NITORI Group’s Sustainability

NITORI Group’sE SGMateriality 7

Effective corporate governanceDiscussion with Outside Directors 1

Non-Audit and Supervisory( Committee)
Members

the Company’s Board of Directors is making progress in discussing

Generation 1.0 arrangement was what we might call an extension

major themes such as management strategy and we’re lookingof relationships between friends. Generation 2.0 could be

forward to future discussions.

described as an arrangement whereby outside directors keep

Yoshizawa: This is the ﬁrst time I’ve ever been a member of thecorporate governance and compliance in mind as they monitor

Board of Directors at a listed company. I’ve learned a great dealmanagement. I think Japan is currently in Generation 2.0. andpersonally from attending the Company’s Board meetings. At other

Generation 3.0 is an arrangement whereby, in addition to the rolecompanies’ Board meetings that I experienced in Japan, there wasoutside directors play in Generation 2.0, they not only advise on

often very little opportunity to discuss business strategy. On themanagement strategy, but also become involved in its formulation.

other hand, my impression is that Board meetings at venture

Based on my own experience of running a company, my comments

companies overseas are very strategic and discussions are guided

are intended to enable discussion of management strategy from aby the directors’ skills, drawing on their various perspectives as

Generation 3.0 perspective. As an outside director, I try to probe

specialist professionals. To be honest, before attending the meetings

deeply, primarily as a means of helping to formulate betterof the Company’s Board of Directors, I thought the atmospheremanagement strategy.

might be similar to the ﬁrst group of companies I’d experienced, but

Miyauchi: I think the current executive directors are a great team:once I attended meetings here, I gained the deﬁnite impression thatthey’re extremely passionate about their work, they work quickly,

this Board belongs to the second group. I’m very impressed by how

and they thoroughly understand the relevant issues. It’s important

the Board of Directors discusses strategy properly.

that this continues to be the case. And this is the perspective fromwhich I intend to approach monitoring.

We held a conversation with three outside directors who are non-Audit and Supervisory Committee Members: Mr. Sadayuki Sakakibara, Mr.
Yoshihiko Miyauchi, and Ms. Naoko Yoshizawa (newly appointed). The themes discussed included the distinguishing characteristics of theNITORI Group’s Board of Directors and the sustainable growth of the NITORI Group. The conversation was led by Kenichiro Aoya, Executive
Ofﬁcer and General Manager of the Legal Ofﬁce.
*To avoid spreading COVID-19, those present wore face masks during the discussion and removed their masks only to have their photographs taken.

At the shareholders’ meeting two female directors were appointed.
Could you tell us what changes you’re expecting with theaddition of a female perspective?

Sakakibara: I regard the addition of two female directors as a major
reform. With women’s participation, the atmosphere at Board
meetings will change completely and both the content and qualityof comments will naturally differ from before, especially as opinionsfrom a new perspective are voiced. And when you consider that, in49

Enhancing the Effectiveness of the Board of Directors

strategy have become the main topics of discussion. I have a real

Could you tell us what you regard as the distinguishing
characteristics of the Company’s Board of Directors, having
attended its meetings?

engage in enthusiastic discussion while emphasizing a strategic

sense that this Board of Directors has evolved into a forum that canapproach, considering practical management strategy from athe case of consumer goods such as the products the Companyhandles, the authority for purchasing decisions often lies withwomen, a management strategy focused on women’s perspective
is indispensable. In terms of diversity too, we could perhaps add
another female member. And I also think it would be a good idea toHave there been any occasions when you felt that yourcomments at a Board meeting changed the result of a
discussion, or led to improvements in how duties are executedor how the Board of Directors is run?

Sakakibara: Although the Company’s Board of Directors is stilldeveloping, I think it has evolved signiﬁcantly even in just these last
two years. The opinions of outside directors including myself aretaken seriously; for example, the suggestion that we should allow
more time to discuss medium- to long-term strategy was properlyaddressed. I feel that the executive directors are very quick to act.
Miyauchi: When the outside directors offer their opinions, theexecutive directors give those opinions serious thought and come

Sakakibara: It’s been exactly two years since I assumed thelong-term perspective, and incorporating the shareholder

position of outside director. During that time, the outwardperspective.

characteristic that struck me most was that NITORI Group’s Board

Miyauchi: In my case, a year has passed since I became anof Directors is an extremely objective and progressive. Theoutside director, so I am now in my second year. To address thepercentage of members who are independent outside directors isquestion from a corporate governance perspective, I believe thatover 40%, and as the skills matrix shows, the mix of outside

the essential purpose of governance is to help a company continue

directors’ skills is extremely well-balanced. In terms of the way

generating value over the medium to long term. The responsibility

meetings are run too, the outside directors lead a lively exchange

for generating value lies with the executive directors, and it’s theof opinions, and for that reason, I feel that it really is a Board ofrole of the Board of Directors to monitor whether they are on theDirectors in the true sense. The board chairperson, Akio Nitori, isright track toward their purpose and goals. That being the case, myan owner-manager, but he always listens to the outside directors’

own focus is on monitoring from an external perspective as aopinions and comments and reflects them in his business

representative of the market. In fact, the Company’s Board ofmanagement faithfully and with a sense of urgency. I feel that thisDirectors is moving in the right direction faster than I imagined it

Sakakibara: As I mentioned

Sakakibara: DX has become a key shared concept, not onlyis a distinguishing characteristic lacking in other companies

would. It may still be developing in some respects, but in light of myearlier, I monitor andthroughout Japan, but throughout the entire world. Yet, it seems tomanaged by their founders. As outside directors are in the position

own experiences as an outside director at more than tencomment from theme that many companies in Japan are taking an over-simplisticof monitoring the executive directors, I try to comment from thecompanies, I think the Company’s Board of Directors is on course

perspective of shareholders

approach by directly equating DX to IT. IT and AI are merely tools;

perspective of shareholders and society at large. I can see that theto be top class, so to speak. I’ve also been extremely impressed byand society at large. There

the real objective lies elsewhere. That’s to reform businesses andexecutive directors take our comments very seriously, and instigate

how the Board’s chairperson, Akio Nitori, who is also theare three generations ofoperations. In addition to reforming the Company’s actualactions and improvements accordingly. When I ﬁrst assumed thisCompany’s founder, listens with humility to the outside directors’

outside directorbusinesses for the DX era, therefore, we will also need to reform all

position, numerous detailed business execution-related matters

opinions, and in no time at all, carefully considers them andarrangements: Generation

the operations that make up each business, including store

would be selected for discussion by the Board of Directors, but

incorporates them into the business. Mr. Sakakibara and I both

1.0, Generation 2.0, andoperations and the product mix. I think we should treat DX as ourrecently, matters relating to management strategy and businesshave experience of running companies ourselves, and in our view

Generation 3.0. The

actual management strategy and create a specialized internal

have non-Japanese directors in future from a diversity standpoint.
Miyauchi: I think of diversity as meaning variety. But it’s not a caseof a woman speaking on behalf of women or a man speaking on
behalf of men. What will be important as the next step, I think, will
be to avoid categorizing people in terms of separate genders or
nationalities in the name of “diversity,” and instead, to ensure thatpeople with an array of different backgrounds and skills can bringup with plans. Even if the plans don’t come to fruition, the outside
directors have fulﬁlled their duty by expressing their opinions.
When I give my opinions to the Company’s executive directors, I
feel conﬁdent that they will always seriously discuss the issues Iraise. From that point of view, I feel that my role as an outside
director at the Company is meaningful.

variety into debates.

Achieving Sustainable Growth and Enhancing
Corporate Value for the Company

Could you tell us what perspectives you yourselves adopt whencommenting or expressing opinions at Board meetings?

Could you tell us the potential issues to be aware of when
implementing digital transformation (DX) in NITORI Group overthe medium to long term?

Sadayuki Sakakibara
Outside Director, NITORI Group50

Could you tell us how the sustainable growth of NITORI Groupshould be combined and balanced with ESG and SDGs?

operating sites need to be put in place to focus on this strategic

as a whole to move in a single direction globally, this issuearea. There can be no doubt that overseas expansion isbecomes very difﬁcult to deal with. To cite some speciﬁc examples,

only develop the physical

Sakakibara: In the last year or two, ESG and SDGs have come tochallenging. Accordingly, I believe that, rather than trying to control

the Company needs to consider how to implement employee

infrastructure necessary forbe recognized as the top priority in business management

overseas operations from Japan, it’s only once human resources

appraisals and management accounting. It will be important toDX, but should alsoworldwide. However, instead of undertaking related initiatives for

totally committed to a certain country are living and working there

design systems that take local approaches into account.

deliberate on how to create

nebulous reasons, as in the past, we should engage with ESG andthat the ﬁrst signs of success will emerge. The Company has only

Meanwhile, another issue is, of course, human resources. Aa new NITORI Group,

SDGs as key issues for the company, acknowledging that ourjust made it to the start line in terms of global businesscompany can’t just start managing overseas operations overnight if

drawing on the opinions ofbusiness depends on doing so to remain viable. Amid major

development. I think it should develop specialist human resources

experience hasn’t been accumulated well in advance. I’m well

the outside directors.

worldwide trends including efforts to achieve net-zero carbon

who can formulate overseas strategy, and undertake upfront

aware that the Company’s investing effort in developing human

Miyauchi: We should thinkemissions by 2050, and to address human rights issues, NITORI

investment, while holding more discussions including exchanges ofresources, but it’s important to tackle the issue of how to cultivate
individuals capable of management suited to different countries
and regions from a young age.

organization to promote it.
This organization should not

Yoshihiko Miyauchi

Outside Director, NITORI Group

Group cannot survive as an enterprise unless it sets out its policy

opinions with outside directors.

incorporated into, or combined with, the Company’s main businessand priorities. At this very moment we’re at a fork in the road, andMiyauchi: It’s fantastic that the entire company is heading in themodel. Effective use of DX might enable us to change NITORI

as a company it will be crucial to have guiding principles.

same direction, guided by a vision for the next ten years. Looking

Group’s business formats in positive ways. However, doing so will

Miyauchi: I too sense rapid change. With regard to assessments byback at the Company’s business model to date, it hasn’t branchedrequire human resources with the business management skills toorganizations such as ESG assessment bodies, for the time beingout into new products or services, but has instead concentrated ondetermine the changes to be made; I therefore think we should

I think we have no choice but to aim for just a “pass mark,” but inits original furniture and home fashion businesses as a means of

Sakakibara: An important role of the Board of Directors is choosing

develop such human resources.

future we must earn better assessments in a way that is workablebuilding a wide network of stores and achieving success. And now

the next generation of senior managers. In fact, one could even

Yoshizawa: I believe there are three hurdles to overcome infrom a business perspective. This is because corporate activities

that it’s become a leading company in the domestic arena, thesay that taking the lead in the replacement of senior management

about how DX could beimplementing DX. The ﬁrst is the “ideas hurdle,” the second is theare set to come under increasing pressure from outside, bothCompany’s taken on the ambitious task of trying to do two difﬁcult

is another one of our key functions as outside directors. The“investment decision hurdle,” and the third is the “execution hurdle.”

socially and politically. In future, we should aim to be among thethings at the same time: enter the markets for new formats andCompany has set up a discretionary Nominating andI myself often talk to companies about DX, and the most common

top companies that lead the way in terms of ESG and SDGs, asservices, and advance into new geographical areas overseas. BothCompensation Committee, so the Board of Directors needs to because of failure for DX initiatives is the poor quality of the initialwell as in other areas. I see this as the path we must follow.

of these endeavors require knowledge, but if the Company is tokept fully informed of the types of discussions that take place atideas on which they’re based. The ﬁrst requirement when

Yoshizawa: Given that shareholders provide the capital that funds

make progress on these fronts, what it lacks above all are human

this committee. I also believe that key issues and strategies

implementing DX is usually to conduct a POC (Proof of Concept),sustainable growth, I think it’s essential to focus action on theresources. The Company needs to engage in serious, probing

shouldn’t be discussed only at meetings of the Board of Directors. I

but POCs generally achieve only a 20% success rate. Or it might

issues that are currently of greatest concern among institutional

discussions to determine how to develop the human resources thatthink it would be a good idea to also have something like abe even less than that. Accordingly, the reality is that, unless a

investors and other shareholders—namely, the environment, andwill be central to its plans. The fact is that it’s trying to do something

separate discussion forum made up entirely of outside directors.

DX-related idea proves to be at least ﬁve times more successful

climate change in particular. As the Company’s Integrated Report

unprecedented that no other retail or services business has everMiyauchi: The Company shouldn’t aim merely to be a corporate

than usual at the POC stage, it won’t be a worthwhile investment.

shows, its initiatives to tackle environmental issues have madedone. Japan boasts numerous outstanding retail and services

governance high-flier by Japanese standards, within the framework

So, the number of high-quality ideas that can be generated at thegreat progress. However, when business expands, distribution

businesses, but few of them have been successful outside thisof the Japanese Companies Act; it should aim to lead the way

beginning is important. The next most common pattern of failure iscenters and stores, for example, increase, and this results in a vast

country. So, I’m really looking forward to seeing the Company

overseas as well. And surely it should also consider the future

an inability to get others involved. Within a company, individual

number of route permutations. It may therefore become impossible

make inroads overseas according to the NITORI Way, and mypossibility of changing its corporate governance structure topeople and departments have their own differing opinions andto improve the efﬁciency of distribution routes from within theexpectations are high. That’s another reason for the Company tobecome a Company with a Nominating Committee, etc. Progressaims. But, when implementing DX, it’s essential for the entire

existing system. For that reason, NITORI Group always needs tohold repeated discussions as a matter of urgency and put its plans

is being made in delegating business execution-related matters tocompany to proceed based on a shared understanding. DX is a

be taking action focused on the next step ahead, such as

into action.

the executive directors, but I also think it would be great if we could

considering new technologies now.

Yoshizawa: In my own experience, growth in the size of overseas

create a setup whereby even more authority for reporting, such asoperating sites gives rise to the issue of how to ensure effective

monthly reporting, is delegated to executive directors to enable

Could you tell us your thoughts regarding the challenges ofglobalization?

governance over them. It’s important to delegate certain aspects ofmore dynamic discussion of medium- to long-term topics.

of failure, which is employing low-quality solutions to issues. For

Sakakibara: My perception is that the Company’s global businessmarkets, but in cases where it’s necessary for the NITORI Group

example, if one takes a tools-based approach to dealing with adevelopment is still far from adequate. Growth in the Group’s global

certain issue, and decides from the start to solve the issue usingbusiness will be crucial to achieve its mission and vision, but simply

AI, that mindset is in itself misguided. AI is just a means to an end;

persisting with the current way of doing things won’t be enough.

there are many other factors and choices to be considered when

In terms of the organization,

solving an issue. Failing to think about those other elements is afor instance, the Groupmistake. The keys to avoiding failures such as these areshould create an internal

commitment to DX on the part of the management, and a sharedorganization dedicatedunderstanding among employees. And, when coming up with

exclusively to global

ideas, it’s important to ensure diversity by, for instance, introducing

business development.

a variety of opinions from outside the company. This is because

Overseas strategy is apeople inside a company sometimes regard things as normal when

specialist ﬁeld that requires

they’re actually not.

sophisticated skills; anbusiness reform aimed at providing added value to customers. As
it entails creating an organization and corporate culture that can
provide added value continuously, I believe it’s necessary toinvolve the entire company. And next we come to the third patternorganization and overseas
51

Could you tell us your thoughts on further strengthening theCompany’s corporate governance?

governance to local operating sites that fully understand their own

Naoko Yoshizawa

Outside Director, NITORI Group(newly appointed)

52