Approaches to Corporate Governance
- MC's Corporate Governance System Supporting Sustainable Growth
Basic Policy
MC strives to continuously raise corporate value through corporate activities rooted in the principles of fairness and integrity with the Three Corporate Principles for a corporate philosophy. MC believes that by helping to enrich society, both materially and spiritually, it will also meet the expectations of its shareholders, customers, and all other stakeholders.
In order to achieve these goals, MC recognizes strengthening corporate governance on an ongoing basis as an important subject concerning management since it is the foundation for ensuring sound, transparent, and efficient management. Therefore, MC is working to put in place a corporate governance system that is even more effective based on the Audit & Supervisory Board System. This includes strengthening management supervision through such measures as (i) appointing Independent Members of the Board who satisfy MC's Selection Criteria for Outside Directors and Outside Audit & Supervisory Board Members, and (ii) establishing advisory bodies to the Board of Directors where the majority are Independent Members of the Board and other experts from outside MC. At the same time, this also includes implementation of MC's prompt and efficient decision-making and business execution through enhancing the monitoring function of the Board of Directors.
Corporate Governance Framework (as of April 1, 2024)
The Board of Directors and the Board of Directors' Advisory Bodies
The Board of Directors
The Board of Directors is responsible for making decisions concerning important management issues and overseeing business execution. In-house Directors utilize their rich experience of working within MC, and Independent Directors utilize their practical, objective, and professional perspectives to ensure appropriate decision-making and management oversight.
Composition and Size of the Board of Directors and the Policy and Process for Appointing Nominated Directors
| Composition and Size | The composition and size of the Board of Directors is appropriately determined to help it maintain transparent, fair, timely and decisive decision-making, and carry out effective oversight, with one-third or more being made up of Independent Directors. |
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| Appointment Policy | To ensure decision-making and management oversight are appropriate for MC, which is involved in diverse businesses and industries in a wide range of fields, and from the perspective of ensuring diverse standpoints, several Directors are appointed from both within and outside MC with the depth of experience and high level of knowledge and expertise needed for fulfilling their duties. |
| In-house Directors In addition to the Chairman of the Board and the president and CEO, MC's in-house Directors are elected from Executive Officers(Senior Executive Vice Presidents & Executive Vice Presidents) responsible for companywide management so that they can fully leverage their abundant business experience to ensure appropriate decision making and robust management supervision by the Board of Directors. | |
| Independent Directors Independent Directors are appointed from those who possess a practical perspective of highly experienced company officers and those who possess an objective and professional perspective with a deep insight on global dynamics and socio-economic trends. These individuals thus contribute to appropriate decision making and robust management supervision by the Board of Directors as they bring diverse perspectives into its deliberations. | |
| Appointment Process | In line with the policies described above, the President and CEO proposes a list of nominated Directors, which is then deliberated at the Governance, Nomination and Compensation Committee and resolved by the Board of Directors before being presented at the Ordinary General Meeting of Shareholders. |
Skills Matrix of Directors and Audit & Supervisory Board Members
Directors and Audit & Supervisory Board Members are selected in light of their experience, knowledge, expertise, and overall character. At the Board of Directors, these individuals deliberate based on diverse perspectives to ensure appropriate decision making and robust management supervision. The areas of experience, knowledge, and expertise judged to be important for MC's Board of Directors and the reasons for their adoption are shown below. The matrix on the next page shows the areas in which each Director and Audit & Supervisory Board Member has experience, knowledge, or expertise.
- The table below does not represent all the experience, knowledge or expertise of the Director or Audit & Supervisory Board Members.
- The applicability of each skill area in the table below is judged based mainly on the individuals' experience in former positions, their current positions and their formal qualifications.
The Board of Directors' Advisory Bodies
Governance, Nomination and Compensation Committee
The majority of the Committee's members are Independent Directors. It deliberates on matters related to governance, nomination, and compensation.
<Main Discussion Themes>
- The corporate governance system (roles, functions and selection methods of the Directors and Audit & Supervisory Board Members, etc.)
- Evaluation of the effectiveness of the Board of Directors
- Successor requirements and basic policies concerning the appointment and dismissal of the President and CEO
- Review of the remuneration package including the policy for setting remuneration, appropriateness of remuneration levels and composition, and linkage to sustainability factors
<Composition of Committee (*Committee Chairman)> (as of June 23,2023)
Independent members (4):
- Tsuneyoshi Tatsuoka, Independent Director
- Shunichi Miyanaga, Independent Director
- Sakie Akiyama, Independent Director
- Mari Sagiya, Independent Director
In-house members (3):
- Takehiko Kakiuchi,* Chairman of the Board
- Katsuya Nakanishi, Director, President & CEO
- Mitsumasa Icho, Full-time Audit & Supervisory Board Member
President's Performance Evaluation Committee
The President's Performance Evaluation Committee has been established as a subcommittee to the Governance, Nomination and Compensation Committee, comprising the same Chairman and Independent Directors as the parent committee to evaluate the President's performance. The President is not a member of the committee.
International Advisory Committee
Comprises overseas experts from various backgrounds, including industry, government, and academia, and provides recommendations and advice from an international perspective through exchange of opinions and discussions on the external environment with a focus on world affairs.
<Main discussion themes> FY2023
- The Year of Disruptive Choices – Global Elections in 2024
- The sudden rise of AI – Risks and Rewards
- Soft Power in the Global South – Leveraging Influence and Prosperity
<Composition of Committee (*Committee Chairman)> (as of April 1, 2024)
Overseas members (6):
- Mr. Jaime Augusto Zobel de Ayala, Chairman, Ayala Corporation (The Philippines)
- Professor Joseph S. Nye, Harvard University Distinguished Service Professor (U.S.A.)
- Mr. Niall FitzGerald, KBE, Former CEO & Chairman, Unilever (Ireland)
- Mr. Natarajan Chandrasekaran, Chairman, Tata Sons (India)
- Sir Rod Eddington, Former CEO, British Airways (Australia)
- Ambassador Bilahari Kausikan, Former Permanent Secretary, Ministry of Foreign Affairs Singapore (Singapore)
Japanese members (4):
- Takehiko Kakiuchi,* Chairman of the Board
- Katsuya Nakanishi, Director, President & CEO
- Norikazu Tanaka, Director
- Tsuneyoshi Tatsuoka, Independent Director
Secretary General: Baden Firth
Audit & Supervisory Board
The Audit & Supervisory Board comprises all of the Audit & Supervisory Board Members responsible for auditing the decision-making processes and management performances of Directors in compliance with the Companies Act and other laws / regulations as well as MC's Articles of Incorporation and internal rules / regulations. Full-time Audit & Supervisory Board Members and Independent Audit & Supervisory Board Members ensure the soundness of the management by executing audits with abundant working experience at the Company, and with various experiences in their particular field as well as a neutral and objective perspective, respectively. In addition to resolutions of matters required by law and other important issues, the Audit & Supervisory Board strives to enhance information-sharing among the Members through briefings on key matters and reporting status on the auditing activities of each of the Members.
Composition and Size of the Audit & Supervisory Board and the Policy and Process for Appointing Nominated Audit & Supervisory Board Members
| Composition and Size | In principle, the total number of Audit & Supervisory Board Members is 5, with more than half their number being made up of Independent Audit & Supervisory Board Members. |
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| Appointment Policy | To ensure MC's sound business development and improve its social credibility through audits, several Audit & Supervisory Board Members are appointed from within and Independent MC with the depth of experience and high level of expertise needed for conducting audits. |
| Full-Time Audit & Supervisory Board Members Full-Time Audit & Supervisory Board Members are appointed from those with knowledge and experience in corporate management, finance, accounting, risk management, or other areas. These individuals are expected to carry out audits by employing their abundant business experience at MC, with the aim of securing the soundness of management. | |
| Independent Audit & Supervisory Board Members Independent Audit & Supervisory Board Members are appointed from those with rich knowledge and experience across various fields. These individuals are expected to carry out audits by exercising a neutral and objective perspective, with the aim of securing the soundness of management. | |
| Appointment Process | After consulting with the Full-Time Audit & Supervisory Board Members, the President & CEO creates a proposal for nominated Audit & Supervisory Board Members, which is then deliberated by the Governance, Nomination and Compensation Committee and approved by the Audit & Supervisory Board before being resolved by the Board of Directors and presented at the Ordinary General Meeting of Shareholders. |
Main Activities of Audit & Supervisory Board Members (Audit & Supervisory Board)
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1. Dialogue with Executive Officers
Opportunities are created for all Audit & Supervisory Board Members, including the Outside Audit & Supervisory Board Members, to engage in dialogues with the Chairman of the Board, President and CEO, Corporate Functional Officers, Business Group Heads/CEOs, Business Division COOs, General Managers of Administrative Departments, General Manager of Auditing Departments, General Manager of the Corporate Strategy & Planning Department and General Managers of the Corporate Staff Section.
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2. Attendance at Important Meetings
Besides the Audit & Supervisory Board, Full-time Audit & Supervisory Board Members attend meetings of major internal management bodies—including the Board of Directors; Governance, Nomination and Compensation Committee; Executive Committee; and Business Strategy Committee—and provide opinions as necessary. Besides the Audit & Supervisory Board, the Outside Audit & Supervisory Board Members attend meetings of the Board of Directors after being briefed on discussions in the Executive Committee and lower conference bodies, and provide opinions as necessary.
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3. Onsite Audits and Observations
In light of the relaxation of restrictions on overseas travel, the Audit & Supervisory Board resumed overseas onsite audits and observations, which they worked to enhance while striving to prevent the spread of COVID-19. In the fiscal year ended March 31, 2023, the Audit & Supervisory Board Members met with the CEOs and executive officers of 24 MC Group companies in seven locations overseas and 19 domestic MC Group companies, as well as the regional chiefs of 10 overseas and domestic offices. The Audit & Supervisory Board Members reported on the results of their onsite audits to the Chairman of the Board, the President and CEO, and relevant executive officers.
- Onsite audit of MC Data Plus, Inc.
- Onsite audit of Mitsubishi Company (Thailand) Ltd. / Thai-MC Company Limited
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4. Reinforcement of Group Corporate Governance
In addition to dialogues with the CEOs and other executive officers of the MC Group companies, opportunities are arranged for the exchange of information every quarter with the Audit & Supervisory Board Members of 37 major Group companies in Japan, and Audit & Supervisory Board Members of the MC Group companies also convene subcommittees to provide opportunities to share information and exchange opinions. MC also provides assistance in training for those who will be assigned to the MC Group companies as full-time Audit & Supervisory Board Members. We will continue working to strengthen the Group corporate governance through regular monitoring.
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5. Enhancing the Effectiveness of the Audit & Supervisory Board and Its Members
To increase the effectiveness of the audits performed by Audit & Supervisory Board Members, in the year ended March 31, 2023, continuing initiatives implemented in the previous fiscal year, we further enhanced the reviews of the activities of the Audit & Supervisory Board. Specifically, as in previous years, the Audit & Supervisory Board held mid-year and year-end reviews of audit progress, focusing mainly on key audit areas. In addition, the Audit & Supervisory Board carried out an evaluation of its effectiveness, mainly through a survey of its members and hearings about the survey results. The Audit & Supervisory Board discussed the findings of this evaluation in order to review its auditing methods and reflect the results in the audit plan for the coming fiscal year. The evaluation found that the audits performed by the Audit & Supervisory Board functioned adequately, that ongoing efforts are being made to enhance the Audit & Supervisory Board’s effectiveness, and that it will continue to bolster its effectiveness going forward by working to enhance operations in such areas as efficiently setting up dialogues.
Selection Criteria for Outside Directors and Outside Audit & Supervisory Board Members
To make the function of Outside Directors and Outside Audit & Supervisory Board Members stronger and more transparent, MC has set forth Selection Criteria for Outside Directors and Outside Audit & Supervisory Board Members as follows, after deliberation by the Governance, Nomination and Compensation Committee, which is composed with Independent Directors in the majority.
<Selection Criteria for Outside Directors>
- Outside Directors are elected from among those individuals who have an eye for practicality founded on a wealth of experience as corporate Executive Officers, as well as an objective and specialist viewpoint based on extensive insight regarding global conditions and social and economic trends. Through their diverse perspectives, Outside Directors help ensure levels of decision-making and management oversight appropriate to the Board of Directors.
- To enable Outside Directors to fulfill their appointed task, attention is given to maintain their independency*; individuals not ensuring this independency in effect will not be selected to serve as Outside Directors.
- MC’s operations span a broad range of business domains; hence there may be cases of conflict of interest stemming from business relationships with firms home to a corporate Executive Officer appointed as Outside Directors. MC appropriately copes with this potential issue through the procedural exclusion of the director in question from matters related to the conflict of interest, and by preserving a variety of viewpoints through the selection of numerous Outside Directors.
<Selection Criteria for Outside Audit & Supervisory Board Members>
- Outside Audit & Supervisory Board Members are selected from among individuals who possess a wealth of knowledge and experience across various fields that is helpful in performing audits. Neutral and objective auditing, in turn, will ensure sound management.
- To enable Outside Audit & Supervisory Board Members to fulfill their appointed task, attention is given to maintain their independency*; individuals not ensuring this independency will not be selected to serve as Outside Audit & Supervisory Board Members.
(Note) Independency for the purpose of Selection Criteria for Outside Directors and Outside Audit & Supervisory Board Members
To make a judgment of independence, MC checks if the person concerned meets the conditions for Independent Directors and Independent Audit & Supervisory Board Members as specified by the Tokyo Stock Exchange, Inc., and whether the person concerned is currently any of the following items (1) to (7) and whether they have been at any time in the past 3 fiscal years.
| (1) |
A major shareholder of MC (a person or entity directly or indirectly holding 10% or more of the voting rights), or a member of business personnel of such shareholder (*1).
*1A member of business personnel refers to a managing director, corporate officer, Executive Officer, or other employee of a company (Hereinafter the same). |
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| (2) |
A member of business personnel of a creditor of MC exceeding the threshold set by MC (*2).
*2Creditors exceeding the threshold set by MC refer to creditors to whom MC owes an amount exceeding 2% of MC's consolidated total assets. |
| (3) |
A member of business personnel of a supplier or a customer of MC exceeding the threshold set by MC (*3).
*3Suppliers or customers exceeding the threshold set by MC refer to suppliers or customers whose transaction amount with MC exceed 2% of MC's consolidated revenues. |
| (4) | A provider of professional services, such as a consultant, lawyer, or certified public accountant, receiving cash or other financial benefits from MC, other than Directors' or Audit & Supervisory Board Members' remuneration, where the amount exceeds ¥10 million per fiscal year. |
| (5) | A representative or partner of MC's Independent auditor. |
| (6) |
A person belonging to an organization that has received donations exceeding a certain amount (*4) from MC.
*4Donations exceeding a certain amount refer to donations of more than ¥20 million per fiscal year. |
| (7) | A person who has been appointed as an Outside Director or Outside Audit & Supervisory Board Member of MC for more than 8 years. |
If a person is still judged by Mitsubishi Corporation to be effectively Independent despite one or more of the above items (1) to (7) applying, MC will explain and disclose the reason at the time of their appointment as an Independent Director or Independent Audit & Supervisory Board Members.
