Evaluation of the Effectiveness of the Board of Directors

Method of Evaluation

As we did in the previous fiscal year, Denka analyzed and evaluated the effectiveness of the Board of Directors by having individual Directors complete the “Self Evaluation Questionnaire”, which covers items related to the effectiveness of the Board of Directors, such as scale, composition, operation and 27 other items, and discusses the questionnaire results at Board of Directors meetings.

Summary of Evaluation Results and Future Efforts

Results confirmed that the frequency and time of meetings of the Board of Directors and its composition (balance and diversity of knowledge, experience and abilities) are appropriate, and due to the further efforts of the Nomination and Remuneration Advisory Committee and the D&A Roundtable Meeting, it has also been confirmed that management oversight and supervision is being properly implemented by the Board of Directors, of which 44% are Independent Outside Directors.
While there have been improvements in monitoring and following up on long-term business strategies and large-scale investment projects, there was an opinion that the Board of Directors should continue to make efforts to provide timely information and increase the number of opportunities for free discussion, which was last year’s issue of enhancing discussion of board of directors meetings. With respect to further utilization of the Nomination and Remuneration Advisory Committee, the frequency of its meetings was increased and explanations and materials were enhanced to further invigorate discussions. As a result, we have seen a steady increase in its effectiveness, including a review of the executive remuneration system and the establishment of a new training system for candidates for management positions. In order to ensure the reliable operation of these systems in the future, we are aware of the need to continue discussions and make recommendations.
It was also pointed out that further careful selection of agenda items for the Board of Directors and more efficient reporting would require continued review and consideration, with an eye to speeding up the decision-making process.
In light of these constructive opinions, the Board of Directors will continue its efforts to improve its effectiveness, thereby enhancing corporate value over the medium and long term and meeting the expectations and trust of shareholders and other stakeholders.

Concepts on the Appointment of Directors

Under the new vision, in order to achieve the eight-year management plan “Mission 2030” through fiscal 2030, the Company aims to strengthen the management structure with Directors and Executive Officers, while enriching the governance structure and supervisory function. In electing Directors, internal Directors are chosen from persons who possess a wealth of experience and achievements in various divisions within the Company, while also possessing insights and adequate specialized knowledge as Director, and Outside Directors are chosen from persons who possess specialization required for continuous growth and improvement in corporate value of the Company and wide insights based on a wealth of business experience and management experience at other companies. The Company believes that it is important for the Board of Directors as a whole to elect a good balance of personnel with a variety of knowledge, experience, and abilities, and ensure that the composition of the Board of Directors is diverse in terms of gender, international background, work history, and other factors. Additionally, the Company believes that Independent Outside Directors should comprise at least one third of Directors. The present ratio is approximately 44%.

Director Remuneration

We have set the remuneration for each Director (excluding Audit Committee Members) based on their roles and responsibilities within the limit of the total amount approved by the General Meeting of Shareholders. In order to enhance objectivity and transparency, remuneration is determined by the Board of Directors after receiving advice and recommendations from the Nomination and Remuneration Advisory Committee and this process is set forth in our internal regulations. Remuneration for Directors consists of a basic remuneration set at a fixed amount as well as performance-linked remuneration and stock remuneration. The performance-linked remuneration is designed to increase awareness of Directors of their responsibility to work to improve business and individual performance each fiscal year so as to function as an incentive, while the stock remuneration aims to instill a strong sense of purposefulness toward achieving medium- to long-term growth in corporate performance and corporate value in our Directors. However, Outside Directors and Non-Executive Directors receive only basic remuneration in light of their duties.

FY2022 Director Remuneration