Corporate Governance

Approach to Enhancing Functions to Audit and Supervise Management

  • 2003
    Established the Management Evaluation Committee (currently, Advisory Committee)
  • 2004
    Implemented the Executive Officer System
  • 2006
    Established the External Directors System
  • 2006
    Established the Compensation Advisory Committee
  • 2010
    Implemented the Independent Officers System
  • 2016
    Prepared Basic Corporate Governance Policy
  • 2016
    Formed Nomination Advisory Committee
  • 2016
    Began Evaluation of the Board of Directors

Basic Approach to Corporate Governance

Lion’s top priorities for corporate governance are to increase management transparency, strengthen supervisory functions, accelerate decision making, and ensure compliance. By strengthening and enhancing its corporate governance systems, Lion aims to increase its corporate value.

System of Corporate Governance

Organizational Structure

Lion is a company with a Board of Corporate Auditors as defined in the Corporation Law, with a system of corporate governance in which the Board of Directors provides adequate oversight of management while independently operating corporate auditors provide appropriate auditing. To reinforce the Board of Directors’ management oversight function and speed decision making, Lion has adopted an executive officer system. In addition, to increase management transparency and further enhance corporate governance, Lion has established a Nomination Advisory Committee and Compensation Advisory Committee comprising mainly external directors and external corporate auditors.

Lion’s Corporate Governance System Chart

Board of Directors / Directors

The Board of Directors carries out the duties specified by law and the Articles of Incorporation, decides important matters related to Lion’s business execution, and oversees the execution of the duties of directors and executive officers.

Such important matters as Groupwide management policy and strategy are considered by the Senior Executive Committee, which determines their general outline, before being taken up by the Board of Directors for a final decision. Important matters related to business execution by individual departments are delegated to the Board of Executive Officers for more nimble decision making.

To ensure speedy decision making, the Articles of Incorporation specify that the Board of Directors shall comprise no more than 11 members. To improve the effectiveness of the board’s oversight function, at least two members are external directors.

Directors, being fully aware of their fiduciary responsibility to shareholders, must work to increase the corporate value of the Lion Group and contribute to the common interests of shareholders. Directors must endeavor to actively contribute to Board of Directors meetings, engage in constructive discussion, and gather the information and obtain the knowledge and training necessary to carry out their duties.

External directors must oversee management from an independent perspective and work to provide management advice, monitor conflicts of interest, and actively reflect the opinions of stakeholders at meetings of the Board of Directors.

Executive Officers System

Attended by all executive officers, the Executive Committee meets once a month to ensure that the execution of duties is conducted in a timely manner and to strengthen the functions of the Board of Directors. At the same time, the Executive Committee serves to promote expeditious decision making with respect to both fundamental and important matters related to business execution. There are currently 18 executive officers, 6 of whom hold the position of director concurrently. The term of office of executive officers is one year, which is equivalent to the term of office of directors.

Board of Corporate Auditors / Auditors

The Articles of Incorporation specify that the Board of Corporate Auditors shall comprise no more than five members, at least half of whom must be external corporate auditors. The Board of Corporate Auditors provides oversight to ensure that the directors are executing their duties in accordance with the law and the Articles of Incorporation. The board also exercises appropriate authority over such matters as the selection, dismissal, and compensation of accounting auditors. The Board of Corporate Auditors determines audit standards, policies, and plans for the corporate auditors. The corporate auditors attend important meetings, including those of the Board of Directors, conduct hearings on the status of the execution of the directors’ duties, implement on-site audits at Lion’s headquarters and other important operating sites, and investigate Lion subsidiaries.

As independently operating authorities, corporate auditors oversee the execution of the duties of the directors. Fully aware of their fiduciary responsibility to shareholders, corporate auditors work to assure the soundness of efforts to improve corporate value and contribute to the common interests of shareholders.

Corporate auditors must endeavor to secure the transparency and fairness of the Company’s decision making, actively express their opinions at Board of Directors meetings, and gather the information and obtain the knowledge and training necessary to carry out their duties.

Corporate auditors must oversee and verify the construction and operation of the system of internal control. Standing corporate auditors must strive to share the information they obtain in the course of their duties with the other corporate auditors.

The Board of Directors selects candidates who meet the criteria of the Director/Corporate Auditor Candidate Selection Standards and Standards Regarding the Independence of External Directors/Corporate Auditors established by the Board of Directors and submits them for consideration by the Nomination Advisory Committee. Based on the results of this consideration and approval by the Board of Corporate Auditors, the Board of Directors selects candidates to propose for appointment to the Shareholders Meeting. Reasons for the selection of candidates are provided in the convening notice of each Shareholders Meeting as part of the appointment proposal.

Advisory Committees

Lion has established the Nomination Advisory Committee and Compensation Advisory Committee, comprising mainly external directors and external corporate auditors, as advisory bodies to the Board of Directors. These committees help improve management objectivity and transparency. In addition, to further enhance corporate governance, Lion maintains an Advisory Committee composed of outside experts other than external directors and external corporate auditors.

1. Nomination Advisory Committee

The Board of Directors consults the Nomination Advisory Committee regarding the necessary qualities, reasons for selection and related processes for nominating directors, corporate auditors and executive officers as well as hiring individuals who have previously served in these roles as consultants. The committee considers the matters in question and provides a response to the Board of Directors (or, for matters regarding corporate auditors, to the Board of Corporate Auditors). The committee also exchanges opinions on the development of future Group presidents. The Nomination Advisory Committee comprises external directors and external corporate auditors as well as a representative director predetermined by the chairman of the Board of Directors. The members of the committee select from among themselves the committee chairperson, who must be an external director or external corporate auditor.

2. Compensation Advisory Committee

The Board of Directors consults the Compensation Advisory Committee regarding such matters as the compensation system, compensation levels, and bonus calculation methods for directors and corporate auditors. The committee considers the matters in question and provides a response to the Board of Directors (or, for matters regarding corporate auditors, to the Board of Corporate Auditors).

The Compensation Advisory Committee comprises external directors and external corporate auditors. The members of the committee select from among themselves the committee chairperson.

3. Advisory Committee

The Advisory Committee comprises outside experts other than the external directors and external corporate auditors who possess extensive knowledge and insight. The committee considers the appropriateness and other aspects of Lion’s management policies and measures. The committee serves to reflect objective opinions from a wide range of perspectives in management. In principle, the committee meets twice a year. The chairperson of the Board of Directors reports a summary of the committee’s advice to the Board of Directors.

Matters Related to the Selection of External Directors and External Auditors

To contribute to the strengthening of its corporate governance and enhance the supervision and monitoring of management, Lion appoints external officers (three external directors and two external corporate auditors) who have no conflicts of interest with the Company and the Company’s important business partners, and who can remain independent. At present, Lion has five such independent external officers.

External Directors
Name Hideo Yamada
Attendance Attended 17 of 17 Directors’ meetings held during the fiscal year
Reasons for
Appointment

Hideo Yamada possesses a wealth of expert knowledge and experience as a lawyer and also has experience at other companies both as an external director and an external corporate auditor. He has actively participated in meetings of the Board of Directors, and suitably carried out his role as an external director for the Company, including supervising business execution. The Company judges that his sophisticated insight into such issues as compliance is necessary to enhance the transparency of management and strengthen the oversight of the Board of Directors, and therefore requests that he be reelected as an external director.

Reasons for Appointment
Mr. Yamada meets the qualifications set forth in the Lion Corporation Standards Regarding the Independence of External Directors/Corporate Auditors as well as the criteria for independence of the Tokyo Stock Exchange Co., Inc. (Japan Exchange Group). He is, therefore, judged to be independent, and was duly appointed as an independent External Director.

Name Kazunari Uchida
Attendance Attended 12 of 13 Directors’ meetings held during the fiscal year
Reasons for
Appointment

Kazunari Uchida possesses experience as the Japan representative of an international management consulting group and also has experience at other companies both as an external director and an external corporate auditor. He has actively participated in meetings of the Board of Directors, and suitably carried out his role as an external director for the Company, including supervising business execution. The Company judges that his sophisticated understanding of management decision making is necessary to enhance the transparency of management and strengthen the oversight of the Board of Directors, and therefore requests that he be reelected as an external director.

Reasons for Appointment
Mr. Uchida meets the qualifications set forth in the Lion Corporation Standards Regarding the Independence of External Directors/Corporate Auditors as well as the criteria for independence of the Tokyo Stock Exchange Co., Inc. (Japan Exchange Group). He is, therefore, judged to be independent, and was duly appointed as an independent External Director.

Name Takashi Shiraishi
Attendance Appointed at the 156th Annual Meeting of Shareholders held on March 30, 2017
Reasons for
Appointment

Takashi Shiraishi has never been involved in corporate management either as a director or corporate auditor. However, he has managerial experience as the president of a national university, has served as the president of the Japan External Trade Organization’s Institute of Developing Economies and possesses broad-ranging expert knowledge in such areas as Asian politics, economics, and social issues. The Company judges that his sophisticated understanding of management decision making is necessary to enhance the transparency of management and strengthen the oversight of the Board of Directors, and therefore requests that he be elected as an external director.

Reasons for Appointment
Mr. Shiraishi meets the qualifications set forth in the Lion Corporation Standards Regarding the Independence of External Directors/Corporate Auditors as well as the criteria for independence of the Tokyo Stock Exchange Co., Inc. (Japan Exchange Group). He is, therefore, judged to be independent, and was duly appointed as an independent External Director.

External Corporate Auditors
Name Noboru Kojima
Attendance Attended 17 of the 17 Directors’ meetings and 12 of the 12 meetings of the Board of Corporate Auditors held during the fiscal year
Reasons for
Appointment

Mr. Kojima is a Certified Public Accountant and Certified Tax Accountant and has in-depth knowledge of accounting and tax matters. He also has experience as external corporate auditor for other companies, and Lion would like to have access to his knowledge and experience to strengthen its accounting functions.

Reasons for Appointment
Mr. Kojima meets the qualifications set forth in the Lion Corporation Standards Regarding the Independence of External Directors/Corporate Auditors as well as the criteria for independence of the Tokyo Stock Exchange Co., Inc. (Japan Exchange Group). He is, therefore, judged to be independent, and was duly appointed as an independent External Corporate Auditor.

Name Hideo Higashi
Attendance Attended 16 of the 17 Directors’ meetings and 11 of the 12 meetings of the Board of Corporate Auditors held during the fiscal year
Reasons for
Appointment

Mr. Higashi has expert knowledge of tax and financial matters and experience in key positions in government agencies. Accordingly, Lion would like to draw on his knowledge and experience to strengthen its accounting functions.

Reasons for Appointment
Mr. Higashi meets the qualifications set forth in the Lion Corporation Standards Regarding the Independence of External Directors/Corporate Auditors as well as the criteria for independence of the Tokyo Stock Exchange Co., Inc. (Japan Exchange Group). He is, therefore, judged to be independent, and was duly appointed as an independent External Corporate Auditor.

Director and Corporate Auditor Compensation

Director and corporate auditor compensation is decided by the Board of Directors based on the results of consultation with the Compensation Advisory Committee.

Compensation is set within the limits decided by resolution of the Shareholders Meeting. Compensation for directors (excluding external directors) consists of fixed monthly compensation and performance-linked compensation (bonuses and stock-based compensation). Compensation levels are determined for each director and corporate auditor based on individual roles and responsibilities using survey data from specialized external institutions as an objective benchmark.

The ratio of performance-linked compensation and stock-based compensation for directors is revised as necessary to maintain sound, appropriate incentives to increase corporate value over the medium and long terms.

Total Compensation of Directors and Corporate Auditors

Corporate Officer Classification Number of Corporate Officers Total Compensation Paid (FY2016)
Directors (External Directors) 12 (3) ¥462 million (¥24 million)
Corporate Auditors (External Auditors) 4 (2) ¥76 million (¥24 million)
Total 16 (5) ¥538 million (¥48 million)

The above figures include the fixed portion of the compensation and stock options of four directors (of which one was an External Corporate Director) who resigned at the conclusion of the 155th Annual Meeting of Shareholders held on March 30, 2016.

Evaluations of the Board of Directors

Striving to ensure the effectiveness of the Board of Directors, every fiscal year, the board conducts evaluations related to such areas as the board’s operating methods and the content and status of the proposals it considers. These evaluations include examinations of each director. A summary of the results of these evaluations is disclosed in the Corporate Governance Report. An anonymous self-assessment survey of all directors and corporate auditors was conducted regarding Board of Directors meetings held in 2016.

Summary of the Evaluation of the Board of Directors

  • The number of persons on Lion’s Board of Directors is sufficient for deliberations, including the number and proportion of external directors. Board members have the knowledge, experience, capabilities, and diversity necessary to enhance corporate value.
  • The frequency, number of agenda items, and deliberation time of the Board of Directors are appropriate. The deliberations comprise open, constructive debate that does not hinder risk taking.

The evaluation found that the membership and operations of Lion’s Board of Directors are appropriate, and that decision making on important matters related to business execution and oversight of the execution of duties, are conducted in a proper manner. As such, the effectiveness of Lion’s Board of Directors was deemed sufficient.

Of note, suggestions received from the evaluation included: 1) Discussions on management strategy should be enhanced to further increase corporate value and 2) External directors and corporate auditors should be provided with more extensive information regarding the background and context of important agenda items. Lion will implement necessary measures, and make efforts to further enhance the effectiveness of the Board of Directors.

See Lion’s Corporate Governance website for further details.

Messages from the External Directors

External Director Hideo Yamada

There are few companies with a history dating back a century. In fact, it is often said that a company’s average lifespan is just 30 years. Lion is an exceptional company that well exceeds 100 years. Moreover, this has been accompanied by remarkable progress over the last 10 years. For a company to increase earnings to this extent while gaining the trust of society is exceedingly rare. I honestly believe that Lion is deserving of being called a “Beautiful Company.” Lion’s corporate management, displaying a respect for tradition and underpinned by humanity, is conducted with full consideration of the interests of shareholders, employees, trading partners, and consumers. I do what I can in my position as an external director to ensure continued growth for Lion for another 100 years. Specifically, this means asking direct questions during Board of Directors meetings when there are unclarified issues, and having the courage to offer candid advice as necessary. At the same time, part of my role is to provide encouragement as a close supporter, based on judgments from a broad perspective. In particular, in my position as an attorney, I approach my role with a focus on compliance and governance.

External Director Kazunari Uchida

Lion is a wonderful company with extremely kind and serious people. That corporate culture is reflected in the Board of Directors, with few barriers between people or divisions, and an atmosphere in which opinions are exchanged freely.

At the same time, I sometimes sense a lack of a drive to achieve goals no matter what, and make Lion a better company. Of course, there is nothing wrong with a pleasant workplace, but I would like Lion to be an excellent company where employees can achieve further growth with the assistance of management while the Company aims higher.

As a management consultant, I utilize the experience I have gained advising numerous companies to fulfill two roles. The first is “negative checks,” directly indicating problems or concerns regarding Lion’s management from the standpoint of corporate governance. The other is to offer advice to promote Lion’s further growth, such as suggesting a course of action, or urging a more-aggressive stance if a target seems overly conservative. These are called “positive checks.”

Directors, Corporate Auditors, and Executive Officers

As of March 30, 2017

Representative Director,
President Executive Officer ITSUO HAMA Chairman of the Board and Chief Executive Officer

Representative Director,
Senior Managing Executive Officer YUJI WATARI Responsible for Corporate Ethics, Supply Chain Management Headquarters, Purchasing Headquarters, Production Headquarters and Production Engineering Research Center

Director, Managing Executive Officer MASAZUMI KIKUKAWA Responsible for Health and Home Care Products Division, Health and Home Care Products Sales Division, Gift and Channel-Specific Products Division, Direct Marketing Division, Advertising Department, Behavioral Science Research, and Distribution Policy Department

Director, Senior Executive Officer KENJIRO KOBAYASHI Responsible for Human Resources and General Affairs Headquarters, Secretary Department, Corporate Brand Promotion Office, System Department, Corporate Communication Center and CSR Promotion Department

Director, Senior Executive Officer TOSHIO KAKUI Responsible for Research and Development Headquarters, Overall Chemicals Businesses, Overall International Businesses, International Division, Intellectual Property Department

Director, Senior Executive Officer TAKEO SAKAKIBARA Responsible for Risk Management, Corporate Strategy Headquarters, Consumer Service Center, Pharmaceutical Affairs and Quality Assurance Department and Legal Department

External Director HIDEO YAMADA Attorney at Law

External Director KAZUNARI UCHIDA University professor

External Director TAKASHI SHIRAISHI University professor

The notification of the nomination of Mr. Hideo Yamada, Mr. Kazunari Uchida, and Mr. Takashi Shiraishi as independent directors has been sent to the Tokyo Stock Exchange.

Audit & Supervisory Board Member YASUTARO NAKAGAWA

Audit & Supervisory Board Member JUNKO NISHIYAMA

External Audit & Supervisory Board Member NOBORU KOJIMA Certified Public Accountant, Certified Tax Accountant

External Audit & Supervisory Board Member HIDEO HIGASHI Certified Tax Accountant

The notification of the nomination of Mr. Noboru Kojima and Mr. Hideo Higashi as independent directors has been sent to the Tokyo Stock Exchange.

Substitute Audit & Supervisory Board Member

TAKAO YAMAGUCHI Certified Public Accountant, Certified Tax Accountant

Executive Officers

KOHEI MIYAUCHI Executive General Manager of Purchasing Headquarters

TOMOMICHI OKANO Executive General Manager of Research and Development Headquarters

HIROYUKI CHIBA President and Executive General Manager of Lion Specialty Chemicals Co., Ltd.

RYUJI NAKAZAWA Executive General Manager of Gift and Channel-Specific Products Division

YUTAKA SHINOHARA Executive General Manager of Production Headquarters

YUGO KUME Executive General Manager of Health and Home Care Products Division

FUMITOMO NORITAKE Executive General Manager of Direct Marketing Division

MASAHARU MIKUNI Executive General Manager of Health and Home Care Products Sales Division

HITOSHI SUZUKI Executive General Manager of International Division and Director of Strategic Planning Department

SHINICHIRO HIRAOKA Executive General Manager of Supply Chain Management Headquarter and Director of Supply Chain Management Department

JIRO NAGASAWA Executive General Manager of Human Resources and General Affairs Headquarters

KENGO FUKUDA Executive General Manager of Corporate Strategy Headquarters