Corporate Governance Structure

Corporate Governance System

The Company conducts a diverse range of business globally. Accordingly, the Company has established a corporate audit governance model of a Company with auditors in which the Board of Directors consisting of Internal Directors and Outside Directors has been established in order to ensure rapid and efficient decision-making and appropriate supervisory functions in management. The Company has determined that this governance model is functioning effectively as set forth in items (a) and (b) below. Therefore, the Company will retain the current governance structure.

(a) Ensuring rapid and efficient decision-making

The Company ensures rapid and efficient decision-making by appointing Directors who serve concurrently as Executive Officers and are well-versed in the Company’s diverse business activities.

(b) Appropriate supervisory functions

The Company ensures appropriate supervisory functions by implementing various measures, including appointing Outside Directors that account for the majority of candidates for the Board of Directors; establishing the Audit & Supervisory Board Member’s Office; fostering collaboration among the Audit & Supervisory Board Members, the Audit Department and the Accounting Auditor; and carrying out advance briefings, on the same occasion, on matters referred to the Board of Directors for both Outside Directors and Outside Audit & Supervisory Board Members.

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Board of Directors

The Board of Directors comprises 10 Directors (including six Outside Directors; nine males and one female. The percentage of female director on the Board is 10%), and makes decisions regarding management policy and other important matters and supervises the execution of duties by Directors.

To clearly segregate management and execution, the Chairman of the Board without representative rights and the authority for business execution, in principle, chairs the Board of Directors Meetings.

In FY2021, the Board of Directors met 17 times to make decisions regarding execution of duties by the Corporation and all members of the Board of Directors were present at all meetings during their terms of office. In FY2021, the Board of Directors mainly deliberated as below:

- The Medium-Term Management Strategy “GC2024” (Business Environment, Green Strategy, Improving Profitability, Marubeni Group HR Strategy, Capital Allocation Policy, Shareholder Returns Policy, etc.)

- Investment and financing projects (share transfer of subsidiary, which owns oil and gas fields in the UK North Sea; development of a floating offshore wind farm in Scotland; and the reorganization of Gavilon and transfer of Gavilon's shares)

- Financial results and other finance related matters (share repurchases, etc.), remuneration for Directors/Audit & Supervisory Board Members

- Evaluation of the effectiveness of the Board of Directors, internal control related matters, and how to enhance the corporate governance system (to respond to revisions to Japan's Corporate Governance Code, etc.).

The term of Board of Directors is one year to clarify management responsibility and flexibly build optimum management structure in response to changing management environment.

Audit & Supervisory Board

The Audit & Supervisory Board comprises five Audit & Supervisory Board Members (including three Outside Audit & Supervisory Board Members). The Company adopts a corporate audit governance system and each of Audit & Supervisory Board Members is responsible for overseeing Directors in the execution of their duties by attending important meetings, such as the Board of Directors Meetings, and by monitoring business activities and financial conditions in accordance with the auditing policies and plans set by the Audit & Supervisory Board.

The Audit & Supervisory Board Members and the Accounting Auditor are striving to grasp the audit status of each other through measures such as exchanging information at monthly meetings. The Company's Accounting Auditor for the FY2022 is Ernst & Young ShinNihon LLC. The Audit & Supervisory Board and the Audit Department, a department which performs internal audits, exchange opinions at monthly meetings and implement audit operations through close cooperation. In the FY2021, the Audit & Supervisory Board met 16 times, and all Audit & Supervisory Board Members were present at all meetings of the Audit & Supervisory Board during their terms of office, excluding Mr. Kida, who was absent for 1 meeting.

The President holds meetings with the Audit & Supervisory Board Members on a regular basis, reports on execution of duties and exchange opinions. Other Directors, Group CEOs, COOs and Corporate Staff Group General Managers report their duty execution status to the Audit & Supervisory Board Members every year. Officers immediately report to the Audit & Supervisory Board Members when they discover that there is a concern that the Company will suffer significant damage.

Corporate Management Committee

The Corporate Management Committee is an advisory committee for the President and consists of three Representative Directors including the President, two Senior Managing Executive Officers, three Managing Executive Officers, and one Executive Officer. It deliberates management-related policies and company-wide important matters.

Committee of Heads of Divisions

The members of the Committee of Heads of Divisions are the President, the representative directors, the Division COOs and Regional CEOs and COOs appointed by the President. They discuss matters pertaining to budgeting, account settlement and financial planning as well as other issues related to the execution of business.

Committee of Executive Officers

The Committee of Executive Officers consists of 39 Executive Officers (three of whom also serve as Director) to communicate management policies issued by the President and other information and discuss matters that affect business execution such as financial performance and results of internal audits.

Nomination Committee

The memberships of the committee are composed so as to ensure independence, as Independent Outside Directors/Audit & Supervisory Board Members constitutes the majority of the members and the committee is chaired by an Independent Outside Director as well. The Nomination Committee mainly deliberates on proposals regarding the selection of candidates of Director and Audit & Supervisory Board Member, proposals regarding the selection of the President for the next term, and successor plans formulated and operated by the President (including plans related to necessary qualities and requirements, successor candidate groups, and training), and reports to the Board of Directors. In FY2021, two Committee meetings were held for deliberations regarding candidates of Director and Audit & Supervisory Board Member and successor plans, and all the Committee members attended all the meetings.

Committee’s Members: Inside Director 1, Outside Directors 2
Chairperson: Outside Director

Governance and Remuneration Committee

The memberships of the committee are composed so as to ensure independence, as Independent Outside Directors/Audit & Supervisory Board Members constitutes the majority of the members and the committee is chaired by an Independent Outside Director as well. The Governance and Remuneration Committee deliberates on the policy for determining remuneration for Directors and Executive Officers as well as appropriateness of the level of remuneration, and reports to the Board of Directors. In FY2021, five Committee meetings were held for deliberations regarding remuneration for Directors and Executive Officers, review of stock-based compensation plans, evaluation of the effectiveness of the Board of Directors, and disclosure of information on Directors/Audit & Supervisory Board Members. All Committee members attended all of the meetings.

Committee’s Members: Inside Directors 2, Outside Directors 1, Outside Audit & Supervisory Board Members 2
Chairperson: Outside Director

Overview of Corporate Governance Systems

Organization Form Company with auditors
Chairperson of the Board Chairperson
Number of Directors 10 (including 6 Outside Directors)
Number of Audit & Supervisory Board Members 5 (including 3 Outside Members of Audit & Supervisory Board)

All Outside directors and audit & supervisory board members are independent officers as defined by the Tokyo Stock Exchange.

Number of Times convened in FY2021 : Major Board and Committee Meetings

Board of Directors 17 times
Audit & Supervisory Board 16 times
Corporate Management Committee 35 times
Committee of Heads of Divisions 3 times
Committee of Executive Officers 2 times

Committees

The Company has established various committees as an organization directly under the President for dealing with important matters related to business execution and internal control, etc.
Main committees and their roles are as follows:

Committee Role Chairman Meeting Frequency
Investment and Credit Committee
The committee discusses projects subject to the internal approval (“Ringi”). The Investment and Credit Committee makes decisions on proposals to be submitted to the Corporate Management Committee. Managing Executive Officer, Member of the Board
(Takayuki Furuya)
Once a week, as a rule
Compliance Committee The committee provides enlightenment activities such as training as establishment, maintenance and management of the compliance system of the Marubeni Group. Senior Managing Executive Officer
(Mutsumi Ishizuki)
Four times a year, as a rule, and whenever necessary
Sustainability Management Committee The committee deals with the identification and periodic review of “Materiality” which takes into account the ESG (environmental value, social value and governance) point of view as it pertains to business fields as a whole and also deliberates matters related to sustainability, including ESG support and report it to the Board of Directors. Managing Executive Officer, Member of the Board
(Takayuki Furuya)
Once a year, as a rule, and whenever necessary
Internal Control Committee The committee confirms and reviews status of formulation and operation of basic internal control policy in accordance with the Companies Act, drafts their revision proposals, develops and operates system and evaluates effectiveness regarding financial reporting in accordance with the Financial Instruments and Exchange Act and prepares internal control report drafts. Senior Managing Executive Officer
(Mutsumi Ishizuki)
Held as necessary
Disclosure Committee

The committee formulates principles and basic policy drafts regarding disclosure, establishes and improves the internal system regarding statutory disclosure and timely disclosure and judges the significance and appropriateness regarding statutory disclosure and timely disclosure.

Managing Executive Officer, Member of the Board
(Takayuki Furuya)
Held as necessary

Roles and Functions of Outside Directors and Outside Audit & Supervisory Board Members

Roles and Functions of Outside Directors

Outside directors offer opinions on business management drawn from their broad experience and high-level perspective, and give advice to better implement corporate governance.
Outside directors attend the meetings of the Board of Directors and the Committee of Executive Officers, making active contributions from the perspective of internal control. Prior to meetings, Outside Directors are provided with agendas and fully briefed on management issues and project execution status. Two of the Outside Directors are members of the Governance and Remuneration Committee (one is the chairman) and three are members of the Nomination Committee (one is the chairman).

*Please refer to [the Corporate Governance Report]for Reasons of Appointment.

Roles and Functions of Outside Audit & Supervisory Board Members

Outside Audit & Supervisory Board Members monitor the directors' execution of duties and draw upon their wealth of professional expertise to offer various recommendations and advice to enhance the Audit & Supervisory Board.
Outside Audit & Supervisory Board Members attend meetings of the Audit & Supervisory Board and also the Board of Directors and Committee of Executive Officers. In addition, the Outside Audit & Supervisory Board Members meet with the President on a regular basis, as well as with members of the Audit Department, Corporate Accounting Department, and outside auditors, for an exchange of opinions. They receive audit-related information from Full-time Audit & Supervisory Board Member, which they use in the execution of their auditing duties. Two of the Outside Audit & Supervisory Board Members are also members of the Governance and Remuneration Committee.

*Please refer to [the Corporate Governance Report]for Reasons of Appointment.

Executive Compensation

Amounts of executive compensation, details of policies regarding calculation methods used to decide compensation, and methods for making compensation decisions are as follows.

The maximum total remuneration shall be determined for all Directors by resolution at a General Meeting of Shareholders. The Governance and Remuneration Committee chaired by an Outside Director/Audit & Supervisory Board Member, with the majority of its members consisting of Outside Directors/Audit & Supervisory Board Members, deliberates on the policies for compensation decisions and the appropriateness of the compensation levels, and provides reports to the Board of Directors. The remuneration amount is determined by resolution of the Board of Directors.
Compensation for individual Audit & Supervisory Board Members is decided through deliberation by the Audit & Supervisory Board Members.
The remuneration of Directors other than Outside Directors (“Eligible Directors”) consists of basic remuneration, which is a fixed amount that is in accordance with the roles of the Eligible Directors, performance-linked remuneration, which is linked to consolidated business results in the previous fiscal year, additional pay and personal evaluation pay, and shares with restriction on transfer subject to market-capitalization-based exercisability conditions (“Performance Share Units”). Form of payment consists of cash, shares with restriction on transfer (“Restricted Stock”) and Performance Share Units.
Additional Pay consists of director bonuses and representative director bonuses, and personal evaluation pay consists of an organization performance evaluation and a qualitative evaluation. For the organization performance evaluation, the evaluation item is whether the consolidated net income target is achieved or not. The amount in which the organization performance evaluation is reflected is calculated by multiplying basic compensation by the ratio determined by the Board of Directors corresponding to the achievement/non achievement of the target. Qualitative evaluation takes into consideration business results in the fiscal year, medium- to long-term contributions (such as efforts and initiatives for new value creation toward the future) and other such measures. The amount in which qualitative evaluation is reflected is calculated by multiplying basic compensation by a ratio which has been determined by the Board of Directors to reflect the qualitative evaluation.
Concerning the individuals’ evaluation-based compensation, the President who is the chief executive officer is judged to be most suitable for conducting qualitative evaluation and the Board of Directors has given President & CEO Masumi Kakinoki the authority for the said evaluation (hereinafter referred to as the “qualitative evaluation by the President”). In order to ensure appropriate exercise of this authority, the ratio to reflect the qualitative evaluation by the President is within the range determined by the Board of Directors.
Beginning in FY2021, the Corporation has introduced Restricted Stock and Performance Share Units (the “Plan”) to Eligible Directors. The purpose of the Plan is to give Directors an incentive to work to sustainably enhance the corporate value of the Corporation in the medium to long term, thereby enhancing future market value, and promoting greater value sharing with shareholders.

1. Restricted Stock
20% of the base annual remuneration and performance-based compensation is granted as Restricted Stock to Eligible Directors with a certain no transfer period. An Eligible Director may not transfer, create security interest over, or otherwise dispose of the Corporation’s common shares which were allotted to them under the Allotment Agreement during the period from the day the shares were allotted to them under the Allotment Agreement until immediately after the time the Eligible Director resigns or retires from their position as Director, Executive Officer, or other officer or employee of the Corporation or the Corporation’s subsidiary that the Corporation’s Board of Directors designates. The purpose of the no transfer period is to promote greater value sharing with shareholders in the medium to long term.
2. Performance Share Units
Up to 1.5 times an amount equivalent to 10% of basic compensation is allotted as Performance Share Units on top of the basic compensation. Performance Share Units refers to the Corporation’s common shares that the Corporation will issue to Eligible Directors (or dispose of) in accordance with the achievement of targets linked to market value growth rate and other performance indicators predetermined by the Corporation’s Board of Directors.

Remuneration for Outside Directors and Audit & Supervisory Board Members, all of whom are independent from business operation, consists entirely of basic remuneration, and does not include performance-linked remuneration.

Type Descripition Fixed/Variable Form of payment
i) Basic compensation ・Basic compensation corresponding to each Director’s position Fixed 80%: Cash
20%: Restricted Stock
ii) Performance-based compensation ・Compensation linked to consolidated business performance in the previous business year
・Performance-based compensation is an amount of basic compensation multiplied by a factor.
・The factor to be applied is determined based on the “sum of 50% of the consolidated net income and 50% of the core operating cash flow for the previous business year*1.” If the sum is below 100 billion yen, the factor is 0. If the sum is 100 billion yen or more, the factor proportionally increases (an increase of approx. 2 percentage points per increase of 5 billion yen).
Variable
iii) Bonuses ・Director bonuses
・Representative directors are paid representative director bonuses in addition to director bonuses.
Fixed Cash
iv) Individuals’ evaluation based compensation ・Organization’s performance evaluation: The evaluation item is whether the consolidated net income target is achieved or not. The amount in which organization’s performance evaluation is reflected is calculated by multiplying basic compensation by the ratio determined by the Board of Directors corresponding to the achievement/non achievement.
・Qualitative evaluation by the President: Qualitative evaluation by the President takes into consideration business results in the fiscal year, medium- to long-term contribution, such as efforts and initiatives for new value creation toward the future, etc. The amount in which qualitative evaluation by the President is reflected is calculated by multiplying basic compensation by the ratio to reflect the qualitative evaluation by the President, which is within the range determined by the Board of Directors.
Variable
v) Performance Share Units ・Up to 1.5 times an amount equivalent to 10% of base annual compensation is allotted as Performance Share Units on top of the bas compensation. Performance Share Units refers to the Corporation’s common shares that the Corporation will issue to Eligible Directors (or dispose of) in accordance with the achievement of targets linked to market value growth rate and other performance indicators predetermined by the Corporation’s Board of Directors. Variable Performance Share Units

〈Reference: Correlation between the "sum of 50% of the consolidated net income and 50% of the core oprationg cash flow" and performance-based compensation〉

Correlation between the sum of 50% of the consolidated net income and 50% of the core oprationg cash flow

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〈Reference: Composition of remuneration〉

Composition of remuneration

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The total of remuneration and other payments for Directors and Audit & Supervisory Board Members in the FY2021

Category Number of recipients Amount of payment
(Millions of yen)
Breakdown (Millions of yen)
Basic compensation* Performance-based compensation* Shares with restriction on transfer Shares with restriction on transfer subject to market-capitalization-based exercisability conditions
Directors Internal
Directors
7 892 390 296 158 48
Outside
Directors
6 101 101 - - -
Total 13 993 491 296 158 48
Audit & Supervisory Board Members Internal Audit & Supervisory Board Members 3 80 80 - - -
Outside Audit & Supervisory Board Members 3 51 51 - - -
Total 6 131 131 - - -

*The amounts presented for "basic compensation" and "performance-based compensation" are the total amounts of cash competition and do not include "shares with restriction on transfer."

Note 1. The amounts less than 1 million yen are rounded off.

Note 2. By resolution of the General Meeting of Shareholders, the maximum annual amount of remuneration for Directors has been set at “1,100 million yen (including 120 million yen for Outside Directors)” (by resolution of the 96th Ordinary General Meeting of Shareholders held on June 19, 2020, with 11 Directors related to the decision [including five Outside Directors]), the maximum monthly remuneration for Audit & Supervisory Board Members has been set at “12 million yen” (by resolution of the 88th Ordinary General Meeting of Shareholders held on June 22, 2012, with 5 Directors related to the decision)

Note 3. The Corporation introduced the Restricted Stock and Performance Share Unites in FY2021. The total amount of remuneration and other payments used for Restricted Stock and Performance Share Units will be within the above amount specified for remuneration and other payments for Directors, with the amount for Restricted Stock capped at a maximum of 180 million yen per year, and Performance Share Units capped at a maximum of 120 million yen per year.

Note 4. The Company abolished the retirement remuneration plan at the close of the 83rd Ordinary General Meeting of Shareholders held on June 22, 2007 and resolved on making a final payment of retirement remuneration accompanying the abolishment of the retirement remuneration plan. In accordance with the resolution, the Company decided to pay retirement remuneration to each Director who is eligible to receive the final payment either at the time of retirement as Director or at the time of retirement as Executive Officer, whichever is later, and to each Audit & Supervisory Board Member who is eligible to receive the final payment at the time of retirement as Audit & Supervisory Board Member. In the FY2020, retirement remuneration which paid to Directors/Audit & Supervisory Board Members who are eligible to receive a final payment in relation to the abolition of the Retirement Remuneration plan was 0.

Individuals to whom the total amount of compensation paid exceeded 100 million yen in the FY2021

(Millions of yen)

Name Category of position Amount of payment Basic compensation Performance-based compensation Shares with restriction on transfer Shares with restriction on transfer subject to market-capitalization-based exercisability conditions
Fumiya Kokubu Director 172 72 59 32 10
Ichiro Takahara Director 120 51 41 22 7
Masumi Kakinoki Director 205 87 70 37 11
Akira Terakawa Director 100 47 32 16 5
Mutsumi Ishizuki Director 108 48 35 19 6

Evaluation of the effectiveness of the board of directors

As for effectiveness evaluations regarding the Board of Directors, the Governance and Remuneration Committee, the majority of whose members are Independent Outside Directors/Audit & Supervisory Board Members, assesses and reviews the Board of Directors as a whole, including its composition and operation, etc., and then reports to the Board of Directors. Then, based on deliberations in meeting of the Board of Directors, an overview of the evaluation results is disclosed, and this is utilized to make improvements regarding the operation, etc. of the Board of Directors.
As for the effectiveness evaluation regarding the Board of Directors in FY2021, the Corporation held an interview with all Directors and Audit & Supervisory Board Members in addition to conducting the questionnaire that was conducted until last year. The questionnaire was revised under the intention to focus on key management issues while continuing to adhere to the revised corporate governance code.

I. Evaluation framework and techniques

1. Target persons

  • All Directors (13 people) and Audit & Supervisory Board Members (5 people)

Current posts as of December 2021

2. Implementation method

  • Questionnaire and interview (responded to anonymously)

Utilization of outside specialized organization for implementation

3. Evaluation items

  1. (1) Growth strategy and mid-term management plan
  2. (2) Group governance
  3. (3) Increasing corporate value through divestment of non-profitable businesses
  4. (4) Risk management
  5. (5) Allocation of management resources
  6. (6) Utilization of discretionary committees
  7. (7) Diversity, skills, and attributes of the Board of Directors
  8. (8) Training the Board members and Audit & Supervisory Board members
  9. (9) HR strategy (diversity of core human capital)
  10. (10) Responding to sustainability issues
  11. (11) Policies regarding communication with shareholders
  12. (12) Understanding expectations from shareholders
  13. (13) Operation of Board of Directors meetings (selection of topics, providing information, following up on issues pointed outby Board members, etc.)
  14. (14) Utilization of Outside Directors

4. Evaluation process

With the content of the questionnaire responses and interviews as a basis, the Board of Directors carried out deliberations based on assessments and reviews by the Governance and Remuneration Committee regarding the Board of Directors as a whole including its composition and operation, etc.

II. Overview of evaluations results

1. Overview

Based on assessments and reviews by the Governance and Remuneration Committee, the Board of Directors has deliberated, and it has been confirmed that an effective Board of Directors is being operated.

In particular, the activeness of discussions among the directors, including the Outside Directors, and the Corporation’s provision of sufficient education opportunities and information to Outside Directors/Audit & Supervisory Board Members was seen as highly valuable. Also highly valued was the deliberation of issues such as sustainability and the mid-term management plan, which took place with sufficient content and frequency to the Board of Directors.

2. Handling issues in effectiveness evaluations pertaining to the Board of Directors in FY2020

(1) Enhancement of deliberation of key issues through board meetings and free discussions
Members of the Board of Directors discussed issues such as the mid-term management strategy “GC2024”, responses to the revised corporate governance code, and shareholder returns through board meetings and free discussion meetings separate from the board meetings. Taking into account the results of questionnaires and interviews, evaluation scores regarding the quality of the discussions have improved compared to evaluation results in FY2020.

(2) Discussions regarding expectations from stakeholders (promotion of sustainability, expectations from shareholders and investors)
The Board of Directors discussed the corporation’s “Green Strategy” as one of the key components of mid-term management strategy “GC2024”, based on the recognition of the global trend emphasizing the importance of sustainability and ESG issues. Expectations from shareholders were also discussed as one of the key issues during the Board of Directors meetings. Taking into account the results of questionnaire and interview, evaluation of these items has significantly improved compared to evaluation results in FY2020.

(3) Discussions regarding the diversity of Board members
The Board of Directors has discussed issues such as the function of the Board and the composition of the group, as the Corporation has publicly revealed the skill matrix regarding each Board member’s expertise and experience. Taking the results of the questionnaire and interview into account, evaluation of these items has improved compared to evaluation results in FY2020. Aiming to materialize the Corporation’s aspirations and growth strategy, the Corporation will be exploring ways to improve the functions of the Board of Directors through the pursuit of the ideal composition of skills and experience in the group with regards to changes in the external environment surrounding the Corporation.

3. Handling issues in effectiveness evaluations pertaining to the Board of Directors in FY2021

(1) Enhancement of discussions in the Board of Directors meetings regarding key material management issues, changes in external environment, and risks
The Board of Directors has positively evaluated the discussions regarding the Corporation’s mid-term management policies and the monitoring of the actions taken based on these policies. Notably, issues related to the influence of COVID-19 to the Corporation’s operations and countermeasures to the situation have been discussed on various occasions, and the result of the discussions were reflected in the Corporation’s operations. The Board of Directors will enhance discussion of material management issues through conducting discussions regarding the changes in the external environment and risk related to the key management issues.

(2) Discussions regarding HR strategy and allocation of management resources to human capital
The Board of Directors discussed the Corporation’s HR strategy and the appropriate allocation of management resources to human capital as one of the key components of mid-term management strategy “GC2024”. The Board of Directors will continue to deliberate and monitor the progress of the Corporation’s HR strategy and the allocation of management resources to human capital.

(3) Supporting the Outside Directors to further utilize their expertise
The Corporation has generally received high evaluations from Outside Directors for its support, such as the sharing of information. As the Corporation plans to make Outside Directors the majority of the Board of Directors subject to approval in the ordinary general meeting of shareholders for FY2022, the Corporation will further enhance support for Outside Directors in order to assist them in fulfilling their duties through the facilitation of meetings outside of ordinary Board of Directors meetings and further provision of information.

Referring to the results of effectiveness evaluations regarding the Board of Directors in FY2021, the Corporation will continue to work on maintaining and improving the effectiveness of the Board of Directors going forward, and to pursue improvements in long term corporate value.