Corporate Governance

About Lion’s Stance toward Governance as a Means to Enhance Corporate Value
Lion’s Action

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.

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, Established the Compensation Advisory Committee; 2010: Implemented the Independent Officers System; 2016: Prepared Basic Corporate Governance Policy, Formed Nomination Advisory Committee, Began Evaluation of the Board of Directors

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.

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 16 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 18 of 18 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 as an Independent External Director

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 16 of 18 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 as an Independent External Director

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 Attended 13 of 13 Directors’ meetings held during the fiscal year
Reasons for Appointment

Takashi Shiraishi 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. 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 as an Independent External Director

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 18 Directors’ meetings and 13 of the 13 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 as an Independent External Corporate Auditor

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 17 of the 18 Directors’ meetings and 13 of the 13 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 as an Independent External Corporate Auditor

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 (FY2017)
Directors (External Directors) 9 (3) ¥491 million (¥33 million)
Corporate Auditors (External Auditors) 4 (2) ¥82 million (¥24 million)
Total 13 (5) ¥573 million (¥57 million)

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 2017.

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.

In fiscal 2016, an evaluation of the board’s effectiveness uncovered certain issues. These 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. While Lion has achieved a measure of success with initiatives aimed at addressing each of these issues, the Company recognizes that there is still room for improvement. Looking ahead, Lion will continue to 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 External Audit & Supervisory Board Members

Noboru Kojima
External Audit & Supervisory Board Member

Auditors audit the execution of business by directors on behalf of shareholders, and submit an audit report with the results of that audit to the General Meeting of Shareholders.

I have been an Audit & Supervisory Board member for Lion for three years, and have performed these duties utilizing my experience as a Certified Public Accountant. I hold interviews with all directors and executive officers, and conduct site visits of all major facilities both in Japan and overseas, and audit those operations. The auditing method, appropriateness of results, and audit quality are affirmed in the auditing reports received from the accounting auditors at the end of each fiscal quarter and fiscal year.

Fortunately, Lion’s corporate environment is apposite from the perspective of corporate governance, and an internal control organization has been established. I think that Lion’s executives and employees, supported by steady business results, are performing to the best of their abilities.

Five of Lion’s 13 directors and Audit & Supervisory Board members are independent officers. These independent officers play a central role in the lively questioning during meetings of the Board of Directors, while, at the same time, help to deepen discussions of the Nomination and Compensation committees.

These structures express a desire to fulfill responsibilities to shareholders and all stakeholders. I believe that my role is to undertake part of that responsibility, and do my best for Lion’s business operations.

Hideo Higashi
External Audit & Supervisory Board Member

I have served as an external Audit & Supervisory Board member for Lion for three years. I believe that my role as an external auditor is to have an “inner outward-looking eye,” and audit from a broad and objective viewpoint, without being constrained by conventional wisdom within the Company. Audit & Supervisory Board members, by auditing the execution of business by directors as independent agents, also have a duty to ensure the healthy and sustainable growth of a company, and contribute to the establishment of a high-quality corporate governance system to meet its social responsibility.

During these last three years, together with the Audit & Supervisory Board members, I conducted regular interview-style audits with the representative directors, and operating audits of directors and executive officers. I received detailed explanations of Lion’s various businesses, and confirmed from an impartial, third-party standpoint that compliance and governance with the aim of risk management reaches the furthest corners of the Company.

Recently, scandals have been uncovered at major corporations that had been praised as companies with leading governance systems. However, I feel that Lion’s internal controls for risk management are functioning efficiently, as confirmed through audits of major facilities both in Japan and overseas.

Going forward, I will use what abilities I have in a sincere effort to contribute to greater shareholder and enterprise value at Lion through the independent stance and universally equitable approach of an external Audit & Supervisory Board member.

Directors, Corporate Auditors, and Executive Officers

(As of March 29, 2018)

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

Representative Director,
Senior Managing Executive Officer MASAZUMI KIKUKAWA Responsible for Corporate Ethics, Direct Marketing Division, International Division and Overall Chemicals Businesses

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

Director, Senior Executive Officer TOSHIO KAKUI Responsible for Supply Chain Management Headquarters, Production Engineering Research Headquarters, Purchasing Headquarters, Research & Development Headquarters, Production Headquarters, Intellectual Property Department and Safety and Disaster Prevention Promotion Department

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

Director, Executive Officer YUGO KUME Executive General Manager of Health & Home Care Products Division, Responsible for Communication Design Department, Consumer Knowledge Center and Distribution Policy 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

FUMITOMO NORITAKE Executive General Manager of Research and Development Headquaters

TOMOMICHI OKANO Executive General Manager of Production Engineering Research Headquarters

HIROYUKI CHIBA Executive General Manager of Purchasing Headquaters

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

HITOSHI SUZUKI Executive General Manager of International Division

SHINICHIRO HIRAOKA Executive General Manager of Supply Chain Management Headquarter

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

KENGO FUKUDA Executive General Manager of Corporate Strategy Headquarters

YASUTSUGU SHIMIZU Executive General Manager of Production Headquarters

TAKASHI NAGAI Executive General Manager of Direct Marketing Division