The Morinaga Group will enhance its corporate governance with the aim of maximizing corporate value and achieving enduring corporate growth based on the basic policies of improving the health and efficiency of management, ensuring the reliability of its financial position, providing timely and appropriate disclosure of information, complying with laws and regulations, and strengthening the trust and relationships with all stakeholders.
(1) Positioning of Stakeholders
To enable us to fulfill our social responsibility in all areas of our business activities, we are committed to maintaining and further developing strong relationships with all stakeholders, who sustain our company, and achieving coexistence with society and sustainable growth in accordance with corporate principles and the code of conduct.
(2) Management Monitoring Functions
We are committed to building an effective internal control system by strengthening the management monitoring functions of the Board of Directors, appointing outside Directors and Statutory Auditors, requiring attendance by Standing Statutory Auditors at important meetings, and placing the Audit Division under the direct control of the President.
(3) Consistency in Thinking within the Entire Group
While respecting the independence of our subsidiaries, we endeavor to maintain close ties amongst the Group’s member companies.
Management of Corporate Affairs
Morinaga’s “Rules on Decision-Making Criteria” states clear definitions of authority and responsibility for respective decision-making units, including the Board of Directors, Management Meetings, Directors, Executive Officers, and General Managers of individual divisions and departments.
＜Board of Directors＞
The Board of Directors deliberately makes decisions on statutory matters and the execution of important business based on the business judgment principle and supervises the execution of business. The Board consists of eleven Directors, out of which four are Outside Directors, seven are male, and four are female Directors.
Management Meetings, which is mainly comprised of Directors and Standing Statutory Auditors, deliberates and makes decisions on important management themes and other matters for which authority is delegated by the Board of Directors. To ensure the effectiveness and efficiency of deliberations at the Board of Directors and Management Meetings, sufficient prior discussions are made at various committees that serve as advisory bodies for the Boards. These committees include the IR Committee, which is concerned with information disclosure, and the Officer Appointment and Remuneration Committee, a forum to discuss matters concerning Directors’ personnel and remuneration matters.
＜Executive Officer System＞
With the aim of increasing the agility to respond to the changing business environment and accelerating the decision-making process, Morinaga has adopted an executive officer system. With this move, the Company delegated authority and responsibility for executing regular business relating to the implementation of strategies to Executive Officers, ensuring efficient management and a clarification of responsibilities for business execution.
In FY2021/3, the Board of Directors discussed the following matters related to CSR:
We have four Statutory Auditors, including three Outside Statutory Auditors. One of these three Outside Statutory Auditors is a Standing Statutory Auditor, and all of the four Statutory Auditors are male. In accordance with the Guidelines for Auditors, Statutory Auditors audit the Directors’ performance of their duties based on the Rules on Statutory Auditors’ Audit. Standing Statutory Auditors hold regular meetings with the Representative Director and attend management meetings of the Board of Directors and other important gatherings to audit the Directors’ performance of their duties. Audit Division, which is responsible for carrying out internal audit, directly reports to the President. Composed of five members, the Division audits all divisions (including subsidiaries) in a planned manner, and exchanges opinions with the divisions jointly with Standing Statutory Auditors. To ensure close cooperation, opinion exchange sessions are held regularly and as needed basis between all Statutory Auditors and the Accounting Auditor, as well as between Standing Statutory Auditors and the General Manager of the Audit Division. The General Manager of the Audit Division and the Standing Statutory Auditors attend the meetings of the Internal Control Steering Committee, which is composed of members selected from major divisions and departments, and exchange opinions with the Committee members on a regular basis. Morinaga appointed Deloitte Touche Tohmatsu LLC as its accounting auditor.
The Company’s Executive Remuneration Basic Policy stipulates that the Company shall establish and operate a system that prioritizes the strengthening of executives’ motivation for contributing to the enhancement of corporate value over the medium- to long-term and the achievement of sustainable growth, while discouraging excessive risk-taking. We are determined to continue pursuing a better remuneration system, ensuring the objectivity and transparency of the remuneration determination process and taking into account regulatory revisions and social trends in the future.
At the 169th Annual General Meeting of Shareholders held on June 29, 2017, the maximum amount of remuneration for Directors was resolved to be 500 million yen per annum (including the maximum 40 million yen per annum for Outside Directors and excluding the employee salaries of Directors who concurrently serve as employees). The number of Directors immediately following the conclusion of the said Annual General Meeting of Shareholders was 11 (including 2 Outside Directors). Moreover, separately from the said monetary remuneration, at the 170th Annual General Meeting of Shareholders held on June 28, 2018, the introduction of a performance-linked stock compensation plan using a trust for Directors (excluding Outside Directors and non-residents of Japan) was approved. The maximum amount of cash to be contributed by the Company for each target period covering 3 fiscal years is 180 million yen in total.
The maximum amount of remuneration for Statutory Auditors was resolved at the 169th Annual General Meeting of Shareholders held on June 29, 2017 to be 80 million yen per annum. The number of Statutory Auditors at the conclusion of the said Annual General Meeting of Shareholders was 4.
The Board of Directors has resolved to delegate President and Representative Director to determine details of the amounts of remuneration for individual Directors. The authority pertains to determination of the amount of basic compensation for each Director and evaluation of the performance-linked portion of each Director. Such authority was delegated to the President and Representative Director because the President and Representative Director is the most suitable person to evaluate each Director from a broad perspective, considering the Company’s overall financial performance. In order to ensure that the authority is appropriately exercised, the Board of Directors consults the Officer Appointment and Remuneration Committee, which consists of Directors including Outside Directors, about the draft and the President and Representative Director determines the individual amounts of remuneration based on the report of the Officer Appointment and Remuneration Committee.
Of monetary remuneration, payment of executive bonuses is determined by the resolution of the General Meeting of Shareholders and determination of the individual amounts of bonuses shall be delegated to the President and Representative Director, based on the resolution of the Board of Directors. The Board of Directors consults the Officer Appointment and Remuneration Committee about the draft and the President and Representative Director determines the individual amounts of bonuses based on the report of the Officer Appointment and Remuneration Committee.
Regarding stock compensation, which is non-monetary compensation, its maximum amount is the amount resolved at the General Meeting of Shareholders, separately from monetary remuneration. The Company awards a certain number of points to Directors (excluding Outside Directors and non-residents of Japan) in accordance with the provision of the “Share Delivery Rules” following consultation with the Officer Appointment and Remuneration Committee and receiving its report.
（1）Method of analysis and evaluation
In regard to the effectiveness of the Board of Directors as a whole, the Company conducted a survey of all Directors including Outside Directors, and all Statutory Auditors including Outside Statutory Auditors, from February to March this year, as it does each year. The survey covered the composition, operation, and agenda of the Board of Directors, the nomination and remuneration of senior management, risk management, dialogue with shareholders, etc., systems to support the Board of Directors, and issues indicated in previous evaluations of the Board of Directors. The Board of Directors conducted an exchange of opinions on the results of the survey, and each Director executed an evaluation.
In addition, the results of the survey were analyzed and evaluated by a third-party law firm, in order to provide an expert and objective opinion, and the evaluation of the Board of Directors was discussed and decided at a meeting of the Board of Directors held in April 2021, with reference to this third-party analysis and evaluation.
（2）Result of the evaluation
As a result of analysis and evaluation by the third-party law firm, the Company’s Board of Directors was determined to be functioning effectively in fiscal 2020, in light of the Companies Act and the Corporate Governance Code, without any significant dysfunction or structural deficiency, etc. Based on this evaluation, the Company recognized that the Board of Directors was effective and functioning effectively in line with the basic views on corporate governance, etc. of the Company.
（3）Initiatives for improvement
The following issues were identified in the evaluation of the effectiveness of the Board of Directors in the previous fiscal year: optimization of the composition of the Board of Directors; establishment of appropriate matters for resolution and matters for reporting; further clarification of the decision process regarding Directors’ nomination and remuneration; making thorough debate regarding risk management; making debate more active based on the perspectives of stakeholders; and making debate more active beyond each area of responsibilities. The Company recognizes that a considerable degree of improvement has been achieved in these issues based on the evaluation of the effectiveness in fiscal 2020.
（4）Initiatives for the future
The Company recognizes the following issues for the future, in order to strengthen the function of the Board of Directors, and further enhance its effectiveness and governance.
By implementing necessary measures to improve the above issues, based on this evaluation of the effectiveness of the Board of Directors, the Company intends to further enhance the effectiveness of the Board of Directors, and further strengthen corporate governance.
The Morinaga Group is committed to maximizing corporate value and achieving an enduring corporate growth by strengthening our internal control system, increasing the management efficiency, operating its business properly, and ensuring effective supervisory and audit practices. To ensure appropriate execution of duties, the Board of Directors endeavors to establish an effective internal control system as well as a system of compliance to legal requirements and internal rules including the Articles of Incorporation, while Statutory Auditors are responsible for auditing the effectiveness and functionality of such systems. In addition, Morinaga and its subsidiaries home and abroad have introduced a helpline to collect a wide range of information about compliance issues take appropriate measures against them.
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