Message from the Chair of the Nomination and Remuneration Advisory Committee

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Outside directors played a leading role in executing the succession plan to appoint a new president, and will continue working to establish new management systems and improve corporate governance with a view to raising enterprise value over the medium and long terms

Takahiro Ikeda
Outside Director and Chair of the Nomination and Remuneration Advisory Committee
Mr. Ikeda has served as an executive officer of Mitsubishi Chemical Corporation*1, president of Dia Chemical Co., Ltd., and a director and managing executive officer of Mitsubishi Rayon Co., Ltd.*1. Having expanded Mitsubishi Chemical Corporation’s operations in Indonesia, he is highly familiar with markets in Asia, particularly the ASEAN region.
*1 Now Mitsubishi Chemical Group

Corporate governance reforms have led to substantial improvements in business execution and management supervision

When I was appointed as an outside director in 2018, UACJ was being forced to implement dramatic structural reforms because prior large-scale investments had not generated returns as expected and market conditions had worsened following trade friction between the United States and China. Therefore, deliberations by the Board of Directors at that time focused on how to implement the structural reforms, maintain stable growth, and raise the Company’s enterprise value.

As part of the structural reforms, the Company took steps to strengthen its corporate governance system. In fiscal 2020, the number of directors and executive officers was reduced as a means to speed up management decision-making. Later on, the Company updated its performance-linked remuneration system to meet the latest expectations, adopting total shareholder return and SDG assessments as evaluation indicators, and establishing malus and clawback clauses. Thanks to this series of measures for strengthening corporate governance, the Company’s business execution and the Board’s management supervision role improved substantially compared to the time I was appointed in 2018. I believe this made it possible to successfully carry out all measures of the reforms, which included streamlining and selling off businesses as well as initiatives for accelerating returns on investments. Efforts to strengthen corporate governance continued into fiscal 2023 with the launch of an outside director mutual evaluation system, which is relatively rare among Japanese companies.

The fact that members of the Board frequently communicate and hold constructive discussions in various settings outside of formal Board meetings is one reason why UACJ’s corporate governance has evolved so much over the past six years. For example, some members participate in deliberations of the Nomination and Remuneration Advisory Committee, which holds two-hour meetings once per month. This is comparatively frequent among Japanese companies with a board committee system. Furthermore, members of the Board routinely interact and hold discussions outside of meetings.

Looking ahead, I believe that UACJ will need to improve its global communications. Based on a discussion I had with the president of an operational subsidiary overseas some time ago, business policies decided by the Board appeared to have been communicated too slowly to the subsidiary. For UACJ to grow as a global company, it must share information more effectively with its subsidiaries around the world to ensure that the Group as a whole pursues the same goals.

The Nomination and Remuneration Advisory Committee played a central role in appointing a new president in a process emphasizing objectivity and transparency

In April 2024, UACJ changed its president for the first time in six years, newly appointing Shinji Tanaka, formerly a director and managing executive officer, as president and representative officer. The Company’s succession plan was originally announced in 2019, and this was the first time it was used for the appointment of a new president. After the plan was created, the Nomination and Remuneration Advisory Committee compiled a list of qualified candidates and held a series of deliberations, placing importance of reaching an objective, transparent, and timely decision on a successor. It also held several interviews with candidates to learn more about each individual’s values, vision, character, business approach, and other matters that cannot be determined just by observing their track records. Recognizing that the next president would be responsible for leading more reforms, the committee set a number of requirements, including the ability to adapt to changes, devise strategies, execute plans, envision the future, incorporate feedback, and effectively communicate while respecting diversity. Based on these criteria, the committee gradually narrowed down the candidates and finally nominated Mr. Shinji Tanaka for the position of president. Following approval by the Board of Directors, he assumed this position on April 1, 2024, the starting date of the UACJ Group’s new mid-term management plan.

The decision to appoint Mr. Tanaka was approved by all members of the Nomination and Remuneration Advisory Committee and the Board of Directors, as he was an optimal candidate who met a majority of the requirements. For example, he demonstrated his ability to adapt to changes in the operating environment and execute plans as head of the Structural Reform Division in 2021 and 2022. At that time, structural reform plans set in 2019 were derailed by the COVID-19 pandemic, but he was able to execute additional measures in response and finally complete the reforms as planned. Moreover, Mr. Tanaka has almost three decades of practical experience in manufacturing operations, and as an executive officer, he was transferred to Thailand to set up operations at UACJ (Thailand) Co., Ltd. I visited its production plant at that time, and was impressed by his all-out efforts to quickly get production up and running while building trust with local employees through dialogue, despite difficulties with language and different work cultures. This demonstrated his communication competence and respect for diversity, which are important qualities of a leader. For a leader of a global enterprise, however, I believe that international business experience is more important than anything.

Mr.Tanaka was also highly evaluated for his extensive experience and expertise in recycling, which he refined while serving as head of the Sustainability Division until his appointment as president. Promoting recycling is a major pillar of UACJ’s medium- and long-term growth strategies, and under the new mid-term management plan, it is an important means to create business opportunities by adding more environmental value to products. During the nomination process, the candidates were asked about what they could do and want to do for UACJ. In response to this critical question, Mr. Tanaka detailed a vision of the future centered on recycling, and appeared to be strongly determined to pursue it. Looking ahead, the Board of Directors will evaluate President Tanaka’s leadership ability and success in establishing a new recycling-driven business model, and closely monitor the progress of reforms being implemented to achieve the goals of the new mid-term management plan and the long-term roadmap, UACJ Vision 2030.

As an outside director, I will help monitor this process while offering pertinent suggestions and proposals. For example, I believe that cooperation with different industries, including those involved in other metals as well as plastics, may be necessary in the future in order to further expand aluminum applications from can stock to automotive parts, home appliances, and various other products. It will also be essential to work with companies and governments in other parts of the world, including other Asian countries and the United States. Several outside directors on the Board, including me, have done business in other industries and countries, and we can make use of this experience and our networks to devise strategies and form partnerships.

Focusing on systematically grooming leaders and improving the selection process with an eye to the future

In accordance with the Company’s succession plan, a new president is officially appointed after being nominated by the Nomination and Remuneration Advisory Committee and then approved by the Board of Directors. We outside directors play a very important role in this selection process, as we make up five of the committee’s seven members and over half of the Board. Recognizing the importance of this responsibility, all of us follow procedures properly and draw on our expertise and experience in deliberations. I believe our deliberations grew even more earnest after the Company introduced an outside director mutual evaluation system in fiscal 2023. Perhaps the process could be improved in some respects, but we are proud to have unanimously approved a new president by effectively executing the succession plan. To build on this success, we would like to focus on systematically grooming leaders in the future by giving younger candidates more chances to take on big responsibilities and by offering opportunities for managers to gain experience outside the Company.

We do not know how many years will pass until the next president is chosen, but by that time, the members of the Board of Directors, Nomination and Remuneration Advisory Committee, and secretariats will have changed significantly. Therefore, to ensure that the succession process is even smoother in the future, we are currently revamping current processes and operational procedures so that our experience and know-how remain useful. By fulfilling my responsibility to help pass on the progress we made in corporate governance reforms, I hope to contribute to raising the Company’s enterprise value in the years ahead.