To enable thorough discussions based on diverse opinions and prompt, rational decision-making, the Board of Directors consists of members that satisfy the extensive level of experience and education required by the Company.
In FY2023, the Board of Directors deliberated on authorizing the maintenance of takeover defense measures and introduction of a Board Benefit Trust system (presented as agenda items at the 165th Annual General Meeting of Shareholders) and authorizing quarterly financial results, financial summaries, and year-end reports.
Moreover, the Board received regular reports on monitoring outcomes regarding the progress status of the Mid-term Management Plan SPEED 25/30 from the executive departments, as well as reports on the status of progress regarding sustainability, reports summarizing large-scale capital investments, and reports on financing and investment in affiliated companies.
The Outside Directors also expressed useful comments and opinions from an objective and expert standpoint based on their extensive experience, while the Board of Directors as a whole appropriately shared information in a timely manner and discussed such information from various perspectives.
Hodogaya Chemical considers the appointment of Directors as one of the most important matters for the company, where the Board of Directors determines the selection criteria for candidates for Internal and Outside Directors and determines the selection of candidates for Directors, including the next CEO, based on deliberations by the Nominating and Compensation Committee.
Criteria for appointing inside directors include having personal qualities befitting a company manager and possessing rich experience and education. Criteria for appointing outside directors include having accumulated rich experience and possessing an extensive track record and knowledge.
Individuals deemed to lack these qualities or deemed to have contributed to significantly poor business performance are recognized as having cause for dismissal.
Our website’s section disclosing the Reference Documents of the Annual General Meeting of Shareholders provides the professional backgrounds and other information on director candidates as support for being appointed candidates for director.
Board of Directors Skills Matrix
The following seven skills were selected for the Board of Directors Skill Matrix for achieving the SPEED 25/30 Mid-term Management Plan.
A partial review was performed in May 2023, and a human resources strategy was added due to greater weight put on human resources in our business strategy.
| Name | Corporate management |
Law & risk management |
Finance & accounting |
Human resources strategy |
Business strategy |
R&D, technology and production |
International business |
|---|---|---|---|---|---|---|---|
| Yuto Matsumoto | 〇 | 〇 | 〇 | 〇 | 〇 | ||
| Kaoru Kasahara | 〇 | 〇 | 〇 | ||||
| Shinichi Sato | 〇 | 〇 | 〇 | ||||
| Shinichi Matsuno | 〇 | 〇 | 〇 | 〇 | |||
| Shuji Kato (outside) | 〇 | 〇 | 〇 | 〇 | |||
| Masaki Sakai (outside) | 〇 | 〇 | 〇 | 〇 | |||
| Shinobu Fujino (outside) | 〇 | 〇 | 〇 |
* The skill matrix includes the areas expected for each individual. It is not meant to be a comprehensive list of all forms of expertise and experience they may possess.
Reasons for appointment as director
Director
| Name | Reasons for appointment |
|---|---|
| Yuto Matsumoto | Since joining the Company in April 1983, Mr. Matsumoto has accumulated experience in the R&D Department, followed by moving to the Sales Department (including experience overseas), and then being appointed President in November 2016. Mr. Matsumoto has been deemed qualified to be a Company director due to possessing extensive experience and knowledge, while also having carried out his professional duties responsibly. |
| Kaoru Kasahara | Since joining the Company in April 1981, Mr. Kasahara has worked in the R&D and Production Departments and has accumulated extensive experience and knowledge as the current officer in charge of the Group’s Production Departments. He has been deemed qualified to be a Company director due to this impressive track record, while also having carried out his professional duties responsibly. |
| Shinichi Sato | Mr. Sato joined the Company in March 2014 and has been engaged in operations of the Internal Control Department and Legal Department of the Group while utilizing his extensive experience and knowledge gained during his time in the banking field. He is considered a suitable member of the board as he adeptly performs his responsibilities overseeing the promotion of sustainability, accounting, human resources, internal controls, internal audits, and the Secretary Department. |
| Shinichi Matsuno | Mr. Matsuno joined the company in April 1981, and he is involved in a wide range of duties in the research and development, purchasing, sales, and planning divisions, and he is a factory manager. He has a wide range of work experience and knowledge from the company and group companies, which he applies to his work. He can be expected to adequately perform his duties, and hence is considered a suitable member of the board and auditing committee. |
Outside Directors
| Name | Reasons for appointment |
|---|---|
| Shuji Kato | Mr. Kato has accumulated wide‑ranging professional experience in government agencies and other posts. Furthermore, he possesses extensive knowledge and experience as a manager and was appointed a Company director and Audit & Supervisory Committee member in June 2015. He has been deemed qualified to be a Company director and Audit & Supervisory Committee member due to having carried out his professional duties responsibly before and after that appointment. The Company has high expectations for Mr. Kato to utilize his experience in trade and industry administration, international business, and corporate management, while also fulfilling a role supervising the Company’s decisions on the fundamental direction of business, as well as supervising directors who have been entrusted with business execution. The Company provided notice to the Tokyo Stock Exchange on Mr. Kato being an independent director, in accordance with the rules and regulations of the exchange. |
| Masaki Sakai | Since being appointed Company director and Audit & Supervisory Committee member in June 2019, Mr. Sakai has brought his knowledge and experience from many years of government employment inside and outside Japan to bear on his work duties at the Company. He has been deemed qualified to be a director and Audit & Supervisory Committee member due to the expectation that he will carry out his professional duties responsibly. The Company has high expectations for Mr. Sakai to utilize his experience in agriculture, forestry and fisheries administration, as well as his experience with international business, while also fulfilling a role supervising the Company’s decisions on the fundamental direction of business, and supervising directors who have been entrusted with business execution. The Company provided notice to the Tokyo Stock Exchange on Mr. Sakai being an independent director, in accordance with the rules and regulations of the exchange. |
| Shinobu Fujino | Mr. Fujino was previously only involved in the business as an outside director, but he has extensive experience working for businesses, specialized knowledge as a career counselor, and a wide range of experience and knowledge as an outside director. He uses this to perform his duties for the company, and he can be expected to adequately perform his duties, and hence is considered a suitable member of the board and auditing committee. He is also expected to use his extensive knowledge and experience on training personnel, organizational development, and promoting diversity to fulfill a role supervising other board members tasked with setting the basic direction of the company and executing operations. If he is chosen as a board member and member of the auditing committee, he will be reported as an independent director in accordance with the requirements of the Tokyo Stock Exchange. |
At Hodogaya Chemical, candidates for independent outside directors are selected from among those who meet the Tokyo Stock Exchange’s requirements of independence and possess extensive experience and knowledge.
Accordingly, the Company has registered three of the Outside Directors as independent officers specified by the Tokyo Stock Exchange, and if the substitute Director who is an Audit & Supervisory Committee Member is appointed as Director, the Company intends to register him as an independent officer specified by the exchange.
Note that one of the substitute Directors who are Audit & Supervisory Committee Members had been employees of a financial institution which is a major lender to Hodogaya Chemical; however, 9 years have elapsed since they left said financial institution. Therefore, the Company deems that there are no concerns over their independence.
Furthermore, the Company does not have any transactional relationships with the three Outside Directors.
In FY2023, Outside Directors not only attended Board of Directors meetings, Audit & Supervisory Committee meetings, and Nominating & Compensation Committee meetings, but also did the following.
Status of attendance at meetings of the Board of Directors, Audit & Supervisory Committee, and Nominating and Compensation Committee
| Number of Company shares held | Number of Board of Directors meetings attended in FY2023 |
Number of Audit & Supervisory Committee meetings attended in FY2023 |
|
|---|---|---|---|
| Representative Director, President and CEO Yuto Matsumoto |
8,900 share | 13/13 | ー |
| Director and Senior Managing Executive Officer Kaoru Kasahara |
6,100 share | 13/13 | ー |
| Director and Managing Executive Officer Shinichi Sato |
3,200 share | ー | ー |
| Director (Audit & Supervisory Committee Member) Shinichi Matsuno |
6,200 share | ー | ー |
| Outside Director (Audit & Supervisory Committee Member) Shuji Kato |
2,000 share | 13/13 | 13/14 |
| Outside Director (Audit & Supervisory Committee Member) Masaki Sakai |
700 share | 13/13 | 14/14 |
| Outside Director (Audit & Supervisory Committee Member) Shinobu Fujino |
100 share | 10/10* | 10/10* |
* She has attended all meetings since taking up position as Director in June 2023.
Hodogaya Chemical became a Company with an Audit & Supervisory Committee in June 2015, and the President has been entrusted with the decision-making for all matters except the items for arbitrary decision set forth in the Companies Act.
This means that Hodogaya Chemical’s Board of Directors has adopted a monitoring model to commit to its role as a monitor.
To verify whether or not this monitoring function is effective, the Audit & Supervisory Committee as well as the Board of Directors is evaluated based on the evaluation criteria comprising the following nine items every year.
This helps strengthen the Board of Directors’ monitoring function and expedite the procedures for managerial decision-making and business execution.
Evaluation process
Evaluation Results for FY2023
| Evaluation Standards | Status of Initiatives |
|---|---|
| 1. Election of multiple independent Outside Directors |
|
| 2. Narrowing down matters for resolution |
|
| 3. Establishment of appropriate reporting matters |
|
| 4. Deliberation on agenda items related to personnel affairs and remuneration of Directors |
|
| 5. Provision of proper explanations beforehand to independent Outside Directors |
|
| 6. Preparation of informative and easy-to-understand materials |
|
| 7. Appropriate time management (meeting frequency, time for deliberations, etc.) |
|
| 8. Implementation of effective and efficient organizational audits |
|
| 9. Follow up and respond to new trends in corporate governance and the best way to operate the Board of Directors |
|
| Overall Evaluation for FY2023 |
As outlined in the table above, the Board of Directors satisfies the evaluation standards and achieves the following two items, allowing for the conclusion that the Board of Directors’ functions as intended
|
| Future Initiatives |
|
Hodogaya Chemical has established a policy on the election and dismissal of Directors and the election and dismissal of a Representative Director and of Directors with special titles. In regard to the selection of the Representative Director, the Company emphasizes specific facts, including the qualities required of Director candidates and that the candidates possess a dignified presence as part of upper management. In addition, the Company requires candidates to possess the ability to engage in management from a commanding perspective and management that captures the trends and changes of the times, where the Board of Directors makes a final decision following deliberations by the Nominating and Compensation Committee.
Upon assuming office, the Internal Directors of Hodogaya Chemical are provided with training to acquire knowledge of the roles and responsibilities expected of directors, laws and regulations, as well as compliance.
Independent Outside Directors are also provided explanations of Hodogaya Chemical’s business, finances, organization, and other aspects, so that they can fulfill the roles and responsibilities expected of them when they assume office. Thereafter, they deepen their understanding of the company by visiting offices in Japan and overseas to check on the situation.
Additionally, training sessions for directors by outside attorneys are held on a regular basis.
Hodogaya Chemical positions its Directors’ compensation plan as a priority item for corporate governance. The basic requirements in determining the compensation of Directors include: 1. Compensation linked to performance; 2. Incentives to improve corporate value; 3. Linkage to shareholder interests; and 4. Securing and retaining talented personnel.
In consideration of the above, individual director compensation is paid to directors within the range approved at the General Meeting of Shareholders.
Determinations on the individual compensation of directors (excluding directors who are Audit & Supervisory Committee members) are made by resolution of the Board of Directors at the discretion of representative directors; however, bylaws stipulate that representative directors shall determine compensation amounts after deliberations by the Nominating and Compensation Committee.
Specifically, in order to appropriately incentivize contributions to the Company’s sustainable growth, since FY2016, the Company has adopted a stock‑based compensation plan for directors that, in addition to the existing compensation linked to short‑term performance, adds compensation linked to mid-to long‑term performance.
As a result, the ratio of performance‑linked compensation to overall director compensation has been approximately 40%, while, within this 40%, the ratio of compensation linked to short‑term performance versus compensation linked to mid‑ to long‑term performance has been approximately 25% vs. 15%.
Compensation linked to medium- and long-term performance will transitioned to a Board Benefit Trust system starting in October 2023.
Directors who are Audit & Supervisory Committee members receive only a fixed‑amount base compensation in consideration of the fact that they are not involved with executive functions.
Composition of director compensation
Total director compensation, etc.
| Type of director | Total compensation (millions of yen) |
Totals of different types of compensation (millions of yen) | No. of applicable directors (persons) |
||
|---|---|---|---|---|---|
| Base compensation (cash) |
Performance‑linked compensation (cash) |
Non‑monetary compensation (company stock) |
|||
| Directors (excluding Audit & Supervisory Committee Members) (excluding Outside Directors) |
99 | 63 | 15 | 19 | 3 |
| Directors who are Audit & Supervisory Committee Members (excluding Outside Directors) |
15 | 15 | — | — | 1 |
| Outside Directors | 23 | 23 | — | — | 4 |
| Total | 138 | 102 | 15 | 19 | 8 |
* Amounts are rounded down to the nearest million yen.