Corporate Governance

Basic Approach

The Meiji Group's philosophy is to brighten customers' daily lives as a corporate group in the Food and Health fields. Our mission is to widen the world of “Tastiness and Enjoyment” and meet all expectations regarding “Health and Reassurance.” We do this with the goal of continuing to find innovative ways to meet our customers' needs, today and tomorrow. In this way, we aim to achieve sustainable growth and increase corporate value over the medium to long term. The basic approach to management of the Group is for operating companies to manage businesses autonomously while collaborating with each other under the holding company's control.

The main role of Meiji Holdings Co., Ltd., is to advance Groupwide management strategies, create an optimal operating structure, and oversee the business management of operating companies. Responsibility for operational execution is delegated to operating companies appropriately. Within the Group, oversight and execution of business management are separated. Accordingly, the Group has established and operates a corporate governance system including a Board of Directors. Meiji Holdings is a company with audit & supervisory board members. The Board of Directors' oversight and audit & supervisory board members' auditing heighten the objectivity and transparency of business management.

Meiji Holdings operates in line with all the principles of the Corporate Governance Code.

Corporate Governance System

Organizational Chart

Functions and Roles of Respective Committees

Board of Directors
Members: 3 independent outside directors, 7 internal directors
Structure:
  • The composition of the Board of directors as a whole should have the knowledge, experience, and managerial competencies for decision-making. The Board of Directors will consist of directors with knowledge, experience, and abilities in areas vital to core operations and the management of operating companies including corporate development, accounting, finance, human resources, general affairs, and Investor Relations, as well as independent non-employees directors who is capable of providing objective supervision and advice from a wide perspective as a non-executive directors. The appointment of female director will enhance diversity in decision-making.
  • The Board of Directors should be consist of managing directors to oversee core operations, executives to manage operating companies, and non-executive directors including two or more independent outside directors. Currently the number of Board of Directors would be around 10.
Role: To develop and pursue Group strategy. To monitor the performance of the management and directors in the operating company. To achieve sustainable growth and increase corporate value over medium- to long-term by realizing our Group philosophy. To improve our profitability and capital efficiency.
Scope of delegation to management teams: Vital matters outlined by law, the Articles of Incorporation, and the Rules of the Board of Directors. Vital matters include overall Group direction and major investment proposals. The execution of businesses and operations outlined by the Board of Directors should be delegated to management teams in accordance with the Group Company Management Regulations and Work Regulations. The Board of Directors will receive periodic reports and review them.
Auditing Structure and Audit & Supervisory Board
Independent auditor Ernst & Young ShinNihon LLC
Audit department (internal auditing) Audit Department
Principal meetings auditors attend Board of Directors, Executive Committee, Audit Department Liaison Meeting, Audit & Supervisory Board, and others

Structure:
  • Audit & Supervisory Board: In principle, one regularly scheduled meeting shall be held monthly in accordance with Audit & Supervisory Board Regulations.
  • Audits by the Audit & Supervisory Board: The Audit & Supervisory Board will consist of four Board members, of which two must be outside Audit & Supervisory Board members.
  • Internal audits: Conducted by dedicated staff from the Audit Department.
  • Accounting audits: Designates Ernst & Young ShinNihon LLC.
Efforts to enhance and improve the audit functions of audits by the Audit & Supervisory Board:
  • Assign dedicated staff to assist with Audit & Supervisory Boards' tasks.
  • Audit & Supervisory Board members are encouraged to attend important meetings such as Board of Directors' meetings and Executive Committee meetings.
  • Provide periodic reports and distribute important documents to the Audit & Supervisory Board
Audit & Supervisory Board Members: 2 outside audit & supervisory board members, 2 internal audit & supervisory board members
Nomination Committee
Members: 3 independent outside directors, 1 internal directors
Role: Recommending candidates for the positions of director or executive officer to the Board of Directors

*For reasons for appointment of directors and auditors, refer to the notice of convocation.

Compensation Committee
Members: 3 independent outside directors, 1 internal directors
Basic approach to structure: Compensation Committee should be comprised of independent outside directors and internal directors. At least half of members must be outside directors.
Role: Evaluating the performances and considering the compensation of directors and executive officers

*Refer to “Director Compensation” for details.

Executive Committee (convenes twice a month in principle)
Members: Directors and executive officers
Role: Advisory body to the president and representative director
Function: Deliberating general important matters concerning operational implementation

Business Management System Features

The Company is strengthening its corporate governance structure through the following initiatives.

  1. Appointment of two outside directors and two outside audit & supervisory board members, all of whom are designated as independent directors
  2. Limitation of the term of service for directors to one year
  3. Introduction of an executive officer system to separate business execution and audit functions and to accelerate management decisions while clarifying management responsibility
  4. Appointment of one female director
Organizational structure Company with audit & supervisory board
Chairman of the Board of Directors President and representative director
Directors 10 (including 3 independent outside directors)
Audit & supervisory board members 4 (including 2 outside audit & supervisory board members)
Appointment of independent directors 5 (Outside directors, outside audit & supervisory board members)
Number of times the Board of Directors convened in fiscal 2016 13
Number of times the Audit & Supervisory Board convened in fiscal 2016 15
Evaluation of Board of Directors
  • The Board of Directors will annually analyze and evaluate its own effectiveness/performance.
  • The evaluation method is a self-evaluation by Board of Directors' members (directors and Audit & Supervisory Board members) using a survey sheet.
  • The results are analyzed and assessed to improve the functions of the Board of Directors.
  • The most recent evaluation analysis results indicate that the Meiji Holdings' Board of Directors is functioning effectively.
Training for Directors, Audit & Supervisory Board Members, and Executive Officers
Meiji Holdings provides directors, Audit & Supervisory Board members, and executive officers with opportunities as necessary to further their understanding of their expected roles and duties, and opportunities to acquire required knowledge.
(Expected roles and duties)
Legal responsibility, corporate governance, compliance, risk management, etc.
(Required knowledge)
Group operations, organizations, financial status, etc.
Criteria for Independence
Meiji Holdings requires that independent outside directors and outside Audit & Supervisory Board members not being applicable to any of the following.
(1) An executive director of Meiji Holdings or its subsidiary.
(2) An executive director of the Meiji Holdings parent company or a fellow subsidiary of the Meiji Holdings parent company.
(3) A party(Note1) for whom Meiji Holdings is a major transaction partner or an executive director of said party, or a major transaction partner(Note2) for Meiji Holdings or an executive director of said party.
(4) A consultant, accounting specialist, or legal specialist earning major monetary amounts or other assets from Meiji Holdings other than director’s compensation(Note3) (If the party earning said assets is a corporation, union, or other organization, this shall refer to persons associated with said organization).
(5) A party who was applicable to (1) during the 10-year period prior to selection.
(6) A party who was applicable to (2) through (4) during the 1-year period prior to selection.
(7) A relative within second degree of kinship to a party (excluding non-executives) who is currently applicable to (1) through (4) or who was applicable during the 1-year period prior to selection.

(Notes)

  1. A “party for whom Meiji Holdings is a major transaction partner” shall refer to a party who received payments from Meiji Holdings equal to or exceeding 2% of said party's total annual consolidated net sales or 100 million yen, whichever is higher, during the most recent fiscal year.
  2. A “major transaction partner for Meiji Holdings” shall refer to a party who made payments to Meiji Holdings that were equal to or exceeded 2% of our total annual consolidated net sales during the most recent fiscal year.
  3. “A consultant, accounting specialist, or legal specialist earning major monetary amounts or other assets from Meiji Holdings other than director compensation” shall refer to a party who received monetary payments or assets other than director's compensation from Meiji Holdings of a value equal to or exceeding 2% of said party's consolidated net sales of 10 million yen, whichever is higher, during the most recent fiscal year.
Multiple Positions as Independent Outside Director
When an independent outside director will hold the position of director at multiple listed companies, the number of positions must not exceed the amount appropriate for ensuring the ability to secure the time and labor required to execute the roles and responsibilities as a director or Audit & Supervisory Board member of Meiji Holdings.
Transactions between Related Parties
  • When a director or Audit & Supervisory Board member of Meiji Holdings or a major operating company seeks to conduct a transaction with Meiji Holdings or a major operating company, said transaction shall require the approval of the Board of Directors.
  • The transaction status of approved transactions must be reported to the Meiji Holdings Board of Directors.

Details of the Compensation of Directors and Audit & Supervisory Board Members

(FYE 3/2017)

Position Number of persons provided with compensation Compensation (¥ million)
Directors (excluding outside directors) 9 367
Audit & supervisory board members (excluding outside audit & supervisory board members) 2 58
Outside directors and audit & supervisory board members 6 66
Total 17 491

*1. Resolution of the General Meeting of Shareholders sets a limit of ¥1 billion on the compensation of directors for one year.

*2. Resolution of the General Meeting of Shareholders sets a limit of ¥ 300 million on the compensation of audit & supervisory board members for one year.

Nomination policy

Director Candidates
(Policy)
  • Internal director candidates: Requires vast experience and expert knowledge as well as management judgment skills and an excellent character. Elect executive directors for major operations and executives of operating companies.
  • Independent outside director candidates: Requires an objective and multifaceted perspective on management, and satisfies our criteria for judging independence.
    Elect persons with the character, knowledge, and skills required to fulfill the role of an outside director.
(Method)
Nominated annually via a resolution by the Board of Directors following deliberation by the Nomination Committee.
(Compensation Structure)
(1) Internal Directors
  • Remuneration for internal directors comprises base compensation, performance-linked compensation, and stock-based compensation.
  • The amount of base compensation is a fixed amount of compensation, and determined by rank.
  • The amount of performance-linked compensation paid comprises Group-linked performance, which is evaluated based on the Group sales and operating income, and individual performance, with the degree of linkage varying depending on position.
  • As for stock-based compensation, the Company has appropriated a portion of base compensation for acquiring treasury stock through the executive shareholding association until June 2017. However, it was resolved at the 8th General Meeting of Shareholders on June 29, 2017, to introduce a restricted stock compensation system in order to incentivize internal directors to contribute toward sustainably enhancing the Group’s corporate value and to further promote shared value among shareholders. Accordingly, the Company will discontinue its stock-purchasing fund and instead issue shares with restrictions on transfer from July 2017.
(2) Independent Outside Directors The Company pays fixed (base) compensation only; no incentive remuneration is paid.
Audit & Supervisor Board candidates
(Policy)
  • Elect persons with excellent character, knowledge, expert skills and a strong sense of ethics. Candidates must be able to provide accurate advice and conduct audits concerning the legality and appropriateness of company operations from an objective and neutral perspective.
  • Include at least one person with appropriate knowledge related to finance and accounting.
(Method)
Nominated via a resolution by the Board of Directors following deliberation by the Nomination Committee and approval by the Audit & Supervisory Board.
Executive Officer Candidates
(Policy)
Evaluate performance and experience to elect parties capable of conducting transparent, fair, timely, and decisive decision-making and conducting optimal Group management.
(Method)
Nominated annually via a resolution by the Board of Directors following deliberation by the Nomination Committee.

Interlocking Ownership of Listed Stocks

When exercising voting rights for retained listed stocks, Meiji Holdings makes affirmative decisions based on deference to the decisions of the board of directors of the company in question. However, this excludes cases where said vote could have a negative impact on the relationships or transactions of the Meiji Group, or cases where there is the clear potential for a mutual loss of profit by shareholders.

Internal Control System

We provide products and services to a large number of customers through our food and pharmaceuticals business operations. In accordance with the Corporate Behavior Charter, the Meiji Group has established an internal control system befitting the Group and the Group companies that is based on mutual collaboration and multifaceted checking functions to ensure directors, executive officers, and other employees comply with the Food Sanitation Act, the Pharmaceutical and Medical Device Act, and other statutory laws and regulations and the Articles of Incorporation, thereby ensuring fair and sound business activities firmly rooted in compliance.

Compliance

Regarding “compliance as the cornerstone of its operations,” the Meiji Group abides by statutory laws and regulations, international agreements, social norms, and the regulations of respective Group companies. The Group advances concerted initiatives aimed at inculcating and entrenching compliance awareness to ensure that employees carry out their duties equitably and honestly and based on a welldeveloped awareness of compliance and high ethical standards. Such efforts include improving and expanding educational and training programs, disseminating information through an in-house intranet, and making hotlines available.

Risk Management System

The Company has established specific rules for risk management and constructed an appropriate risk management system. For the whole Group, the Company systemically conducts precise risk management. In addition, it has established systems to minimize damage in the event of an emergency.
In light of lessons learned from the Great East Japan Earthquake in March 2011, the Group has established basic policies for business continuity plans as stated below.

Basic Policies for Business Continuity Plans

To ensure it can provide customers with the products and services they require, even in disaster, the Meiji Group has set out business continuity plans based on the following policies.

  1. Ensure the safety of the lives of persons involved in the Group and their families
  2. Discharge the Group’s social responsibility
  3. Minimize damage to businesses arising from cessation of operations

Communicating with Shareholders

Meiji Holdings works proactively and voluntarily towards communicating with shareholders, and promotes constructive communication with shareholders. Related initiatives are detailed below.

  1. General communication with shareholders is managed by the PR & IR Department, which is managed by the director in charge of Public Relations & Investor Relations.
  2. To enhance communication, related departments (Investor Relations, Corporate Development, Financial & Accounting, General Affairs) share information at liaison meetings.
  3. In addition to one-on-one meetings, Meiji Holdings holds earnings conferences twice-yearly for institutional investors and securities analysts to announce the second quarter and the fiscal year results, as well as small meetings led by the Company President. We also provide information via our website for shareholders and investors. We publish our investment securities reports, earnings flash reports (Japanese/English), annual reports (Japanese/English), and earnings conference materials (Japanese/English) on this website. We also stream video of our earnings conferences and publish a Q&A summary to further communication.
  4. Comments and feedback gained through investor relations activities are summarized into reports. The director in charge of Public Relations & Investor Relations reports to the Executive Committee and the Board of Directors regularly.
  5. Due care is given to insider information during communication. Communication is conducted in accordance with the Rules Concerning the Prevention of Insider Trading, which outlines the handling of important information. We also establish a quiet period.