Corporate Governance

Basic Approach to Corporate Governance

The MCHC Group defines KAITEKI as “the sustainable well-being of people, society and our planet Earth”, and has “realizing KAITEKI” as its vison. The MCHC Group will not stop at providing solutions to environmental and social problems, but also aim to contribute to a sustainability in both through our corporate activities.

For Realizing KAITEKI, MCHC 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.

Governance System

MCHC has transitioned to a company with a nominating committee, etc. after receiving approval at the June 2015 General Meeting of Shareholders. This system separates functions for the supervision and execution of business in a bid to enhance management transparency and openness, strengthens management oversight functions, and improves management agility by accelerating decision-making. While management supervision is now undertaken by the Board of Directors and three committees comprised of the Nominating Committee, Audit Committee, and Compensation Committee, corporate executive officers make business decisions and are in charge of business execution.

System diagram: “Board of Directors (5 Outside Directors: 7 Internal Directors) is placed directly under “Shareholders’ meeting.”
                “Nominating Committee (4 Outside Directors 4: 1 Internal Director),” “Audit Committee (3 Outside Directors: 2 Internal Directors),” and “Compensation Committee (3 Outside Directors: 2 Internal Directors)” are placed directly under “Board of Directors.” 
                “Audit Committee Secretariat” is placed directly under “Audit Committee.” 
                “MCHC’s executing departments” are as follows.
                “Corporate executive officers” including “Executive officer in charge of the Internal Control Division” and “Internal Auditing Division (Internal Audit Office)” are placed directly under “Corporate Executive Officers Committee (President): Corporate Executive Officers Committee makes decisions on important matters.” 
                “Departments” including “Internal Control Division (Internal Control Office)” are placed directly under “Corporate executive officers”; “Internal Control Division (Internal Control Office)” reports to “Executive officer in charge of the Internal Control Division.”  “Chief Group Compliance Officer” is appointed as an independent position.  “Internal Auditing Division (Internal Audit Office)” conducts internal audits with respect to “Corporate executive officers” and “Departments.” 
                “MCHC’s executing departments” execute management administration, internal controls, auditing, etc., with respect to “MCHC subsidiaries.”
                “Board of Directors” delegates business execution decisions and oversees business execution with respect to “MCHC’s executing departments.”
                “Audit Committee” performs auditing with respect to “Board of Directors” and “MCHC’s executing departments” as well as “Accounting auditor,” and  conducts examination with respect to “MCHC subsidiaries.” 
                “Accounting auditor” conducts financial auditing with respect to “MCHC’s executing departments.”

History of strengthening Corporate Governance

Date Initiatives Objective
June 2006 Introduced Stock-Based
Compensation (Stock option) Plans
To link director’s remuneration to shareholder value
June 2013 Appointment and inauguration of an outside director To strengthen the system of management supervision
June 2014 Appointment and inauguration of a foreign director To improve diversity in directors
June 2015 Appointment and inauguration of a female director To improve diversity in directors
Transition to a company with a nominating committee, etc. To enhance management transparency and fairness, to strengthen management supervision functions
June 2016 Increase number of outside directors To improve diversity in directors
June 2021 Appointment of the leading independent outside director To improve the independence of the Board of Directors, to strengthen cooperation between executive and outside directors

Roles and Responsibilities

Board of Directors

The Board of Directors determines basic management policies, such as medium- term business strategies and annual budgets. As a general rule, corporate executive officers are entrusted with the responsibility of executing operations in accordance with these basic policies, excluding matters that must be legally resolved by the Board of Directors. It primarily supervises the execution of duties by the corporate executive officers.

In order to appropriately supervise management, the Company formulates the basic management policies and appoints directors with advanced expertise and a high level of insight in terms of management experience, finance and accounting, science and technology, IT and production, risk management, business strategy and marketing, laws and regulations, etc., and globality and diversity. IIn addition, in order to strengthen the supervisory function of the Board of Directors, the majority of Directors do not concurrently serve as Executive Officers, and we have established a system to ensure appropriate supervision of business execution.

That being said, the Articles of Incorporation stipulate that there shall be no more than 20 directors at one time. As of July 1, 2021, there are a total of 12 directors (of which three directors are also corporate executive officers), including the five outside directors. Each director services a term of one year. This is to facilitate the establishment of a management structure that can quickly respond to changes in the business environment, and to further clarify the responsibilities and roles of each director.

Nominating Committee

The Nominating Committee nominates director candidates and executive officers, and also nominates president candidates for major subsidiaries that are not listed companies (Mitsubishi Chemical Corporation., Mitsubishi Tanabe Pharma Corporation and Life Science Institute, Inc.). As of July 1, 2021, the Nominating Committee consists of five members including four outside directors.
An outside director serves as the chairperson to enhance the transparency and soundness of the nominating process.

Nominating Committee (as of July 1, 2021)

Outside Directors Inside Director
Chairperson

Takayuki Hashimoto

Members

Chikatomo Hodo
Kiyomi Kikuchi
Takako Masai

Ken Fujiwara

Audit Committee

The Audit Committee is responsible for auditing the execution of duties by the corporate executive officers and directors , preparing audit reports, gathering information from the Representative Executive Officer, etc., establishing a system for cooperation with the Internal Audit Department,reviewing the Group’s internal control system and conducting audits and investigations of the corporate group. As a general rule, the committee meets once a month. As of July 1, 2021, the Audit Committee consists of five members including three outside directors. Together with selecting full-time members, the Audit Office that performs internal audits and the Internal Control Office that formulates and promotes policies on establishing internal control systems collaborate closely to enhance the audit system administered by the Audit Committee. An inside director who is a full-time member of the Audit Committee serves as the chairperson to ensure the smooth collection of information and sufficient cooperation between divisions.

Management shall set the Office of Audit Committee as a body to assist the Audit Committee’s duties and have it assist in auditing based on the instructions thereof. The appointment (transfer, evaluation, etc.) of employees of the Office of Audit Committee and the development of the budget of the Office of Audit Committee shall be subject to approval of the Audit Committee.

Tatsumi Yamada is qualified as Certified Public Accountant. and Takako Masai has worked for several banks and has experience as a member of the Policy Board of the Bank of Japan, so they have considerable knowledge of finance and accounting.

Audit Committee (as of July 1, 2021)

Outside Directors Inside Directors
Chairperson

Shigeru Kobayashi

Members

Kiyomi Kikuchi
Tatsumi Yamada
Takako Masai

Hiroshi Katayama

Compensation Committee

The Compensation Committee designs the compensation system for directors and corporate executive officers and determines the individual amount of compensation for each director and corporate executive officer at the Company. The committee also determines the individual amount of compensation for the presidents of major subsidiaries that are non-listed companies (Mitsubishi Chemical Corporation., Mitsubishi Tanabe Pharma Corporation and Life Science Institute, Inc.). As of July 1, 2021, the Compensation Committee consists of five members including three outside directors.
An outside director serves as the chairperson to enhance transparency and fairness of the decision-making process.

Compensation Committee (as of July 1, 2021)

Outside Directors Inside Directors
Chairperson

Chikatomo Hodo

Members

Takayuki Hashimoto
Tatsumi Yamada

Hidefumi Date

Corporate Executive officers

The corporate executive officers decide the execution based on basic management policies (medium term business strategies and annual budgets, etc.).
Regarding important matters in the management of the Group, deliberations are made at the corporate executive officers, which is the council by the corporate executive officers. In addition to determining the division of duties of each corporate executive officer for other matters, we make it appropriate and efficient decision-making by clarifying the authority to decide the corporate executive officer in charge.

Corporate Executive Officers Committee

The Corporate Executive Officers Committee is composed of all corporate executive officers, deliberates and decides on important matters concerning the management of the Company and the Company group, and also monitors the Group’s business based on the medium-term management plan, annual budget etc.
That being said, the Member of the Audit Committee and Major Subsidiaries(Mitsubishi Chemical Corporation., Mitsubishi Tanabe Pharma Corporation, Life Science Institute, Inc. and Nippon Sanso Holdings Corporation)’ President and CEO can attend the Corporate Executive Officers Committee at any time to express freely.

Status of Outside Directors

In order to appropriately supervise management, the Company formulates the basic management policies of the Group and has decided to appoint directors with advanced expertise and high level of insight in terms of management experience, finance and accounting, science technology, IT and production, risk management, business strategy and marketing, laws and regulations, etc., and globality and diversity. In accordance with this policy, the Company has elected five persons as Outside Directors: Mr. Takayuki Hashimoto, who has extensive experience in corporate management and high level of insight on digital business; Mr. Chikatomo Hodo, who has extensive experience in corporate management and high level of insight on management know-how; Ms. Kiyomi Kikuchi, who has experience and high level of insight as a lawyer; Mr. Tatsumi Yamada, who has experience and high level of insight as a certified public accountant; and Ms. Takako Masai, who has extensive experience and high level of insight on analysis of financial and economic conditions and management of financial policy.

Leading Independent Outside Director

To improve the independence of the Board of Directors and to strengthen cooperation between executive and outside directors, we have appointed the leading independent outside director, who is elected by the outside directors. The leading independent outside director consolidates the opinions of the outside directors, consults with the Chairman of the Board of Directors and the President and CEO, and presides over and chairs meetings consisting solely of outside directors.

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 MCHC Group (Executive Director, Corporate Executive Officer, Executive Officer, Manager, employee, partner, etc. The same shall apply hereafter.)
(2)A person who has been engaged in execution of operation of the MCHC Group in the past 10 years
2.Major shareholder
A person who directly or indirectly holds 10% or more of MCHC’s total voting rights or a person engaged in execution of operation of a company that directly or indirectly holds 10% or more of MCHC’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 MCHC 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 MCHC and Group Major Subsidiaries
4.Accounting Auditor
Accounting Auditor of the MCHC 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 MCHC 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 MCHC 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 MCHC and Group Major Subsidiaries
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 MCHC Group as its Director
8.Close relatives, etc.
(1)Close relatives, etc. of a person engaged in execution of important operations of the MCHC 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
  • *1if the said business partner receives from MCHC 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 MCHC.
  • *2If MCHC and Group Major Subsidiaries receives from the said business partner an amount equivalent to 2% or more of MCHC’s annual consolidated net sales in the latest fiscal year or the said business partner loans to the MCHC Group an amount equivalent to 2% or more of MCHC’s total consolidated assets, the said business partner shall be considered as a major business partner of MCHC.
  • *3The party is deemed to fall under the items 3. To 7. When the relevant conditions were met any time in the past three years.

Policy on Deciding Compensation for senior management

The remuneration system for directors and corporate executive officers shall be separate and determined by the Compensation Committee based on the following principles.

Basic Policy on Decision on Directors’ Compensation

  • In view of the role of supervising and auditing our management from an independent and objective standpoint, we have only established a basic remuneration (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.
  • For a director concurrently serving as a corporate executive officer, the remuneration for a corporate executive officer shall apply.

Basic Policy on Decision on Corporate Executive Officer Remuneration

  • We have established a remuneration system that is strongly aware of the three axes of KAITEKI management toward realizing our corporate vision of KAITEKI : Management of 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.

Composition of the remuneration of corporate executive officers

In light of the basic policy, the remuneration of corporate executive officers is set as follows.

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