GOVERNANCE
Enhancement of corporate governance is a key management priority for the JT Group as it continuallyworks to improve.
This chapter provides an overview and outlines our
initiatives to enhance Group governance, which supports all our business activities, setting out a framework for transparent, fair, timely and bold decision-making in pursuit of the 4S model.
Here, our Chairperson of the Board and Outside Directors explain details of board discussions and their work
to enhance governance.

090

Message from the Chairperson

092

Messages from Outside Directors

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102

Management structure108	Internal controls

088Japan Tobacco Inc.

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Message from the Chairperson“

 oing all we can to create a better future forD
the JT Group and our society as a whole”

Mutsuo Iwai
Chairperson

Revision of Shareholder Return Policy
For sustainable profit growth over the mid to long term,
Company policy balances profit growth with shareholder
returns, with highest investment priority placed on growthof the tobacco business. In order to fully embody this established principle and moreover demonstrate our resolve tobuild shareholder returns through profit growth, we on the

Board have revised our shareholder return policy. In discussion, we agreed that it is important to follow through on our
strategy to attain our mid-term goals for RRP and HTS, andpromptly show results that contribute to sustainable profit
growth.

Stronger corporate governance
I was elected to chair the Board of Directors of Japan
Tobacco Inc. effective from the beginning of fiscal 2022.
To keep building our corporate value, especially in anenvironment of constant, drastic change, it is vital that now,
more than ever, we take our decisions and actions to thenext level. Just as all our directors make the most of theirrespective skills and expert knowledge, I too will tap into myexperience as deputy chair up to fiscal 2021 and as a leader
in the Group’s tobacco and processed food businesses
for years before, and do my utmost to help cultivate ourcorporate value over the mid to long term.
In meetings of the Board in fiscal 2021, we discussed an ideal operating model for sustainable profit growth, businessstrategies to that end, and corporate governance practices
to help sustain them. We also considered ways to help makeour society more sustainable, an essential condition for ourown sustainable growth. Please let me now share some ofwhat came out of those discussions.

A stronger operating model for the tobacco business
As of January 2022, the Company has introduced a new
operating model that unifies our former Japanese-domestic
tobacco business and international tobacco business. The
Board of Directors approved this reorganization as a necessity for the Company’s mid- and long-term growth. Further,
our Outside Directors expressed strong support for it aswell, emphasizing that this will facilitate the evolution of theinitiatives we have been taking as a global company alongmore forward-looking lines.
At the same time, we made decisions on measures toreinforce our competitiveness in the domestic market,
including an early voluntary retirement program. The Boardof Directors instructed Executive Officers to communicate
the new measures to everyone in the Company in ways thatwill fuel motivation, assuring that employees affected by the
new measures, especially those retiring early, are fully provided with care, and emphasizing that the success or failureof the new operating model depends on the awareness andactions of not just the management team but of each andevery employee going forward.

2027 goals for RRP and HTS
While the Company will work to ensure sustainable growthon the strength of a unified tobacco business, it is important
to clearly show our road map for success. In February 2022,
we publicly announced the goals we aim to achieve by 2027.
Ahead of this announcement, the Board had received reports
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from executive officers on the status of RRP-related markets,
product development, customer response to our products, andbusiness risks. I understand that the tobacco business is steadily
implementing global initiatives, and I hope to see yet further
progress as we enhance investment under Business Plan 2022.

I believe that ensuring the Company can achieve sustainable mid- and long-term profit growth – while assuring
stakeholder interests and contributing, ultimately, to thedevelopment of our economy and society – necessitatesfurther reinforcing corporate governance. In this context,
the effectiveness of the Board of Directors, which is responsible for supervising all the Company’s businesses, is especially important. For that reason, we assess the effectivenessof the Board every year, and proactively work to address any
challenges revealed from the assessment results, so as tomake our corporate governance practices even better. An
Outside Director commented that the Company’s Board isalready far more effective than those of many companies,
and yet we will commit ourselves to facing the challenges
identified by our assessments and continue working to
improve.

We also place high value on our discussions with stakeholders, including those representing the capital markets, as well
as a range of monitoring results, and continually create opportunities to hear shareholder opinions through dialogue
about our ESG responsibilities. The suggestions we receive
through these initiatives lead to discussion by the Board
on how to improve. For example, in fiscal 2021 we decided
to revise our KPI related to executive remuneration so as
to encourage sharing with investors at a deeper level, andstrengthen our commitment to growth over the medium
and longer terms.
4For details about assessments of Board effectiveness and our initiatives for
improvement, see P. 96.
4For details about executive remuneration, see P. 98.

Building sustainability for our businesses and our society
Our businesses are rooted in interaction with the society inwhich we operate. This is why, for our sustainable growth,
it is essential to contribute to social development throughour business operations. Based on this understanding, theCompany has made it a standard practice to involve theBoard of Directors in the processes of setting sustainability
goals, discussing specific measures to achieve them, andmanaging their progress. I believe this has borne impressive
fruit, such as new targets for greenhouse-gas emissions, environmental goals concerning our products and packaging,and our target ratio for women in management, as well as
the JT Group’s recent first report on human rights, whichsummarizes our initiatives in this area, especially regarding
our tobacco business. The Group’s progressive initiatives
have met with resounding support from our Outside

Directors, and I myself feel confident about them as well.
At the same time, I recognize the strong interest the capital
markets are demonstrating in what the Company is working
to achieve over the long term and our strategies for success.
The Board maintains close contact with our Executive
Officers to ensure that any insights are applied to ouroperations.
In light of our changing environment, popular interest in thesustainability of our businesses as well as the society wherein they operate will only grow. The JT Board of Directors
will continue our utmost effort, through dialogue with our
stakeholders, to help build a better society in which theGroup can sustainably grow.
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Messages from Outside Directors

I will do my utmost to help JT win better understanding among our
stakeholders.

Main Kohda
Independent Outside Director

I have long held a very positive evaluationof the JT Group as an organizationthat is highly aware of its own need for
self-transformation. I particularly value its
commitment to carefully and comprehensively designing initiatives to enhance
its operating model and optimizing its
workforce with further growth in mind,
constantly challenging itself and neverbeing satisfied with the status quo. Underpandemic conditions these initiatives
have required decisions that are far moreconsequential than is normally the case,but I believe that they have been the rightdecisions for cultivating the mid- to longterm growth of the Group.

In terms of sustainability, the JT Group
maintains an ambitious approach relative
to the industry as a whole, and I expect
it will follow through on those initiatives
to steadily achieve the goals set out in its
sustainability strategy. As market interestin corporate ESG responsibilities rises, it
is essential for us to maintain good communication with investors to foster theirpositive evaluation of the Group’s efforts,based on the understanding that we seesustainability as an investment rather thana cost. I will do my best to facilitate theseendeavors.

In a drastically-changing international environment, I will contributeto the sustainable development of the unique businesses that comprise the JT Group.

Masato Kitera
Independent Outside Director

I am committed to supporting the JT Group to embrace the kind of organizational evolution demanded by frequent and unanticipated change.

Yukiko Nagashima
Independent Outside Director

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Japan Tobacco Inc.

Currently, the JT Group is conducting
in-depth discussions regarding its purpose
and what it wants to become in the
future. Above and beyond the specificattributes of our vision, what I think isimportant in these kinds of discussions is
how its ethos is reflected in the ways weconduct our business, and whether all
employees have a sense of ownership inthat. Only with that accomplished, I think,will we truly become what we want tobe. While I understand that the Executive
Officers are already attending to this carefully, as a director, I want to help chart our
vision of the future as set out in the midterm Business Plan, incorporating eachbusiness and in sync with the purposes of
the Group.

It is also important for the Board of
Directors to pursue further discussion,from a long-term perspective, on such key
topics as what the Company aims to become. Concerning the assessment of theeffectiveness of the Board, I can confirm
that the necessary processes have been
well executed, and the results are being
fed back to the Board. Improving our
discussions from a long-term perspective
has been identified as a challenge for2022 and beyond. I will endeavor to help
enhance initiatives to support the Board incarrying forward, and improving, its work
for sustainable growth of the JT Group.

I vividly remember the days during mystay in Geneva, 20 years ago, when I
learned about JT’s global businesses
and ambitious M&A strategies. The
environment surrounding JT today is very
different. The global environment haschanged substantially just in the past few
years, with the pandemic and emerging
geopolitical risks. To win the understanding of investors and other stakeholders
under these circumstances, we must
effectively articulate our management
team’s directions for the Company, as wellas our determination to pursue them, inthe most supportive ways.

JT has adjusted its performance indicatorsfor executive remuneration to better
integrate its initiatives for mid- to longterm growth and to more thoroughlyshare our values with shareholders. This isnothing less than a strong commitment
from management. The recent inclusionof non-financial indicators is especially
positive, and we will ensure that ourassessment framework functions as intended and remains easy for stakeholders
to understand.

If everything seems under control, you’re not going fast enough.

Tetsuya Shoji
Independent Outside Director

I have only recently been selected as an
Outside Director of the JT Group, but I
understand that today’s capital market
expects JT to demonstrate how it willachieve and maintain sustainable growth
in a rapidly and radically changing
business environment. Originally a public
corporation, JT has evolved through manychanges, not least of which was privatization, to become what it is today – but
I believe that bolstering the confidenceof the capital market necessitates that it
continues to evolve and transform.
While working for Nippon Telegraph andTelephone, another formerly public corporation, I experienced major transformation
as well. The mindset I adopted to handle
that process is encapsulated by the quotefrom racing driver Mario Andretti above,
describing what I believe is an ideal mindset for facing change. Based on personal
experience, I believe that it is essential for
a company not to settle for the status quo,
but rather to constantly challenge it, or,
as I like to phrase it, “to advance, lead andmaintain an international perspective.”
It is vital to make a habit of continually
evolving and updating both ourselves
and our work. As a member of the Board,
I will work with the management team torise to the challenge of breaking free ofcomplacence, and fostering sustainablegrowth and development for the Group
as it continues to hone the high-quality
technology and innovative expertise it has
been cultivating for all these years.

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Corporate governanceCorporate governance structure

JT Group Compliance Committee and the Advisory Panel on
Nomination and Compensation, both established voluntarily. The former has outside experts serving in key roles; thelatter is comprised entirely of Directors who do not serve as
Executive Officers, and more than half of its members are
independent Outside Directors. We have also streamlined
our Board of Directors and expedited operational execution
by delegating authority to Executive Officers.

Our corporate governance system
General Meeting of Shareholders

Select/dismiss
members

Select/dismiss
members

Select/dismiss
members
Report results of
audit

Independent
AuditorBoard of Directors

Report10 directors(4 outside directors)

6 members(4 outside members)

ReportReport/propose

Oversee performance
Audit

JT Compliance Committee
Report/proposeCooperate

Audit & Supervisory
Board

5 members(3 outside members)

Audit & Supervisory
Board Members’
OfficeReportOperational
Review andBusiness
Assurance
Division

5 members(3 outside members)

President andChief Executive Officer

Internal
audit

Executive Officers
ReportDivisions
Group
audit

Subsidiaries

Legal and Compliance
Division

ReportInternal Director

Advisory Panel on Nomination
and Compensation

Internal Director and Executive Officer

Outside Director

Internal Auditor

Outside Auditor

Basic policy
The JT Group believes that corporate governance is aframework for transparent, fair, timely and decisive decision-making in pursuit of the 4S model, our management
principle. Pursuing the 4S model means striving to fulfill
our responsibilities to our valued consumers, shareholders,
employees and the wider society, carefully considering therespective interests of these key stakeholder groups, andexceeding their expectations wherever we can.

over the mid to long term, benefits our stakeholders and, inturn, helps to move the economy and society forward. We
believe that the Corporate Governance Code has high affinity with the 4S model, and fully comply with the principlesof the Corporate Governance Code, which has been revisedin June 2021 to include the principles of the Prime Market.
We will endeavor to continuously enhance our corporate
governance as a key management priority.

We have established the JT Corporate Governance Policy inrecognition that improvement in corporate governance isconducive to sustainable profit growth and corporate value

Please visit our website for more on the JT Corporate
Governance Policy.

Rationale behind current governance regime
We are strengthening objective and impartial management
oversight functions by positioning an independent and fair
Audit & Supervisory Board that appropriately oversees thejob performance of Executive Officers and Members of the094

Japan Tobacco Inc.

Board (hereinafter Directors).
We have built an effective corporate governance regime under the Audit & Supervisory Board’s oversight. It includes the

We continuously seek to improve corporate governance andincrease management transparency and objectivity through,for instance, the appointment of an additional Outside
Director and outside Audit & Supervisory Board member
in 2019 and further appointment of an additional Outside
Director in March 2022. Through such measures, we settled
upon our current corporate governance regime as we
believe it functions effectively with respect to operational
execution and oversight.

Board of Directors (met 13 times with 100% attendance rate in fiscal 2021)
Our Board of Directors is responsible for setting JT Groupmanagement strategies, making decisions on importantmatters and overseeing all operations. The Board meetsonce monthly as a general rule, and meets promptly
whenever necessary, in order to make a decision with regard
to the important matters, including those specified by laws
and regulations, and to supervise business execution. It also
receives reports on the state of operational execution fromthe Directors. It includes at least one-third of independent
Outside Directors with qualifications conducive to sustainable profit growth and the increase of corporate value inthe mid to long term in order to strengthen the supervisory

functions and make management transparent.
In March 2022, we amended the term of the Board of
Directors to one year from the previous two-year term inorder to build a management foundation to address thechanges in the business environment in a timely mannerand to strengthen our corporate governance by clearly
defining the responsibilities of the Directors and enhancing
trust with shareholders. The Board discussed importantmatters including the Business Plan and nomination of
Executive Officers in 2021.

Advisory Panel on Nomination and Compensation (met 5 times with 100% attendance rate in fiscal 2021)
The Advisory Panel on Nomination and Compensation’s
purpose is to render the Board’s decision-making moreobjective and transparent, and to upgrade the Board’s
oversight functions by having the Board deliberate on executive appointment and remuneration in accordance withresults of deliberation in the Panel. Its specific roles include
supporting the growth, including succession plans, of
executive candidates; deliberating on selection of nominees
for seats on the Board of Directors and Audit & Supervisory
Board and dismissal of designated Directors and Directors
also serving as Executive Officers; and reporting the resultsof deliberation on remuneration of Directors and Executive
Officers. In order to ensure its independence and objectivity,

the Panel is comprised entirely of Directors who do not serve
as Executive Officers, in which more than half of its members
are independent Outside Directors. The Panel determinedto elect a member from the independent Outside Directors
as its Chairperson starting March 2022. Ms. Main Kohda waselected as the Chairperson for FY2022 term. In 2021, it met
to specify the skills required of the Board of Directors; discuss
the development of a skills matrix; review remunerationlevels; review executive candidates; deliberate on candidates
for the Board of Directors nominations; and review the key
performance indicators (KPIs) for the executive bonus andperformance share units for FY2022.

Audit & Supervisory Board (met 15 times with 100% attendance rate)
The Audit & Supervisory Board conducts operational and accounting audits as an independent body serving the interestsof shareholders. It has five members, three of whom are outsiders, all of whom have experience in such fields as corporate
management, law, finance, and accounting. The Audit &Supervisory Board members proactively exercise their authority, including attending and speaking at Board of Directors

meetings and other important meetings as well as actively
inspecting business sites. In addition, they also conduct audits
appropriately from an objective viewpoint in accordance withthe characteristics of the duties of the independent outside/standing Audit & Supervisory Board members. In 2021, theAudit & Supervisory Board discussed issues including auditing
policies and preparation of Audit Report.
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Corporate governanceEvaluation of effectiveness of the Board of Directors

Succession planning

We annually evaluate the effectiveness of our Board of
Directors through a multi-step process. First, all Directors
and Audit & Supervisory Board members complete a
self-assessment questionnaire with regards to factors
including the Board’s operations, oversight function anddialogues with shareholders and investors. Second, theBoard’s administrative staff interview the Directors and Audit& Supervisory Board members individually as necessary

We place priority on fostering successive generations of executives who will manage our future operations, expanding
our pool of executive candidates and improving its quality.

programs ; and hold regular discussions on identification of
the mid- to long-term challenges the candidates are facing
and the policies we provide to support their growth.

To develop a steady stream of highly skilled, highly qualified
leaders capable of excelling in the global arena, we selectfuture executive candidates from each hierarchy throughGroup-wide open recruitment and nomination by top management. Our CEO, along with other senior management,
are deeply involved in these selections. Our CEO participates
in meetings held to support the next generation executives.
In these meetings, participants discuss which candidates
receive support to become the next generation executives
based on several factors. The first factor is based on close
examination of whether they have an excellent mind ofownership, corresponding to a high sense of ethics, integrity
and a broad perspective. The second factor is based on
their qualifications in terms of their abilities to accomplish
achievements through our Group’s growth strategies as
an executive or executive officer. Other factors include
the consideration of objective, external evaluation andcompetitiveness in markets. We also formulate development
programs, which provide a variety of challenging businessexperiences; review statuses of development based on the

Especially for those who are regarded highly qualified as our
directors or Audit & Supervisory Board members, we review
their development status and deliberate to enhance a succession plan and its planning process with input from both
external consultants and the independent Outside Directors
on our Advisory Panel on Nomination and Compensation.

Board operations

to delve deeper into their questionnaire responses andcompile the evaluation results. Lastly, the Board reviews andanalyzes the self-assessment results with the aim of further
improving its effectiveness. We take advice from external
consultants in drafting the questionnaire and analyzing theresults in order to ensure objectivity and further improve theevaluation process.
The evaluation items are as follows.

Composition (ratio between inside and outside members; diversity), Performance (frequency; stringency of agendas; pre-meeting briefing), Support & Coordination (coordination among Directors,
Audit & Supervisory Board members and internal auditing department; utilization of committees;
information-sharing outside Board), Discussion (fair and swift decision-making in line with management principle; unrestricted discussion), etc.

Oversight function

Reporting methods on business operations, Risk management system, Increase in awareness ofcompliance, Process of determining executives’ remuneration, Succession planning, etc.

Dialogues with sharehold- Sharing opinions from shareholders and investors,
Optimization of dialogue methods, etc.
ers and investors
The Board effectiveness evaluation for 2020 yielded generally positive results across all evaluation items as continuingfrom 2019. It confirmed that the Board is functioning not
only effectively but increasingly so. On the other hand, theevaluation identified areas where further improvement iswarranted. The areas of improvement include ones related
to the Board’s operations to further enhance discussions,and ones to further increase information-sharing that could
contribute to in-depth discussions on corporate governanceand further enhancements of the quality of the Board’s
decision-making. In addition, the Board has incorporated
the ongoing impact of the COVID-19 pandemic on the
Company’s business and worked on making the following
improvements throughout 2021.
E ffective and efficient operations of the Board of Directors
aimed to further enhance discussions– Continued to hold detailed pre-meeting briefings regarding material matters– Secured sufficient deliberation time by allocating appropriate time for each agendan

Key issues• Initiatives to further improve quality ofdeliberations and discussions• Enhancement of discussions from longterm perspective
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Japan Tobacco Inc.

– Continued online Board meetings and improved themeeting operations
Further enhancement in discussions and information sharing for better-quality decision-making by the Board– Shared enriched information on the following matters:• Updates on material measures concerning mid- to longterm strategies• Updates on material measures and verification of theireffectiveness• Updates on corporate governance and its future policies• Updates on dialogues with shareholders and investors• COVID-19 pandemic’s impact, countermeasures,and updates on Group employees and each businessn

As with the previous year, the results of the Board’s evaluation on its effectiveness in 2021 provided generally positive
feedback and exhibited improvements in the categories
mentioned above. Even 2022 onwards, the Board will continue to pursue improvements required for the issues listed
below, in order to continuously enhance its effectiveness.

Our action plans going forward• Continued improvements in Board of Directors operations• Further expansion of opportunities to discuss mid- to long-term strategies, etc.
• Further expansion of progress reporting and information sharing on key measures, etc.

As one example, our JT-Next Leaders Program, launched in2013, aims to continuously cultivate young executives whowill spearhead the JT Group globally. It is open to employees in their 30s or younger, including new recruits not yet
officially onboarded. Applicants are screened objectively
based on an integrated assessment with internal/external
evaluation, such as human assessment, 360-degree surveys,
and interviews with Executive Officers. We preferentially
support the successful applicants’ personal growth on aGroup-wide basis over multiple years. Through such programs, we are expanding our talent pool from the bottom
up age-wise as we continue to pursue reinforcement of ourhuman resources.

Our policy pertaining to listed subsidiary’s governance
We have a publicly-listed subsidiary, namely Torii
Pharmaceutical Co., Ltd. (hereinafter Torii), in light of the
management benefits of owning a subsidiary, including
capital market discipline. Another motivation is for Torii toacquire increased competitive advantage in its businessthrough factors, such as credibility building and recruitmentof excellent human resources, both of which are importantin the pharmaceutical business.
Together with Torii, we have built an integrated value chain
to collaborate efficiently with each other. Specifically, we
conduct R&D while Torii handles manufacturing, sales andpromotional activities. From a Group-wide perspective, we
continue to optimize our pharmaceutical business modeland deepen collaboration between JT and Torii by, forinstance, having consolidated all R&D and clinical development functions into JT.

In regard to owning a listed subsidiary, we believe it is anindispensable prerequisite for the subsidiary to maintainindependence in terms of management and to duly protect
its minority shareholders’ interests in order for, not only thesubsidiary, but also for the Group to grow in value. Therefore,
we are striving to build an appropriate governance regime
for Torii as a listed subsidiary.
We have instituted the Group’s Responsibility and Authority
Regulations as an internal decision-making regulation.
Torii has opted to adopt these regulations, thereby gaining
autonomy in terms of decision-making authority. Suchautonomy ensures its independence as a listed subsidiary.
Additionally, Torii is upgrading its governance regime’s
effectiveness by transiting to a majority-independent Boardof Directors, which was approved at its Annual General
Meeting of Shareholders on March 26, 2020.

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Corporate governance

Executive remuneration

Base salary
Respective shares*1
Payment method

Executive remuneration policy
The Board determines the policies on executive remuneration including the methodology on determination of each
Director’s remuneration. These policies are determined
after being deliberated and reported by the Advisory Panelon Nomination and Compensation comprised entirely of
Directors who do not serve as Executive Officers, in whichmore than half of whose members being independent
Outside Directors, in order to ensure independence andobjectivity. Based on these policies, our basic concept on
executive remuneration is as follows:

n

n

n

n

S et remuneration at an adequate level to retain personnel
with superior capabilities
Link remuneration to Company’s performance so as tomotivate executives to achieve their performance targets
Link remuneration to Company’s value in mid to long termEnsure transparency by implementing objective andquantitative frameworks

Executive remuneration setting process
We benchmark the amount of remuneration for each
Director based on a survey on remuneration for directors
conducted by third parties, taking into account the remuneration levels of major Japanese manufacturers with similar
sizes and profits that are expanding overseas. Specifically,
after benchmarking the level of base salaries for directors ofpeer companies, and the percentage of variable remuneration including annual bonuses and mid- to long-term incentives, the amount of remuneration for each Director is determined following various calculation methods stipulated ininternal regulations, based on deliberations at the Advisory
Panel on Nomination and Compensation, within the maximum amount approved at the Annual General Meeting.
Currently, the Board considers that the Representative
Director and President is most qualified to determine theamount of remuneration for each Director with having an
overview of the Company’s management and performanceas well as taking into account the evaluation on each
Director’s execution of duties. Based on this concept, theBoard delegates its determination to the Representative
Director and President. The Representative Director andPresident determines the amount of remuneration for each
Director including base salary, executive bonus, monetarycompensation claims for the allotment of restricted stock
remuneration and of performance share unit, based on various calculation methods stipulated in internal regulations,in accordance with deliberation at the Advisory Panel on
Nomination and Compensation. The Board concludes theRepresentative Director and President’s determination isaligned with the policies. In 2021, Masamichi Terabatake,the Representative Director and President, determined theamount of remuneration.
The remuneration for Audit & Supervisory Board members
is also benchmarked in the same way, and is determined bydeliberation among the Audit & Supervisory Board members
within the maximum amount approved at the Annual
General Meeting.

Composition of executive remuneration
Executive remuneration comprises of (1) monthly “base salary”, (2) “executive bonus” linked to the Company’s businessperformance in a fiscal year, as well as (3) “restricted stock
remuneration plan” and (4) “performance share unit plan”,
both of which are linked to the corporate value in the mid
to long term. The composition of executive remuneration is
as follows.

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Japan Tobacco Inc.

Short-term incentive

Base salary
Approx. 33~42%

Executive bonus
Approx. 31~35%
Cash

The remuneration is composed of base salary, executive
bonus, restricted stock remuneration plan and performance
share unit plan (PSU), as shown by percentage terms in the
diagram below, assuming baseline amounts for executive
bonuses and PSU. This composition reflects that their role isto achieve performance targets through day-to-day operational execution.

SharesShares & cash*3*1 Respective shares of total remuneration vary depending on each director’s duty, as shown by the range in the diagram.
*2 The ratio of restricted stock remuneration to PSU is 3:1*3 50% of the total amount of PSU is paid in cash for tax payment budget*4 T he diagram above is based on the Company’s assumptive performance and share price. Respective shares fluctuate in accordance with the fluctuations of theperformance and share price.

Directors who do not serve as Executive Officers(excluding Outside Directors)
Directors who do not serve as Executive Officers (excluding
Outside Directors) receive remuneration that consists of
the “base salary” alone and excludes performance-linked
remuneration, as they are responsible for determining
group-wide management strategies to enhance corporate
value and for fulfilling their supervisory function: for example, monitoring the execution of mid- to long-term growthstrategies, and others.

Outside Directors
Remuneration for Outside Directors is composed of “basesalary” alone and does not include performance-linked
compensation to ensure their independence. An Outside
Director who serves as the Chairperson of the Advisory
Panel on Nominations and Compensation receives remuneration at a level of the amount corresponding to theduty, in addition to the remuneration level of other Outside
Directors.

Audit & Supervisory Board Members
Remuneration for the Audit & Supervisory Board members is
composed of “base salary” alone in light of their key responsibility for conducting audits.

Components of executive remuneration
Base salary
Executives are remunerated with a monthly base salary as
per their responsibilities. They are individually evaluatedon achievement of their performance targets throughexecution of their duties that will lead to the Company’s sustainable profit growth. Performance targets are set throughinterviews with the Group CEO at the beginning of the fiscal
year and evaluated at the end of the year. The base salary
for the following fiscal year will be set within a certain range
reflecting the individual performance evaluations. However,an individual performance evaluation is not applicable for
the Group CEO.

Executive bonus
Directors who also serve as Executive Officers

Mid- to long-term incentive
Restricted stock
PSU*2
remuneration*2
Approx. 25~33%

An executive bonus for Directors who also serve as
Executive Officers is paid as monetary remuneration reflecting the performance in the fiscal year. Adjusted operating
profit at constant FX and profit (attributable to the ownersof the parent company) are the key performance indicators(KPI), respectively weighted at 75% and 25% in calculating
the amounts of executive bonuses. Performance-linked
payout is based on the KPI achievement in the range of 0%
to 200%. In the event that we acknowledge that a Director
who is a recipient of a bonus has conducted wrongful

behavior, a part of the received bonus is subject to return to
the Company.
Starting from FY2022, we have decided to introduce core
revenue at constant FX, adjusted operating profit on areported basis and an RRP (Reduced-Risk Products)-related
index as new KPIs on top of its existing KPI. Core revenue
at constant FX, adjusted operating profit at constant FX,
adjusted operating profit on a reported basis, and profit are
the KPI, weighted at 15%, 35%, 25% and 25%, respectively.
Performance-linked payout is based on the KPI achievement
and is in the range of 0% to 190% with either -10%, 0% or+10% added/deducted to results depending on evaluationsof the RRP-related index.

Restricted Stock Remuneration Plan
The Restricted Stock Remuneration Plan is designed to further enhance shared value in the mid to long term between
the Directors who also serve as Executive Officers (hereinafter eligible directors) and the shareholders. Eligible directors
receive monetary compensation claims every fiscal year
towards restricted shares and allocation of the Company’scommon share by paying all of the monetary compensation
claims in kind in accordance with the resolution of theIntegrated Report 2021

099

CORPORATE PROFILEVALUE CREATION

BUSINESS andSUSTAINABILITYFINANCIAL INFORMATION /OTHERS

GOVERNANCE

Corporate governance

Board of Directors (the allotment being made from treasury
shares). The Company enters into an agreement with theeligible directors with regards to the allotment of the shares.
Although the restriction period is thirty years, in cases where
any eligible director retires due to expiration of the term or
resigns due to reasons deemed reasonable by the Board of
Directors, from a position as Director or any other positions
separately specified by the Board of Directors during the
restriction period, the transfer restrictions are removed on allof the allotted shares that the eligible director owns.
In the event that we acknowledge wrongful behavior as
determined by the Board or any other wrongful act by a
Director who was allotted restricted stock remuneration
during the restriction period, all or a part of the allottedshares are acquired by the Company without any
compensation.

Performance Share Unit Plan (PSU)
PSU is a performance-linked stock compensation systemthat aims to strengthen shared value with shareholders, toenhance company value over the mid to long term and tocommit to achieving business results over the mid-term.
PSU offers monetary remuneration claims and cash to the
Directors who also serve as Executive Officers during thefirst year of the performance evaluation period, as performance-linked stock compensation. After a three-year performance evaluation period ends, attainment rates of numerictargets including earnings are determined following a review
by the Advisory Panel on Nomination and Compensation. As

a general rule, eligible directors receive the cash and monetary claims after the end of each performance evaluation
period. Eligible directors receive monetary remuneration
claims towards the purchase of Company shares and receive
the Company’s common shares (the allotment is made fromthe treasury shares).
We determine necessary indices to calculate the numberof shares given to eligible directors including each numerictarget used in this compensation system and performance-linked factors following a review by the Advisory
Panel on Nomination and Compensation. Profit (attributable
to the owners of the parent company) has been set as aperformance share unit plan KPI for the evaluation periods
starting in 2020 and 2021. For the evaluation period startingin 2022, we have decided to introduce an ESG-related
index on top of profit. Performance-linked payout is set
to be in the range of 0% to 200% based on the KPI (i.e.,
profit) achievement in both 2020 and 2021. In 2022, performance-linked payout is set to be in the range of 0% to 190%
based on the KPI (i.e., profit) achievement and either -10%,
0% or +10% is added/deducted to results depending on
evaluations of the ESG-related index.
In the event that we acknowledge wrongful behavior as
determined by the Board or any other wrongful act by a
Director during the performance evaluation period, theDirector is disqualified from receiving all or a part of the cash
and monetary claims that were planned to be paid.

KPIs for executive remuneration
From 2022 onwards, we have introduced new indices suchshareholders. With this revision, the ratio that performance on

as one on a reported basis and non-financial to design aa reported basis accounts for in the KPIs used to determine

more multifaceted system for assessing our performance.

executive bonuses, our short-term incentive, has increased

We aim to evaluate our initiatives conducive to mid- to long-to 50%.

PSU
KPI

Existing
Newly-

Introduced to share attainment rate of profit growth with shareholders

100%

ESG-related index

Introduced in order for us (evaluatee) and shareholders (evaluator) to seek agreement on
what is conducive to corporate value
In 2022, we adopted our progress on initiatives to realize net zero as ESG-related index,
specifically target attainment rates to reduce GHG emissions

±10%

added

Total amount of remuneration in 2021
Category
Directors (excluding Outside
Directors)
Audit & Supervisory Board
Members (excluding outside
members)
Outside Executives
Total

Newlyadded100

Base salary

Executive bonus

Restricted stock
remuneration

PSU

Numbers(persons)

1,405

482

549

191

183

6

83

83

—

—

—

2

133

133

—

—

—

7

1,621

698

549

191

183

15

Maximum amount of executive remuneration
The maximum total amount of executive remuneration
for all Directors is 1,100 million yen per year (of which 100
million yen is set for Outside Directors). This amount comprises base salary and executive bonus. The maximum total
amounts of restricted stock remuneration and PSU for the
Directors who also serve as Executive Officers are 210 million

yen per year (115,200 shares) and 130 million yen per year
(76,800 shares), respectively. The maximum total amount of
remuneration for the Audit & Supervisory members is 240
million yen per year for all of the members. These maximum
amounts are all approved at the Annual General Meetings.

37th Annual General Meeting on March 23, 2022
Internal Executives

Purpose/Details

Total amount

Who also serve as
Executive Officers

O

O

O
—

Who do not serve as
Executive Officers

Outside Executives

Ratio

Base salary

35%

Executive bonus

Within 1,100 million yen(100 million yen for Outside Directors)

O—

Restricted stock
remuneration

Within 210 million yen
Within 115,200 shares

O

—

—

PSU

Within 130 million yen
Within 76,800 shares

O

—

—

Total

Within 1,440 million yen

Adjusted operating
profit at constant FX

Assess performance of business itself which is foundation of sustainable profit growthProfitIntroduced to share attainment rate of profit growth with shareholders

25%Core revenue atconstant FX

Assess growth rate of top line. This KPI is introduced given significance of assessment of topline growth to realize mid- to long-term sustainable profit growth15%

Adjusted operating
profit on reported
basis

Assess business performance including FX impact. This KPI is introduced to assess current
performance from multifaceted perspective considering balance between constant FX
basis and reported basis

25%

RRP-related index

Assess qualitatively implementation of strategies and attainment rate regarding RRP(Reduced-Risk Products), our focus area

±10%

Japan Tobacco Inc.

Total amount by component (JPY MM)

Total amount(JPY MM)

Notes: 1. The amount of PSU in the diagram is the amount booked as expenses for 2021.
2. Executive bonus and PSU are categorized as performance-linked remuneration.
3. Restricted stock remuneration and PSU are categorized as non-monetary compensation.
4. The diagram above includes a Director who resigned on March 24, 2021.

Executive bonus

Existing

Ratio

Profitterm growth and further strengthen the shared value with

KPI

Purpose/Details

Integrated Report 2021

101

CORPORATE PROFILEVALUE CREATION

BUSINESS andSUSTAINABILITY

GOVERNANCE

FINANCIAL INFORMATION /OTHERSManagement structure
Directors and Members of the Audit & Supervisory Board
Ten Directors (including four Outside Directors)
The Directors marked with * also serve as Group Executive Officers

Mutsuo Iwai
Chairperson of the Board
Date of birth: October 29, 1960
Number of shares held: 36,000

Shigeaki Okamoto
Deputy Chairperson of the
Board
Date of birth: February 20, 1961
Number of shares held: 0

April 1983	Joined the Company (Previously, Japan
Tobacco and Salt Public Corporation)
June 2003	Vice President, Corporate Planning
Division
July 2004	Vice President, Corporate Strategy
Division
June 2005	Senior Vice President; and President,
Food Business
June 2006	Member of the Board; Senior Vice
President; and President, Food Business
June 2008	Senior Vice President; and Chief Strategy
OfficerJune 2010	Member of the Board; Senior Vice
President; Chief Strategy Officer; andPresident, Food Business
June 2011	Member of the Board, Japan Tobacco Inc.
	Executive Vice President, JT International S.A.
June 2013	Senior Vice President; and Chief Strategy
Officer

April 1983	Entered the Ministry of Finance (hereinafter the Ministry)
July 2001	Head of Management Office, General
Coordination Division, Planning and Coordination Bureau, Financial Services Agency
July 2002	Director for Supervisory and Financial
Risk Stabilization Management, General
Coordination Division, Supervisory
Bureau, Financial Services Agency
July 2004	Director of Research Division, Budget
Bureau, the Ministry
July 2006	Director for the Budget Bureau, Planningand Administration Division of Budget
Bureau, the Ministry
July 2009	Head of Secretariat Division, Minister’s
Secretariat, the Ministry
August 2012	Deputy Director-General of the Budget
Bureau, the Ministry
July 2015	Deputy Vice Minister, the Ministry
July 2017	Director-General of the Budget Bureau,
the Ministry(As of March 23, 2022)

January 2016	Senior Vice President; and President,
Tobacco Business
March 2016	Representative Director and Executive
Vice President; and President, Tobacco
Business
January 2020	Member of the Board
March 2020	Deputy Chairperson of the Board
June 2020	Outside Director, Benesse Holdings, Inc.
(Current Position)
June 2021	Outside Director, TDK Corporation(Current Position)
March 2022	Chairperson of the Board (Current
Position)
Significant Concurrent Positions Outside the Company
Outside Director, Benesse Holdings, Inc.
Outside Director, TDK Corporation

Kiyohide Hirowatari*
Representative Director andExecutive Vice President
Date of birth: November 11, 1965
Number of shares held: 47,700

Kazuhito Yamashita*
Director
Date of birth: February 4, 1963
Number of shares held: 33,100

Main Kohda
Director (Independent Outside Director)
July 2018	Administrative Vice Minister, the Ministry (Retired from the office in July 2020)
June 2021	Outside Audit & Supervisory Board
Member, Yomiuri Land Co., Ltd. (Current
Position)
December 2021	Outside Audit & Supervisory Board
Member, The Yomiuri Shimbun Osaka
Head Office (Current Position)
	Outside Audit & Supervisory Board
Member, The Yomiuri Shimbun Seibu
Head Office (Current Position)
March 2022	Deputy Chairperson of the Board(Current Position)
Significant Concurrent Positions Outside the Company
Outside Audit & Supervisory Board Member, Yomiuri
Land Co., Ltd.
Outside Audit & Supervisory Board Member, The
Yomiuri Shimbun Osaka Head OfficeOutside Audit & Supervisory Board Member, The
Yomiuri Shimbun Seibu Head Office

Date of birth: April 25, 1951
Number of shares held: 0

Yukiko Nagashima
Director (Independent Outside Director)
Date of birth: April 4, 1961
Number of shares held: 0

Masato Kitera
Masamichi Terabatake*
Representative Director andPresident, Chief Executive
Officer
Date of birth: November 26, 1965
Number of shares held: 132,700

Naohiro Minami*
Representative Director andExecutive Vice President
Date of birth: January 21, 1964
Number of shares held: 48,300

102Japan Tobacco Inc.

April 1989	Joined the Company
July 2005	Vice President, Secretary’s Office
July 2008	Vice President, Corporate Strategy
Division
June 2011	Senior Vice President; Chief Strategy
Officer; and President, Food Business
June 2012	Senior Vice President; and Chief Strategy
OfficerJune 2013	Member of the Board, Japan Tobacco
Inc.

	Executive Vice President, JT International S.A.
January 2018	President and Chief Executive Officer
March 2018	Representative Director and President,
Chief Executive Officer (Current Position)
Significant Concurrent Positions Outside the Company
Chairman and Managing Director, JT International
Group Holding B.V.

April 1986	Joined the Company
December 2005	Controller
July 2010	Deputy Chief Financial Officer; andController
June 2012	Senior Vice President; Chief Financial
Officer; and Controller
July 2012	Senior Vice President; and Chief Financial Officer
January 2018	Executive Vice President, Chief Financial
Officer and Communications

March 2018	Representative Director and Executive
Vice President, Chief Financial Officer
and Communications
January 2022	Representative Director and Executive
Vice President; Finance and Corporate
Communications (Current Position)
Significant Concurrent Positions Outside the Company
Supervisory Board Member, JT International Holding
B.V.

Director (Independent Outside Director)
Date of birth: October 10, 1952
Number of shares held: 0

Tetsuya Shoji
Director (Independent Outside Director)
Date of birth: February 28, 1954
Number of shares held: 0

April 1989	Joined the Company
July 2010	Vice President, Legal Division
June 2012	Senior Vice President; Chief Legal Officer; and Vice President, Legal Division
July 2014	Senior Vice President; and Chief Legal Officer
January 2015	Senior Vice President; Head of Tobacco
Business Planning Division, Tobacco
Business
January 2017	Senior Vice President, Human Resources
January 2018	Executive Vice President, Compliance,
General Affairs, Legal, Corporate
Strategy, IT, CSR, Human Resources andOperation Review & Business Assurance

March 2018	Representative Director and Executive
Vice President, Compliance, General
Affairs, Legal, Corporate Strategy, IT,
CSR, Human Resources and Operation
Review & Business Assurance
January 2019	Representative Director and Executive
Vice President, Corporate, Pharmaceutical and Processed Food Businesses
January 2022	Representative Director and Executive
Vice President, Corporate, Sustainability
Management, Pharmaceutical andProcessed Food Businesses (Current
Position)

April 1986	Joined the Company
May 2007	Vice President, Corporate, Scientific & Regulatory Affairs Division, Tobacco Business
July 2009	Vice President, Corporate Affairs Division, Tobacco Business
June 2010	Senior Vice President; and Chief
Corporate, Scientific & Regulatory Affairs
Officer, Tobacco Business
January 2015	Senior Vice President; and Head of China
Division, Tobacco Business

January 2019	Senior Vice President, Compliance, Sustainability Management and General Affairs
March 2019	Member of the Board and Senior Vice
President, Compliance, Sustainability
Management and General Affairs
January 2022	Member of the Board and Senior Vice
President, Corporate Governance andCompliance (Current Position)

September 1995	Started independently as novelist(Current Position)
January 2003	Member of Financial System Council,
the Ministry of Finance
April 2004	Visiting Professor, Faculty of Economics,
Shiga University
March 2005	Member of the Council for Transport
Policy, the Ministry of Land, Infrastructure, Transport and Tourism
November 2006	Member of the Tax Commission, Cabinet
Office, Government of Japan
June 2010	Member of the Board of Governors,
Japan Broadcasting Corporation

June 2012	Outside Director of the Company(Current Position)
June 2013	Outside Director, LIXIL Group Corporation
June 2016	Outside Director, Japan ExchangeGroup, Inc. (Current Position)
June 2018	Outside Director, Mitsubishi Motors
Corporation (Current Position)
Significant Concurrent Positions Outside the Company
Novelist
Outside Director, Japan Exchange Group, Inc.
Outside Director, Mitsubishi Motors Corporation

April 1985	Joined Recruit Co., Ltd. (Current Recruit
Holdings Co., Ltd.)
April 2006	Corporate Executive Officer, Recruit Co., Ltd.
January 2008	President and Representative Director,
Recruit Staffing Co., Ltd.
October 2012	Corporate Executive Officer, Recruit
Holdings Co., Ltd.
June 2016	Standing Audit & Supervisory Board
Member, Recruit Holdings Co., Ltd.
(Current Position)
April 2018	Standing Audit & Supervisory Board Member, Recruit Co., Ltd. (Current Position)

March 2019	Outside Director of the Company(Current Position)
June 2021	Outside Audit & Supervisory Board
Member, Sumitomo Corporation (Current Position)
Significant Concurrent Positions Outside the Company
Standing Audit & Supervisory Board Member, Recruit
Holdings Co., Ltd.
Standing Audit & Supervisory Board Member, Recruit
Co., Ltd.
Outside Audit & Supervisory Board Member, Sumitomo
Corporation

April 1976	Entered the Ministry of Foreign Affairs(hereinafter the Ministry)
January 2008	Director-General for Sub-Saharan African Affairs, Middle Eastern and African
Affairs Bureau, the Ministry	Secretary General, the Fourth Tokyo
International Conference on African
Development
July 2008	Director-General, International Cooperation Bureau, the Ministry
January 2010	Deputy Vice-Minister, the Ministry
September 2012	Assistant Chief Cabinet Secretary
November 2012	
Ambassador Extraordinary and Plenipotentiary of Japan to People’s Republic of China

April 2016	Ambassador Extraordinary and Plenipotentiary of Japan to the French Republic
June 2016	Ambassador Extraordinary and Plenipotentiary of Japan to the French Republic, Principality of Andorra and Principality of Monaco(Retired from the position in December 2019)
April 2020	Adviser of the Company
June 2020	Outside Director, Marubeni Corporation(Current Position)
	Outside Director, Nippon Steel Corporation (Current Position)
March 2021	Outside Director of the Company(Current Position)
Significant Concurrent Positions Outside the Company
Outside Director, Marubeni Corporation
Outside Director, Nippon Steel Corporation

April 1977	Joined Nippon Telegraph and Telephone Public Corporation
June 2006	Senior Vice President and General Managerof the Personnel Department, Nippon Telegraph and Telephone West Corporation
June 2009	Senior Vice President and Head ofGeneral Affairs, Nippon Telegraph andTelephone Corporation
June 2012	Senior Executive Vice President andRepresentative Member of the Board,
NTT Communications Corporation
June 2015	President & CEO and Representative
Member of the Board, NTT Communications Corporation
October 2018	Representative Member of the Board, NTT, Inc.

June 2020	Corporate Advisor, NTT Communications Corporation (Current Position)
March 2021	Outside Director, Sapporo Holdings
Limited (Current Position)
June 2021	Outside Director, Hitachi Zosen Corporation (Current Position)
	Outside Director, Mitsubishi Logistics
Corporation (Current Position)
March 2022	Outside Director of the Company(Current Position)
Significant Concurrent Positions Outside the Company
Corporate Advisor, NTT Communications Corporation
Outside Director, Sapporo Holdings Limited
Outside Director, Hitachi Zosen Corporation
Outside Director, Mitsubishi Logistics Corporation

Integrated Report 2021

103

CORPORATE PROFILEVALUE CREATION

BUSINESS andSUSTAINABILITY

GOVERNANCE

FINANCIAL INFORMATION /OTHERSManagement structure

Five Audit & Supervisory Board Members (including three Outside Audit & Supervisory Board Members） (As of March 23, 2022)

Ryoko Nagata
Standing Audit & Supervisory
Board Member
Date of birth: July 14, 1963
Term of office: 4 years from March 2019
Number of shares held: 12,400

April 1987	Joined the Company
April 2001	Vice President, Products Division, FoodBusiness Division, Food Business
June 2008	Senior Vice President; Head of Beverage
Business Division; and Vice President,
Product Division, Food Business Division, Food Business
July 2008	Senior Vice President; and Head of
Beverage Business, Food Business
July 2010	Senior Vice President; and Head of
Beverage Business

June 2013	Senior Vice President, CSR
January 2018	Senior Vice President, Assistant to
President
March 2018	Standing Audit & Supervisory Board
Member of the Company (Current
Position)
June 2021	Outside Director, Honda Motor Co., Ltd.
(Current Position)
Significant Concurrent Positions Outside the Company
Outside Director, Honda Motor Co., Ltd.

Executive Officers
President
Masamichi Terabatake

Senior Vice Presidents
Kenji Ogura

Chief Executive Officer*

Corporate Affairs & Communications, Tobacco
Business, Japan

Executive Vice Presidents
Naohiro Minami
Finance and Corporate Communications

Kiyohide Hirowatari

Hiroshi Yamamoto
Standing Audit & Supervisory
Board Member
Date of birth: November 29, 1963
Term of office: 4 years from March 2019
Number of shares held: 2,600

Toru Mimura
Standing Audit & Supervisory
Board Member(Independent Outside Audit &Supervisory Board Member)
Date of birth: December 26, 1955
Term of office: 4 years from March 2019
Number of shares held: 0

Hiroshi Obayashi
Audit & Supervisory Board
Member (Independent
Outside Audit & Supervisory
Board Member)
Date of birth: June 17, 1947
Term of office: 4 years from March 2019
Number of shares held: 0

Koji Yoshikuni
Audit & Supervisory Board
Member (Independent
Outside Audit & Supervisory
Board Member)
Date of birth: September 7, 1952
Term of office: 4 years from March 2019
Number of shares held: 0

April 1987	Joined the Company
July 2008	Vice President, Non-Tobacco Material
Procurement Division, Tobacco Business
June 2012	Vice President, Operational Review andBusiness Assurance Division

March 2019	Standing Audit & Supervisory Board
Member of the Company (Current
Position)

Corporate, Sustainability Management, Pharmaceutical Business and Food Business

Senior Vice Presidents
Kazuhito Yamashita
Corporate Governance, Compliance

Junichi Fukuchi

April 1979	Entered the Ministry of FinanceJuly 2010	Deputy Director-General of the Planningand Coordination Bureau; Secretary-General of the Executive Bureau, Certified
Public Accountants; Auditing Oversight
Board, Financial Services Agency
July 2011	Director General, Kinki Local Finance
Bureau, the Ministry of Finance
January 2012	Deputy Director-General, Minister’s
Secretariat, the Ministry of Defense(hereinafter the Ministry)
September 2012	Director-General, Bureau of Personnel
and Education, the Ministry
July 2013	Director-General, National Institute for
Defense Studies, the Ministry

July 2014	Director-General, Bureau of Finance andEquipment, the Ministry
October 2015	Vice-Minister of Defense for International Affairs, the Ministry
September 2016	Chairman, Sompo Japan Nipponkoa
Research Institute Inc.
October 2017	Director, Eltes Co.,Ltd.
March 2018	Registered as Attorney at Law (Current
Position)
March 2019	Standing Outside Audit & Supervisory
Board Member of the Company (Current
Position)
Significant Concurrent Positions Outside the Company
Attorney at Law, Shiba International Law Offices

April 1970	Judicial Apprentice
April 1972	Appointed as Public Prosecutor
May 2001	Director-General of the Rehabilitation
Bureau, the Ministry of Justice (hereinafter the Ministry)
January 2002	Deputy Vice-Minister of Justice, the Ministry
June 2004	Director-General of the Criminal Affairs
Bureau, the Ministry
June 2006	Vice-Minister of Justice, the Ministry
July 2007	Superintending Prosecutor, Sapporo
High Public Prosecutors’ Office
July 2008	Superintending Prosecutor, Tokyo High
Public Prosecutors’ Office
June 2010	Prosecutor-General
March 2011	Registered as Attorney at Law (Current Position)
April 2011	Outside Audit & Supervisory Board
Member, Daiwa Securities Co., Ltd.
(Current Position)

June 2013	Outside Director, Mitsubishi Electric
Corporation (Current Position)
June 2014	Outside Audit & Supervisory Board
Member, Nippon Steel & Sumitomo
Metal Corporation (Current Nippon
Steel Corporation)
March 2015	Outside Audit & Supervisory Board Member of the Company (Current Position)
June 2020	Outside Director, Audit & Supervisory
Committee Member, Nippon SteelCorporation (Current position)
Significant Concurrent Positions Outside the Company
Attorney at Law, Obayashi Law OfficeOutside Audit & Supervisory Board Member, Daiwa
Securities Co. Ltd.
Outside Director, Mitsubishi Electric Corporation
Outside Director, Audit & Supervisory Committee
Member, Nippon Steel Corporation

April 1975	Joined Japan Broadcasting Corporation(hereinafter the Corporation)
June 2003	Director Responsible for Finance ofNews Department, the Corporation
June 2005	Executive Director, Yokohama Broadcasting Station, the Corporation
June 2007	Chief of Secretariat for Board of Governors, the Corporation
February 2010	Senior Director, the Corporation
April 2012	Executive Director, the Corporation

April 2017	Vice President and Professor, the Graduate School of Project Design	Auditor, Hosei University (Current
Position)
March 2019	Outside Audit & Supervisory Board
Member of the Company (Current
Position)
April 2019	President, the Graduate School ofInformation & Communication (Current
Position)(As of January 1, 2022)

Chigusa Ogawa

Hiromasa Furukawa
Food Business

Kei Nakano
Corporate Strategy

Leaf Procurement, Tobacco Business, Japan

Yasuhiro Nakajima
Head of RRP Japan Office, Tobacco Business,Japan

Shuichi Hirosue
Marketing, Tobacco Business, Japan

Akihiro Koyanagi
Manufacturing, Tobacco Business, Japan

Takehisa Shibayama
Information Technology

Hiroyuki Fukuda
Corporate Communications

Osamu Hirose
General Counsel

Hisato Imokawa
Chief Sustainability Officer

Chief Executive Officer, Tobacco Business, Japan

Daniel Torras

Yuki Maeda

Performance & Integration, Tobacco Business,Japan

Nobuya Kato

Muneaki Fujimoto

Yoshiyuki Mishima

Chief Financial Officer, Tobacco Business, Japan

Eiichi Kiyokawa
Sales, Tobacco Business, Japan

President, Pharmaceutical Business

Chief Financial Officer

People & Culture

Shigenori Ohkawa
Head of Central Pharmaceutical Research Institute, Pharmaceutical Business* Masamichi Terabatake concurrently serves as
President, Tobacco Business.

Members of JTI Executive Committee(As of April 1, 2022)

Eddy Pirard

Guergana Andreeva

Lucine Ovumyan

President and Chief Executive Officer

Senior Vice President, People & Culture andCorporate Security

Senior Vice President,
Corporate Affairs and Communications

Executive Vice President and Deputy CEO

John Fraser

Takehiko Tsutsui

Roland Kostantos

Senior Vice President, Legal & Regulatory Affairs,
and Chief Compliance Officer

Senior Vice President,
Reduced-Risk Products

Koji Shimayoshi

Chief Operating Officer

Vassilis Vovos
Senior Vice President, Finance & Sustainability,
Chief Financial Officer

Tom Greene
Senior Vice President,
Chief Digital and Information Officer, Global
Business Services* The members above report directly to Eddy Pirard,
President and Chief Executive Officer.

For reasons for appointment of the Directors, please refer to the Notice of Convocation of the 37th Ordinary General Meeting of Shareholders.
For reasons for appointment of the Audit & Supervisory Board members, please refer to the Notice of Convocation of the 34th Ordinary General Meeting of Shareholders.
We have established a set of independence criteria. For details, please refer to ‘JT Corporate Governance Policy’.

104

Japan Tobacco Inc.

Integrated Report 2021

105

CORPORATE PROFILE

BUSINESS andSUSTAINABILITYVALUE CREATIONGOVERNANCE

FINANCIAL INFORMATION /OTHERSManagement structure

The concept of skills necessary for the Directors
The JT Group aims to achieve sustainable profit growthand enhance corporate value over the mid to long term by
pursuing the 4S model, which is our management principle.
Based on our 4S model, our vision is to continue to bea growing global company that provides diverse value,unique to the JT Group.
We have adopted the following composition of the Board of
Directors in order to enable the Directors to identify the JT
Group management strategies and make decisions on important matters, as well as to effectively supervise all operations. The Advisory Panel on Nomination and Compensation
has repeatedly engaged in discussions on the compositionof the Board of Directors:nT he Board may have as many members as necessary andappropriate, up to a maximum of 15. It comprises diverse
professionals with a high sense of ethics and integrity as

well as knowledge, experience and skills, taking into consideration such factors as gender, international experience,
work experience, race, ethnicity, cultural background, andother aspects of diversity, along with the skills necessary toserve as Directors.
The Board includes at least one-third of Independent
Outside Directors with qualifications conducive to theCompany’s sustainable profit growth and corporate value
over the mid to long term, in order to strengthen the
supervisory functions and transparency of management.

Skills matrix for proposed Directors and Members of the Audit & Supervisory Board

We expect in particular that each Director will demonstrateskills based on their knowledge and experience in thefollowing areas, in light of our management principle, visionand business plan, in order for the Board of Directors toproperly fulfill its roles and responsibilities. We believe thatthe Board of Directors as a whole has the necessary skills at
this time.

nAreas in which skills are expected to be particularly effective
n

n

n

n

n

n

106

“ Corporate Management,” including JT Group’s management strategy, operations, and business strategy based on
4S model, our management principle
“Global Management,” which is essential for JT Group,
which operates globally
“Corporate Finance, Accounting and Capital Policy” and“Legal, Compliance, and Risk Management," which are basisof decision-making for effective management and businessactivities
“IT/Information Security,” is one important managementfoundation for strengthening competitiveness of JT Group“Corporate Governance,” which is foundation of ourcorporate activities in order to maximize stakeholder value,
pursue sustainable profit growth, and grow corporate value
over long term
“Sustainability/Environment and Society,” which we
consider core to our management initiatives and for which
we formulate strategies based on 4S model and materiality
analysis

Japan Tobacco Inc.

nn

“ D&I/Organizational Behavior and Human Resource
Management,” one of our focus areas, being promoted sothat all JT Group employees can feel motivated in theirwork and maximize their abilities
“Business Development/M&A” to formulate strategies andcarry out measures for further development and businessgrowthIn addition, in light of the roles and responsibilities of themembers of the Audit & Supervisory Board to oversee
the job performance of the Directors, we are particularly
expecting members of the Audit & Supervisory Board todemonstrate their skills in the areas of “Corporate Finance,
Accounting and Capital Policy,” “Legal, Compliance and Risk
Management,” and “Corporate Governance.” At present, we
believe that the entire Audit & Supervisory Board has thenecessary skills.

Areas in which skills are expected to be particularly effective

Name

Position

Corporate
Management

GlobalManagement

MutsuoIwai

Chairpersonof the Board●●

ShigeakiOkamoto

DeputyChairpersonof the Board

Masamichi
Terabatake
NaohiroMinamiKiyohide
Hirowatari
Kazuhito
Yamashita
Main
Kohda
YukikoNagashima
MasatoKiteraTetsuya
Shoji

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Security

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Ryoko
NagataAudit &
Supervisory
Board
Standing
Member●Hiroshi
Yamamoto

Audit &
Supervisory
Board
Standing
MemberToru
MimuraAudit &
Supervisory
Board
Standing
OutsideMemberHiroshi
Obayashi

Audit &
Supervisory
Board
OutsideMemberKoji
Yoshikuni

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OutsideDirector

D&I/Organizational
SustainBehavCorporate
ability/Businessior andGoverEnvironDevelopHumannancement andment/M&A
Resource
Society
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Director

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Corporate
Legal,
Finance,CompliAccountance anding and
Risk ManCapitalagement
Policy

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Integrated Report 2021

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CORPORATE PROFILE

BUSINESS andSUSTAINABILITYVALUE CREATIONGOVERNANCE

FINANCIAL INFORMATION /OTHERSInternal controls

Risk management
The JT Group identifies and closely monitors risks that could
affect its operations and implements measures to both prevent them from materializing and minimize their impacts ifthey were to materialize. We have established an integrated

system for identifying and managing all identified risks. Ourrisk management process comprises the following four
steps.

such guidelines to their personnel (defined as employees,
directors, etc.; likewise below) and endeavor to increase
compliance effectiveness by conducting various training
programs and other educational activities for their respective personnel.

An executive appointed by the CEO to be in charge of risk management (currently the director in charge ofcorporate governance and compliance) identifies all risks that could affect the JT Group.

② Assess risks

Executive Officers assess risks in their respective organizational units probability of materializing and themagnitude of its impact if it were to materialize. They identify material risks that need to be monitored andreport them to the executive in charge of risk management. Based on such reports, the executive in chargeof risk management identifies Group-level material risks with the potential to inflict major losses in terms ofattainment of the Group’s management targets and business strategies and reports said risks to the CEO.

③ F ormulate plansto address risks④ M onitor progressof plans

Executive Officers regularly report to the executive in charge of risk management and the CEO on the progressof the plans to address the Group’s material risks.

under the direction of senior executives. Such incidents andpertinent information about them are reported to the Boardof Directors in a timely and appropriate manner.

We enforce strict compliance. We have instituted a Code of
Conduct that mandates that all directors and employees
act in compliance with applicable laws, government
regulations, our Articles of Incorporation and societal
norms pursuant to regulations established by the Board of
Directors. To ensure fair and effective compliance practices,
we have established the JT Group Compliance Committee
as a deliberative body that reports directly to the Board of
Directors.
The JT Group Compliance Committee is headed by the
Chairperson of the Board and includes external experts as
key members. It meets regularly every year. It deliberates
on Group-wide compliance-related matters, including
annual Compliance Action Plans’ implementation status andReportDivisions in each business & corporate divisions

Group companies* Composed of 2 internal and 3 external members

adoption/revision of compliance-related regulations and ourCode of Conduct, to deeply instill a compliance mindset in
employees. We have also appointed an Executive Officer incharge of compliance to oversee our Legal and Compliance
Division, which implements and promotes a cross-Group
compliance regime and endeavors to identify compliancedeficiencies. In 2021, the JT Group Compliance Committee
met three times to discuss compliance promotion initiatives,among other matters. The outcomes of its discussions wereincorporated into the 2022 Compliance Action Plan.

We annually conduct a Group-wide questionnaire survey
to check the status of compliance practices in our Japanese
operations. In 2021, 96.6% of employees completed thesurvey. The survey’s findings are reported to directors andemployees, and are used by concerned organizational units
to reassess their respective compliance plans and formulate
and implement measures to improve compliance.

Internal reporting system (whistle-blower system)
Approve initiatives

4Please see Risk factors (P. 80) for more on risks facing the JT Group.

ComplianceJapan Tobacco Inc.

ReportCompliance Office
Executive Officers oversee formulation of plans to address the JT Group’s material risks and submit them tothe executive in charge of risk management and the CEO.

We have prepared crisis management and disaster responsemanuals in preparation for emergencies. When a crisis or
natural disaster occurs, we set up an emergency project task
force. We have made advance arrangements to enable concerned organizational units and subsidiaries to swiftly takeappropriate action in close coordination with each other108

JT Group Compliance Committee*
Supervise/Advise

Action Plans formulated by the JT Group Compliance
Committee include actions to maintain/enhance compliance programs, address priority compliance issues, conduct
trainings and seminars, operate the internal reporting
system and implement Compliance Promotion Month.

Compliance surveys

Board of Directors① Identify risks

Compliance action plans

Group companies have set up hotlines for their employees
and other parties to report acts suspected of being legal/
regulatory violations and other such concerns. Compliancepromotion departments that receive a report or query via
their hotlines investigate its details and then take action,
including recurrence-prevention measures, as needed.
Additionally, JT has set up another hotline apart from theone staffed by its Legal and Compliance Division. The
second hotline is independent from organizational units
involved in operational execution and staffed by Audit &Supervisory Board members, who investigate the detailsof any reports or queries received via the hotline. JT thentakes action, including recurrence-prevention measures, as
needed. JT refers or reports serious problems involving the
JT Group to the JT Group Compliance Committee for further
review as needed.

Group companies’ respective organizational units that
promote compliance (e.g., JT’s Legal and Compliance
Division and subsidiaries’ corresponding organizational
units) distribute the JT Group Code of Conduct and other

Integrated Report 2021

109

CORPORATE PROFILEVALUE CREATION

BUSINESS andSUSTAINABILITY

GOVERNANCE

FINANCIAL INFORMATION /OTHERSInternal controls

Quality control
We are committed to maintaining the public’s trust in our
products. To do so, we have implemented quality assurance
systems across all of our businesses.

Tobacco business
For tobacco products, we are building a globally uniform
quality assurance model and making necessary changes
based on this model with the aim of providing high-quality
products.
Our quality assurance activities fundamentally aim to improve quality and rectify deficiencies by providing feedback
to concerned organizational units about quality issues identified based on quality information from markets and related
research. For example, when our RRP (reduced-risk product)
devices are in the development stage, we confirm that they
not only comply with applicable laws and regulations but
also that they meet industry safety standards for electric
products by having them evaluated as needed by external
specialists.
Additionally, in conjunction with measures to strengthen
the tobacco business’s operating model, we established
Global Quality Assurance in January 2022 as a new organization independent from the tobacco business’s markets andInternal auditing
other global operational functions. Global Quality Assurance
endeavors to provide high-quality products by assuming accountability for quality assurance activities across the entire
value chain from R&D through procurement, manufacturing,marketing, distribution and sales based on fair decisions
from the consumer’s* standpoint.

Pharmaceutical businessIn our pharmaceutical business, we are strictly committed
to safety and quality control in compliance with regulations
such as the Pharmaceutical and Medical Device Act andministerial ordinances that govern pharmaceutical quality
and safety.

Processed food businessIn our processed food business, we place utmost priority on
food safety management across the entire value chain fromsourcing ingredients to delivering products to consumers.
We do so under our four-pronged framework, consisting of
the following categories: Food Safety, Food Defense, Food
Quality and Food Communication.

110

Japan Tobacco Inc.

The Division formulates annual internal audit plans subject
to the CEO’s approval. Its head mandatorily reports internal
audit results to the CEO, reports annually to the Board of
Directors, and may freely and regularly confer with the CEO
and our subsidiaries’ senior-most executives about internal
audit findings, internal controls’ status and risk assessments.

Our subsidiaries may set up their own internal auditingorganizations at their own discretion. Those that have done
so include major subsidiaries JTI, TS Network, Torii andTableMark. Subsidiaries’ internal audit plans are approved
by, and their audit results reported to, their respective
presidents. JT’s Operational Review and Business Assurance
Division coordinates internal audits with subsidiaries’internal auditing organizations. Subsidiaries’ annual internal
audit plans and their internal audit results are reported to
the Group CEO and our Board of Directors through ourOperational Review and Business Assurance Division. To
increase internal audits’ efficiency and effectiveness, weperiodically hold meetings to improve audit quality throughinformation-sharing among internal auditing staff acrossthe Group. We also conduct joint audits with and provide
auditing assistance to subsidiaries as necessary.

*Adult consumers. Minimum legal age for smoking varies in accordance withthe legislation in each country.

Internal controls over JT International

Information security
We have established information security regulations toclearly demonstrate our commitment to information security and comprehensively promote information security measures on an ongoing basis. Specifically, we have adopted a
JT Group IT Governance Policy and JT Group Information
Security Standards and mandated and implemented
required IT risk mitigation measures, including access restrictions, anti-virus defenses, education, audits and monitoring.
We endeavor to appropriately manage and safeguard our IT
systems, data and other information assets. We are pursuing
initiatives to strengthen information security with respect
to both hardware and software. Hardware-wise, we continually test and improve our key IT systems’ security-related
technologies and operations. Software-wise, we globally

Our Operational Review and Business Assurance Division
conducts internal audits from an objective standpoint
independent from organizational units involved in operational execution and reports directly to the CEO. It assesses
management and operational systems and the state ofoperational execution across all business activities from thestandpoint of legal compliance and rationality with the aimof safeguarding company property and increasing operational efficiency. To fulfill its responsibilities, it has unrestricted authority to observe all activities, inspect all records andquestion all personnel on a Group-wide basis.

conduct security-related educational activities to promote
proper handling of information assets by all employees. In
2021, 99.4% of JT and its Japanese Group companies’ employees attended security training programs. Additionally,
we designated effective information management as a 2021
compliance priority and provided user education in light of
information security’s growing importance in a remote work
environment. We are also conducting educational activities
in our international tobacco business, having rolled out ourinternally-developed i-secure program across all overseas
geographies. The i-secure program’s effectiveness isconstantly being measured by employee behavior metrics.
It has been instrumental in raising employees’ information
security consciousness.

The tobacco business is operated by JTI, a subsidiary ofholding company JT International Group Holding B.V. With
appointees from JT occupying a majority of seats on thelatter’s Board of Directors, JT sets the tobacco business’s
overall strategy. Major decision-making authority and settlement procedures between JT and JTI are prescribed ininternal regulations, most notably our Authority andResponsibility Regulations. From an operational agility
standpoint, JT has delegated a certain degree of authority
to JTI while retaining approval authority over JTI’s budgets
and mid-term plans, as well as proposed investments thatexceed a certain materiality threshold. Through such arrangements, JT endeavors to exercise governance over JTI.
JTI has its own internal regulations on delegation of responsibilities and authority called the JTI Operating
Guidelines. JTI delegates authority to its market subunits,

plants and Executive Officers within the scope of authority
delegated to it by JT.
Additionally, JT’s Audit & Supervisory Board members
and Operational Review and Business Assurance Division
are authorized to audit JTI. JT’s Audit & Supervisory Board
members audit JTI as warranted. While JTI’s internal audits
are conducted by its own internal auditing staff, JT’s
Operational Review and Business Assurance Division audits joint JT-JTI operations in coordination with JTI’s internal auditing staff. The results of audits by JTI’s internal auditing staff are reported to the president of JT’s Tobacco
Business Headquarters, who is also chairman of JT
International Group Holding B.V.
Through these arrangements, JT is building an appropriate governance regime.

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