Corporate Governance

Our basic management policy is to continuously enhance our corporate value and meet shareholder expectations. To carry out this policy, we have established an efficient organizational structure and various systems designed to respond to changes in the business environment. In addition, to improve transparency in management and strengthen oversight functions, our basic approach to corporate governance is to accurately disclose information to shareholders and investors, and we consider this to be one of our highest management priorities.

The Board of Directors consists of nine directors, five of whom are Outside Directors with extensive corporate and organizational management experience and outstanding insight.

In addition to the Board of Directors, we have established the Managing Directors’ Meeting to function as another deliberation and decision-making body for business execution. In principle, both organizations meet once per month. The Board of Directors deliberates and makes decisions on important matters related to management, including the Company’s basic policies and matters required to be resolved by laws, regulations, and the Articles of Incorporation of the Company. The Managing Directors’ Meeting deliberates and makes decisions on all aspects of the Company’s operations (excluding matters submitted to the Board of Directors) in order to ensure the speedy and efficient execution of the Company’s business operations. Furthermore, the Company has formed the Officers’ Remuneration Committee, which is chaired by an outside director and serves as an advisory body to the Board of Directors, in an effort to ensure transparency and appropriateness in reviewing and evaluating remuneration for officers and the nomination of candidates for directors and Audit & Supervisory Board members.

Shin-Etsu Chemical has adopted the Company with Audit & Supervisory Board Members system as its organizational structure. The Audit & Supervisory Board consists of four Audit & Supervisory Board Members, including three Outside Audit & Supervisory Board Members. In addition to attending important internal meetings such as meetings of the Board of Directors and the Managing Directors’ Meeting, Audit & Supervisory Board Members receive reports from Directors, Corporate Officers, employees, and others on the status of execution of their duties and audit the execution of duties by Directors through on-site inspections of business sites and subsidiaries and other investigations. Audit & Supervisory Board Members also receive quarterly reports and explanations regarding accounting audits from an accounting auditor, and ensure proper collaboration by exchanging information and opinions as necessary. They also regularly receive reports and explanations regarding the status of internal auditing from the Internal Auditing Department and work cooperatively with it, exchanging views and ideas.

To ensure transparency and appropriateness in the processes involved in reviewing and evaluating remuneration for officers, as well as nominating candidates for senior management, directors, and Audit & Supervisory Board members, we have established the Officers' Remuneration Committee. This committee is chaired by Independent Outside Director Hiroshi Komiyama and includes two other independent outside directors, Kuniharu Nakamura and Michael McGarry, as well as Representative Director-President Yasuhiko Saitoh, making a total of four directors. They comprehensively review and evaluate each director's contributions to the Company’s performance and overall management every fiscal year, and report their findings to the Board of Directors.

The remuneration system of Directors shall be designed to contribute to the mid- to long-term enhancement of the corporate value of the Company, and the remuneration of Directors shall be determined by the Board of Directors based on the results of the review and evaluation by the Officers’ Remuneration Committee as well as its opinion thereon. The remuneration shall consist of “fixed remuneration” determined as appropriate for each individual’s position, job responsibilities, etc., and “performance-based remuneration” that takes into consideration the annual financial performance of the Company as an incentive for the enhancement of corporate value, as well as “stock options” as an incentive for higher motivation and morale to execute one’s duties and to improve performance, and ultimately for the enhancement of shareholder value (stock price-linked remuneration).

On the other hand, the remuneration of Audit & Supervisory Board Members shall be determined through their mutual consultation. The remuneration shall consist of “fixed remuneration” determined as appropriate for each individual’s job responsibilities as an Audit & Supervisory Board Member. Outside Directors and Audit & Supervisory Board Members are not entitled to any“performance-based remuneration” or “stock options” as they are expected to perform supervisory and checking functions over management.

At every meeting of our Board of Directors, Outside Directors ask questions and make suggestions regarding agenda items, and there is a lively exchange of opinions and discussion. A total of 13 Board of Directors meetings were held in FY2023, at which matters stipulated by law, the Articles of Incorporation, and the Company’s Board of Directors Regulations were discussed, deliberated, and resolved without omission. In addition, the Board of Directors receives individual opinions each year from Outside Directors regarding the effectiveness of the Board of Directors as a whole. As a result, the Board of Directors of the Company was evaluated as being effective and received valuable feedback on “Further Enhancement of Agenda Items and Discussions at Board of Directors Meetings” and “Conducting meetings with Outside Directors and Outside Audit & Supervisory Board Members.”

The company has formulated a "Basic Policy on Internal Controls" to help put in place "structures to ensure that the execution of duties by Directors is fully compliant with relevant legislations and the articles of incorporation, and structures to ensure the appropriateness of business operations within the corporate group, which consists of its subsidiaries, this corporation, and other corporate business," as stipulated by the Companies Act and an Ordinance of the Ministry of Justice. Our internal control system is structured and implemented in accordance with the above policy. We review it constantly and endeavor to make it more appropriate and efficient.

The Auditing Department, which is a dedicated department, conducts operational audits of each department from the perspective of legality and rationality of business activities, and evaluates the status of development and operation of internal controls related to financial reporting from an independent standpoint. The results are reported directly to Directors, including the Representative Director, and Outside Audit & Supervisory Board Members.

In its business principle, the Group states that it strictly complies with all laws and regulations and conducts fair business practices. Each and every Group employee performs their daily work duties sincerely based on this. We believe that it is our social responsibility and one of our contributions as a company to properly pay taxes for the profits in accordance with the laws and regulations of the countries and regions in which we operate.

As part of our efforts to this end, we strive to instill and raise awareness of tax compliance and provide education, especially for employees involved in tax affairs, to improve their tax knowledge and practical skills. For important tax issues, we consider the appropriateness of tax treatment while receiving appropriate advice from experts, and strive to file appropriate tax returns based on the laws and regulations of each country. We also place importance on maintaining good relationships with the tax authorities in each country by dealing with them in good manner. We do not engage in any business activities for the purpose of tax avoidance. The total corporate income tax paid in FY2023 was 208.9 billion yen for consolidated companies. The breakdown by region is as follows: Japan 110.9 billion yen, the U.S. 78.3 billion yen, Europe 7.4 billion yen, and Asia-Oceania 12.1 billion yen.

The company aims to develop the whole Group by supporting and respecting the autonomy of the Group companies.

Group companies are managed based on the "Shin-Etsu Chemical Group Company Operational Regulations." The 99 consolidated subsidiaries conduct prior consultation and report on the following projects.