Corporate Governance

As of August 1, 2023

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 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 (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, 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/1021KB)

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

Directors and the Board of Directors

Composition of the Board of Directors and 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.

Establishment of the Advisory Body to the Board of Directors

We established the Nomination and Remuneration Advisory Committee (chairperson: Outside Director). Functioning as an advisory body to the Board of Directors, more than half of the Committee members are Outside Directors. The Nomination and Remuneration Advisory Committee is in charge of deliberating on the following matters and will report the outcome of such deliberation to the board of directors. Additionally, the Committee shall also deliberate and determine any matters delegated by the board of directors that are not included in following matters, and report the outcome of such deliberation or decision to the board of directors.

1. Policy and procedure for appointment and dismissal of the President and Chief Executive Officer
2. Policy and procedure for 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 nominating successors to the President and Chief Executive Officer)
5. Nominations of candidates for directors and audit & supervisory board members (including deciding representative directors and executive directors)
6. Appointment of members of the Management Council
7. Structure and level of remuneration and bonuses for directors and executive officers, as well as limits for remuneration of audit & supervisory board members
8. Advisor system

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.

Audit & Supervisory Board Members and the Audit & Supervisory Board

Enhancement of Auditing Capabilities

We are enhancing the audit structure so that Audit &Supervisory Board Members are able to audit the execution of duties by Directors as a Member of the Board of Directors or an Executive Officer (Representative Director). The Audit& Supervisory Board comprises five members, including three Outside Audit & Supervisory Board Members. Full-time Audit & Supervisory Board Members utilize their specialized knowledge of the Company’s operations and wide-ranging experience to perform audits, while Outside Audit &Supervisory Board Members utilize their advanced specialized knowledge and abundant experience in the fields of legal affairs, accounting, or corporate management. In addition to resolving statutory matters, the Audit & Supervisory Board shares the status of activities of Audit & Supervisory Board Members and receives prior explanations on matters to be discussed by the Board of Directors in an effort to improve the efficiency and quality of the auditing activities of Audit &Supervisory Board Members.

Ensuring Audit Effectiveness

To obtain sufficient information vital to their audits, Audit & Supervisory Board Members attend important meetings such as Board of Directors’ meetings, receive reports from Directors, employees, and other relevant parties regarding the execution of their duties, ask them for explanations as necessary, inspect important internal authorization documents, and examine the status of operations and the financial status regarding the Head Office and important operating locations. Audit & Supervisory Board Members also promote communication and exchanges of information with directors, audit & supervisory board members, and other relevant parties of subsidiaries, receive reports on the subsidiaries’ business as necessary, and make visit and observe principal subsidiaries.

The Audit & Supervisory Board Members’ Administration Department has been established as a specialized organization to support the work of the Audit & Supervisory Board Members. The Audit & Supervisory Board Members participate in personnel evaluations and transfers and so on regarding these employees to ensure their independence from the Board of Directors.

Collaboration with the Internal Auditing Department and Accounting Auditors

Audit & Supervisory Board Members periodically receive reports from the Internal Auditing Department on internal audit plans and their results in order to ensure the effectiveness of their auditing duties. In addition, Audit & Supervisory Board Members exchange information with the Accounting Auditors through regular meetings and are aware of auditing activities of the Accounting Auditors by attending audit review meetings and observing inventory audits by the Accounting Auditors. In this manner, Audit & Supervisory Board Members interact closely with the Internal Auditing Department and Accounting Auditors.

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.

Remuneration of Directors and Audit & Supervisory Board Members

Remuneration of Directors is resolved by the Board of Directors within the limit resolved at the General Meeting of Shareholders. Upon the resolution of the Board of Directors, the details are deliberated by the Nomination and Remuneration Advisory Committee, an advisory body of the Board of Directors a majority of whose members are Outside Directors, and the results thereof are reported to the Board of Directors as part of our efforts to further enhance transparency and objectivity.

The award of the performance-linked bonus to the individual corporate officers is decided through individual interview with the President, who reports the result to the Nomination and Remuneration Advisory Committee.

The remuneration, etc. of Audit & Supervisory Board Members is deliberated by the Nomination and Remuneration Advisory Committee, and the amount of remuneration to be paid to the respective Audit & Supervisory Board Members is determined based on consultation with the Audit & Supervisory Board Members, within the upper limit resolved at the General Meeting of Shareholders.

Overview of Executive Remuneration Plan

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.

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

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)