The basic approach to corporate governance of Mitsubishi Materials Corporation (the “Company”) is described below.
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:
Further, Outside Directors play a role in supervising the appropriateness of Directors and Executive Officers in the execution of their duties from an objective standpoint and in providing a diverse range of values regarding the management of the Company based on expert knowledge and through experience that differs from that of officers who advanced internally,so that the Board of Directors' management supervisory functions would be further strengthened.
The Board of Directors is comprised of 10 Directors (including 7 Outside Directors), and the Chairman of the Board of Directors is performed by the Chairman of the Company.
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. Moreover, in order to develop human resources for the next generation responsible for management, the Nomination Committee deliberates on candidates for successor to the CEO and their development plans, and it supervises the appropriate development of successor candidates.
Majority of the Nomination Committee members shall be Independent Outside Directors, and the Chairperson shall be performed by an Independent Outside Director. The Nomination Committee is comprised of 5 Directors (including 4 Outside Directors), and the Chairperson is Mariko Tokuno (Independent Outside Director).
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 full-time Member of the Audit Committee in order to improve the effectiveness of audits conducted by the Audit Committee. The Audit Committee is comprised of 5 Directors (including 4 Outside Directors), and the Chairperson is Tatsuo Wakabayashi (Independent Outside Director).
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. The Remuneration Committee is comprised of 5 Directors (including 4 Outside Directors), and the Chairperson is Hikaru Sugi (Independent Outside Director).
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 8 Directors (including 7 Outside Directors), and the Chairperson is Koji Igarashi (Independent Outside Director).
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.
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.
The Governance Deliberative Council enhances the deliberation, reporting, and follow-up system for governance-related matters (CSR, safety and health, plant safety, environmental management, quality management, auditing, etc.). It is composed of members of the Strategic Management Committee and general managers of related departments. The Governance Deliberative Council deliberates in February of each year on policies and annual plans for the next fiscal year for business divisions (including business sites and subsidiaries) involved in governance-related matters. And in September of each year, it reports on the status of actions and deliberates on review plans, thereby improving the effectiveness of group-wide initiatives.
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.:
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:
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:
2.An individual who falls under any of items (1) through (5) below:
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.
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.:
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.
The main expertise and experience owned by the Directors are shown in the Skill Matrix. In addition, the table 2 shows from what perspectives the Directors contribute and provide knowledge on the corporate policies in the Company's Medium-term Management Strategy and the reforms the Company is undertaking to carry out those based on their respective expertise and experience as indicated in the Skill Matrix (For the new Directors, the expected roles are listed).
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:
Basic remuneration shall be paid in cash as fixed remuneration in accordance with one’s job position.
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:
*Sustainability Policy Items
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*
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.
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 income 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 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 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. 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.
| Classification of Officers | Total amount of remuneration, etc. (Million Yen) |
Type of Remuneration, etc. | |||||
|---|---|---|---|---|---|---|---|
| Monetary remuneration | Nonmonetary remuneration | ||||||
| Basic remuneration | Bonus (Performance-linked remuneration) | Stock-based compensation*4 | |||||
| Total amount (Million yen) | Number of eligible recipients (persons) | Total amount (Million Yen) | Number of eligible recipients (persons) | Total amount (Million Yen) | Number of eligible recipients (persons) | ||
| Director (Other than Outside Director) |
124 | 124 | 2 | — | — | — | — |
| Executive Officer | 466 | 354 | 10 | — | — | 112 | 10 |
| Outside Director | 111 | 111 | 6 | — | — | — | — |
The Board of Directors met 19 times in fiscal 2022. To ensure the effectiveness of the Board of Directors, the Company requires each Director to make every effort to attend all meetings, and the attendance rate was 100% in fiscal 2022. High attendance rates are also maintained by the Nomination Committee (which met 14 times), Audit Committee (17 times), and Remuneration Committee (9 times).
| Board of Directors | Nomination Committee | Audit Committee | Remuneration Committee | Total | |
|---|---|---|---|---|---|
| Number of meetings held | 19 | 14 | 17 | 9 | 59 |
| Rate of attendance of all Directors (%) | 100 | 100 | 100 | 100 | 100 |
| Rate of attendance of External Directors (%) | 100 | 100 | 100 | 100 | 100 |
The term of a Director is one year pursuant to the articles of incorporation. As of July 2022, the average number of years served by active Directors was 4.2 years while the figure for Directors who have resigned in the past five years was 4.7 years.
| Item | Unit | |
|---|---|---|
| Average number of years served by active Directors at present | years | 4.2 |
| Average number of years served by Directors who resigned in the past five years | years | 4.7 |
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.
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.
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.
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.
The key results of analysis of the questionnaire and interviews compiled by the third-party organizations are as follows.
As a result of deliberations by the Board of Directors in consideration of the results of the thirdparty 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.
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.
Looking ahead, the Board of Directors will keep making continuous efforts toward further effectiveness improvements.
A framework for conducting audits of the state of the execution of duties by Directors and Executive Officers has been established (1) by, utilizing methods via the Internet, attending important meetings such as the meetings of the Strategic Management Committee, conducting 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 examining important approval documentation, etc. by members of the Audit Committee, and (2) by investigating the state of business and assets at the Company headquarters and significant business sites and conducting onsite audits of subsidiaries, etc. as needed by select members of the Audit Committee according to the audit standards and audit plans, etc. of the Audit Committee as established by the Audit Committee. 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.
As of June 28, 2022, the Audit Department of the Strategic Headquarters and the Audit Department of in-house companies, which are departments in charge of internal audits, consist of 31 persons, including the General Managers of each Audit Department. They are responsible for conducting internal audits based on the instructions of the responsible Executive Officer in cooperation with the Audit Committee to evaluate 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 reliability of financial reports, the state of safeguards for assets and their effective utilization, 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.
Furthermore, the Audit Department 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.
Additionally, the Audit Committee regularly receives reports from Accounting Auditors on audit results, shares this information, and engages in audits in close cooperation with said Accounting Auditors after discussing audit plans for both with Accounting Auditors.
Since the establishment of the Internal Control System Management Committee in January 2006, we have taken steps such as developing a set of basic principles for improving the Group’s internal control systems, and ensuring compliance with the requirements to introduce internal control evaluation and disclosure systems in relation to financial reporting, in an effort to ensure compliance with the Companies Act, the Financial Instruments and Exchange Act, and other relevant legislation, and to establish the optimal internal control systems for both Mitsubishi Materials and the Mitsubishi Materials Group companies.
Regarding evaluations conducted during fiscal 2022 on our internal control system for financial reporting, an Internal Control Report was submitted in June 2022 for which we received an unqualified opinion of the auditing firm that the content is appropriate.
The Company has a policy of not acquiring or holding shares (strategic holdings) other than purely for investment purposes, except when it is required for their business strategy.
With regard to the Shares in the Form of Strategic Share Holdings, the appropriateness of such holdings shall be specifically reviewed and examined at a meeting of the Board of Directors on an annual basis. As a result of such reviews and examinations, the Company will reduce any Shares in the Form of Strategic Share Holdings if it is not deemed to be necessary to hold such shares.
The Company will make a continuous effort to reduce the Strategic Share Holdings in accordance with the result of such reviews and examinations.
In fiscal 2022, out of all of the Strategic Share Holdings (shares in 43 issuing companies held by the Company at the end of March 2021), we sold all or a part of the shares issued by 22 issuing companies. The sales price was approximately 56.6 billion yen (at market value) in total.
Changes in Number of listed Strategic Holdings
Percentage of Strategic Holdings in consolidated net assets 
The Sustainable Management Office established within Mitsubishi Materials will oversee and promote the enhancement of the Group’s governance, including quality control. In addition, the Governance Deliberative Council will continue to meet and discuss the governance plans of sites and inspect their progress, and each site will continue to implement initiatives to enhance governance formulated by the Sustainable Management Office and others. Corporate divisions will continue to support the initiatives taken at each site.
In this way, we will continue our initiatives to enhance the Group’s governance, including quality control, and report the status of the initiatives’ implementation to the Board of Directors.
Aim for governance under which efficient and autonomous communication can take place between the parent company and subsidiaries, between the head office and plants, and among subsidiaries.
It turned out that RRM and other companies (all of which were consolidated subsidiaries of the Company located in the U.S., hereinafter collectively referred to as “RRMs”) conducted transactions with companies in which some senior executives of RRM have jointly invested. Insufficient checks on senior executives (minimized involvement in RRMs to maintain a climate that supported RRM’s success up to that period), concentration of authorities in senior executives and the culture to follow the top (History of success by top-down management as an owner-managed company), etc. were the causes. In addition, we conduct investigations into the existence of similar cases in the Group to confirm that there are no other cases.
| Issues | Measure |
|---|---|
| Enhancement of compliance system |
Establish a management team and have it conduct an advance review of material matters Assign Compliance Officer and necessary Staff |
| Establish external contact window for reporting with attorneys-at-law, etc. being the contact window | →Established in April 2021 |
| Renovation and enhancement of management system at RRMs by appointing senior executives dispatched from shareholders | April 2021: President and CEO* of MCC Development Corporation and others dispatched from shareholders
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| Enhancement of board of directors’ effectiveness and enhancement of conversations with executives at subsidiaries, etc. | Increase the frequency of board of directors meetings and dialogs with the parent company (being implemented) |
In response to the case of conflict-of-interest transactions by senior executives of RRMs, in addition to RRMs recurrence prevention measures, we take measures to further strengthen internal controls to prevent and detect fraud by senior executives throughout the Group at an early stage.
| Themes | Specific measures | FY2022 Summary |
|---|---|---|
| 1) Strengthening internal checks |
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| 2) Raising the awareness of officers |
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| 3) Enhancing communications between persons in the second line |
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| 4) Expanding internal audits (Internal Audit Dept.) |
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We have formulated and are executing measures for enhancing the Group governance framework in order to solve issues regarding Group-wide governance that were identified based on analyses of the backgrounds and causes of quality issues that have occurred in our group since 2017. Monitoring by Outside Directors and outside experts ended on May 13, 2020, but we have continued to engage in autonomous governance enhancement activities.
| Points that were clarified by the 1st survey | Points that were clarified by the 6th survey | |
|---|---|---|
| While compliance awareness has been growing, we need to continue efforts to create specific rules and procedures and keep employees fully informed of them. | ▶ | Initiatives for strengthening compliance, including measures taken by the management and CSR and compliance training, are also felt to be adequate. |
| While the importance of compliance-related reporting and provision of compliance-related information is understood, many employees feel anxious or hesitant. | ▶ |
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| While measures to strengthen compliance are being driven by employees in managerial positions further improvement is desired for workplace management and communication. | ▶ |
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[Subjects]
All officers and employees of Mitsubishi Materials and domestic group companies (64 companies in total)
All officers and employees of overseas group companies (66 companies in total)
[Response rate] 91%