Sustainability / GovernanceCorporate Governance

Outline of the Corporate Governance Framework (as of June 22, 2022)

The Company appoints Outside Directors to apply their expertise by providing opinions and advice. The Outside Directors account for the majority of the Board of Directors of the Company. The Company expects the Outside Directors to strengthen the appropriateness of the decisions made by its Board of Directors and the supervision of the execution of Director duties. On the other hand, the Company has adopted an Executive Officer system. The adoption of this system has enabled the Company to clearly separate its decision-making, supervisory, and business execution functions. Such a clear division of roles has allowed the Company to bolster its business management structure so that it has the mobility and institutes that can promptly adapt to the changes in the business environment. The Company strives to improve our corporate value continuously in reasonable consideration of stakeholders.

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*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.

ESG DataCorporate Governance

Corporate Governance Framework (as of June 22, 2022)

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, Supervising the execution of business and business operations from the objective point of view. Ensuring this effectiveness of the role of Board of Directors, it is constituted of four 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 eight 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 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 in line with the regulations for the Board of Directors.
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.

Audit & Supervisory Board

The Audit & Supervisory Board comprises five members (four men and one woman), and a majority of three members are independent Audit & Supervisory Board Members that meet the Standards for Independence of Outside Directors/Outside Audit & Supervisory Board Members. Audit & Supervisory Board Members possess extensive experience and wide-ranging knowledge concerning accounting, finance, legal affairs, management, and other disciplines, and fulfill auditing functions from a third-party, independent standpoint.
The Audit & Supervisory Board holds meeting to share information, deliberate on, and make decisions about important issues related to the Company’s audits. It also regularly attends the 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 Auditing Office, the Company’s internal auditing division, as needed.

Nomination and Compensation Committee

The Nomination and Compensation Committee, which is chaired by Outside Directors and consists of Outside Directors, who are in the majority of the Board of Directors, the Chairperson 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.

Executive Officers

The Company has adopted an Executive Officer System. This system has enabled the Company to isolate its decision-making, supervisory structure, and, consequently, its corporate activities in a clear manner. through reinforcing the system of business execution by prompt decision-making for active corporate management.
Currently, this system comprises 21 Executive Officers (four of whom serve concurrently as Directors).
The Executive Officers include the officers in charge of SBU (Strategic Business Unit), heads of SBU, heads of in-house companies, heads of sites, heads of corporate divisions, and the presidents of Group Companies, who administer corporate affairs.
Each Executive Officer is given definite authorities in line with the regulation approval processes (the regulation of administrative authority). The Executive Officers seek to make decisions promptly, taking business opportunities appropriately. In addition, the Company is committed to developing human resources with a sense of independence and responsibility who deserve board members by delegating authority to promote the Mid-Term Strategy and Long-Term Vision. For example, the executive officers appointed by the President and CEO serve as chairs of some committees. On the other hand, important subjects of all the execution of duties are reported in the Board of Directors meetings every month in line with the regulations of the Board of Directors. The Directors and Audit & Supervisory Board Members indicate and advise that the execution of duties conducted by executive officers is controlled by the supervision of the Board of Directors.

Management Meetings

Daicel has established the Management Meetings as a body to deliberate on and make decisions about prior to its President & CEO implementing the basic corporate management policies formulated by the Board of Directors.
The Management Meetings consists of the President & CEO, Directors (excluding Outside Directors) and the Executive Officers selected by the President & CEO as its members. The Management Meetings convene, in principle, twice a month. Also, two Standing Audit & Supervisory Board Members attend the meetings and they can express their opinions appropriately in case of necessity.
The processes and results of the meetings are reported at the Board of Directors’ meetings every month in line with the regulations of the Board of Directors. The Board of Directors and Audit & Supervisory Board Members indicate and advise that the execution of duties conducted by executive officers is controlled by the supervision of the Board of Directors.

FY2022/3 Initiatives Based on the FY2021/3 Effectiveness Evaluation

In view of the Effectiveness Evaluation of FY2021/3, in FY2022/3 we took steps to further enhance discussions at meetings of the Board of Directors. This includes enhancing reports on the content of discussions at Management Meetings and other meetings, along with departmental strategies and progress made, as well as spending time discussing management strategies.

Compensation for Directors and Audit & Supervisory Board Members

1. 1Basic Policy
   1. (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. (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 Outside Directors, who shall be paid only a 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 decision 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 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. (2)Performance-linked remuneration
      Performance-linked remuneration 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 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 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 (σ, sigma) based on the average value of net sales over the past five years.
      • Draw a line based on three points: the value of net sales for the relevant fiscal year, which serves as an indicator; the value that is 1σ higher than the first figure, and the value that is 1σ 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 final amount of performance-based bonuses are determined by assessing the status of each Director from the perspectives of practicing sustainable management policies and accomplishing medium-term strategies, and adding or subtracting up to 20% to or from the basic amount of the performance-based bonus.
   3. (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.

*Daicel does not have a system for paying retirement benefits to officers.

Training for Directors and Senior Management

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 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 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.

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 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：47KB]

Verification by the Board of Directors

We will periodically verify the appropriateness of things such as the purpose, the quantitative and qualitative benefits arising from business transactions, and the economic rationality of the risks held of all stocks that we possess. We report the results of this verification to the Board of Directors, and the content is examined carefully.
As a result of the verifications, in FY2022/3 we sold all our shareholding in one of three listed stocks and part of our shareholding in two listed stocks. We also sold all our shareholding in one unlisted stock.

Standards Regarding the Exercise of Voting Rights Associated with Cross-Shareholdings

Regarding voting rights related to strategic shareholdings, we exercise those rights with due consideration for avoiding any serious impacts on Daicel and our Group’s purposes of possession, contributing to sustainable growth and enhancing mid- and long-term corporate value of the investee company, and contributing to the common benefits of shareholders.

General Meeting of Shareholder

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, 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.
The Annual General Meeting of Shareholders was held on June 22, 2022, amid the COVID-19 pandemic. During the meeting, we asked shareholders to wear masks and placed alcohol-based disinfectants near the reception desk and contactless thermometers near the entrance as measures to prevent infection. Inside the buildings, we let shareholders seat at a greater distance from each other compared to past meetings, and staff disinfected the microphones after use by each shareholder. Daicel’s Directors and organizing staff also checked their temperatures and physical condition prior to participating and wore masks during the meetings.
We will continue to place importance on dialogue with shareholders and hold General Meetings of Shareholders with thorough safety considerations.

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, the Company strives to promote communication, aspiring to foster better understanding of the Daicel Group among institutional investors. In FY2023/3, business briefings on the Healthcare, Smart and Materials were held as opportunities to promote a better understanding of the Daicel Group's businesses. In view of the COVID-19 pandemic, these IR events, including the financial briefing session, were held not only in person but also online teleconferencing to allow investors to participate as much as possible.

With respect to individual investors, we participated in individual investor events hosted by securities companies and explained our business, in addition to providing information via our corporate website. 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.