Corporate Governance
We are working on continuously improving our systems and their operation to strengthen and enhance a viable corporate governance.
Our basic approach to corporate governance
Under the Nippon Shokubai Group Mission ”TechnoAmenity: Providing prosperity and comfort to people and society, with our unique technology,” we will increase our corporate value and achieve sustainable growth.
We consider viable corporate governance to be essential and have adopted initiatives toward that end. We ensure the rights and equality of our shareholders and maintain an open dialogue, collaborate with various stakeholders as appropriate, disclose information as appropriate and ensure transparency, ensure that the roles of Board Meeting and management teams relate to the appropriate execution of duties, ensure appropriate supervision of the execution of these duties and strengthen and enhance our internal control systems.
Initiatives to strengthen governance
Our basic information on corporate governance system
（as of June 21, 2023）
| Main Items | Content |
|---|---|
| Institutional design | Company with an Auditors Meeting |
| Number of Members of the Board | 8 (5 internal, 3 external), including a female Member of the Board |
| Ratio of Outside Members of the Board (Independent Officers) | 38% |
| Term of office of the Members of the Board | 1 year |
| Number of Board Meetings (FY2022) (Average attendance rate of Outside Members of the Board / External Statutory Corporate Auditors each) | 15 times (100% / 100%) |
| Number of Statutory Corporate Auditors | 4 (2 internal, 2 external) |
| Ratio of External Statutory Corporate Auditors (Independent Officers) | 50% |
| Term of office of Statutory Corporate Auditors | 4 years |
| Number of Auditors Meeting (FY2022) (Average attendance rate of External Statutory Corporate Auditors) | 15 times (100%) |
| Executive Officer system | Have already been introduced |
| Number of Executive Officers | 16, including 5 who concurrently serve as a Members of the Board |
| Advisory body to the Board Meeting | Nomination and Remuneration Committee established |
Our corporate governance system
(as of November 1, 2023)
Roles and Functions of Various Bodies and Committees
Board Meeting
Comprising eight Members of the Board, including three Outside Members of the Board, Board Meeting reports, deliberates and resolves important matters related to business operations, and supervises the business operations of each Member of the Board. In general, meetings are convened monthly under the chairmanship of a Member of the Board selected from members by a resolution of the Board Meeting. Four Statutory Corporate Auditors, including two External Statutory Corporate Auditors, also attend to give advice and state their opinions when necessary.
Corporate Managing Committee
Comprising the President and executive officers, this committee generally convenes once a month to deliberate on items related to the implementation of basic policies and important management issues. Among proposals discussed by the Corporate Managing Committee, important issues are forwarded to Board Meeting for consideration.
Auditors Meeting
Comprising four Statutory Corporate Auditors, including two External Statutory Corporate Auditors, the Auditors Meeting usually convenes monthly, submits reports and engages in discussions and deliberations on important matters related to audits.
Accounting Auditor
Nippon Shokubai is audited by Ernst & Young ShinNihon LLC.
Nomination and Remuneration Committee
An advisory body to the Board Meeting, this is a voluntary organization comprising three or more Members of the Board (including a majority of Outside Members of the Board). It advises on the election/dismissal of the President and Member of the Board, as well as draft nominations of candidates for Members of the Board and Statutory Corporate Auditor positions and on remuneration and bonuses for Members of the Board.
Nomination and Remuneration Committee members
| Name | Status | Attendance rate |
|---|---|---|
| Kazuhiro Noda | President and Member of the Board | 100% |
| Tetsuo Setoguchi | Outside Member of the Board | 100% |
| Miyuki Sakurai | Outside Member of the Board | 100% |
Risk Management Commitee
An advisory body to the Board Meeting, this is an organization consisting of the president and members appointed by the president. It advises the Board meeting on matters related to identification, response policies, response measures, and the person responsible for management of serious Group-wide risks, etc.
TechnoAmenity Promotion Committee
We promote sustainability activities based on our belief that promoting sustainability means implementing the Nippon Shokubai Group Mission “TechnoAmenity: Providing prosperity and comfort to people and society, with our unique technology.” We consider promotion of sustainability activities as a core theme of our corporate management. The Committee is responsible for deciding policies and strategies therefor, providing instructions to relevant departments, and evaluating the results of the activities.
Internal Audit Department
The Internal Audit Department (6 members) conducts audits on the effectiveness and efficiency of each operational process, compliance and other matters from a standpoint independent from other executive sections, and thereby verifies the appropriateness of internal control of the Company. The Internal Audit Department strives to improve the effectiveness of internal audits by working in close cooperation with Statutory Corporate Auditors and the Accounting Auditor through mutual exchange of information and opinions.
In addition, the results of internal audits are regularly reported to the President, the Board Meeting, Statutory Corporate Auditors, and the Auditors Meeting.
Policy and procedure for election/dismissal of Members of the Board and Statutory Corporate Auditors
The Board Meeting, including three independent Outside Members of the Board, decides on election/dismissal of management executives and nomination of candidates for Members of the Board and Statutory Corporate Auditors, taking thoroughly into account their expertise, experience, achievements, qualities, abilities, personalities and the like. Also, the Nomination and Remuneration Committee, a voluntary organization consisting mainly of independent Outside Members of the Board, has been established to receive advice on election/dismissal of the President and Member of the Board and nomination of candidates for Members of the Board and Statutory Corporate Auditors, thereby ensuring transparency and fairness in election/dismissal of the President and Member of the Board, and nomination of candidates for Members of the Board and Statutory Corporate Auditors.
Specialty and Experience of Members of the Board and Statutory Corporate Auditors
*1 In the table above, up to three main areas of specialty and experience are marked for each person.
*2 Sustainability referred to in the above list represents mainly expertise and experience in the environmental aspect.
*3 SCM is an acronym for Supply Chain Management and DX is an acronym for Digital Transformation.
Evaluation of the effectiveness of the Board Meeting
1.Process of evaluating the effectiveness of the Board Meeting
As an initiative to improve the effectiveness of the Board Meeting, the Company conducts surveys such as questionnaires to both of the Members of the Board and Statutory Corporate Auditors once a year to evaluate the effectiveness of the Board Meeting. In FY2022, we have implemented the evaluation through a third-party.
Evaluation Process of Board Meeting Effectiveness for FY2022
- Attendance of the Board Meeting and survey of materials of the Board Meeting by a third-party organization
- Questionnaire for all Members of the Board and all Statutory Corporate Auditors
- Third-party interviews with all Members of the Board and all Statutory Corporate Auditors
- Opinion exchange meeting between all Members of the Board (independent Outside Members of the Board) and the President, Member of the Board.
- Summary of the result of the effectiveness evaluation at the Board Meeting
2.Items for improvement
The items for improvement identified in the evaluation of the previous fiscal year are as follows:
- Enhancing discussions regarding management policies and strategies at the Board Meeting
- Strengthening the supervisory/advisory function for business execution
- Developing a skill matrix for the Board Meeting
- Nurturing candidates for an officer in charge of sustainable growth
3.Evaluation results and initiatives for the future
- It was confirmed that all the systems that support the composition, operation, deliberations/reports and the supervision of business execution of the Board Meeting were functioning properly and that the effectiveness of the Board Meeting was ensured. It was also confirmed that the measures taken based on the items for improvement identified in the evaluation of the effectiveness of the Board Meeting in the previous fiscal year had been implemented properly.
- To steadily achieve “stronger corporate governance” to foster sustainable growth and enhance medium- to long-term corporate value set forth in “TechnoAmenity for the Future-I” launched in fiscal 2022, we are currently making the following efforts:
≪Enhancing discussions regarding management policies and strategies≫
・Selection of appropriate themes for discussion at the Board Meeting
・Enhancing information provision and training for Outside Officers regarding the
status of internal considerations and discussions, and industry environment, etc.
≪Strengthening of supervisory functions related to nomination and remuneration≫
・Enhancing discussions on important themes, such as the desired skill set of the
Board Meeting, at the Nomination and Remuneration Committee
Outline of the executive remuneration system
1.Basic Policy
- To have Members of the Board put the Company’s mission into practice and provide an incentive to sustainably enhance corporate value
- To have Members of the Board share interests with shareholders according to the Company’s business results and commensurate with their responsibilities
- To set the executive remuneration system at a reasonable level in light of the Company’s business results, the level of employee salaries, and that of other companies
- To have the Nomination and Remuneration Committee, consisting mainly of independent Outside Members of the Board, deliberate on the matter, thereby ensuring transparency and fairness
2.Components of the Remuneration
The remuneration for Members of the Board (excluding Outside Members of the Board) consists of basic remuneration, which is fixed remuneration, and bonuses and stock compensation, which are performance-linked remuneration. Outside Members of the Board receive only basic remuneration as fixed remuneration because they oversee business operations from an independent standpoint.
The Ratio of remuneration for the Members of the Board (excluding Outside Members of the Board)
Outline of remuneration
| Fixed remuneration | Performance-linked remuneration | ||
|---|---|---|---|
| Basic remuneration | Bonuses | Stock compensation | |
| Type | Fixed remuneration | Short-term incentive | Medium- and long-term incentive |
| Persons to be paid | Members of the Board | Members of the Board (excluding Outside Members of the Board) | Members of the Board (excluding Outside Members of the Board) |
| Method of payment | Money | Money | Shares and Money |
| Time of payment | Monthly | Paid at a certain time after the Ordinary General Meeting of Shareholders each year | Paid upon the retirement of a Member of the Board |
| Description | ・Paid based on the position and responsibilities. ・The amount of remuneration for Outside Members of the Board is determined by comprehensively considering the level of remuneration of the Company’s officers, and that of other companies. | ・Bonuses are paid according to evaluation indicators: the degree of achievement of key performance indicators (KPIs) and the degrees of achievement of targets by each individual as assessed by the target management system. ・KPIs consist of “profit before tax” and “ROA (return on assets before tax),” with achievement ratings ranging from 0 to 150%. | ・Utilizing the share benefit trust mechanism for officers, payments shall be made according to the total cumulative number of performance-linked points, which are linked to the achievement level of the mid-term management plan, and fixed points, which are for the purpose of holding shares to share stock value. ・Performance-linked points and fixed points shall be granted at a ratio of 1:1. ・Performance-linked points vary depending on the degree of achievement of KPI results in the final year of the mid-term management plan against the targets of the mid-term management plan set as KPIs. ・KPIs consist of “operating profit” and “ROE (return on equity attributable to owners of parent)”, with evaluation weights of 50% for “operating profit” and 50% for “ROE”. In addition, each achievement rating shall be in the range of 0 to 150%. |
3. Process for Determining Remuneration
- The Nomination and Remuneration Committee, a voluntary advisory organization consisting mainly of independent Outside Members of the Board, has been established. The Committee deliberates on policies, systems, and issues related to the determination of remuneration for Members of the Board, as well as the appropriateness of the level of remuneration and the amount of remuneration for individual Members of the Board, and reports back to the Board Meeting.
- Based on the Committee’s report, the Board Meeting determines the policy for determining the details of remuneration, etc. for each individual Member of the Board and details of remuneration, etc. within the framework of the amount of remuneration approved by the General Meeting of Shareholders. After the determination of the Board Meeting, the President and Member of the Board is entrusted with decisions regarding the amounts of basic remuneration and bonuses, excluding stock compensation, for individual Members of the Board in light of the contents of the Committee’s report.
Aggregate Amount of Remuneration to Members of the Board and Statutory Corporate Auditors
| Category of positions | Aggregate amount of remuneration (million yen) | Aggregate amount of remuneration by type (million yen) | Number of persons to be paid (persons) | ||
|---|---|---|---|---|---|
| Fixed remuneration | Performance-linked remuneration | ||||
| Basic remuneration | Bonuses | Stock compensation | |||
| Members of the Board (Outside Members of the Board) | 429 （39） | 259 （39） | 131 （－） | 39 （－） | 9 （3） |
| Statutory Corporate Auditors (External Statutory Corporate Auditors) | 72 （20） | 72 （20） | － （－） | － （－） | 5 （2） |
| Total (Outside Officers) | 501 （59） | 331 （59） | 131 （－） | 39 （－） | 14 （5） |
*2 The basic remuneration includes 8 million yen of basic remuneration of the performance-linked remuneration for the period from April 2022 to June 2022. The amount of such performance-linked remuneration was calculated in accordance with the determination policy for the contents of remuneration, etc. for individual Members of the Board, which was resolved at the Board meeting held on February 26, 2021.
*3 The amount of bonuses represents the amount of provision for directors’ bonuses for the current fiscal year.
*4 The amount of stock compensation is the amount posted for the current fiscal year.
Cross shareholding
Under the Nippon Shokubai Group Mission ”TechnoAmenity: Providing prosperity and comfort to people and society, with our unique technology,” we are willing to further advance our contributions to industry and society. To this end, Nippon Shokubai, as a chemical manufacturer, with a view to continuously improving its corporate value, believes that long and stable relationships of trust with business partners are important in development, production, sales and other activities. Based on this belief, we own shares of our partners for the purpose of cross share holding when deemed necessary.
Each year, the Board Meeting, including three independent Outside Members of the Board, comprehensively examines all the listed shares we own by issue in light of the above purpose, taking into consideration the capital costs, and confirms the importance of the shareholding. We sell shares if it is judged no longer important to hold such shares.
In fiscal 2022, we sold all shares of three issues. As a result, the number of issues of crossheld shares as of March 31, 2023 decreased from 70 as of the end of the fiscal year before the introduction of the Corporate Governance Code (March 31, 2015), to 35.