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Gate 4 Management Foundation

Mitsui’s Corporate Governance

In terms of strengthening corporate governance, the Company worked to improve diversity among members of the Board of Directors. At the same time, an even greater number of discussions regarding Mitsui’s future direction and business strategies were held at Board of Directors’ meetings. In these ways, the Company has been moving forward with efforts to enhance the effectiveness of the Board of Directors.

Corporate Governance Framework

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Organizational Format Organizational Format

Directors and Audit & Supervisory Board Members

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  Name Female Foreigner Position at the Company Term of Office Stipulated Governance Committee*1 Nomination Committee*1 Remuneration Committee*1
Directors Masami Iijima     Representative Director, Chairman of the Board of Directors 1 year*3  
Tatsuo Yasunaga     Representative Director, President and Chief Executive Officer  
Yukio Takebe     Representative Director, Executive Vice President      
Takakazu Uchida     Representative Director, Executive Vice President    
Kenichi Hori     Representative Director, Senior Executive Managing Officer      
Hirotatsu Fujiwara     Representative Director, Senior Executive Managing Officer    
Yoshio Kometani     Representative Director, Senior Executive Managing Officer      
Shinichiro Omachi     Representative Director, Senior Executive Managing Officer    
Miki Yoshikawa     Representative Director, Senior Executive Managing Officer      
Izumi Kobayashi   Director (External)*2  
Jenifer Rogers Director (External)*2    
Samuel Walsh   Director (External)*2    
Takeshi Uchiyamada     Director (External)*2    
Masako Egawa   Director (External)*2  
Audit &
Supervisory
Board Members
Makoto Suzuki     Full-time Audit & Supervisory Board Member 4 year*4      
Kimiro Shiotani     Full-time Audit & Supervisory Board Member      
Haruka Matsuyama   Audit & Supervisory Board Member (External)*2    
Hiroshi Ozu     Audit & Supervisory Board Member (External)*2    
Kimitaka Mori     Audit & Supervisory Board Member (External)*2    
  • ◎: Committee chair for the respective advisory committees
  • Independent Director / Audit & Supervisory Board Member
  • The terms of Directors end at the conclusion of the ordinary General Meeting of Shareholders held in the fiscal year that ends within one year of the Director’s appointment by the previous ordinary General Meeting of Shareholders.
  • The terms of Audit & Supervisory Board Members end at the conclusion of the ordinary General Meeting of Shareholders held in the fiscal year that ends within four years of the Director’s appointment by the previous ordinary General Meeting of Shareholders.

Advisory Bodies

1 Governance Committee

Committee chair Chairman of the Board of Directors
Composition
(including
committee chair)
Chairman of the Board of Directors
President and Chief Executive Officer
1 Internal Director
3 External Directors
1 External Audit &
Supervisory Board Member
Expected role The Governance Committee will work to enhance management transparency and fairness and achieve sustained improvement in the Company’s corporate governance by continually monitoring corporate governance and considering governance enhancement measures.
Function To consider basic policies and measures concerning the governance of the Company, to consider the composition, size, and agenda of the Board of Directors, with the aim of achieving further improvement in corporate governance, and to consider the role of the Board of Directors’ advisory committees, including recommendations on deliberations and discussions in meetings of the Nomination and Remuneration committees
Meetings in the
fiscal year ended
March 31, 2020
3
Results in the
fiscal year ended
March 31, 2020
The Governance Committee carried out a discussion in relation to the Effectiveness of the Board of Directors and responded to the Practical Guidelines for Group Governance while taking into consideration the viewpoint of the external members.

2 Nomination Committee

Committee chair External member (External Director)
Composition
(including
committee chair)
Chairman of the Board of Directors
President and Chief Executive Officer
2 External Directors
1 External Audit &
Supervisory Board Member
Expected role To enhance the transparency and objectivity of processes relating to the nomination of Directors and Managing Officers through the involvement of external members, and to ensure the fairness of Directors’ and Managing Officers’ nominations.
Function To study the selection and dismissal standards and processes for nominating Directors and Managing Officers, establish succession plan for the President and Chief Executive Officer and other top executives, and evaluate Director nomination proposals and to deliberate on the dismissal of Directors and Managing Officers.
Meetings in the
fiscal year ended
March 31, 2020
4
Results in the
fiscal year ended
March 31, 2020
The Nomination Committee discussed the composition and the balance of the Board of Directors, and carried out a review of the standards and the process for nominating and dismissing Directors and Managing Officers. The Committee confirmed that the candidates met the selection criteria of the Directors and Managing Officers, and discussed the succession plan for the post of Chief Executive Officer.

3 Remuneration Committee

Committee chair External member (External Audit & Supervisory Board Member)
Composition
(including
committee chair)
2 Internal Directors
2 External Directors
1 External Audit &
Supervisory Board Member
Expected role To enhance the transparency and objectivity of decision-making processes relating to remuneration for Directors and Managing Officers through the involvement of external members, and to ensure the fairness of remuneration for Directors and Managing Officers through ongoing monitoring.
Function To study the system and decision-making process relating to remuneration and bonuses for Directors and Managing Officers, and to evaluate proposals of remuneration and bonuses for Directors and proposals for evaluation and bonuses for Managing Officers.
Meetings in the
fiscal year ended
March 31, 2020
4
Results in the
fiscal year ended
March 31, 2020
The Remuneration Committee carried out a review of the remuneration and bonus structure and determination processes for Directors and Managing Officers, and evaluated remuneration proposals.

History of the Governance System

History of the Governance System

The number of External Audit & Supervisory Board Members (number appointed/upper limit according to the Articles of Incorporation) was temporarily 4/7 and is currently 3/5.

Board and Other Meetings Held in the Fiscal Year Ended March 2020

Board and Other Meetings Held in the Fiscal Year Ended March 2020

Free discussion among all members of BOD and ASB

Since the first free discussion held in the fiscal year ended March 31, 2019 was evaluated very positively in the evaluation of effectiveness in the same year, we organized the free discussion continuously during the fiscal year ended March 31, 2020.

FY2019
The opinions for
the evaluation of
the effectiveness

Date, Venue, etc. Agenda
  • November 12, 2019
  • Off-site meeting at a training facility of the Company
  • Free discussion attended by all members of the Board of Directors and the Audit & Supervisory Board
  • 1. Conglomerate Management Strategies
  • 2. Mitsui Diversity Management

Basic View on Corporate Governance

In structuring the corporate governance framework, the Company places emphasis on “improved transparency and accountability” and “the clarification of the division of roles between the oversight activities and the executive activities of management.” For “improved transparency and accountability,” the Company ensures sound supervision and monitoring of management with the viewpoints of External Directors and External Audit & Supervisory Board Members. The Company has also established an internal control system for disclosure so that all executives and employees fulfill their accountability to stakeholders under the principle of fair disclosure. For “the clarification of the division of roles between the oversight activities and the executive activities of management,” the Company delegates execution of business to Managing Officers substantially while the Board of Directors retains a supervisory role over Managing Officers’ business activities. Chief Operating Officers of the 16 Headquarter Business Units and the 3 Overseas Regional Business Units serve concurrently as Managing Officers and engage in business operations for the consolidated Group in a responsive and flexible manner.

While increasing the effectiveness of supervisory functions by having Audit & Supervisory Board Members, the Company implements corporate governance by maintaining an Audit & Supervisory Board system because it believes that having Internal Directors who are familiar with its business practices and operations is essential to the business of a general trading company. By adopting a Committee System in which External Directors and External Audit & Supervisory Board Members participate, the Company achieves highly effective corporate governance to secure “improved transparency and accountability” and “the clarification of the division of roles between the oversight activities and the executive activities of management.”

Board of Directors

The Board of Directors is the highest authority for execution of business and supervision, and in order to secure this function, the Company has maintained a number of Directors that is suitable for having substantial discussions. The tenure of Directors is one year, and Directors can be reappointed without obstruction. The Chairman is authorized to call for a meeting of the Board of Directors and to chair the meeting. His role as the Chairman of the Board of Directors of the Company chiefly involves carrying out supervision of management. He does not concurrently serve as an executive officer and he is not involved in the execution of day-to-day business operations. In addition, the Company has established the Governance Committee, the Nomination Committee, and the Remuneration Committee to serve as advisory bodies to the Board of Directors. These committees have majorities of external members, including their chairpersons.

At Board of Directors’ meetings, matters that are deliberated or reported on abide by the Company’s internal regulations. In addition to matters concerning fundamental policies related to management, important business execution and matters authorized by resolutions of the General Meeting of Shareholders, the Company passes resolutions on matters determined by law and company statute. The Board of Directors also receives reports regarding matters determined by law and the status of important business operations. Regular meetings of the Board of Directors are held once every month in principle and extraordinary meetings are held from time to time at any time if deemed necessary. In the fiscal year ended March 31, 2020, 15 meetings were held.

Number of proposals/reports to the Board FYE March 2020
Type of Proposals/Reports FY2020
Corporate strategy, sustainability and other matters related to governance 25
Financial results and other related matters 17
Matters related to Audit & Supervisory Board members and independent auditor (including “Key Audit Matters” update, Interim Review on the 100th Fiscal Year Audit, Internal Auditing) 7
Matters related to risk management, internal controls, and compliance 6
Matters related to human resources 3
Individual projects/matters 12
Total 70
Sustainability, internal control or risk management-related reports to the Board FYE March 2020

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Agenda of the Board Time of Meeting Matters Reported Relevant Risk Management Structures/Systems
Internal Control System Review 2020/4/8*
  • Internal control overall
  • Authority delegation system, ringi system, oversight and support by corporate staff divisions
  • Prior setting of position limits, monitoring by specialist units
  • Internal Control/Portfolio Management Committee
Sustainability related 2020/3/25
  • Overall activities related to sustainability (including climate change)
  • Sustainability Committee
Mitsui & Co. Group Compliance System 2019/10/30
2020/3/25
  • Compliance risks
  • Compliance Committee
  • Establishment of and compliance with Business Conduct Guidelines for Employees and Officers of Mitsui & Co., Ltd.
  • Development of internal whistleblowing system
  • Implementation of training and other awareness-raising activities.
Internal control evaluation report given under the Financial Instruments and Exchange Law 2019/6/20
  • Internal controls relating to financial reporting
  • J-SOX Committee
  • Self-assessment of effectiveness of internal control systems by units under assessment, and testing by independent units
Internal Auditing Div. Activity Report 2019/9/11
  • Results of internal auditing
  • Internal audit framework centered on Internal Auditing Div.
Mitsui & Co.’s risk exposure and controls 2019/12/18
  • Credit risk (commercial claims, external loans/guarantees, term deposits)
  • Market risk (commodity/forex long and short positions, inventories)
  • Business risk (business assets, loans/guarantees to related parties, external investments)
  • Country risk
  • Operational risk
  • Examination of credit lines and ringi applications and monitoring
  • Ringi examination of commodity/forex long and short positions, on-site inspection of inventories, etc.
  • Examination through ringi processes, realization of returns from investment projects and their optimization
  • Collection and analysis of country risk information, position monitoring by country, designation of countries for suspension of transactions, designation of special countries, formulation of country-specific policies
  • We have taken further steps to identify operational risk affecting individual business projects
Cyber security 2019/12/18
  • Cyber security
  • Technical support, human support (including security awareness activities), support to affiliated companies

The status of internal control regarding FYE March 2020 was reported to the Board of Directors on April 8, 2020, immediately after the ending of such FYE.

Audit & Supervisory Board

The Audit & Supervisory Board Members supervise the Directors’ execution of duties as an independent institution with the mandate of the shareholders. For this purpose, Audit & Supervisory Board Members carry out multi-faceted, effective audit activities such as attending important internal meetings, verifying reports and investigating our business, and take necessary measures in a timely manner.

A meeting of the Audit & Supervisory Board Members is regularly held prior to a meeting of the Board of Directors and whenever necessary. In the fiscal year ended March 31, 2020, 24 meetings were held.

The main items considered and discussed at the Audit & Supervisory Board are as follows: Audit policies, audit plans and work assignments; Assessment of the Independent Auditor; Audit activities conducted by full-time Audit & Supervisory Board Members; Major issues and due process relating to matters to be discussed at the Board of Directors’ meetings; Major issues and resolutions relating to the internal control system on a Global Group basis; and Monitoring of progress on discussions between the Company and the Independent Auditor about various issues including “Key Audit Matters.”

Each Audit & Supervisory Board Member has a duty to audit the following issues: (i) in the area of business auditing, execution of duties by Directors, decision-making processes at the Board of Directors and others, and the status of operation and improvement of the internal control systems, and (ii) in the area of financial auditing, the independence of the Independent Auditors, the system of financial reporting, accounting policies and processing of financial information, financial statements, reports from the Independent Auditors, and the system of corporate information disclosure.

Summary of Evaluation of the Effectiveness of the Board of Directors

Every fiscal year, the effectiveness of the Board of Directors is evaluated through a process that entails confirming efforts being undertaken in the fiscal year to address the challenges identified in the previous fiscal year’s assessment and identifying issues to be addressed for the next fiscal year, with an emphasis on PDCA cycles to improve the effectiveness of the Board of Directors. Based on the results of the effectiveness evaluation of the Board in March 2019, the Board and the Board Secretariat addressed the following points during the March 2020 period:

Recognition of issues based on evaluation results carried out on March 31, 2019 Initiatives Evaluation of questionnaire carried out on March 31, 2020
Deepening deliberations on individual business projects Clarify the strategic position of the relevant business unit. Enhancement of materials indicating the positioning of large-scale projects throughout the company and their impact on other businesses, etc. The majority (the majority of external directors and audit & supervisory board members) positively evaluated the results. Improvement and evaluation from the previous term.
Free Discussion (FD) at Off-Site Meeting FD at Off-site Meeting by focusing the themes on “Management Strategy as Conglomerate” and “Mitsui Diversity Management.” The majority (the majority of external directors and audit & supervisory board members) positively evaluated the results. Improvement and evaluation from the previous term.
Changes to the management of the Board of Directors Accelerated early distribution of Board materials. Use of written resolutions to secure sufficient time for deliberations on necessary matters. Appropriate reporting of the contents of discussions at the Corporate Management Committee. The majority (the majority of external directors and audit & supervisory board members) positively evaluated the results. Improvement and evaluation from the previous term.
Advisory committee The activities of each advisory committee are regularly reported to the Board of Directors. Report on the action plan of each advisory committee at the Board of Directors’ meeting. The majority (the majority of external directors and audit & supervisory board members) positively evaluated the results. Improvement and evaluation from the previous term.
Effectiveness evaluation method In addition to self-evaluation, third-party evaluation is conducted by appointing a third-party evaluation organization. The majority (the majority of external directors and audit & supervisory board members) positively evaluated the results. Improvement and evaluation from the previous term.

Effectiveness Evaluation for the Fiscal Year Ended March 31, 2020

Based on the results of the self-assessment and third-party evaluation, and the following discussions at the External Members Meeting in February 2020 and the Governance Committee and Corporate Management Committee meetings in March 2020, the Board of Directors reviewed its effectiveness evaluation at a meeting in April 2020.

Self-evaluation

Implemented in December 2019
14 directors and 5 auditors
For each question Grade 5
Comparison with the previous fiscal year + Comments

Third-party Evaluation

Implemented from January to February 2020
14 directors and 5 auditors
Individual interviews

In addition to the self-evaluation method, third-party evaluation is conducted for the Board of Directors’ effectiveness in the fiscal year ended March 31, 2020.

Results of Evaluation

Evaluation of the effectiveness by a third-party organization indicates that the Company is generally at a high level.

  • The majority of respondents expressed improvements in the challenges of “Deepening deliberations on individual business projects,” “Camp Free Discussion,” “Review of Management of the Board of Directors,” “Advisory Committees,” and “Effective Evaluation Methods,” which were issues that were addressed last year.
  • Composition of the Board of Directors: Increasing diversity due to an increasing number of female, non-Japanese external directors, as well as external directors with practical business experience.
  • Management of the Board of Directors: Prompt dissemination of Board of Directors’ documents through the use of tablet devices without hard copy has been established. Appropriate support by the Board of Directors Secretariat, including appropriate scheduling and sharing of the minutes of Corporate Management Committee meetings.
  • Deliberation by the Board of Directors: Appropriate deliberation items and increased efficiency through active use of written resolutions ensuring sufficient deliberation time.
  • Board of Directors’ meetings were held to discuss the Company’s direction and business strategy in a free and open manner. In the External Members Meeting and Free Discussions with external officers, discussions cover a broad range of topics to further understanding of overall strategy and direction.
  • The reports to the Board of Directors was made regarding the risk management system on a Companywide and multifaceted basis, and based on this report, risks are pointed out and examined.
  • Opportunities and costs for acquiring necessary knowledge through the meetings of external directors and advance briefings are appropriately secured, and there is also an adequate system of coordination between external directors and the management, accounting auditors, and the Internal Auditing Division.

As a result of summarizing the above, the Board of Directors judged that the effectiveness of the Board of Directors was appropriately ensured in the fiscal year ended March 2020.

Further improving the effectiveness
  • Further improvement of the management of the Board of Directors
    • Provision of information on individual business projects at the consideration stage
    • Subsequent progress reports on matters approved by the Board of Directors
    • Extension of time of prior briefing about important matters
    • Providing information on assumed CF and IRR at the investment stage for impairment projects
    • Review of frequency and duration of Board meetings
    • Additional implementation of Free Discussion that does not involve overnight stays
  • Further improve the effectiveness of the Board of Directors in discussions on overall strategy
    • We will work to achieve further improvements in the effectiveness of the Board of Directors through efforts to energize discussions about Mitsui’s overall strategies from the respective viewpoints of both external and internal directors.
  • Clarifying the roles of the advisory committees
    • The roles of each advisory committee shall be clarified with the aim to further realize the functions of voluntary advisory committees.

Summary of Results of Third-Party Evaluation of the Effectiveness of the Board of Directors

The third-party evaluation entailed separate interviews of all Directors and Audit & Supervisory Board Members from January through early February 2020 about the effectiveness of the Company’s Board of Directors. In conclusion, it was found that the Company’s governance structure is operating at a high level of effectiveness overall. Based on the interviews with all Directors and Audit & Supervisory Board Members, affirmative opinions were in the majority on the following points.

Composition

External Directors’ High level of insight and Diversity (both in terms of attributes and experience)

Attributes: Gender, Nationality, and Generation
Experience: Management, administration, financial, legal affairs, accounting, etc.
Responsibility

Strong commitment to Governance, compliance, and integrity

Internal Control Structure and Organizational Structure
Formulation and thorough enforcement of Mitsui & Co. Group Conduct Guidelines “With Integrity”
Management

Enhancement of deliberations on individual projects

Quantitative and qualitative analysis and presentation of the position of profit and risk at the entire company and head office.
Vigorous and transparent Board discussions

Overall discussion and the design of appropriate forums

Agenda: Companywide agenda, strategic agenda, and medium- to long-term vision
Venue: Board of Directors, External Membersʼ Meeting, Free Discussion, Meal Session, etc.

The chairman’s proceedings based on a consensus basis

Neutral listening attitude of the chairman and active listening to the opinions of internal and external directors
Multiple deliberations and rejection of majority voting principles

Continuous improvement and sincere support to the Board of Directors by the Secretariat

Enhancement of preliminary briefing and continuous improvement by the Secretariat
Sincere and diligent response to feedback from External Directors and Audit & Supervisory Board Members, etc.

Remuneration of Directors and Audit & Supervisory Board Members

Structure of Remuneration

Structure of Remuneration

Remuneration of Directors

Remuneration of Directors (excluding External Directors) is determined by a resolution of the Board of Directors on the basis of deliberations by the Remuneration Committee, which is chaired by an External Director. It consists of fixed basic remuneration, a performance-related bonus based on Mitsui’s key performance indicators, and stock-based compensation linked to the stock price as medium- to long-term incentive compensation. As for stock-based compensation linked to the stock price, it is provided in the form of share performance-linked restricted stock from the fiscal year ended March 31, 2020. Also, each Director (excluding External Directors) is required to purchase the Company’s common shares using his or her monthly remuneration, up to ¥1 million each time, through Mitsui Executives’ Shareholding Association. The appropriateness of percentages of fixed basic remuneration, a performance-related bonus, and stock-based compensation is verified each year by the Remuneration Committee, taking trends at other companies and other factors into consideration. The findings are reported to the Board of Directors. Retirement compensation is not paid to Directors.

Performance-related bonus

1 Total amount paid in bonuses

The performance-related bonus is calculated using a formula that is advised as appropriate by the Remuneration Committee and subsequently resolved at a Board of Directors’ meeting. For the fiscal year ending March 31, 2021, the total amount of bonus is calculated as follows:

Total amount of bonus = (Consolidated profit for the period attributable to owners of the parent × 50% × 0.1%) + (Core operating cash flow × 50% × 0.1%)

However, the total amount shall not exceed ¥700 million. If the consolidated profit for the period attributable to owners of the parent is negative, i.e., a “net loss,” and/or core operating cash flow is negative, i.e., a “cash outflow,” then these items are set to 0 for the calculation. Consolidated profit for the period attributable to owners of the parent and core operating cash flow are key indicators for Mitsui, and they are taken into consideration when determining the dividend policy.

2 Amount paid as individual bonuses

The total amount calculated by the method shown above is distributed to each Director in proportion to the following points, which are assigned for each position. Amounts will be rounded to the nearest ¥10,000, however, if the total amount of the individual bonuses paid exceeds ¥700 million, and each amount less than ¥10,000 will be rounded down.

Amount individually paid = Total amount of bonus × Position points / Sum of position points

Based on the composition of the Directors as of the date of the issuance of this report, the maximum amounts that may be paid for each position (at the limit of the total bonus amount of ¥700 million) are as follows:

Chairman/President = ¥700 million × 10 points / (10 points × 2 persons + 7 points × 2 persons + 6 points × 5 persons = 64 points) = ¥109.37 million
Executive Vice President = ¥700 million × 7 / 64 points = ¥76.56 million
Senior Executive Managing Officer = ¥700 million × 6 / 64 points = ¥65.62 million

Points by position

Chairman/President
10
Executive Vice President
7
Senior Executive Managing Officer
6
Executive Managing Officer
5

Remuneration system of share performance-linked restricted stock

The purpose of the remuneration system of share performance-linked restricted stock (hereinafter referred to as the “System”) is to provide an additional incentive to Directors to achieve sustaining growth in Mitsui’s medium- to long-term performance and cor­porate value, and to foster a heightened sense of shared value with shareholders, by paying remuneration consisting of the Company’s ordinary shares, with a certain transfer restriction period, to Directors (shares allocated under the System will be referred to below as the “Shares”) in addition to basic fixed remuneration and a performance-related bonus. This new compensation system is a share performance-linked remuneration system, since the number of Shares held by Directors at the end of a certain period (hereinafter referred to as the “number of Shares after valuation”) would vary based on a comparison of the growth rates of the Company’s stock price and the Tokyo Stock Price Index (TOPIX) over a specified period. By taking into account not only movements in the Company’s stock price, but also the performance of the Company’s stock compared with the stock market as a whole, the System is intended to give Directors a heightened awareness of the need to improve Mitsui’s corporate value by amounts greater than the growth of the stock market.

1 Payment method

Under the System, Directors would be granted an entitlement to receive monetary remuneration and will be issued Shares, whether newly issued as ordinary shares or disposed of, in exchange for the in-kind investment of their full entitlement. The amount of entitlements to be paid to each Director under the System will be determined by the Board of Directors based on deliberations by the Remuneration Committee, within the maximum limit approved at the General Meeting of Shareholders.

2 Total number of shares to be issued or disposed of, paid-in amount per share

The total number of ordinary shares that would be newly issued or disposed of by the Company under the System would be no more than 500,000 per year (however, this number may be changed within reasonable limits if the Company’s ordinary shares are affected by a stock split (including a free allotment of new ordinary shares in the Company) or a reverse stock split, or if other circumstances arise that require adjustments to the total number of the Company’s ordinary shares that are issued or disposed of as restricted shares). The paid-in amount per Share will be decided by the Board of Directors based on the average daily closing price for the Company’s ordinary shares on the Tokyo Stock Exchange (excluding days on which there is no closing price, the price will be rounded up to the nearest whole yen) in the three months immediately prior to the month containing the date on which the Board of Directors made a resolution concerning issuance or disposal of the shares (hereinafter referred to as the “date of the Board of Directors’ resolution”), within a range that is not especially advantageous to the Directors.

3 Details of share performance linkage conditions

The number of shares after valuation would be determined as follows in linkage with the share performance, etc.

  • If the growth rate of the Company’s share price*1 is equal to or greater than 150% of the growth rate of the Tokyo Stock Price Index (TOPIX),*2 the number after valuation will be deemed to be the entire number of Shares issued.*3
  • If the growth rate of the Company’s share price is lower than 150% of the TOPIX growth rate, the number of Shares after valuation will be a number calculated using the following formula, and the remainder of the Shares will be acquired by the Company without compensation at the end of the valuation period.

Details of share performance linkage conditions Details of share performance linkage conditions

  • This is the growth rate of Mitsui’s share price during a valuation period defined as three years from the date of the Board of Directors’ resolution (or the period to the date of retirement if a Director retires from their role as a director or managing officer of Mitsui before the lapse of three years. The same applies to (*2)). The growth rate will be specifically calculated as follows:
    • A: The average closing price of Mitsui’s stock on the Tokyo Stock Exchange during the three months immediately prior to the month in which the final day of the valuation period falls
    • B: The total dividend per share for Mitsui’s ordinary shares during the valuation period
    • C: The average closing price of Mitsui’s stock on the Tokyo Stock Exchange during the three months immediately prior to the month in which the date of the Board of Directors’ resolution falls
    • Growth rate of Mitsui’s share price = (A+B)÷C
  • This is the growth rate of the TOPIX during a period of three years from the date of the Board of Directors’ resolution. It will be specifically calculated using the following formula.
    • D: The average TOPIX closing price on the Tokyo Stock Exchange during the three months immediately prior to the month in which the final day of the valuation period falls
    • E: The average TOPIX closing price on the Tokyo Stock Exchange during the three months immediately prior to the month in which the date of the Board of Directors’ resolution falls
    • TOPIX growth rate = D÷E
  • Number of Shares = Entitlement to monetary compensation determined according to rank / Paid-in amount per Share

Number of shares after valuation (image)

Number of shares after valuation (image)

4 Restriction on transfer

Directors would be unable to transfer, pawn, or otherwise dispose of the Shares (hereinafter referred to as “Restriction on Disposal”) for a period of 30 years from the pay-in date (hereinafter referred to as “Restriction on Transfer Period”). During the Restriction on Transfer Period, the Shares would be managed in dedicated accounts established with a securities company nominated by the Company.

5 Lifting of the Restriction on Disposal

Irrespective of the provisions of 4 above, the Restriction on Disposal will be lifted if a Director retires as a director or managing officer of the Company before the end of the Restriction on Transfer Period.

6 Grounds for acquisition without compensation (claw-back clause)

In addition to the condition that there will be acquisition without compensation under the conditions for linkage to the share performance in 3 above, the Company will acquire without compensation all or part of the Shares during the Restriction on Transfer Period if a Director engages in actions that contravene laws and regulations, or on other grounds as stipulated in the agreement concluded between the Company and the Director.

7 Procedures in the event of organizational restructuring, etc.

The Company would make reasonable adjustments to the number of Shares to be acquired without compensation or the time when the Restriction on Disposal will be lifted, by resolution of the Board of Directors, if the Company enters into a merger agreement resulting in the absorption of the Company, or a share swap agreement or share transfer plan under which the Company becomes a wholly owned subsidiary, or otherwise undertakes organizational restructuring, etc., during the Restriction on Transfer Period, pursuant to a resolution of a General Meeting of Shareholders (or a resolution of the Board of Directors in the case of a matter for which a resolution of a General Meeting of Shareholders is not required).

The Company’s policy on the method used to calculate remuneration for Directors

The Company’s policy on the method used to calculate remuneration for Directors is decided by the Board of Directors within limits approved by resolutions at General Meetings of Shareholders. Before making decisions, the Board of Directors receives a report from the Remuneration Committee, which is chaired by an External Director, to the effect that the amounts are appropriate, based on prior deliberations by the Committee. The amounts for the fiscal year ended March 31, 2020 were determined through the following processes.

  • The basic remuneration for Directors, excluding External ­Directors, has been decided according to a specific formula based on the resolution of the Board of Directors on December 19, 2018, which was approved as appropriate by the Remuneration Committee. The individual amounts of basic remuneration paid to the External Directors were decided at the meeting of the Board of Directors held on April 12, 2017, based on the report of the Remuneration Committee stating that these amounts were appropriate.
  • The amounts of performance-related bonus were decided according to a formula adopted at the meeting of the Board of Directors held on April 12, 2017. After deliberating on this formula, the Remuneration Committee reported to the meeting of the Board of Directors held on April 12, 2017 that the formula was appropriate.
  • The remuneration system of share performance-linked restricted stock was decided by a resolution of the Board of Directors at a meeting held on July 3, 2019. The Remuneration Committee reported to that meeting of the Board of Directors that the number of stock options to be allocated was appropriate.

Remuneration for External Directors

Remuneration of External Directors is limited to a fixed remuneration that does not include a performance-related portion, and there is no obligation of share purchasing for External Directors.

Remuneration of Audit & Supervisory Board Members

Remuneration of Audit & Supervisory Board Members is determined through deliberation among the Audit & Supervisory Board Members, the total of which should not exceed the amount determined at the General Meeting of Shareholders. Audit & Supervisory Board Members receive only monthly fixed remuneration, which is not related to the performance of Mitsui. Retirement compensation is not paid to Audit & Supervisory Board Members.

Remuneration of Directors and Audit & Supervisory Board Members in the fiscal year ended March 31, 2020

* Please view the table below while scrolling horizontally.

Category of position Number of recipients*1 (¥ million)
Basic remuneration Bonus Stock compensation Total remuneration*2
Directors (excluding External Directors) 11 724 507 322 1,552
Audit & Supervisory Board Members
(excluding External Audit & Supervisory Board Members)
4 132 132
External Directors 6 104 104
External Audit & Supervisory Board Members 3 60 60
Total 24 1,020 507 322 1,849
  • The above includes Directors and Audit & Supervisory Board Members who retired from office in the fiscal year ended March 31, 2020.
  • In addition to the above amounts, a total of ¥468 million was paid to 102 retired Directors, and ¥41 million to 12 retired Audit & Supervisory Board Members, as pensions (representing payments determined prior to the abolition of those systems).
  • Amounts less than ¥1 million are rounded off.

External Directors / External Audit & Supervisory Board Members Selection Criteria

Selection Criteria: External Directors

External Directors
  • The prospective person’s extensive business experience and knowledge are required to deliberate and knowledge of his or her particular area of business should be used.
  • The Company puts great value on ensuring the independence of External Directors from the Company in the pursuit of their management oversight functions.
  • With a view to overseeing business operations in a way that reflects the perspectives of our diverse stakeholders, the Company shall take into consideration the fields from which candidates originate, along with their gender.

Reasons for Appointing Each External Director

* Please view the table below while scrolling horizontally.

Name Independent Director Reasons for Appointment Attendance at Meetings in FY2020 (Number of Meetings Attended / Total Number of Meetings) Significant Concurrent Positions
(As of June 19, 2020)
Izumi Kobayashi Ms. Kobayashi has deep insight in organizational management and risk management for generating innovation, which she has accumulated through her experience working as the representative of private sector financial institutions and a multinational development bank. She speaks out actively from diverse perspectives at the Board of Directorsʼ meetings, making a significant contribution to deepening the discussion. In the fiscal year ended March 31, 2020, she served as a member of the Remuneration Committee, and contributed to the discussions related to the design of a remuneration system for Officers and evaluation of Officers. In addition, as chair of the Nomination Committee, she exercised strong leadership in enhancing the transparency of the procedures for the appointment of executives, including the CEO. In view of these points, we have appointed Ms. Kobayashi for another term as External Director so that she may continue to advise and supervise the Company’s management.
  • BD (15/15)
  • N (4/4)
  • R (4/4)
  • Ex (15/15)
External Director, ANA HOLDINGS INC.
External Director, Mizuho Financial Group, Inc.
Jenifer Rogers Ms. Rogers has a global perspective and deep insight in risk management cultivated through her experience working for international financial institutions and her experience in legal work as in-house counsel. She makes many useful comments concerning risk control at the Board of Directorsʼ meetings, making a significant contribution to enhancing the supervisory function of the Board of Directors. In the fiscal year ended March 31, 2020, she served as a member of the Governance Committee, actively providing her opinions with the aim of creating a highly transparent governance system. In view of these points, we have appointed Ms. Rogers for another term as External Director so that she may continue to advise and supervise the Company’s management.
  • BD (15/15)
  • G (3/3)
  • Ex (15/15)
General Counsel Asia, Asurion Japan Holdings G.K.
External Director, Kawasaki Heavy Industries, Ltd.
External Director, Nissan Motor Co., Ltd.
Samuel Walsh Mr. Walsh has global expertise and excellent management skills cultivated through his long years working in upper management within the automobile industry and as chief executive officer of an international natural resources company. At the Board of Directorsʼ meetings, he makes many proposals and suggestions from a broad-minded standpoint based on his abundant business management experience, and makes significant contributions to active discussions at the meetings of the Board of Directors, and to improving the effectiveness of said meetings. In the fiscal year ended March 31, 2020, he served as a member of the Governance Committee, actively providing his opinions with the aim of creating a highly transparent governance system. He has diverse perspectives based on his global corporate management experience and expertise and knowledge related to capital policy and business investment. We have appointed Mr. Walsh for another term as External Director so that he may continue to advise and supervise the Company’s management.
  • BD (15/15)
  • G (3/3)
  • Ex (15/15)
Gold Corporation (Australia)
Chairman of the Board
Takeshi Uchiyamada Mr. Uchiyamada has long been involved in research on environmental and safety technologies at Toyota Motor Corporation, which could realize a “smart mobility society” called for by today’s society, as well as in the development of products demanded by consumers, and has been exercising his excellent managerial skills as an executive officer of Toyota Motor Corporation. At the Board of Directorsʼ meetings, he makes many proposals and suggestions from a broad-minded standpoint based on his management experience at a global company and his in-depth knowledge of society in general, and makes significant contributions to active discussions at the meetings of the Board of Directors, and to improving the effectiveness of said meetings. In the fiscal year ended March 31, 2020, he served as a member of the Nomination Committee, and contributed to the discussions with the aim of enhancing the transparency and effectiveness
of the procedures for the appointment of executives, including the CEO.
In view of these points, we have appointed Mr. Uchiyamada for another term as External Director so that he may continue to advise and supervise the Company’s management.
  • BD (11/11)
  • N (4/4)
  • Ex (10/12)
Chairman of the Board of Directors, Toyota Motor Corporation
External Director, JTEKT CORPORATION

JTEKT CORPORATION is an equity-accounted associated company of Toyota Motor Corporation.

Masako Egawa Ms. Egawa has deep insight in finance and corporate management gained through her experience of management as a director of The University of Tokyo, her many years of experience working at global financial institutions, and through her research on management and corporate governance at Japanese companies. She has also made extensive contributions to the public interest, including serving as a member of the Tax Commission, the Council for Science, Technology and Innovation, the Fiscal System Council, and the United States – Japan Conference on Cultural and Educational Interchange. Although Ms. Egawa has no direct experience participating in corporate management, we have newly appointed Ms. Egawa as External Director so that she may advise and supervise the Company’s management, by utilizing the above wide-ranging experience and knowledge.
  • BD
  • G
  • R
  • Ex

External Director, Tokio Marine Holdings, Inc.
External Director, Mitsui Fudosan Co., Ltd.
Adjunct Professor, Graduate School of Business Administration, Hitotsubashi University

  • BD Board
  • G Governance Committee
  • N Nomination Committee
  • R Remuneration Committee
  • Ex External Members Meeting

Note: An External Director who is unlikely to have conflicts of interest with general shareholders, as stipulated by the stock exchange

External Audit & Supervisory Board Members

The External Audit & Supervisory Board Members shall be selected with the objective of further heightening the neutrality and independence of the auditing system, and, in particular, it is expected that the External Audit & Supervisory Board Members will give an objective voice to their auditing opinions from the standpoint of neutrality, building on such factors as independence. When selecting candidates for External Audit & Supervisory Board Members, the Audit & Supervisory Board shall confirm that no issues with independence arise by taking into consideration such factors as relations with the Company, management and important staff members.

Reasons for Appointing Each External Audit & Supervisory Board Member

* Please view the table below while scrolling horizontally.

Name Independent Audit & Supervisory Board Member Reasons for Appointment Attendance at Meetings in FY2020 (Number of Meetings
Attended /
Total Number of Meetings)
Significant Concurrent Positions
(As of June 19, 2020)
Haruka Matsuyama We have appointed Ms. Matsuyama on expectation she will objectively express audit opinions from an independent and neutral standpoint, with advanced insight into corporate governance and risk management cultivated through her many years of experience in legal affairs as a judge and as an attorney at law. In the fiscal year ended March 31, 2020, she served as a member of the Governance Committee, proactively voicing her opinions to contribute to the building of a transparent and objective governance structure.
  • BD (14/15)
  • AS (23/24)
  • G (3/3)
  • Ex (13/15)
Attorney at Law
External Director, T&D Holdings, Inc.
External Director, Mitsubishi UFJ Financial Group, Inc.
External Director, Restar Holdings Corporation
Hiroshi Ozu Mr. Ozu has been appointed on the expectation he will objectively express audit opinions from an independent and neutral standpoint, with advanced insight into governance and risk management cultivated through the many years of experience and perspective in legal affairs he has gained as a prosecutor and an attorney at law. In the fiscal year ended March 31, 2020, he served as a member of the Nomination Committee, contributing to improving the transparency of the Company’s Director and Audit & Supervisory Board Member nomination process.
  • BD (15/15)
  • AS (23/24)
  • N (4/4)
  • Ex (14/15)
Attorney at Law
External Audit & Supervisory Board Member, Toyota Motor Corporation
External Audit & Supervisory Board Member, Shiseido Company, Limited
Kimitaka Mori Mr. Mori has been appointed on the expectation he will objectively express audit opinions from an independent and neutral standpoint, based on his advanced expertise in corporate accounting cultivated through his many years of experience as a certified public accountant. In the fiscal year ended March 31, 2020, he served as a member of the Remuneration Committee, contributing to discussions about examining and revising the remuneration system for Officers from an objective standpoint.
  • BD (15/15)
  • AS (24/24)
  • R (4/4)
  • Ex (15/15)

Certified Public Accountant
External Director, Japan Exchange Group, Inc.
External Audit & Supervisory Board Member, East Japan Railway Company
External Director, Sumitomo Life Insurance Company

  • BD Board
  • AS Audit & Supervisory Board
  • G Governance Committee
  • N Nomination Committee
  • R Remuneration Committee
  • Ex External Members Meeting

Note: An External Director who is unlikely to have conflicts of interest with general shareholders, as stipulated by the stock exchange

Criteria for Independence of External Members (Directors/Audit & Supervisory Board Members)

External Directors or External Audit & Supervisory Board Members of Mitsui who do not fall under any of the following items are to be judged to have independence.

  • Person who is currently or was in the past 10 years an executive director, executive officer, managing officer, manager, employee, administrative officer, etc. (hereinafter referred to as “executing person”) of Mitsui or Mitsui’s consolidated subsidiaries
  • Person or the executing person of a corporation holding either directly or indirectly 10% or more of the total number of the voting rights of Mitsui
  • Person whose major business partner is Mitsui of Mitsui’s consolidated subsidiaries (*1) or the executing person of the same
  • Major business partner of Mitsui or Mitsui’s consolidated subsidiary (*2) or the executing person of the same
  • Independent auditor of Mitsui or Mitsui’s consolidated subsidiary or employee, etc., of the same
  • Person providing professional services such as consultant, lawyer or certified public accountant who received from Mitsui monetary payment or other property benefits exceeding ¥10 million in total other than officer remuneration in the most recent fiscal year (referring to the person belonging to the organization if the one who received the relevant property is an organization such as a corporation or association)
  • Person or the executing person of a corporation who received the annual total of ¥10 million or more of donations or aid funds from Mitsui or Mitsui’s consolidated subsidiary in the most recent fiscal year
  • Person who has fallen under any of (2) to (7) above in the past three years
  • Spouse or relative within the second degree of kinship (hereinafter referred to as “close relatives”) of the person who is currently or has been recently the important executing person of Mitsui or Mitsui’s consolidated subsidiary (including Director who is not the executing person in the case of External Audit & Supervisory Board Member)
  • Close relatives of the person who currently falls or has fallen recently under any of (2) to (7) above (excluding the one who is not important)
  • If the relevant business partner received from Mitsui or Mitsui’s consolidated subsidiary the payment equivalent to 5% or more of its annual transaction volume (non-consolidated) in the most recent fiscal year or the relevant business partner obtained from Mitsui or Mitsui’s consolidated subsidiary the money loans equivalent to 5% or more of its consolidated total assets in the most recent fiscal year, the relevant business partner is deemed to be the person whose major business partner is Mitsui or Mitsui’s consolidated subsidiary.
  • If Mitsui or Mitsui’s consolidated subsidiary received from the relevant business partner the payment equivalent to 2% or more of Mitsui’s annual consolidated transaction volume in the most recent fiscal year or the relevant business partner provided Mitsui or Mitsui’s consolidated subsidiary with the money loans equivalent to 2% or more of Mitsui’s consolidated total assets, the relevant business partner is deemed to be the major business partner of Mitsui or Mitsui’s consolidated subsidiary.

Support Systems

For External Directors, before regular and extraordinary meetings of the Board of Directors, materials on the proposals are provided and advance explanations are given. For External Audit & Supervisory Board Members, company information that contributes to their auditing, including summaries of regular meetings between Full-time Audit & Supervisory Board Members and staff in the Audit & Supervisory Board Member Division, is provided in a timely manner by the Full-time Audit & Supervisory Board Members and the staff. Advance distribution of materials and advance explanations are conducted regarding regular and extraordinary meetings of the Audit & Supervisory Board and of the Board of Directors. For external members, the Company provides personal computers and tablets (hereinafter referred to as the “External Members’ PCs”) and distributes materials for meetings of the Board of Directors in a timely manner, thereby ensuring the time to review agendas. In the fiscal year ending March 31, 2021, since it is difficult and inappropriate that all Directors and Audit & Supervisory Board Members gather physically due to the spread of COVID-19, Mitsui holds the meetings of the Board of Directors and the meetings of Audit & Supervisory Board Members as remote meetings using a web conference system. Mitsui sets up a usage environment of such web conference system on the officers’ PCs and provides support so that the Directors and Audit & Supervisory Board Members can discuss matters effectively even at remote meetings. The Company sets up a Board of Directors’ database for use in storing information such as minutes and other materials of past meetings of the Board of Directors, and maintains a platform that enables access to such database from the officers’ PCs.

External Members Meetings

External Members Meetings are periodically held for the purpose of exchanging information and opinions regarding important matters in management among external members, or among external members, Internal Directors, Full-time Audit & Supervisory Board Members and/or Managing Officers. The meetings were held 15 times during the fiscal year ended March 31, 2020, where information and opinions were exchanged regarding matters such as the corporate management policy, audits, the operation of operating segments and human resource development.

Agenda of External Members Meetings in FYE2020
Theme
1 Iron & Steel Products Business Unit
2 Guidance on responding to questions put to external directors at a general meeting of shareholders
3 Market Reaction, Points of Interest / Feedback on Investor Day 2019 Panel Discussion
4 Results of the Engagement Survey
5 Update of “Moon Creative Lab”
6 Reporting on the Status of Cash Flow Allocation
7 Business Environment Outlook 2020
8 Activities of Audit & Supervisory Board Members
9 Digital Transformation Activity Report
10 Track Record Verification by Analysis on Investment Case
11 Corporate Strategy (Medium-term Management Plan 2023 Formulation Framework)
12 Discussion on Evaluation of Effectiveness of the Board of Directors
13 Human Resource Development
14 Exchange of opinions and information with independent auditor
15 Individual Project Matter

Coordination between Supervision by the External Directors or Auditing by External Audit & Supervisory Board Members, Auditing by the Internal Auditing Division, Audit & Supervisory Board Members and the Independent Auditors, and Relationship with Divisions Involved in Internal Control

The External Directors and External Audit & Supervisory Board Members, through the meetings of the Board of Directors, the meetings of the Audit & Supervisory Board and the External Members Meetings, respectively, exchange information and opinions on auditing by the Internal Auditing Division, auditing by Audit & Supervisory Board Members and accounting audits by the Independent Auditors as well as mutually coordinate with them to supervise and audit the internal control system. Specifically, they periodically receive reports on the following at the meetings of the Board of Directors, respectively; results and plans of the internal audits, results and plans of auditing by the Audit & Supervisory Board, summary of the management letter by the Independent Auditors, results of the internal control system assessment in accordance with the Financial Instruments and Exchange Act of Japan, the operational status of compliance programs, and other matters regarding the management and improvement of the internal control systems. At the External Members Meetings, External Directors, Audit & Supervisory Board Members, and the Independent Auditors mutually exchange information and opinions regarding the policy of audits, as well as opinions about the activities of Full-time Audit & Supervisory Board Members. Full-time Audit & Supervisory Board Members, at their discretion, hold a meeting to exchange opinions beforehand among the External Directors and External Audit & Supervisory Board Members on certain important matters to be discussed at meetings of the Board of Directors, in order to provide External Board Members with sufficient information for effective discussion at meetings of the Board of Directors.

Policy on Training for Directors and Audit & Supervisory Board Members

Upon assumption, opportunities are given to Directors and Audit & Supervisory Board Members for gaining full understanding of the business, financial affairs, organization, etc., of Mitsui, the Companies Act of Japan and related laws and regulations, corporate governance and internal controls to ensure that they may fulfill their duties, including legal responsibilities, in the respective roles (fiduciary duties) expected of Directors or Audit & Supervisory Board Members, which are mandated by the shareholders. Furthermore, opportunities are given for keeping them up to date as necessary.

Policy Related to Acquisition and Holding of Cross-Shareholdings

The Company defines listed shares held for reasons other than purely for investment returns as cross-shareholdings. These are acquired and held in accordance with the following policy.

  • The purpose of cross-shareholdings in investees for which the equity method applies is to improve the corporate value of the investees and increase the equity method-based profit and dividends to be received through participation in the management of the investees. Cross-shareholdings in companies other than equity-method applicable investees (including deemed shareholdings) are categorized as “listed shares for general investment purposes” and regarded as a means of creating business opportunities and building, maintaining, or strengthening business and collaborative relationships.
  • Investments in the shares of equity-method applicable companies are implemented only in cases where the economic rationale is recognizable. At the same time, each year the Board of Directors reviews the meaning of and policy on holding such shares, including a verification of the rationale in relation to the Company’s cost of capital, within the framework of portfolio reviews that are carried out in relation to investment assets generally, including unlisted shares. If the meaning of holding these assets has significantly declined, a policy toward withdrawal shall be determined.
  • When acquiring listed shares for general investment purposes, the Company conducts a prior stringent assessment of the probability of the investment, creating business opportunities, or building, maintaining, or strengthening business and collaborative relationships, and owns the shares only if there is a viable rationale. At the same time, each year the Board of Directors reviews the meaning of and policy on holding listed shares for general investment purposes by verifying the economic rationale based on the status of dividends, business-related profits, and other related profits, in comparison to the Company’s overall costs, including its acquisition cost, market value and cost of capital, with verification of qualitative aspects based on the status of and outlook for the creation of business opportunities, as well as business and collaborative relationship with each cross-shareholding investee. If as a result of this review the meaning of holding these assets has significantly declined, our policy is to sell such assets, thereby reducing the cross-shareholdings.

Independent Auditors

The Company appoints certified public accountants belonging to Deloitte Touche Tohmatsu LLC as Independent Auditors to carry out auditing under the Companies Act of Japan and the Financial Instruments and Exchange Act of Japan as well as auditing of consolidated financial statements in English.

To secure prompt financial closing and reliability, the auditing work of the Company and its consolidated subsidiaries is in principle entrusted solely to Deloitte Touche Tohmatsu, which belongs to the same network as Deloitte Touche Tohmatsu LLC.

Internal Audits

Based on the order or approval of the President and Chief Executive Officer, the Internal Auditing Division evaluates the establishment and operational conditions of internal controls from various perspectives. These include the effectiveness and efficiency of operations, reliability in terms of financial reporting, compliance with laws and regulations, and the safeguarding of Company assets. The division also provides advice and proposals for improving the adequacy and effectiveness of risk management, control methods, and governance. The Internal Auditing Division carries out regular audits that cover the Company, overseas offices and subsidiaries, domestic subsidiaries, and other affiliated companies. Identifying the items to be audited based on risk, these audits provide an independent and objective evaluation in accordance with international internal audit standards. Additionally, the division carries out audits based on Companywide themes, such as import/export management, and on the protection of private information. The division also implements extraordinary audits of events that have brought about exceptional economic loss or have damaged the Company’s reputation, investigating the causes of such events and examining the adequacy of measures to prevent recurrence. Furthermore, the Internal Auditing Division, as an independent body, complies with and assesses internal controls regarding the credibility of financial reporting, pursuant to the Financial Instruments and Exchange Act.