As of June 24, 2022
The Asahi Kasei Group Vision is to provide new value to society and solve social issues by enabling "living in health and comfort" and "harmony with the natural environment" under the Group Mission of "contributing to life and living for people around the world." With this as a base, the Company aims to contribute to society, achieve sustainable growth, and enhance corporate value over the medium to long term by promoting innovation and creating synergy through integration of various businesses. The Company continues to pursue optimal corporate governance as a framework to make transparent, fair, timely, decisive, and appropriate decision-making in accordance with changes in the business environment.
1. Securing the Rights and Equal Treatment of Shareholders
While taking proper measures to secure shareholders' rights, the Company develops a proper environment for exercise of shareholders' rights including paying attention to foreign shareholders and minority shareholders and providing information necessary for the exercise of rights accurately and in a timely manner.
2. Proper Cooperation with Stakeholders other than Shareholders
The Group Vision of the Company is to provide new value to society and solve social issues by enabling "living in health and comfort" and "harmony with the natural environment" for people around the world, and the Company works to facilitate cooperation with its stakeholders.
3. Proper Information Disclosure and Securing of Transparency
The Company, in addition to disclosure required by laws and regulations, actively provides information to various stakeholders including financial information such as financial position and operating results, management strategy/issues, and non-financial information concerning risks and governance, etc.
4. Responsibilities of the Board of Directors
In order to achieve sustainable growth, enhance medium to long term corporate value, and increase earnings ability and capital efficiency, the Board of Directors of the Company presents the overall direction of its management strategy, develops an environment to support risk-taking by the management, and effectively oversees the business management of the Company from an independent and objective standpoint, based on the fiduciary responsibility and accountability to shareholders.
5. Dialog with Shareholders
The Company develops a system to have a constructive dialog with shareholders/investors and actively promotes such dialog.
Corporate Governance Framework
Corporate governance configuration
Meetings of Board of Directors, Advisory Committees, and Audit & Supervisory Board (fiscal 2021)
|No. of meetings held||Average attendance||Main subjects of agenda|
|Board of Directors||15||99%
(Directors and Audit & Supervisory Board Members)
|Nomination Advisory Committee*||3||100%
|Remuneration Advisory Committee*||6||100%
|Audit & Supervisory Board||18||99%
(Audit & Supervisory Board Members)
- * The Nomination Advisory Committee and Remuneration Advisory Committee are comprised of the 3 Outside Directors and Representative Directors Hideki Kobori and Koshiro Kudo as members, with the Nomination Advisory Committee and the Remuneration Advisory Committee chaired by Outside Director Tsuyoshi Okamoto.
Policy and Procedures to Nominate Candidates for Directors
In selecting candidates for Directors, the Company chooses persons with deep insight and excellent skills suitable for Directors. For inside Directors, the Company chooses those with expertise, experience and skills in the required field as candidates. Meanwhile, for Outside Directors, the Company chooses as candidates corporate executives, academic experts, and former civil servants with abundant experience, expecting objective oversight of management based on their deep insight.
To further increase the objectivity and transparency of the nomination of candidates for Directors, the Company has established the Nomination Advisory Committee whose members mainly comprise outside Directors. This committee is involved in the examination of the composition and size of the Board of Directors and the nomination policy for officers and provides advice.
Diversity of Expertise and Experience of Directors/Audit & Supervisory Board Members (Skills Matrix)
In order to “contribute to life and living for people around the world,” the Company pursues two aspects of sustainability: “contributing to a sustainable society” and “sustainable increase in corporate value.” To this end, we have identified the knowledge, experience, and capabilities required to advance Group management and its supervision and auditing at a higher level in a discontinuous and uncertain business environment, and have considered the composition of the Board of Directors with consideration to the balance of its diversity and independence.
Specifically, in addition to “corporate management and strategy,” “finance and accounting,” “legal affairs, intellectual property, and risk management,” and “R&D, manufacturing, and technology,” which are indispensable for pursuing opportunities and reducing risks, we also emphasize “global” to align with the internationalization of markets and businesses, “digital” to advance digital transformation, “environment and society” to respond to changes in the social environment and the status of stakeholders with agility, and “human resource management” to utilize people as the foundation of business management.
|Corporate Management & Strategy||Finance & Accounting||Legal Affairs, Intellectual Property, & Risk Management||R&D, Manufacturing & Technology||Global||Digital||Environment & Society||Human Resource Management|
|Directors||Hideki Kobori||★||★||★||Koshiro Kudo||★||★||★||★||Shuichi Sakamoto||★||★||★||★||Fumitoshi Kawabata||★||★||★||Kazushi Kuse||★||★||★||Toshiyasu Horie||★||★||★|
|Audit & Supervisory Board Members||Masafumi Nakao||★||★||★||★|
Evaluation of the Effectiveness of the Board of Directors
The Board of Directors of the Company conducts regular evaluations of its own effectiveness through deliberations by the Board of Directors after the end of each fiscal year. The main measures implemented in fiscal 2021 and issues recognized for the future are as follows:
Main measures implemented in fiscal 2021
The Board of Directors of the Company implemented the following measures in fiscal 2021 based on evaluation of the previous fiscal year.
- (1) Considered the role of the Board of Directors throughout the year, including enhanced agenda items relating to medium- to long-term management issues and holding meetings of independent officers
The Board of Directors actively took up and deliberated agenda items relating to sustainability, business portfolio management, risk management promotion, and the new MTP that starts in fiscal 2022. Furthermore, in addition to the regular meeting opportunities between Outside Directors and Audit & Supervisory Board Members that were held in the past, in October 2021, an opportunity was created for only Outside Directors and Outside Audit & Supervisory Board Members to hold a discussion on the role of the Board of Directors, the nature of explanations and deliberations at meetings of the Board of Directors, and how to evaluate the effectiveness of the Board of Directors, from an independent and objective standpoint, as an interim review of effectiveness evaluations of the Board of Directors. Based on this meeting, multiple deliberations at meetings of the Board of Directors led to the 2) Introduction of “matters to be discussed” and narrowing down agenda items, and 3) Improvements to enhance deliberations at meetings of the Board of Directors, below.
- (2) Introduction of “matters to be discussed” and narrowing down agenda items
In addition to “matters for resolution” and “matters for reporting,” “matters to be discussed” was established as an agenda item to further deepen deliberations on important management matters, such as, for example, financial and capital policies, establishment of optimum governance, MTP and other management plans, business portfolio strategies, and large-scale M&A and investments. At the same time, the Board of Directors expanded the scope of sustainability and diversity-related matters to be discussed by the Board of Directors, while promoting the entrustment of decision-making authority for certain business operations, such as capital investment and personnel affairs, to ensure prompt management decision-making and effective deliberations by the Board of Directors.
- (3) Improvements to enhance deliberations at meetings of the Board of Directors
The Board of Directors further enhanced deliberations at meetings of the Board of Directors by increasing the time for questions and answers on the day of meetings of the Board of Directors based on prior explanations to Outside Directors and by clarifying issues and improving executive summaries for large-scale M&A and investment projects, etc.
Issues recognized for the future
Based on measures implemented in fiscal 2021, the Board of Directors has confirmed a common awareness of the following issues for the future.
- (1) Review and improve results of efforts during the current fiscal year
Based on the improvement efforts made during the current fiscal year, conduct an interim review and make improvements in a timely and appropriate manner.
- (2) Deepen deliberations on the makeup of the Board of Directors
Continuously scrutinize the size and makeup of the Board of Directors, including its independence and diversity.
Remuneration of Directors
Note: Percentages shown for Directors who have executive responsibilities (FY2021)
|Fixed base remuneration||Performance-linked remuneration||Stock-based remuneration|
- Performance-linked remuneration → commitment to results
- Stock-based remuneration → perspective of shareholders
- Note: Outside Directors receive fixed base remuneration only
The amount of remuneration, etc. of Directors and Audit & Supervisory Board Members in fiscal 2021
|Classification||Amount Paid (¥ million)||Breakdown by remuneration type (¥ million)||Number of Directors and Audit & Supervisory Board Members Paid|
|Basic remuneration||Performance-linked remuneration||Stock-based remuneration|
|(of which Outside Directors)||49||49||－||－||4|
|Audit & Supervisory Board Members||140||140||－||－||6|
|(of which Outside Audit & Supervisory Board Members)||45||45||－||－||3|
Policy on Determining Remuneration Amounts and Calculation Methods
As one of the corporate governance mechanisms to ensure that the Group can achieve sustainable growth and enhance corporate value over the medium to long term, the Company has sought advice of the Remuneration Advisory Committee on the decision-making policy pertaining to the contents of remuneration, etc. for individual Directors (hereinafter, the "Decision-making Policy"). Respecting the contents of the reports thereof, the Board of Directors has made a resolution on the Decision-making Policy as follows.
The remuneration for Audit & Supervisory Board Members consists of fixed remuneration, since the performance-linked remuneration system is not applied in the remuneration for them. Individual remuneration amounts are determined through discussions with Audit & Supervisory Board Members.
Policy for Determining Director Remuneration
- 1. Basic policy
The Directors’ remuneration of the Company is one of the important components of corporate governance. The Company designs this system to provide appropriate incentives to both executives and supervisors for achieving sustainable growth and improving medium- to long-term corporate value.
Remuneration for Non-executive Directors* including Outside Directors, who supervise the management of the Company, is comprised solely of fixed basic remuneration at a level determined in consideration of third-party survey data, in order to secure a high degree of independence unaffected by short-term earnings fluctuations.
The remuneration for Executive Directors combines performance-linked remuneration with stock-based remuneration as nonmonetary remuneration, in addition to fixed basic remuneration which serves a basic livelihood, in order to provide incentives tied to earnings and management strategy as senior management, with levels of remuneration amounts and proportions of types of remuneration adjusted as appropriate for each role according to management strategy and tasks, in consideration of third-party survey data.
To ensure the optimal way of remunerating Directors and design of the remuneration system, the Board of Directors and the Remuneration Advisory Committee regularly deliberate and continually confirm their appropriateness and make improvements.
- 2. Policy for determining the timing for payment and conditions of remuneration
Considering the purpose of each type of remuneration, fixed basic remuneration is paid monthly as it serves as a basic livelihood, performance-linked remuneration is paid monthly as it serves as a constant incentive, and for stock-based remuneration, points described below are granted to eligible Directors on a certain date each fiscal year set forth in the Share Grant Regulations determined by the Board of Directors, and shares of the Company are provided to eligible Directors at the time they retire both as Director and as officer of the Group in light of the purpose of the stock-based remuneration to share the medium- to long-term perspectives of shareholders.
- 3. Policy for determining each individual’s basic remuneration (monetary remuneration)
Amounts of basic remuneration for Directors are determined through comprehensive consideration in accordance with rank and responsibility taking account of other companies’ levels of remuneration and the Company’s earnings.
- 4. Policy for determining content of performance-linked remuneration and nonmonetary remuneration as well as method of calculating amounts and numbers thereof
Performance-linked remuneration, which comprises a part of remuneration for Executive Directors, combines both achievement of financial targets including invested capital efficiency with achievement of non-financial targets including individual targets such as progress on sustainability, so as to provide incentives tied to earnings and management strategy as senior management.
Performance-linked remuneration is calculated based on a comprehensive judgment on the basis of achievement of financial targets such as consolidated net sales, operating income, ROIC, etc., together with achievement of individually set targets including progress on sustainability. Standards for financial incentives are selected as appropriate for clear and objective evaluation based on earnings results together with the perspective of awareness for improving invested capital efficiency.
The formula required to calculate individual performance-linked remuneration is outlined as follows.
[Formula required to calculate individual performance-linked remuneration]
- 5. Policy for determining the proportion of basic remuneration, performance-linked remuneration, and nonmonetary remuneration for individual Executive Directors
The proportion of basic remuneration, performance-linked remuneration, and stock-based remuneration for each Executive Director is determined to provide an appropriate incentive in accordance with management strategy and management tasks, with consideration given to the level obtained from third-party survey data.
The proportion of basic remuneration, performance-linked remuneration, and stock-based remuneration for each Executive Director is generally 6:3:1, with performance-linked remuneration ranging between 0% to 200% of the base amount based on rank, according to evaluation. However, the Board of Directors and the Remuneration Advisory Committee regularly deliberate on its appropriateness, and improvement is made based on continual confirmation of appropriateness.
- 6. Policy for determining items to be entrusted regarding determination of content of remuneration of individual Directors and for determining content of remuneration of individual Directors
Among remuneration of each individual Director, determination of the amount of performance-linked remuneration is entrusted to the Remuneration Advisory Committee based on a resolution of the Board of Directors, with the Remuneration Advisory Committee being authorized to confirm the reasonableness and appropriateness of the evaluation of the achievement of targets by each Executive Director as proposed by the President and Director, and to determine remuneration amounts for individual Directors by applying this evaluation to the formula determined by the Board of Directors.
To ensure that such authority is properly exercised, the Remuneration Advisory Committee is comprised of a majority of Outside Directors, and it regularly reports to the Board of Directors on the process of the above confirmation and determination.
Regarding determination of basic remuneration and stock-based remuneration for individual Directors, the Board of Directors requests deliberation by the Remuneration Advisory Committee and makes a determination based on ample consideration of the result of deliberation by the Remuneration Advisory Committee.
Fixed basic remuneration by rank is paid upon determination of the amount by the Board of the Directors. Stock-based remuneration is granted to eligible Directors when certain conditions are met, corresponding to points granted to each Director based on the Share Grant Regulations adopted by the Board of Directors.
- 7. Important matters for determining the content of individual remuneration, etc. for Directors
In the event that a Director who is eligible for payment of stock-based remuneration, which is nonmonetary remuneration, as part of the above-stated remuneration for Executive Directors, retires due to personal reasons (except in cases where it is determined that the resignation is due to unavoidable circumstances), and in the event that a Director is dismissed or resigns due to causing loss or damage to the Company’s group companies as defined in the Share Grant Regulations, etc., all or some of the points granted up to that point shall be forfeited and no shares of the Company corresponding to the forfeited points shall be granted, or no further points shall be granted, based on a resolution of the Board of Directors.
- *Non-executive Directors include Director and Chairman.
Independence Standards and Qualification for Outside Directors/Audit & Supervisory Board Members
In determining that Outside Directors and Outside Audit & Supervisory Board Members are independent, the Company ensures that they do not correspond to any of the following and that they are capable of performing their duties from a fair and neutral standpoint.
- 1. A person who conducts business on behalf of the Group (Executive Directors, Executive Officers, Operating Officers, employees, etc.) or a person who has done so over the last 10 years
- 2. A company or a person who executes the businesses thereof whose major business partner is the Group (an entity with more than 2% of its annual consolidated net sales coming from the Group)
- 3. A major business partner of the Group (when payments by this partner to the Group account for more than 2% of the Company's annual consolidated net sales or when the Company borrows money from such partner amounting to more than 2% of the Company's consolidated total assets) or a person who executes the businesses thereof
- 4. A person who receives a large amount of money or other financial gain (¥10 million or more in one year) from the Group as an individual other than remuneration for being a Director/Audit & Supervisory Board Member of the Company
- 5. A company which receives a large amount of donations or aid (¥10 million or more in one year) from the Group or a person who executes the businesses thereof
- 6. A main shareholder of the Group (a person/company who directly or indirectly owns 10% or more of all voting rights of the Company) or a person who executes the businesses thereof
- 7. A person who executes the businesses of a company which elects Directors/Audit & Supervisory Board Members/employees of the Group as Directors/Audit & Supervisory Board Members
- 8. An Independent Auditor of the Group or any staff thereof
- 9. A person who has fallen into any of the categories 2 through 8 above over the last three years
- 10. A person who has a close relative (spouse, relative within the second degree of kinship, or those with whom they share living expenses) who falls under any of the categories 1 through 8 above, provided that "a person who executes businesses thereof" in 1, 2, 3, 5, 6, and 7 above shall be replaced with "an important person who executes the businesses thereof (Executive Directors and Executive Officer, etc.)"
- 11. A person who has served as Outside Director or Outside Audit & Supervisory Board Member of the Company for more than eight years in total.
Status of Audits by Audit & Supervisory Board Members, Financial Audits and Internal Audits
- For internal audits of business execution, the company has established an Internal Audit Department, reporting directly to the President. The Internal Audit Department formulates an annual audit plan according to the Company's Basic Regulation for Internal Audits, and conducts an audit of the Group under the approval of the President.
- As for audits by Audit & Supervisory Board Members, each Audit & Supervisory Board Member audits the execution of duties of Directors by attending meetings of the Board of Directors and examining the status of execution of operations based on the audit policy stipulated by Audit & Supervisory Board. To support the function of the Audit & Supervisory Board, the Company has established an Audit & Supervisory Board Members Office.
- PricewaterhouseCoopers Arata LLC is contracted as the Independent Auditors to perform financial audits according to the Companies Act and Financial Instruments and Exchange Act.
- Mutual cooperation between the Internal Audit Department, Audit & Supervisory Board, and Independent Auditors is reinforced through periodic liaison meetings of the Internal Audit Department, Audit & Supervisory Board, and Corporate Auditors of core operating companies, etc. During these meetings, the effectiveness of the Group's internal control system for legal compliance and risk management is reviewed. In addition, the Audit & Supervisory Board confirms the audit plan with the Independent Auditors and receives reports of the results of audits on the Group at the end of the quarterly consolidated accounting period and at the end of the annual consolidated accounting period.
The Company is continuing to reduce its holdings of shares held for purposes other than pure investment (strategic shareholdings), taking into consideration factors such as the risk of share price fluctuations, costs associated with such holdings, and capital efficiency.
The purpose, effectiveness and economic rationale of individual strategic shareholdings are regularly evaluated from qualitative and quantitative aspects each year, and are reviewed by the Board of Directors. As a result of the verification, the Company reduces, through sales or other means, holdings of shares judged to be no longer compatible with the purpose of holding them or deemed to have costs and risks that outweigh the benefits of holding them, taking into consideration the conditions of the company concerned.