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Corporate Governance

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.

Fundamental Approach to Corporate Governance

Approach

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.

Basic Policies

  • (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

As a company with an Audit & Supervisory Board, MGC has, for the purpose of business execution, established an executive officer system that clearly separates management decision-making and supervisory functions from the business execution function. The Board of Directors decides basic management policies, matters relating to items stipulated by law and the Company’s Articles of Incorporation, and other important management matters. The Board of Directors oversees the execution of business, while executive officers are responsible for directly managing business affairs.
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.
Matters to be discussed by the Board of Directors are stipulated in the Regulations of the Board of Directors.These include matters relating to the General Meeting of Shareholders; matters relating to Directors, other executive officers and the Board of Directors; matters relating to calculations, etc.; matters relating to shares, etc.; matters related to the execution of important business; other matters as stipulated by laws, regulations, and the Articles of Incorporation; and matters deemed necessary by the Board of Directors. Under the supervision of the Board of Directors, the management team conducts business in line with the company’s management policies.
The Audit & Supervisory Board members also 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.

Basic Information about Corporate Governance System

Organizational Format Company with an Audit & Supervisory Board
  • Composition of the Board of Directors
    • Directors’ term of office
    • Chair of the Board of Directors
    • Establishment of a voluntary advisory committee
  • Twelve (of which four are outside directors)
  • One year
  • Chairman
  • Compensation and Nominating Committee: six (Chairman, President, four outside directors)
Composition of the Audit & Supervisory Board Four (of which two are outside Audit & Supervisory Board members)
Number of Independent Officers Six
  • Business Execution System
    • Composition of the Management Council
    • Composition of the Operations Council
  • Executive officer system
  • Eight (Chairman, President, six managing executive officers)
  • Twenty-two (All executive officers including the Chairman and President)
Introduction of a Hostile Takeover Defense Plan None

Corporate Governance and Risk Management Organization Chart

Assessing the Effectiveness of the Board of Directors

To assess the effectiveness of the Board of Directors in fiscal year 2020, we conducted a survey of the directors and Audit & Supervisory Board members regarding the Board of Directors as a meeting, as an organization, and from an overall perspective. The Board of Directors then held discussions based on the aggregate results and opinions that were received.
The final assessment was that lively discussions of important management and other issues, including matters related to CSR, are being held; that full reports on the status of execution of duties are being provided appropriately; and lastly, that effective supervision and sharing of information are taking place. While we recognize that the Board of Directors is performing at a certain level, we will continue to consider strategies to further improve the understanding of the outside directors and outside Audit & Supervisory Board members, as well as to encourage deeper discussion.
Going forward, we will also move ahead with any needed reviews, focusing on items where room for improvement has been identified.

Compensation and Nominating Committee

The Compensation and Nominating Committee functions both to determine executive officer compensation and to nominate and appoint key members of the management team. The majority of the committee is comprised of independent outside directors. The Board of Directors is responsible for appointing and dismissing key members of management, including the Chairman and President, and for nominating directors and Audit & Supervisory Board members. The Compensation and Nominating Committee is consulted prior to those matters being put before the Board of Directors for discussion, as is the case with decisions on policies regarding executive officer compensation and total annual amounts, and in determining allocation of those amounts.
Note that the appointment, dismissal and nomination of said officers are judged in light of certain selection criteria that include whether they have the appropriate internal and external work experience and knowledge for the position; whether they have the dignity and ethical values appropriate to their responsibilities; and whether they have violated any laws, the Articles of Incorporation, or company rules.

Training of Directors and Audit & Supervisory Board Members

MGC has newly-appointed directors and audit & supervisory board members 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, audit & supervisory board members, and other officers opportunities to attend external seminars covering various topics, including compliance, risk management, internal control, and legal issues, and provides them with relevant books and other materials.
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 by 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.

Information Sharing and Support Network for Audit & Supervisory Board Members

An employee not subject to instructions from directors is assigned to assist Audit & Supervisory Board members with their duties. In addition to providing practical support for conducting audits, the employee facilitates communication between the Audit & Supervisory Board members and coordinates their activities as the administrative staff of the Audit & Supervisory Board. Audit & Supervisory Board members regularly exchange views with directors, periodically and promptly receive reports on the status of business execution and other important matters from directors and office staff, request explanations whenever necessary, and express opinions. These members also inspect important documents related to the execution of business and request explanations from directors and the office staff. They can also make use of specialists who are independent from the Company, such as attorneys, for the purpose of making proper decisions related to auditing.
In addition, outside directors and Audit & Supervisory Board members are encouraged to share opinions and information regularly in an effort to promote cooperation between the outside directors and members of the Audit & Supervisory Board.

Introduction of Diverse Perspectives

MGC has developed a global business that ranges widely from basic chemicals to high-performance materials. Because our management decisions require a high degree of expertise, the Board of Directors as a whole strives to maintain a well-balanced diversity of knowledge, experience, and abilities, centered on those from within the Company who are deeply familiar with our business and management, with the addition of multiple independent directors who, representing the perspectives of shareholders and other stakeholders, provide advice and supervision.
The Company currently has 12 directors (of whom four are independent outside directors), which we believe to be generally appropriate in size and effectiveness.
In order to ensure the fair and objective oversight of management, particular attention is paid to the independence of outside officers (outside directors and outside Audit & Supervisory Board members), in accordance with criteria set by the Tokyo Stock Exchange regarding independence. MGC appoints only candidates who have no conflict of interest with general shareholders.
The Company nominates as independent all outside officers who satisfy the requirements for being an independent officer.

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Criteria Regarding Independence of Outside Officers

Candidates are deemed to qualify as an independent officer as long as none of the following apply:


  1. If any of the following applies to the candidate:
    • Has been a business execution manager*1 of the Group*2.
    • Is a major shareholder*3 of MGC or is or has been a business execution manager for a major shareholder company within the previous five years.
    • Is or has been a business execution manager of an important business partner*4 within the previous five years.
    • Has been dispatched from a company or organization that has established a relationship with the Group through the reciprocal appointment of outside officers.
    • Works for or has worked for an auditing firm within the previous five years that has conducted a statutory audit of MGC.
    • Provides or has provided consulting services other than statutory auditing to the Group within the previous three years, for which he or she has received high compensation.*5

  2. If any of the following applies to a close relation*6 of the candidate:
    • Is or has been an important business execution manager*7 of the Group within the previous five years.
    • Is a major shareholder of MGC or a business execution manager for a major shareholder company.
    • Is or has been a business execution manager within the previous five years of an important business partner.
    • Works for or has worked for an auditing firm within the previous five years that has conducted a statutory audit of MGC.
    • Provides or has provided consulting services other than statutory auditing to the Group within the previous three years, for which he or she has received high compensation.

  3. 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.

    • *1 Business execution manager: Either a director overseeing business execution, an executive officer, other officer involved in business execution, or an employee
    • *2 The Group: MGC or one of its subsidiaries
    • *3 Major shareholder of MGC: A shareholder currently holding, either directly or indirectly, 10% or more of total shares issued and outstanding
    • *4 Important business partner: A business partner that has made transactions, including buying and selling, amounting to 2% or more of consolidated net sales over the previous three consecutive years. Consolidated net sales pertain to the Group in the event the Group is the seller, or to the partner in the event the Group is the buyer.
    • *5 High compensation: 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
    • *6 Close relation: Either a spouse, first- or second-degree relative, or financial dependent
    • *7 Important business execution manager: Either a director overseeing business execution, an executive officer, or other officer involved in business execution

Reasons for Appointment of Outside Directors

Name Independent officer Reasons for appointment Attendance at Board of Directors meetings (FY 2020)
Tsugio Sato Yes Dr. Tsugio Sato has highly advanced expertise in wide fields of study in chemicals such as inorganic materials chemistry, and provides appropriate supervision and advice to MGC’s management. It is deemed that he would contribute to ensuring the validity and appropriateness of MGC’s decision making in the future.
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.
Board of Directors Attended 12 of 12 meetings (100%)
Haruko Hirose Yes Ms. Haruko Hirose has many years of experience overseas and insight as director at international organizations on a global scale, and it is deemed that she would provide appropriate supervision and advice to MGC’s management.
Although she has not been directly involved in corporate management, other than as Outside Director, she has served in important positions at a international organization. It is deemed that she would contribute to ensuring the validity and appropriateness of MGC’s decision making in the future.
Ms. Hirose has no vested interests in MGC, and is considered to be able to carry out her duties impartially and objectively from an independent standpoint.
Board of Directors Attended 9 of 9 meetings (100%)
Toru Suzuki Yes Mr. Toru Suzuki has many years of experience overseas and insight as a manager at a company operating on a global scale, and it is deemed that he would provide appropriate supervision and advice to MGC’s management.
It is deemed that he would contribute to ensuring the validity and appropriateness of MGC’s decision making in the future.
Mr. Suzuki has no vested interests in MGC, and is considered to be able to carry out his duties impartially and objectively from an independent standpoint.
Board of Directors Attended 9 of 9 meetings (100%)
Yasushi Manabe Yes Mr. Yasushi Manabe has many years of experience and insight as a manager at a company operating on a global scale, and it is deemed that he would provide appropriate supervision and advice to MGC’s management.
It is deemed that he would contribute to ensuring the validity and appropriateness of MGC’s decision making in the future.
Mr. Manabe has no vested interests in MGC, and is considered to be able to carry out his duties impartially and objectively from an independent standpoint.
Board of Directors
(Elected June 2021)

Reasons for Appointment of Outside Audit & Supervisory Board Members

Name Independent officer Reasons for appointment Attendance at Board of Directors meetings (FY 2020)
Takashi Kimura Yes Takashi Kimura offers insights as an executive manager with many years of experience in general management at financial institutions and other companies, and has considerable knowledge concerning finance and accounting, and we believe that he will be suitable as an outside auditor from the perspective of ensuring the lawfulness and appropriateness of the execution of duties by directors.
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.
Board of Directors Attended 12of 12 meetings (100%)
Audit & Supervisory Board Attended 14 of 14 meetings (100%)
Yasuomi Matsuyama Yes Yasuomi Matsuyama offers insights as an executive manager with many years of experience in general management at financial institutions and other companies, and has considerable knowledge concerning finance and accounting, and we believe that he will be suitable as an outside auditor from the perspective of ensuring the lawfulness and appropriateness of the execution of duties by directors.
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.
Board of Directors Attended 12 of 12 meetings (100%)
Audit & Supervisory Board Attended 14 of 13 meetings

Compensation of Directors and Audit & Supervisory Board Members

Policies and Methods for Determining Compensation to Directors

Compensation to directors of MGC (excluding outside directors) consists of annual compensation and restricted stock compensation.
Annual compensation consists of a fixed basic compensation based on the individual’s position and responsibilities, and performance-based compensation that takes into account various indicators of the Company’s performance. Compensation is divided into monthly installments and paid monthly, and a certain percentage is accumulated annually as a reserved retirement benefit to be paid at the time of retirement. This amount may be subject to reduction based on the individual’s performance and other factors. Performance-based compensation is intended to be an incentive for overall Company performance, and is determined using indicators such as ordinary income, based on actual results, level of achievement, and so on. In addition, given the nature of the Company’s business, in which each business reaches profitability through a variety of processes over many years — including research and development, manufacturing process development and market development — annual compensation consists primarily of basic compensation, with a general guideline of about 30% for performancebased compensation.
Restricted stock compensation is compensation paid to directors once each fiscal year in the form of grants of MGC stock; directors are granted a certain number of shares based on their positions and responsibilities. The purpose of restricting transfers of these shares and having recipients hold them for a certain period of time is to provide an incentive for sharing value with shareholders and for working toward sustained growth of corporate value.
In addition to these forms of compensation, an amount that is considered appropriate may be paid as a bonus upon resolution of the General Meeting of Shareholders.
Note that outside directors, whose position is independent of business execution, are paid only fixed basic compensation.
Annual officer compensation is determined by the Board of Directors upon comprehensive consideration of Company performance, common standards and employee salary trends, and so forth, and after consultation with the Compensation and Nominating Committee. In addition, allocation of individual compensation is entrusted to the President by the Board of Directors, based on the determination that the President is the most suitable person to evaluate each director while having a highlevel view of the Company as a whole. The President makes these decisions based on discussions regarding the allocation of compensation by the Compensation and Nominating Committee.
The above policies are decided upon by the Board of Directors after consultation with the Compensation and Nominating Committee, comprised of a majority of outside directors.

Compensation to Audit & Supervisory Board Members

Compensation to Audit & Supervisory Board members consists only of a fixed basic compensation amount within a range stipulated by the General Meeting of Shareholders, which is determined through deliberations by the Audit & Supervisory Board members.

Compensation (For Fiscal 2020)
Position Total Amount of Compensation
(millions of yen)
Total Amount of Compensation by Type (millions of yen) Number of People Receiving Compensation
Basic Performance Restricted Stock
Directors
( excluding outside directors)
444 294 120 29 11
Audit & Supervisory Board Members
(excluding outside Audit & Supervisory Board members)
53 53 - - 3
Outside Officers 70 70 - - 6
Total 567 418 120 29 20

Note: The amount of restricted stock compensation for directors indicated above is the amount reported as an expense relating to restricted stock compensation for the current fiscal year.

Hostile Takeover Defense Plan

At present, MGC has not established a hostile takeover defense plan.