Corporate Governance

Policy on Corporate Governance

DIC has prepared a Policy on Corporate Governance and published the policy on its global website.

Corporate Governance System

As a company with internal auditors, DIC has a Board of Directors and an Audit & Supervisory Board. The Company has also instituted an executive officer system and has established a Nomination Committee, Remuneration Committee, Executive Committee, Sustainability Committee, Quality Committee and Work Style Revolution (WSR) 2020 Committee.

• Board of Directors

  From the perspective of making business decisions in a timely manner and reinforcing corporate governance, the Board of Directors consists of 10 directors, four of whom are outside directors (two of whom are female, including one who is a foreign national). The Board of Directors typically meets once monthly to make decisions on matters delegated to it under the Companies Act of Japan and on important business matters stated in the regulations for meetings of the Board of Directors, as well as to receive status reports on the execution of business activities and supervise the execution of the business.

• Nomination Committee

  To ensure objectivity in the nomination of directors, Audit & Supervisory Board members and executive officers, among others, the Nomination Committee was established to provide recommendations to the Board of Directors regarding the appointment and dismissal of directors, Audit & Supervisory Board members and executive officers. The committee meets as necessary and consists of six directors, four of whom are independent outside directors, with an independent outside director serving as chair.

• Remuneration Committee

  To ensure objectivity in the determination of remuneration for directors and executive officers, the Remuneration Committee was established and has been entrusted with responsibility for determining remuneration, among others, for directors and executive officers. The committee meets as necessary and consists of six directors, four of whom are independent outside directors, with an independent outside director serving as chair.

• Corporate Value Improvement Committee

  The Corporate Value Improvement Committee was established in April 2024 to explore the role of companies in society from a high-level, broad viewpoint and advise the Board of Directors from a third-party perspective regarding the improvement of corporate value over the long term. The committee consists of four outside directors and depending on the theme invites external experts to serve as advisors.

• Executive Committee

  The Executive Committee was established as a body to advise on important matters related to the execution of the DIC Group’s business. The committee meets twice monthly in principle and consists of executive officers and others designated by the Board of Directors from among the President and CEO, the Executive Vice President, the heads of the units, and the general managers of the management units and product divisions. As part of the auditing process, one Audit & Supervisory Board member also attends Executive Committee meetings. Details of deliberations at meetings and the results thereof are reported to the Board of Directors.

• Sustainability Committe

  The Sustainability Committee, which functions as an advisory body, formulates sustainability policies and activity plans, evaluates and promotes sustainability initiatives, and deliberates and makes decisions regarding matters of importance when it deems this to be necessary. In fiscal year 2023, the Sustainability Committee met four times. The committee consists of executive officers and others designated by the Board of Directors from among the President and CEO, Executive Vice President, the heads of the units, the general managers of the management units and product divisions, and the managing directors of regional headquarters. As part of the auditing process, one Audit & Supervisory Board member also attends Sustainability Committee meetings. Details of deliberations at meetings and the results thereof are reported to the Board of Directors.

• Quality Committee

  In addition to reporting on the status and progress of quality management, the Quality Committee functions as a deliberative body for the DIC Group’s Quality Policy, principal initiatives and important issues in Japan. In principle, the committee meets once quarterly and consists of executive officers and others designated by the Board of Directors from among the President and CEO, the Executive Vice President, the heads of the units, and the general managers of the management units and product divisions. As part of the auditing process, one Audit & Supervisory Board member also attends Quality Committee meetings. Details of deliberations at meetings and the results thereof are reported to the Board of Directors.

• WSR 2020 Committee

  The WSR 2020 Committee was established to deliberate work style reform–related measures and investment plans, among others, with the aim of enhancing Group employee job satisfaction and productivity. In principle, the committee meets once quarterly and consists of executive officers and others designated by the Board of Directors from among the President and CEO, the Executive Vice President, the heads of the units, and the general managers of the management units and product divisions. Details of deliberations at meetings regarding matters of particular importance and the results thereof are reported to the Board of Directors.

• Audit & Supervisory Board

  The Audit & Supervisory Board comprises four members, including two who are outside (one of whom is female). In principle, the Audit & Supervisory Board meets once monthly. Board activities include debating and determining auditing policies and auditing plans. Board members also report on the results of audits conducted, as well as attend important meetings, including those of the Board of Directors, Executive Committee and Sustainability Committee, meet with representative directors on a periodic basis to exchange information and opinions, and collect business reports from directors, executive officers and employees. In addition, the Company has established an Audit & Supervisory Board Members’ Office, to which it assigns dedicated personnel to assist the Audit & Supervisory Board members in their duties.

  The Company’s four Audit & Supervisory Board members have extensive experience in and knowledge of finance and accounting, which they are able to leverage in the performance of their duties. Full-time Audit & Supervisory Board member Hiroyuki Ninomiya oversaw corporate accounts at the Company for many years and was general manager of the Accounting Department and Head of the Finance and Accounting Unit. Full-time Audit & Supervisory Board member Toshinobu Kitamura was in charge of finance and accounting for the Company and served as vice chairman and CFO of DIC (China) Co., Ltd. In addition to providing expertise in corporate law, outside Audit & Supervisory Board member Keita Nagura provides tax accounting services pursuant to Article 51 of the Certified Public Tax Accountant Act. Outside Audit & Supervisory Board member Keiko Kishigami is a certified public accountant with extensive experience in corporate auditing.

• Internal Auditing Department

  The internal auditing department comprises four local teams of employees covering Japan, the Asia–Pacific region, the PRC, and the Americas, Europe, the Middle East and Africa. The department is charged with formulating annual audit plans based on quantitative and qualitative risk assessments. These plans are finalized when they receive approval from the Executive Committee and are reported to the Audit & Supervisory Board, which provides instructions regarding key concerns, and conducts internal audits, including monitoring the effectiveness of internal controls.

• Accounting Auditors

  The Company has engaged Deloitte Touche Tohmatsu LLC as its independent auditors. The Company strives to ensure an environment that facilitates the accurate disclosure of information and fair auditing. The Audit & Supervisory Board members, accounting auditors and internal auditing department conduct audits from their respective independent positions, but also liaise periodically to facilitate close cooperation, thereby ensuring the effectiveness of audits.

Rationale Behind Current Corporate Governance System

DIC has instituted an executive officer system, a move aimed at separating decision making and implementation and thereby accelerating business execution and clarifying responsibilities. The Company has appointed four highly independent outside individuals to its Board of Directors to reinforce its monitoring of business execution. The Company also has a Nomination Committee, Remuneration Committee and a Corporate Value Improvement Committee, which include four outside directors, to ensure objectivity in the nomination of, and in determining remuneration for, directors and executive officers, as well as measures to bolster corporate value. Four Audit & Supervisory Board members, which include one attorney and one certified public accountant as outside members, conduct audits in liaison with the accounting auditors and the internal auditing department. This structure ensures the effective functioning of the Company’s corporate governance system.

System of Internal Controls

01Status of the System of Internal Controls and the Establishment of a Framework for Risk Management

In striving to conduct its operations in accordance with The DIC Way, the DIC Group has prepared and operates a system of internal controls based on the Companies Act of Japan to ensure the appropriateness of its operations.

• The Company shall work to set forth the DIC Group Code of Business Conduct as the standard regarding compliance, which directors and employees should comply with, and to disseminate the same.
• The Company shall, as part of its compliance activities, establish an internal notification system as a channel available for the employees of the DIC Group and set up multiple notification channels independent from channels used in the execution of business activities, thereby creating a structure that can quickly respond to domestic and international notifications.
• To ensure that the duties of directors are performed properly and efficiently within the DIC Group, the Company shall establish regulations for company organization and authority.
• The Company shall formulate long-term management plans and annual budgets based on DIC Group management policies and management strategies and, through dissemination of the same, ensure common goals are shared within the DIC Group. The Company shall make progress reports to the Board of Directors.
• Information pertaining to the performance of duties by directors shall be recorded, retained and managed appropriately in accordance with the regulations for document management. The Company shall establish regulations for systems of information management and shall prepare a system for preventing leakage of confidential information of the DIC Group.
• The Company shall formulate a risk management policy and shall identify, assess, prioritize and address any risks that may have a significant impact on the management of the DIC Group.
• The Company shall determine an administrative department for each subsidiary from the standpoints of business execution and management and shall supervise the execution of business by dispatching a director to each subsidiary.
• The Company shall clarify important matters, including those pertaining to subsidiaries, that must be approved by or reported to the Company.

02Basic Policy toward Eliminating Demands by Antisocial Elements

This basic policy, which is outlined in the DIC Group Code of Business Conduct, is to stand firmly against antisocial elements and in no way to acquiesce to demands presented by such elements. The General Affairs and HR Department is responsible for coordinating efforts to respond to extortion or other demands presented by antisocial elements, while individuals have been put in charge of efforts at each site and within each Group company. These individuals work in close collaboration with legal counsel and the police to ensure the Company’s responses are resolute. The Company has also prepared and distributed a manual on appropriate responses to such demands with the aim of raising awareness among employees.

Outside Directors and Outside Audit & Supervisory Board Members

01Number and Role of Outside Directors and Outside Audit & Supervisory Board Members

The Company currently has four outside directors and two outside Audit & Supervisory Board members. As well as attending meetings of the Board of Directors, the four outside directors—who have extensive experience in corporate management—serve as members of the Nomination Committee, the Remuneration Committee and the Corporate Value Improvement Committee, enabling them to provide supervision with an independent point of view, thereby helping to reinforce the Company’s corporate governance. The two Audit & Supervisory Board members—one a certified public accountant and the other an attorney—advise management of the DIC Group from an expert, multifaceted and independent perspective, thereby helping to reinforce the auditing function.

02Independence Standards for Outside Directors and Outside Audit & Supervisory Board Members

The Company recognizes the need to appoint individuals to the position of outside director and outside Audit & Supervisory Board member, which are shown below. The Company’s outside directors and outside Audit & Supervisory Board members are individuals who, based on these standards, are unlikely to have conflicts of interest with ordinary shareholders and who comply with criteria for the independence of directors and Audit & Supervisory Board members set by the Tokyo Stock Exchange.

03Support System for Outside Directors and Outside Audit & Supervisory Board Members

Prior to meetings of the Board of Directors, relevant materials are distributed to all outside directors and outside Audit & Supervisory Board members. In addition, the executive officers in charge provide explanations of the agenda to outside directors, while full-time Audit & Supervisory Board members provide explanations as necessary to outside Audit & Supervisory Board members.

Other Initiatives to Enhance the Corporate Governance System

01Composition of the Board of Directors

• The Board of Directors, which is chaired by the chairman and representative director, resolves major operations-related issues. To facilitate the effective oversight of management, the Board of Directors comprises outside directors, who maintain independence, and other individuals having a thorough knowledge of the businesses of the DIC Group, with consideration given to ensuring a balance among necessary knowledge, experience and capabilities. The Nomination Committee selects candidates for the position of director based on expertise and experience, as shown in the skills matrix. The Board of Directors is of an appropriate scale based on the presumption that authority will be delegated to management.

  Given the increasingly global nature of the DIC Group’s business activities, the Company is also striving to diversify the composition of the Board of Directors. At present, three of the Board’s members are women (two outside directors and one outside Audit & Supervisory Board member). One of the female outside directors is a foreign national.

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Composition of the Board of Directors

Skills Matrix for Directors and Audit & Supervisory Board Members

The table to the right is a skills matrix summarizing the knowledge, experience and capabilities of current directors and Audit & Supervisory Board members.

02Remuneration for Directors and Audit & Supervisory Board Members

Remuneration for directors is determined by the Remuneration Committee in accordance with the policies for determining remuneration for individual directors adopted by the Board of Directors and stipulated in the Executive Regulations, with consideration given to such factors as prevailing market rates, the Company’s operating results, individual qualifications, ability to perform duties, actual performance of duties and balance with employee salaries. Directors receive basic remuneration; bonuses, which are linked to consolidated operating results and achievement of individual targets; and stock compensation, which aims to strengthen awareness of the importance of contributing to the medium- to longterm improvement of operating results, as well as to the enhancement of corporate value, and of sharing the same objectives as shareholders. Directors who serve concurrently as executive officers are eligible for bonuses and stock compensation, in addition to basic remuneration, while other directors and outside directors are eligible for basic remuneration only.
Remuneration for Audit & Supervisory Board members consists of basic remuneration only, which is determined in accordance with internal rules established by the Audit & Supervisory Board, with consideration given to ensuring a balance with remuneration for directors and to prevailing market rates.

Remuneration for Directors and Audit & Supervisory Board Members in Fiscal Year 2023

03Evaluating the Effectiveness of the Board of Directors

The Company analyzes and evaluates the effectiveness of the Board of Directors annually via a self-evaluation conducted by directors and Audit & Supervisory Board members. In fiscal year 2023, all directors and Audit & Supervisory Board members were surveyed regarding selfevaluations, Board administration and other issues, and interviewed on an individual basis, with responses analyzed and evaluated by the Board of Directors.
Owing to the aforementioned efforts, it was confirmed that free and lively discussions had been held, led by outside directors and outside Audit & Supervisory Board members, and that appropriate deliberations had been conducted by the Board of Directors. In addition, regarding issues identified in the evaluation conducted in fiscal year 2022, it was judged that discussions pertaining to the progress of the Company’s DIC Vision 2030 long-term management plan and of major investment projects had been enhanced through improvements such as the creation of multiple opportunities for explanation and deliberation, increased opportunities to hear explanations from executive officers who are foreign nationals, and the restructuring of the Company’s risk management system. Accordingly, the effectiveness of the Board of Directors was confirmed.
In fiscal year 2024, DIC will seek to further bolster the Board of Directors’ effectiveness. As well as revising DIC Vision 2030 and reviewing progress of the plan’s priority measures, the Company will encourage understanding of its current status by organizing regular opportunities for outside directors to provide overviews of individual businesses, among others. The Company will also continue to discuss specific distinctively DIC aspects of its corporate governance system, as part of its ongoing effort to promote improvement.

Other Initiatives

01Ensuring Diversity in the Promotion of Core Human Resources

DIC works to foster a corporate culture that draws on its understanding and respect for diversity to produce creative ideas and to incorporate the concept of diversity into management, thereby creating workplaces that enhance job satisfaction for employees. Respect for diversity is also stipulated in the Company’s Basic Sustainability Policy.
As measurable targets for ensuring diversity, the Company has set targets for percentage of management positions in Japan occupied by women and percentage of employees in Japan accounted for by foreign nationals, publishing actual figures in the integrated report.
The Company’s policy for fostering human resources and creating work environments in a manner that ensures diversity is to “promote efforts to ensure diverse human resources are in the right places and the creation of work environments that enable employees to maximize their capabilities.” A director has been put in charge of diversity to create an effective configuration.
In its long-term management plan, the Company identifies three strategic priorities for reinforcing management of human capital: Foster human resources, ensure mobility (hiring, retention and succession), and improve engagement and organizational cohesiveness. The WSR 2020 Committee targets the development of new work styles with the objective of enhancing productivity and job satisfaction. The status of measures implemented under this project is disclosed in the integrated report.

02Sustainability Initiatives

The Company promotes sustainability initiatives in line with 13 key themes that reflect its belief that, as a manufacturer of fine chemicals, it has a responsibility to address ESG-related issues, and discloses the progress thereof in the “Overview of Sustainability” section of its integrated report.

03Policy on Strategic Shareholdings

The Company may strategically hold shares in listed companies, with the exception of affiliated companies, only when there is a reasonable expectation that they will contribute to sustainable growth or the improvement of corporate value over the medium to long term.

The Board of Directors annually reviews the suitability of individual strategic holdings to verify their suitability, examining whether benefits associated with possession are commensurate with the cost of capital, as well as determining the risks of not holding the shares. If, as a result of this review, the significance of a holding is judged to have weakened, it will, in principle, be reduced.

At the Board of Directors’ meeting held on March 3, 2023, the Company reviewed the suitability of all investment securities held for purposes other than pure investment as of December 31, 2022, as described above. As a result, it was confirmed that the significance of certain holdings was lacking. Accordingly, the Company will strive to reduce these holdings going forward, taking into account impact on the market and other factors. Regarding holdings judged to be suitable, should circumstances change that call this judgment into question the Company will consider reduction or other measures. The Company will continue its efforts to further reduce strategic shareholdings, aiming to lower them to 4% or less of net assets (based on market capitalization) by the fiscal year ending December 31, 2026.