the results of the questionnaire and interviews compiled and analyzed, the Directors discussed the effectiveness of the Board of Directors based on that report.
      • ・March 2022 / Following the discussions in February and March, the Board of Directors passed a resolution on the effectiveness of the Board of Directors for FY2022.
    2. (2) Questionnaire items
      The questionnaire uses a five-grade evaluation for the questions below (1. Strongly agree, 2. Agree, 3. Neither agree nor disagree, 4. Disagree, 5. Totally disagree) and provides a free comment space where needed.
      • ・Roles and functions of the Board of Directors
      • ・Scale and composition of the Board of Directors
      • ・Status of operations of the Board of Directors
      • ・Composition, roles and status of operations of each of the Nomination Committee, Audit Committee and Remuneration Committee
      • ・Support system for Outside Directors
      • ・Relationship with investors and shareholders
      • ・Overall effectiveness of the Company's governance system and the Board of Directors
    3. (3) Interview items
      Based on the responses to the questionnaire, the third-party organization conducted interviews on the following important matters concerning the effectiveness of Board of Directors.
      • (i) Views on business and management
        Optimization of business portfolio
        Promotion of CX (efforts for management innovation) and organizational reform
        Status of corporate culture and human resources
        Status of group governance and internal control
      • (ii) Views on the Board of Directors
        Supervisory function by the Board of Directors
        Status of discussions at the Board of Directors
        Comments by Outside Directors
        Quality of discussions at the Board of Directors and future responses
        Discussions on sustainability issues
        Setting of agenda
        Materials and presentations
        Views on the leading Independent Outside Directors
        Succession plan for the Chief Executive Officer
        Views on the Chairman and its succession plan
        Composition of Outside Directors and their succession plan
        Sharing of information on discussions at the Nomination Committee with the Board of Directors
        Status of activities of the Audit Committee
  2. Issues based on the FY2021 evaluation and evaluation of responses to those issues

    As a result of the questionnaire and interviews conducted by the third-party organization regarding the initiatives concerning the following matters taken by the Company in FY2022 based on the results of the evaluation of the effectiveness of the Board of Directors for FY2021, it was confirmed that "certain measures were taken and improvements have been made" and "sufficient discussions were conducted by the Board of Directors" in general.

    1. (1) Matters pertaining to enhancement of management supervisory functions (the manner of supervision, including supervision of the measures taken based on the Medium-term Management Strategy, the appropriate content and number of proposals to the Board of Directors, the content and volume of materials for the Board of Directors, and time for prior consideration)
      • ・Distribution of materials for the Board of Directors should be made at an early timing with particularly important sections in materials highlighted.
      • ・Emphasis should be made on explaining new matters, and causes and countermeasures, etc. of matters that are progressing unfavorably in reports made by Executive Officers at the Board of Directors meetings.
      • ・In regard to matters deliberated by the Board of Directors, reporting of business results, budget, financial results, etc. should be made in the first half so that Directors may judge the appropriateness of each measure based on the general situation of business performance, etc.
      • ・Business briefings should be held regularly for Outside Directors in order to deepen their understanding of our business and major projects, overseas sites/business expansion, and overview and background, etc. of measures taken under the Medium-term Management Strategy.
    2. (2) Matters pertaining to understanding of capital cost and setting of indicators
      • ・In line with the partial review of the Medium-term Management Strategy, financial plans, including ROIC, were reviewed after consultation by the regular Board of Directors meetings held in March and April 2021.
      • ・Appropriate calculation and operation methods, etc. of management indicators, including ROIC, should be further discussed by the Board of Directors to develop a monitoring structure based on appropriate management indicators applicable for the next Medium-term Management Strategy.
    3. (3) Matters pertaining to supervision of the policy for reduction of the Strategic Share Holdings
      • ・Strategic Share Holdings should be examined based on business alliances, business relationships, and investment effects to systematically reduce shares if it is deemed unnecessary to hold them.
    4. (4) Matters pertaining to supervision of Group governance, etc.
      • ・Initiatives should be taken on the Group-wide measures to activate communication and enhance internal control.
      • ・Previously implemented reports on safety, quality, compliance, etc. by the Sustainable Management Office to the Board of Directors should be continued as provision of necessary information for monitoring.
  3. Results of analysis of the questionnaire and interviews by the third-party organization

    The key results of analysis of the questionnaire and interviews compiled by the third-party organizations are as follows.

    1. (1) Effectiveness, etc. of the Board of Directors
      • ・The supervisory function of the Board of Directors is appropriately exercised, and its effectiveness is considered to be high.
      • ・In the self-evaluation of Directors, it was confirmed that each individual contributed to activating discussions at the Board of Directors meetings and to exercising the supervisory function.
    2. (2) Supervisory function of the Board of Directors
      • ・The management team is currently working on business and organizational reforms, but there are still many issues recognized. The role, composition, and discussions of the Board of Directors are expected to change in response to such business and management stages. As for their role, it is considered that "the support and supervision of execution will be important in the success of reforms and the creation of growth areas" and "discussions are needed to enhance the supervision function to monitor the efforts to address issues."
      • ・The Board of Directors has a common understanding that supervision of management and execution is an important role. The way in which a supervisory function is exercised is considered to differ depending on the experience and perspective of each Director. Specific measures included "support execution and lead to change," "examine from both quantitative and qualitative aspects, focusing on major policies related to the whole," and "strictly monitor progress and achievements in response to commitments." There is an opinion stating that it is better for the Board of Directors to take a more leading role in matters related to the way the Company ought to be, such as sustainability issues.
    3. (3) Sustainability
      • ・On sustainability issues, many directors believe it is better for the Board of Directors to demonstrate stronger leadership and set a direction from the Board's point of view. In order to conduct effective discussions, it is considered necessary to "clarify the definition of sustainability," "organize how Outside Directors can contribute," "establish a sustainability committee to hold discussions outside the Board of Directors," and "enhance the secretariat structure" among others.
  4. Summary of FY2022 evaluation results

    As a result of deliberations by the Board of Directors in consideration of the results of the third-party analysis, it was confirmed that the effectiveness of the Board of Directors of the Company was secured in FY2022. Matters recognized as issues in the questionnaire and interviews and a summary of deliberations of the Board of Directors regarding those issues are as follows.

    1. (1) Matters pertaining to the operation of the Nomination Committee, Audit Committee and Remuneration Committee
      • ・There was an opinion that "the Nomination Committee has not sufficiently shared information with the Board of Directors regarding the status of consideration of the succession plan for the internal Directors." Regarding this, there was an opinion indicating that "this evaluation result may be due to a lack of sharing of discussions had by the Nomination Committee with the entire Board of Directors or to inadequate sharing of relevant information from Directors who also serve as Executive Officers. This can also be said of discussions at the Remuneration Committee, etc., and from a broad perspective, it may be a question of whether each committee shares the content of deeper discussions."
      • ・On the other hand, there was a comment stating that "in some cases, the content of discussions at each committee includes information that is not necessarily appropriate to be shared with the Board of Directors as a whole because of the presence of relevant persons within the Board." Regarding this, an opinion was given that "opportunities for discussion among Outside Directors only should be increased, taking into account cases where it is not appropriate to share information with internal relevant parties."
    2. (2) Matters pertaining to supervision of growth strategies by the Board of Directors
      • ・Regarding the optimization of the business portfolio, there was an opinion stating, "Since a certain degree of business reforms, including restructuring and withdrawal, is expected to be completed, discussions on growth strategies, such as strengthening existing businesses and fostering new businesses, should be deepened from a multifaceted perspective."
      • ・In addition, while there was an opinion stating, "It is necessary to enhance explanations and information provision from Executive Officers in order for the Board of Directors to accurately monitor the current situation," there was also an opinion stating, "This is covered by the business briefing, etc. for Directors currently held."
    3. (3) Matters pertaining to the establishment of a sustainability committee
      • ・Through this evaluation process, it was found that on sustainability, many Directors believe "it is better for the Board of Directors to demonstrate stronger leadership and set a direction from the Board's point of view."
  5. FY2023 initiatives toward further enhancement of effectiveness

    The Company's FY2023 measures to enhance effectiveness based on evaluation results of the effectiveness of the Board of Directors in FY2022 are as follows.

    1. (1) Responding to opinions on the operation of the Nomination Committee, Audit Committee and Remuneration Committee
      • ・In the evaluation process, a point was made that while the details of in-depth discussions by each committee need to be shared more with the Board of Directors as a whole, for matters discussed by the Nomination Committee and the Remuneration Committee in particular, the presence of stakeholders (mainly internal directors) at meetings of the Board of Directors also needs to be taken into account. Accordingly, the frequency of Outside Directors' opinion exchange meetings, where discussions take place only among Outside Directors, will be increased.
    2. (2) Responding to opinions on the supervision of growth strategies by the Board of Directors
      • ・When formulating the next Medium-term Management Strategy planned to be announced in 2023, the details of measures, including matters related to growth strategies, will be explained by the execution side and discussed from a multilateral perspective by making use of settings such as briefings for Directors (please refer to the following paragraph). In addition, the rolling after the formulation of the next Medium-term Management Strategy will also be discussed from a multilateral perspective.
      • ・Business briefings for Outside Directors, which were previously held as a platform where Executive Officers provided explanations and information to the Board of Directors to accurately monitor the current situation, will be reorganized into briefings for Directors targeting all Non-executive Directors and will be held continually. The briefings will cover matters such as the next Medium-term Management Strategy, business portfolio, Group-wide strategy, individual business strategy, R&D and intellectual property strategy, business restructuring, investment, progress on each MMDX theme, and rolling review of the Medium-term Management Strategy.
    3. (3) Responding to opinions on the establishment of the Sustainability Committee
      • ・The Sustainability Committee was established under the Board of Directors on June 28, 2022.
      • ・The Committee will consider monitoring methods and issues related to sustainability management and others as matters at request of the Board of Directors for advice.

Looking ahead, the Board of Directors will keep making continuous efforts toward further effectiveness improvements.

Policy on Determining of Remuneration for Officers

With the aim of creating an attractive remuneration system for outstanding management personnel that will drive improvements in the Group's corporate value from a medium- to long-term viewpoint and establishing remuneration governance that will enable the Company to fulfill its accountability to stakeholders, including shareholders, the Company shall establish a policy on determining the remuneration for Directors and Executive Officers (hereinafter, "Officers") and a remuneration system as follows:

  1. Policy on Determining Remuneration for Officers
    1. (1) A system shall be created that provides competitive standards for remuneration compared with companies of a business category and size similar to the Group.
    2. (2) The performance of the functions and duties assumed by each Officer and contributions to the improvement of medium- to long-term corporate value shall be evaluated in a fair and equitable manner, and the evaluation results shall be reflected in remuneration.
    3. (3) In order to have remuneration function as a sound incentive to improve the Group's medium- to long-term corporate value, remuneration shall consist of basic remuneration, an annual bonus based on performance evaluations in each fiscal year, etc. and stock-based compensation, which is a medium- to long-term incentive linked to medium- to long-term performance and corporate value. The remuneration composition ratio shall be determined appropriately in accordance with one's job position. Provided, however, that for Directors (excluding those who concurrently hold the posts of Director and Executive Officer), only basic remuneration shall be paid in cash, in light of their function and role of supervising the performance of job duties by the Executive Officers.
    4. (4) An annual bonus shall be determined with the emphasis on the performance in each fiscal year, while appropriately evaluating the relative results of Total Shareholder Return (TSR)* and the status of each Executive Officer's implementation of medium- to long-term management strategies, etc.
      *TSR = Average closing price of the stock on each day in March of the current year + Total amount of dividends per share in the current fiscal year Average closing price of the stock on each day in March of the previous year
    5. (5) A medium- to long-term incentive shall be stock-based compensation that enables Officers to share awareness of profits with shareholders in order to enhance corporate value from a medium- to long-term viewpoint.
    6. (6) The policies for determining remuneration and the amount of individual remuneration shall be deliberated and determined by the Remuneration Committee composed of a majority of Independent Outside Directors.
    7. (7) Necessary information shall be disclosed actively so that stakeholders including shareholders can monitor the relationship between performance, etc. and remuneration.

  2. Remuneration System for Officers
    1. (1) Directors (excluding those who concurrently hold the posts of Director and Executive Officer)
      The remuneration system for Directors shall be determined so that only basic remuneration shall be paid in cash, taking into consideration an individual Director's job position, whether he/she is a full-time/part-time Director, etc. and referring to the standards for remuneration of other companies based on the research of outside experts.
    2. (2) Executive Officers
      The remuneration payable to Executive Officers shall consist of basic remuneration, which is fixed remuneration, and an annual bonus and stock-based compensation, which are performance-linked remuneration. The remuneration composition ratio shall be in line with "Basic remuneration/Annual bonus/Stock-based compensation = 1.0/0.6/0.4" (*In the case where the annual bonus payment rate is 100%) as to the Chief Executive Officer, and for other Executive Officers, the ratio of performance-linked remuneration to basic remuneration shall be set lower than that for the Chief Executive Officer.
      Further, the standards for remuneration shall be determined by referring to the standards of peer companies (similar-sized companies determined by the Remuneration Committee) based on the research of outside experts.

    <Basic Remuneration>
    Basic remuneration shall be paid in cash as fixed remuneration in accordance with one's job position.

    <Annual Bonus (Short-term Incentive Remuneration)>
    The annual bonus shall be determined based on the consolidated operating profit, relative comparison of TSR, and status of achievement of the non-financial target set for each Executive Officer, on a single-year basis.
    The specific evaluation items shall be as follows:

    «Evaluation Items»

    1. (i) Consolidated operating profit (or, in the case of an Executive Officer in charge of business activities, operating earnings from the relevant business sector), based on which the earning capacity of one's main job is evaluated; to be multiplied by an adjustment factor based on the consolidated operating profit growth rate compared with other companies to enhance consciousness on growth greater than market growth (relative comparison with six nonferrous metal companies and the companies chosen mainly among similar-sized manufacturing companies)
    2. (ii) Relative comparison of TSR (relative comparison with six nonferrous metal companies and the companies chosen mainly among similar-sized manufacturing companies)
      (Relative comparison among the Company and six nonferrous metal companies and, between the Company and companies chosen similar-sized manufacturing companies)
    3. (iii) Non-financial evaluation that evaluates the status of achievement of the targets set for each Executive Officer at the beginning of the term and other relevant factors with regard to efforts aimed at improving medium- to long-term corporate value, which is less likely to be represented in short-term performance, as well as efforts in line with the Sustainability Policy*
      *Sustainability Policy Items
      1. 1. Build a Work Environment that puts Safety and Health First
      2. 2. Respect Human Rights
      3. 3. Promote Diversity and Inclusion
      4. 4. Cultivate Mutual Prosperity with Stakeholders
      5. 5. Strengthen Corporate Governance and Risk Management
      6. 6. Engage in Fair Business Transactions and Responsible Sourcing
      7. 7. Ensure Stable Provision of Safe, Secure, and High Value Added Products
      8. 8. Proactive Engagement for the Global Environment

    «Calculation Formula»
    By deeming the amount payable for achievement of the target (Base Annual Bonus) as 100%, the amount for each individual shall be calculated by using the following calculation formula:

    Annual Bonus = Base Annual Bonus by Job Position × Payment Rate Based on Performance Evaluation*

    *"Payment Rate Based on Performance Evaluation" shall range from 0% to 200% based on a performance.

    «Evaluation Weight»
    The annual bonus shall be determined based on the evaluations of each portion of 60%*, 20% and 20% of the base amount, which depends on one's job position, in terms of consolidated operating profit (or, in the case of an Executive Officer in charge of business activities, operating profit from the relevant business sector), relative TSR comparison and non-financial factors, respectively.
    * To be adjusted using consolidated operating profit growth rate compared with other companies.

    Evaluation Weight(Click the picture to see the enlarged image)

    «Target of performance evaluation indicator for annual bonus»
    With regard to the target of performance evaluation indicators for annual bonuses, in principle, the consolidated performance forecast for the next fiscal year at the time of the announcement of financial results at the end of the current fiscal year shall be applied (For operating earnings of the business for which the Officer is responsible, the figures on which the consolidated performance forecast was based shall be used.).

    «Stock-based compensation (Medium- to Long-term Incentive Remuneration)*»
    Stock-based compensation shall be a system that utilizes a trust for the purpose of achieving the sharing of a common profit awareness with shareholders. This shall be used as an incentive for improving the medium- to long-term corporate value of the Group and under which the Company's shares and cash equivalent to the proceeds from the realization of the Company's shares shall be delivered and paid (hereinafter referred to as "Delivered, etc.") in accordance with one's job position, upon retirement from the post of Executive Officers. No performance conditions nor stock price conditions shall be set with respect to the shares to be delivered.
    Please note that in the case of a non-resident staying in Japan, different treatment may be applied under laws or for any other relevant circumstances.

    * The Officers' remuneration system adopts a structure called BIP (Board Incentive Plan) and grants to the Executive Officers the shares of the Company's common stock, etc. It is an incentive plan to accumulate points to be given to Executive Officers in accordance with their positions for each three consecutive fiscal year (initially from Fiscal 2021 to Fiscal 2023) (the "Applicable Period"), and to grant the shares of the Company's common stock equivalent to 70% of such accumulated points (shares less than one unit shall be disregarded) and cash equivalent to realized value of the shares of the Company's common stock equivalent to the remaining accumulated points as compensation to Executive Officers after their retirement. One point is deemed equal to one share of the Company's common stock, and if a stock split or reverse stock split occurs during the trust period, the number of the Company's shares per point shall be adjusted according to the stock split ratio or reverse stock split ratio of the Company's shares. The maximum number of points to be given to Executive Officers during the initial Applicable Period shall be 350,000 points in total.

Status of Audits

(Status of audits performed by the Audit Committee)
In addition to attending meetings of the Strategic Management Committee and other important meetings, by making use of a method via the internet at the same time, members of the Audit Committee conduct interviews with Directors, Executive Officers, departments in charge of internal audits, and other departments in charge of internal control concerning progress on the execution of their duties, and view important approval documentation, etc. Selected members of the Audit Committee investigate the state of business and assets at the Company headquarters and important business sites according to the audit standards and audit plans, etc. of the Audit Committee as established by the Audit Committee. They also conduct onsite audits of subsidiaries, etc. as needed, while forming a framework for conducting audits on the state of the execution of duties by Directors and Executive Officers. Additionally, the Audit Committee holds regular meetings with Corporate Auditors at major Group companies as part of efforts to enhance coordination of audit systems in line with Group management measures in place. An organization has been set up directly under the Audit Committee to assist the Committee in its duties concerning such audits performed by members of the Audit Committee.
Tatsuo Wakabayashi, Chairperson of the Audit Committee, has extensive knowledge of finance and accounting, having successively served as president and chairman of financial institutions.
Also, Hiroshi Watanabe, a Member of the Audit Committee, has extensive knowledge of finance and accounting through his experiences as Vice-Minister of Finance for International Affairs at the Ministry of Finance and in management at government-affiliated financial institutions.
Kazuhiko Takeda, a member of the Audit Committee, has extensive knowledge of finance and accounting through his experience as CFO at major subsidiaries of listed companies.
The Audit Committee examines the status of the development and operation of the internal control system, the status of the development and operation of the internal control system for financial reporting, the status of measures for work place safety, the status of the preparation and implementation of measures to enhance the internal control system, the status of the implementation of measures to comply with the Antimonopoly Act, the appropriateness of auditing methods and the results of audits by Accounting Auditors, as well as other matters.
Full-time Members of the Audit Committee attend important meetings such as the Strategic Management Committee, the Group's Management Committee, Budget Deliberation, Monozukuri and R&D Strategy Meetings and the Governance Deliberative Council, and make comments or suggestions on matters of concern. Regular meetings are also held with the Chief Executive Officer, as well as individual discussions with Executive Officers, to exchange opinions. In addition, they receive reports from each division of the Strategic Headquarters and professional CoE division on a regular or timely basis and make suggestions or recommendations. Details thereof are shared with the Audit Committee in a timely manner.


(Status of internal audits)
As of June 28, 2022, the Audit Dept. of the Strategic Headquarters and the Audit Dept. of in-house companies, which are departments in charge of internal audits, consist of 31 persons, including each General Manager of each Audit Dept. They are responsible for conducting internal audit work on the instructions of the responsible Executive Officer in cooperation with the Audit Committee to investigate whether internal control systems are developed and applied in an appropriate manner. They also audit the effectiveness and efficiency of company operations across the Group, the credibility of financial reports, the state of asset preservation and use, the risk management status, and the state of compliance with laws and regulations, and internal rules and standards, based on internal audit plans approved by the responsible Executive Officer and the Audit Committee.
Further, the Audit Dept. of the Strategic Headquarters works on their audits in close liaison with the Audit Committee by regularly reporting the results of Group-wide audits performed and sharing information.


(Status of accounting audits)

  • (1) Name of Audit Corporation
    KPMG AZSA LLC
  • (2) Continuous Audit Period
    Since 1975 (for 47 years)
    The above-mentioned period was counted from the establishment of Shinwa Audit Corporation, one of the predecessors of KPMG AZSA LLC, the current audit corporation. If the continuous audit period includes a period when the audits were conducted by a private firm, a predecessor of Shinwa Audit Corporation, it is for 57 years since 1965.
  • (3) Certified Public Accountants Who Performed Audit Work
    Three Certified Public Accountants (all of whom are designated Limited Liability Partners and Engagement Partners) perform audit work.
  • (4) Composition of assistants for audit work
    The assistant team for audit work for the Company consisted of ten (10) Certified Public Accountants and 13 other persons.
  • (5) Policy and reason for selection of auditing firm
    Based on the standards for evaluation and selection of Accounting Auditor established by the Audit Committee, it comprehensively evaluates the audit plans, quality control system, independence, expertise and remuneration, etc. of Accounting Auditor after obtaining materials from Executive Officers, related departments in the Company and Accounting Auditor and receiving reports necessary for determination.
  • (6) Policy on appointment, dismissal and non-reappointment
    The Audit Committee has a policy to appoint the Accounting Auditor based on the following criteria: (1) expertise, independence, timeliness and appropriateness, quality control and governance systems, (2) ability to respond to the Company's multi-industry and global business developments, (3) efficiency improvement of accounting audit operations, (4) communication with the Audit Committee, management, etc., and (5) any applicability to dismissal requirements based on statutory grounds. The Audit Committee's policy is to dismiss or not reappoint if the aforementioned criteria are not satisfied.
  • (7) Evaluation of the Accounting Auditor by the Audit Committee
    The Audit Committee shall determine said reappointment of the Accounting Auditor after careful examination based on the above-mentioned standards for evaluation and selection of the Accounting Auditor.

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