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Executive roundtable

Mutsuo Iwai

Main Kohda

Yukiko Nagashima

Masato Kitera

Tetsuya Shoji

Chairperson of the Board

Independent Outside Director

Independent Outside Director

Independent Outside Director

Independent Outside Director

How do we view the JT Group’s governance?
Corporate governance in pursuit of the 4S model, ourmanagement principle
Iwai

As a corporation with an Audit & Supervisory

Board, JT manages its organization and businesses with
objectivity and neutrality, and has been enhancing its supervisory functions. In addition to slimming down the Boardof Directors and introducing an Executive Officer system, in2012 we brought in Outside Directors, which now hold fourof the nine Board of Directors’ seats. We have built an effective corporate governance system through measures including the establishment of the Advisory Panel on Nomination
and Compensation, comprised entirely of directors who
do not serve as Executive Officers, more than half of them
Independent Outside Directors.
The JT Group believes that corporate governance is a framework for transparent, fair, timely and decisive decision-making
in pursuit of the 4S model, our core management principle.
Good governance is a priority issue in the recently revised
JT Group materiality, and we are working to further enhance
governance to ensure that we remain a corporation that canfulfill and win the trust of our many stakeholders.

Kohda

I have had the pleasure of working with the JT

Shoji

For good governance to reach throughout anGroup as an Outside Director since June 2012, when the of-organization, I think the diversity and inclusion of its board

fice was first established, and I’ve enjoyed many opportuni-means a lot, which we see in the Outside Directors on the JTties to visit Group operations and tobacco sourcing regions

board. With different backgrounds and specialties, each of

in several countries. Most recently I visited a subsidiary in

you views and handles things differently. In not accommo-

Brazil, where I was impressed with how well and consistent-

dating your views or concerns to suit JT practices, you eachly the organization has absorbed the 4S model. The plantbring unique experience and ideas to the table in making

makes and demonstrates the policy of worker safety first,

decisions. I believe our ability to discuss matters from di-and the growers are treated as the center of leaf-tobaccoverse viewpoints leads to more effective advice and support

production. In multiple situations I have been able to experi-

for decision makers. I feel strongly that the Company seri-

ence how much the Company cherishes its people.

ously considers the opinions and perspectives we offer.

What do you think are the main challenges
for JT governance?
Nagashima If there is an illness called “overserious gov-

ernance,” we’d better check to be sure that JT doesn’t haveit from time to time. I say this because JT’s culture is to do
everything seriously, and the flip side of that is overdoing it
and harming ourselves, which we have to watch for. If governance is steering the ship, as Mr. Iwai has said, we have tokeep building our helmsmanship skills. That by itself, I think,indicates self-evolution, and to do that we have to continually ask why we’re doing it and maintain a balanced view.

At JT, every discussion, decision-making processes andresponse to negative events refers to the 4S model, with its

In a recent roundtable talk, our chairperson and Outside Directors discussed
what JT can do for the future of theGroup and society from the standpointof governance. Here are some highlights.

Iwai

We created the 4S model when JT first went

focus on four kinds of stakeholders. I can’t think of anotherpublic, thinking what the Company should be moving for-company in which these management principles have soward. Having been personally involved in the work of mak-thoroughly penetrated. I think this is a JT Group strength.

ing and promoting the model over the years, I’m delighted
to know that our effort has successfully reached those on

Nagashima I feel the 4S model has become the very flesh

and blood of the JT Group, to a surprising degree. I think we
can fairly attribute this to the great deal of time the Company has allowed for the model to become established as partof its mission to do the tobacco business right. I think the
4S model has permeated the organization through the daily
practice of doing business right in accordance with the 4S
model.

the production floors and work fronts. In Japanese the word
“governance” is usually translated to mean “management
and oversight,” but its original meaning is to grasp the helmand steer. So I think that within JT, governance should mean
paying close attention to the JT Group Purpose we’ve justestablished and applying the 4S model in steering the JT
Group ship on the right course. As we move forward we
make it a rule to follow only the correct course and avoid
shortcuts, even if there is one, and given that conviction weare able to take some risks along the way. It’s my job to build

KiteraI feel JT has learned and come to embrace

the important aspects of governance through years ofan environment where you, the Outside Directors, can speak
frankly to help JT on a successful voyage.

KiteraIn Japanese society the means to the goal

often becomes the goal. When I ask people in other companies why they are doing a given thing, for example, I often
hear, “doing it is meaningful by itself.” This is my second year

challenge in the tobacco business. I’m confident that theat JT as an Outside Director, and I’ve yet to see the means toorganization has integrated good governance practices due

the goal become the goal itself here. This I think is a strength

to the broad understanding that unless good governanceof JT in operating globally. I have no doubt that here at JT,

reaches across the entire Group, not just the head office, thisgoals are set in pursuit of what is essential.

business would not be possible.

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Executive roundtable

You’re right on point there. Now we have athan ever. We thought the “fulfilling moments” that tobac-

Group Purpose spread throughout the organization will

excellence. We may need to work harder to communicate

way to be clearer that what we offer society, markets andco products offer, much as luxury products do, would beremain a continuing challenge. As our Tokyo head officethat about ourselves.

consumers as we do business serves the purposes of whatmeaningful to future society rather than just useful, and thus

we do. I think we’re ready with ways to increase the value ofwould continue to be highly valuable. That thinking led toour people, while allowing everyone in the firm to confirm

the Purpose.

Shoji

Ensuring that the 4S model and the new JT

world how it is embracing these challenges and pushing for

manages our operations, including the large-scale tobacco
business, we have to be sure we are steering in the right
direction, with the right touch. At the same time our domestic and international tobacco businesses are now operating

Iwai

Ms. Kohda often tells me JT should work hard-

er on more PR. (laughs)

under a unified team, with head office functions moved to

In deciding between perfection and speed, JT seems to be

Geneva, and a range of functional shifts are moving forward,

biased toward perfection. That said, it can sometimes makeincluding the delegation of authority. As this progresses I

big decisions surprisingly fast. From the governance stand-understand we are taking a fresh look at how we govern

point it would help with the evolution of our decision-mak-international operations from Japan. With the JT Group Pur-ing if we on the board undertake more frequent and precise

pose and 4S model as shared touchstones, I think they will

reviews of major investments. In that context my personal

generally guide our decisions.

challenge is to eliminate, even if imperfectly, the asymmetric
distribution of information between Outside Directors andExecutive Officers. I’d like to encourage you to engage indiscussions while actively exchanging opinions with regularShoji

the meaning of their personal commitment to our business.

Because the ability to enjoy such moments is a subjective
concept, different for each person, we know we can’t makeKohda

I take the JT Group Purpose to be an im-them happen for everyone. What we can do may be limited

mensely deep theme. Roughly speaking it’s about some-given such diversity in the concept, in addition to different

thing at the root of capitalism and human life. People havetime frames and various life situations. In discussing ex-

been pushing straight toward affluence. There is justified

isting and future business and new products and making

concern, however, that we have sacrificed a lot to get there.

decisions in board meetings, I don’t think of the Purpose

JT raises this question and is prepared to rise to the chal-as all-encompassing or almighty. I think it would be great,

lenge. It encourages its employees to explore this kind ofthough, if we can, within its limitations, discuss the points

awareness for themselves and go deeper. I want JT to takeconnecting what JT can do with what society wants.

its time in cultivating and extending the Purpose.
Kohda

employees.

I think that JT is an organization in whichpeople, including us directors, put lots of enthusiasm into

JT is reliably functioning as a corporation with an Audit & Su-

discussions that might seem naive to outsiders.I think it’s apervisory Board. In the medium term, I think it’s also import-

good quality, in any case.

ant to regularly examine whether JT’s governance system isreliably functioning, while deepening our understanding of

Shoji

what society demands of us, such as the Corporate Gover-Every person sees and interprets this concept

differently. But the Purpose clarifies the grounds for ournance Code.

decisions as we work to be a company that suggests ways
Kohda

Taking a bird’s-eye view, JT has what we mighteach have different metrics for them. Board meetings arecall “square” DNA, because it began as a government corpo-

and what role should the Board of Directors

forums for discussing that kind of difference in viewpoint,

ration with exclusive rights to market tobacco products. Our

play in actualizing that Purpose?

where what you called “naive” discussions are practical, I

people are serious, nearly to a fault, and the agenda items
that come up in board meetings are perfectly prepared. Thatsaid, JT people are not satisfied with perfection. Their DNA
demands constant improvement. When I need something
explained and ask a tricky question, they look into it seriously and take specific action. I think that may be an importantdriver that’s brought JT to where it is today. While I think
seriousness is an important quality, being too square canmake us inflexible or overcautious, leading to missing good
opportunities.

Fulfilling Moments, Enriching Life
KiteraI think the recently established JT Group

Purpose is brilliant in ways that no other company has
shown. This has a lot to do with the difficulty of the tobacco
business, which we cannot overcome without this Purpose.
If we were to take what the Company does now for granted

Nagashima In creating the Purpose I didn’t ask the proj-

think. We need to always look back to the beginning. Giv-

ect team to make something pretty, but rather I empha-

en that the definition of what the Purpose embodies will

sized the importance of maintaining a process in whichchange with time and technologies, how can we incorpo-

everyone feels ownership of the result and can proudly

rate it in our products and services? It’s sobering to thinksay, “This is our Purpose.” I’m very happy to know that so

about our responsibility to evolve the board to support thismuch time went into that process. It did take time, but I

kind of visioning from the viewpoints of consumers, markets

think it’s wonderful that each person involved is able toand society.

own it and give it life.
Kiteraand write it down as the Purpose, we wouldn’t need it. The
Purpose is there to help us to go beyond what we’re doing

Iwai

In discussing the Purpose we went deeper

When you mention naive discussions, I recall

that I felt much the same in the diplomatic community I

JT is a global company, making active social contributions

now. Executive Officers should use the JT Group Purpose as

on two points: how society will change and what we canwas part of before. Whenever we discuss what or how to do

through taking leadership in Japan in promoting diversity

a guiding star in promoting internal discussion that leads to

do. In a society where, following various developments,

things, if we don’t begin with naive discussion, we may get

and inclusion in workplaces, but from my perspective JT has

real action.

efficiency is given too much value, we projected that

off on the wrong foot. So now I feel I’m up for a lot of naive

bringing our humanity back would be more important

discussion to help find our best path.

sometimes been too modest. I’d like JT to further show the092

to experience fulfilling moments. We four Outside Directors

What is your hope for the JT Group Purpose,

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Executive roundtable

Nagashima Count me in for naive discussion as well. At

the same time, I want to help measure up to market expectations, with a certain urgency in mind.

Attitudes toward board discussions
Kohda

Nagashima Looking back over the year I notice a re-cord-high percentage of individuals among JT investors. On

the capital markets and shareholders in accordance with thebetween us and those who have been Executive Officers at

the markets institutional investors are more active, and we

4S model with a sense of great responsibility. Through deepJT. We can’t bridge that gap, and we mustn’t try to bridge it

have to conduct higher-quality and more active dialogue

discussions about specifically how we should express thatby force. I think it’s important to stay aware that the value

with them. So we’re running a study group focusing on

responsibility, we continue to clearly inform them about

Outside Directors can contribute is all the greater for that

this. Taking a fresh look at where JT stands now, Executive

our capital policies, investment priorities and shareholder

asymmetry.

Officers are discussing how to approach investors for dia-

returns.

Before each board meeting JT provides us

Transparency of information is also important. A given factwith detailed explanations of the agenda items. Recently

can be seen from different perspectives, but the fact itself

it’s become regular practice for the four of us to attend themust not be omitted. At JT, this is assured.

briefings together. Those sessions ahead of the meetings areimportant opportunities for sharing information and exchanging views, and I am allowed to ask pointed questions.
I always get detailed feedback from the Executive Officers. In
any discussions I feel well-informed, not just of the specificsubject but of the related risks and actions involved as well.
That’s why I strongly feel that JT maintains a fair discussion
practice.

Iwai

Nagashima The asymmetric distribution of informationthat Chairperson Iwai mentioned is an important difference

logue as well, as a high priority. We Outside Directors havebeen given opportunities to get updated on what’s been
decided by the Executive Officers, including examination
to determine whether a decision is truly the right one. On
those occasions we can take advantage of the differences

KiteraI don’t think the functions of Outside Directors

are the same for all corporations; they vary depending oneach situation. At JT I feel a good breathing balance between Outside Directors and Executive Officers. There arein viewpoint between Executive Officers and Outside Directors. I think it would be wonderful if we can use the energy
those differences generate as opportunities to improve ourknowledge.

We are working to increase the satisfaction of

The new Purpose clarifies the direction JT should take forthe long term, so we should follow through on what we
promise with specific actions and return the results to ourstakeholders—in other words, deliver value to our shareholders, investors, consumers and employees. We will facevarious challenges along the way, but we’re committed
to discussing with the board how to overcome them andevolve our strategies for the better.

times when we Outside Directors have to oversee Executive
Officers to fulfill our intended function. At JT I feel that’s handled successfully, by both parties breathing together rather
than unilaterally, dominated by “supervisors.”

Dialogue with capital markets
Kohda

When I came in as an Outside Director in 2012

there were 51,000 JT shareholders. By the end of 2022 thatgrew to over 700,000. Despite divestment by institutions,
I understand that JT remains trusted by individual shareholders because it maintains a rock-solid financial base andreliable shareholder returns.
Shoji

This is only my second year as an Outside

Director, so there’s a gap between you three and me interms of the information I have, of course. In briefings aheadof board meetings I’m able to check the historical background of a given topic, and I can also catch up with theothers when I get private briefing time. So my knowledge
on agenda topics is deeper by the time the board meeting
happens. In the board meetings of other companies, I often
see agenda items that are not fully explained, obviously
showing the desire of the Executive Officers to push them

In watching what some individual investors abroad havebeen doing, totally disregarding what’s happening to thecorporations they invest in, I strongly feel that we should
communicate with individual investors, from the PR standpoint in addition to IR, to inform them fully and accurately. I
think this is one of the major challenges JT will have to embrace. I’m aware that JT is able to operate with the supportof individual investors, so I’ve been stressing the importanceof communication, which boils down to how we respond tothat fact.

through. JT’s fair approach to raising agenda items and moretransparent discussions are very helpful.

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