Basic Views on Corporate Governance
Organizational Composition and Operation
| Corporate Governance System | Company with an Audit & Supervisory Committee |
|---|
Directors
| Number of Directors Stipulated in Articles of Incorporation | 15 |
|---|---|
| Directors' Term of Office Stipulated in Articles of Incorporation | 1 year |
| Chairperson of the Board | President |
| Number of Directors | 7 |
| Election of Outside Directors | Elected |
| Number of Outside Directors | 3 |
| Number of Independent Directors | 3 |
Supervisory Committee
Composition of Supervisory Committee and Attributes of the Chairperson
| All Committee Members | Full-time Members | Inside Directors | Outside Directors | Committee Chair | |
|---|---|---|---|---|---|
| Supervisory Committee | 4 | 1 | 1 | 3 | Inside Director |
| Appointment of Directors and/or Staff to Support the Supervisory Committee | Appointed |
|---|
Matters on Independence of Said Directors and/or Staff from Executive Officers
MITSUI E&S Co, Ltd. (the Company) has established the Office of Audit and Supervisory Committee, which has full-time employees to assist the Audit & Supervisory Committee.
The employees of the Office of Audit and Supervisory Committee are assigned to assist the Audit & Supervisory Committee in its audits, etc., under the direction of the Audit & Supervisory Committee.
The personnel transfer and performance evaluation, etc. of the employees of Office of Audit and Supervisory Committee are discussed with the Audit & Supervisory Committee in advance to ensure their independence from the executive directors and to ensure the effectiveness of their instructions.
Voluntary Established Committee(s)
| Voluntary Establishment of Committee(s) equivalent to Nomination Committee or Remuneration Committee | Established |
|---|
Status of Voluntarily Established Committee(s), Attributes of Members Constituting the Committee and the Committee Chairperson
| Committee's Name |
All Members | Full-time Members | Inside Directors | Outside Directors | Outside Experts | Other | Chairperson | |
|---|---|---|---|---|---|---|---|---|
| Voluntarily Established Committee Equivalent to Nomination Committee |
Nomination Committee |
5 | 0 | 2 | 3 | 0 | 0 | Outside Director |
| Voluntarily Established Committee Equivalent to Remuneration Committee |
Remuneration Committee |
5 | 0 | 2 | 3 | 0 | 0 | Outside Director |
Supplementary Explanation
Currently, the “Nominating Committee” consists of three independent outside directors appointed by the Board of Directors, two inside directors, which is chaired by an independent outside director. The committee discusses and reports on director selection procedures and succession plans, as well as director candidate proposals for the next fiscal year.
The Compensation Committee consists also of three independent outside directors appointed by the Board of Directors and two inside directors. The committee is chaired by an independent outside director and confirms performance-linked compensation based on the previous year's business performance, among other matters.
In order to ensure the independence of these voluntarily established committees, the Company basically requires that a majority of the members of each committee be independent outside directors. However, in case that the number of independent outside directors is equal to the number of inside directors (including the president) at a committee, the independence of the committee is ensured by having an independent outside director chair the committee.
Matters Concerning Independent Directors
| Number of Independent Directors | 3 |
|---|
Other Matters Concerning Independent Directors
The Company designates all outside directors, as Independent Directors. They meet the qualifications.
Please refer to the separate page “Independence Criteria for Outside Directors” for the Company's independence criteria.
Reasons for Adoption of Current Corporate Governance System
The Company has adopted the current corporate governance system based on the judgment that a governance system in which the Audit and Supervisory Committee enhances the effectiveness of the audit function and experienced outside directors monitor the directors' performance of their duties from the management perspective will contribute to the sustainable enhancement of the corporate value of the Company Group, based on the corporate philosophy.
Actions to achieve cost of capital and stock price conscious management
Since 2019, the Company has been working to reform and improve its business structure.
In order to switch to business management that pays attention not only to operating income margin but also on business management that takes into account cost of equity and stock prices, with the goal of achieving a return on invested capital (ROIC) that exceeds the weighted average cost of capital (WACC), while paying attention to return on equity (ROE) and price-to-book ratio (PBR).
The most recent figures for these indicators are ROIC > WACC, and the Company will strive to maintain these figures permanently while improving our corporate value.
Reasons for Non-compliance with the Principles of the Corporate Governance Code
The Company implements all principles of the Corporate Governance Code as of the date of this report.
Supplementary Principle 2-4-1 Ensuring Diversity in the Promotion to Core Human Resources
The Company takes the following actions to ensure diversity.
- Set a target for ensuring diversity in the hiring of new graduates and ensure diversity in the population first.
- The target for promotion to management positions, etc., will be raised in steps according to the increase in the diversity of the population.
In May 2025, the Company announced its Mid-Term Business Plan MITSUI E&S Rolling Vision 2025, where the Company sets targets for fiscal 2027 of each ratio of female and foreign employee
among new technical graduates, overall employees, and management positions.
In addition, the Company has disclosed also the target for fiscal 2030 of each ratio of the female and foreign employee to overall employees in MITSUI E&S Rolling Vision 2025.
For the detailed information, please refer to the Company’s website.
Regarding mid-career hires, the number of assistant managers and senior managers, who are candidates for management positions, varies depending on their age, making it difficult to set a certain target.
Supplementary Principle 3-1-3 Initiatives on Sustainability
The Company announced announced the MITSUI E&S Rolling Vision 2025 where the Company’s sustainability initiatives are incorporated. The Company is working to address the sustainability issues.
- The Company has set “Creating a decarbonized society” and “Resolving issues of a society with a shrinking population” as its management challenges.
- The Company has clarified the position of sustainability in its management philosophy, established strategic materiality, integrated it into management plans, reflected it in business activities, and set target indicators in order to link them to information disclosure, compensation, and the establishment of a supervisory system.
Please refer to “MITSUI E&S Rolling Vision 2025” as well as the “Integrated Report” and “Annual Securities Report for the 122nd Fiscal Year” on its website for information on its efforts to address issues surrounding sustainability at present and its investments in human capital and intellectual property, respectively.
Please refer to the aforementioned "Integrated Report" for the disclosure of climate change-related information based on the TCFD, an internationally established disclosure framework.
Based on the recognition that standards for the disclosure of sustainability information in Japan and overseas are gradually developing, the Company is taking a prudent and careful approach to the disclosure of such information.
As a step toward achieving the Company’s materiality goals, it has started calculating its Scope 3 of Greenhouse Gas (GHG) emissions since fiscal 2023 in addition to Scope 1 and Scope 2. To ensure the accuracy of the calculation figures, the Company has obtained certification from an external third-party organization for our GHG emissions and disclosed it since fiscal 2024.
For the detailed information, please refer to the Company’s website.in fiscal 2023 in fiscal 2024.
Principle 4-9 Independence Standards and Requirements for Independent Outside Directors
The Company has established "Independence Criteria of Outside Directors" referring to the independence criteria provide by Tokyo Stock Exchange etc.
Supplementary Principle 4-11-1Competence, diversity, etc. of the Board of Directors as a whole
In selection and determination of candidates for Directors, the Company is striving to ensure a certain number of inside Directors familiar with the business and management control of the Company Group. At the same time, with a view to meet the demand for diversity, the Company is working to ensure a balance of knowledge, experience and capability, as well as diversity within the Board of Directors as a whole, by inviting Outside Directors with abundant experience in other industries.
The Company specifies the skills and areas of expertise specifically expected to Directors as the following eight categories:
- Corporate management
- International experience
- Finance/M&A
- Legal affairs/Auditing
- Marketing
- Technologies/IT
- Human resource development
- Climate/Environment
Please refer to the "Notice of the 122nd Ordiary General Meeting of Shareholders, Page21" posted on the Company's website for a skills matrix that visualizes the skills and areas of expertise specifically expected of each director.The applicability of each director to the skill items is determined by comprehensively taking into consideration their management experience, practical experience, specialized knowledge, official qualifications, etc.
Supplementary Principle 4-11-2 Status of Concurrent Positions held by Directors
The Company discloses the status of the Directors holding concurrent positions at other listed companies in the Company's business report and other annual reports, which are all remaining within a reasonable range.
For details, please refer to the "Notice of the 122nd Ordinary General Meeting of Shareholders" posted on the Company's website.
Principle 5-1. Policy on Constructive Dialogue with Shareholders
The Company recognizes that the understanding and support of shareholders is essential for achieving sustainable growth and enhancing corporate value over the medium to long term, and that it is necessary to build long-term relationships of trust through constructive dialogue with shareholders and investors.
The CFO oversees the dialogue with shareholders and investors and, as necessary, discusses appropriate methods with the officers in charge of the relevant divisions, outside directors, and Audit and Supervisory Committee members. Specifically, the Company will clearly publish its philosophy, business performance, and business details on our website, hold regular financial results briefings for securities analysts and institutional investors, and hold business briefings for individual investors as appropriate.
Please refer to the Company's website for information on the Group's philosophy, business performance, and business activities.