Roundtable Discussion with Outside Directors
Aiming to Improve Corporate Value over Medium and Long Term by Reinforcing Corporate Governance
Amid increasing uncertainty in society, the Marubeni Group is strengthening its corporate governance structure with the aim of improving corporate value through solving social issues. Outside directors have become the majority on the Board of Directors since June 2022. In this roundtable discussion, three outside directors talked about the three themes of “Marubeni’s corporate governance,” “GC2024 Mid-Term Management Strategy,” “improvement on the effectiveness and transparency of the Board of Directors,” along with their own roles and aspirations.
Corporate Governance at Marubeni
As social issues become more complex, it has become harder to solve these issues with a single solution alone. As a general trading company with a variety of functions, Marubeni is expected to put all the functions into action and solve social issues, while also pursuing greater corporate value. I think it would be ideal to change the role of the Board. For example, the Board of Directors should discuss the direction and future portfolio from a medium- to long-term perspective, while delegating decision-making authority for individual projects to executive officers.
As chairperson of the Governance and Remuneration Committee, I lead discussions about the effectiveness of the Board of Directors and the executive compensation system. Over the past few years, we have had conversations about this from multiple angles with the intention of making improvements. While considering changes in society, I am keen to put further improvements into motion.
An issue that should be taken up regarding executive compensation is how to evaluate their contributions to solutions for social issues. This is becoming increasingly important.
In my opinion, Marubeni’s Board of Directors engages in frank and open discussions of agenda items from multiple perspectives. After booking major impairment losses in the fiscal year ended March 31, 2020, Marubeni’s executives have advanced reforms, including reviews of the business portfolio. Marubeni is also taking sustainability seriously, which has become even more important lately. For proposals that require a major decision, board members receive carefully thought-out explanations in pre-meeting briefings, and Chairman Kokubu plays the role of eliciting the opinions of each and every board member, facilitating very constructive dialogues during meetings. Moreover, opportunities are created for the outside directors to exchange opinions with Chairman Kokubu and President Kakinoki. This serves to improve the effectiveness of the Board of Directors by facilitating discussions of high-level issues, such as problems related to economic security.
The Nomination Committee, which I have chaired since 2021, discusses the best way for Marubeni to design and set into motion succession plans, as well as the state of personnel training and human resource development. The members of the committee, including President Kakinoki, will continue to examine these issues.
One year has passed since I was appointed as an outside director, and over this time, I have thought about what a general trading company is and how corporate governance should be throughout the Marubeni Group. The Board of Directors to which I belong is a part of the parent that is one of the huge group of over 450 companies. Therefore, governance cannot be achieved by looking only at the head office executives. Unfortunately, in my first year as an outside director, partly due to the impact of COVID-19, there were few opportunities to talk directly with employees at Group companies and on the front lines. I hope to increase opportunities for more insightful and broader communications.
In recent years, when a scandal come to light at a company, people immediately question whether corporate governance is functioning at that company. I believe the corporate culture of a company has a major impact on whether corporate governance functions well. When I talk with executives and members of the Board of Directors, I get the positive impression that Marubeni’s corporate culture is very open. This is evident in Opinion Box, a way for employees to communicate directly with President Kakinoki. I think that corporate governance works when advanced supervision functions can be applied to internal organizations that are open and highly transparent.
President Kakinoki himself carefully replies to each question that reaches him via Opinion Box. I believe it is an opportunity for employees to nurture a sense of belonging and further their understanding of management policies.
With Opinion Box, in addition to President Kakinoki, the heads of each division have shared their initiatives as videos streamed to all employees across the Company. I was impressed by the great way to forge connections horizontally across vertically integrated organizations.
GC2024 Mid-Term Management Strategy
With the aim of realizing Marubeni’s ideals for 2030, GC2024 is a three-year management strategy that carries on initiatives from GC2021. Under GC2021, I believe Marubeni saw tangible results from efforts to change its business portfolio, including the divestiture of Gavilon’s grain business, in addition to the booking of impairment losses on assets of concern due to the COVID-19 pandemic, the rebuilding of its financial foundation and the improvement of investment discipline. After GC2021’s “three years of transformation,” GC2024 is designated as a plan for “three years for putting strategy into practice” and Marubeni transitions to a stage for rapidly implementing its strategies.
As executives implement these strategies, from the standpoint of balancing supervision and execution, I believe it was logical for Marubeni to increase the ratio of outside directors on the Board of Directors and strengthen oversight functions.
I believe GC2024 is an apt description of the initiatives that Marubeni will take over the medium to long terms, centered on its green strategy. To date, Marubeni has achieved corporate growth as a whole by expanding individual businesses. In light of future changes in the world order and industrial structure, however, Marubeni is required to create new value by harnessing all of its functions interactively as a general trading company. I believe that being in a position that allows Marubeni to do this is a strength. I think that the key to growth ahead will be creating new businesses through initiatives that span across individual businesses and involve business divisions throughout the entire organization. To this end, it will be important to talk about horizontal collaboration, starting with the green strategy and others. If necessary, I will offer ideas for improvements while monitoring progress on GC2024 with this in mind.
With an eye on improving corporate value, I believe it is our mission to figure out how to reflect such ideas in the direction of management, while having high-level, broad-based discussions in the Board of Directors and building consensus among executives.
In GC2024, the “Marubeni HR Ecosystem” is a fundamental pillar of the Group’s human resource strategy, an idea that reflects the importance of human resources in management. Looking at indicators, such as the percentage of female employees in management positions, Marubeni has considerable room for improvement in terms of diversity. I expect to see results from management’s specific plan of action that puts the most emphasis on empowering women. In discussions about human resource strategy, I have said at meetings of the Board of Directors that there is value in having diverse human resources, not in just recognizing diversity. I aim to encourage diverse human resources to utilize their abilities to their fullest.
Amid global uncertainties and the accelerating pace of change, it is important for Marubeni to quickly and flexibly respond to changes in the business environment and innovate technologies while treasuring its existing businesses. With this in mind, I expect Marubeni not only to allocate human resources and other resources to take on challenges in new domains (“Horizon 3”), but also to enhance its corporate culture that allows employees to continue bold challenges with appropriate risk management based on their thoughts on what they can do for Marubeni and stakeholders.
Improving Effectiveness and Transparency of Board of Directors
In our aim to improve the effectiveness of the Board of Directors, one way is to strengthen oversight functions. To sustain improvements in corporate value, I look forward to thinking and discussing with executives about the role that Marubeni should fulfill in society from a long-term perspective, a sustainability standpoint, and the viewpoints of stakeholders. The outside directors are a diverse group of people with broad backgrounds. Given the accumulated experiences of each outside director, I hope to have a meaningful exchange of ideas that lead to stronger oversight functions, including suggestions for Marubeni to consider.
Now that the outside directors are a majority on the Board of Directors, from the standpoint of diversity, I believe it would be good for the Board of Directors to have more women and foreign nationals as members, given its business model as a general trading company with a wide range of operations around the world. I also think it would be good to have younger members as well. With value systems having become more diverse, each generation has different views and approaches to matters. I think it would be desirable to increase the precision of discussions at the Board of Directors, such as medium- to long-term aims, by incorporating broader perspectives to get rid of any blind spots.
I do not think there is a perfect composition to strive for at the Board of Directors. Marubeni has significantly changed its structure by forming a majority of outside directors on its Board of Directors, and one aim of this is to speed up management. In terms of corporate growth, it is important to delegate authority to executives so they can implement strategies on their own accord and respond to change more quickly. At the same time, I believe it is vital for the Board of Directors to discuss medium- to long-term direction while taking into account viewpoints from the front lines, and to supervise the executive side so that the wrong direction is not taken. While fulfilling this role, I believe that as a general trading company, Marubeni must build an appropriate corporate governance structure that aligns with its unique business model in the world. Instead of following a standard playbook or another company’s actions, we should refine and polish the corporate governance structure as we see fit.
As Ms. Okina has said, diversity is a critical issue in the world to come. People in the same organization tend to think alike, but in order to survive fierce global competition, this will not lead to the creation of new value. In this sense, I think it would be better for Marubeni to have more women and foreign nationals on not only the Board of Directors, but also in its ranks of executives. Since Marubeni engages in complex businesses on the global market, the acceptance of more diversity in its human resources at the management and business execution levels will be pivotal for enhancing corporate value in the future, in my opinion.
With a majority of outside directors, the diversity of opinions increases from people with various backgrounds and knowledge, and I expect discussions to be even more lively than before as the “common knowledge” for Marubeni will not work. With that said, we must avoid having misguided discussions, and outside directors must be vigilant to make sure the Board of Directors is not isolated from executives and front-line conditions. Marubeni has been improving the quantity and quality of information given to outside directors prior to meetings, and has created opportunities for outside directors to talk directly with heads of business divisions. Due to the breadth of its business domains, from the standpoint of Group governance, it is necessary to understand the special issues at individual Group companies, as well as read up on information about the markets and industries in each business. For this reason, I believe it is important for outside directors to visit worksites and talk directly with employees on the front lines.
While the monitoring functions of the Board of Directors are further strengthened, as directors, we must be careful to avoid undermining the ambitiousness and aggressiveness of the executives, in my opinion.
Roles and Aspirations of Outside Directors
Given my background in engineering, consumer-focused businesses and launching new businesses, the role I think I should play is more offensive than defensive, and I intend to add value myself by providing advice about growth fields and new businesses. In addition to discussions and presentations at the Board of Directors, I am looking forward to personally meeting employees and managers on the front lines, and through the relationship between supervision and execution, I aim to bring to bear my own experiences and insights.
With so many social issues, starting with environmental problems, it has become more important to train human resources able to take on the challenge of solving these issues. Corporate value will definitely improve as a result of training human resources to solve social issues, by investing in the reskilling and retraining of human resources, not just hiring new employees, in terms of a human resource strategy for the long term. Viewing this as a chance to solve social issues and improve corporate value along the way, we must be diligent in fulfilling our duties as outside directors.
The role of outside directors is to discuss governance and the future direction of Marubeni at the Board of Directors, and then monitor business execution thereafter. To keep executives from moving in the wrong direction, I believe it is my responsibility as an outside director and the chair of the Governance and Remuneration Committee to keep an eye on both the external business environment and internal conditions, while listening carefully to the voices of investors.
Now that Marubeni has learned from past failures and rebuilt its earnings and financial foundation, it is expected to be on the next stage of growth. As an outside director, I think we should encourage value creation while letting Marubeni take full advantage of our combined experiences from outside of Marubeni.