Q&A with the Chairman of the Board of Directors and Outside Directors
As part of our efforts to sustain the company’s business growth and build its overall value, we commit to rigorous corporate governance. At the core of our corporate governance system is the Board of Directors. Below is a conversation between Kazuyuki Inoue (Chairman of the Board of Directors and Representative Director) and outside directors about the board’s current performance and future prospects.
Director Yoshio Kometani
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Director Mayumi Tamura
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Chairman of the Board of Directors Kazuyuki Inoue
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Director Yumiko Jozuka
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Director Junichi Kawada
Q1 What is your impression of the company’s Board of Directors?
The meeting agenda is well planned out by the executive team. It is high in quality, and clear on the key issues and risks. Much of this is due to the company’s robust decision-making process, which is grounded in the credo, The Analects and the Abacus. Even as an outside director, I feel comfortable in expressing concerns or offering suggestions. There is just the right amount of healthy tension but also an atmosphere of trust. I believe that the board can become even more effective with more in-depth strategic discussions for sustaining the company’s growth and building its overall value.
Junichi Kawada
The board has an atmosphere where every board member can earnestly consider and exchange ideas about how the company can sustain its growth and maximize profits over the medium and long term. Every year, board discussions go into more frequent and greater depths on the Mid-Term Business Plan and strategies for each business area. In the event of a dispute or an accident, outside directors, along with members of the Audit & Supervisory Board, exercise our supervisory function, playing an active role in discerning the facts of the case and making sure that the necessary action is being taken. Because this is a year for formulating the next Mid-Term Business Plan, which will begin next year, I expect the board to devote more time to discussing the future of Shimizu. I would add that the board’s staff team is very conscientious in responding to our feedback.
Yumiko Jozuka
Q2 What are your thoughts on integrating cost-of-capital considerations?
The board devotes its time to discussing a growth strategy that will increase corporate value. The business divisions develop policies aligned with the strategy while formulating plans for better profitability. The board monitors the company’s progress in its Mid-Term Business Plan and voices opinions as necessary. It is important to consider cost of capital in discussing how to make effective use of held corporate assets and to strategically optimize capital allocation, but also, how to lower the cost of capital through better corporate governance, stronger risk management, and greater transparency in IR communications
Mayumi Tamura
Cost-of-capital consideration in management is becoming an increasing priority; we see its trend in the reduction of securities holdings and higher shareholder returns. On the other hand, to retain the trust of markets, a company must demonstrate its ability to generate stable profit growth in its core business, but it must also clarify its policy on capital allocation, including how it balances growth-related investments with dividends and how it puts its cash and assets to effective use. I would like the board to have further discussions on which sectors will drive the company’s growth and how its various initiatives fit into the overarching strategic picture.
Yoshio Kometani
Q3 What are your thoughts on the process for investment decisions?
When it comes to investment decisions, our role as outside directors is not just to rein in executives’ proposals, but also to support executives in taking calculated risks. It is therefore essential for management to fully disclose what the purpose of the investment is, what the risks are, how the risks will be managed, and expected returns, so that the board can have a transparent and impartial discussion. With M&A and investments for growth, it is all the more important to subject the proposal to scrutiny from an outsider’s perspective that is uninfluenced by company norms. Such a perspective helps the management make decisions that will ultimately increase corporate value over the medium and long term.
Junichi Kawada
The management is more likely to make the right decision about an investment proposal if it clarifies how the proposal fits into the company’s overall growth strategy and what the expected return is, and if it analyzes the risks and prepares measures to manage them. Given that the board considers such matters from a variety of viewpoints, I feel that the board’s monitoring function is working. The business unit proposing the investment and the board’s staff brief outside directors beforehand, enabling us to read up on the proposal ahead of the meeting. I will continue to identify risks from my perspective as an outside director in order to help the executive team take calculated risks.
Mayumi Tamura
Q4 How well is the company doing in disseminating The Analects and the Abacus?
As well as adopting The Analects and the Abacus as its corporate credo, the company disseminates its content to employees through a booklet, internal newsletters, the corporate website, training sessions, and other means. Whenever I attend Shin Diversity Activity or visit a workplace, I have open conversations with the employees there, including with junior workers. From these conversations, I get the impression that employees are proud to be working for Shimizu and that the mindset described in The Analects and the Abacus has permeated considerably. That said, incidents and issues are apt to arise, so the company should keep working to disseminate the mindset into every corner of the organization.
Yumiko Jozuka
For a company with a history as long as Shimizu, the principles set out in The Analects and the Abacus serve as a vital foundation that employees can return to. The idea of contributing to the social infrastructure of the future definitely resonates with employees, as you can see from their attitudes. However, the wording of the text itself may feel a little distant to younger employees. While continuing to disseminate the content through media such as the booklet and internal newsletters, the company should also hold conversations with employees about the content, associating these ideas with daily work as well as the concept of profit, until they have internalized it.
Yoshio Kometani
Message from the Chairman of the Board of Directors
Increasing corporate value over the medium and long term
As Chairman of the Board of Directors, I always try to create an environment in which members feel free to share ideas and voice their concerns. The outside directors actively offer constructive ideas from varied perspectives. With the new board, which includes four newly appointed directors, I will keep working to ensure that we have rigorous discussions, with everyone on the same level and able to perform to the best of their ability.
To further elevate the quality of corporate management, the management team and the Board of Directors must understand their respective duties and roles and commit to the common goal of growth. Drawing on the valuable insights shared by our outside directors today, we will continue to pursue management that is agile, efficient, and transparent, while striving to achieve the sustainable growth of the Shimizu Group and enhance corporate value.
