Corporate Governance

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Enhancing corporate governance to earn stakeholder trust and confidence and increase corporate value

• Basic philosophy of corporate governance
• Corporate governance system
• Evaluation of the Effectiveness of the Board of Directors
• Remuneration of officers
• Succession plans
• Selection and nomination of officers
• Skill matrix
• Internal Controls
• Strategic shareholdings
• Anti-takeover measures

Basic philosophy of corporate governance

We view corporate governance as one of the most important issues to be addressed by management. In order to achieve sustainable growth of the UACJ Group and increase its corporate value over the medium to long term through business activities based on the UACJ Group Philosophy, we are working to develop and enhance an effective governance system, including strengthening management oversight and business execution functions, appropriate disclosure of business information, and thorough compliance and risk management.

UACJ Group Philosophy

UACJ Corporate Governance Guidelines (444KB)

Status of Compliance with the Corporate Governance Code

UACJ strengthens corporate governance based on the intent of the Corporate Governance Code. Disclosure of the 14 principles and supplementary principles required by the Tokyo Stock Exchange is presented in the Corporate Governance Report. We will continue strengthening our corporate governance as needed to respond to changes in the environment surrounding our company.

Corporate Governance Report (200KB)

Corporate governance system

Board of Directors

The Company utilizes an Audit & Supervisory Board system. Following the executive officer system for business execution, managerial decision-making and supervisory functions are separated from business execution, thereby strengthening the functions of the Board of Directors and accelerating the speed of business execution. To further clarify this separation and improve the supervisory function, the Articles of Incorporation stipulate that the president serves as the chief executive officer in charge of business execution.
As of June 19, 2024, the Board of Directors consists of 10 directors (including five independent outside directors) and five Audit & Supervisory Board members (including 3 independent outside members).
Each month, the Board of Directors deliberates on important management matters and reports on the status of business execution, in addition to matters to be resolved in accordance with laws, the Articles of Incorporation, and internal regulations. The Chairman of the Board of Directors is selected by mutual vote, and currently, a non-executive director serves as chairman. In fiscal 2023, the Board of Directors mainly supervised the progress of the third mid-term management plan and materiality measures as well as held discussions on the formulation of the fourth mid-term management plan.
In addition, a Board of Directors Secretariat has been established as a dedicated department to conduct effectiveness assessments and provide support to outside directors, such as by organizing plant tours and providing various forms of information.
We will continue to operate the Board of Directors in an appropriate manner and work to increase the Group’s corporate value over the medium to long term.

Corporate Governance System

Overview of corporate governance system

Main agenda of the Board of Directors

Rationale for Selection of Independent Outside Directors

Audit & Supervisory Board

As an independent body that plays a role in corporate governance, the Audit & Supervisory Board is tasked with auditing the execution of duties by the board members. To improve the quality of auditing, a three-way audit system has been adopted for cooperation among Audit & Supervisory Board audits, internal audits, and audits by accounting auditors. Following the auditing policies and plans set out by the Audit &Supervisory Board and according to its regulation, these audits are conducted, in principle, once a year and focus primarily on the execution of duties by the board members in areas including the development and operation of internal control systems, prevention of risks, and initiatives to address managerial issues.
The Audit & Supervisory Board consists of five Audit & Supervisory Board members (including three independent outside members), two of which have knowledge of finance and accounting.

Rationale for Selection of Independent Outside Members of the Audit & Supervisory Board

Nomination and Remuneration Advisory Committee

In order to strengthen corporate governance, the Company has established the Nomination and Remuneration Advisory Committee as an advisory body to the Board of Directors to enhance objectivity and transparency in the decision-making process for nominating directors, executive officers and auditors, as well as in determining the remuneration of directors and executive officers.
The committee places high priority on independence, with an independent outside director serving as the committee chair and five of the seven committee members being independent outside directors.
In fiscal 2023, the committee mainly deliberated on the appointment of President and Chief Executive Officer, peer evaluation of outside directors, considerations for the term of office and reappointment of Audit & Supervisory Board members, and the fiscal 2024 policy on officer compensation. In turn, the results of these deliberations were reported to the Board of Directors.

Main agenda items

• Appointment of President and Chief Executive Officer
• Approach to operating a pool of human resources for outside officers
• Peer evaluation of outside directors
• Organization and application of criteria for election, dismissal and non-reappointment of officers
• Term of office and reappointment of Audit & Supervisory Board members
• Succession planning
• Confirmation of guidelines on exercising voting rights for institutional investors, etc.
• Targets and results of short-term and medium-to long-term performance-linked remuneration
• Policy on officer remuneration for fiscal 2024, etc.

Overview of main meeting bodies

Improving the skills of directors and Audit & Supervisory Board members

UACJ’s policy is to ensure that directors and Audit & Supervisory Board members are fully equipped to perform their duties by providing the following training at the time of their appointment and during their term of office.
Newly appointed outside officers are provided opportunities to ensure an understanding of the roles and responsibilities of the directors and corporate auditors and to deepen their understanding of the Company’s business, finances, organization, and other matters. Training is also provided throughout the terms of appointment through opportunities for deepening understanding of governance, discussions of Group issues, and training opportunities appropriate for the knowledge, experience, and abilities of each individual director and corporate auditor.
In fiscal 2023, outside officers visited domestic and overseas business sites and group companies to deepen their understanding of the company’s business. In fiscal 2024, outside officers will participate in specific training on governance and compliance.

Support system for directors and Audit & Supervisory Board members

With the aim of enhancing discussions at the Board of Directors, we continue to provide support, such as presentations by external experts on governance, for each officer to deepen their awareness and understanding.
We also hold opinion exchange meetings between outside directors and outside Audit & Supervisory Board members which are separate from Board of Directors meetings, make efforts to actively incorporate the opinions of outside directors into business execution, convene meetings for only the outside officers, and support cooperation between outside directors and outside Audit & Supervisory Board members. Outside officers are provided materials in advance of Board of Directors meetings and opportunities are provided as necessary for outside officers to receive advance explanations of important matters and to meet with key working groups of internal officers.

Evaluation of the effectiveness of the Board of Directors

Each year, the Company evaluates and takes steps to improve the effectiveness of the Board of Directors. At appropriate intervals, we also engage third-parties to conduct analysis and evaluations with the intention of ensuring the neutrality and objectivity of our evaluations and to make our improvement measures even more effective. The most recent and second overall third-party evaluation was conducted in fiscal 2023.

Workflow of effectiveness evaluations

• After reviewing the materials and minutes of the Board of Directors and the Nomination and Remuneration Advisory Committee, the third-party evaluation organization holds discussions with the Chairman of the Board of Directors and the Board of Directors Secretariat and then prepares the questionairre after observing the Board of Directors meetings.
• Directors and Audit & Supervisory Board members respond in writing, and based their responses, the third-party evaluation agency conducts individual interviews with each officer.
• The third-party evaluation organization reports the results to the Board of Directors, which then analyzes the results and discusses measures to improve effectiveness.

Main evaluation items

• Roles and responsibilities of the Board of Directors
• Decision making by the Board of Directors
• Supervisory functions of the Board of Directors
• Composition of the Board of Directors
• Operation of the Board of Directors
• Role of the Nomination and Remuneration Advisory Committee
• Relations with investors and shareholders
• Officer self-evaluations

Results of evaluation in fiscal 2023

• The scope and composition of internal and external members of the Board of Directors is appropriate
• Operation of the Board of Directors is appropriate with regard to the frequency of meetings and the deliberation time, content, and number of discussions
• The Board of Directors and Nomination and Remuneration Advisory Committee conducted active discussions
• The Nomination and Remuneration Advisory Committee’s reporting to the Board of Directors is conducted via a fair and appropriate process
• Appropriate steps were taken to “broaden topics related to material issues” and to “strengthen the monitoring function,” which were issues identified in the fiscal 2022 evaluation

Future issues and measures

• To further improve the quality of discussions on material issues, discussions will continue to be held and forums for discussion outside of Board of Directors meetings will be utilized

History of improvements to the effectiveness of the Board of Directors

Remuneration of officers

UACJ’s officer remuneration system is intended to provide management incentive to respond to the expectations of a variety of stakeholders and to promote steady and sound business development to continue generating the profits needed to contribute to society. The system is also designed to share the benefits and risks of stock price fluctuations with shareholders and increase our officers' desire to help increase share prices, raise corporate value, and improve our performance in the medium and long term. The remuneration system is periodically reviewed to ensure it is functioning appropriately and effectively. The medium- to long-term performance-linked remuneration system was revised in fiscal 2024 upon the adoption of the new management structure and the start of the fourth mid-term management plan. The Nomination and Remuneration Advisory Committee annually reviews the remuneration system and assesses the need for revisions based on changes in the business environment and how the system is actually operating.

Resolutions regarding the remuneration of directors and Audit & Supervisory Board members were passed as described below at the 5th Annual General Meeting of Shareholders on June 21, 2018, the 8th Annual General Meeting of Shareholders on June 22, 2021, the 10th Annual General Meeting of Shareholders on June 21, 2023, and the 11th Annual General Meeting of Shareholders on June 19, 2024.

• Basic remuneration and short-term performance-linked remuneration shall be limited to a total of ¥650 million per year for all Board of Directors members combined. (This amount excludes amounts paid as employee salaries. Remuneration for outside directors is limited to basic remuneration only and will not exceed a total of ¥110 million per year, included in the amount above, for all outside directors.)
• Medium-to long-term performance-linked remuneration for directors excluding outside directors shall be composed of a restricted stock units (RSU) plan and performance share units (PSU) plan. The RSU plan is applicable to directors other than outside directors, and the PSU plans is applicable to directors other than non-executive directors. The total amount of monetary remuneration claims and cash to be paid shall be within the amount calculated by multiplying the number of shares to be delivered by the market price of the stock at the time of delivery and the number of years of the applicable medium-term management plan period up to 15,000 shares per fiscal year for the RSU plan (of which 7,500 shares shall be delivered) and 45,000 shares per fiscal year for the PSU plan (of which 22,500 shares shall be delivered).
• Total remuneration for all Audit & Supervisory Board members shall not exceed ¥100 million per year.

a. Approach to officer remuneration

• A remuneration system that adds motivations towards achieving the performance targets (short-term and medium- to long-term) based on the Company’s business strategy;
• a remuneration level that is competitive enough to attract talented human resources who can lead the Company’s growth and to enhance their motivation to contribute to the Company;
• a remuneration system that involves a highly objective and transparent decision-making process; and
• a remuneration system that can contribute to the sharing of common interests with shareholders and leads to an increased shareholder value.

b. Remuneration system

• The officer remuneration for the Company’s Directors comprises of basic remuneration in the form of fixed remuneration, short-term performance-linked remuneration tied to the level of achievement of the Company’s performance in a single fiscal term, and medium- to long term performance-linked remuneration that is tied to the level of achievement of the Company’s medium- to long-term performance. The remuneration for Outside Directors consists solely of the basic remuneration, as the main responsibility of Outside Directors is the supervision from an objective and independent perspective.
• Basic remuneration for each officer position is set by referring to remuneration survey data provided by an outside institution specialized in the gathering of this kind of data. Remuneration levels are determined based on comparisons to companies that are in similar industries and are of similar size to the Company.
• For each eligible Director, the standard amount of short-term performance-linked remuneration (in cases where the payment rate is 100%; the same applies below) is set at roughly 35% to 40% of his/her basic remuneration.
• For each eligible Director, the standard amount of medium-to long-term performance-linked remuneration is set at approximately 25% of his/her basic remuneration.

c. Mechanism for linking performance

Short-term performance-linked remuneration system

Medium-to long-term performance-linked remuneration system
Restricted stock units (a system of providing shares and cash payments conditional on continuing service for three further years)

Performance share units (a system of providing shares and cash payments in accordance with the level of achievement of medium- and long-term performance goals for the entire Company)

d. Process for determining remuneration

• The policies and specific contents of the Company’s officer remuneration are deliberated at the Nomination and Remuneration Advisory Committee and determined by the Board of Directors referring to the Committee’s report. Over half of the Nomination and Remuneration Advisory Committee is comprised of Independent Outside Directors and Independent Outside Audit & Supervisory Board Members. Furthermore, advice from external specialists is sought as necessary to provide sufficient information to its members.
• Regarding short-term performance-based remuneration for Directors, the Nomination and Remuneration Advisory Committee confirms, at the beginning of the evaluation period, the targets for: 1) the portion based on the company-wide performance evaluation; 2) the portion based on the divisional performance evaluation; and 3) the portion based on the SDGs evaluation, and, at the end of the evaluation period, the level of achievement of these goals and the amount of payment according to the level of achievement. The Committee also confirms the appropriateness of the portion based on the individual performance evaluation. For medium-to long-term performance-based Director remuneration, the Nomination and Remuneration Advisory Committee confirms the targets at the beginning of the evaluation period, as well as the level of achievement and the amount of remuneration based on the achievement level at the end of the evaluation period.
• The Board of Directors has delegated, to Mr. Miyuki Ishihara, the Representative Director & President, the decision on the individual evaluation for the short-term performance-linked remuneration on the basis of the amount of basic remuneration for each Director and the performance of divisions supervised by respective Directors excluding Outside Directors. The reason for the delegation is that the Representative Director & President is considered competent to evaluate respective directors’ significant efforts that are not reflected in the company-wide or divisional performance, taking into consideration the performance of the Company as a whole. The appropriateness of the decisions made on the delegated matters is reviewed in advance by the Nomination and Remuneration Advisory Committee.
• The amount of remuneration for Audit & Supervisory Board Members is determined by consultation among the Audit & Supervisory Board Members within the range approved by the general meeting of shareholders.

(For your reference)
[Shareholding Guidelines]
The Company recommends its Directors (excluding Outside Directors) and Executive Officers to own the Company’s shares with the value equal to approximately 25% of their basic remuneration (annual amount) within five years from the date of appointment as an officer.

Initiatives to date

• *1 Outside directors are not subject to the performance-linked remuneration system, as their primary duty is to provide supervision from an independent, objective standpoint.

Total remuneration of directors and Audit & Supervisory Board members in fiscal 2023

Note1　The above table includes three directors who retired at the conclusion of the 10th Ordinary General Meeting of Shareholders held on June 21, 2023.

Note2　For performance-linked remuneration, the amount to be recognized as an expense in the current fiscal year is stated.

Succession plans

UACJ has put in place succession plans for its president and officers. Every year, the president selects a pool of candidates and confirms measures for their development and other details. Various human resource data is used to identify successor candidates, and an internal process is set up to identify talent from multiple perspectives. In order to provide them with the abilities and experience necessary for senior management, the strengths and issues of each pool member are identified, and they are developed through tough assignments and transfers. The Nomination and Remuneration Advisory Committee then confirms the content and works to ensure the suitability of the succession plans.
The progress of succession planning is regularly reported to the Board of Directors to ensure objectivity.
The committee also led the evaluation of the final candidates for the new president and determined that Mr. Tanaka was the most suitable for the position, with the Board of Directors resolving at its January 30, 2024 meeting to appoint him.

Workflow of the succession plan for the Company president

Selection and nomination of officers

The Nomination and Remuneration Advisory Committee deliberates and decides on the nomination of directors and other senior management by evaluating candidates based on elements such as their career history and capabilities. The Board of Directors makes the final decision on officer appointments based on the committee’s recommendations. Candidates for the Audit & Supervisory Board must also be approved by the Audit & Supervisory Board. When selecting independent outside directors, the Company considers candidates based on its criteria for independence, and seeks individuals who can be expected to contribute to the Company through frank, active, and constructive dialogue at the Board of Directors meetings. Opportunities are provided to evaluate their contributions after appointment. Currently two of the five independent outside directors are women, and four of the directors have experience in corporate management. UACJ will continue its focus on achieving a balance in the overall knowledge, experience, and abilities of the Board of Directors, and in developing systems that take into account diversity and scale.

Criteria for Independence for Outside Directors and Audit & Supervisory Board Members (67.0KB)

Peer evaluation of outside directors

In recognition of the fact that outside directors, who are responsible for management oversight, should be evaluated independently to ensure that they are fulfilling their expected roles and responsibilities appropriately, UACJ has implemented mutual evaluations of outside directors.
In the peer evaluations, each outside director (self-evaluation) and committee member (peer evaluation) responds to a questionnaire prepared by the Nomination and Remuneration Advisory Committee. In addition, directors on the executive side are also asked to complete a questionnaire, thereby ensuring that the evaluation is multifaceted.
The results of the evaluations are reported to the Nomination and Remuneration Advisory Committee, which confirms that each outside director is fulfilling their roles and responsibilities appropriately, and are also used in the process for reappointment or non-reappointment.
Peer evaluations can be conducted only when there is a healthy tension based on mutual trust through discussions at meetings of the Board of Directors and the Nomination and Remuneration Advisory Committee, and they function effectively as an opportunity for reflection on the roles and responsibilities of outside directors.

Skill matrix

The Nomination and Remuneration Advisory Committee and the Board of Directors have discussed and established the following skills (knowledge, experience, and abilities) that a member of the Board of Directors should possess in order for the Company to achieve the long-term management vision UACJ VISION 2030 as well as to realize the growth, value creation and corporate structure required to reach UACJ VISION 2030.
We intend to create a Board of Directors that is overall equipped with nine skill sets for executing effective management oversight. The following table shows these skills.

Reason for selection as a desired skill field

Board composition and expertise

Click on the image to open the PDF file. (481KB)

Note: The above table does not indicate the complete range of each individual’s knowledge, experience, and ability

Internal control

The UACJ Group endeavors to strengthen its internal control system to help ensure that its business activities are in line with management objectives, within the law and rational. Furthermore, as regards the status of internal controls stipulated by the Financial Instruments and Exchange Act, the Internal Auditing Department conducts tests and assessments with the aim of ensuring the reliability of financial reporting.

Status of the Internal Control System

As described below, the UACJ Group’s internal control systems (Systems for ensuring that the execution of duties by the Directors and employees of the Company and the Group complies with laws and ordinances, and the Articles of Incorporation, and for ensuring the propriety of the business activities of the corporation and of the corporate group consisting of the corporation and its subsidiaries) have been established in accordance with Japan’s Companies Act and Ordinance for Enforcement of the Companies Act.

Strategic shareholdings

We hold shares in companies that we deem necessary for the sustainable growth and smooth conduct of our business, including the maintenance and strengthening of transactions, business alliances, and the stable procurement of raw materials. In accordance with our basic policy of minimizing and reducing such holdings, each year the Board of Directors conducts a comprehensive review of individual cross-shareholdings, examining both quantitative and qualitative aspects such as their significance and economic rationale. Shareholdings that are, as a result of the examination, deemed to have little significance or rationale are to be sold off sequentially. As of the end of March 2024, UACJ held cross-shareholdings in 29 companies. The total amount of cross-shareholdings on the balance sheet at the end of fiscal 2023 was 5.732 billion yen, which represents 1.90% of total consolidated equity.

Anti-takeover measures

Presently, UACJ has not adopted any anti-takeover measures.