Jump to section

Governance

Corporate Governance

View Sumitomo Corporation's Sustainability : Corporate Governance

Principles

Corporate Governance Principles

Sumitomo’s Business Philosophy and the Sumitomo Corporation Group’s Management Principles form the backbone of the corporate ethics and represent the foundation underpinning our corporate governance. Based on this, we established the Sumitomo Corporation Corporate Governance Principles, recognizing that the essence of corporate governance is enhancing management efficiency and maintaining sound management, as well as ensuring management transparency to secure the first two. Efforts to build a better corporate governance system and carry out business activities following these principles help the Company achieve sustainable growth, enhance corporate value over the medium to long term, and fulfill its mission as a good corporate citizen, as well as benefits the interests of shareholders and all other stakeholders. For this reason, we continuously work to further enhance and improve our corporate governance.

Sumitomo Corporation Corporate Governance Principles(PDF/158KB)

System

System and features of corporate governance

The Company believes that it is the most appropriate system for the Company by securing the effective supervisory and monitoring function of management oversight by electing independent Outside Directors and Outside Audit & Supervisory Board Members and by establishing the Nomination and Remuneration Advisory Committee, comprised mainly of independent Outside Directors, under an audit & supervisory board member system. The Company has elected multiple independent Outside Directors (as of June 23, 2023, the number of independent Outside Directors is five.) with a wealth of experience and a high degree of specialized knowledge and expertise in different fields. This ensures appropriate decision-making in board meetings and further reinforces the oversight function through further diverse perspectives. Also, the Company has established the Nomination and Remuneration Advisory Committee (chaired by an Outside Director) as an advisory body of the Board of Directors in which the majority of members are Outside Directors. This enhances independence, objectivity and transparency of the Board of Directors’ function with respect to nomination and remuneration of Executive Officers. To strengthen the oversight framework from an external perspective, three of five Audit & Supervisory Board Members are the independent Outside Audit & Supervisory Board Members, one is a legal expert, one is a certified public accountant with considerable knowledge of finance and accounting, and the other has an experience in business management, thereby ensuring an auditing system that incorporates a diversity of perspectives. Furthermore, in addition to attending the Board of Directors Meeting, Audit & Supervisory Board Members are permitted to attend all internal meetings, enabling them to obtain sufficient information essential for auditing. By implementing the measures above, the Company believes that it has developed an effective, enhanced corporate governance system.

Our Medium-Term Management Plan “SHIFT 2023,” which began in fiscal 2021, also includes further enhancement of our corporate governance in its “Management Base Shift” chapter. For the purpose of strengthening functions of the Board of Directors, the Company will make efforts for further improvements of functions for monitoring by the Board of Directors over the execution of operations through effective supervision of key management policies and strategies (allocation of management resources, strategies related to business portfolio, sustainability management, etc.) and improving organizations for further strengthening objectivity of functions of the Board of Directors.

The Company's Corporate Governance System

Corporate Governance Report(PDF/897KB)

Framework for "Improving Management Efficiency" and "Maintaining Sound Management"

Directors and the Board of Directors

Election of Outside Director

To facilitate thorough debate and prompt, rational decision-making, the Board of Directors is composed of an appropriate number of members and diversity is ensured in terms of attributes including experience, knowledge, expertise, and gender. In addition, of the eleven Directors elected, five are Outside Directors with a wealth of experience and a high degree of specialized knowledge and expertise in different fields. This ensures appropriate decision-making in board meetings and further reinforces the oversight function through diverse perspectives. All Outside Directors meet the standards related to independence set by the financial instruments exchange that the Company is listed on, and the Standards for Independence set by Sumitomo Corporation.

Name Reasons for proposing and summary of expected roles
Kimie Iwata
since June 2018

< Attendance at Meetings of the Board of Directors in fiscal 2022 >
15 of 18 meetings (83.3%)
Ms. Iwata served in several key positions for many years at the Ministry of Labour (currently Ministry of Health, Labour and Welfare), and after retiring from the ministry served in various executive and outside director positions for private companies. Through these and other roles, she has accumulated wide-ranging knowledge and a wealth of experience in business management, corporate governance, corporate social responsibility, and diversity, etc.; she is also honest in character, as well as highly insightful and capable. She will contribute to the Company’s aims of ensuring appropriate decision-making from diverse perspectives in board meetings and further enhancing supervisory functions, and is thus judged to be qualified for the role of Outside Director of the Company and to be able to perform her duties properly in that position. For these reasons, she is appointed as the position of Outside Director. She is expected to draw on her experience and knowledge to fulfill the role of ensuring appropriate decision-making by the Board of Directors and further enhancing management supervisory functions. In addition, as Chair of the Nomination and Remuneration Advisory Committee, she is also expected to contribute to further enhancing the independence, objectivity and transparency of the nomination and remuneration process for Director, Audit & Supervisory Board Member and executive management.
Hisashi Yamazaki
since June 2018

< Attendance at Meetings of the Board of Directors in fiscal 2022 >
18 of 18 meetings (100%)
Mr. Yamazaki has highly specialized knowledge and a wealth of experience in law based on his career over many years as a judge and attorney at law; he is also honest in character, as well as highly insightful and capable. He will contribute to the Company’s aims of ensuring appropriate decision making from diverse perspectives in board meetings and further enhancing supervisory functions, and is thus judged to be qualified for the role of Outside Director of the Company and to be able to perform his duties properly in that position. For these reasons, he is appointed as the position of Outside Director. He is expected to draw on his experience and knowledge to fulfill the role of ensuring appropriate decision-making by the Board of Directors and further enhancing management supervisory functions.
Akiko Ide
since June 2020
< Attendance at Meetings of the Board of Directors in fiscal 2022 >
18 of 18 meetings (100%)
Ms. Ide served in several key positions for many years at a major telecommunications carrier, working as a group company executive and as a full time audit & supervisory board member of the parent (holding) company. Through these and other roles, she has accumulated wide-ranging knowledge and a wealth of experience in information and communications, business management, and corporate governance, etc.; she is also honest in character, as well as highly insightful and capable. She will contribute to the Company’s aims of ensuring appropriate decision-making from diverse perspectives in board meetings and further enhancing supervisory functions, and is thus judged to be qualified for the role of Outside Director of the Company and to be able to perform her duties properly in that position. For these reasons, she is appointed as the position of Outside Director. She is expected to draw on her experience and knowledge to fulfill the role of ensuring appropriate decision-making by the Board of Directors and further enhancing management supervisory functions. In addition, as Member of the Nomination and Remuneration Advisory Committee, she is also expected to contribute to further enhancing the independence, objectivity and transparency of the nomination and remuneration process for Director, Audit & Supervisory Board Member and executive management.
Takashi Mitachi
since June 2022
< Attendance at Meetings of the Board of Directors in fiscal 2022 >
14 of 14 meetings (100%)
(Since appointed Director on June 24, 2022)
Mr. Mitachi served in several key positions for many years at a major US consulting firm. Through these and other roles, he has accumulated wide-ranging knowledge and a wealth of experience in business management and enterprise risk management, etc.; he is also honest in character, as well as highly insightful and capable. He will contribute to the Company’s aims of ensuring appropriate decision-making from diverse perspectives in board meetings and further enhancing supervisory functions, and is thus judged to be qualified for the role of Outside Director of the Company and to be able to perform his duties properly in that position. For these reasons, he is appointed as the position of Outside Director. He is expected to draw on his experience and knowledge to fulfill the role of ensuring appropriate decision-making by the Board of Directors and further enhancing management supervisory functions. In addition, as Member of the Nomination and Remuneration Advisory Committee, he is also expected to contribute to further enhancing the independence, objectivity and transparency of the nomination and remuneration process for Director, Audit & Supervisory Board Member and executive management.
Takahisa Takahara
since June 2023
Mr. Takahara has held several key positions for many years at a major consumer goods manufacturer, serving as Director, Senior Director, and President & CEO. Through these and other roles, he has accumulated wide-ranging knowledge and a wealth of experience in business management; he is also honest in character, as well as highly insightful and capable. He will contribute to the Company’s aims of ensuring appropriate decision-making from diverse perspectives in board meetings and further enhancing supervisory functions, and is thus judged to be qualified for the role of Outside Director of the Company and to be able to perform his duties properly in that position. For these reasons, he is appointed as the position of Outside Director. He is expected to draw on his experience and knowledge to fulfill the role of ensuring appropriate decision-making by the Board of Directors and further enhancing management supervisory functions.

Standards for Appointment and Independence of Outside Directors and Outside Audit & Supervisory Board Members(PDF/94KB)

Improvement of Deliberation and Enhancement of Monitoring Function at the Board of Directors

The Board of Directors enhances its deliberations and strengthen its monitoring functions by the following initiatives:

  • Agenda items for the Board of Directors are carefully selected by the Board of Directors to promote more focused discussion of management policies and plans and other important matters for companywide management. Members of the Board of Directors also select items that should be taken up for more intensive discussion at the Board of Directors meetings each year (agenda setting).
  • The Board of Directors receives reports from each business unit on the state of progress on its strategies, any associated issues and its response to those issues, and carries out a discussion focusing on such issues. The Board of Directors also periodically monitors the state of business execution companywide by receiving reports on the activities of the main corporate committees.
  • The Board of Directors holds off-site meetings in addition to regular meetings, for free and open discussions on important management topics, including management policies and plans and ESG (Environment, Social and Governance) issues. Moreover, to ensure that Outside Directors and Outside Audit & Supervisory Board Members actively contribute to the discussions at the Board of Directors, a monthly meeting is held, which is comprised of Outside Directors and Outside Audit & Supervisory Board Members, in which they engage in robust discussion.
  • Prior to every meeting of the Board of Directors, Outside Directors and Audit & Supervisory Board Members are briefed on the agenda items due for discussion.

Separation of Duties between the Chairman of the Board of Directors and the President and Chief Executive Officer, and Limits on Their Terms of Office

In principle, the positions of Chairman of the Board of Directors and the President and Chief Executive Officer are clearly defined and separate in order to ensure mutual supervision, and both positions cannot be held simultaneously by the one person. The role of the Chairman of the Board of Directors is to supervise the management of the Company; the Chairman has no involvement in day-to-day execution of operations and no authority to represent the Company.

In principle, the Chairman of the Board of Directors and the President and Chief Executive Officer are each limited to term of six years. This limitation on the tenure of top management helps eliminate the possibility of governance problems occurring as a result of the top management not being changed over for a long period of time.

Evaluation of the Board of Directors

To maintain and enhance the effectiveness of the Board of Directors, each year Directors and Audit & Supervisory Board Members engage in analysis and evaluation of the Board’s effectiveness through self-evaluation and other methods. This is followed by the disclosure of overviews of the results.
In fiscal 2022, from the perspective of preventing the effectiveness evaluation from becoming a mere formality and implementing the PDCA cycle to improve the functions of the Board of Directors, the members of the Board of Directors discussed the methods and items of the effectiveness evaluation and made the following revisions:

  1. We have changed the questionnaire from “anonymous” format to “named” format as we considered that it is important to understand the background of the respondents and their opinions as well as their awareness of issues in order to deepen discussions based on the opinions expressed in the questionnaire, and judged that frank exchange of opinions is sufficiently conducted at the Board of Directors at present.
  2. On top of that, we have decided to stop using a third party for interviews for this effectiveness evaluation. Instead, we have decided to enhance the process of discussing issues and improvement actions among all the members of the Board of Directors based on the results of the “named” questionnaire.
  3. In the questionnaire, while remaining the basic questions unchanged in order to observe the progress of improvement from a fixed point of view, we have further narrowed the questions down to the main issues, and have adopted a format in which each Director and Audit & Supervisory Board Member wrote freely what he or she has considered to be issues.

The evaluation for fiscal 2022 conducted in accordance with the above and its results are summarized below.
Based on the opinions expressed by Directors and Audit & Supervisory Board Members and issues identified on the effectiveness evaluation for fiscal 2022, we will continue to make efforts to further increase the effectiveness of the Board of Directors.

  1. Evaluation Methods
    1. Individuals Evaluated
      All eleven Directors and five Audit & Supervisory Board Members
    2. Implementation method
      We conducted a questionnaire survey (responses with names) in December 2022. Based on the results, Directors and Audit & Supervisory Board Members held multiple discussion to evaluate and analyze the results, and to identify the issues and the initiatives for how we should improve them.
    3. Evaluation Items
      (i) functions and roles of the Board of Directors
      (ii) agenda items of the Board of Directors
      (iii) quality and content of discussion at the Board of Directors
      (iv) provision of support and information to members of the Board of Directors
      (v) composition of the Board of Directors
      (vi) an advisory body to the Board of Directors
      (vii) fulfillment of roles by the Chairman of the Board of Directors
      (viii) fulfillment of roles by internal Directors
      (ix) fulfillment of roles by Outside Directors
      (x) expectation for roles of Audit & Supervisory Board Members
      (xi) overall evaluation, etc.
    4. Third Party Assistance We received advice and assistance from a third party (external consultant) in determining the questions for the questionnaire, etc.
  2. Evaluation Results Overview
    All Directors and Audit & Supervisory Board Members held discussions based on the results of the questionnaire, and evaluated that the Board of Directors is functioning effectively overall, with the level of its operations and performance of functions improving year by year through constant efforts. The main opinions were as follows:
    • The agenda of the Board of Directors is systematically discussed and appropriately set. In particular, monitoring of the implementation of the strategy based on the medium-term management plan is regularly and comprehensively addressed, and sufficient time is spent on discussions. In the future, it is advisable to spend more time discussing geopolitical events and other environmental change that may give impact on our management, as well as the medium- to long-term management strategies based on such impact.
    • Providing prior briefing to Directors and Audit & Supervisory Board Members, sharing of discussions at Management Council and its questions and answers at the advance briefings with them, and holding of meetings of outside Directors and Audit & Supervisory Board Members have invigorated essential discussions at the Board of Directors. The constructive questions and answers and sufficient exchange of opinions on each agenda have contributed to the enhancement of monitoring and decision-making functions of the Board of Directors.
    • Outside Directors have provided suggestions and advice based on their expertise and experience. The Outside Directors have contributed to fulfillment of the supervisory function by the Board of Directors by providing opinions from the viewpoints of various stakeholders, which are difficult for internal management and officers to recognize.
    In addition, in this effectiveness evaluation, we returned to and discussed the most essential issues of the Board of Directors, such as “what functions and roles the Board of Directors should play”. Although it is necessary to continue to discuss this issue, we will carry out the actions including below, to further strengthen and enhance our corporate governance, based on the results of this discussion.
    • From the perspective of strengthening both the management and monitoring functions of the Board of Directors and increasing corporate value, we will continue to set appropriate agenda items and deepen discussions on medium- to long-term management policies.
    • We will improve the quality of discussions at the Board of Directors by establishing a new organization to support communications between the Board of Directors and the managements/officers, and by advancing initiatives such as reviewing agenda items for the Board of Directors, preparing concise materials and organizing discussion points.

Establishment of the Nomination and Remuneration Advisory Committee

The Nomination and Remuneration Advisory Committee, of which a majority of members are Outside Directors, and which is also chaired by an Outside Director, has been established as an advisory body to the Board of Directors. The Committee meets as necessary, and is in charge of deliberating (1) policies and procedures regarding appointment and dismissal ofthe President and Chief Executive Officer, (2) policies and procedures regarding appointment and dismissal of the Chairman of the Board of Directors, (3) nomination criteria for Directors and Audit & Supervisory Board Members, (4) appointment and dismissal of the President and Chief Executive Officer (including the nomination of a successor of the President and Chief Executive Officer), (5) nominations of candidates for Directors and Audit & Supervisory Board Members (including determination of Representative Directors and Executive Directors), (6) appointment of Management Council members, (7) the structures/levels of remuneration and bonuses for Directors and Executive officers and the limit of remuneration for Audit & Supervisory Board Members, and (8) the advisor system, and will submit the results thereof as recommendations to the Board of Directors. In FY2022, the Nomination and Remuneration Advisory Committee met 7 times to deliberate the abovementioned matters, and submitted the results thereof as recommendations to the Board of Directors.

Composition of the Nomination and Remuneration Advisory Committee

Total Members Internal Directors Outside Directors Committee Chairman
5persons 2 persons (President and Chief Executive Officer, Chairman of the Board of Directors) 3 persons Outside DirectorOutside Director

The knowledge, experience and competencies, etc. (collectively, “Skills”) that the Board of Directors is required to possess, and Skills that Directors or Audit & Supervisory Board Members currently in office possess (as of September 2023)

  1. This table identifies the types of knowledge, experience and competencies, etc. (individually, "Skill" and collectively, “Skills”) that the Board of Directors is required to possess for fulfilling its roles, and indicates which Directors or Audit & Supervisory Board Members currently in office possess such Skills. In our view, it is important that the Board of Directors as a whole possesses these Skills.
  2. Since the Company is active in investing in various businesses, we consider “Corporate management” and “Investment/M&A” Skills to be particularly important. Under the ongoing medium-term management plan, “SHIFT2023,” we are promoting a business portfolio shift with a focus on digital transformation (DX) and the enhancement of sustainability management as two sweeping trends. To this end, we emphasize the Skill of “ICT/DX/Technology” for business reforms or business development through exploiting digital solutions or the mixture of technology and innovation solutions and the Skill of “ESG/Sustainability” for sophisticating sustainability management. In addition, the Skills of “Finance/Accounting,” “Legal/Riskmanagement” and “HR management and development” are important for supporting or administering the Company’s business operations.
  3. The key Skills for Audit & Supervisory Board Members on which a high priority is placed are "Corporate management", "Finance/Accounting", and "Legal/Riskmanagement", since they are responsible for auditing Directors’ execution of duties.
  4. Since the Company carries out business transactions and investments all over the world, respective Directors or Audit & Supervisory Board Members are required to have a keen insight from a global perspective. Knowledge concerning “governance” is another indispensable skill for serving as a Director or Audit & Supervisory Board Member. Because we mandate that all Directors and Audit & Supervisory Board Members possess such two skills, they are not included in seven Skills that are indicated in the table and selected in paragraph 2 above.
  5. The Skills that the Board of Directors are required to possess may vary according to business strategies or changes in the external environment. This table will be updated from time to time based on the Board of Directors’ review and discussions on required Skills.
  • A brief history of each of the incumbent Directors and Audit & Supervisory Board Member is disclosed.
    Management

Directors(Internal)

 Male  Female

Name Role
(Term of office as Director)
Knowledge, experience and competencies, etc.(Skills)
Corporate management Investment / M&A ICT / DX / Technology ESG / Sustainability Finance / Accounting Legal / Risk management Human resources management & development
 Kuniharu Nakamura Director, Chairman
(14years 3months)
 Masayuki Hyodo Representative Director, President and Chief Executive Officer
(5years 3months)
 Shingo Ueno Representative Director, Executive Vice President
(3months)
 Takayuki Seishima Representative Director, Executive Vice President
(4years 3months)
 Reiji Morooka Representative Director, Senior Managing Executive Officer
(1year 3months)
 Hirokazu Higashino Representative Director, Senior Managing Executive Officer
(1year 3months)

Directors(Outside)

 Male  Female

Name Role
(Term of office as Director)
Knowledge, experience and competencies, etc.(Skills)
Corporate management Investment / M&A ICT / DX / Technology ESG / Sustainability Finance / Accounting Legal / Risk management Human resources management & development
 Kimie Iwata Outside Director
(5years 3months)
 Hisashi Yamazaki Outside Director
(5years 3months)
 Akiko Ide Outside Director
(3years 3months)
 Takashi Mitachi Outside Director
(1year 3months)
 Takahisa Takahara Outside Director
(3months)

Audit & Supervisory Board Members(Internal)

 Male  Female

Name Role
(Term of office as Director)
Knowledge, experience and competencies, etc. (Skills)
Corporate management Investment / M&A ICT / DX / Technology ESG / Sustainability Finance / Accounting Legal / Risk management Human resources management & development
 Daisuke Mikogami Senior Audit & Supervisory Board Member (Full-Time)
(3months)
 Kazunari Sakata Audit & Supervisory Board Member (Full-Time)
(1year 3months)

Audit & Supervisory Board Members(Outside)

 Male  Female

Name Role
(Term of office as Director)
Knowledge, experience and competencies, etc. (Skills)
Corporate management Investment / M&A ICT / DX / Technology ESG / Sustainability Finance / Accounting Legal / Risk management Human resources management & development
 Toshio Nagai Outside Audit & Supervisory Board Member
(7years 3months)
 Yoshitaka Kato Outside Audit & Supervisory Board Member
(7years 3months)
 Yukiko Nagashima Outside Audit & Supervisory Board Member
(2years 3months)

Audit & Supervisory Board Members and the Audit & Supervisory Board

Audit & Supervisory Board Members
and the Audit & Supervisory Board

Enhancement of Auditing capabilities

The Audit & Supervisory Board comprises five members—two Inside Fulltime Audit & Supervisory Board Members and three Outside Audit & Supervisory Board Members (including one woman). The Inside Audit & Supervisory Board Members must have a sincere character, deep insight, and high-level skills as well as specialized business knowledge and a broad range of experience, and they are appointed without regard for gender, nationality, and other such characteristics.
The Outside Audit & Supervisory Board Members must also have a sincere character, deep insight, and high-level skills as well as advanced specialized knowledge, particularly in fields such as law, accounting, or corporate management, and extensive experience, and they too are appointed without regard for gender, nationality, and so on. Among the Outside Audit & Supervisory Board Member, one is a legal expert (a former Chief Justice of the Osaka High Court), one is a certified public accountant with considerable knowledge of finance and accounting, and the other is a fulltime Audit & Supervisory Board Member of a listed company and has an experience in business management. All of the Outside Audit & Supervisory Board Members satisfy the criteria on independence set by financial instruments exchanges on which the Company is listed, as well as the Standard for Independence established by Sumitomo Corporation.

Ensuring Audit Effectiveness

Each Audit & Supervisory Board Member attends important meetings such as the Board of Directors Meeting, receives reports form Directors and employees, etc. regarding the execution of their duties, asks them for explanations as necessary, inspects important internal authorization documents and examines the status of operations and the financial status regarding the head office and important operating locations. As for subsidiaries, each Audit & Supervisory Board Member promotes communication and exchange of information with Directors and Audit & Supervisory Board Members, etc. of subsidiaries, and receives reports on thesubsidiaries’ business as necessary.
The Audit & Supervisory Board Members' Administration Department (five employees) has been established as a specialized organization to support the work of the Audit & Supervisory Board Members. The Audit & Supervisory Board Members participate in personne levaluations and transfers and so on regarding these employees to ensure their independence from the Board of Directors.

Collaboration between the Internal Auditing Department and Accounting Auditors

To ensure audit efficiency, Audit & Supervisory Board Members interact closely with the Internal Auditing Department, receiving reports on internal audit plans and their results in a timely manner. In addition, Audit & Supervisory Board Members exchange information with and monitor the auditing activities of the accounting auditors through regular meetings. By attending audit review meetings and observing inventory audits by the accounting auditors, the Audit & Supervisory Board Members constantly work to improve audit efficiency and quality.

Training and Information Provision for Directors and Audit & Supervisory Board Members

On taking office, Outside Directors and Audit & Supervisory Board Members have the opportunity to receive a briefing on areas including the Sumitomo Corporation Group’s Management Principles, management policy, business activities, finances, organization, medium-term management plan “SHIFT 2023,” and risk management system. To enable Directors and Audit & Supervisory Board Members to acquire the necessary knowledge and update it as appropriate, we additionally provide access to resources including seminars and e-learning facilities, offering financial support to cover the necessary costs.

To deepen their understanding of “Sumitomo’s Business Philosophy” and the Company’s business activities, Outside Directors and Outside Audit & Supervisory Board Members, in principle, visit a Sumitomo-related facility during the first fiscal year of their term in office and have opportunities to observe at least one workplace in Japan and at least one workplace overseas every year. In fiscal 2022, overseas workplace visits were canceled due to the spread of COVID-19; four Sumitomo-related facility and workplace visits in Japan were conducted.

Executive Remuneration Plan

Matters related to policy for deciding the remuneration for individual directors

The decision making policy for the remuneration of individual Directors was resolved at the Board of Directors meeting after deliberation within the Nomination and Remuneration Advisory Committee (chaired by Outside Director), a majority of whose members are Outside Directors.

  1. System for remuneration (● indicates such Director eligible for each type of remuneration)
    Type of Remuneration Director Type
    Executive Director Chairman of the Board of Directors Outside Director
    Fixed Monthly Remuneration
    Variable Performance Linked Bonus
    Stock-based remuneration
  2. Ratio and remuneration standards regarding each types of remuneration

    The Company will establish an appropriate ratio, etc. between fixed remuneration (monthly remuneration) and variable remuneration (“performance linked bonus” which is linked with short term performance of the Company and “stock-based remuneration” which is linked with middle and long term performance of the Company and shareholder value) which corresponds to Director’s position, (i) by setting an appropriate remuneration standards to acquire and retain highly capable management who will bring about the Company’s sustainable growth and increase of corporate value in the middle to long term, and (ii) to design as healthy incentive to sustainable growth of the Company, based on its business environment, management strategy and human resources strategy, with reference to objective remuneration market research data, etc. provided by external specialized agencies.

  3. Policy and method on the decision of the amount of each remuneration

    • Policy on the decision of the amount of each remuneration: as follows
    • Method on the decision of the amount of each remuneration: Remuneration of each Directors is resolved by the Board of Directors within the limit resolved at the General Meeting of Shareholders. For the resolution by the Board of Directors, the details are deliberated by the Nomination and Remuneration Advisory Committee and the results thereof are reported to the Board of Directors. For other method, as follows

  Policy on the decision of the amount of each remuneration Method on the decision of the amount of each remuneration
Fixed Monthly Remuneration
  • Fixed amount remuneration determined based on the abovementioned standards is provided.
  • Variable Performance Linked Bonus
  • From the perspective of reinforcing the relationship with its group’s management strategy, the total amount to be paid is determined in accordance with the performance management index to be focused on in the medium-term management plan. The amount to be paid to individual Executive Directors is distributed according to their position and personal evaluation and is paid after the end of the fiscal year.
  • Each Executive Director is evaluated on the basis of both financial indicators and non-financial indicators.
  • The Board of Directors, reflecting reports from the Nomination and Remuneration Advisory Committee, set assumed values for each performance management index and decide formula for calculating the performance linked bonuses for individual Executive Directors (for the relevant fiscal year) based on actual values for each performance management index.
  • After the end of fiscal year, Representative Director, President and Chief Executive Officer (who is delegated such decision by the Board of Directors) shall decide personal evaluations of each Executive Directors regarding the performance management index which is a part of the formula, following meetings with each of Executive Directors, and performance linked bonuses for each fiscal year will be determined as per the formula, within the limit resolved at the General Meeting of Shareholders.
  • Representative Director, President and Chief Executive Officer will 70 report to the Nomination and Remuneration Advisory Committee about the grading results to make sure that the personal evaluations are appropriate.
  • Restricted Performance Share Unit-Based Remuneration
  • This remuneration is aimed at promoting efforts at optimizing its business portfolio, increasing corporate value in the medium to long term and to ensure sustainable growth, focusing on the link with indicators related to environment, society and governance (ESG) together with shareholder value. Further, we shall promote to share value with the shareholders. The actual contents and timing of payment of the stock-based remuneration for each Directors is decided by the Board of Directors after consultation with the Nomination and Remuneration Advisory Committee.
  • The Board of Directors, reflecting reports from the Nomination and Remuneration Advisory Committee, decide formula for calculating the stock-based remuneration for individual Executive Directors at the first board meeting of relevant evaluation period based on actual values for each performance management index in several fiscal years.
  • Nomination and Remuneration Advisory Committee (who is delegated such decision by the Board of Directors), comprised of Outside Directors, Chairman of the Board of Directors and Representative Director, President and Chief Executive Officer, shall decide personal evaluations of each Executive Directors on the indicator regarding environment, society, and governance (ESG) which is a part of the formula, and report the evaluations to the Board of Directors.
  • Remuneration system

    1. Executive remuneration plan (● indicates the persons eligible for each type of remuneration, etc.)
      Type of remuneration, etc. Eligibility
      Executive Directors/ Executive Officers Chairman of the Board of Directors Outside Directors Audit & Supervisory Board Members
      Fixed Monthly Remuneration
      Variable Performance-Linked Bonus
      Restricted Performance Share Unit-Based Remuneration
    2. Remuneration standards and remuneration composition ratios of Executive Directors and Executive Officers

      • We have set our remuneration standards and remuneration composition ratios to appropriate levels in light of current business environment, business strategies and human resources strategy, . We have done so with reference to objective remuneration market research data, etc. provided by external specialized agencies.
      • The image of the remuneration of Representative Director, President and Chief Executive Officer is as shown below.
    3. Performance-linked bonus

      • From the perspective of reinforcing the relationship with our group’s management strategy, the total amount to be paid is determined in accordance with the performance management index to be focused on in the medium term management plan “SHIFT 2023”, as well as the year-on-year stock price growth rate (ratio of the Company’s stock price growth to the growth rate of TOPIX(Tokyo Stock Exchange Stock Price Index))
      • The amount to be paid to individual officers is distributed according to their position and personal evaluation and paid after the end of the fiscal year.
      • Each officer is evaluated on the basis of both financial indicators (status of achievement of business plans, etc. in the respective areas of responsibility) and non-financial indicators (such as individual Strategic Business Units’ achievement of KPIs and KAIs, and progress in addressing important company-wide issues) so that they can become more aware in regard to their commitment to management strategy and results.
      • The ratio of financial indicators to non-financial indicators in personal evaluation is 50:50, and of evaluation based on non-financial indicators, 20% relates to the important company-wide issues of business reform through digital transformation (DX), enhancement of sustainability management, and promotion of Diversity, Equity & Inclusion.

      [Total amount of performance-linked bonuses]

      • The potential range of business results in terms of consolidated net income and basic profit cash flow is assumed to be from 200 to 600 billion yen; if business results fall outside this range, the total amount of performance-linked bonuses to be paid is decided separately by the Board of Directors based on report from the Nomination and Remuneration Advisory Committee.
      • In order to further promote the initiatives of the medium term management plan “SHIFT 2023”, we added the year-on-year stock price growth rate as a new indicator for determining the total amount of performance-linked bonuses. The total amount to be paid is worked out by multiplying the amount calculated from consolidated net income and basic profit cash flow by the year-on year stock price growth rate. The range of the year-on-year stock price growth rate is from 80 to 120%.

    4. Restricted Performance Share Unit-Based Remuneration

      • With the aim of further promoting efforts to increase the Company’s corporate value over the medium to long term and share value with our shareholders, the number of company’s common shares (restricted) to be provided are determined according to the Company’s stock growth rate (ratio of the Company’s stock price growth to the growth rate of TOPIX (Tokyo Stock Exchange Stock Price Index)) during the three-year evaluation period.
      • In order to promote efforts to help solve Company’s Key Social Issues and to make non-financial indicators (related to environment and/or society) be more closely linked with Share Unit-Based Remuneration so that increase awareness of the Company’s commitment to the enhancement of sustainability management, evaluation on the non-financial indicators (“climate change”, “promotion of women's active engagement” and “employee engagement”) is used to calculate the amount of Company’s common shares to be granted as restricted shares.
      • The restriction period will be from the day the shares are provided until the day the recipient resigns or retires from all their positions as Director or Executive Officer of the Company or any other position determined by the Board of Directors to realize shareholder value over the medium to long term.

    Internal Audits

    The Internal Auditing Department under the Head of Internal Control and Internal Audit, who reports directly to the President and Chief Executive Officer, is an independent organization that monitors the operations of the Group, and audits organizations and operating companies of the Group. As well as reporting the internal audit results directly to the President and Chief Executive Officer, in principle on a monthly basis, periodic reports are also made to the Board of Directors and the Audit & Supervisory Board. The department regularly conducts audits on all aspects of internal control, comprising asset and risk management, compliance and business operations. It evaluates the effectiveness and adequacy of the internal controls of auditees, taking into account the significance of the inherent risks. At the same time, it provides appropriate advice for improvements and expedites improvement and maintenance on the auditee’s own initiative, thereby contributing to the improvement of governance and internal controls within the Sumitomo Corporation Group.

    Committees

    Corporate Strategy Promotion Committee, Global Innovation Promotion Committee, Company Investment Committee, Internal Control Committee, Compliance Committee, Corporate Sustainability Committee, Corporate Communication Committee, IT Strategy Committee, HR Management System Committee, Pension Management Committee, and Intelligence Committee are established as advisory bodies for the Management Council with regard to specific matters that are important from the perspective of Sumitomo Corporation as a whole.

    Basic Policy on Information Disclosure

    System for Ensuring Management Transparency

    Basic Policy on Information Disclosure

    To bring an accurate understanding of the Company's management policies and business activities to all our stakeholders, we shall strive to make full disclosure, not limiting ourselves to the disclosure of information required by law but also actively pursuing the voluntary disclosure of information.

    Corporate Disclosure Policy

    Communicating with Shareholders and Other Investors

    Measures relating to the General Meeting of Shareholders

    We send out a convening notice describing how to access the material for the General Meeting of Shareholders (for shareholders who requested the delivery of such material in paper, the printed material for the General Meeting of Shareholders) to shareholders approximately three weeks prior to each Ordinary General Meeting of Shareholders. For the convenience of shareholders, we also provide the notice on our corporate website in advance of sending a Notice of Convocation, together with its English-language translation. We allow shareholders and investors sufficient time to thoroughly examine the propositions to be resolved at the Meeting by enabling them to exercise their voting rights via internet (including through the Electronic Voting Platform for institutional investors operated by Investor Communication Japan, Inc. [ICJ]). In addition, we stream the General Meeting of Shareholders live for shareholders on internet and the streaming video of the meeting is posted on our website for a certain period after the close of the meeting. In 2022, we begin accepting questions from shareholders on internet prior to the General Meeting of Shareholders.

    Disclosing Various Information

    The IR section of our corporate website provides various materials that may be useful in making investment decisions in a timely manner. These materials include financial results, yukashoken houkokusho (Japanese annual securities reports) and other Tokyo Stock Exchange filings as well as documents from company briefings. Moreover, we provide our Integrated Report and ESG Communication Book, and endeavor to ensure proactive disclosure of not only financial information but non-financial information as well.

    Investor Relations and Shareholder Relations(*)

    In order to ensure direct communication with shareholders and other investors, we hold quarterly meetings attended by top management to provide information on our financial results for analysts and institutional investors in Japan, as well as one-on-one meetings with them. For individual investors, we hold company briefings online as well as in major cities across Japan. For overseas, we continuously hold one-on-one meetings with institutional investors mainly in Europe, North America and Asia. In addition to these, we ensure regular and constructive engagement with domestic and overseas institutional shareholders who substantially hold the Company’s shares. Such engagement primarily addresses our initiatives and policies, etc. relating to ESG (Environment, Social and Governance) issues. While increasing management transparency, we aim to strengthen our relationships of trust with shareholders and investors.

    (*) Briefings and meetings were held both face-to-face and online in fiscal 2022.


    While working to improve and enhance our corporate governance structure and systems, from the perspectives of "improving management efficiency" and "maintaining sound management" by implementing the measures above, we will continue to further strengthen internal auditing, risk management, compliance, to further improve the effectiveness of internal control.

    Status of Compliance with the Japan's Corporate Governance Code

    Status of Compliance with the Japan's Corporate Governance Code

    Status of Compliance with the Japan's Corporate Governance Code

    The Company complies all Principles of the Corporate Governance Code. Please refer to Corporate Governance Report for details.

    Corporate Governance Report(PDF/1021KB)

    Policy on Cross-shareholdings and Standards for Exercising Voting Rights

    As a general rule, the Company will neither acquire nor hold shares in other listed companies for purposes other than pure investment.

    However, the Company may decide to hold shares in listed companies in some exceptional cases when the Company determines that it is appropriate. For such determination, the Company will comprehensively assess and verify the capital cost of individual stocks and the economic rationality and significance of holding the stocks in light of the necessity of partnering or other business needs. Each year, the Board of Directors reviews whether or not the Company’s holding of listed shares is appropriate.

    If such annual review concludes that specific shareholdings are of little significance, the Company will push ahead with the sale of the shares.

    In FY 2022, the Company sold shares of 22 listed stocks (either in whole or in part), amounting to 33.8 billion yen in total. As of the end of March 2023, the Company’s shareholdings in listed companies cover 59 stocks, with the total balance of 190.7 billion yen.

    When exercising voting rights, the Company examines various aspects through both quantitative and qualitative approaches in accordance with its own guidelines. Such examination focuses on whether each proposal presented to shareholders will lead to the enhancement of shareholder value and medium- to long-term corporate value of both the Company and the investee company. In this way, the Company tries to make adequate decisions as to whether to vote in favor of or against each proposal based on comprehensive judgments.

    If an entity holding shares in the Company for purposes other than pure investment indicates its intention to sell the shares, the Company will, in principle, respect such intention, and the business relationship between the entity and the Company will not be affected.

    History of strengthning corporate governance

    Status of Compliance with the Japan's Corporate Governance Code

    Status of Compliance with the Japan's Corporate Governance Code

    Sumitomo Corporation has worked continuously to strengthen governance. This has included introducing the Audit & Supervisory Board system, increasing the number of Outside Audit & Supervisory Board Members and Outside Directors, and evaluating the effectiveness of the Board of Directors. Looking ahead, we will make further efforts toward enhancing the effectiveness of governance by strengthening group governance and reinforcing the functions of the Board of Directors.

    1993 Appointed first Outside Audit & Supervisory Board Member
    1998 Established the Sumitomo Corporation Group's Corporate Mission Statement
    2003 Established the Sumitomo Corporation Corporate Governance Principles
    Reduced the number of Directors (from 24 to 12)
    Introduced the executive officer system
    Specified the term of office of Chairman and President (limited to six years) in the Sumitomo Corporation Corporate Governance Principles
    Increased the number of Outside Audit & Supervisory Board Members by 1 to 3 (for a total of 5 Audit & Supervisory Board Members)
    2005 Shortened term of office of Directors and Executive Officers to 1 year
    2007 Established the Remuneration Committee as an advisory body to the Board of Directors, the majority of whose members are Outside Directors
    2013 Appointed first two Outside Directors
    Specified the term of office of Outside Directors (limited to 6 years) in the Sumitomo Corporation Corporate Governance Principles
    Specified the term of office of Outside Audit & Supervisory Board Members (limited to 8 years) in the Sumitomo Corporation Corporate Governance Principles
    2015 Reviewed governance and decision-making processes
    • Management Council became the highest executive-level decision-making body
    • Enhancement of monitoring function by the Board of Directors
    • Reorganized the Remuneration Committee as the Nomination and Remuneration Advisory Committee, the majority of whose members are Outside Directors
    Increased the number of Outside Directors by 1 to 3
    2016 Began evaluating the effectiveness of the Board of Directors (evaluation period began with FY2015; continues each year)
    Complied with all principles of Japan's Corporate Governance Code (continues each year)
    Revised the Board of Directors' agenda criteria
    Increased the number of Outside Directors by 1 to 4
    2017 Reduced the number of Internal Directors from 10 to 6 (Chairman, President, 3 Officers in charge of the Corporate Group, 1 General Manager of a Business Unit)
    2018 Increased the number of Outside Directors to 5
    2019 Revised the counselor and honorary advisor system
    Set the policy and procedure for appointment and dismissal of the President and Chief Executive Officer
    Determined the policy and procedure for appointment and dismissal of the Chairman of the Board of Directors
    2020 Began agenda setting for the Board of Directors
    2021 Disclosed the skills matrix for Directors and Audit & Supervisory Board Members
    2023 Newly established a dedicated department to support Directors