Sojitz Corporation

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Corporate Governance

Basic Concept

We strive to improve our corporate value over the medium to long term based on the “Sojitz Group Statement” (“The Sojitz Group creates value and prosperity by connecting the world with a spirit of integrity”). In order to materialize this, based on our belief that the enhancement of our corporate governance is an important issue of management, we have built the following corporate governance structure in our effort to establish a highly sound, transparent and effective management structure, while also working toward the fulfillment of our management responsibilities and accountability to our shareholders and other stakeholders.

Management and Business Execution System

We employ an executive officer system for the purpose of, clarifying authority and responsibilities, and ensuring a smooth and swift execution of business through the separation of managerial decision-making from business execution.

The Board of Directors, chaired by the Chairman of the Board, is the highest decision-making body reviewing and resolving fundamental policies and most important cases concerning the management of the Group. The Board of Directors also supervises business execution through proposals of important matters and regular reports from the executing body.

As the executing body, we have established the Management Committee, chaired by the President, who is also the Chief Executive Officer. The Committee is responsible for the review and approval of the Group’s important managerial and executive agendas, from the Group-wide and medium-to-long-term viewpoints. In addition, we have established the Finance & Investment Deliberation Council for the review and approval of investments and loans, the Human Resource Deliberation Council for the review and approval of major human resource matters, and internal committees to handle issues to be addressed from cross-organizational perspectives, as executing bodies all directly reporting to the President & CEO.

The term of Directors and Executive Officers is one year, in order to respond swiftly and appropriately to rapid changes in the business environment and clarify their responsibilities to management.

Monitoring and Supervisory Functions for Management

We appoint multiple Outside Directors for the purpose of receiving appropriate advice and proposals on management of the Group from an outside, objective standpoint and to reinforce the supervisory function of the Board of Directors. In addition, we ensure appropriateness and transparency with regard to the appointment of Directors and remuneration by having Outside Directors serve as the chair of the Nomination Committee and the Remuneration Committee, both advisory bodies to the Board of Directors. We have also appointed a Director who does not hold representative power as the Chairman of the Board of Directors, created a management structure which focuses on overseeing business execution, and are working to improve the effectiveness of the Board of Directors in terms of their ability to provide independent and objective business oversight.

We are a company with an Audit & Supervisory Board, that independently oversees and audits the operations of the Group.

 

Governance Structure

We now implement all principles established in the Corporate Governance Code announced in June 2018.

Please refer below for more details.

Corporate Governance Report

 

Structure

Organizational form

Sojitz is a company with an Audit & Supervisory Board.

Board of Directors

The Board of Directors is comprised of six members (including two outside directors). It discusses and resolves management policies and high-priority issues facing the Group, as the Company's foremost decision-making body.

Nomination Committee/Remuneration Committee

Sojitz has established the Nomination Committee and Remuneration Committee as consultative bodies to the Board of Directors, to ensure appropriate and transparent selection and compensation of directors.

Each committee comprises four members (two of whom are outside directors) and is chaired by an outside director.

Audit & Supervisory Board

The Audit & Supervisory Board is comprised of five members (four of whom are outside Audit & Supervisory Board Members). Independent from the Board of Directors, the Audit & Supervisory Board Members audit directors’ execution of duties.

Accounting Auditors

Sojitz has appointed the independent auditing firm KPMG AZSA LLC to conduct accounting audits based on Company Law, financial statement auditing based on the Financial Instruments and Exchange Act, quarterly reviews, and internal auditing.

Internal Audits

The Internal Audit Dept. has conducted audits under the command of the Internal Audit Committee (*). Internal audits are led by the Audit Dept. based on auditing plans approved by the Internal Audit Committee and the Board of Directors at the beginning of each term. The Audit Dept. conducts audits to assess priority matters, such as compliance, reliability of financial reporting, risk management, and investment/loan management, primarily focusing on the business departments, corporate departments, and the Group’s consolidated subsidiaries including major overseas affiliates. Additionally, the Audit Dept. monitors whether each department’s internal controls and governance systems are functioning effectively and suggests practical ways to amend operational issues.

On top of the auditing work conducted in their respective roles, the corporate auditors, accounting auditors, and internal auditors exchange information to mutually complement their separate functions and raise auditing effectiveness.

  • (*) 20 In April 2018, the Internal Audit Committee was established as a subsidiary body of the Board of Directors, to strengthen supervision over business execution by the Board, and to separate internal audits from execution. This has created a more effective audit and supervisory structure combining audit functions performed by the Audit & Supervisory Board Members with those of the Accounting Auditor by having the Internal Audit Dept. perform internal auditing, as an organization well-versed in the Company’s internal processes.

Meetings of the Board of Directors, Audit & Supervisory Board, etc.

Meetings as of March 31, 2019:

Board of Directors
18
Nomination Committee
4
Remuneration Committee
3
Audit & Supervisory Board
19

Business Executing Bodies

We have established the following executing bodies that directly report to the President, who is the Chief Executive Officer.

  • Management Committee
    The Committee is comprised of Executive Directors and Executive Officers in charge of business divisions and the heads of corporate departments. It reviews and approves management policies, management strategies and management administrative matters among the Group from Group-wide and medium-to-long-term viewpoints.
  • Finance & Investment Deliberation Council
    The Council is comprised of Executive Directors and Executive Officers in charge of business divisions and the heads of corporate departments. It discusses and resolves important investment and loan proposals from Group-wide viewpoints.
  • Human Resource Deliberation Council
    The Council is comprised of Executive Directors and Executive Officers in charge of business divisions and the heads of corporate departments, and discusses and resolves important issues pertaining to human resources from Group-wide viewpoints.
  • Internal Committees
    In order to enhance corporate value, we have established the following internal committees that act as executing bodies under the direct supervision of the President & CEO to advance management initiatives that need to be handled across the organization. Each internal committee regularly reports on its activities to the Board of Directors and the Management Committee.
    • Internal Control Committee
      The Internal Control Committee formulates policies to maintain and improve our internal control system based on the Companies Act and the Financial Instruments and Exchange Act, and monitors this internal control system and its enforcement among the Group.
    • Compliance Committee
      The Compliance Committee examines and formulates fundamental policies and measures to ensure compliance.
    • Sustainability Committee
      The Sustainability Committee examines and formulates fundamental policies and measures related to promotion of Sustainability.
    • Security Trade Control Committee (*)
      The Security Trade Control Committee examines and establishes Sojitz’s basic approach to security trade control.

In addition, we have established the Disclosure Subcommittee, Security Trade Control Subcommittee and Information Security Subcommittee as subsidiary bodies of the internal committees.

* In April 2019, the Security Trade Control Subcommittee was reorganized as the Security Trade Control Committee to expedite responses to changing security trade control issues associated with Sojitz Group and establish appropriate trade control systems.


Analysis and Assessment of the Effectiveness of the Board of Directors

Each year, we analyze and assess the effectiveness of the Board of Directors as a whole in order to improve the functions of the Board of Directors. The results of the analysis and assessment for the fiscal year ended March 31, 2019, and the tasks ahead are as follows.

 





Analysis & Assessment Method
A written survey and an individual interview were conducted for all Directors and Audit & Supervisory Board Members. The results of this survey were then assessed by a third party (an outside consultant).
The analysis and assessment outcome based on the results of the third-party assessment and individual interviews was reported to the Board of Directors for a discussion on tasks to be addressed.




Survey Items
Roles and responsibilities of the Board of Directors, Composition of the Board of Directors, Management of the Board of Directors, Decision-making process of the Board of Directors, Supervision by the Board of Directors, Support system for the Board of Directors, Nomination Committee and Remuneration Committee, which are advisory bodies to the Board of Directors, Items concerning outside Directors, and Suggestions for improving effectiveness, etc.


Outline of Assessment Results
The aggregated survey results showed that the overall average score exceeded the standard, and the third-party assessment was favorable as detailed below. It is therefore confirmed that the Board of Directors is function appropriately and effectively as described below.







Excerpts from Third-Party Assessment Observations
・From such findings as active discussions led by Outside Officers, appropriate restraints, an excellent description of bills on the agenda, appropriate composition of the Board of Directors and high competence of the secretariat, it can be concluded that the effectiveness of Sojitz’s Board of Directors is fairly high.

・Comments in consideration of the number of Outside Directors exceeding one-third of the Directors were often heard not only from Outside Officers but even from In-house Executive Officers. Discussions on governance took place at the meetings of the Board of Directors, showing such a topic is shred among all Board members. This indicates the Board members’ high dedication to enhancing the governance of the Board.

・It was found that support systems were needed to promote the understanding of items on the agenda and opportunities for communication among Outside Officers.




Tasks ahead to further increase the effectiveness of the Board
Based on the results of the above analysis and assessment, Sojitz will continue working to improve the effectiveness of the Board of Directors, such as by conducting regular monitoring of the progress of the Medium-term Management Plan and the operation al status of the Nomination Committee; strengthening the alliance between in-house and Outside Directors/Audit & Supervisory Board Members; providing explanations on the strategies of the business divisions and the points of discussion by the Finance & Investment Deliberation Council regarding investment and loan projects; and promoting Outside Directors’ visits to the sites of Sojitz Group business operations.

Training Policy for Directors and Audit & Supervisory Board Members

We take the following initiatives to enable Directors and Audit & Supervisory Board Members to appropriately fulfill their roles and responsibilities.

  • We provide newly appointed Directors and Audit & Supervisory Board Members with opportunities for lectures by lawyers on legal obligations and responsibilities of Directors and Audit & Supervisory Board Members, as well as programs targeting company management, such as third-party consulting sessions. We also have new officers undergo lectures on management methods and systems related to critical risk factors which impact our company’s activities, held by the departments in charge of internal controls and risk management.
  • In order for internal and Outside Directors and Audit & Supervisory Board Members to deepen their understanding of our extensive business activities, Chief Operation Officers (COO) of each business division hold business and initiative briefing sessions, and in order for them to deepen their understanding of the latest macroeconomic conditions, our research institute holds monthly briefing sessions. In addition, we provide other necessary information on an ongoing basis.
  • We offer Directors and Audit & Supervisory Board Members opportunities to attend seminars, etc. held by external organizations such as the Japan Association of Corporate Directors and the Japan Audit & Supervisory Board Members Association.

Remuneration of Directors and Audit & Supervisory Board Members for the Year Ended March 31, 2019)

(Millions of yen)

Classification
Number of persons to be paid
Basic remuneration
Performance-linked remuneration
Total
Monetary
(※1、2)
Share
(※3)
Monetary
(※1)
Share
(※3)
Directors (Total)
10 342 26 79 39 488
Directors(Internal)
6 318 26 79 39 464
Outside Directors
4 24 - - - 24
Audit & Supervisory Board Members (Total)
5 106 - - - 106
Audit & Supervisory Board Members(Internal)
1 37 - - - 37
Outside Audit & Supervisory Board Members
4 68 - - - 68
Notes: 1. Directors’ maximum remuneration: Resolved at the Ordinary General Shareholders’Meeting held on June 27, 2007
Internal Directors: ¥550 million per year (excluding salary as employee)
Outside Directors: ¥50 million per year
     
2. Audit & Supervisory Board members’ maximum remuneration: Resolved at the Ordinary General Shareholders’ Meeting held on June 27, 2007
¥150 million per year
     
3. Performance-linked Remuneration for Directors: Resolved at the Ordinary General Shareholders’ Meeting on June 19, 2018
  Persons eligible for Delivery of Sojitz shares: ・Directors (excluding Outside Directors and non-residents in Japan)
・Executive Officers (excluding non-residents in Japan)
  Upper limit of cash contributed by Sojitz: JPY 700 million in total for three fiscal years
  Upper limit of the number of Sojitz shares subject to Delivery to Directors: 3 million points (equivalent to 3 millions shares) for three fiscal years
 
The total amount of the aforementioned share remuneration represents the amount reported as expenses for fiscal 2018 associated with the share delivery points regarding the System (Board Incentive Plan (BIP) Trust).
(Note)Figures are rounded down to the nearest million yen.

Policies on Appointment and Standards for Independence of Outside Officers

We place importance on the independence of outside officers. We have formulated our own Independence Standards for Outside Directors and Outside Audit & Supervisory Board Members in addition to the provisions of the Companies Act, and standards for independence of officers set by financial instruments exchange, and confirm that all our outside officers meet these standards.

(Reference) Standards Concerning the Appointment and Independence of Candidates for Outside Directors and Outside Audit & Supervisory Board Members

<Standards Concerning the Appointment of Candidates for Outside Directors and Outside Audit & Supervisory Board Members>
The Company appoints Outside Directors from those with a wide range of knowledge and deep insight and abundant experience in industries and administrative fields, targeting those who have management experience in business corporations and government agencies and others who have objective and specialist viewpoints toward world affairs, social and economic trends and corporate management. In appointing Outside Audit & Supervisory Board Members, in addition to the above, we also ensure the diversity of the candidates’ background from the perspective of reflecting the viewpoints of a variety of stakeholders in the audit of business activities.

<Independence Standards for Outside Directors and Outside Audit & Supervisory Board Members>
The Company judges Outside Directors and Outside Audit & Supervisory Board Members to be independent by confirming that they do not fall under any of the following standards, in addition to the independence standards prescribed by financial instruments exchanges.

  • 1.  A major shareholder of the Company (a shareholder holding 10% or more of the total voting rights of the Company) or a member of business personnel thereof
  • 2.  A major creditor to the Company (a creditor from whom the Company owed an amount exceeding 2% of the consolidated total assets of the Company in the most recent fiscal year) or a member of business personnel thereof
  • 3.  A major business partner of the Company (a business partner whose transaction amount with the Company exceeded 2% of the Company’s annual consolidated revenue in the most recent fiscal year) or a member of business personnel thereof
  • 4.  A party whose major business partner is the Company (an entity whose transaction amount with the Company exceeded 2% of its annual consolidated net sales in the most recent fiscal year) or a member of business personnel thereof
  • 5.  An attorney, certified public accountant, certified tax accountant, consultant or other professional who received money or other property from the Company for his/her services as an individual in an amount exceeding ¥10 million annually on average over the past three fiscal years, other than remuneration of Directors or Audit & Supervisory Board Members (if such money or property was received by an organization, such as a corporation or partnership, this item refers to a person who belongs to the organization that received money or other property from the Company in an amount exceeding ¥10 million annually on average over the past three fiscal years or in an amount of 2% of the annual total revenue or consolidated net sales of the organization, whichever the greater.)
  • 6.  A person who receives donations or grants from the Company in an amount exceeding ¥10 million annually (if such donations or grants are received by an organization, such as a corporation or partnership, this item refers to a member of business personnel of the organization.)
  • 7.  A person who is the Accounting Auditor of the Company or a person who is engaged in audit activities of the Company as an employee of the Accounting Auditor
  • 8.  A person who has fallen under any of the above items 1. to 7. in the past three years
  • 9.  A spouse or relative within the second degree of kinship of a person falling under any of the above items 1. to 8. (limited to the person holding the position of officer or other important positions)
  • 10. A spouse or relative within the second degree of kinship of a member of business personnel (limited to the person holding the position of officer or other important positions) of the Company or any of its consolidated subsidiaries
  • 11. A person whose term of office as Outside Director or Outside Audit & Supervisory Board Member of the Company exceeds eight years
  • 12. A person with concerns on his/her independence such as having constant and substantial conflict of interest with general shareholders as a whole in performing the duties of Outside Director or Outside Audit & Supervisory Board Member or for other reasons

Outside Directors and Outside Audit & Supervisory Board Members / Reasons for Appointmen

<Outside Directors>
Name
Board of Directors Meetings
(No. attended/No. held in FY2018)
Audit & Supervisory Board Meetings
(No. attended/No. held in FY2018)
Kayoko Naito
100%(14 out of 14)
As a lawyer, Ms. Kayoko Naito Possesses sophisticated, expert knowledge in international and corporate law. She was judged to be a good fit for the position given her ability to provide accurate and meaningful advice from an independent perspective regarding the Company’s business—particularly with regards to legal matters, risk management, and corporate governance.
Norio Otsuka
100%(14 out of 14)
Mr. Norio Otsuka has a wealth of experience in top management from his time acting as Director, President and Chief Executive Officer/Chairperson of the Board of Directors at NSK, where he advanced the company’s global growth strategy and strengthened corporate governance. He was judged to be a good fit for the position, as he provides accurate and meaningful advice from an practical perspective regarding the Company’s long-term strategy and ways to further strengthen corporate governance.
<Outside Audit & Supervisory Board Members>
Name
Board of Directors Meetings
(No. attended/No. held in FY2018)
Audit & Supervisory Board Meetings (No. attended/No. held in FY2018)
Takayuki Ishige
100%(18 out of 18)
100%(19 out of 19)
Takayuki Ishige supervises the Company’s management and gives appropriate advice within and outside the Board of Directors, from an independent standpoint and objective viewpoint as an Outside Audit & Supervisory Board Member, based on his wealth of knowledge earned in the areas of finance and accounting, experience in being responsible for duties including management audits, as well as serving as an Audit & Supervisory Board Member at Kao Corporation, and thus has been appointed.
Mikinao Kitada
100%(18 out of 18)
100%(19 out of 19)
Mikinao Kitada supervises the Company’s management and gives appropriate advice within and outside the Board of Directors, from an independent and objective viewpoint as an Outside Audit & Supervisory Board Member, based on his experience in the judicial field holding important posts as public prosecutor and as an attorney, as well as in serving as an outside director and outside Audit & Supervisory Board Member at various companies, and thus has been appointed.
Kazunori Yagi
100%(18 out of 18)
100%(19 out of 19)
Kazunori Yagi supervises the Company’s management and gives appropriate advice within and outside the Board of Directors, from an independent standpoint and objective viewpoint as an Outside Audit & Supervisory Board Member, based on his experience holding important positions at Yokogawa Electric Corporation, including roles in accounting and business planning, and as a Director. He has also served as an outside director at several other companies and has abundant experience in corporate management, as well as expertise knowledge in auditing as a member of the Certified Public Accountants and Auditing Oversight Board, and thus has been appointed.
Hyo Kambayashi
100%(18 out of 18)
100%(19 out of 19)
Hyo Kambayashi supervises the Company’s management and gives appropriate advice within and outside of the Board of Directors, from an independent and objective viewpoint as an Outside Audit & Supervisory Board Member, based on his experience holding important positions in audit firms as a Certified Public Accountant, experience and insight as the management of a risk consulting company, along with highly specialized expertise in the area of internal control, and thus has been appointed.
* Kayoko Naito and Norio Otsuka were appointed at the 15th Ordinary General Shareholder's Meeting (June 19, 2018)

Holdings of Listed Shares

<Policies for Shareholdings>
Each year, we conduct a quantitative assessment of listed shares held in each company as part of our shareholding policy to ensure that dividends or related profit earned from those shares exceeds the weighted average cost of capital (WACC). We also conduct a qualitative assessment, looking at whether the shares help improve our corporate value. Based on these assessments, we examine the value of retaining these shares. We retain those that are deemed to be worthwhile, seeking ways to achieve greater impact and benefit from those shares. Meanwhile, for those shares which are deemed to now lack significant value, we set a deadline to improve their value; or if there is no indication these shares will improve, we examine the possibility of divestiture. The Board of Directors and the Management Committee conducts this assessment for each lot of shares held in each company.

<Exercising of Voting Rights>
Based on the significance of holding shares of listed companies, we exercise our voting rights based on whether or not they contribute to sustainable growth and improved corporate value over the medium-to-long term for both the Company and the investment target. We also have a system of monitoring the status of exercise of voting rights.

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