INITIATIVES TO STRENGTHEN CORPORATE GOVERNANCE

Initiatives to Strengthen Corporate Governance

The Company positions the development and promotion of the corporate governance system as one of the most important management issues, and implements ongoing initiatives to strengthen corporate governance.

Evolution of Corporate Governance System

Evolution of Corporate Governance System

Changes in the Composition of Outside Directors

The Company has continued to raise the proportion of Outside Directors over time with a view to strengthening its corporate governance.
Currently 7 Outside Directors have been appointed to ensure a high level of independence; the composition of these Outside Directors is well-balanced in terms of skills and credentials.

Changes in the Composition of Outside Directors

Changes in the Composition of the Nominating Committee, Audit Committee, and Remuneration Committee

To promote high standards and ensure transparency of the decision-making process, the Company has been improving the composition of the Nominating Committee, Audit Committee, and Remuneration Committee, and currently each committee is chaired by an Outside Director and is composed solely of non-executive directors.

Changes in the Composition of the Nominating Committee, Audit Committee, and Remuneration Committee

Evaluation of the Effectiveness of the Board of Directors

(Purpose of evaluating the effectiveness of the Board of Directors)

To confirm that the Board of Directors is functioning effectively through its oversight function to realize enhanced corporate value on a medium- to long-term basis and to enhance corporate governance, through an annual evaluation by each Director, the Company’s Board of Directors analyzes and evaluates the effectiveness of the Board of Directors as a whole, and in addition to disclosing a summary of those results, where necessary, it formulates and implements policies to enhance its effectiveness.

(Initiatives undertaken thus far toward the desired role of the Board of Directors)

In June 2016, the Company transitioned to a Company with Nominating Committee, etc. The main roles of the Board of Directors shall be to make decisions on both basic management policy and important business execution and to supervise the performance of duties by Directors and Corporate Executive Officers from the standpoint of greater clarity of roles and a strengthening of functions in both the supervision of the management and the execution of business.
Thus far, based on the results of the annual analysis and evaluation of effectiveness, issues are carefully reviewed, and the management plan is discussed in detail. Additionally, the Board of Directors ensures that there are sufficient reporting opportunities and details from the Corporate Executive Officers and that thorough information is provided to Outside Directors, implementing initiatives that ensure that roles are suitably fulfilled.
In fiscal 2020, based on the ”Mitsubishi Estate Group Long-Term Management Plan 2030” formulated and released in January 2020, from the position of appropriately monitoring management to increase shareholder value and social value from a long-term standpoint, in addition to the existing evaluation items, we added items related to future initiatives to be improved.

Furthermore, we received advice from third-party evaluation organizations at each phase, including creating a questionnaire, analyzing the responses and results, and sharing issues. Following is a summary of the process and results of the evaluation of the effectiveness of the Board of Directors that we implemented.

1. Process of Evaluation

(1) Method of Evaluation

All directors conducted self-evaluations in the form of a response to a questionnaire relating to the composition, operation, effectiveness, etc., of the Board of Directors and each of the Nominating, Audit, and Remuneration committees, and taking these results into consideration, they discussed the issues with each other and examined proposed corrective measures at Board of Directors’ meetings.

(2) Items of Evaluation

In terms of evaluation items based on the Long-Term Management Plan 2030, the Company added “the required skills and diversity for the Board of Directors three to five years in the future” as part of the evaluation of the Board’s composition and “topics to be fleshed out in future discussions for monitoring and the nature of reports on the status of business execution from corporate executive officers” as part of the evaluation of the Board’s effectiveness and operation.

Composition of the Board of Directors Proportion of outside directors, size in numbers, skills, and diversity
Effectiveness of the Board of Directors Management plan, monitoring of execution of business and risk management systems, dialogue with shareholders and investors, operation of the Nominating, Audit, and Remuneration committees, etc.
Operation of the Board of Directors Frequency, required time, report on status of business execution of corporate executive officers, provision of information outside of Board of Directors’ meetings, questions and answers, training, etc.
Others Method of the evaluation of the effectiveness of the Board of Directors, etc.

2. Results of Evaluation and Future Initiatives

(Results of Evaluation)

The Board of Directors deemed that it was functioning effectively.

(Analysis of Results)

In the questionnaire on the evaluation of effectiveness completed by each director, a significant number of items received a high ratio of “appropriate” as the response. Furthermore, a constructive exchange of opinions took place for each evaluation item, including issues pointed out by directors and their suggestions for the future. In particular, with respect to appropriate monitoring of the Long-Term Management Plan 2030, a high level of awareness was observed regarding such matters as the contents of reporting by the corporate executive officers on business execution and the balance between the time used for briefings and the time used for discussions.

(1) Main Items Improved Since the Previous Evaluation

In the previous fiscal year’s evaluation of effectiveness, “appropriate monitoring of the progress status of the Long- Term Management Plan 2030” and “continued implementation of initiatives aimed at further improving the diversity of the Board of Directors, with efforts mainly by the Nominating Committee” were identified as main issues and future initiatives for further improvements in effectiveness of the Board of Directors. As for the status of improvement for these issues during the fiscal year under review, the following points were identified based on examinations and discussions conducted by the Board of Directors.

  • In regard to the Long-Term Management Plan 2030 that began in FY2021, having continuously implemented briefings on the Company’s businesses for outside directors and exchanged opinions with them, the Board of Directors dedicated sufficient time to monitoring the state of business execution.
  • At meetings of the Nominating Committee, discussions were held and opinions were exchanged regarding the level of diversity that the Board of Directors should maintain to achieve the Long-Term Management Plan 2030.

(2) Main Issues and Future Initiatives Aimed at Further Improvements in Effectiveness

Through a process of examination and discussion at Board of Directors’ meetings, the following points were identified.

  • The management environment has changed significantly due to the spread of COVID-19 and other factors.
    Accordingly, to deepen discussions on progress evaluations of and strategy revisions to the Long-Term Management Plan 2030, the Board of Directors must expand and enhance its monitoring to ensure supervision with an awareness of Companywide issues, including changes in the management environment, capital policies, and business portfolio strategy, as well as sustainability.
  • Examinations of the composition and diversity of the Board of Directors must be implemented on an ongoing basis to further improve the Board’s effectiveness.

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