Sustainability / GovernanceCorporate Governance

Corporate Governance Framework (as of June 21, 2024)

Board of Directors

The Company recognizes a role of Board of Directors as following: setting the direction we should aim for and creating a concrete business strategy toward the target and supervising the execution of business and business operations from an objective point of view. Ensuring this effectiveness of the role of Board of Directors, it is constituted of five Inside Directors and six Outside Directors: the former have a profound insight about our businesses, the latter have a wealth of experience in the business management and diverse expertise (including nine men and two women in the Board as a whole). Also, all of Outside Directors are independent. The details about them are indicated in the part titled “Information about Directors and Audit & Supervisory Board Members” in the Securities Report. The Outside Directors satisfy the “Standards for Independence of Outside Directors/Outside Audit & Supervisory Board Members” as defined by the Company. Therefore, we organize the Board of Directors in a way that allows the Outside Directors, who are in a majority on the Board of Directors, to state their opinions to the Company’s management from the objective and independent Directors’ point of view.
The President and CEO serves as the Chairperson of the Board of Directors, but in the unlikely event that proceedings are not conducted fairly and impartially, the Board of Directors confirms that the Outside Directors, who make up the majority of the Directors, will act as a deterrent and take measures such as correcting the Chairperson's conduct of the proceedings or appointing another person as the Chairperson.
The Board of Directors has a meeting once a month as a general rule. The Board of Directors meets to make decisions concerning important management issues and supervise the execution of duties and operations. In addition, five Audit & Supervisory Board Members, three of whom are the Outside Audit & Supervisory Board Members, also attend the Board of Directors meetings, where they express their opinions appropriately in case of necessity.
The term of office for Daicel’s Directors is one year. This short term of office enables Daicel shareholders to increase their involvement in the appointment of Directors. At the same time, it allows the Company to better clarify the management responsibilities of its Directors and thereby strengthen its corporate governance.
It is necessary for each Director to develop his/her knowledge of our business to ensure effective supervision of the execution of business. Therefore, we provide opportunities for mainly Outside Directors and Outside Audit & Supervisory Board Members to tour our manufacturing sites and provide an explanation of Daicel’s departments, products and technologies as well as the Board of Directors’ meetings.

The activities of the Board of Directors are as follows.

Number of meetings of the Board of Directors held in FY2024/3 was 15
Number of Board of Directors resolutions, discussions, and reports are as follows

FY2024/3 Board of Directors
Summary of Major Resolutions, Discussions, and Reports Related to Governance and Compliance

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Audit & Supervisory Board

The Audit & Supervisory Board comprises five members (four men and one woman), and a majority of three members are independent Outside Audit & Supervisory Board Members that meet the standards for independence of Outside Directors and Outside Audit & Supervisory Board Members. Outside Audit & Supervisory Board Members possess extensive experience in accounting, finance, legal affairs, and other disciplines, as well as broad insight into fields such as CSR, corporate governance, and business ethics, and fulfill auditing functions from a third-party, independent standpoint.
The Audit & Supervisory Board holds meetings to share information, deliberate on, and make decisions about important issues related to the Company’s audits. It also regularly attends Board of Directors meetings and important internal meetings held by Standing Audit & Supervisory Board Members, and regularly meets with the Representative Director, Outside Directors, and External Auditors. In addition, it works to improve auditing effectiveness through such means as communicating with the Internal Audit Department’s Auditing Division when needed.

The activities of the Audit & Supervisory Board Members are as follows.

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*Relevance [ ○: Responsible ●: Optional / Partially responsible ]

With respect to Key Audit Matters (KAM), along with attending regular meetings and gatherings with External Auditors to confirm brainstorming progress, the Audit & Supervisory Board communicate important information to the executive team as needed.

Nomination and Compensation Committee

The Nomination and Compensation Committee, which is chaired by an Outside Director and consists of Outside Directors, who are in the majority of the Board of Directors, and Representative Directors, reports on the personnel and remuneration of Directors, Executive Officers and other officers in response to requests from the Chairperson of the Board of Directors or Chairperson of the Audit & Supervisory Board, from the point of view of ensuring objectivity, transparency, and validity in the process of decision.
The Nomination and Compensation Committee is administered in line with the regulations for the Nomination and Compensation Committee. This committee has the authority to state the opinions in response to requests from the chairperson of the Board of Directors regarding the decision of the candidates for the Directors and the Audit & Supervisory Board Members, the appointment of executive officers, etc. and the compensation assessment process of Directors and Audit & Supervisory Board Members. The chairperson of the Board of Directors must report the response of the Nomination and Compensation Committee in the Board of Directors meetings regarding the decision of the candidates for Directors and Audit & Supervisory Board Members and the decision on compensation for Directors and Audit & Supervisory Board Members. The Board of Directors meets to make decisions concerning these topics in consideration of responses from the Nomination and Compensation Committee.

The activities of the Nomination and Compensation Committee are as follows.
Number of meetings of the Nomination and Compensation Committee in FY2024/3 was 9
Number of Committee agenda items are as follows

Executive Officers

The Company has an Executive Officer System in order to clearly delineate decision-making and supervisory functions from business execution functions and further energize corporate management through swift decision-making.
The Company’s 20 Executive Officers (five of whom are also Directors) execute operations as heads of SBUs, sites, or corporate divisions or as presidents of Group companies.
In accordance with the Rules Concerning Circulars (rules relating to job functions) these Executive Officers are given a certain measure of decision-making authority that they exercise to make swift decisions after accurately assessing business opportunities. Certain committees have an Executive Officer nominated by the President and CEO to serve as Chairperson in overseeing efforts to develop driven, responsible managers that will achieve the aims of the medium-term strategy and long-term vision of the Company.
These Executive Officers report important matters concerning business execution at monthly Board of Directors meetings and take advice from Directors and Audit & Supervisory Board Members to serve in supervising the Board of Directors.

Management Meetings

In the course of the President and CEO carrying out basic policies on corporate management as determined by the Board of Directors, the Management Meetings holds discussions and makes decisions about important business plans and business execution plans, as well as individual business operation execution.
Generally meeting twice a month, the committee consists of the President and CEO as well as Directors (excluding Outside Directors) and Executive Officers nominated by the President and CEO. The committee also has two Standing Audit & Supervisory Board Members that give their views on matters when needed.
The committee reports on the progress and results of its proceedings at monthly Board of Directors meetings and takes advice from Directors and Audit & Supervisory Board Members to serve in supervising the Board of Directors.

FY2024/3 Initiatives Based on the FY2023/3 Effectiveness Evaluation

In view of the Effectiveness Evaluation of FY2023/3, in FY2024/3 we spent more time reporting on the status of execution of management strategies, matters related to return on capital and stock prices, and the status of initiatives related to sustainability and human capital in order to further enhance discussions at the Board of Directors.

Compensation for Directors and Audit & Supervisory Board Members

1. 1Basic Policy
   1. （1）The Compensation of Directors and Audit & Supervisory Board Members shall be determined by Board of Directors’ resolutions for Directors and Audit & Supervisory Board Members’ discussions for Audit & Supervisory Board Members, within the scope of the total amount of compensation, etc. approved at the General Meeting of Shareholders.
   2. （2）The Compensation of Directors shall consist of monthly compensation, performance-based bonuses, and stock compensation, which will generally be paid according at a 55:30:15 ratio that is subject to change according to the position. This rule does not apply to Outside Directors, who shall be paid only monthly compensation. The compensation of Audit & Supervisory Board Members shall consist solely of monthly compensation.
   3. （3）To ensure objectivity, transparency, and validity regarding compensation, the Board of Directors makes its decisions following deliberations based on recommendations made by the Nomination and Compensation Committee.
2. 2Basic Policy on Compensation
   1. （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 fulltime.
      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 situations, among other factors.
   2. （2）Performance-linked remuneration

      Performance-linked remuneration of Directors is 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 evaluate things such as business growth, market expansion, and improvements in the earning power of our core business. These indicators are given a 50-50 weighting, and the basic amount of the performance-based bonus is calculated by multiplying the rank-based amount with a payment 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 shown in the table below.

      Indicator	Weight	Target achievement rate	Coefficient
      Consolidated net sales	50%	120% or more	200%
      		More than 100% but less than 120%	*1
      		100％	100%
      		More than 80% but less than 100%	*2
      		80% or less	0%
      Consolidated operating income	50%	120% or more	200%
      		More than 100% but less than 120%	*1
      		100％	100%
      		More than 80% but less than 100%	*2
      		80% or less	0%

      • *1These bonuses are proportional to the percentage that the target figure was achieved, within a range of 101% to 199%.
      • *2These bonuses are proportional to the percentage that the target figure was achieved, within a range of 1% to 99%.

      The final amounts of performance-based bonuses are determined by assessing the status of each Director from the perspectives of practicing Sustainable Management Policy and accomplishing Mid-Term Management Strategy and adding or subtracting up to 20% to or from the basic amounts of the performance-based bonuses.

   3. （3）Restricted Stock Compensation System
      Daicel introduced the 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.

*The executive compensation system is current as of April 1, 2024. Daicel does not have a system for paying retirement benefits to officers.

Return of Stock Compensation

For the purpose of ensuring the soundness of the stock compensation system for Directors, the Board of Directors has established a provision to confiscate all or part of the stock-compensation before or after the lifting of the transfer restriction at the discretion of the Board of Directors in the event of a certain reason such as an unlawful act.

Training for Directors, Audit & Supervisory Board Members and Executive Officers

Directors and Audit & Supervisory Board Members attend external seminars and training sessions in order to accomplish such things as acquiring the knowledge necessary for the performance of their duties and work tasks, as well as to update 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 employees such as senior employees (excluding Outside Directors).

In addition, we provide opportunities for Outside Directors to tour our manufacturing sites and receive an explanation of Daicel’s business activities so they can better understand our business and utilize their knowledge in discussions within Board of Directors meetings.
In FY2024/3, we conducted executive training on corporate ethics, explained the business of Polyplastics Co., Ltd., a major subsidiary of the Daicel Group, explained the business of the Material SBU, Safety SBU, and Smart SBU, and reported on our sustainability activities.

Education and Training Programs

Establishment of the Internal Control System

Daicel develops and manages a system of internal controls under its Basic Policy for Structuring the Internal Control System to ensure the appropriateness of its business operations as stipulated under Japan’s Companies Act.
Furthermore, Daicel has established the Internal Control Council chaired by a senior managing executive officer, who concurrently serves as the general manager of the Corporate Support Headquarters and comprising general managers of corporate departments as members, to accurately grasp the status of the establishment and management of these systems and to discuss related measures toward ultimately ensuring the effectiveness of internal controls throughout the Group.
Standing Audit & Supervisory Board Members also attend meetings held by the council as observers. The council provides a report on its activities to the Audit & Supervisory Board and Board of Directors, and the Board of Directors has confirmed that the Basic Policy is being implemented appropriately.

Basic Policy for Structuring Internal Control Systems [PDF：107KB]

Cross Shareholdings of the Company (investment shares held for purposes other than to be net assets)

In line with the above-mentioned policy, in FY2024/3 the Company sold all shares of two securities and some shares of four securities out of 22 listed securities held by the Company. We also newly acquired shares of one unlisted security. As of the end of FY2024/3, the Company held 47 stocks for a balance sheet amount of ¥71.2 billion. Although the Company proceeded with the sale of strategic shareholdings as planned, the rise in share prices has increased the market value of shares. This resulted in an increase in the amount recorded on the balance sheet.

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Cross Shareholdings of the Company (total investment securities and deemed holdings of shares for purposes other than to be net assets)

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Plan for Future Stockholding Reductions

In light of various circumstances that include the impact on the market and the financial strategies of the issuing entity, the Company plans to sell any stock that fails to satisfy our purpose for shareholding or that is deemed to be no longer economically practical due to factors that include changes in the business environment.
The balance of cross shareholdings not including deemed holdings of shares and cross shareholdings including deemed holdings of shares as a proportion of consolidated net assets from FY2025/3 to FY2026/3 is expected to be as shown below.
Although the reduction plan has not been revised, the ratio of strategic shareholdings to consolidated net assets is expected to increase due to the rise in stock prices compared to May 11 2023’s external announcement.

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*The Company’s reduction plan is based on information obtained by the Company as of May 26, 2023 and on certain assumptions deemed to be reasonable. Actual figures may diverge from the plan due to various factors.

General Meeting of Shareholder

We have considered the Annual General Meeting of Shareholders as a valuable opportunity to engage with our shareholders. For this reason, 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, to ensure that as many shareholders as possible to exercise their voting rights, we offer voting alternatives via postal mail or the Internet, using computers, smartphones and other devices, 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 Ordinary General Meeting of Shareholders held on June 23 2023, when COVID-19 had already been classified as a Class 5 disease, infection prevention measures were continued at the venue, while the time required for the General Meeting of Shareholders was limited to one hour or less, and the limit on the number of questions from shareholders was eliminated. With the safety of our shareholders as a top priority, we held the General Meeting of Shareholders with an emphasis on dialogue, using it as a valuable opportunity for communication with our shareholders.

IR Activities

Under the supervision of the officer in charge of IR, the Company promotes IR activities in cooperation with the management team including the President and CEO, and related departments such as the IR department. In line with the forementioned basic policy on Information disclosure, Daicel adopts a proactive approach toward its IR activities.

By holding quarterly financial briefing session and things such as individual interviews, interviews at conferences sponsored by securities companies, and small meetings with the President and CEO, the Company strives to promote communication, aspiring to foster better understanding of the Daicel Group among institutional investors. In FY2024/3, we held business briefings on the Life Sciences and Engineering Plastics businesses as well as small meetings with Outside Directors as opportunities to promote a better understanding of the Daicel Group's businesses.

We provide information to individual investors through our corporate website, and strive to enhance its content so that they can understand the Daicel Group in an easier-to-understand manner. Furthermore, we conducted an online survey of 2,000 individual investors to develop a deeper understanding of the Daicel Group and ask their opinion about Daicel Group.

Furthermore, we offer an email newsletter service providing information that Daicel has published on TDnet and EDINET. Please follow this link to sign up for our investor relations email newsletter.

Investor Relation

Feedback on Dialogue with Shareholders and Investors

The IR department feeds back to management and related departments as needed about the content of dialogues with shareholders and investors, their opinions and requests, and the content of analyst reports. In addition, the officer in charge of IR reports the dialogue to the Board of Directors and the IR department reports it to the management team on a quarterly basis at the meetings, which is used in discussions aimed at improving our corporate value.