Corporate Governance Guidelines

Upholding “We lead with innovative solutions to achieve KAITEKI, the well-being of people and the planet” as its Purpose, the Mitsubishi Chemical Group Corporation (MCG) Group aims to provide value to all stakeholders (Value) through better innovation (Science) and to contribute to healthy living, the sustainability of society, and the Earth (Life).
For realizing KAITEKI, in accordance with these guidelines, MCG shall establish a system to enhance both the soundness and efficiency of business administration, improve the transparency of its business administration through suitable disclosure of information and dialogue with stakeholders, and endeavor to establish a better suitable corporate governance system.

Development of a framework that improves the soundness and efficiency of management
Enhancement of management transparency
Attachment 1: Policy on Dialogue with Shareholders
Attachment 2: Standards for Independence of Outside Directors

Development of a framework that improves the soundness and efficiency of management

1. Group Management Structure and Institutional Design

(1) Group management system

In order to improve corporate value through agile management based on the Group’s comprehensive strengths in the three business areas of performance products, industrial materials and healthcare, MCG adopts a group management system where MCG manages the entire Group efficiently as “One Company, One Team.”

(2) Institutional design

MCG adopts a company with a nominating committee, etc. in a bid to enhance management transparency and openness, strengthen management oversight functions and improve management agility by accelerating decision-making.

2. Board of Directors

(1) Roles

The Board of Directors determines basic management policies (group philosophy,medium-term management plans, annual budgets, etc.), and supervises the overall management. In principle, the Board of Directors delegates authority to corporate executive officers to make business execution decisions based on the basic management policies.

(2) Constitution

In order to establish the Group’s basic management policies and oversee management appropriately, MCG appoints directors from a multifaceted viewpoint by defining expected universal skills—corporate management, global business, and risk management—and skills required for medium- to long-term management—legal affairs, compliance, finance, our industry and related industries, and technology/science/digital knowledge.
Furthermore, in a bid to enhance oversight functions, a majority of the Board of Directors shall not concurrently serve as Corporate Executive Officers.

(3) Leading Independent Outside Director

ⅰ.With a view to strengthen the independence of the Board of Directors and strengthening cooperation between executive officers and outside directors, the Company shall appoint the leading independent outside director.
ii. The roles of the Leading Independent Outside Directors are as follows.
iii. The leading independent outside director shall be selected by mutual selection of outside directors.

(4) Director Liaison Committee

ⅰ.A Director Liaison Committee that consists of directors shall be established and held as necessary as a place to provide important management information to directors as well as a place for a frank exchange of views on management issues.
ii. In addition to the above, a meeting that consists of outside directors shall be held as necessary as a place for discussion among outside directors.

(5) Evaluation of the Board’s effectiveness

The Board of Directors shall evaluate its effectiveness every year and disclose the outline of the results. To ensure the professionalism of the evaluation method and the objectivity of the evaluation process, evaluations by a third-party organization shall be conducted on a regular basis.

3. Committees

(1) Nominating Committee

ⅰ.Roles and constitution: The Nominating Committee nominates candidates for directors and corporate executive officers. In consideration of transparency and fairness in the process of nominating candidates, an outside director serves as the head of the committee.
ⅱ.Succession planning for the President: MCG shall appoint a person who is well acquainted with the Group’s diverse business activities as successor to the President. The Nominating Committee nominates candidates for corporate executive officers also from the perspective of fostering successors to the President.

(2) Audit Committee

The Audit Committee audits the execution of duties by corporate executive officers and directors, and reviews the Group’s internal control system, etc.
In consideration of transparency and fairness in the audit, an outside director serves as the head of the committee. Furthermore, strengthen the audit system by appointing full-time audit committee members from within the company, enhancing the functions of the audit committee secretariat, and ensuring the smooth collection of information from each division of MCG, internal control and to forge closer ties with audit divisions and the accounting auditor.

(3) Compensation Committee

The Compensation Committee determines the individual amount of compensation for each director and corporate executive officer. In consideration of transparency and fairness in the process of determining compensation, an outside director serves as the head of the committee.

4. Support system for directors

(1) Training

MCG shall explain to outside directors the Group’s business contents and organization on a continuing basis, and provide opportunities to visit domestic and overseas business sites as well as opportunities for dialogue with the management on a regular basis.
For internal directors, opportunities to develop qualities suitable for directors shall be provided through external seminars held by various organizations, in addition to trainings on compliance and internal control.

(2) Access to external specialists

Directors may use, as needed, external specialists such as lawyers and public accountants at the company’s cost.

5. Accounting auditor

With regard to ensuring the reliability of financial reports by the accounting auditor, MCG shall make appropriate responses in order to establish an adequate supervisory system through the cooperation of the Audit Committee, internal control divisions and audit divisions.
The Audit Committee shall evaluate the effectiveness of audit by the accounting auditor every year and determine the adequacy of re-electing the accounting auditor.

6. Business execution system

(1) Corporate executive officer

Corporate executive officers, under the guidance of the President,carries out Group business management based on the segregation of duties. In addition, the Corporate Executive Officers Committee which is composed of all corporate executive officers shall discuss and make decisions on important matters for the business management of the Group.

(2) Development of an internal control system

ⅰ.Basic policies: The Board of Directors shall determine basic management policies concerning the establishment of an internal control system in a bid to ensure proper operations at the Group as a whole, and oversee the situations of establishment and administration of the system concerning matters such as compliance, ensuring adequacy in financial reports and risk management.
ⅱ.Whistleblowing contact centers: MCG shall establish compliance hotlines to receive reports and consultations regarding compliance issues, etc. In addition to within the company, hotline contact centers shall also be established at external agencies for the convenience of whistleblowers. The identity of whistleblowers shall be hidden, and treatments that would cause disadvantage to the whistleblowers shall be prohibited. The operation of the hotline shall be reported to the Board of Directors as needed.

(3) Ensuring diversity

MCG aims to become an organization with creativity and resilience to change by developing an environment where diverse personnel of different backgrounds such as gender, race and culture respect each other and can exercise their capabilities.

Enhancement of management transparency

1. Appropriate disclosure

MCG seeks to enhance the understanding of stakeholders including shareholders and customers in MCG’s corporate activities by actively disclosing financial information such as management strategies, financial conditions and operating results, as well as efforts toward the realization of KAITEKI.

2. Dialogue with stakeholders

(1) Basic stance

MCG has an active and constructive dialogue with stakeholders such as shareholders and customers through various opportunities, and aims to cooperate for the realization of KAITEKI by sharing issues and goals.

(2) Dialogue with shareholders

MCG shall establish systems and undertake efforts to promote constructive dialogue with shareholders in accordance with the “Policies on Dialogue with Shareholders” (Attachment 1).

(3) Materiality assessment

MCG shall identify important issues (materiality) that must be addressed by the Group while bearing in mind the stakeholders’ perspective, and prioritize important issues while taking into consideration the impact of corporate activities on stakeholders.

3. Policies concerning Group management, capital policies and cross-shareholdings

(1) Medium-term consolidated management plan

MCG draws up for the Group a management policy, a medium- to long-term basic management strategy, and a medium-term consolidated management plan based on the management strategy, and discloses their outlines.
The Board of Directors receives reports on the progress of the medium-term consolidated management plan from corporate executive officers on a regular basis and provides appropriate oversight and recommendations to achieve the plans.

(2) Capital policy

Capital policies shall be described in the medium-term consolidated management plan, etc. When deciding a capital policy that would lead to a change in control or substantial dilution, MCG shall disclose information appropriately.

(3) Policy on cross-shareholdings

MCG and operating companies (excluding listed subsidiaries) shall acquire and hold shares of clients, etc. if the shareholding contributes to medium- to long-term improvement in corporate value. The Board of Directors shall review the adequacy of such cross-shareholdings on a regular basis. MCG will proceed to sell such cross-shareholdings as assessed insufficient in adequacy as a result of the review.
The exercise of voting rights of the cross-shareholdings shall be determined from the perspective of medium- to long-term improvement in corporate value of clients, etc.

4. Policy on appointment/dismissal of corporate executive officers and nomination of candidates for directors

(Corporate executive officers)

The Nominating Committee nominates persons who fulfill the following criteria as candidates for corporate executive officers:

possesses abundant experience, deep expertise and insight in each responsible area, objective and fair judgment and a high level of business management capability.
possesses high ethical standards and a law-abiding mind.
healthy enough to fulfill responsibilities as a Corporate Executive Officer.

Meanwhile, the Nominating Committee may dismiss the corporate executive officer who materially violates one of the criteria above.

(Directors)

The Nominating Committee nominates persons who fulfill the following criteria as candidates for directors:

possesses deep insight as well as objective and fair judgment, which are necessary to fulfill the responsibilities of a director of Company with Nominating Committee, etc.
possesses high ethical standards and a law-abiding mind.
healthy enough to fulfill the responsibilities as a director.
For outside directors, fulfills independence standards that are separately stipulated (Attachment 2), and be able to secure enough time to execute business. In addition, be able to secure diversity among outside directors.

5. Policy on deciding compensation for corporate executive officers and directors

The compensation system for corporate executive officers, and that for directors shall be different. Compensation is determined by the Compensation Committee based on the following concepts:

(Corporate executive officers)

We adopt a remuneration system that stringently focuses on the three axes of management to achieve the MCG Group’s Purpose: Sustainability (Management of Sustainability, MOS), Innovation (Management of Technology, MOT), and Economic Efficiency (Management of Economics, MOE).
The remuneration system will function effectively as an incentive to promote short-term and medium-to long-term performance and the improvement of sustainable company and shareholder value.
We will establish competitive remuneration levels that will lead to the retention and acquisition of talented management personnel that will drive the Group's sustainable growth.
We will operate with a fair and rational compensation decision process that enables us to fulfill our accountability to all stakeholders, including shareholders, customers, and employees.

(Directors)

In view of the directors’ role of supervising and auditing our management from an independent and objective standpoint, the primary remuneration for directors shall be fixed amounts. For outside directors who are expected to supervise and provide advice on management from the viewpoints of shareholders and investors, stock-based remuneration not linked to the Company's business performance shall be paid in addition to fixed remuneration.
In order to secure human resources suitable for fulfilling our responsibilities as a director, the level of remuneration will be determined by taking into account trends in other companies, expected roles, and functionals, etc.

【Revision and abolition】

The revision or abolition of these guidelines shall be approved by the Board of Directors, provided, however, that, minor revisions, such as a revision due to an amendment of reference rules, may become effective by approval of the chairman of the Board of Directors

Established: November 5, 2015
Revised: April 1, 2017
November 20, 2017
May 16, 2018
August 22, 2018
November 1, 2018
March 7, 2019
May 24, 2019
August 28, 2020
October 1, 2020
July 8, 2021
April 1, 2022
July 8, 2022
May 19, 2023

Attachment 1: Policy on Dialogue with Shareholders

MCG will ensure appropriate disclosure so as to gain the trust of our shareholders and encourage long-term holding of MCG’s shares. MCG also intends to engage in active dialogue with shareholders and reflect it in our corporate activities.
Disclosure to and dialogue with shareholders shall be implemented by each relevant department, in cooperation with each other, under the supervision of the President, officer in charge of IR and officer in charge of Legal. Opinions obtained through the dialogue will be reported to the Board of Directors, etc., and shared by the management.
Insider information is managed in accordance with internal regulations such as our information security policy.
Major activities concerning disclosure to and dialogue with shareholders are as follows:

<KAITEKI Report>: MCG discloses our efforts in KAITEKI by issuing an integrated report as the KAITEKI Report, which includes information on governance, social contribution and sustainability, in addition to financial information.
<General meeting of shareholders>: MCG views the general meeting of shareholders as a place for dialogue with shareholders, and strives to actively disclose information through notice of the general meeting of shareholders, etc., as well as offer detailed explanation to questions from our shareholders at the meeting.
<Addressing institutional investors>: In addition to business briefings that are attended by the President and officers in charge, MCG carries out visits and presentations by the President, CFO, PR and IR Office, etc. to institutional investors in Japan and abroad, as well as responding to individual interviews.
<Presentations for individual investors>: The PR and IR Office participates in presentations for individual investors to explain MCG’s businesses and future business development, etc.

Attachment 2: Standards for Independence of Outside Directors

The Company shall elect those as Outside Directors who do not fall under any of the following and are capable of overseeing the Company’s management from a fair and neutral standpoint, free of a conflict of interest with general shareholders.

1. Related party of the Company: (1) Person engaged in execution of operation of the MCG Group (executive director, corporate executive officer, executive officer, manager, employee, partner, etc. The same shall apply hereafter.)
(2) Person who was engaged in execution of operation of the MCG Group over the last 10 years
2. Major shareholder: A person who directly or indirectly holds 10% or more of MCG’s total voting rights or a person engaged in execution of operation of a company that directly or indirectly holds 10% or more of MCG’s total voting rights
3. Major business partner: (1) A person engaged in execution of operation of a company*1 whose major business partner includes MCG and Group Major Subsidiaries (Mitsubishi Chemical Corporation, Mitsubishi Tanabe Pharma Corporation, Life Science Institute, Inc., and Nippon Sanso Holdings Corporation. The same shall apply hereafter.)
(2) A person engaged in execution of operation of a major business partner*2 of MCG and Group Major Subsidiaries
4. Accounting Auditor: Accounting Auditor of the MCG Group or an employee thereof
5. Transaction as an individual: A person who receives money and other financial benefits of 10 million yen or more per year from any of MCG and Group Major Subsidiaries
6. Donation: A person who receives a donation or financial assistance of 10 million yen or more per year from any of MCG and Group Major Subsidiaries or a person engaged in execution of operation of a company that receives a donation or financial assistance of 10 million yen or more per year from any of MCG and Group Operating Companies
7. Reciprocal assumption of the position of Director: A person engaged in execution of operation of a company that has elected any of the Directors and employees of the MCG Group as its Director
8. Close relatives, etc.: (1) Close relatives, etc. of a person engaged in execution of important operations of the MCG Group (spouse, relatives within the second degree of relationship or any person who shares the same livelihood. The same shall apply hereafter.)
(2) Close relatives, etc. of any person who meets the definition of items 3 through 7 above
(3) A person who met the definition of items 3 through 7 above over the last three years

*1If the said business partner receives from MCG and Group Major Subsidiaries an amount equivalent to 2% or more of its annual consolidated net sales in the latest fiscal year, this company shall be considered as the one whose major business partner includes MCG.
*2If MCG and Group Major Subsidiaries receives from the said business partner an amount equivalent to 2% or more of MCG’s annual consolidated net sales in the latest fiscal year or the said business partner loans to the MCG Group an amount equivalent to 2% or more of MCG’s total consolidated assets, the said business partner shall be considered as a major business partner of MCG.