Governance Structure and Operations
Operations of the Board of Directors
As a general rule, the Board of Directors meets once each month. Before each meeting, the directors are expected to make themselves familiar with the proposed resolutions, and materials are distributed to outside directors in advance so that effective discussions can be held on the day of the meeting. In addition, before important management decisions are made, the executive officer responsible sometimes gives a preliminarily explanation concerning the matter at hand.
The seating position of the directors is changed at every meeting, except for that of the chairman and the president, and other such measures are taken to further enhance communication among the directors and ensure that the meetings are dynamic.
The meeting results and attendance rates for the Board of Directors and the three committees at the end of fiscal 2022 were as shown in the table below.
Furthermore, the attendance rate at meetings of the Board of Directors and the three committees for the five outside directors (Chikatomo K. Hodo, Sakie T. Fukushima, Soichiro Sakuma, Akira Ichikawa, and Masumi Minegishi) was 99.4%.
Note:All members of the Board of Directors are required to attend more than 80% of the meetings. In order to achieve this attendance rate, the number of companies which they can serve as directors (officers under Japan’s Companies Act) is restricted to no more than three (listed companies) in principle.
|Board of Directors||Nominating Committee||Audit Committee||Compensation Committee||Total|
|Number of meetings||13||10||13||8||44|
|Attendance rates for all directors (%)||100||100||100||97||99.6|
|Attendance rates for outside directors (%)||100||100||100||95.8||99.4|
Activities of the Board of Directors and the Three Committees in Fiscal 2022
- Board of Directors
In fiscal 2022, the Board of Directors’ agenda was set under the Board Chair’s policy which defines themes to be discussed by the Board of Directors in three areas of strategic impact, i.e., (1) Business Portfolio Transformation, (2) Improved Execution Capability and (3) Restoring Confidence and Trust, with some topics receiving further discussion at Directors’ Roundtable Meetings. Business portfolio transformation was the subject of particularly intense discussion primarily at the Directors’ Roundtable Meeting. The Board requested the executive side to make “business selection and concentration” a top priority. This led to the formulation of the 2025 medium-term business plan.
- Nominating Committee
In fiscal 2022, in accordance with the Director Election standards, the Nominating Committee engaged in careful discussion concerning the policy for selecting director candidates to optimize the following factors.
i) Board of Director
<Chairperson of the Board of Directors>
The Chairperson of the Board of Directors shall be appointed from among Directors who do not concurrently serve as Executive Officers as stipulated in the Articles of Incorporation of the Company. In the previous fiscal year, the Company has appointed an Outside Director as the Chairperson of the Board of Directors, who had a wealth of experience as an Outside Director of companies, as well as that of other companies, a deep understanding of the Company’s governance, and was deemed appropriate as a leader in managing the Board of Directors based on aptitude. For the same reason, we have again selected an Outside Director to chair the Board of Directors.
<Total number of Directors and ratio of number of Directors>
In accordance with the following provisions of the Basic Policy on Corporate Governance, the Company decided to continue with the previous fiscal year’s composition (total of nine Directors, of which five are Outside Directors, four are Internal Directors, six are Non-Executive Directors, and three Executive Directors), which has been confirmed by the Nominating Committee.
• The Board of Directors is composed of a number of Directors within the scope provided in the Articles of Incorporation, taking into account the management issues the Board of Directors is required to address.
• To ensure management transparency and supervisory objectivity, one-third or more of the total number of Directors are Independent Outside Directors, and Directors who do not concurrently serve as Executive Officers constitute the majority of the total Directors.
• To further enhance deliberations on making important management decisions, in addition to the President & CEO, Representative Executive Officer, several Executive Officers in charge of principal duties shall be appointed as Directors.
The Company believes that the number of Outside Directors should be five to six to enable both diversity of discussion and speed of decision-making.
<Number of Internal Directors who do not concurrently serve as Executive Officers>
Likewise, in order to comply with the following provisions of the Basic Policy on Corporate Governance and to ensure a certain level of audit quality as a full-time Members of the Audit Committee, the Company has decided to maintain the same composition (one member) as in the previous fiscal year.
• To enhance the management supervision function and to strengthen cooperation with the Independent Outside Directors as well as communication and coordination with Executive Officers, more than one Inside Director who do not concurrently serve as Executive Officer will be appointed.
ii)Candidates for Outside Directors
We have selected a new candidate who is expected to offer useful supervision and advice on the Company’s management issues on the basis of their abundant, global-level knowledge of R&D, management strategy formulation, new business development and DX promotion.
iii) Candidates for Inside Directors
This fiscal year, we have selected a candidate for the position of Director who will not concurrently serve as an Executive Officer, who has extensive experience in internal audit and is expected to enhance the effectiveness of the Audit Committee as a full-time Audit Committee member. In addition to the President & CEO, two candidates were selected for the position of Director concurrently serving as Executive Officer: Executive Officer in charge of Corporate Planning and Strategy, and Executive Officer in charge of Accounting and Finance.
In addition, the Nominating Committee provides supervision and advice in response to reports from the President & CEO regarding the President’s Succession Plan (fiscal 2022-).
- Audit Committee
The Audit Committee audited the legality and propriety of management decision made by directors, executive officers and corporate vice presidents confirmed the facts of improper conduct as well as violations of the law or articles of incorporation, and monitored and verified the internal control system that has been established and put into operation. It also rigorously reviewed whether an independent position was maintained in the external accounting auditor’s audit and whether a proper audit was conducted and determined selections or dismissals of Accounting Auditors.
- Compensation Committee
In fiscal 2022, in parallel with discussions at the Board of Directors concerning the creation of the medium-term business plan starting from fiscal 2023, the Compensation Committee deliberated and considered a review of the compensation system to further strengthen incentives for achieving targets. As a result, some revisions were made in the “Policy for Determining Compensation.” The main revisions are as follows:
• Concerning the ratio of “fixed remuneration,” “annual performance-linked monetary remuneration,” and “stock-based remuneration” for Executive Officers, the ratio of “fixed remuneration” was reduced by 5%, and that 5% was transferred to “annual performance-linked monetary remuneration.” This is intended to further increase incentives to work on key measures for each fiscal year of the medium-term business plan.
• The indexes of evaluation for performance-linked monetary compensation for the fiscal year were revised to three indicators: current net income, total asset turnover, and KMCC-ROIC, in line with the policies and strategies of the medium-term business plan.
• The evaluation indicator for (performance-linked) medium-term stock compensation was revised to ROE, and the CO2 emissions reduction rate and employee engagement score were introduced as nonfinancial indicators.
Provision of Information and Support System for Outside Directors
- Provision of Information to Outside Directors
The actions described in Training of Directors below are taken.
Also, each outside director is provided with information including the market trend, IR, and crisis management.
- Supporting System for Outside Directors
A Board of Directors Office has been established as the secretariat for the Board of Directors, Nominating Committee, and Compensation Committee, while the Audit Committee Office serves as the secretariat for the Audit Committee. The staff members of these offices support the outside directors to enable the Board of Directors and committees to function properly. Members of this office also distribute the document in advance concerning agenda items to outside directors, and create proposals and plans for visits to company facilities and accompany outside directors as needed as part of activities to these directors. The objectives are to enable outside directors to thoroughly discuss subjects at the Board of Directors meetings and to ensure that these meetings take place with no difficulties.
Training of Directors
In accordance with the director election standards, the Nominating Committee selects candidates for election as director who have the qualities needed to be a director. The company confirms whether new directors require training judging from each individual’s knowledge, experience and other characteristics. If training is needed, the company provides suitable opportunities to receive this training.
- For new independent outside directors, the company provides information about the group’s structure, business activities and finances as well as information about the medium term business plan and its progress and other subjects. These new directors also receive basic information about the company’s businesses and corporate-level functions.
- For independent outside directors, the company arranges visits to the development, manufacturing, sales, service and other operations of every business unit. The executive officer of each business unit provides the directors with the latest information about that business.
Activities in fiscal 2022 are listed below.
(1) Internal announcement event
A total of 10 Outside Directors participated in internal presentations (Value Creation Forum) in four business areas, either on-site or online. Four Outside Directors are also participating in internal presentations online (Business Process Innovations Officers Debriefing).
(2) External exhibitions
One Outside Director visited the IGAS 2022 International Graphic Arts Show for Comprehensive Printing Technology & Solutions.
- New inside directors are provided opportunities to attend governance training held by external institutions, and information about various seminars is given to inside and outside directors as opportunities to participate when appropriate.
Evaluation of Board of Directors Effectiveness
In 2003, the company became a company with committees (now a company with three committees). To determine if the corporate governance system is functioning as intended, the company started performing self-assessments in 2004 concerning the Board of Directors’ effectiveness. Self-assessments have been performed every year since then in order to make improvements.
Since then, every year the past year’s activities are reviewed and self-assessments of the Board of Directors’ and three committees’ effectiveness are carried out in order to confirm that the development and administration of the corporate governance system is contributing to sustainable growth and improvements to medium- and long-term corporate value. Based on these results, the issues that the Board of Directors needs to address in the next fiscal year are clarified and measures to improve effectiveness further are planned.
For fiscal 2022 evaluation of the effectiveness of the Board of Directors, which marked a milestone with the change of the Chairperson of the Board of Directors, a questionnaire and interviews were conducted by an external organization with the aim of increasing objectivity by including a third-party perspective (the previous external evaluation was conducted in fiscal 2016). In addition to standard questions asked by the external organization, the questionnaire included questions designed to elicit issues specific to the Company, and interviews with each Director were designed to identify issues through more in-depth dialogue, as well as to lead to awareness through self-assessment.
The results of the evaluation will be utilized in the activities of the Corporate Governance Committee in fiscal 2023 to further advance the Company’s corporate governance. Please refer to the page 22-25 of the Corporate Governance Report for further information on the evaluation of the effectiveness.
Policy and Procedures for Appointing Director Candidates, and the Applicable Approaches and Standards, etc.
Policy and Procedures for Appointing Director Candidates
Based on reviews concerning the composition, standards for selection, etc. of the Board of Directors and committees by the Corporate Governance Committee, the Nominating Committee raises its policy to upgrade its selections of Director candidates by performing yearly examinations from the standpoints of balance of knowledge, experience and capabilities, and diversity, and uses the following process to make selections. (With the establishment of the Corporate Governance Committee in June 2023, going forward the Committee will review the composition of the Board of Directors and committees and their standards for the selection.)
<Board of Directors>
1) Confirmation of Directors who will resign due to standards for the number of years as a Director or age and expected number of new Outside Director and new Inside Director candidates.
<Outside Director Candidates>
2) To select Outside Director candidates, after the Nominating Committee confirms the selection process, the members of this committee determine the knowledge, experience and capabilities that will be required of new Outside Directors in order to enable them to be a good match with Outside Directors to be reelected.
3) The Nominating Committee chairperson asks for a broad range of recommendations for candidates, based on information from Nominating Committee members, other Outside Directors and the President & CEO. To provide reference information, the Board of Directors Office distributes to Nominating Committee members etc. a candidate database, centered on “chairpersons” of global companies, that includes information about independence, age, concurrent positions and other characteristics of candidates.
4) The Nominating Committee takes into consideration the items listed below in order to narrow down the number of candidates, from the recommended individuals obtained through the preceding process in order to determine an order of priority.
• Selection standards for Directors
• Standard for independence of Outside Directors
• Balance of knowledge, experience and capabilities required for Outside Directors and diversity (skill matrix)
5) The Chairperson of the Nominating Committee and, if necessary, a member appointed by the Chairperson, will interview the candidates in order of candidacy, and approach them about assuming the position of Outside Director.
<Inside Director Candidates>
6) Candidates for “Internal Directors” shall be discussed between the President & CEO and the Internal Nominating Committee on the basis of the following points; proposed candidates for Directors who shall not concurrently serve as Executive Officers, and proposed candidates for Directors who shall concurrently serve as Executive Officers, once the President & CEO has shared with the Internal Nominating Committee his/her concept for the executive structure for the next fiscal year.
• Selection standards for Directors
• Roles of Directors who do and do not concurrently serve as Executive Officers
• Required skills, experience and other characteristics of Directors who do and do not concurrently serve as Executive Officers (skill matrix)
7) The Nominating Committee uses the draft proposals to examine the candidates.
The Applicable Approaches and Standards for Appointing Director Candidates
1.Board of Directors
(1)Approach to the Overall Board of Directors Composition
The Board of Directors is composed of a number of directors within the scope provided in the Articles of Incorporation, taking into account the management issues the Board of Directors is required to address.
1) To ensure management transparency and supervisory objectivity, oversight of management, it is required one-third or more of the directors be independent outside directors, and directors who do not concurrently serve as executive officers constitute the majority of the total number of directors.
2) The Company considers five to six Outside Directors to be appropriate for ensuring both diversity of discussion and speed of decision-making.
3) To enhance the management supervision function, liaise with the independent outside directors and strengthen communication and cooperation with executive officers, more than one inside directors not concurrently serving as executive officers will be appointed.
4) To further enhance deliberations on important decisions from a management standpoint, in addition to the president and CEO, several executive officers in charge of principal duties will be appointed as directors.
5) The Nominating, Audit and Compensation committees are all chaired by outside directors to ensure transparency and objectivity. In addition, to ensure that each committee adequately fulfills its respective roles, each committee is composed of around five members, and a majority of its members is independent outside directors.
6) For more information about the diversity of the Board of Directors, see "Balance of career and skill required for outside director candidates and diversity."
(2)Selection Standards for Directors
The Nominating Committee has selected candidates who satisfy the following standards as being suitable directors for achieving good corporate governance, i.e., ensuring the transparency, soundness and efficiency of the company's operations.
1) Good physical and mental health
2) A person that is well liked, dignified, and ethical
3) Completely law-abiding
4) In addition to having objective decision-making abilities for management, the person must have good foresight and insight
5) Someone with no potential conflict of interest or outside business relations that may affect management decisions in the company's main business areas, and who has either organizational management experience in the business, academic, or governmental sectors or specialized knowledge in technology, accounting, law, or other fields.
6) For outside directors, a candidate with a history of performance and insight in their field, someone with sufficient time to fulfill the duties of a director, and who has the ability to execute required duties as a member of the three relevant committees.
7) The Nominating Committee has separately set points for consideration in the re-election of directors and requirements concerning the number of terms of office, age and other factors. In principle, the term of office for an outside director is up to six years. Specifically, the basic term of office is four years. With a resolution of the Nominating Committee, however, the term of office may be extended once for a prescribed period of two years.
8) Potential director candidates must not be excluded on the basis of gender, nationality, country of origin, cultural background, race, ethnicity or similar reason.
9) In addition, the candidate must have the abilities necessary for a director to run and build a public corporation that is transparent, sound, and efficient.
(1)Criteria on the Independence of Outside Directors
The following types of people are ineligible to serve as outside directors at Konica Minolta. Our Nomination Committee selects outside director candidates with a high level of independence, provided that none of the following criteria apply.
1) Person affiliated with Konica Minolta
- Former employee of the Konica Minolta Group
- Having a family member (spouse, child, or any blood or marital relative twice removed or less) that has served as a director, executive officer, auditor or top manager in the Konica Minolta Group during the past five years.
2) Person affiliated with a major supplier/client
- Currently serving as a managing director, executive officer, or employee of a major supplier/client company/group that receives 2% or more of its consolidated sales from the Konica Minolta Group or vice versa.
3) Specialized service provider (lawyer, accountant, tax accountant, patent lawyer, judicial scrivener, or a consultant for management, finance, technology, or marketing)
- Specialized service provider that received annual compensation of ¥5 million or more from the Konica Minolta Group during the past two years.
- A shareholder holding more than 10% of the voting rights in the company (executive directors, executives, or employees in the case of a corporate body)
- A director taking part in a director exchange
- A director, executive officer, auditor or equivalent position-holder of a company that competes with the Konica Minolta Group, or someone holding 3% or more of the shares of a competing company
- Having some other significant conflict of interest with the Konica Minolta Group
The Company, under the rules of the Nominating Committee, in principle, limits the period in office of Outside Directors up to six years (reappointment limit). Specifically, the basic term of office is four years, and it may be extended once for two years upon approval of the Nominating Committee. This rule is based on the concern that the objectivity of these Directors may decline as the length of time in office increases.
(2) Balance of Career and Skill Required for Outside Director Candidates and Diversity.
1) To ensure the diversity of directors, the Nominating Committee Rules for selection standards for directors state that candidates should "have experience operating an organization in the industrial, government or academic sector or have specialized skills involving technologies, accounting, law or other fields" and "have accomplishments and knowledge in their respective fields suitable for outside director candidates." Moreover, potential director candidates must not be excluded on the basis of gender, nationality, country of origin, cultural background, race, ethnicity or similar reason.
2) Candidates should have the character, skill and experience needed for strengthening and upgrading management in order to enable the Board of Directors to determine the company's strategic direction.
3) To ensure that the Board of Directors can provide useful oversight and advice regarding the Company's management issues, it must have members with diversity of knowledge, experience and abilities, and this needs to be considered when reappointing eligible outside directors or selecting new candidates. Decisions should be made with a view to ensuring the Board's ideal skill matrix, including requirements for industries of origin, main management experience, and areas of specialty.
4) In selecting new outside director candidates for appointment at the General Meeting of Shareholders in 2023, the above-mentioned points of view were weighted heavily. The candidates selected have abundant, global-level knowledge of R&D, management strategy formulation, new business development and DX promotion, and are expected to provide valuable oversight and advice.
(3)Expected Roles of Outside Directors.
1) To participate in important decisions made by the Board of Directors and supervise the decision-making process
2) To submit advice about the establishment of management policies and plans and about reports concerning business operations by using their experience and knowledge
3) To oversee conflicts of interest among the company, its shareholders, senior executives and others
4) To supervise management to protect ordinary shareholders and to reflect the interests of shareholders from the standpoint of ordinary shareholders, which is independent from senior executives and special stakeholders
5) To supervise management as members of the Nominating, Audit and Compensation Committees
(1)Stance Concerning Roles of Inside Directors and Selection of Candidates.
1) An inside director who is not concurrently an executive officer and who has the ability to ensure the quality of audits is selected as a full-time Audit Committee member.
The inside director who serves as a full-time Audit Committee member should have extensive management experience as an executive officer of the company in order to improve the effectiveness of the Audit Committee. The qualifications required in particular are experience in accounting and finance or internal audit, business management and core business management.
This inside director also serves as the Nominating Committee member and Compensation Committee member.
2) They are held accountable for their execution and contribute to energetic and meaningful strategic discussions at Board of Directors meetings. Requirements for these inside directors include responsibility for overseeing major elements of the company’s operations such as strategic planning, accounting and finance, technology, as well as for overseeing main business operations in the company.
Description in the Reference Materials for the General Meeting of Shareholders (The 119th Ordinary General Meeting of Shareholders)
2. Expertise and experience expected of candidates for Directors (skills matrix)
Director skills matrix
2. Reasons for selecting the candidates for Directors
|President and CEO, Representative Executive Officer||Toshimitsu Taiko||
Mr. Toshimitsu Taiko took charge of the Business Technologies Business, the mainstay business of the Company, with the positions of CEO of the US sales subsidiaries, General Manager of each business headquarters, and the Lead Officer responsible for Business Technologies Business, followed by an Executive Officer responsible for Corporate Planning, Investor Relations, etc., to strive to enhance the corporate value of the Group through the formulation and promotion of the Medium-Term Business Plan “DX2022.”
Since assuming the position of President and CEO, Representative Executive Officer in April 2022, he has united the executive team and worked towards sustainable growth, drawing on lessons learned to date. At the same time, he has established a new Mid-term Business Plan, with the core policies of “business selection and concentration,” “thorough cost reduction,” and “optimizing management assets.” He aims to convert the Group into a structure that displays high corporate value by fiscal 2025 by fulfilling the integrated efforts of all executives toward the optimal solution for the Group.
The Company’s current management challenges are steadily delivery of results in the strengthening businesses and stable revenue businesses, and to change the direction of other businesses and radically revise them.
In his President’s Policy for fiscal 2023, Mr. Taiko has declared he will oversee the company’s strong return to profitability and opening up of its future. He is currently providing strong leadership for the entire Company with a view to achieving the targets of the Mid-term Business Plan by engaging in bold initiatives to tackle difficult management issues. Therefore, 15 given that this will be his second year as President and CEO, Representative Executive Officer, the Nominating Committee has nominated Mr. Taiko as a candidate for Director. The Company expects that Mr. Taiko can contribute to effective discussions on important management decisions while fulfilling his accountability as the Director, President and CEO, Representative Executive Officer at the Board of Directors’ meetings, and requests that shareholders elect him as a Director.
|Outside Director||Chikatomo Kenneth Hodo||
Mr. Chikatomo Kenneth Hodo has been in management of a company providing business consulting and IT services for years at Accenture Japan Ltd. He has extensive experience and a broad range of knowledge on digital business as a corporate executive. In addition, Mr. Hodo has a high degree of independence from the Company as stated below.
Following his election as a Director in June 2018, Mr. Hodo has performed well as a member of the Board of Directors and other committees, and was selected to become the Company’s first Outside Director to serve as Chairman of the Board of Directors in June 2022. As Chairman of the Board of Directors, he has formulated the Operations Policy of the Board of Directors, where he clarifies the key points of the Board of Directors’ initiatives, and leads the implementation of the policy. In addition, a third-party organization was used for the evaluation of the effectiveness of the Board of Directors this fiscal year to re-examine the Company’s corporate governance, including the operation of the Board of Directors under the new structure.
Fiscal 2022 activities are listed in “Primary activities of Outside Directors and a summary of the tasks performed on the expected roles” in the business report (page 65). Mr. Hodo has been in charge of the duty, securing sufficient time. The Company expects that Mr. Hodo can continue contributing to the maintenance and upgrading of its corporate governance as before, and requests that shareholders elect him as an Outside Director.
|Outside Director||Soichiro Sakuma||
At Nippon Steel Corporation and Nippon Steel & Sumitomo Metal Corporation (currently Nippon Steel Corporation), Mr. Soichiro Sakuma was involved for many years in management in the manufacturing sector and was in charge of main head office functions, including general administration, human resources, environment and IT, mainly in legal and internal control & audit. He has extensive experience and a broad range of knowledge as a corporate executive. In addition, Mr. Sakuma has a high degree of independence from the Company.
Following his election as a Director in June 2020, Mr. Sakuma has performed well as a member of the Board of Directors and other committees. Fiscal 2022 activities are listed in “Primary activities of outside directors and a summary of the tasks performed on the expected roles” in the business report (pages 65).
Therefore, the Company expects that Mr. Sakuma can continue contributing to the maintenance and upgrading of its corporate governance as before, and requests that shareholders elect him as an Outside Director.
|Outside Director||Akira Ichikawa||
Mr. Akira Ichikawa has been a senior executive at Sumitomo Forestry Co., Ltd., which operates various businesses, including those related to lumber and building materials, housing and construction, and overseas housing and real estate, where he promoted sustainability management, and raised that company’s corporate value over the medium- to long-term. In addition to such extensive management experience and broad-ranging insight as a corporate executive, he has a high degree of independence with respect to the Company.
Following his election as a Director in June 2021, Mr. Ichikawa has performed well as a member of the Board of Directors and other committees. Fiscal 2022 activities are listed in “Primary activities of Outside Directors and a summary of the tasks performed on the expected roles” in the business report (page 66). Mr. Ichikawa has been in charge of the duty, securing sufficient time.
Therefore, the Company expects that Mr. Ichikawa can continue contributing to the maintenance and upgrading of its corporate governance as before, and requests that shareholders elect him as an Outside Director.
|Outside Director||Masumi Minegishi||
Mr. Masumi Minegishi has led the transformation of Recruit Holdings Co., Ltd. into a global tech company through the expansion of the human resources business into the information business and digitalization and globalization. In addition to his wealth of management experience and broad insights as a top leader of companies with DNA related to the commercialization of IT services and business development capabilities, he has a high degree of independence for the Company.
Following his election as a Director in June 2022, Mr. Minegishi has performed well as a member of the Board of Directors and other committees. Activities from June 2022 onward are listed in “Primary activities of Outside Directors and a summary of the tasks performed on the expected roles” in the business report (page 66). Mr. Ichikawa has been in charge of the duty, securing sufficient time.
Therefore, the Company expects that Mr. Minegishi can continue contributing to the maintenance and upgrading of its corporate governance as before, and requests that shareholders elect him as an Outside Director.
|Outside Director||Takuko Sawada||
Ms. Takuko Sawada has played a central role in promoting the previous and current medium-term business plans at Shionogi & Co., Ltd., and has also focused on establishing global functions and collaborating with industry, government, and academia in Japan and overseas. In addition to her extensive global experience and insight in R&D, management strategy formulation, new business development DX promotion, and more, she has a high degree of independence for the Company.
Therefore, the Company expects that Ms. Sawada can contribute to the maintenance and improvement of the Company’s governance by monitoring and offering advice from a global perspective based on her experience in management, and requests that shareholders elect her as an Outside Director.
The Company believes that it is important for the Audit Committee to include a full-time Inside Director who has extensive business management experience and expertise involving the collection of information.
Mr. Hiroyuki Suzuki will attend management meetings of Executive Officers as a Member of the Audit Committee. He will work to optimize the quality and quantity of information for the audit by the Committee as he will grasp and confirm validity of the determination process about operations, which are commissioned to the Executive Officers by the Board of Directors, as well as the operational status of the internal control system and will provide the Audit Committee with feedback on such information.
After engaging in the secretariat duties to support the Audit Committee at the Audit Committee Office of the Company, Mr. Suzuki has also overseen internal audit as the General Manager of the Company’s Corporate Audit Division. Mr. Suzuki has extensive experience and considerable expertise related to internal control. Since 2019, Mr. Suzuki has engaged in supervising management as an Inside Director at the Company not concurrently serving as Executive Officer and properly fulfilled his duties at the Audit and Compensation Committees as an Inside Member.
Therefore, the Company believes that Mr. Suzuki can continue enhancing corporate value by securing the effective operation of its corporate governance, and requests that shareholders elect for him to continue.
|Director||Noriyasu Kuzuhara||The Company believes that it is important to select Executive Officers in title who are in charge of primary duties so that they can engage in active and essential discussions at meetings of the Board of Directors.
Mr. Noriyasu Kuzuhara has realized continuous business growth as the officer responsible for technology development and business in the Company’s core performance materials business, and as Division President of the Material & Component Business Headquarters.
In addition, as Executive Vice President and Executive Officer responsible for corporate planning, he has worked to enhance the corporate value of the Group by utilizing his extensive knowledge of technology, R&D, and manufacturing particularly to formulate strategies for areas to be strengthened in the transformation of the business portfolio.
The Company believes Mr. Kuzuhara can demonstrate accountability to the Board of Directors and participate in important management decisions. Therefore, the Company requests that shareholders elect for him as a Director.
|Director||Yoshihiro Hirai||The Company believes that it is important to select Executive Officers in title who are in charge of primary duties so that they can engage in active and essential discussions at meetings of the Board of Directors.
Mr. Yoshihiro Hirai has a high level of expertise and extensive experience in finance and accounting, as well as knowledge of financial strategy from a global perspective. In addition, as Executive Vice President and Executive Officer, he has been in responsible for accounting, finance, and risk management since April of this year, and has worked to enhance the corporate value of the Group by promoting the new Medium-Term Business Plan.
The Company believes Mr. Hirai can demonstrate accountability to the Board of Directors and participate in important management decisions. Therefore, the Company requests that shareholders elect for him as a Director.
Executive System and Appointment of Executive Officers
- Under a mandate from the Board of Directors, executive officers make decisions about operations and then execute them. The business execution is overseen by the Board of Directors and reviewed by the Audit Committee to ensure the efficiency, adequacy, legality and soundness of management.
- Executive officers are appointed by the Board of Directors, which selects the president and CEO, selects senior executive officers from among the executive officers, and establishes a division of duties among the officers. The executive officers, including the president and CEO, make decisions concerning the execution of duties delegated by the Board of Directors, and execute their duties.
Selection or Dismissals of Executive Officers
- The Board of Directors uses a fair, timely and appropriate method to select people who have the capabilities to serve as executive officers. These individuals must be able to create new value for the Group and earn the support of internal and external stakeholders. Standards for making these judgments about capabilities are defined in “Standards for the Selection of Executive Officers.”
Individuals must have the ability and experience for the internal and external management of the Group's business operations. Qualification standards also take into consideration knowledge about specialized fields and technologies, an individual's age when the time for renewing the appointment comes, and other items. In addition, the Board of Directors selects individuals with a strong commitment to ethics, the ability to put customers first, the ability to drive innovation, strong motivation to achieve goals, and other such characteristics.
- To select new executive officers, candidates who have completed senior executive candidate training must pass through the first stage of the selection process, which involves submitting documents and completing an interview. Next, an assessment is performed in order to reach a highly objective and appropriate decision. This process includes input from both an external perspective and from the perspective of people at the Group who frequently interact with these candidates as part of their jobs. An evaluation conference, which consists of the president and CEO and the executive officer responsible for personnel, is held to examine the results of this process. This results in the selection of candidates to become executive officers.
- To determine the new team of executive officers, the president and CEO selects from the list of executive officer candidates the individuals believed to be well suited to serve as executive officers. Next, a proposal for the selection of executive officers for the new fiscal year is prepared and submitted to the Board of Directors, with a list of the duties for each executive officer.
- Prior to the submission of this proposal to the Board of Directors, the Nominating Committee performs oversight of the whole process, including a confirmation that a suitable process was used. Oversight includes receiving the proposal for the new executive officer team (including the proposed new executive officer selections from the president and CEO) and a report about the proposed duties of each executive officer.
- The Nominating Committee considers observing the character of executive officer candidates is an important matter and utilizes opportunities such as attending meetings of the Board of Directors and reporting to informal gatherings of directors. After receiving the proposal for the selection of executive officers mentioned above from the president and CEO, the Nominating Committee discusses the content of the proposal, creates a summary of its conclusions regarding matters such as the appropriateness of candidates and training issues, and provides these as feedback to the president and CEO.
- The Board of Directors takes the “Standards for the Selection of Executive Officers” into full consideration when deciding whether or not to dismiss an executive officer.
Compensation for Directors and Executive Officers
The company, which has adopted the company-with-three-committees system, has established a Compensation Committee. Outside directors account for the majority of members of the committee and the committee is chaired by an outside director to ensure transparency and to determine compensation in a fair and appropriate manner. The company’s directors’ compensation system is intended to strengthen the motivation of directors and executive officers to strive for the continuous medium-to-long-term improvement of the Group’s performance in line with management policies, to meet shareholder expectations and contribute to the optimization of the Group’s value. The company aims for a level of compensation that enables it to attract and retain talented people to take responsibility for the company’s development.
In keeping with these aims, the Compensation Committee has established a policy for determining the individual compensation entitlement of directors and executive officers, and determines the amount of individual compensation entitlement of directors and executive officers in line with this policy.
Compensation Policy (Fiscal 2023)
- Compensation system (see diagram below)
1) Compensation packages for directors (excluding directors who concurrently hold executive officer posts) exclude a short-term performance-based cash bonus because directors have a supervisory role, and consist of a base salary and stock compensation. The stock compensation consists of a medium-term stock bonus (non-performance-linked) and a long-term bonus.
Only a role-specific base salary is provided to outside directors.
2) Compensation packages for executive officers consist of a base salary, an annual performance-based cash bonus, which reflects the performance of the Group, as well as stock compensation. The stock compensation consists of a medium-term stock bonus (performance-linked) and a long-term stock bonus.
- The total amount of individual compensation entitlement and base salary are set at an appropriate level, taking into account position and value of the job, by considering value based upon objective data, evaluation data and other data collected at regular intervals.
- The amount of “annual performance-linked monetary remuneration” shall be determined based on the level of performance in the relevant fiscal year (consolidated operating profit), the degree of achievement of annual performance targets, and the progress of each Executive Officer in advancing strategically important policies. The amount based on the degree of attainment of annual performance targets is determined in the 0% to 200% range of the standard amount of compensation. The targets are major consolidated performance indicators (profit for the year, total asset turnover ratio and KMCC-ROIC*) associated with results of operations. Executive officers' key operational measures include those related to non-financial indicators, such as environment, society and governance (ESG) performance.
*Return on invested capital is used for calculating the annual performance-based cash bonus, and the invested capital represents the assets that can be individually managed and grown by each business division.
- Stock bonus plan
1) In the medium-term stock bonus (non-performance-linked) plan for directors, the company's shares are distributed to directors upon the conclusion of the Medium Term Business Plan, according to their roles and years in office. The plan is designed to enhance directors' motivation to contribute to medium-term shareholder value improvement and to promote their ownership of the company's shares.
2) In the medium-term stock bonus (performance-linked) plan for executive officers, the company's shares are distributed to executive officers upon the conclusion of the Medium Term Business Plan in the 0% to 200% range. The plan is designed to enhance their incentives for attaining the targets of the Medium Term Business Plan and promote their ownership of the company's shares. Mid-term management targets shall be consisted of important consolidated financial indicators (ROE) considering for mid-term management policy, as well as non-financial indicators (CO2 emissions reduction and employee engagement score).
3) The long-term stock bonus for directors (internal directors not also serving as executive officers) and executive officers is awarded in the form of Konica Minolta shares after the retirement of the officer concerned, and is based on the person's position or role and their tenure. The aim of this compensation is to enhance motivation and to contribute to long-term shareholder value improvement.
4) The standard number of shares is set according to the position each director or executive officer held in the first year of the Medium Term Business Plan.
5) Certain portions of shares are distributed in cash on the assumption that they are exchanged for cash.
6) Shares of the company obtained as stock bonus shall be held in principle for one (1) year after the date of retirement from the post of each director or executive officer.
- The standard for compensation of the president and chief executive officer is a 45:30:25 mix of a base salary, an annual performance-based cash bonus, and a medium term performance-based stock bonus. For the other executive officers, the base salary ratio is set higher than that for the president. In addition, the ratio of the medium-term stock bonus (performance-linked) and long-term bonuses within the stock compensation shall be 60:40.
- Compensation for non-residents of Japan may be handled in different ways from the above-mentioned treatment above due to legal and other circumstances.
- If the Board of Directors must resolve a correction to financial statements after they are announced due to a material accounting error or fraud, the Compensation Committee shall consider corrections to performance-based bonuses and limit payment or request return of the bonuses when necessary.
- The company reviews levels, composition and other elements of compensation in a timely and proper manner in accordance with changes in the management environment.
Compensation System Diagram
Indicators for Performance-based Bonuses, Reasons for the Selection of These Indicators, and Method for Determining the Amount of Performance-based Bonuses
1. Annual performance-based cash bonus
(1) Overview (Items and indicators)
|Item||Portion according to performance level||Portion according to attainment of performance targets||Portion according to personal appraisal|
|Assessment index and others||Operating profit||Profit for the year||Total Asset Turnover||KMCC-ROIC||Reflects progress of each executive officer’s key measures|
|Linked with Group consolidated performance result level||Linked with annual performance target attainment rate|
(2) Indicators for performance-based bonuses, reasons for the selection of these indicators
1) The indicator for the level of performance results portion is the amount of Group consolidated operating profit. It was judged that operating profit is the most appropriate indicator for determining the responsibility for performance that should be taken on by executive officers with the aim of realizing sustainable growth and enhanced corporate value by achieving higher levels of operating profit.
2) The indicators for the portion according to attainment of performance targets are the amount of profit for the year, total asset turnover ratio, and KMCC-ROIC. These indicators attach strong significance to the Company’s sustainable growth and the enhancement of the medium- to long-term corporate value. Current profit, was selected in order to improve ROE by achieving a fundamental recovery in profitability and to secure funds for dividends, total asset turnover was chosen with the aim of reducing total assets and interest-bearing debt while ensuring cash allocation, while KMCC-ROIC was selected to increase the efficiency of invested capital. In addition, these indicators have been weighted at 40%, 30% and 30%, respectively.
3) The reason for this is that the “Individual Evaluation” takes as indicators the progress of each Executive Officer’s strategic priority policies and targets, and evaluates them using perspectives and items that are different from those of the “Performance Level” and “Achievement of Performance Targets.” In particular, we take care to implement in a timely and appropriate manner measures that are strategically necessary to improve our corporate value in the medium- to long-term, even if they do not appear in financial indicators or are accompanied by a temporary deterioration of financial indicators. For the portion according to personal appraisal, factors such as progress of each executive officer’s key operational measures are used as indicators. Matters are evaluated from a different perspective from the level of performance results portion and the portion according to attainment of performance targets.
(3) Methods for determining the amount of compensation
1) The amount paid for the level of performance results portion is calculated by multiplying a value determined according to the amount of Group consolidated operating profit by a number of points set for each position. Said value is decided in accordance with a table formulated in advance.
2) The amount paid for the portion according to attainment of performance targets is calculated by multiplying the payment rate calculated from the annual performance target attainment rate (calculated based on the weighting of each indicator) by a set amount according to position. This is intended to leverage the combined power of all our Executive Officers toward the group’s optimal solution by applying the Group’s Executive Officers to its consolidated performance on a joint basis. The rate of the payment varies from 0% to 200%, depending on the attainment level of the target.
3) The “Individual Evaluation” is calculated by multiplying the standard amount for each position by the evaluation of the state of achievement of strategic priority policies for each Executive Officer, which is drafted by the President & CEO (the evaluation ranges from 0% to 200%, taking 100% as a base). In order to ensure objectivity and fairness in this evaluation, the Compensation Committee shall receive an explanation from the President & CEO at the beginning of each fiscal year of each Executive Officer’s strategic priorities and targets, and confirm consistency with the annual management plan outline and medium-term business plan determined by the Board of Directors.
4) The payment amounts in the three items listed above will be discussed and settled by the Compensation Committee.
2. Medium-term stock bonus (performance-linked)
(1) Overview (Items and indicators)
|Item||Medium-term stock bonus (performance-linked)|
* All items are based on the Group
|Group consolidated financial indicators||Non-financial indicators|
|ROE||The CO2 emissions reduction rate||Employee engagement score|
|Linked with attainment rate of medium term business plan targets|
(2) Indicators and the reasons for the selection of these indicators
In order to achieve sustainable growth and increase corporate value over the medium to long term, we use ROE as a financial indicator, and our CO2 emission reduction rate and employee engagement score as non-financial indicators (all on a group-wide basis). ROE was selected to enhance profitability from an investor’s perspective, the CO2 emissions reduction rate was selected to link environmental value to business growth while addressing the social issue of climate change, and employee engagement score was selected to maximize performance by developing and acquiring human resources and strengthening organizational capabilities. In addition, these indicators have been weighted at 80%, 10% and 10%, respectively.
(3) Methods for determining the amount of compensation
1) The number of stock to be distributed is determined by multiplying the payment rate calculated from the target attainment rate in the final fiscal year of the medium-term business plan, reflected with the weighting of the indicator, by the number of points set for the position accumulated over the same period, with one point equaling one share that will be transferred as compensation.
The rate of the payment varies from 0% to 200%, depending on the attainment level of the target.
2) Points set per position is calculated by dividing the amount of resources allocated per position by a reference stock price.
3) The reference stock price is the average price paid (weighted average) by the trustee entrusted by the company, the trustor, when purchasing the number of shares in the company required to pay the stock bonus on the stock market.
4) The number of shares transferred listed above will be discussed and settled by the Compensation Committee
Activities of the Compensation Committee, etc.
|Month||Attendance||Main agenda items ◆: Resolution adopted ◇: Deliberated ○: Reported △ :Other|
|May 2022||All 5 attended||◆ Compensation for individual Executive Officers in FY2022 (annual base salary)
◆ Compensation for Chairperson of the Board as the Independent Director
◆ Revision of internal rules for executive compensation
◆ Financial compensation linked to fiscal year performance of executive officers in FY2021
◆ Stock compensation for executive officers in FY2021
|June 2022||All 4 attended||◆Chairperson selection
◆Compensation Committee's FY2022 annual policy and annual plan
◆Individual compensation for officers starting July 2022 (annual base salary)
|July 2022||All 4 attended||◇Examination of executive compensation system review|
|September 2022||All 4 attended||◇Examination of executive compensation system review|
|November 2022||All 4 attended||◇Examination of executive compensation system review
○Report on executive compensation survey
|December 2022||All 4 attended||◇Examination of executive compensation system review|
|February 2023||All 4 attended||◇Examination of executive compensation system review|
|March 2023||3 attended||◆ Partial revision of the Policy for Determining Compensation and internal rules for executive compensation
◆ Compensation for individual executive officers in FY2023 (annual base salary)
|May 2023||All 4 attended||○ Voluntary return of a portion of executive officer compensation|
|May 2023||All 4 attended||◆Financial compensation linked to fiscal year performance of Executive Officers in FY2022
◆ Stock compensation for Executive Officers in FY2022
◆ Partial revision of the Policy for Determining Compensation and internal rules for executive compensation
○Strategic priority policies for Executive Officers in FY2023
Amount of Compensation Paid to Directors and Executive Officers for the Year Ended March 2023
|Total||Total base salary||Performance-linked compensation||Stock bonus|
1.The number above includes one Outside Director and two Inside Directors who resigned at the date of the 118th Ordinary General Meeting of Shareholders held on June 17, 2022. At the end of the period (March 31, 2023), the Company has five Outside Directors, one Inside Director (not concurrently holding Executive Officer posts) and seven Executive Officers.
2.In addition to the three inside directors shown above, the company has another three inside directors who concurrently hold executive officer posts, and the compensation to these directors is included in compensation to executive officers.
3.Regarding the performance-linked compensation, the amounts which were recorded as expense in the period are stated.
4.Regarding the stock-based compensation, the amounts shown are those to be recorded as expenses in the fiscal year concerned, based on calculation of the expected amount of compensation including future granting of the company's shares, in accordance with the expected number of points granted to Directors (excluding outside directors) and executive officers. The amount includes the amount of medium-term stock bonus (performance-linked) to be delivered in proportion to the achievement rate of the targets of the medium-term business plan.
5.In addition to the above compensation, the following payment was made during the current fiscal year under review in accordance with the resolution of the Compensation Committee at that time for the previous compensation upon retirement, which was abolished in June 2005.
• One Director 1 million yen (retired on June 17, 2022)
There is no director whose total amount of remuneration, etc. exceeds 100 million yen in the current fiscal year.
Guidelines on Officer Ownership of Konica Minolta Shares
In order to further raise awareness of shareholders' expectations for performance improvement and growth in the stock price, a stock bonus linked to the “medium-term stock bonus (performance-linked)”, “medium-term stock bonus (non-performance linked)”, and “long-term stock bonus” have been introduced. Accordingly, Stock Ownership Guidelines have also been established for inside directors and executive officers.
Group Auditing System
Creating a System That Aims for Effective Audits
Konica Minolta Inc., which has adopted the company-with-committees system, has established an Audit Committee, while its subsidiaries in Japan have appointed their own respective auditors. In addition, Konica Minolta Inc., has a Corporate Audit Division, which conducts an internal audit of the entire Group.
The members of the Audit Committee and the Corporate Audit Division, as well as auditors of the subsidiaries in Japan, share related information and strengthen the coordination of audit activities across the Group. With the aim of ensuring effective audits, the same parties hold regular meetings with the accounting auditors, review auditing systems and policies, and examine whether or not the accounting auditors can fulfill their tasks properly.
Audit Committee System and Roles
The Audit Committee is comprised of four directors (who do not hold positions as executive officers), three of whom are outside directors. The chairperson of the Audit Committee is selected from among the outside directors. To ensure effective operation of the committee, it has established its own office (Audit Committee Office) with staff members who are independent of any sections committed to actual business operations. The Audit Committee members evaluate the legality and validity of the management decisions made by directors, executive officers, and corporate vice presidents, and monitor and validate internal control systems, assess the adequacy of the accounting auditors, and determine the agenda of the general meeting of shareholders regarding the appointment and dismissal of accounting auditors. In principle, a committee meeting is held before the meeting of the Board of Directors, so that the committee members can present their opinions to the meeting of the Board of Directors, if deemed appropriate.
Corporate Audit Division Systems and Role
The Corporate Audit Division of Konica Minolta Inc., which directly reports to the president and CEO, is responsible for the Group-wide internal audit and monitoring, and performs internal audits of Konica Minolta and its subsidiaries, as well as major overseas affiliated companies. Using the risk-assessment approach, the division evaluates these companies in terms of the reliability of their financial statements, the efficiency and effectiveness of their businesses operations, and the level of their legal compliance. The division also conducts follow-up audits in which it examines improvement measures taken by respective companies in response to suggestions provided by internal auditors. For reporting, the division has established dual reporting lines, and audit reports regarding internal audits are reported to the president and the Audit Committee each time.
In addition, major subsidiaries have their own internal audit divisions which work closely with the Corporate Audit Division of Konica Minolta Inc., and enhance the internal audit function of the entire Group.
※Clicking the link above will take you to the“Mitsubishi UFJ Trust and Banking Corporation”website.