Message from Outside Directors

George Buckley

Impressions of Hitachi’s Corporate Governancethreaten our survival. Japanese companies need to push harder for

Corporate governance is a topic some aspect of which is discussed atbetter growth, better margins and better cash management, while

every board meeting. I believe the Company has made great strides in

not forgetting the many good aspects of their work culture. Hitachi

recent years regarding corporate governance. Hitachi formulated andneeds to retain the good aspects of Japanese culture, while adopting

disclosed its Corporate Governance Guidelines which outline qualifi-

some new behaviors and methodology.

cations for outside directors, etc. in May 2012, to increase thetransparency of its management. I think the governance of Hitachi isvery positive. The Board meetings are conducted very openly andworld. Yet today, many have been overtaken by their foreign contem-

great credit is due to the chair of the Board for encouraging this.

poraries. These competitors adapted and learned from Japanese

Furthermore, I think the corporation is very open to different reforms
and different standards of governance. For example, in 2014, wecompanies and, in some cases, the “students” are now doing better
than their “teachers.” We must not allow that to happen at Hitachi.

changed the committee structure. Under the new structure, outside

Going forward, we therefore need to pursue efforts to makedirectors became chairs of the nominating committee and compensation

Hitachi a more sustainably- competitive company. If we become acommittee. In this way, we are adopting a more western-style gover-more sustainably-competitive company, we become more prosperous;

nance. I believe we have carried out reforms effectively, and accordingly

and if the company becomes more prosperous, the company becomes

our corporate governance is being modeled by other companies.

more secure for everyone; employees, investors, customers andWhen I have spoken to investors in Hitachi, they really admire whatsuppliers alike. Faster, profitable growth must be our goal, inside anHitachi is doing and say they wish other companies would do more.

ethical and legal framework.

Issues to Address

Approach to Value Creation

As an outside director of Hitachi, I think Hitachi’s strengths are its

I believe there are five great value-creating activities that will help us

magnificent technology and the breadth of its business. It is one of thebecome a globally competitive company; sales growth, margin enhance-

10 greatest modern companies in the world. It has enormous strengths.

ment, improving working capital terms, legally and morally lowering ourHowever, we still don’t always leverage those strengths as effectively as

taxation burden, and working to improve our P/E (price/earnings) ratio.

we could. This is an important issue we need to address. What I recom-Each of these previous activities contributes to value creation.

mend to companies is that our main mission is to create increasing

Then, we should approach these activities with six competitive

shareholder value every year. That’s the real mission. But, of course, wevectors, six sets of tools if you like. These tools are the cost of thealso need to make Hitachi a happy place to work, a secure place for

product, technology and innovation, distribution, customer service,employees, and a good place for customers and all stakeholders. We

brand and marketing, and people. We always have to remember

need to keep the interests of all of our stakeholders in mind, not just one.

nothing in the company would get done if it wasn’t for the people.

I think another issue, not only for Hitachi, but for many Japanese24

We can see the reason for this very clearly. Thirty five years ago,
Japanese companies were the most creative and competitive in theSo, it’s people who change the company, and people who drive

companies is a cultural one. Japanese people rightly have a strong

reforms. It’s people who will innovate. It’s really the people and how

positive belief in their society and in the power of the group. But a

we inspire, motivate and reward them that are the keys to this wholedownside of this is that it sometimes slows action and our willingness

puzzle. It’s the single most important thing, people.

to adapt to changing economic and competitive circumstances. Since

To truly become a sustainably-competitive company, we can’t just be

the world outside is changing ever faster, to remain competitive, wegood at technology, but bad at cost. We can’t just be good at cost, andhave to be willing to change more, to adapt better and to reform

bad at technology. We can’t just have great distribution, but have badfaster. If we reform slower than our competitors, they will overtake us

products. Therefore, I believe that a balanced approach to these six vectors

and, ultimately, that could be very hard for the corporation andwill allow us to accomplish this difficult but essential task going forward.

Hitachi, Ltd. | Annual Report 2015

Cynthia CarrollImpressions on Change at Hitachi

Becoming a Global Company

Over the last couple of years, Hitachi has broadened the makeup

Our objective of having over 50% of our revenues from outside ofof the board, where today, the majority of the board is comprised ofJapan has now been achieved this year, and this demonstrates

outside directors and is functioning under international governance

Hitachi’s ability to become a global company. The Social Innovation

standards. Hitachi’s executive team aims to be world-class in all

Business is the business platform for further global growth. Acrossaspects of the Hitachi businesses. There is clear recognition that inHitachi, we need to leverage the scale, scope and expertise of theorder to become truly global, diversity of thinking and experiences iscompany to ensure organizational efficiency (reducing redundancy),

key, as the executives seek input from the board. The breadth of theagile decision making and responsiveness to the needs of our customers

board discussions and the level of engagement and interaction have

while constantly seeking innovative solutions for today and for thecontinually progressed as we often challenge and debate issues. Thefuture. Our ability to integrate our marketing and sales of our products

executives are listening, reflecting, and responding to input.

across customers and geographies is an enormous opportunity andAnother change relates to the development of the Social Innova-

this will take creativity and teamwork.

tion Business. I attended the Hitachi Social Innovation Forum in Las

In promoting globalization to achieve higher profit ratios and cash

Vegas, and was impressed by the diversity of solutions being developed

flow levels than our competitors, Hitachi is supporting more diversifi-by Hitachi in conjunction with our customers and suppliers fromcation. There is a recognition that globalization starts with the top

across an enormous range of businesses, industries and social envi-

team in exposing people to alternative perspectives in various parts ofronments. In my opinion, no other company in the world has thethe world. Many of the newcomers at Hitachi are speaking English

expertise and the technical and innovative capability to serve such

while Hitachi is recruiting people from different backgrounds, different

a broad consumer base. The Social Innovation Business represents thenationalities, different experiences, and different educational exposures,catalyst in becoming a truly global corporation.

which I believe is very important. This is particularly critical withrespect to marketing and commercial matters. The board members

Hitachi’s Strengths

themselves are worldly and recognize the need to diversify in order toI have been hugely impressed with the people that I have met atbecome truly global.

Hitachi. The leadership of the company is dedicated and has vast

It is up to everyone in the Hitachi Group to achieve success as Oneexperience. In addition, the receptiveness and openness of theHitachi. Each of us has a role to play in this endeavor. Creating One

Chairman & CEO and President & COO are evident as they actively

Hitachi will happen by working together, respecting input from one

seek different perspectives and inputs. Hitachi employees haveanother and working as a team, both within each business and acrossenormous opportunities to learn and develop across businesses andthe Hitachi Group.

across geographies in a company that has the potential to be theFinally, I believe Hitachi must have a keen awareness of ourleader in virtually all of its businesses. I can’t imagine a more exciting

competition, constantly driving towards outperformance and seeking

place to work as a young person beginning a career.

opportunities for growth and value creation. We need to be aware ofAnother strength of Hitachi is that the company produces theour strengths and where we need to improve. The recent decision onhighest quality products and is very sophisticated in its technology andthe acquisition of the rail business in Italy is an example of how weinnovation. It is a company with name recognition and is respected

identified a complementary business to the broader rail business thatthroughout the world. Together, these strengths represent enormous

would catapult us into an improved market position while capturing

levers for further value creation and enhancement.

synergies. This kind of strategic initiative will clearly enhance ourglobal position.

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