Mitsubishi Corporation

Approaches to Corporate Governance
- MC's Corporate Governance System Supporting Sustainable Growth

Basic Policy on Corporate Governance

With the Three Corporate Principles for a corporate philosophy, MC strives to continuously increase corporate value through corporate activities rooted in the principles of fairness and integrity. MC believes that by helping to enrich society, both materially and spiritually, it will also meet the expectations of all its stakeholders. In order to achieve these goals, MC recognizes the continuous strengthening of corporate governance on an ongoing basis as a fundamental management policy since it is the foundation for ensuring sound, transparent, and efficient management.

Under this basic policy on corporate governance, MC transitioned to a Company with an Audit & Supervisory Committee upon approval at the 2024 Ordinary General Meeting of Shareholders held on June 21, 2024 to achieve a ) separation of oversight and execution in the management; b ) oversight of management based on sufficient deliberation by the Board of Directors; and c ) timely and decisive decision-making which has ability to respond to changes by delegating partial decision -making authority for the execution of important operations to President and CEO and other Executive Directors(herein referred to collectively as the "Executive Directors").

Under this corporate governance system, the Executive Directors, who have been designated by the Board of Directors, shall formulate original drafts of the management strategies and business plans, etc., and subsequently the Board of Directors shall deliberate and determine them. The Executive Directors shall periodically report on the progresses of these strategies and plans to the Board of Directors, and the Board of Directors shall monitor that progress to continuously increase corporate value.

MC shall establish internal rules and regulations for such matters as codes of conduct for officers and employees; Company-wide lateral management systems; and measures for prevention, correction, and improvement; and internal whistleblower systems. After informing all parties, MC shall rigorously reflect the rules and regulations in operations and realize its compliance system. MC shall also establish appropriate internal control systems, check the operating status of these systems on an annual basis, and endeavor to continuously improve and strengthen them.

MC has formulated Principles of Corporate Governance (hereinafter “Principles of Corporate Governance”) define MC’s basic corporate governance policies.

MC Principles of Corporate Governance

Corporate Governance Framework (as of June 21, 2024)

The Board of Directors

Based on its fiduciary responsibility and accountability to shareholders, the Board of Directors shall fulfill the roles and responsibilities listed below to promote MC’s sound and sustainable growth and continuous increase of corporate value, and to help enrich society, both materially and spiritually while also realizing transparent, fair, timely and decisive decision-making and highly effective oversight of the management:
to provide a broad management direction in line with MC’s business reality, taking into consideration the external environment surrounding MC’s businesses, trends, and global perspectives, etc.;

  • to oversee the development and operation of the business management and risk management systems the executives have established to support appropriate risk-taking; and,
  • to provide highly effective oversight of the executives by evaluating them from an independent and objective standpoint in light of the basic management policies formulated by the executives and approved by the Board of Directors, and by encouraging them to take necessary corrective actions.

Composition and Size of the Board of Directors & Appointment Policy and Process of the Directors

Size and Composition For the purpose of fulfilling the roles and responsibilities of the Board of Directors, the Board of Directors shall be of an appropriate size and composition to ensure diversity, and at least one-third of its members shall be Independent Directors who meet MC’s Standards for Independent Directors*.
Roles and Responsibilities In-house Directors
  • Chairman of the BoardChairman of the Board shall aim to ensure MC’s sound and sustainable growth and continuous increase of corporate value by enhancing deliberations and ensuring that the Board of Directors fulfills its roles and responsibilities. To this end, strive to maintain and develop corporate governance, and as Chairman of the Board of Directors, lead discussions at Board of Directors meetings in a neutral manner by appropriately eliciting the opinions of Outside Directors, while taking into account the actual situation the executives are confronting.
  • Executive DirectorsExecutive Directors shall carry out business operations in accordance with the basic management policies approved by the Board of Directors, report on the status of business execution to the Board of Directors, and aim to ensure MC’s sound and sustainable growth and continuous increase of corporate value by executing day-to-day business operations based on the deliberations of the Board of Directors.
Outside Directors With a practical, objective and professional perspective on corporate management, Outside Directors shall oversee the execution of management strategies proposed by the executives. Based on their own experience and insight gleaned from their networks, Outside Directors shall provide advice on broad direction in a medium- and long-term perspective as they participate in appropriate decision-making within the Board of Directors, with the aim of ensuring MC’s sound and sustainable growth and continuous increase of corporate value.
Appointment Policy Based on the roles and responsibilities of the Directors (excluding Directors who are Audit & Supervisory Committee Members), and in accordance with the following policy, overall character will be considered during the appointment process of the Directors (excluding Directors who are Audit & Supervisory Committee Members).
In-house Directors In addition to the Chairman of the Board of Directors and the President, who serves as the Chief Executive Officer in charge of business execution, In-house Directors (excluding Directors who are Audit & Supervisory Committee Members) are appointed from among the Executive Officers (Senior Executive Vice Presidents and Executive Vice Presidents) in charge of company-wide management.
Outside Directors
  1. Outside Directors (excluding Directors who are Audit & Supervisory Committee Members) are appointed from those who possess a practical perspective based on experience as a corporate executive and those who possess an objective and professional perspective with a deep insight on global dynamics and socio-economic trends.
  2. To enable Outside Directors (excluding Directors who are Audit & Supervisory Committee Members) to fulfill their appointed task, attention is given to maintain their independency as set forth in MC’s Standards for Independent Directors*; individuals not ensuring this independency will not be appointed as Outside Directors (excluding Directors who are Audit & Supervisory Committee Members).
  3. 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 appointed as an Outside Director (excluding Directors who are Audit & Supervisory Committee Members). MC shall appropriately cope with this potential issue by preserving a variety of viewpoints through the appointment of numerous Outside Directors (excluding Directors who are Audit & Supervisory Committee Members).
Appointment Process Based on the appointment policy above, the President and CEO shall prepare a proposal for the election of candidates for Directors (excluding Directors who are Audit & Supervisory Committee Members), which shall be deliberated by the Corporate Governance and Nomination Committee, and shall be submitted to the general meeting of shareholders after being resolved by the Board of Directors as a proposal for the election of Directors (excluding Directors who are Audit & Supervisory Committee Members).

Audit & Supervisory Committee

The Audit & Supervisory Committee, as a statutory independent body tasked with auditing the Directors’ performance of their duties with a mandate from shareholders, shall be responsible for establishing a high-quality corporate governance system through the appropriate performance of its duties and for playing a role in the monitoring function of MC in cooperation with the Board of Directors. Through these roles and responsibilities, the Audit & Supervisory Committee shall support the maintenance and development of MC’s corporate governance, consider the interests of its various stakeholders, and strive to work with them to achieve MC’s sound and sustainable growth and continuous enhancement of corporate value and social credibility.

Size and Composition of the Audit & Supervisory Committee, and Appointment Policy and Process of Audit & Supervisory Committee Members

Size and Composition For the purpose of fulfill the roles and responsibilities of the Audit & Supervisory Committee, the Audit & Supervisory Committee shall be of an appropriate size and composition to ensure diversity, and a majority of the members shall be Independent Audit & Supervisory Committee members who meet MC’s Standards for Independent Directors*.
Roles and Responsibilities Full-time Audit & Supervisory Committee Members Based on their company-wide management experience within MC and their knowledge and experience in finance, accounting, legal affairs, risk management, etc., Full-time Audit & Supervisory Committee Members shall (a) together with the Chairman of the Board, fulfill the roles and functions of the Board of Directors as non-executive In-house Directors. They are also (b) responsible for the timely and accurate assessment of the status of management execution, as well as for creating an environment for effective auditing and oversight by the Audit & Supervisory Committee, and cooperating with other Audit & Supervisory Committee members to conduct audits and provide oversight from an objective and broad perspective. They shall also directly deliver unfettered opinions to the executives with conviction when necessary, with the aim of ensuring MC’s sound and sustainable growth and enhancement of corporate value and social credibility.
Outside Audit & Supervisory Committee Members With a practical, objective and professional perspective on corporate management, Outside Audit & Supervisory Committee Members shall oversee the execution of management strategies proposed by the executives. Based on their own experience and insight gleaned from their networks, Outside Audit & Supervisory Committee Members shall provide advice on broad direction in a medium- and long-term perspective as they participate in appropriate decision-making within the Board of Directors, with the aim of ensuring MC’s sound and sustainable growth and continuous increase of corporate value.
In addition to the roles and responsibilities of Outside Directors described above, Outside Audit & Supervisory Committee Members shall audit and oversee MC from a neutral and objective standpoint based on their diverse and abundant knowledge and experience in corporate management as well as their own expertise, aiming for MC’s sound and sustainable growth and continuous enhancement of corporate value and social credibility.
Appointment Policy Based on the roles and responsibilities, and in accordance with the following policy, overall character will be considered during the appointment process of the Audit & Supervisory Committee Members.
Full-time Audit & Supervisory Committee Members Appointed from among persons with knowledge and experience in company-wide management, finance, accounting, legal affairs, risk management, and other areas.
Outside Audit & Supervisory Committee Members
  1. Appointed from among persons with diverse and abundant knowledge and experience in corporate management and expertise that contribute to auditing and oversight.
  2. To enable Outside Audit & Supervisory Committee Members to fulfill their appointed task, attention is given to maintain their independency as set forth in MC’s Standards for Independent Directors*; individuals not ensuring this independency will not be appointed as Outside Audit & Supervisory Committee Members.
  3. 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 appointed as an Outside Audit & Supervisory Committee Members. MC shall appropriately cope with this potential issue by preserving a variety
    Outside Audit & Supervisory Committee Members
    Full-time Audit & Supervisory Committee Members
    Outside Audit & Supervisory Committee Members
    Appointment
    Policy
    of viewpoints through the appointment of numerous Outside Audit & Supervisory Committee Members.
Appointment Process The President and CEO, in consultation with Full-time Audit & Supervisory Committee Members, based on the appointment policy above, shall prepare a proposal for the appointment of candidates for Directors who are Audit & Supervisory Committee Members. After deliberation by the Corporate Governance and Nomination Committee, and with the consent of the Audit & Supervisory Committee, a proposal for the election of candidates for Directors who are Audit & Supervisory Committee Members shall be resolved by the Board of Directors and submitted to the general meeting of shareholders.

(Note) MC’s Standards for Independent Directors

To make a judgment of independence, MC checks if the person concerned meets the conditions for Independence Criteria prescribed by the Tokyo Stock Exchange, Inc., and whether the person concerned is currently any of the following items (a) to (g) and whether they have been at any time in the past 3 fiscal years. If a person is still judged by MC to be effectively independent despite one or more of the below items (a) to (g) applying, MC will explain and disclose the reason for their appointment as an Independent Director.

(a) 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 [*1] of such shareholder.
(b) A Member of Business Personnel of a creditor of MC exceeding the threshold set by Mitsubishi Corporation [*2].
(c) A Member of Business Personnel of a supplier or a customer of MC exceeding the threshold set by MC [*3].
(d) 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’ remuneration, where the amount exceeds ¥10 million per fiscal year.
(e) A representative or partner of MC’s Independent auditor.
(f) A person belonging to an organization that has received donations exceeding a certain amount [*4] from MC.
(g) A person who has been served as an Outside Director and/or an Outside Audit & Supervisory Board Member of MC for more than 8 years.
  • *1 A “Member of Business Personnel” in this MC’s Standards for Independent Directors refers to a managing director, corporate officer, Executive Officer, or other employee of a company.
  • *2 “Creditors exceeding the threshold set by MC” refer to creditors to whom MC owes an amount exceeding 2% of MC’s consolidated total assets.
  • *3 “Suppliers 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 “Donations exceeding a certain amount” refer to donations of more than ¥20 million per fiscal year.

Main Activities of Audit & Supervisory Board Members (Audit & Supervisory Board)* Actual Activities in FY2023

MC transitioned from a Company with an Audit & Supervisory Board to a Company with an Audit & Supervisory Committee, following approval at MC’s 2024 Ordinary General Meeting of Shareholders held in June 21, 2024. The following items 1. to 5. refer to the contents and activities of the Company with an Audit & Supervisory Board prior to the transition.

  1. 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, Senior Executive Vice President, Corporate Functional Officers, Business Group Heads/CEOs, Business Division COOs, General Managers of Administrative Departments, General Manager of Auditing Department, General Manager of the Corporate Strategy & Planning Department and General Managers of the Corporate Staff Ar.

  2. 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.

  3. 3. Onsite Audits and Observations

    In the fiscal year ended March 31, 2024, the Audit & Supervisory Board Members met with the CEOs and executive
    officers of 12 MC Group companies in three locations overseas and 16 domestic MC Group companies, as well as the regional chiefs of 7 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.

  4. 4. Reinforcement of MC 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 34 major MC 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 corporate governance of MC Group through regular monitoring.

  5. 5. Enhancing the Effectiveness of the Audit & Supervisory Board and Its Members

    To increase the effectiveness of the audits performed by the Audit & Supervisory Board Members, in the year ended March 31, 2024, 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 status, focusing mainly on key audit areas. In addition, the Audit & Supervisory Board carried out an evaluation of its effectiveness based on a survey of its members and hearings about the survey results. The Audit & Supervisory Board reviewed its auditing methods and deliberated matters to be followed up in the audit activities for the coming fiscal year. The results of the evaluation confirmed that the audits performed by the Audit & Supervisory Board functioned adequately, that its effectiveness is appropriately ensured, and that the Audit & Supervisory Board will continue to consider methods to further enhance its effectiveness (e.g. sharing the Audit & Supervisory Board’s opinions with the Board of Directors, or exchanging opinions with Outside Directors).

Skills Matrix of Directors

Directors are appointed in light of their experience, insight, expertise and overall character. At the Board of Directors, these individuals deliberate based on variety of viewpoints to realize transparent, fair, timely and decisive decision-making and highly efficient oversight of the management. The areas of experience, insight 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 has experience, insight or expertise.

(notes)
  • The matrix does not represent all the experience, insight or expertise of the Directors.
  • The applicability of each skill area in the matrix is judged based mainly on the individuals’ experience in former positions, their current positions and their formal qualifications.
  • The matrix shows the Directors as of June 21, 2024

The Board of Directors' Advisory Bodies

Corporate Governance and Nomination Committee

For the purpose of strengthening corporate governance on an ongoing basis, enhancing the objectivity and transparency of the nomination process undertaken by the Board of Directors, and ensuring the fairness of this process, the Corporate Governance and Nomination Committee shall, in response to consultation by the Board of Directors, deliberate and monitor the matters, based on the opinions and advice of Independent Directors, and propose opinions to the Board of Directors.

＜Main Discussion themes＞
  • Basic framework and fundamental policy of corporate governance: Corporate governance system, size and composition of the Board of Directors, matters deliberated by the Board of Directors, evaluation of the effectiveness of the Board of Directors, etc.;
  • Matters about the appointment and dismissal of the Board of Directors: The policy of the appointment and dismissal of Directors, a proposal for the appointment and dismissal of Directors, an appointment and dismissal process of Directors;
  • Matters about the nomination etc.: Succession plan of the President and CEO, requirements for the roles associated with the position of the President and CEO, fundamental policy for the appointment and dismissal of a President and CEO, reorganizations related to company-wide strategy and appointment of the Executive Officers related to corporate functions; and,
  • Other matters deemed by the chair of the Corporate Governance and Nomination Committee to require deliberation.
＜Composition of Committee (*The Committee Chair) (As of June 21, 2024)＞
Independent members (7):
  • Shunichi Miyanaga (Independent Director)
  • Sakie Akiyama (Independent Director)
  • Mari Sagiya (Independent Director)
  • Mari Kogiso (Independent Director)
  • Tsuneyoshi Tatsuoka (Independent & Audit & Supervisory Committee Members)
  • Rieko Sato (Independent & Audit & Supervisory Committee Members)
  • Takeshi Nakao (Independent & Audit & Supervisory Committee Members)
In-house members (3):
  • Takehiko Kakiuchi* (Chairman of the Board)
  • Katsuya Nakanishi (Director, President & Chief Executive Officer)
  • Mitsumasa Icho (Full-time Audit & Supervisory Committee Member)

Compensation Committee

For the purpose of establishing a system that reflects opinions of each stakeholder in our management and, to this end, enables the Board of Directors to incorporate international and external diverse perspectives into its deliberations, the International Advisory Committee shall provide recommendations and advice to the Board of Directors from an international standpoint.

＜Main Discussion themes＞
  1. Matters deliberated by the Compensation Committee:
    1. Fundamental policy for the remuneration for the Directors and Executive Officers: The policy for setting the Directors’ and Executive Officers’ remuneration; the appropriateness of remuneration levels and composition; the operation status of remuneration system; and
    2. Other matters deemed by the chair of the Compensation Committee to require deliberation.
  2. Matters deliberated and determined by the Compensation Committee:
    1. Evaluation of sustainability factors tied into Executive Officers’ remuneration; and
    2. Evaluation of the President and CEO’s performance*.

*In addition to four members of the Compensation Committee, all Outside Directors (including Outside Audit and Supervisory Committee Members) participate in deliberations and decisions.

＜Composition of Committee (*The Committee Chair) (As of June 21, 2024)＞
Independent members (3):
  • Sakie Akiyama (Independent Director)
  • Mari Kogiso (Independent Director)
  • Tsuneyoshi Tatsuoka (Independent & Audit & Supervisory Committee Members)
In-house members (1):
  • Takehiko Kakiuchi* (Chairman of the Board)

International Advisory Committee

For the purpose of establishing a system that reflects the opinions of each stakeholder in our management and, to this end, enables the Board of Directors to incorporate international and external diverse perspectives into its deliberations, the International Advisory Committee shall provide recommendations and advice to the Board of Directors from an international standpoint.

＜Main discussion themes＞FY2023
  1. The Year of Disruptive Choices – Global Elections in 2024
  2. The sudden rise of AI – Risks and Rewards
  3. Soft Power in the Global South – Leveraging Influence and Prosperity
＜Composition of Committee (*The Committee Chair) (As of June 21, 2024)＞
Overseas members (6) (Nationality):
  • Mr. Jaime Augusto Zobel de Ayala / Chairman, Ayala Corporation (The Philippines)
  • Professor Joseph S. Nye / Harvard University Distinguished Service Professor (United States of America)
  • Mr. Niall FitzGerald, KBE / Former 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 & Chief Executive Officer)
  • Kotaro Tsukamoto (Director, Senior Executive Vice President)
  • Tsuneyoshi Tatsuoka (Independent Director)
Corporate Governance Report (Translation of report filed with the Financial Instruments Exchange) (PDF:1.8MB)
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