Basic Views and Policies on Corporate Governance of JSR
1. Basic policy
- (1)It is the JSR Group's goal to make steady progress in realizing its corporate mission (Materials Innovation: We create value through materials to enrich society, people and the environment). This shall be done through efficient and transparent business management, by sustaining sound and healthy business practices. The Group will also continuously strive to create new corporate values with the hope of becoming an attractive corporation that can earn the trust of and satisfy the interests of all our stakeholders.
- (2)JSR therefore has been and will continue focusing on the enhancement of corporate governance as an important management challenge.
2. Corporate governance structure
- (1)As a company with audit & supervisory board, JSR principally monitors and oversees the execution of duties by directors and the management through its Board of Directors and audit & supervisory board members.
- (2)JSR has continuously strengthened the function of management supervision, improved efficiency in decision making and execution of business duties, and enhanced the transparency and soundness of business management through the introduction of an officer system and the appointment of outside directors and audit & supervisory board members, who are independent from JSR and have extensive business experience and a high level of expertise.
- (3)The Board of Directors established JSR's corporate mission and makes important decisions including those of JSR's business strategies.
- (4)The Board of Directors developed an environment where management can take appropriate risks and demonstrate entrepreneurship through the introduction of a performance-based director remuneration framework.
- (5)The Board of Directors supervises directors and management through the assessment of business performance and appointment of directors.
The current Board of Directors consists of nine (9) directors, four (4) of whom are independent outside directors with vast experience and extensive expertise in management of corporations and businesses. In the future, JSR will elect 1/3 (one third) or more independent outside directors with similar expertise in order to increase corporate value and oversee business management. Seiji Takahashi, who is a Director and Managing Officer, serves as the board’s chairperson.
- (7)The current Audit & Supervisory Board consists of three (3) audit & supervisory board members, two (2) of whom are independent outside audit & supervisory board members with extensive and sophisticated expertise (one is a lawyer and the other is a certified public accountant). In the future, JSR will elect two independent outside audit & supervisory board members with vast experience and extensive and sophisticated expertise in such fields as law, accounting, and etc., to effectively audit the execution of duties by directors and the management.
- (8)JSR established the Remuneration Advisory Committee of which majority members are independent outside directors and the chair of which is Tadayuki Seki, who is an independent outside director in order to ensure the objectivity and transparency of its directors' remuneration framework. The committee deliberates on matters such as establishment of the remuneration policies, designing the remuneration framework, setting performance targets, reviewing rationale of incentive remunerations, appropriateness of the level and composition of the remunerations, and determination of the amount of remuneration of each position based on the remuneration framework and others, and makes recommendations to the Board of Directors.
- (9)JSR set basic policies on remuneration of directors as follows: the remuneration scheme should increase corporate value over the medium and long-term, attract diverse and superior personnel, be linked to short-term, medium-term and long-term business performance, have management and shareholders share profits, while maintaining the transparency and accountability, to achieve accomplishment of the management strategies and business strategies of JSR. Remuneration for directors consists of a fixed basic remuneration, an annual bonus linked to the attainment level of business performance in each fiscal year, a performance-linked stock remuneration to be granted after the applicable period (“Performance Share Units”) for the purpose of steadily implementing the medium-term management plan and business structural reforms which is planned to end in FY2024, and restricted stock shares (non-monetary remuneration) as remuneration designed to facilitate earlier sharing of corporate values between directors and the shareholders of JSR. In light of their roles, remuneration for outside directors and audit and supervisory board members consists of basic remuneration only.
JSR established the Nomination Advisory Committee of which majority members are independent outside directors and the chair of which is Tadayuki Seki, who is an independent outside director to ensure the transparency of the policy and procedures of nominating candidates for directors. The committee deliberates criteria for the size(number of people) and diversity in terms of breadth of knowledge, experience, capability, gender, international consciousness, work history, age, and other factors necessary for the Board of Directors as well as criteria and procedures for nominating and/or identifying candidates for future appointment as the CEO and President, directors, officers with directorship status (including senior officers), and audit & supervisory board members, and submits its findings to the Board of Directors. In order to ensure transparency of the deliberation, the committee takes such necessary measures as discussion solely among outside independent directors for the agenda relating to appointment/reappointment or dismissal of the CEO and President. The committee, through its active involvement in the selection process, systematically develops and selects candidates for the successor to the CEO and President in an objective and transparent manner by providing the pool of candidates with necessary training and coaching.
3. Relationship with stakeholders
- (1)JSR established "Responsibility to Our Stakeholders" (responsibility to customers, business partners, employees, society, and shareholders) as one of the important pillars of its management policies in order to express its commitment to its stakeholders.
- (2)JSR appropriately responded to issues related to sustainability, such as social and environmental issues and also promoted measures to secure diversity including those for encouraging greater participation of female employees.
For details of JSR's Sustainability report, please visit the following site:https://www.jsr.co.jp/jsr_e/sustainability/index.shtml
- (3)To fulfill its commitment to its stakeholders as stated in its "Responsibility to Our Stakeholders", the JSR Group established "the JSR Group Principles of Corporate Ethics" as a code of conduct for its directors and employees and endeavored to ensure the code is thoroughly communicated to, and understood and observed by all directors and employees.
For details of the JSR Group Principles of Corporate Ethics, please visit the following site:
4. Securing the rights and equal and equitable treatment of shareholders
JSR has continued to develop an environment where shareholders can appropriately exercise their voting rights at the ordinary general meeting of shareholders.
JSR will continue to implement the following measures: holding an ordinary general meeting of shareholders earlier than other companies (in the middle of June each year); disclosing the contents of the notice of convocation of an ordinary general meeting of shareholders early via internet (the start of measures for electronic provision) prior to the date of dispatching such materials; introducing an electronic voting platform via the Internet, etc.; participating in the electronic voting platform for institutional investors; enhancing contents of the convocation notice; and translating the convocation notice into English, etc.
- (2)JSR will explain its basic idea on its capital policies to shareholders. Especially in the case of those policies that may undermine the interests of existing shareholders, such as introducing takeover defense measures, MBO, and increase in capital stock, etc., JSR is determined to sufficiently examine their necessity and rationality and to take appropriate procedures to ensure sufficient explanation to shareholders.
- (3)JSR holds listed shares as cross-shareholdings only after comprehensively reviewing the rationality of holding such shares in the lights of business management strategies and economics of such shareholdings while it has been reducing cross-shareholdings when holding such shares has become irrational. The Board of Directors periodically reviews the status and the policies for holding individual cross-shareholdings by taking such factors into consideration as the purpose of holding, potential risk and expected return, and cost of capital required for holding such individual shares. When exercising voting rights of cross-shareholdings, JSR comprehensively determines to vote for or against their proposals after reviewing whether or not their corporate governance system and proposals will contribute to the improvement of their corporate value over the medium and long-term.
5. Capital policy
- (1)While prioritizing growth investment to continuously create corporate value, JSR has been aiming at providing appropriate returns to shareholders, including combination of dividends and treasury stock acquisitions, by taking into account its business performance and medium and long-term capital requirements.
JSR has been managing its businesses bearing the cost of capital in mind by using the cost of capital as reference for decisions for investment and evaluation of the businesses and by introducing ROI target as a reference to determine performance-linked remuneration to the directors other than outside directors and to the officers of JSR. JSR has been and will be continuously endeavoring to improve capital efficiency indices, such as ROE and ROIC.
6. Dialogue with shareholders
- (1)JSR has been promoting constructive dialogue with shareholders in the following manner.
JSR has been promoting constructive dialogue with shareholders in the following manner.
1)JSR appoints an officer in charge of IR. The CEO and President or the officer in charge of IR explains business performance, financial positions, and the details and progress of the mid-term business plan at the quarterly analyst meeting and mid-term business plan explanatory annual meeting for institutional investors. Business briefings are also held to explain business conditions and other matters.
Every year the CEO and President or the officer in charge of IR holds interviews with institutional investors in Japan and overseas to explain the above matters. In addition, JSR establishes opportunities for directors, (including independent outside directors,) to engage in dialogue as necessary.
- 3)Opinions and questions that JSR receives from investors through the above-mentioned dialogues are periodically fed back to management.
- (2)In dialogues with shareholders, JSR has strived to appropriately treat insider information.
7. Information disclosure policy
JSR established its information disclosure policy and prepared organizations and systems for information disclosure. JSR has strived to ensure prompt, accurate, active and fair disclosure of information by establishing a company-wide cooperative framework to improve the quality of information disclosure.
- (2)With the aim of actively providing company information to shareholders and investors, JSR has been posting such information on its website as corporation information including business performance, financial position, and details of main businesses, sustainability promotion activity including CSR information such as efforts to conserve the environment and responsible care (RC), and research and development (R&D) activities.
Corporate Governance Structural Diagram
1. Board of Directors
The Board of directors consists of nine (9) directors four (4) of whom are independent outside directors with independence and extensive experience of business and management) and holds meetings once monthly, in principle. The Board discusses and makes decisions on important business matters, including the direction of JSR's business strategy, and also supervises directors' and officers' execution of their business duties. Seiji Takahashi, who is a Director and Managing Officer, serves as the board’s chairperson.
In addition, all three (3) audit & supervisory board members including two (2) independent outside audit & supervisory board members regularly attend the Board of Directors meetings to state their opinions. In total 17 meetings were held in fiscal year 2022 ending in March 2023, of which attendance ratio was 100% (all of the members of directors and audit and supervisory board members attended all of the meetings).
JSR has established the Remuneration Advisory Committee and Nomination Advisory Committee as an advisory organization to Board of Directors. For details of the committees, please refer the “Supplementary Explanation” of “Voluntary Establishment of Committee” under [Directors] of “1. Organizational Composition and Operation” in “II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management” of the Corporate Governance Report attached above.
2. Executive Committee
In order to speed up the decision-making process and improve the efficiency of business operations, the Executive Committee, consisting of the CEO and President, and officers or general managers appointed by the CEO and President, meets once a week as a rule to discuss and give direction to matters relating to the Group’s fundamental management initiatives, management policies and management plans, along with important matters concerning the execution of business activities at each business division, or to receive reports. Of the matters deliberated by the Executive Committee, important items are passed to the Board of Directors, while the rest are decided on by the CEO and President after deliberation by the Executive Committee. A standing audit & supervisory board member also participates in the meeting.
3. Business Issues Committee
The Business Issues Committee, consisting of the CEO and President, and officers appointed by the CEO and President, meets once a month as a rule to hold broad-ranging discussions on the Group’s fundamental management strategies and policies, basic policies behind specific projects, and changes to business strategies. By sharing information and a common understanding of such matters, it also holds discussions on the direction of the company and reflects these in the deliberations of the Board of Directors and the Executive Committee.
4. Officers Committee
This committee, consisting of the CEO and President and all officers, aims to ensure members’ thorough understanding of business conditions and important business matters. Standing audit & supervisory board member also attends the committee’s meetings.
5. Audit & Supervisory Board and audit & supervisory board members
The Audit & Supervisory Board, consisting of three (3) audit & supervisory board members and holding meetings once monthly in principle as stipulated in the Regulations of the Audit & Supervisory Board, receives reports on important matters, holds discussions, and makes decisions. The two (2) outside audit & supervisory board members are independent ones, a lawyer and a certified public accountant and conduct audits from a standpoint independent from JSR and by using their professional expertise.
In accordance with standards for audits by audit & supervisory board members, the audit & supervisory board members attend meetings of the Board of Directors, and other important meetings including Executive Committee meetings to monitor how important decisions are reached and business activities are executed. The audit & supervisory board members also receive reports from the independent auditors, directors, and employees. Through these activities, audit & supervisory board members holds deliberations in order to form auditing opinions.
6. Outline of Audit by audit & supervisory board members, Internal Audit, and Independent Auditors
- (1)Audit by audit & supervisory board members
The details of audit by audit & supervisory board members are stated as in the above 5. Audit & Supervisory Board and audit & supervisory board members.
- (2)Internal Audit
JSR has established the Corporate Audit Department to improve the effectiveness of the JSR Group's internal control system. In accordance with the audit plan, the Corporate Audit Department regularly conducts internal audits such as compliance audits and business operation audits at its divisions and departments as well as its Group companies both in Japan and overseas and reports the audit results to CEO and President, related departments, and the standing auditor & supervisory board member and also regularly reports internal audit plans and reports of internal audit results to the Board of Directors and Audit & Supervisory Board.
- (3)Independent Auditors
JSR's independent auditor is KPMG AZSA LLC. The audit & supervisory board members work closely with the independent auditors. The audit & supervisory board members interview the independent auditors about the audit plan and receive reports on the audit results. Furthermore, the audit & supervisory board members and independent auditors exchange information and opinions as necessary in the course of each fiscal year.
7. Sustainability Promotion Committee
In order to establish good relationships with various stakeholders and to become a company that is trustworthy and indispensable, the JSR Group has established the “Sustainability Promotion Committee” (SPC) with the purpose of promoting sustainability activities that contribute to all stakeholders by creating value through corporate activities. The SPC has been established as a cross-functional meeting body chaired by the CEO and President of the Company to facilitate the practical implementation of sustainability activities. The SPC is a meeting body that deliberates and coordinates sustainability-related matters, including the Sustainability Action Policy, in light of domestic and international developments related to ESG and the SDGs. Made up of the executive officers in charge of corporate planning, production engineering, procurement & logistics, quality assurance, environment & safety, R&D, human resources development, accounting, finance, public relations, general affairs, legal & compliance, systems strategy, cyber security management, sustainability promotion, diversity promotion, the digital solutions business, the life sciences business, and the plastics business, it operates so as to cover every functional department and business division of the JSR Group. There are four committees operating under the SPC: the Sustainability Planning Committee, the Environment, Safety, and Quality Committee, the Risk Management Committee, and the Corporate Ethics Committee. The SPC oversees and guides the activities of these four committees, and endeavors to strengthen and promote management through regularly scheduled meetings held, in principle, four times a year, as well as extraordinary meetings. Reports of the SPC’s activities are also made to the Board of Directors.