Mitsubishi Gas Chemical Company, Inc. (MGC) has established its Corporate Governance Policy and discloses reports on its related systems in accordance with rules set by the Tokyo Stock Exchange. This corporate governance report is also revised when necessary.
Corporate Governance Policy
Mitsubishi Gas Chemical Company, Inc. (MGC) shall strive to operate effective corporate governance systems and continuously reinforce and enhance those systems in order to meet the expectations of all stakeholders including shareholders. Accordingly, it shall adhere to the following basic principles:
- (1) Ensure the rights of and equality among shareholders.
- (2) Engage in appropriate collaboration with shareholders and other stakeholders.
- (3) Conduct appropriate information disclosures and maintain transparency.
- (4) Properly carry out the responsibilities of the Board of Directors and other bodies.
- (5) Engage in constructive dialogue with shareholders.
Corporate Governance System
MGC has adopted a corporate auditing system and, for the purpose of business execution , has established an executive officer system, which clearly separates management decision-making and supervisory functions from the business execution function. The Board of Directors decides the basic policies of management, as well as important matters relating to items decreed by law and the company’s Articles of Incorporation. The Board of Directors oversees the execution of business, while executive officers are responsible for directly managing business affairs.
Corporate Governance and Risk Management Organization Chart
MGC has set the term of office for directors at one year to clarify the accountability of management. There is also a stipulation that MGC’s directors may concurrently serve as an officer at a maximum of three companies other than MGC Group companies, to ensure that they can fully concentrate on MGC’s management.
For matters arising in the course of business execution that may have a significant effect on the company, the Board of Directors makes its decisions on the basis of multifaceted deliberations, including deliberations on management policies by the Management Council and deliberations on plans for executing specific policies by the Operations Council. The Board of Directors receives advice from attorneys and other experts when necessary in the course of its decision-making and supervision of business execution.
In addition, discussions incorporating a diverse range of opinions are held to evaluate the efficacy of the Board of Directors.
MGC’s Audit & Supervisory Board is comprised of four corporate auditors, of which three are full-time and two are outside members. They attend important meetings such as those held by the Board of Directors and the Operations Council, conduct audits of each division and surveys of subsidiaries, and audit the execution of business. The members also monitor important decision-making processes and business execution in order to ensure reasonable decision-making and compliance with the law and corporate norms.
Training of Directors and Corporate Auditors
MGC has newly appointed directors and corporate auditors attend mandatory seminars outside the company covering legal-related matters, particularly in connection with the Companies Act of Japan, in order to enhance their understanding of the roles, responsibilities and duties of their respective positions. When deemed necessary, MGC gives directors, corporate auditors, and other officers opportunities to attend external seminars covering various topics, including compliance, risk management, internal controls, and legal issues, and provides them with relevant books and other documents. Furthermore, all executive officers and directors overseeing business execution participate in workshops held each year, in which they discuss challenges and tasks for management in group settings. When appropriate, experts from outside the company are invited to give informative lectures on current topics such as revisions to laws.
In addition, MGC works to improve the efficacy and quality of its auditing by organizing study meetings for members of the Audit & Supervisory Board and providing opportunities for them to attend external seminars of their choosing in order to gain additional knowledge of relevant laws, auditing techniques, financial accounting, and other matters.
Compensation and Nominating Committee
MGC’s Compensation and Nominating Committee was established for the purpose of ensuring transparency, objectivity, and proper conduct in the process of determining compensation for directors and executive officers, and of nominating and appointing directors, corporate auditors and executive officers.
Proposals for compensation and nominations are submitteds to the committee, which is made up of the chairman of the Board, the president, and outside directors, prior to deliberations by the Board of Directors.
Information Sharing and Support Network for Outside Directors
An employee not subject to instructions from directors has been assigned to assist corporate auditors with their duties. In addition to providing practical support for conducting audits, the employee facilitates communication between the auditors and coordinates their activities as the administrative staff of the Audit & Supervisory Board.
As members of the Audit & Supervisory Board, corporate auditors regularly exchange views with directors, periodically and promptly receive reports on the status of business execution and other important matters from directors and the office staff, request explanations whenever necessary and express opinions. The auditors also inspect important documents related to the execution of business and request explanations from directors and the office staff. The auditors can make use of specialists who are independent from the company, such as attorneys of law, for the purpose of making proper decisions related to auditing.
In addition, outside directors and corporate auditors are encouraged to share opinions and information at any time in an effort to promote cooperation between the outside directors and members of the Audit & Supervisory Board.
Standards for Outside Directors and Outside Auditors
MGC has set specific standards for determining the ineligibility of outside director and auditor candidates, as follows.
- A candidate is or has been a business execution manager (defined throughout this section as either a director overseeing business execution, an executive officer, other officer involved in business execution, or an employee) in the past at MGC or one of its subsidiaries (hereafter, “the Group”). Otherwise, a candidate is or has been a close relation (defined throughout this section as either a spouse, first- or second-degree relative, or financial dependent) of an important business execution manager of the Group (defined throughout this section as either a director overseeing business execution, an executive officer, or other officer involved in business execution) within the previous five years.
- A candidate is a major shareholder of MGC (defined throughout this section as a shareholder currently holding, either directly or indirectly, 10% or more of total shares issued and outstanding) or is or has been a business execution manager for a major shareholder company within the previous five years. Otherwise, a candidate is currently a close relation of a major shareholder of MGC or an important business execution manager of a major shareholder company.
- The candidate or a close relation of the candidate is or has been a business execution manager within the previous five years of an important business partner that has made transactions, including buying and selling, amounting to 2% or more of consolidated net sales (of the Group in the event the Group is the seller, or of the partner in the event the Group is the buyer) over the previous three consecutive years.
- The candidate has been dispatched from a company or organization that has established a relationship with the Group through the reciprocal appointment of outside officers.
- The candidate or a close relation of the candidate works for or has worked for an auditing firm within the previous five years that has conducted a statutory audit of MGC.
- The candidate or a close relation of the candidate provides or has provided consulting services other than statutory auditing to the Group within the previous three years, and has received, in the case of an individual, an annual amount of 10 million yen or more, or in the case of a member of company or organization, compensation exceeding 2% of its consolidated net sales or total revenue.
- The candidate has another important vested interest in the Group and has been reasonably deemed to be unable to fulfill his or her duties as an independent officer.
All outside officers attend meetings of the Board of Directors and periodically receive reports concerning the status of internal audits as well as basic policies and plans related to the implementation of internal controls. In advance of Board of Director meetings, part-time outside officers are given explanations about items to be discussed based on distributed materials in order to ensure that they fully understand the matters beforehand. In addition to Board of Director meetings, all outside officers attend other regularly held meetings in order to exchange opinions with directors and auditors. Furthermore, for the purpose of sharing information, outside directors exchange views in regularly held meetings attended exclusively by outside officers, and attend meetings of the Audit & Supervisory Board as observers. Finally, newly appointed outside officers are given explanations about the business and operations of each division of the MGC Group, as well as opportunities to tour production plants and other facilities.
Reasons for Appointment of Outside Directors
|Name||Independent officer||Reasons for appointment|
|Kazuo Tanigawa||○||Kazuo Tanigawa offers insights as an executive manager with many years of experience at a corporation that operates globally. Based on his ability to provide advice and properly supervise MGC’s management, he can be expected to contribute to ensuring that the company’s decision-making is appropriate and reasonable going forward.
Mr. Tanigawa has no vested interests in MGC, and is considered to be able to carry out his duties impartially and objectively from an independent standpoint.
|Tsugio Sato||○||Tsugio Sato has highly advanced expertise in a wide range of chemical fields, particularly inorganic materials chemistry, and has the ability to provide advice and properly supervise MGC’s management. Although Mr. Sato has not been directly involved in corporate management in the past, he has held a number of important posts at university research institutes, and, therefore, can be expected to contribute to ensuring that the company’s decision-making is appropriate and reasonable.
Mr. Sato has no vested interests in MGC, and is considered to be able to carry out his duties impartially and objectively from an independent standpoint.
Reasons for Appointment of Outside Auditors
|Name||Independent officer||Reasons for appointment|
|Takashi Kimura||○||Takashi Kimura offers insights as an executive manager with many years of experience at financial institutions and other companies, and can be expected to apply that experience in the auditing of MGC.
Mr. Kimura has no vested interests in MGC, and is considered to be able to carry out his duties impartially and objectively from an independent standpoint.
|Yasuomi Matsuyama||○||Yasuomi Matsuyama offers insights as an executive manager with many years of experience at financial institutions and other companies, and can be expected to apply that experience in the auditing of MGC.
Mr. Matsuyama has no vested interests in MGC, and is considered to be able to carry out his duties impartially and objectively from an independent standpoint.
Compensation of Directors and Auditors
Compensation to Directors
Compensation to directors (excluding outside directors) consists of monthly compensation, which is the total of a basic compensation amount decided in accordance with each director’s position and duties, performance-based compensation reviewed every fiscal year, and a reserved retirement benefit. The reserved retirement benefit consists of a reserved sum that reflects each director’s performance based on internal rules and is to be paid in full upon retirement.
In addition to these forms of compensation, a bonus amount that is considered appropriate may be paid upon resolution of a general meeting of shareholders.
Additionally, in order to promote commonly held interests with shareholders and further motivate directors to work toward increasing medium- to long-term corporate value, guidelines have been established, and a minimum number of MGC shares to be held by directors has been stipulated. A set amount of compensation to directors is contributed to their share ownership plan for the acquisition of MGC shares.
Furthermore, compensation proposals are discussed by the Compensation and Nominating Committee, comprised of the chairman, president, and outside directors, prior to deliberations by the Board of Directors.
In addition , MGC has not established a stock option system for compensating directors and auditors.
Compensation to Corporate Auditors
Compensation to corporate auditors, who serve as members of the Audit & Supervisory Board, consists only of a basic compensation amount within a range stipulated by the general meeting of shareholders, which is determined through deliberations by the corporate auditors.
Compensation (For Fiscal 2017)
|Position||Total amount of compensation (millions of yen)||Total amount of compensation by type (millions of yen)||Number of people receiving compensation|
|Basic compensation||Reserved retirement benefits|
|Directors (excluding outside directors)||469||373||96||12|
|Auditors (excluding outside auditors)||51||51||-||4|
|Outside directors and auditors||52||52||-||4|
Note: In the above reserved retirement benefits for directors, provision has been made for the current fiscal year with respect to reserved retirement benefits for 12 directors other than outside directors.
Hostile Takeover Defense Plan
At present, MGC has not established a hostile takeover defense plan.