Our basic approach to corporate governance is as 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:
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.
The Nomination Committee is comprised of five Directors (including three Outside Directors), and the Chairperson of the Nomination Committee is performed by an 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.
The Audit Committee is comprised of five Directors (including three Outside Directors), and the Chairperson of the Audit Committee is performed by an Outside Director. The Audit Committee also elects two full time Member of the Audit Committee in order to improve the effectiveness of audits conducted by the Audit 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.
The Remuneration Committee is comprised of five Directors (including three Outside Directors), and the Chairperson of the Remuneration Committee is performed by an 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 11 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, Executive Officers’ Meetings review and determine important matters concerning the management of the entire Group. Executive Officer’s Meetings are attended by all 11 Executive Officers, and the Chairman of the Executive Officer’s Meeting is performed by the Chief Executive Officer.
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 in corporate management (business similar to or different from the Group’s business, etc.) and individuals who possess broad and advanced expert knowledge and extensive experience in relation to finance and accounting affairs, legal matters, administrative affairs, science and technology, 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.
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 evaluation of consolidated operating profit growth rate compared with other companies, as well as a performance evaluation and nonfinancial evaluation, on a single-year basis.
The specific evaluation items shall be as follows:
With the amount to pay when targets are achieved (base annual bonus) as 100%, the amount for each individual is calculated based on the following formula.
Annual bonus = base annual bonus×performance evaluation payment rate(*)
Based on the evaluations of each portion of 40%, 40% and 20% of the base amount, which depends on one’s job position, in terms of current net profit attributable to owners of parents, consolidated operating profit (or, in the case of an Executive Officer in charge of business activities, operating earnings from the relevant business sector) and non-financial factors, respectively, the annual bonus shall be determined by using consolidated operating profit growth rate as an adjustment factor.
Stock-based compensation shall be a system that utilizes a trust for the purpose of achieving the sharing of common profit awareness with shareholders, which shall be used as an incentive for the improvement of the medium- to long-term corporate value of the Group and under which Company shares or an equivalent amount converted to money shall be delivered or paid, in accordance with one’s job position, upon retirement from the post of Officer. 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.
| Position | Total Amount of Remuneration (Millions of yen) |
Remuneration by Type (Millions of yen) | Number of Executives (persons)7) | |
|---|---|---|---|---|
| Basic5) | Bonus6) | |||
| Directors (of which Outside Directors) |
273 3) （99） |
273 99 |
— | 14 （6） |
| Audit & Supervisory Board Members 1) (of which Outside Audit & Supervisory Board Members) |
33 4) （15） |
33 （15） |
— | 5 （3） |
| Executive Officers2) | 275 | 275 | — | 10 |
The Company analyses and evaluates the effectiveness of the Board of Directors based on the evaluation by each Director on an annual basis.
The method applied to evaluate the effectiveness of the Board of Directors in fiscal 2019, and a summary of the results of such are outlined below.
Answers to a questionnaire distributed to all 11 Directors in December 2019 were retrieved. Based on the results of this questionnaire, a review of the effectiveness of the Board of Directors was conducted at a meeting of the Board of Directors held in February 2020, with a resolution reached on evaluations of the effectiveness of the Board of Directors in fiscal 2020 at a meeting of the Board of Directors held in March 2020.
This questionnaire was implemented by revising the questions, taking into consideration the change to a Company with a Nomination Committee after the approval at the 94th Ordinary General Meeting of Shareholders held on June 21, 2019 and other factors.
The core questionnaire items are as follows.
As a result of deliberations by the Board of Directors, the Board of Directors was able to verify that it achieved a sufficient level of effectiveness for fiscal 2020. A summary of questionnaire responses and discussions within the Board of Directors is provided below.
In addition to attending meetings of the Executive Officer Committee and other important meetings, 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. Select 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, and conduct visiting audits of subsidiaries, etc. as needed, as well as forming a framework for conducting audits of 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 within departments responsible for internal audits to assist the Audit Committee in its duties concerning such audits performed by members of the Audit Committee.
The Internal Audit Dept., which is consisted of the General Manager and other 24 employees as of June 30, 2020, responsible for conducting internal audits works on the instructions of the Chief Executive Officer in cooperation with the Audit Committee to investigate whether internal control systems are configured and applied in an appropriate manner, and 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 Chief Executive Officer and the Audit Committee.
Further, in addition to conducting joint audits with the Audit Committee after conferring on the audit plans for both at the beginning of the term, the department responsible for internal audits engaged in audits in close cooperation with the Audit Committee, reports to said committee on audit results on a regular basis, and shares this information, etc.
Additionally, the Audit Committee regularly receives reports from independent accountants on audit results, shares this information, and engages in audits in close cooperation with said independent auditors after conferring on the audit plans for both with independent 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.
Evaluations conducted during fiscal 2020 found our internal control systems in relation to financial reporting to be sufficient and effective, with no material weaknesses identified. The results were then submitted in June 2020 in the form of an Internal Control Report with the qualified opinion of an auditing firm.
Future Group governance enhancement initiatives
In light of the recent quality issues the Group has caused, we recognize the need to further enhance our Group governance, including quality control, and are implementing several measures, with which we are aiming at resolving the concerns with the Group that led to the recent quality issues and avoiding the same situation repeating itself in the future, These measures have been steadily progressing and desired results are obtained.
Up until now, the Committee for Monitoring of Measures to Enhance Governance confirmed and supervised reports on the performance and results of our activities, and this committee was disbanded on May 13, as our efforts over these two years have ensured that the various measures were executed properly and led to the expected results.
Hereafter, the Sustainable Management Office established at the Company will supervise and promote the enhancement of Group governance including quality control. We will also continue the Governance Deliberative Council which reviews and checks the progress of governance plans at each of our business sites.
Business sites will continue autonomous activities regarding quality control and governance enhancement, following the Group policy formulated by organizations such as the Sustainable Management Office and the governance plan approved by the Governance Deliberative Council. As we have done until today, we will continue our efforts to enhance Group governance including quality control, report the status of those efforts to the Board of Directors, and continue monitoring them at Board of Directors meetings. We are committed to ensure that the various measures we have implemented do not become a mere facade, and continue to remind the whole Group of the strong will of management to uphold the SCQDE priority, even when various environmental changes cause difficulty.
Susumu Sasaki, Managing Executive Officer
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.
We have formulated and executed measures for enhancing the Group governance framework in order to solve issues regarding the governance of the entire Group that were identified based on the background of quality issues and an analysis of their causes. A summary of our activities over the past two years, which we promoted based on advice and monitoring of Outside Directors and outside experts, is indicated below.
Having achieved what we expected from these efforts over the past two years, we have concluded the monitoring of Outside Directors and outside experts. As we move forward, we will continue autonomous efforts.
|
Group Governance Framework Enhancement Measures
|
Concrete Measures
|
FY2019 to FY2020 Performance
|
Effect/Future Measures
|
|---|---|---|---|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|