Corporate Governance

Basic Approach

Strengthening corporate governance is a key management initiative that enables us to enhance corporate value and achieve our social mission and responsibilities as a listed company.

Daicel maintains its agility by clarifying the responsibilities of each part of its organization and by adopting a management system that supports timely decision-making and implementation. Moreover, by actively soliciting external opinions to improve management transparency and fairness, Daicel will strive to maintain the soundness of its corporate management.

Corporate Governance Framework

The Company has established a corporate framework under which its Board of Directors makes management decisions in an efficient manner and fulfills its supervisory functions, and its Audit & Supervisory Board accomplishes its auditing and supervisory functions. Such a framework has enabled us to keep reinforcing our corporate governance. Specifically, by welcoming External Directors and allowing them to provide opinions and advice based on their expertise, Daicel is working to ensure that the decisions made by its Board of Directors are appropriate and the execution of director duties is effectively supervised. Daicel has also adopted an in-house company system to promote various initiatives aimed at strengthening collaboration among its production, sales, and R&D functions, improve productivity and strategic functions within its corporate departments, and reestablish its R&D structure. Moreover, we have adopted an Executive Officer System that has enabled us to clearly separate our decision-making, supervisory, and business execution functions. Such a clear division of roles has allowed us to bolster our business management structure and, consequently, corporate activities.

Corporate Governance Report(June 26, 2019)

Outline of the Corporate Governance Framework (as of June 21, 2019)
Item Content
Type of organizational structure Company with Audit & Supervisory Board
Chairperson of the Board Chairman
Number of Directors 10
Number of External Directors (number of independent directors) 5(5)
Number of Audit & Supervisory Board Members 5
Number of outside Audit & Supervisory Board Members (number of independent members) 3(3)
Number of Executive Officers (number of officers concurrently serving as directors) 21(4)
Number of female directors 1
Number of Board of Director meetings held
(average attendance rate of External Directors / Outside Audit & Supervisory Board Members)
15 in FY2019/3
(96.7% / 95.6%)
Term of Directors 1 year
Voluntary advisory body to the Board of Directors Nomination and Compensation Committee is composed of 8 Directors (including 5 External Directors) and chaired by an External Director
Body that deliberates important corporate matters and reports to the president Management Advisory Committee
Compensation system for Directors and Audit & Supervisory Board Members*
  • 1. Monthly compensation
  • 2. Performance-linked remuneration (excluding external directors and outside Audit & Supervisory Board members)
  • 3. Restricted Stock Compensation (excluding External Directors and Outside Audit & Supervisory Board Members)
Auditor Deloitte Touche Tohmatsu LLC

*The compensation system also applies to Executive Officers and others.
The ratio between the three types of compensations (1, 2, and 3) is roughly maintained at 65:20:15.

Corporate Governance Framework (as of June 21, 2019)

コーポレート・ガバナンス体制

Directors & Senior Management
Standards for independence of outside officers (PDF)

Effectiveness Evaluation of the Board of Directors

To maintain or improve the effectiveness of the Board of Directors, since FY2016/3 Daicel has been evaluating the performance of the Board of Directors once a year by asking Directors and Audit & Supervisory Board Members to complete a questionnaire. In FY2019/3, we implemented measures in response to the results of the previous year’s effectiveness evaluation to enhance discussions on management strategy, provide External Directors with necessary information for management decisions and supervision, and simplify terminology to ensure an adequate understanding of the issues.

We will conduct the following effectiveness evaluation for FY2019/3 and implement improvements based on the results to further enhance the effectiveness of the Board of Directors in FY2020/3.

  1. ①Evaluation Method
    • Questionnaires completed by Directors and Audit & Supervisory Board Members
  2. ②Outline of the Results
    • The Board of Directors engaged in productive discussions with external officers actively offering their opinions, and we were able to confirm that the Directors and the Audit & Supervisory Board Members gave a high rating to the board’s effectiveness. On the other hand, new issues have emerged, and we will continue to pursue efforts to further strengthen the effectiveness of the Board of Directors.
  3. ③Major Initiatives for FY2020/3
    • Further enhance discussions on mid- to long-term issues (discussions on management strategy, ESG, or SDGs)
    • Maintain and improve the appropriate board composition to enhance discussion
    • Provide sufficient and timely information necessary for productive discussions (prepare reference materials that are easy to understand, and create opportunities for external directors to understand business content)
  4. ④The Future of Effectiveness Evaluations
    • We would like to establish an effectiveness evaluation method that is appropriate for Daicel by considering a variety options such as conducting individual interviews and introducing third-party evaluation.

Training for Directors

Directors and Audit & Supervisory Board Members attend external seminars and training sessions in order to acquire the knowledge necessary for the performance of their duties and work tasks in addition to updating their skills. The Company bears the costs of these activities. It also provides annual compliance training for Directors, Audit & Supervisory Board Members, Executive Officers, and other senior employees (excluding external officers).

In addition, we provide opportunities for External Directors to tour our manufacturing sites and receive an explanation of Daicel’s business activities during the Board of Directors’ meetings so they can better understand our business and utilize their knowledge in discussions with in Board of Director’s meeting.

Appointment and Compensation of Directors

Appointment and Nomination Procedures for Directors and Senior Management

In nominating candidates for Directors and Audit & Supervisory Board Members and appointing senior management, Daicel in principle requires the individuals to agree with and inherit the Daicel Group’s Basic Philosophy, Conduct Policy, and Daicel Code of Conduct and to possess the necessary credentials and experience to realize mid- and long-term enhancement of the Company’s corporate value. The Company also nominates and appoints individuals with adequate personality, knowledge, motivation, ethical views, and management perspective to lead the Company. Decisions on nominations and appointments are made by the Board of Directors based on the advice of the Nomination and Compensation Committee.

Nomination and Compensation Committee

The Nomination and Compensation Committee was established as an advisory body on the nomination of Directors and executive officers and make recommendations on their compensation in response to consultation by either the chairperson of the Board of Directors or the Audit & Supervisory Board. To ensure transparency, validity, and objectivity regarding decisions on personnel and compensation, the committee is chaired by an External Director, and five external directors represent the majority of the committee’s eight members.

Director Remuneration

  1. Basic Policy
    1. Compensation of Directors and Audit & Supervisory Board Members shall be determined by Board of Directors’ resolution for Directors, and Audit & Supervisory Board members’ discussion for Audit & Supervisory Board Members within the scope of the total amount of compensation, etc., approved by the General Meeting of Shareholders.
    2. Compensation of Directors shall consist of monthly compensation, performance-based bonuses, and stock compensation, which will generally be paid according at a 65:20:15 ratio. This rule does not apply to External Directors, who shall be paid only a monthly compensation. The compensation of Audit & Supervisory Board Members shall consist solely of monthly compensation.
    3. To ensure objectivity, transparency, and validity regarding compensation, the Board of Directors makes its decision following deliberations based on recommendations made by the Nomination and Compensation Committee.
  2. Basic Policy on Compensation
    1. Monthly Compensation
      • In principle, the monthly compensation of Directors and Audit & Supervisory Board Members is a fixed amount paid in accordance with internal rules that are determined by the Directors’ duties and job titles in business execution and as to whether or not the Audit & Supervisory Board Members are full-time.
        Regarding monthly compensation, the Company has revised the compensation to an appropriate and fair level reflective of its business performance, accomplishment of medium- and long-term business plans, and social situation, among other factors.
    2. Performance-based Bonuses
      • Performance-based bonuses of Directors are paid in accordance with the accomplishment of performance indicators designated by the Board of Directors. Currently, net sales and operating income are used as the indicators to emphasize business growth, market expansion, and improvements in the earning power of our core business. These indicators are given a 50-50 weighting, and the bonus amount is calculated by multiplying the rank-based amount with a payout rate that fluctuates between 0% and 200% depending on the level of accomplishment of the performance indicators. The payout rates linked to the indicators are calculated as follows.
        • Calculate the standard deviation (Ʃ, sigma) based on the average value of net sales over the past 5 years.
        • Draw a line based on 3 points: the value of net sales for the relevant fiscal year, which serves as an indicator; the value that is 1Ʃ higher than the first figure and the value that is 1Ʃ lower than the first figure.
        • The payout ratio is determined by plotting the actual net sales of the relevant fiscal year on that line.
          (The same calculation is used to determine the payout ratio based on operating income.)
    3. Restricted Stock Compensation System
      • Daicel introduced Restricted Stock Compensation System to step up value-sharing with shareholders and motivate directors to contribute more to medium- to long-term improvement in corporate value. The stocks cannot be transferred for a period of 30 years, and the Board of Directors decides on an amount for each eligible individual, which is then divided by the stock price at a certain point to calculate the number of shares to be awarded.
Category Number of Recipients Amount (Annual)
Cash Compensation Stock-based Compensation Total
Monthly Compensation Performance-based Bonus
Directors (External Directors) 10
(6)
238 million yen
(49 million yen)
48 million yen
(-)
52 million yen
(-)
339 million yen
(49 million yen)
Audit & Supervisory Board Members (Outside Members) 6
(4)
96 million yen
(37 million yen)
-
(-)
-
(-)
96 million yen
(37 million yen)
Total 16 335 million yen 48 million yen 52 million yen 435 million yen

Note: The above figures for the number of recipients and amount include 2 Directors and 1 Audit & Supervisory Board Member who retired as of the 152nd General Meeting of Shareholders, held on June 22, 2018.

Management Advisory Committee

The Management Advisory Committee is in charge of deliberating on such important corporate matters as the formulation of Group strategies and business restructuring based on such strategies. By doing so, the committee serves as an advisory body for the President. The committee comprises the President, Directors (excluding External Directors), and Executive Officers designated by the President, and the committee convenes these members on an as-needed basis.

Internal Control Systems

In accordance with basic policy for structuring internal control systems, the Daicel Group works to administer and enhance its internal control systems. Furthermore, Daicel has established the Internal Control Council as a body charged with grasping accurately the status of the establishment and management of these systems in an effort to ensure the effectiveness of internal controls throughout the Group.

Basic Policy for Structuring Internal Control Systems

Communication with Shareholders and Investors

Appropriate Information Disclosure and Constructive Dialogue

Daicel encourages fair evaluation of its corporate value by following its disclosure policy to foster accurate understanding of the Company among its stakeholders, including shareholders and investors. With the aim of building relationships of trust with all its stakeholders, Daicel has opted for a basic policy of disclosing corporate information in a timely, impartial, accurate, and proactive manner on an ongoing basis. We also carry out IR activities to engage in dialogue with our shareholders and investors to further enhance the company’s value.

Our disclosure policy, including our basic policy on information disclosure, is available on our website.

General Meeting of Shareholders

We have considered the Annual General Meeting of Shareholders as a valuable opportunity to engage with our shareholders. Daicel posts the convocation notice for its Annual General Meeting of Shareholders on its website prior to distributing it by postal mail, aiming to provide shareholders with sufficient time to examine the agenda items. Moreover, as we would like as many shareholders as possible to exercise their voting rights, we offer voting alternatives via postal mail or the Internet for those who are unable to attend the meeting. To facilitate their further understanding of initiatives of the Daicel Group, we are striving to provide easy-to-understand answers to questions voiced by shareholders.

At the Annual General Meeting of Shareholders held on June 22, 2018, we set up an exhibition booth outside the venue with the aim of showcasing the Daicel Group’s products and technologies.

After the closure of the meeting, we invited attendees to join a casual gathering aimed at facilitating interaction between shareholders and Daicel’s officers and Directors. This enabled Daicel’s officers to engage in in-depth dialogue with attendees.

IR Activities

In line with the aforementioned basic policy on Information disclosure, Daicel adopts a proactive approach toward its IR activities. By holding quarterly results briefings as well as individual interviews, small meetings, and facility tours, the Company actively strives to promote communication, aspiring to foster better understanding of the organization among institutional investors. We also reach out to individual investors by participating in investment events hosted by securities companies to offer business briefing for individual investors and by organizing facility tours for individual shareholders as an opportunity for dialogue. In FY2019/3, we conducted a web-based questionnaire of 2,000 individual investors to develop a better understanding of our operations and obtain their feedback on the Daicel Group.

For Investors

Events Occasions
(FY2019/3)
Content
Financial briefing sessions for analysts and institutional investors 4 Held on a quarterly basis; the interim and period-end results were presented by the president, while the first and third quarter results were explained via conference calls hosted by the Investor Relations Department
Facility tours for analysts and institutional investors 1 Held a business briefing together with a facility tour (FY2019/3 tour took place at the Daicel Harima Plant)
Individual interviews with analysts and institutional investors Approx.
200
Conducted individual interviews and conference calls with analysts and institutional investors
Small meetings with domestic institutional investors 2 President attended these meetings to exchange opinions with domestic institutional investors
Participation in conferences for overseas investors 4 Participated in domestic conferences for overseas investors, with the officer in charge of IR conducting individual interviews
Individual visits to overseas investors 3 Either the president or the officer in charge of IR visited overseas shareholders and investors (in North America, Europe, and Asia)
Business briefings for individual investors 4 Participated in investment events for individual investors hosted by the head office or branch offices of securities companies and offered business briefings
Facility tour for individual shareholders 1 Held business briefing and facility tour (FY2019/3 tour took place at the Daicel Innovation Park)

Facility tour for domestic institutional investors (Harima Plant)

Facility tour for individual shareholders (Innovation Park)