Mitsubishi Chemical : Company Governance Report 2021/12/13

Company Governance Report

Final Replace: December 13, 2021

Mitsubishi Chemical Holdings Company

Chief Govt Officer Jean-Marc Gilson

Contact: Osamu Shimizu

Normal Supervisor, Company Communications Workplace

Securities Code: 4188

https://www.mitsubishichem-hd.co.jp/english/

The company governance of Mitsubishi Chemical Holdings Company (the “Firm”) is described under.

  1. Fundamental Views on Company Governance, Capital Construction, Company Profile and

Different Fundamental Data

1. Fundamental Views

The Mitsubishi Chemical Holdings Company (MCHC) Group defines KAITEKI as “the sustainable well- being of individuals, society and our planet Earth”, and has “realizing KAITEKI” as its vison. The MCHC Group is not going to cease at offering options to environmental and social issues, but additionally intention to contribute to a sustainability in each via our company actions.

For Realizing KAITEKI, in accordance with these pointers, MCHC shall set up a system to reinforce each the soundness and effectivity of enterprise administration, enhance the transparency of its enterprise administration via appropriate disclosure of data and dialogue with stakeholders, and endeavor to determine a greater appropriate company governance system.

Please check with our “Mitsubishi Chemical Holdings Company Governance Pointers” on the Firm’s web site for primary insurance policies regarding company governance such because the roles, structure and appointment standards of the Board of Administrators.

(https://www.mitsubishichem-hd.co.jp/english/group/governance/coverage.html )

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] (Up to date)

The contents are primarily based on the Company Governance Code revised in June 2021. As well as, the contents for the prime market, which will probably be utilized after April 4, 2022, are voluntarily described prematurely.

(Voluntary and measurable targets for guaranteeing range)

With regard to the “voluntary and measurable targets” associated to the promotion of ladies, overseas nationals and midcareer hires to center managerial positions, the MCHC Group doesn’t presently set the Group’s widespread numerical targets as every Group firm conducts recruitment and promotion of managers primarily based on its enterprise technique in accordance with the MCHC Group’s primary technique and medium-term administration plan.

(Idea of guaranteeing range and insurance policies for human useful resource growth and inside surroundings growth to make sure range)

Beneath its medium- to long-term primary administration technique KAITEKI Imaginative and prescient 30, the MCHC Group is aiming to create versatile human sources programs that embrace the range, experience and mobility of its individuals and has been selling reforms which might be based on the 5 pillars.

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[Five pillars that form the foundation for highly accommodating human resources systems]

  1. Making certain pay for job/efficiency
  2. Human sources programs designed in line with every sort of operation/job
  3. Strengthening capabilities to create expertise and minds that may meet world wants
  4. The precise jobs for the correct individuals globally by utilizing a typical platform of expertise administration
  5. Cluster-typeorganizations that allow complicated downside fixing

Primarily based on the foregoing, we have now recognized range and inclusion as one of many materials points to be addressed by the MCHC Group as a part of our present medium-term administration plan, APTSIS 25. We’ve additionally set the range ratio of administration as a numerical goal for fiscal 2025 and have launched into company tradition reforms by initially selling range in a top-down vogue.

[Disclosure Based on the Principles of the Corporate Governance Code] (Up to date)

As used on this report, the next phrases shall have the next meanings: “senior administration” means company government officers.

“officers” means administrators and company government officers.

Cross-Shareholdings>

(Mitsubishi Chemical Holdings Company Governance Pointers [Development of a framework that improves the soundness and efficiency of management])

The Firm and main subsidiaries shall purchase and maintain shares of shoppers, and many others. if the shareholding contributes to medium- to long-term enchancment in company worth. The Board of Administrators shall evaluation the adequacy of such cross-shareholdings frequently. Contemplating the impact available on the market, we make effort to promote such cross-shareholdings as assessed inadequate in adequacy.

On September 16, 2021, the Board of Administrators reviewed the adequacy of all cross-shareholdings of Group as of the top of March, 2021, in mild of financial rationale as measured by ROIC and necessity for enterprise, and many others. On account of the evaluation, we have now discovered insufficiency in adequacy of part of cross-shareholdings. Contemplating the impact available on the market, we’ll proceed to promote such cross-shareholdings as assessed inadequate.

The Firm investigates the existence of associated occasion transactions comparable to transactions involving members of the board or company government officers and their shut kin via strategies together with in search of direct affirmation from members of the board. The Firm units aggressive and conflict-of-interest transactions as a matter to be resolved by the Board of Administrators, who affirm the adequacy of the transactions. The Firm has no shareholder who holds 10% or extra of the voting rights of all shareholders.

To ensure that company pension funds to carry out their roles as asset proprietor, Mitsubishi Chemical Company which is the core enterprise firm of the Firm group has taken measures primarily based upon the rules as printed by Ministry of Well being, Labor and Welfare.

Particularly, Mitsubishi Chemical Company has set pointers for administration of pension belongings, established committee for administration of pension belongings, decided proportion of composition of political belongings and carried out the entire evaluation of asset administration corporations.

Along with the foregoing, in cooperation with consultants, Mitsubishi Chemical Company has carried out measures for correct administration of company pension funds.

(What the corporate goals for)

The Firm Group goals to appreciate KAITEKI via our company actions. KAITEKI is the Firm’s authentic idea which means “the sustainable well-being of individuals, society and our planet Earth.” To comprehend KAITEKI, the Firm Group promotes KAITEKI Administration with the target of accelerating company worth primarily based on our three core administration insurance policies of enhancing capital effectivity, creating modern applied sciences, and enhancing sustainability for individuals, society and the Earth with an emphasis on time.

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Please check with KAITEKI Administration on the Firm’s web site for particulars. (https://www.mitsubishichem- hd.co.jp/english/kaiteki_management/kaiteki/)

(Administration plan)

In February 2021, the Firm has formulated its new medium-term administration plan APTSIS 25, Step 1, which can start from fiscal 2021. With regard to the affect of the COVID-19 pandemic, the scenario will seemingly stay unsure. Primarily based on this consciousness, the five-year interval of APTSIS 25 from fiscal 2021 has been divided into two phases: Step 1 (With COVID-19) and Step 2 (After COVID-19). The principal measures in Step 1 (fiscal 2021 to fiscal 2022) have been formulated. The plan for Step 2 (fiscal 2023 to fiscal 2025) will probably be formulated in fiscal 2022.

Please check with the Medium-Time period Administration Plan on the Firm’s web site for particulars. (https://www.mitsubishichem-hd.co.jp/english/ir/pdf/01033/01180.pdf)

(New Administration Coverage)

The Firm has formulated a brand new administration coverage “Forging the long run” and it’s disclosed on December 1, 2021.

Please check with a brand new administration coverage on the Firm’s web site for particulars. (https://www.mitsubishichem-hd.co.jp/english/ir/01168.html)(https://www.mitsubishichem-hd.co.jp/english/ir/library/analysts_meeting.html)

(The Firm’s view on total company governance)

Please check with our “Mitsubishi Chemical Holdings Company Governance Pointers” on the Firm’s web site for our view on total company governance. (https://www.mitsubishichem-hd.co.jp/english/group/governance/coverage.html)

(Coverage and procedures for deciding compensations of senior administration and administrators)

(Mitsubishi Chemical Holdings Company Governance Pointers [Development of a framework that improves the soundness and efficiency of management]3(3), [Enhancement of management transparency]5) The Compensation Committee determines the person quantity of compensation for every director, company government officer and main subsidiaries president (excluding listed subsidiaries).

Coverage on Figuring out Remuneration of senior administration and administrators is [Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods]

(Coverage and procedures within the appointment/dismissal of the senior administration and the nomination of administrators)

(Mitsubishi Chemical Holdings Company Governance Pointers [Development of a framework that improves the soundness and efficiency of management]3(1), [Enhancement of management transparency]4) The Nominating Committee nominates candidates for administrators, company government officers and the presidents of main subsidiaries which might be non-listed corporations (Mitsubishi Chemical Company. and Life Science Institute, Inc.). In consideration of transparency and equity within the technique of nominating candidates, an outdoor director serves as the top of the committee.

Coverage on appointment/dismissal of senior administration and nomination of administrators is described at [Policy on appointment/dismissal of senior management and nomination of directors].

(Motive for the Appointment of Officers)

The rationale for appointment of officers are described on the finish of this report [Reason for appointment of the Director] and [Reason for appointment of the corporate executive officers].

The MCHC Group works to extend company worth via KAITEKI Administration by implementing the three axes of administration of sustainability (MOS), administration of know-how (MOT) and administration of economics (MOE) in an built-in method.

We work via our price creation cycle aimed toward sustainable development. We begin with a deal with environmental and social points in addition to accelerating modifications in social wants. We then establish development enterprise domains the place the MCHC Group’s enterprise portfolio can present options, in step with our mission and worth.

As well as, the MCHC Group’s imaginative and prescient towards 2030 beneath KAITEKI Imaginative and prescient 30 is to unravel social points for a sustainable future via management as a worldwide options supplier, and the Group has formulated its medium-term administration plan APTSIS 25 towards reaching such imaginative and prescient. Beneath APTSIS 25, we have now

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recognized the fabric points to be addressed by MCHC Group and set targets for the fabric points recognized, with MOS Indices additionally set to measure progress as a way to proceed steadily with initiatives. With regard to the disclosure of the affect of local weather change-related dangers and incomes alternatives on its enterprise actions and earnings, MCHC introduced its assist for the ultimate TCFD suggestions in October 2018. Inside the framework of enhanced local weather change-related measures, the MCHC Group is working for improved options in GHG discount and carbon cycle, that are among the many development companies recognized in KAITEKI Imaginative and prescient 30, in addition to progressing with measures towards reaching the technique’s goal for GHG discount. Progressive enhancement of data disclosure is one other initiative which we’re concentrating on to extend our company worth.

For particulars, please check with “Sustainability” and “Report in Line with the Suggestions of the TCFD” on the Firm’s web site and the Firm’s built-in report KAITEKI Report 2021. (https://www.mitsubishichem-hd.co.jp/english/sustainability/index.html)(https://www.mitsubishichem-hd.co.jp/english/ir/library/tcfd.html)(https://www.mitsubishichem-hd.co.jp/english/ir/library/kaiteki_report.html)

The Firm delegates authority to company government officers to make all enterprise execution choices, except for issues that should be legally resolved by the Board of Administrators and vital issues when it comes to portfolio administration.

(Mitsubishi Chemical Holdings Company Governance Pointers Attachment 2)

Independence Requirements for Impartial Administrators are described at [Matters relating to Independent Directors].

(Mitsubishi Chemical Holdings Company Governance Pointers [Development of a framework that improves the soundness and efficiency of management]2(2))

With a view to set up the Group’s primary administration insurance policies and oversee administration appropriately, Administrators who possess a complicated stage of information and deep perception in administration expertise, finance and accounting, science know-how, IT and manufacturing, danger administration, enterprise technique and advertising and marketing, legal guidelines and laws, and many others., and globalism and variety are appointed.

Moreover, in a bid to reinforce oversight capabilities, a majority of Administrators of the Board is not going to concurrently tackle the function of Company Govt Officer.

Concerning the abilities matrix described above, please check with the Discover of the Normal Assembly of Shareholders.

(https://www.mitsubishichem-hd.co.jp/english/ir/pdf/01079/01234.pdf)

Concerning the Administrators of the Board’s concurrent positions, please check with the Discover of the Normal Assembly of Shareholders.

(https://www.mitsubishichem-hd.co.jp/english/ir/pdf/01079/01234.pdf)

– Implementation of the Board of Administrators Effectiveness Analysis

In accordance with the Mitsubishi Chemical Holdings Company Governance Pointers, the Board of Administrators is evaluated for his or her effectiveness yearly and a abstract of the outcomes are disclosed.

– Analysis strategies and processes

In FY 2020, the analysis was carried out by an impartial exterior evaluation group by inspection of the minutes of conferences of the Board of Administrators, the Company Govt Officers Committee, the Nominating Committee, the Audit Committee, and the Compensation Committee, gathering responses from all administrators together with the chairperson via a questionnaire (solutions utilizing a 5-point scale and written feedback), interviewing every director for about one hour, and offering an analysis primarily based on the reviewer’s skilled information. Primarily based on such outcomes, the Board of Administrators mentioned the problems that

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ought to be addressed and future challenges. Primarily based on these discussions, the Chairperson reported the problems that ought to be addressed and future challenges to the Board of Administrators.

– Define of analysis outcomes

The findings from the analysis of the Board of Administrators’ effectiveness carried out by the impartial evaluation group are briefly described as follows.

  1. The effectiveness of the Board of Administrators is secured when it comes to a structural framework, as is proven in such proven fact that the scheme of a “firm with a nominating committee, and many others.” outlined in Japan’s Corporations Act is adopted. Nonetheless, some essential points are discovered when it comes to the substance.
    • Many administrators have identified that the effectiveness as a holding firm’s board of administrators just isn’t sufficiently secured, and so they have advocated the need of clarifying the roles of the Board and redefining the agenda.
  2. Efforts to deal with the problems recognized within the earlier yr’s effectiveness analysis introduced enhancements in some points. Nonetheless, another points haven’t been sufficiently addressed, as is evident from harsh feedback given by some exterior administrators. Their feedback pertain to discussions on roles as a holding firm, prior distribution of board assembly supplies, and different issues.
  3. For the reason that mission of accelerating company worth of the Mitsubishi Chemical Holdings Company is to be entrusted to a brand new CEO recruited from exterior, enhancing the effectiveness of the Board of Administrators, because the supervisory physique of the CEO, is an pressing essential subject. Due to this fact, the Firm is predicted to deal with the next 4 points, amongst others.
    • Redefining the roles of the Board of Administrators and redesigning the agenda
    • Encouraging administrators’ management
    • Revisiting the composition of the Board of Administrators
    • Reinforcing the perform of director nomination

Primarily based on the analysis findings described above and ensuing discussions by the Board of Administrators, The Firm goes to take motion towards redefining the roles of the Board of Administrators and the agenda, revisiting the composition of the Board of Administrators and additional reinforcing the perform of director nomination.

[Outline of results of the Evaluation on the Effectiveness of the Board of Directors in fiscal 2020] is described on the finish of this report.

(Mitsubishi Chemical Holdings Company Governance Pointers [Development of a framework that improves the soundness and efficiency of management]4(1))

MCHC shall clarify to exterior administrators the Group’s enterprise contents and group on a unbroken foundation, and supply alternatives to go to home and abroad enterprise websites in addition to alternatives for dialogue with the administration frequently.

For inside administrators, alternatives to develop qualities appropriate for administrators shall be supplied via exterior seminars held by varied organizations, along with trainings on compliance and inside management.

(Mitsubishi Chemical Holdings Company Governance Pointers Attachment 1)

MCHC will guarantee applicable disclosure in order to achieve the belief of our shareholders and encourage long-term holding of MCHC’s shares. MCHC additionally intends to have interaction in energetic dialogue with shareholders and replicate it in our company actions.

(Coverage on Dialogue with Shareholders)

Disclosure to and dialogue with shareholders shall be carried out by every related division, in cooperation with one another, beneath the supervision of the President, officer in command of IR and officer in command of authorized. Opinions obtained via the dialogue will probably be reported to the Board of Administrators, and many others., and shared by the administration.

Please check with our “Mitsubishi Chemical Holdings Company Governance Pointers” on the Firm’s web site for our Coverage on Dialogue with Shareholders. (http://www.mitsubishichem- hd.co.jp/english/pdf/governance_guidelines.pdf)

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