Achieving Transparent and Sound Governance

Eiken Chemical Co., Ltd. recognizes that corporate governance with a strong focus on the shareholders’ perspective is one of its most vital management issues for the purposes of enhancing management soundness, speed and transparency and improving enterprise value, and carries out activities on that basis. For this reason, the Company is organized as a “company with nomination committee,” maintaining separation of the executive and supervisory functions of management. Important matters related to basic management policy are decided through the deliberations of the Board of Directors, while execution of business is conducted swiftly and smoothly based on in-house rules and regulations and through an appropriate chain of instruction and command.

In accordance with its code of corporate governance, Eiken Chemical discloses governance-related matters through the publication of a Corporate Governance Report.

As a company with a Nominating Committee, etc., the Board of Directors appoints three internal directors and five outside directors. The Chairman of the Board of Directors is a non-executive internal director who is separate from the President.
The Nominating Committee consists of three members, two outside directors and one internal director, and is chaired by an outside director. Based on the selection criteria, the Company decides on the content of the proposal at the General Meeting of Shareholders regarding the election of directors and the appointment of executive officers.
The Compensation Committee consists of three members, two outside directors and one internal director, and is chaired by an outside director. The Company has decided on policies for determining individual remuneration for directors and executive officers, as well as individual remuneration.
The Audit Committee consists of four members, three outside directors and one internal director, and is chaired by an outside director. The Board of Directors decides on matters related to the basic policy and implementation plan for audits, as well as the content of proposals such as the appointment of an accounting auditor to be submitted to the General Meeting of Shareholders. With regard to conflict-of-interest transactions by Executive Officers, the "Executive Officer Regulations" stipulate that when an executive officer intends to enter into a transaction with the Company, he or she must disclose important facts about the transaction in advance and obtain the approval of the Board of Directors.

Eiken Chemical is organized as a company with nomination committee. The Company determines remuneration for directors and executive officers on an individual basis in accordance with the resolutions of the Remuneration Committee, a majority of whose members are outside directors. To incentivize executives to bolster the Company’s business results and contribute to shareholder value, the criteria for determining remuneration are decided in consideration of each executive’s responsibilities based on factors such as rank and executive duties, the Company’s business results, the management environment and industry norms.

Compensation for Executive Officers consists of fixed compensation, performance-linked compensation, and restricted stock compensation. In addition, the compensation of Outside Directors, who are independent of business execution, is not linked to business performance and consists of fixed compensation and restricted stock compensation. In accordance with the resolution of the Compensation Committee held on November 18, 2022 to introduce a restricted stock compensation plan, the stock-based compensation system has been abolished.
The ratio of basic compensation, performance-linked compensation, and restricted stock compensation is set at 90%:0%:10% for Directors and 50%:30%:20% for Executive Officers as model cases.

The composition of the Board of Directors of Eiken Chemical is well balanced in terms of knowledge, skills and experience in global business and sustainability, as required to achieve the Company’s management policy and management plans based on the management vision.  Its members were selected with an emphasis on diversity, including diversity of gender, nationality, professional background and age. Nominees for in-house director are chosen for their ability to fulfill the roles of deciding important matters of corporate management and supervision of executive officers in the execution of their duties.  Outside directors are nominated for highly specialized knowledge, skills and abundance of experience that cannot be obtained from in-house directors alone. Each director is expected to leverage his or her capabilities born of experience to maximum effect to decide important matters of basic management policy and supervise the execution of duties.

The Board of Directors appoints executive officers in consideration of executive-officer selection criteria, following consultation with the Nomination Committee regarding each candidate.