Corporate Governance


Corporate Governance Principles

Sumitomo Corporation established the "Sumitomo Corporation Corporate Governance Principles" while keeping in mind that our backbone of corporate ethics is in the "Sumitomo's Business Philosophy" and the "Management Principles." "The Sumitomo Corporation Corporate Governance Principles" was established based on our view that the essence of corporate governance is "improving management efficiency" and "maintaining sound management," as well as "ensuring management transparency" to secure the first two. Following the "Sumitomo Corporation Corporate Governance Principles," we are always seeking to establish the most appropriate managerial system for the Company and are continuously strengthening our corporate governance to realize management that serves the interests of shareholders and all other stakeholders.

Sumitomo Corporation Corporate Governance Principles(PDF/205KB)

System and features of corporate governance

The Company believes that it is the most appropriate system for the Company by reinforcing the 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 19, 2020, 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, the Company has three independent Outside Audit & Supervisory Board Members who are two legal (a former Prosecutor-General and a former President of Osaka High Court) and one accounting expert out of the five members of the Audit & Supervisory Board, thereby ensuring an auditing system that incorporates a diversity of perspectives. In addition to attending meetings of the Board of Directors, Audit & Supervisory Board Members are permitted to attend all internal meetings, enabling them to obtain sufficient information essential for auditing by always participating in important meetings. By implementing the measures above, the Company believes that it has developed an effective, enhanced corporate governance system.
Our “Medium-Term Management Plan 2020,” which began in fiscal 2018, also includes initiatives for further strengthening functions for monitoring by the Board of Directors over the execution of operations through discussions on a wide range of key management issues including environment, society and governance (ESG)-related matters at the Board of Directors’ off-site sessions, in addition to the reporting to the Board of Directors regarding the status of progress and issues of business unit strategies, policies for responding to issues, and reporting on activities of principal committees as well as portfolio reporting related to concentrated risks such as market fluctuation risk and country risk.

The Company's Corporate Governance System

Corporate Governance Report(PDF/821KB)

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 Tokyo Stock Exchange and other exchanges, and the Standards for Independence set by Sumitomo Corporation.

Name Reasons for proposing
Nobuyoshi Ehara
since June 2016

< Attendance at Meetings of the Board of Directors in fiscal 2019 >
16 of 16 meetings (100%)
Mr. Ehara has wide-ranging knowledge and a wealth of experience in finance and business management accumulated through his many years working in important positions at a major US financial institution and managing a private equity firm, among other roles. He is also honest in character, as well as highly insightful and capable. Mr. Ehara 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, we proposed him to be elected as an Outside Director.
Koji Ishida
since June 2017

< Attendance at Meetings of the Board of Directors in fiscal 2019 >
16 of 16 meetings (100%)
Mr. Ishida has wide-ranging knowledge and a wealth of experience in finance and business management, accumulated through his many years working in important positions in a major financial institution, and serving as a member of the Policy Board at the Bank of Japan, among other roles. He is also honest in character, as well as highly insightful and capable. Mr. Ishida 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, we proposed him to be elected as an Outside Director.
Kimie Iwata
since June 2018

< Attendance at Meetings of the Board of Directors in fiscal 2019 >
16 of 16 meetings (100%)
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, Ms. Iwata 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. Ms. Iwata 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, we proposed her to be elected as an Outside Director.
Hisashi Yamazaki
since June 2018

< Attendance at Meetings of the Board of Directors in fiscal 2019 >
16 of 16 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. Mr. Yamazaki 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, we proposed him to be elected as an Outside Director.
Akiko Ide
since June 2020
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, Ms. Ide 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. Ms. Ide 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, we proposed her to be elected as an Outside Director.

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

We carefully select agenda items requiring discussion by the Board of Directors so that the Board of Directors can concentrate on the deliberation of important matters regarding the company-wide management such as the business policy and management plan. At the same time, we have increased the matters to be reported to the Board of Directors to make it possible for the Board of Directors to concentrate supervising execution of operation, so that the Board of Directors can enhance its monitoring function. With regard to important topics, moreover, we provide the opportunity for Directors to exchange opinions freely before the resolution.

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:

  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

In May, 2019, the senior advisor and honorary advisor system was reviewed by a resolution of the Board of Directors based on deliberation results by the Nomination and Remuneration Advisory Committee whereby former President and Chief Executive Officers and Chairmen of the Board of Directors are hereafter appointed as special advisors with fixed terms instead of senior advisor and honorary advisor.

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 2019, in order to boost initiatives to further enhance the effectiveness of the Board of Directors, we conducted interviews by a third party in addition to conducting a questionnaire survey (anonymous) as in Fiscal 2018. The following is an overview of the Board of Directors’ effectiveness evaluation and the results of such evaluation for Fiscal 2019, which was reported at the Board of Directors’ meeting held on March 24, 2020:

  1. Evaluation Methods
    1. Individuals Evaluated
      All 10 Directors (at that time) and 5 Audit & Supervisory Board Members
    2. Implementation method
      Questionnaire survey (anonymous) and interviews conducted during the period from December 2019 to January 2020.
      Note: Implemented by a third party (external consultant).
    3. Evaluation Items
      (i) Composition of the Board of Directors
      (ii) Administration of the Board of Directors
      (iii) Enhancement of discussions at meetings and reinforcement of the monitoring function of the Board of Directors
      (iv) Systems for providing support, including information provision, to Outside Directors
      (v) Own initiatives, etc.
      (vi) Evaluation of improvement measures, etc.
    4. Evaluation process
      The results of analysis of the questionnaire survey and interview responses as evaluated by a third party (external consultant) were reported to the Board of Directors.
  2. Evaluation Results Overview
    The overall evaluation and analysis by a third party concluded that the Board of Directors has generally been functioning effectively.
    With regard to the items (please refer to item 3. below), which had been identified as issues in Fiscal 2018’s evaluation and we worked on improvement in Fiscal 2019, it was confirmed that the majority of evaluations were positive, citing that improvement has been seen in each of them.
    At the same time, regarding the composition of the Board of Directors, enhancement of deliberations on matters to be focused on, and further enhancement of the monitoring function of the Board of Directors, various opinions and proposals were presented to improve the effectiveness of the Board of Directors, and it was confirmed that there was an awareness of issues.
    Based on this, in order to further improve the effectiveness of the Board of Directors of the Company, the Board of Directors will discuss issues and priority matters that the Board of Directors should address in the future.
  3. Major Initiatives in Fiscal 2019 Addressing Board of Directors Evaluations for Fiscal 2018
    The Fiscal 2018 Board of Directors evaluation recommended reviewing the way in which business units conduct regular reporting on strategy, specific initiatives, and their progress, and also reviewing the duration of related discussions, while it also recommended improvements to materials distributed at Board meetings. With regard to these recommendations, we carried out the following measures to further improve the effectiveness of the Board of Directors in Fiscal 2019:
    (i) In Board meetings, discussions are required to be limited to important points on the agenda in order to secure more time for discussing agenda that are to be focused on and to enhance discussions.
    (ii) Recognizing that management strategy, the management plan, and the business portfolio are matters to be focused on in discussions, regular reporting by business units on strategy, specific initiatives, and their progress is required to provide an explanation with a focus on issues in promoting the Medium-term Management Plan 2020, and solutions and policies to address the issues; and
    (iii) Materials distributed at Board meetings are required to explain technical terms in the main body with footnotes, etc. and clarify key points of discussions.

Audit & Supervisory Board Members and the Audit & Supervisory Board

Enhancement of Auditing Capabilities

To strengthen corporate auditing capabilities from an external viewpoint, we elect the number of external auditors to three out of the five members on the Audit & Supervisory Board. Of these three, two are legal experts (a former Prosecutor-General and a President, Osaka High Court) and one is an accounting expert—ensuring an auditing system that incorporates a diversity of perspectives. They fulfill the standards related to independence set by the Tokyo Stock Exchange and other exchanges, and the Standards for Independence set by Sumitomo Corporation.

Ensuring Audit Effectiveness

Audit & Supervisory Board Members attend meetings of the Board of Directors and other important internal meetings, receive reports from Directors and employees etc. the status of their business execution, demand explanations thereof as necessary, review important documents approving transactions etc. and examine the status of operations and the financial status at the headquarter and major business places of the Company. Regarding subsidiaries, Audit & Supervisory Board Members endeavors to communicate and exchange information with the subsidiaries’ directors and audit & supervisory board members etc. and receive reports their operation as necessary.

The Company has also established the Audit & Supervisory Board Members’ Administration Department (as of June 19, 2020, the Department has 4 members.) as an entity dedicated specifically to assisting all Audit & Supervisory Board Members with their duties. The Company ensures the independence of the Department’s members from Directors by the measure that Audit & Supervisory Board Members involve in the personnel evaluations and personnel transfers of the members of the Department.

Collaboration between 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, the Audit & Supervisory Board Members constantly work to improve audit efficiency and quality by, for example, exchanging information with and monitoring the auditing activities of the Accounting Auditors through regular meetings.

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, and risk management system. To enable Directors and Audit & Supervisory Board Members to acquire the necessary knowledge and update it as appropriate, we additionally supply books and other materials and provide access to other resources including seminars and e-learning facilities, offering financial support to cover the necessary costs.

To deepen their understanding of Sumitomo’s Business Philosophy, Outside Directors and Audit & Supervisory Board Members, in principle, visit a Sumitomo-related facility during the first fiscal year of their term of office. Outside Directors are also given the opportunity to make an on-site observation visit to a facility in Japan and to an overseas facility related to the Company’s businesses at least once a year.

Remuneration of Directors and Audit & Supervisory Board Members

The Company has established, as the advisory body of the Board of Directors, the Nomination and Remuneration Advisory Committee (chairperson: Outside Director) in which a majority of its members is Outside Directors. The structure and the level of remuneration of Directors and the total amount of remuneration of Audit & Supervisory Board Members are deliberated in the Nomination and Remuneration Advisory Committee and the results thereof are reported to the Board of Directors meeting as a part of our efforts to further enhance transparency and objectivity.

Overview of Executive Remuneration Plan

Internal Control System

The Company's Board of Directors resolved and implemented the systems set forth in the Companies Act, Article 362 of Paragraph 4, Item 6 (internal control system) to realize the high effectiveness of internal control of the Company. The Company will endeavor to establish a system in line with requests made from time to time based on ongoing reevaluations by reviewing the Company’s internal control implementation status each year.

Internal Control System (as of April 1, 2020)(PDF/154KB)

An overview of the Company’s internal control systems and their implementation status as of March 31, 2020(PDF/159KB)

Internal Audits

The Internal Auditing Department, which reports directly to the President and Chief Executive Officer, was established as an independent organization to monitor the operations of the Company and Group companies. All the internal audit results are reported directly to the President and Chief Executive Officer and also to the Board of Directors.

The Internal Auditing Department checks comprehensively the assets and risk-management, status of compliance and business processes to find their problems and risks inherent. The Internal Auditing Department helps to raise the quality of organizational management by encouraging voluntary improvements and evaluating the effectiveness and the validity of each process.

Committees

Committees including Company Investment Committee, Medium-term Management Plan Promotion Support Committee, Internal Control Committee, Compliance Committee and Corporate Sustainability Committee are established as advisory bodies for the President and Chief Executive Officer or 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

Communicating with Shareholders and Other Investors

Measures relating to the General Meeting of Shareholders

We send out a Notice of Convocation to shareholders approximately three weeks prior to each regularly scheduled General Meeting of Shareholders. For the convenience of overseas shareholders, we also provide both of the notice in Japanese and an English-language translation of the notice on our website in advance of sending a Notice of Convocation. 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 video of the General Meeting of Shareholders on our website for a set period following the close of the meeting. In 2020, we also live-streamed the Meeting for shareholders who could not attend it in person.

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 streaming and related documents of various meetings. Moreover, we provide our Integrated Report and endeavor to ensure proactive disclosure.

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. Also, we periodically visit the United States, the United Kingdom, and other countries in Europe and Asia to hold one-on-one meetings with investors in each region. In addition, we regularly hold meetings with individual investors in Japan. Meanwhile, we ensure constructive dialogue (engagement) between the Company and institutional shareholders who hold the Company’s shares substantially in Japan, Europe and North America regarding our initiatives and policies relating to environment, society and governance (ESG) etc. through meetings with individuals responsible for exercising voting rights on behalf of such institutional investors, etc. While increasing management transparency, we aim to strengthen our relationships of trust with shareholders and investors.

While working to strengthen 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

As of today the Company comply all Principles of the Corporate Governance Code. Please refer to Corporate Governance Report for details.

Corporate Governance Report (PDF/821KB)

Policy on Cross-shareholdings and Standards for Exercising Voting Rights

The Company takes various considerations into account when making decisions about whether to hold shares in other listed companies for purposes other than pure investment. It fully considers a range of issues, such as whether the shareholding will lead to medium-to-long-term growth in profits as a result of maintaining and strengthening the business relationship with the investee company, from the perspective of investment profit, such as a comparison with the capital cost of individual stocks. Based on the above, the Company reviews the significance of its shareholdings and reports the results thereof to the Board of Directors each year. With regard to stocks for which the significance of shareholdings cannot be confirmed, the Company has a policy of reducing the shareholdings of such stocks.

The Company also takes various considerations into account in accordance with the internal guidelines when making decisions about whether to exercise voting rights. Having fully considered a range of issues from both quantitative and qualitative standpoints, it adequately exercises voting rights for each agenda based on whether exercising voting rights will lead to enhanced medium-to-long-term corporate value at the investee company and the Company and to enhanced value for its own shareholders.

When a company that holds the Company’s stock for purposes other than pure investment indicates to sell or dispose of its holdings, the Company respects such a decision in principle and ensures that their business relationship will not be influenced.

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