Corporate Governance

Basic Views on Corporate Governance

Resonac (the “Company”) shall hereby establish the Corporate Governance Basic Policies in order to increase corporate value and shareholders’ common interests through appropriate cooperation with all stakeholders including shareholders.

The Company formulated the Corporate Governance Basic Policies in line with Japan’s Corporate Governance Code and discloses the policies at its website.

Corporate Governance System

The Company, as a pure holding company, specializes in Group strategy and listed company functions. While flexibly responding to business challenges, the Company appropriately allocates its management resources in consideration of the entire Group, for business tie-up, M&A, etc.

The Company introduced a corporate officer system to explicitly divide management oversight and business execution functions, giving authority to Chief X Officers (CXOs) and chiefs of Business Units to execute business. In order to strengthen functional independence, objectivity, and accountability of the Board of Directors, the Company has organized the Nomination Advisory Committee and the Remuneration Advisory Committee as advisory bodies for the Board of Directors. Independent Outside Directors represent the majority of both committees.

Corporate Governance System

Board of Directors

To increase agility of business execution, the Board of Directors delegates part of decisions on important business execution to President and other corporate officers. The Board of Directors mainly focuses on deliberations and decisions concerning basic policies for management, establishment of the internal control system, etc. as well as oversight of execution of duties by Directors and Corporate Officers. We have also established an agile management system to quickly respond to changes in the business environment, and limit the term of office of directors to one year to more clearly define management responsibilities of Directors.

Audit & Supervisory Board

The Company has adopted the Audit & Supervisory Board system. The Audit & Supervisory Board Members attend the Board of Directors’ meetings and other important internal meetings, offering opinions as necessary. They also conduct audits on business execution through on-site investigations, interviews with responsible persons, inspection of important documents, and other appropriate measures, so as to provide suggestions, advice, and recommendations for securing soundness in management. In addition, Standing Statutory Members of the Audit & Supervisory Board concurrently serve as Audit & Supervisory Board Members of the business corporation to enhance audits on Group companies.

Nomination Advisory Committee

The Company has established the Nomination Advisory Committee, advisory bodies to the Board of Directors. Independent Outside Directors represent the majority of its members for the Nomination Advisory Committee. The Committee reports to the Board of Directors after deliberating matters related to election of candidates for Directors.

Remuneration Advisory Committee

The Company has established the Remuneration Advisory Committee, advisory bodies to the Board of Directors. Independent Outside Directors represent the majority of its members for the Remuneration Advisory Committee. The Committee reports to the Board of Directors after deliberating matters related to appointment of senior management, and remuneration of Directors and Corporate Officers, respectively.

Management Committee

The Company and its business corporation Resonac have formed the Integrated Management Committee that gives advice to President on important matters and serves as a body preceding the Board of Directors. For investment matters escalated to the Management Committee, their risks are analyzed and their results and progress are managed through preliminary risk review and assessment by task teams.

Committees and Promotion Councils

Under CXOs in charge of respective functional areas, the Company has established the Risk Management Committee, Compliance Committee, Sustainability Promotion Council, and other committees.

Risk Management Committee

The Committee deliberates on the Group's overall risk management system, the content of risk information to be disclosed externally, and the evaluation of the Group's most important risks and measures to address them. Risk Management

Compliance Committee

The Committee discusses the Company-wide compliance promotion policy, mid-term activity plan, etc., and reports on the progress of the annual plan and the status of issues to be addressed.Compliance

Sustainability Promotion Council

The Promotion Council discusses mid- to long-term strategies, non-financial KPIs, stakeholder engagement, and other issues. For important issues that cross organizational boundaries, projects, etc., are established under the Promotion Council.Sustainability

Internal Audit Department

The Company has organized the Internal Audit Department reporting directly to the President. The Internal Audit Department forms annual internal audit plan under the provisions of the Company’s Internal Audit Rules, audits situations of compliance, conduct of business and internal control system of the Group including affiliated companies, reveals potential risks concerning overall business activities, and reports results of internal audit to the top management, the Board of Directors and the Audit & Supervisory Board.

In addition, the Internal Audit Department cooperates with the Accounts Auditor and Audit & Supervisory Board Members through various measures including periodic briefing session about annual internal audit pan and results of internal audit, while paying attention to each auditing body’s independence.

Accounting audits

The Company concluded an auditing contract with KPMG AZSA, and this audit corporation performs accounting audits for the Company. The Accounting Auditor confirms the annual audit plan with the Audit & Supervisory Board Members and reports the audit results to them. The Accounting Auditor and the Audit & Supervisory Board Members also exchange information and views as required, to promote their cooperation.

Corporate Governance Initiatives

Attendance at Meetings of the Board of Directors and Auditit & Supervisory Board（2024）

  • * Marked Directors and Audit & Supervisory Board Member :
    Number of attendances after appointment at the Ordinary General Meeting of Shareholders held in March 2024

Board Directors

  Bord of Directors
Representative Director, Chairman Kohei Morikawa 15/15（100％）
Representative Director, President Hidehito Takahashi 15/15（100％）
Board Director Hideki Somemiya 15/15（100％）
Board Director Tomomitsu Maoka 15/15（100％）
Outside Director Nori Imai* 12/12（100％）
Outside Director Kozo Isshiki 15/15（100％）
Outside Director Noriko Morikawa 15/15（100％）
Outside Director Tetsuo Tsuneishi 15/15（100％）
Outside Director Kenji Yasukawa* 12/12（100％）

Audit & Supervisory Board Members

  Board of Directors Audit & Supervisory Board
Audit & Supervisory Board Members Toshiharu Kato 15/15（100％） 14/14（100％）
Audit & Supervisory Board Members Mitsuo Katayose* 12/12（100％） 11/11（100％）
(Outside Member) Masako Yajima 15/15（100％） 14/14（100％）
(Outside Member) Yasuyuki Miyasaka 15/15（100％） 14/14（100％）
(Outside Member) Kiyoko Toda* 12/12（100％） 11/11（100％）

Attendance at Nomination Advisory Committee and Remuneration Advisory Committee（April 2024 - March 2025）

Nomination Advisory Committee

  Attendance records
Representative Director, President Hidehito Takahashi 7/7（100％）
Board Director Nori Imai 7/7（100％）
Outside Director Tetsuo Tsuneishi（Chairman) 7/7（100％）
Outside Director Kozo Isshiki 7/7（100％）
Outside Director Noriko Morikawa 7/7（100％）
Outside Director Kenji Yasukawa 7/7（100％）

Remuneration Advisory Committee

  Attendance records
Representative Director, President Hidehito Takahashi 7/7（100％）
Board Director Hideki Somemiya 7/7（100％）
Outside Director Kenji Yasukawa（Chairman) 7/7（100％）
Outside Director Kozo Isshiki 7/7（100％）
Outside Director Noriko Morikawa 7/7（100％）
Outside Director Tetsuo Tsuneishi 7/7（100％）

Approach to the balance and size of the Board of Directors and Audit & Supervisory Board

1. Board of Directors
The Board of Directors shall have a personnel structure giving thoughtful attention to a good balance among specialties, experience, attribute, and other factors, and the size of the Board of Directors shall be set so as to ensure prompt decision-making and appropriate oversight of business execution. In addition, one-third or more of the Board of Directors shall consist of Independent Outside Directors with extensive experience and broad insight in order to secure the appropriateness of business execution and to increase the effectiveness of oversight.
The Board of Directors shall identify the skills necessary to improve its effectiveness, and disclose the status of fulfillment of such skills.

2. Audit & Supervisory Board
The Audit & Supervisory Board shall have a personnel structure that includes Member(s) who has sufficient expertise in financing or accounting. In order to ensure a structure that will increase the effectiveness of audits through independence and advanced information gathering capabilities, Standing Statutory Members of Audit & Supervisory Board shall be appointed and a half or more of the Audit & Supervisory Board shall be Outside Members of Audit & Supervisory Board.

Criteria on the independence of outside directors

The Board of Directors has established independence standards for Outside Directors based on independence criteria stipulated by law and the Tokyo Stock Exchange and selects candidates who meet the standards. See the Attachment of Corporate Governance Basic Policies for the independence standards.

Policies and procedures for determining the remuneration of directors, Audit & Supervisory Board members, and corporate officers

Outline of Director Compensation Scheme

The outline of the Company’s director compensation scheme in and after 2025 is as follows:

1.Basic policy

Directors (excluding outside directors)
  • A compensation scheme appropriate for recruiting and maintaining excellent human resources inside and outside Japan since the Company aims to become a world-leading chemical company for advanced functional materials
  • A compensation scheme that will help motivate efforts to achieve financial goals and increase medium-to-long-term enterprise value, thereby contributing to sustainable growth of the Group
  • A transparent, fair and rational process for deciding compensation from the viewpoint of accountability to all stakeholders, including shareholders
Outside directors
  • A compensation scheme appropriate for the role and responsibility for supervising the Company’s management from an independent and objective standpoint, and providing advice on management with an awareness of enhancing medium- to long-term corporate value

2.Composition and levels of compensation

  • The compensation for executive directors and corporate officers consists of basic compensation (fixed) based on position, etc., Short-Term Incentive (STI) that fluctuates based on business results each financial year, and Long-Term Incentive (LTI) that fluctuates based on medium-to-long-term business results and corporate value. The stock compensation (LTI) will consist of “Performance Share Unit (PSU),” which are granted as Resonac’s common shares based on business results and share price over a three-year period, and “Performance-Linked RS,” in which restricted stock (RS) is granted based on sustainability evaluation each financial year.
  • The compensation levels and the proportion of variable compensation (STI and LTI) in total compensation will be set at appropriate amounts and ratios, based on external expert survey of peer company levels (compared to major manufacturing companies with global operations at their core). The proportion of variable compensation will be set higher for higher-ranking positions, considering the greater responsibility for performance and stock price.
  • Notwithstanding the above, the compensation for the Chairman of the Board and the Chairperson of the Board of Directors will be set individually according to their respective roles and responsibilities.
[Outside Directors]
  • The compensation for Outside Directors consists of basic compensation (fixed) and Restricted Stock (RS). The transfer restrictions on the RS will be lifted upon their resignation.
  • An additional allowance will be paid to members and chairpersons of the Remuneration Advisory Committee or the Nomination Advisory Committee, according to their respective roles.
  • The amount of RS will be approximately 10% of the base remuneration (excluding allowances for committee members and chairpersons).
  • The compensation levels will be set at appropriate amounts, taking into consideration the time and effort each Outside Director is expected to dedicate to fulfilling their expected roles and functions, as well as peer company levels based on external expert surveys (compared to major companies (all industries) with global operations at their core). 

Chart 1 Type of compensation and scope of payment

Type of compensation Scope of payment
Money/non-monetary Composition Executive directors
Corporate officers		 Chairman of the Board of Directors
Outside directors
Money Basic compensation 〇 〇
Short-Term Incentive（STI） 〇 ー
Non-monetary
(stock compensation:LTI)		 Performance Share Units(PSU) 〇 ー
Performance-Linked RS 〇 ー
Restricted Stock(RS) ー 〇

*Performance-Linked RS and Restricted Stock (RS) will be newly introduced from fiscal year 2025.

 

Chart 2 Percentage of compensation components of FY2025 (Standard Amount)

< President and CEO>

 

< Senior Managing Executive Officer and Director >

 

< Chairman of the Board of Directors* >

 
  • * The compensation for the Chairperson of the Board of Directors, whose primary role is to oversee management (in their capacity as chairperson), will consist of base remuneration and Restricted Stock (RS) without performance conditions. The transfer restrictions on the RS will be lifted upon their resignation.
    (Note: Due to rounding to the nearest tenth, the sum of each column may not equal 100%.)

Short-Term Incentive（STI）

The amount of STI to be paid to each individual is calculated by multiplying the base amount for each position by (i) the company-wide performance evaluation coefficient (evaluation weighting: 70%) and (ii) the individual performance evaluation coefficient (evaluation weighting: 30%), in order to enhance the incentive to achieve company-wide performance targets. The performance evaluation coefficients will fluctuate within the range of 0% to 200% depending on the results of performance, etc.

Individual STI Payment Amount = Base Amount by Position × ((i) Company-Wide Performance Evaluation Coefficient + (ii) Individual Performance Evaluation Coefficient)

(i)The company-wide performance evaluation coefficient and (ii) the individual performance evaluation coefficient will be calculated using performance evaluation indicators (KPIs) selected from the financial and strategic indicators that the Company emphasizes for the realization of its long-term vision.

4. Stock compensation

(i) Performance Share Unit (PSU)

Resonac’s PSU are designed to enhance corporate value over the medium to long term. The number of shares granted is calculated by multiplying the standard points, which correspond to the standard amount set by position, by a coefficient (0% to 240%) based on Resonac’s total shareholder return (TSR) over a three-year period. The TSR evaluation coefficient will be determined by comparing the Resonac’s three-year TSR with domestic peer groups (chemical and textile companies of similar size or larger that operate a similar business model to Resonac) and with the growth rate of a stock index composed of chemical companies in Europe and the U.S. To ensure objectivity and transparency, benchmark indices that are widely recognized among shareholders and investors will be selected as stock indices in Europe and the U.S. A certain percentage of the granted shares (assumed to be 50% initially) will be paid in cash equivalent to their market value.

 

Chart 3: Overview of the TSR Evaluation in the 2025 Plan (Evaluation Period: January 2025 to December 2027)

 
(ii) Performance-Linked RS

Performance-Linked RS was introduced in fiscal year 2025 to enhance stock price-conscious management and support the realization of Sustainability Vision 2030. Performance-Linked RS is designed to grant a number of restricted stock (RS) each financial year (after the end of each financial year) calculated by multiplying the standard points, which correspond to the standard amount set for each position, by a coefficient (85% to 115%) based on sustainability evaluation for each financial year. The granted RS will be non-transferable until retirement. A certain percentage of the calculated RS (assumed to be 30% initially) will be retained as points and paid in cash equivalent to the market value at the time of retirement.

(iii)Restricted Stock (RS)

Restricted Stock (RS) will be granted to Chairman of the Board of Directors (internal director) and outside directors each financial year (after the end of each financial year) to encourage them to supervise and advise management with a focus on medium-to-long-term corporate value enhancement. The granted RS will be non-transferable until retirement. RS granted to outside directors will be approximately 10% of basic compensation (excluding committee member and committee chairman allowances).

5. Compensation governance

The Company’s Remuneration Advisory Committee is chaired by an independent outside director, and independent outside directors account for the majority of committee members. The committee will make proposals and reports as necessary to the Board of Directors in view of the latest situation concerning executive compensation and market trends, results of comparison with relevant competitors, and other pieces of advice. To ensure high levels of independence and objectivity, decisions on compensation for respective directors are entrusted to the Remuneration Advisory Committee as from 2022. the Company has appointed Willis Towers Watson, an external consultancy, as advisor.

Amount of remuneration paid to Directors and Audit & Supervisory Board Members （2024）

  Remuneration, etc.(Millions of yen) Total Amount by Type of Remuneration, etc. (Millions of yen) Number of applicable persons
Basic Compensation Short-term Performance- linked Compensation Stock Compensation
Board Directors 623 338 119 166 11
Outside members included in above 70 70 ― ― 5
Audit & supervisory Board Members 111 111 ― ― 7
Outside members included in above 44 44 ― ― 4
  1. 1. The amounts of "Base Compensation" and "Short-Term Performance-Linked Compensation" above are the total amount of compensation paid in fiscal 2024 (all monetary compensation).
  2. 2. The amount of "STI" above is the total amount of remuneration paid in March 2024 (all monetary remuneration) based on the results of business performance, etc. in FY 2023.
  3. 3. The above "LTI" amount is the total amount expensed in FY2024. The Company's LTI is the number of shares of the Company's stock determined based on the results of the three-year TSR (Total Shareholder Return) evaluation, which is deferred and delivered at the time of retirement The LTI is managed through a stock benefit trust (BBT) of Mizuho Trust & Banking Co.
  4. 4. The directors' remuneration for the fiscal years from 2022 to 2024 was resolved at the 113th Annual General Meeting of Shareholders held on March 30, 2022 as follows: for STI and LTI, the amount is for directors excluding outside directors.
      Date of resolution of the General Meeting of Shareholders monetary remuneration
    (Base Compensation + STI)    		 Stock Compensation(LTI)
    (Amount of BBT contribution / Points granted)    		 Number of applicable persons
    Board Director the 113th Ordinary General Meeting of Shareholders held on March 30, 2022 Up to 850 million yen per year
    (Of which, outside directors: 100 million yen)    		 Up to 1.35 billion yen for 3 fiscal years
    (Up to 410,000 points per fiscal year)    		 10
    (Of which, 4 outside directors)
  5. 5. At the 96th Ordinary General Meeting of Shareholders held on March 30, 2005, it was resolved that the amount of remuneration for Audit & Supervisory Board Members shall be no more than 12 million yen per month. As of the close of the said General Meeting of Shareholders, the number of Audit & Supervisory Board Members was four, including three outside auditors.

Evaluation of the Board of Directors’ Effectiveness

Method of Evaluation

The Company evaluates the effectiveness of the Board of Directors every year, aiming to strengthen corporate governance and improve effectiveness of the Board of Directors in and after the next year. To be specific, in December 2024, the Company surveyed respective Directors and Audit & Supervisory Board Members through unidentified questionnaires and free descriptions to evaluate the effectiveness of the Board of Directors in fiscal 2024. Based on the collected self-evaluation results and discussions about the reform of the Board of Directors for exchange of views, all Directors and Audit & Supervisory Board Members discussed the topic at the Board of Directors’ meeting held in March 2025, evaluated the effectiveness of the Board of Directors in fiscal 2024, and formulated an execution plan for fiscal 2025. Note that we have outsourced the questionnaire survey and aggregation of the results to an outside institution in order to ensure its objectivity and enhance future effectiveness of the Board of Directors.

Evaluation results (Actions taken in 2024)

The issues identified in the effectiveness evaluation for the previous fiscal year (fiscal 2023) at the Company, along with the action plan established by the Board of Directors for fiscal 2024 based on those issues, and the achievements we have made in fiscal 2024 in relation to the action plan are as follows:

Issues recognized in fiscal 2023
  • There is variability among the members of the Board of Directors regarding the skills they feel are necessary, indicating the need for in-depth discussions.
  • There is a requirement for the establishment of agendas that are suitable for effective monitoring.
  • There are calls for improvements in information sharing among advisory committees and requests for more substantial discussions regarding investor feedback.
Action plan for fiscal 2024
  1. 1. Continuation of discussions regarding the optimal structure of the Board of Directors (including the composition of the Board and the skills of individual Directors) to function effectively as a monitoring board.
  2. 2. Specific establishment and implementation of agendas that are optimal for the Board to operate as a monitoring board.
  3. 3. Ongoing improvements in communication opportunities and information-sharing mechanisms to enhance the effectiveness of the Board of Directors.
Initiatives taken in fiscal 2024
  1. 1-1. To further invigorate discussions, we added a new category of agenda items titled "Discussion Items" in addition to the traditional decision-making and reporting matters.
  2. 1-2. Utilized "Discussion Items" and opinion exchange meetings to articulate the Board of Directors' supervisory function, clarified the subjects of supervision, and engaged in deep discussions about the skills that the Board should possess.
  3. 2-1. Conducted discussions regarding the subjects that the Board should supervise and corresponding agenda discussions, as well as discussions on agenda setting for 2025.
  4. 2-2. Starting from fiscal 2024, establish and commence operation of an agenda focused on the Company's key issues.
  5. 2-3. Established a follow-up cycle for the Board's identified issues and implemented agenda setting based on these identified issues.
  6. 3-1. Improved the sharing of the contents of pre-meeting explanations and began supplemental explanations during proposal presentations based on prior explanations.
  7. 3-2. Shared the minutes of advisory committee meetings with Board members who are not committee members, and initiate presentations by committee chairs on key discussion points at the Board meetings.
  8. 3-3. Began meetings between the Accounting Auditor and Outside Directors.
  9. 3-4. Held lunch meetings exclusively for Outside Directors and Outside Audit & Supervisory Board Members.

Chart 4: Changes in the characteristics of matters discussed at the Board of Directors’ meetings from fiscal 2022 to fiscal 2024

 

 

 

In fiscal 2024, the Board of Directors was able to efficiently manage the proceedings related to individual execution matters and budget and financial proposals. In the meantime, due to multiple in-depth discussions regarding the structure and functioning of the Board throughout the year, there has been an increase in the proportion of discussions related to the functions of the Board of Directors.

Action plan for fiscal 2025

Action plan for fiscal 2025 based on the effectiveness evaluation of the Board of Directors for fiscal 2024 is as follows.

Challenges identified in the effectiveness evaluation of the Board of Directors for fiscal 2024
  • While there are voices expressing appreciation for efforts to optimize the agenda in terms of the appropriateness of proposals, there is also a call for further enhancement of strategic discussions over the medium to long term.
  • Feedback on investor opinions and the sharing of information from advisory committees has received mixed evaluations among members. There are calls for improvements in the quantity and quality of information, opportunities for better understanding of the Company, and collaboration with various organizations.
  • Although a common understanding has been established regarding the role that the Board of Directors should fulfill, there is a significant disparity in evaluations of the Board's composition between internal and external directors, with calls for discussions on independence and diversity.
Action plan for the Board of Directors for fiscal 2025
  1. 1. Focus on enhancing the functions of the Board as a monitoring body by optimizing the agenda centered around sustainability, portfolio management, and risk management.
  2. 2. Enhance the effectiveness of the Board of Directors through ongoing improvements in communication opportunities and information-sharing mechanisms.
  3. 3. Continue discussions regarding the structure and functioning of the Board of Directors, including its composition.