Governance

Achieving Transparent and Sound Governance

Basic Policy on Corporate Governance

The Eiken Group conducts its business activities in accordance with the"EIKEN WAY", which is enshrined in its management philosophy, management vision and motto. To come to grips as an organization with the environment, society and governance (ESG), the Group establishes a sustainability policy and, by contributing to solutions to social issues, strives to achieve a sustainable society and improve the sustainability of its enterprise value.

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.

Corporate Governance Structure

Executive Remuneration System

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.

Specific Remuneration Policies

Remuneration for directors and executive officers is composed of fixed pay, performance-based pay and remuneration through transfer-restricted shares. In the model case for these types of remuneration, their ratio is 55% fixed pay, 30% performance-based pay and 15% remuneration through transfer-restricted shares. However, the ratio of actual amounts paid may differ from individual to individual.
With a strong awareness of the sustainable improvement of shareholder value and corporate value over the medium to long term, the ratio was changed to 50% fixed pay, 30% performance-based pay and 20% remuneration through transfer-restricted shares at the Remuneration Committee meeting held on May 23, 2024, in order to increase the ratio of restricted stock compensation.
For outside directors, whose position is independent of business performance, pay is not lined to performance and consists of fixed pay only.

1Fixed pay

Fixed pay is a fixed amount paid each month. It differs for directors and for executive officers and varies according to rank and duties.

2Performance-based pay

Performance-based pay is paid to full-time directors and executive officers. As an incentive to improve business results each fiscal year in a sustainable fashion, it is decided as a total amount based on the indices of achievement of targets for consolidated net sales and consolidated operating income in each fiscal year, degree of improvement over the previous fiscal year and ROE, which the Company regards as an especially important management index. For executive officers, criteria are added that measure achievement of strategic targets that cannot be measured using financial figures for business results, such as efforts to reorganize the Company’s operating base to achieve sustainable growth. As such, performance-based pay for executive officers is assessed and paid according to degree of achievement of duties assigned to each individual. The Company plans to introduce evaluation of sustainability.

3Remuneration through transfer-restricted shares

The purpose of remuneration through transfer-restricted shares is to clarify the incentives for directors (except outside directors) and executive officers and align their objectives of with those of shareholders, thereby motivating these officers to maintain keen focus on sustainably improving medium-to-long term shareholder and corporate value.

Total amount of compensation, etc. by officer category, total amount by type of compensation, etc., and number of eligible officers

 

Officer category Total amount of compensation, etc. (Millions of yen) Total amount by type of compensation, etc. (Millions of yen) Number of eligible officers (persons)
Fixed Compensation Performance based compensation Stock-based compensation stock option Restricted Stock-based compensation
Director
(Excluding outside directors)
58 39 13 2 2 3
Executive officers 281 122 109 12 37 11
Outside directors 51 51 6

 

 FY ending March 2024

(Notes)

1. The amount of compensation, etc., for two directors who concurrently serve as executive officers is included in the amount of compensation, etc. for each after separating compensation, etc. as a director and compensation as an executive officer.

2. The amount paid by Executive Officers does not include the salary of employees of Executive Officers who also serve as employees.

3. With regard to stock-based compensation-type stock options, the system has been abolished except for those that have already been granted in accordance with the resolution of the Compensation Committee held on November 18, 2022 to introduce a restricted stock compensation plan, and no new ones have been granted in the current fiscal year, but the amount of compensation recorded as expenses in the current fiscal year is stated for the amount granted in the previous fiscal year.

4. Of the above, stock-based compensation-type stock options and restricted stock compensation fall under the category of non-monetary compensation.

Promoting Executive Diversity

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.

  Results for FY2022 Target for FY2024 Target for FY2030

Female directors as share of directors

12.5% 20% 30%

Foreign-national directors as share of directors

20%

Female executive officers as share of executive officers

30%

Foreign-national executive officers as share of executive officers

20%

Director Skill Matrix

  Corporate management Global business Technological innovation Finance and accounting Law Medicine and healthcare
Morifumi Wada        
Tsugunori Notomi      
Hajime Watari    
Yukiya Hakozaki          
Kiyoshi Ishii          
Kiyomi Nakamura          
Akira Fujiyoshi    
Naoki Matsutake        

 

Notes on the director skill matrix

  1. The director skill matrix indicates the specialization, experience, etc. expected of each director.
  2. In addition to providing specialization, experience and so forth, all directors are expected to manage with focus on sustainability.