SECTION
2SUSTAINABILITY PLATFORM

Corporate Governance Talk
CEO Suzuki
xOutside Director
Ohtsubo

Highly effective governance enhancestransparency in management andfacilitates world-leadingbusiness execution.

48

Jun Suzuki

Fumio Ohtsubo

President and CEO
Representative Director of the Board

Outside Director(Special Advisor toPanasonic Corporation)

TEIJIN LIMITEDINTEGRATED REPORT 2019

Hallmarks of Teijin’s Governance Structure
Suzuki The year 1999 marked a major turning point in Teijin’s
corporate governance. It was the year the Company introduced a corporate officer system, established the Advisory
Board, and instituted outside auditors. In 2003, outside directors were added to the team, leading to the current company
with Board of Statutory Auditors system. Teijin currently hasnine directors (five inside and four outside directors) and fiveauditors (two inside and three outside auditors), for a total of
14 members.
We take pride in our pioneering approach to corporate
governance, having established the Advisory Board 20 years
ago as an advisory body for management with functions togive recommendations for the nomination and compensationof the CEO and chairman.

Ohtsubo From the perspective of an outside director, I agree
that Teijin has taken some pioneering steps in corporate governance. However, other companies are also quick to adapt
to changes in the external environment as we did with establishment of the Corporate Governance Code in 2015. Teijin
needs to continue evolving, without stopping to enjoy theprogress it has made in the past. Another hallmark feature ofTeijin is its easily understandable corporate philosophy fromboth an internal and external standpoint. From a broad perspective, the role of corporate governance is to efficiently
monitor and ascertain whether business execution adheres tothe corporate philosophy from a strategic and ethical perspective. In this sense, Teijin’s well-defined corporate philosophy allows it to effectively implement corporate governance.
This is why I believe Teijin has continued to be in business foran entire century.

Impact of Board of Directors on Management
Suzuki At Teijin, we believe the role of the Board of Directors
goes beyond monitoring business execution (supervision) toalso encompass coaching and advising management. TheBoard of Directors deals with three kinds of agenda items:
policy debates, decision-making and reporting. The corporate
officers first present the course of action and broader strokesof policy for an agenda item as a matter for policy debate,then receive any necessary advice and submit a final proposal
as a matter for “decision-making,” which is followed up with“reporting” after transitioning to the business execution stage.
Multiple matters are advanced at the same time in parallel, somembers of the Board of Directors tend to ask many questions and give plenty of guidance. These matters vary fromimproving returns for shareholders to the social significance ofTeijin. Meetings of the Board of Directors last an average offour hours, and usually with a feeling of tension like at aGeneral Meeting of Shareholders. I sometimes get nervous
before going to the meetings once a month.
Ohtsubo After becoming an outside director, my lasting
impression of the first Board of Directors meeting I attended
was the openness of the discussions. The meetings are notmerely a formality where the agenda is set in stone in advanceand discussions follow the agenda without detour. I believe
the Board of Directors is highly effective with this approach.

Suzuki Another feature of Teijin is that important matters aredeliberated in three layers.
Ohtsubo Regarding major items like M&A decisions or formulating medium-term business plans, for example, information is shared with the Board of Directors from the initial planning stages. These items are thoroughly discussed from avariety of perspectives, such as macroeconomic, geopoliticaland practical standpoints. Then the policy proposed by thebusiness execution side is deliberated a second time in thiscontext. If it is an M&A proposal, specifics are discussed indetail, such as how to take the best approach and readycapital. In the third and final round of deliberation, a decision
is reached after discussing the actual plan put together after
the second round of talks. These repeated deliberations allow
discussions to focus on key points.
Suzuki In our case, outside directors can either apply thebrakes or push the accelerator on decision-making. For
example, even if the business execution side sets an upper
limit for funds allocated for M&A, if an acquisition candidate isa must-have company that aligns well with our strategy, outside directors may push for the M&A deal as a necessaryacquisition, even if it means increasing the amount of theinvestment.
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SECTION
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Corporate Governance Talk

Ohtsubo We are able to push down on the accelerator
because of Teijin’s high level of transparency in management.
This is evident in the sheer number of matters that are discussed by and reported to the Board of Directors, and thevolume of documents for each agenda item is considerable. Afair amount of time is required to digest these documents
before the meetings, but they must be read in order to participate in the discussions. I feel that the outside directors andoutside auditors have diligently read through the documents,
judging by the quality of their questions and criticisms. When I
was first appointed, I remember struggling to carry a thickstack of documents to each meeting of the Board of Directors.

Suzuki Outside auditors read the same documents as theoutside directors, and provide their opinions after gaining an
understanding of the situation. Basically, Teijin is leveraging
the benefits of being a company with Board of Statutory
Auditors to the fullest extent. There are a total of 14 membersin the discussions on the Board of Directors, evenly split
between 7 inside members and 7 outside members, including
the auditors. Most matters are not decided by majority vote.
Everyone engages in a thorough discussion, and even whenmatters are left for the next meeting due to lingering issues, apriority is placed on making decisions that all members canagree with.

Advisory Board Improves Transparency of Management
Suzuki Members of the Advisory Board comprise two
non-Japanese experts, four outside directors, the Company’sadvisor and the CEO. Meetings are convened twice a year,
once each in the spring and fall. The Advisory Board has
three main objectives, namely, to advise management from a
broad viewpoint, evaluate the performance of the CEO andpropose compensation amounts for the CEO, and nominate
the next CEO. The Advisory Board does not have any voting
rights. The results of their discussions are reported to theBoard of Directors.
The Advisory Board was created due to strong concerns
about excessive influence of the CEO and management teamon promotions and other personnel matters. The longer thesame person serves as CEO, the more influence that person
tends to have on personnel matters. The Advisory Board wasintroduced as a system of checks and balances on thisinfluence.
Ohtsubo In the context of advising management, we havereceived astute criticisms and accurate advice from non­Japanese experts on our board, an executive director & CEOof an American chemicals company and a professor at afamous university. All outside directors are members of theAdvisory Board, so they are able to understand current conditions within Teijin and provide advice from an objective pointof view.
Teijin also thoroughly evaluates the performance of its CEO.
For starters, the CEO must give a 90-minute presentation
about business results and a Q&A session for 30 minutes inEnglish. I think CEO Suzuki struggles to speak in English thisentire time, but the listeners are also struggling to understandhim (laughs). The Advisory Board holds meetings once every
six months. The participants read documents before eachmeeting, and also review the minutes of the previous twomeetings. It would not be possible to evaluate performance
without doing so.
Suzuki I am also a member of the Advisory Board. For matters concerning the nomination and compensation advisory
functions of the Advisory Board, an outside director takes thelead on deliberations, and I do not participate in discussions
about matters concerning the CEO. After my presentationand the Q&A session are over, I leave my seat during theperformance evaluation portion of the meeting. The time I
spend waiting outside during my performance evaluation
always seems long.

50TEIJIN LIMITEDINTEGRATED REPORT 2019Ohtsubo Performance evaluations are based on numericalbenchmarks, such as ROE and ROIC. Areas difficult to
express in figures are thoroughly discussed in the meeting.
This is why the meetings tend to last a long time.
Suzuki Regarding future CEO candidates, the Advisory Board
gives advice from the succession planning stage. Teijin does
not simply select candidates from a pool of available people.
Ohtsubo At every meeting, I have an opportunity to see thepresentations of future CEO candidates. The most importantthing, I think, is that the candidates have their confidence andinsight in answering questions after their presentation. Since
there are still many things that cannot be learned from the firstor second presentation, we need to continuously watch thecandidates. We feel significant responsibility in assuming an
integral part of the selection process.
Suzuki The members would probably have a hard timereaching a decision without taking all these steps. Naturally, I
also went through this process when the Advisory Board
recommended me for the CEO position.
Ohtsubo I believe the Advisory Board is a system that has
been put together well from the standpoint of keeping management on their toes. The Advisory Board fulfills an advisory

function for CEO nominations and compensation, and outsidedirectors are also involved in the Nomination Advisory
Committee and Remuneration Advisory Committee for advising on the nomination and compensation of directors otherthan the CEO. This structure facilitates liaisons between theseentities. Performance evaluations for the CEO also relate to
the evaluations of other directors, because the CEO is not
solely responsible for performance.

Suggestions from an Outside Director
Ohtsubo As an outside director, I think Teijin needs tostrengthen its on-site execution capabilities. Information isshared with the Board of Directors from the initial planningstage of an M&A deal or medium-term business plan, so it isclearly understood how a particular idea is advancing. Teijin isquite capable at planning. However, I sometimes feel that theCompany lacks sufficient momentum on execution and progress once a plan moves to the execution stage.

understands the problem. Back then, immigration policy waschanging in the U.S., and CSP had a hard time hiring enoughpeople to work in manufacturing. In this case, I honestly
thought local management should quickly come up with ideas
to solve this problem.

Suzuki Can you give a specific example?

Ohtsubo I believe Teijin has a practical system of corporate
governance with thorough information sharing, lively and open
discussions, and advice and ideas from human resources
who have diverse backgrounds. However, we should not becompletely satisfied with its current state.

Ohtsubo For instance, I recall the plan of action after Teijinacquired U.S.-based Continental Structural Plastics Holdings
Corporation (CSP) in 2017. For starters, a major deal like thisnever goes according to the initial plan, but I sensed a lack ofmomentum after the acquisition. As an outside director, I went
to see what was actually going on over there. After talking
with a local manager, I quickly figured out that he fully

Suzuki I am thankful that our outside directors are willing toput their foot on the accelerator rather than the brakes.

Suzuki I will keep that in mind.

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