Mr. Chikatomo Kenneth Hodo has many years of involvement in the management of Accenture Japan Ltd., which provides management consulting and IT services. He possesses a wealth of experience as a member of corporate management and wide-ranging insight regarding digital business. Mr. Hodo assumed the post of Outside Director of the Company in June 2018 and the post of Chairman of the Board in June 2022
Upon assuming the post of Chairman of the Board
I assumed the post of Chairman of the Board in June 2022. Given the tremendous contributions that previous Chairman Matsuzaki made to improving the effectiveness of and evolving upon corporate governance at the Company for many years, I feel the weight of responsibility as his successor.
This is the first time at the Company for an Outside Director to assume the post of Chairman. After I was approached with the offer to take up that post, I asked people who had served as Chairman at the company with three committees to hear what they had to say. Upon doing so, it was pointed out to me that an Outside Director serving as Chairman resulted in more active remarks by officers on the executive side of things, reason being that when outside individuals engage in the operation of agenda in the capacity of Chairman, they become able to speak up without concerning themselves over the internal hierarchy.Additionally, in the "Practical Guidelines for Independent Directors” formulated by the Ministry of Economy, Trade and Industry (METI) in 2020, it is stated that “Ideally,independent directors should proactively engage in (1) appropriate agenda-setting for the board of directors and (2) the devising of ideas for operation, etc. to facilitate the vitalization of the board of directors.”
Based on the above, I concluded that an Outside Director serving as Chairman at the Company as well could provide a springboard for us to take corporate governance here a further step forward, and therefore accepted the offer presented to me. I will go beyond monitoring business execution and providing relevant advice to leverage the external knowledge, perspectives from capital markets and other elements that only Outside Directors can bring to the table in providing active backup to the devising of strategy by the executive team. My hope is that we will be able to advance to such a new stage of governance. I myself serve as an Outside Director at an asset management company and as an advisor to a private equity fund. Going forward, based on my experience and knowledge gained in those roles, I have faith that I can engage our shareholders as well as a wide range of other stakeholders, both internal and external, from multiple sides.
Furthermore, as of the Ordinary General Meeting of Shareholders that convened in June 2022, the Company’s Board of Directors consists of five Outside Directors and four Inside Directors, with the former comprising the majority. While this number last fiscal year was five and six, which was enough to satisfy the “at least one-third of directors as independent directors” requirement under the Corporate Governance Code, I am proud that we have realized a majority and in doing so, taken a considerable step forward. Moreover, from the angle of knowledge, experience and ability, our Outside Directors constitute an ideal balance of members. With our Outside Directors, Inside Directors and executive bodies working in concert more than before, we will accelerate the transformation of our business portfolio.
Operations Policy of the Board of Directors for FY2022
We will operate the Board of Directors in fiscal 2022 based on the following three overarching directions.
The first of those directions is to narrow down the strategic domains that we should focus on, execute a PDCA cycle and oversee its progress. For fiscal 2022, we have set forth the following three domains: “transformation of our business portfolio,” “improvement of our executive capability,” and “recovery in the trust in us and our self-confidence.” Despite espousing a transformation in our business portfolio as one of our key strategies, we have been unable to obtain the outcomes dictated by our plans, and our business performance has been sluggish. Up to this point, we have discussed areas such as the factors behind that and the issues that we should resolve at meetings of our Board of Directors, but have not reached a breakthrough in the situation. In fiscal 2022, while executing a PDCA cycle with a quarterly frequency, we intend on heavily discussing the above three strategic domains that we should focus on as key agenda of the Board of Directors.
The second direction is to further establish a corporate governance framework from the perspective of our shareholders and investors. As other Directors and I have pointed out, I feel that our Board of Directors and executive team still greatly lacks a perspective that objectively identifies how capital markets view our company, what the situation is at rival corporations, and so forth. Going forward, I believe that both our Board of Directors and meeting bodies on the executive side will need to frequently delve into issues such as what expectations capital markets have of the Company.
The third and final direction is the elevation of corporate governance at the Company to the next stage. Over time, we have tackled the evolution and reform of corporate governance and endeavored to improve its effectiveness as a member of corporate Japan’s vanguard. However, Western enterprises are even further ahead of us in that regard. As an example, in the U.S., discussions on the “Board 3.0” model through which directors who are wellversed in capital markets work together with executive teams and assist them with the devising of management strategy is taking place with considerable frequency. While I am not of the opinion that we should implement those endeavors as is, examining the ideal nature of next-generation governance that suits Japanese society while further elevating the effectiveness of the Board of Directors as the existing monitoring board is another important role of the Board. As I said above, Outside Directors providing backup to the devising of strategy in a more active manner should constitute one such endeavor.
Expectations of the executive team centered on our new President
The Company commenced its initiatives geared towards a succession plan for its President & CEO, Representative Executive Officer in 2015. These were then monitored by the Nominating Committee. More specifically, those initiatives consist of the following process: (1) Define qualification requirements for the President, (2) Select presidential successor candidates, (3) Implement assessments by external organizations, (4) Formulate and carry out eligible successor development plan, (5) Check and evaluate, (if necessary, (6) Narrow presidential successor candidates or reselect, then go through (4) and (5) once more),and (7) Nominate final candidate for presidential succession. The Nominating Committee regularly received reports from then-President Yamana and gave supervision and advice on this process. As a result, current President Taiko was selected as the next President via a resolution by the Board of Directors. I was also involved in the selection process as a member of the Nominating Committee, and believe that President Taiko possesses the tenacity for achieving the transformation of our business portfolio and the ability to consolidate a team into a single whole.
Fiscal 2022 is the final year of our “DX2022” medium-term business plan. I regret to say that we have failed to achieve the targets that we ourselves set over several years, and are in a grim predicament as dictated by negative ROE over three consecutive fiscal years and operating losses over two consecutive fiscal years.I expect that our new executive team led by President Taiko will solemnly accept this reality, then ensure to produce the kind of results that eluded us in previous years.
The Board of Directors will also provide all the support that it can muster while maintaining a sense of crisis. That is one of the reasons why we set forth “improvement of our executive capability” as one of the strategic domains that we should focus on in fiscal 2022. Our Outside Directors include people who have realized portfolio transformations as well as people who have overcome management crises. As those Outside Directors, using such experience and knowledge as our foundation, we intend on presenting greater options for the devising of strategy than before.
Furthermore, for the sake of close communication among Outside Directors, starting in fiscal 2022, we plan on holding meetings solely attended by those directors four times a year. We are also looking into holding meetings that include the presence of the President and Executive Chairman in addition to Outside Directors about twice per year.
Going forward, the Board of Directors will continue endeavoring to grow the Company sustainably and improve corporate value over the medium to long term by proactively helping to devise strategy and improve executive capability in addition to effectively monitoring management execution.