Roles and Results of the Investment Committee (The fiscal year ended March 31, 2020)
The Kurita Group aims to contribute broadly to society through corporate Business Execution Structure activities in the fields of water and the environment in accordance with the Kurita corporate philosophy, "Study the properties of water, master them, and we will create an environment in which nature and man are in harmony." The Kurita Group will work to promote sustainable growth and enhance its corporate value in the medium and long term, deferring to the rights and position of various stakeholders such as customers, business partners, employees, shareholders, and local communities while striving to meet their expectations. To this end, the Kurita Group is striving to establish corporate governance, with the aim of realizing transparent, fair, prompt, and decisive decision-making measures and highly effective management supervision.
To enhance and strengthen the screening of investments and financing of the Kurita Group, the Company established the Investment Committee in April 2017. The role of the Investment Committee is to pre-screen investment and financing projects to be discussed by the Board of Directors or the Executive Committee and report the prescreening results and major discussion points to the Board of Directors and the Executive Committee. The Investment Committee has helped enhance the quality of discussions and the speed of investment decision-making by the Board of Directors and the Executive Committee by organizing major discussion points prior to meetings.
In accordance with the policy of striving to maintain return on equity (ROE) at levels above the cost of shareholders' equity, when making an investment decision, the Kurita Group sets a hurdle rate in consideration of risks for each investment project against the cost of shareholders' equity.
Advisory Councils for the Board of Directors
Nomination & Remuneration Advisory Council
The Company has in place a Nomination & Remuneration Advisory Council, a voluntary committee to increase transparency in the decision-making process regarding remuneration for directors and nomination of directors and members of the Audit & Supervisory Board. In the fiscal year ended March 31, 2020, the Council met four times to discuss nominations (directors and members of the Audit & Supervisory Board) and three times to discuss remuneration. The Council is chaired by an external director, with the main members being the external directors and the external members of the Audit & Supervisory Board.
The chairperson of the Board of Directors consults with the Nomination & Remuneration Advisory Council beforehand when proposals are made to the Board of Directors regarding candidates for director or member of the Audit & Supervisory Board or remuneration for directors. Having received the request, the Council reports on the suitability or unsuitability of the candidates to the Board of Directors.
Profile of Nomination & Remuneration Advisory Council (Fiscal year ended March 31, 2020)
Successor Planning Committee
The Company has in place the Successor Planning Committee, mainly comprising external officers, as an organization for selecting successor candidates for the president, directors, and executive officers and deciding on measures for their development. The committee references objective information such as external organization assessment results for the successor candidates and selects successor candidates for the president, directors, and the executive officers, as well as setting the development measures for the successor candidate for president and directors, and reports these to the Board of Directors.
In the fiscal year ended March 31, 2020, the selection process was improved to include candidates from a wider range of employee ranks and positions.
Fulfilling the Function of the Audit & Supervisory Board Members
In the fiscal year ended March 31, 2020, the Audit & Supervisory Board held 11 meetings, which were attended by all members of the board. Key matters considered and discussed by Audit & Supervisory Board members included the formulation of audit policies and plans, the preparation of audit reports, selection of the Accounting Auditor, remuneration for the Accounting Auditor and details of proposals to be presented to the Annual General Meeting of Shareholders. The Board developed and implemented audit plans targeting priority areas, such as the internal control system (including internal control over financial reporting), the development and implementation of the risk management system and audits of progress regarding priority measures in business plans.
Cooperation with the Accounting Auditor, the Internal Auditing Department and External Directors
In regular meetings between the president and all members of the Audit & Supervisory Board, the president provides details about the Company's management policy, growth strategies, business issues and other topics, while members of the Audit & Supervisory Board provide recommendations based on audit activities. The members of the Audit & Supervisory Board also hold regular meetings with the Accounting Auditor to confirm the independence of the Accounting Auditor, verify the performance of their duties and discuss and exchange opinions about accounting audits. Regular meetings are also held with external directors to exchange opinions about the Company's business management in general.
The members of the Audit & Supervisory Board discuss internal audit plans with the Internal Auditing Department in charge of internal audits of the Company and exchange opinions with them about audit results and evaluations of internal control over financial reporting, risk management, etc.
Participation in Key Meetings and Audit of Group Companies
Full-time members of the Audit & Supervisory Board attend meetings of the Board of Directors, Executive Committee, the E&S Committee and other important meetings, and audit business execution by the directors and oversight duties of the Board of Directors. In addition, they conduct audits of key management departments and carry out field audits of business sites and Group companies to verify the asset position of the entire Kurita Group and the development and operation of the internal control system by directors at Group companies. Full-time members of the Audit & Supervisory Board share information from meetings of the Executive Committee and other key meetings and the details and results of audits and field audits with the part-time member of the Board on a timely basis. In addition, the part-time member of the Audit & Supervisory Board proactively provides opinions during meetings of the Board of Directors and during regular meetings with the president, drawing on their legal expertise and background.
Onsite audits of three domestic business sites scheduled for the start of the fiscal year were cancelled due to the COVID-19 outbreak. However, as an alternative, appropriate audits of the sites were conducted by reviewing audit evidence documentation. Additionally, business reports, financial documents and other materials were appropriately audited through increased use of online meetings and electronic files.
Experience, Capability, and Knowledge of the Audit & Supervisory Board Members
Remuneration for Directors and Members of the Audit & Supervisory Board
The Company's remuneration system for directors excluding external directors is composed of fixed remuneration as base remuneration, and incentive remuneration linked to business results. External directors and members of the Audit & Supervisory Board, who perform oversight functions, receive only fixed remuneration.
Amounts of fixed remuneration are decided for each job title in the case of directors and for each work arrangement in the case of members of the Audit & Supervisory Board. A portion of the remuneration is appropriated for the directors' and Audit & Supervisory Board members' Shareholding Scheme to purchase the Company's shares so that directors and members of the Audit & Supervisory Board share the risk of stock price fluctuation with shareholders.
To provide an incentive to directors (excluding external directors) to continuously increase corporate value, the Company provides short-term and long-term incentive remuneration. The short-term incentive remuneration is variable depending on the degree to which consolidated operating income achieves an annual business target and the performance of duties for which each person is responsible. For the long-term incentive remuneration, the Company has introduced a performance-linked stock compensation program under which points are awarded according to business performance and job title during the term of office, and shares of the Company are granted at the time of retirement in an amount corresponding to the number of accumulated points.
The system and level of remuneration and the performance evaluation of directors are adopted by resolution of the Board of Directors after consulting in advance with the Nomination & Remuneration Advisory Council. Based on reports provided by the Nomination & Remuneration Advisory Council, the Board of Directors decides the allocation of remuneration of the directors within the total amount determined by the Annual General Meeting of Shareholders. The allocation of remuneration for each member of the Audit & Supervisory Board is adopted by resolution of the Audit & Supervisory Board.
Remuneration System for Directors and Members of the Audit & Supervisory Board
Payment Ratio of Base Remuneration and Incentive Remuneration (Average)
Remuneration for Directors and Members of the Audit & Supervisory Board
Total amount of remuneration, etc., for each officer classification, total amount by type of remuneration, etc., and number of eligible officers (Fiscal year ended March 31, 2020)
Independent External Directors
The Company's external directors are appointed for a term of one year and may concurrently hold positions at up to three listed companies including the Company. The external directors use their knowledge and specialist insight accumulated through management experience to evaluate business management and provide opinions from the perspectives of the Kurita Group’s sustainable growth and increasing corporate value over the medium to long term, helping to enhance the rationality and transparency of decision-making by the Board of Directors.
The activities of the independent external directors include making proactive statements and proposals in Board of Directors' meetings, as well as attending as observers in internal committees such as the E&S Committee, the Solutions Business Committee, and the Health and Safety Committee. They also make onsite visits to gain a deeper understanding of operations for evaluating management.
As members of the Nomination & Remuneration Advisory Council and the Successor Planning Committee, external directors also help to enhance the suitability and transparency of discussions in both bodies and work to ensure appropriate evaluations of executive candidates through individual interviews with candidates.
Status of External Directors (As of June 29, 2020)
Dialogue with Shareholders and Investors
The Kurita Group respects the interests of shareholders in management and strives to listen to its shareholders and investors and promote constructive dialogue with them in order to contribute to increasing medium- to long-term corporate value. In communicating information, the Company emphasizes fairness and transparency. The materials and summary of the Q&A sessions of the Company's presentation meetings are posted on Kurita's investor relations website to ensure fair information disclosure.
The Group strives to secure opportunities for dialogue with institutional investors in Japan and overseas and individual investors in Japan through various presentations, conferences, and individual meetings. The president is the main speaker at the financial results presentations. The executive general manager of the Corporate Planning and Control Division is responsible for routine dialogue, except during silent periods, and works with personnel responsible for IR and CSR activities.
IR Activities in the Fiscal Year Ended March 31, 2020
Communication with People Responsible for Exercising Voting Rights
The Company is working to increase opportunities for dialogue with institutional investors responsible for exercising voting rights to listen to their opinions and use them to improve management. In the fiscal year ended March 31, 2020, personnel responsible for investor and shareholder relations met with major investors in Japan eight times to hear the voting policies of institutional investors and to exchange opinions on improving the Group's management and corporate governance. The opinions and requests of institutional investors were swiftly relayed back to management.
Initiatives to Continuously Improve Convenience for Exercising Voting Rights
Shareholdings of Other Listed Companies
The Company holds shares of other listed companies to strengthen business relationships. We verify the economic rationale for mutual shareholdings by comparing expected gains based on capital cost and gains from holding the shares. We also examine the relationships with companies whose shares the Company holds by carefully examining our transaction histories with them. Based on the results of this examination, the Board of Directors reviews the appropriateness of holdings periodically and at other times as necessary, and reduces the number of shares held. Funds gained from the sale of the shares are allocated to capital investment and M&As.