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Corporate Governance System

■Transition to a “Company with Three Statutory Committees”

The Company has long been committed to improving the corporate governance through a range of initiatives including the adoption of governance system aligned with the “monitoring board-type system” where the board is putting more focus on oversight responsibilities to ensure transparency and fairness in governance practice, while ensuring effective strategic planning and timely execution thereof. Now, we take this effort a step further, the Company has transited to a Company with Three Statutory Committees in order to maximize corporate value based on resolution of the Ordinary General Meeting of Shareholders held on March 26, 2024.
Under this structure, by clearly separating the functions between management oversight and execution of the Company’s business while strengthening each of these function, the Company ensures effective implementation of its strategies even in the increasingly volatile business environment.
The oversight function of the Board of Directors will be reinforced by focusing on determining the basic management policy and management strategy while overseeing the implementation thereof in order to accelerate the overall business execution of the Company in a rapidly changing environment. Nominating Committee and Compensation Committee, each composed solely of Independent Directors are responsible for appointment of Directors and remuneration of Directors and Corporate Executive Officers with fairness, transparency, and objectivity for successful implementation of our business strategy. Furthermore, with the strengthened function of the Internal Audit Department, the Audit Committee conducts highly effective audit, whereas Corporate Executive Officers and Executive Officers are responsible for the execution of the Company’s business through an accelerated decision-making process under the direct supervision of Representative Corporate Executive Officers.

The following is the Company’s corporate governance framework:

corporate governance framework

In addition to the above structure, with the recognition that promoting of the Three Lines Model contributes to strengthening corporate governance, the business department on the first line, the function department of the global headquarter and the regional headquarters on the second line and the Internal Audit Department on the third line work together while aiming to promote healthy growth strategies and enhance sustainable corporate value, and establishment and improvement of risk scenarios and risk mitigation activities are continuously carried out.

■Directors and Corporate Executive Officers

▪Composition of the Board of Directors

Of eleven Directors, seven members (64%) are highly independent External Directors who meet the “Criteria for Independence of External Directors” of the Company. Furthermore, of the four internal Directors, two are Directors responsible for business execution and concurrently serve as Corporate Executive Officers, and two are non-executive Directors.
The total number of non-executive Directors, both internal and external, is nine (82%).

▪Composition of the Board of Directors and each committee

Title Name Board of Directors Nominating Committee Compensation Committee Audit Committee Remarks
Director Masahiko Uotani



Director Kentaro Fujiwara



Director Hiromi Anno

Full-time member of the Audit Committee
Director Takeshi Yoshida

Full-time member of the Audit Committee
External Director Kanoko Oishi

External Director Shinsaku Iwahara

External Director Mariko Tokuno

External Director Yoshihiko Hatanaka

External Director Hiroshi Ozu


External Director Yasuko Gotoh


External Director Ritsuko Nonomiya


Notes:

Committee members are marked with 〇, and the chairperson of the Board of Directors and that of the committees are marked with ◎.

▪Criteria for Independence of External Directors

The Company establishes its own “Criteria for Independence of External Directors” (the “Criteria”) with reference to foreign laws and regulations and listing rules, etc. for the purpose of making objective assessment on the independence of the External Directors.
In connection with selecting candidates for External Directors, the Company places emphasis on a high degree of independence of the candidate from the viewpoint of strengthening corporate governance and accordingly, the Company makes judgment on whether the candidate has a high degree of the independence in accordance with the Criteria.

In order to clarify the status of competitive dealings by the Company’s Directors, and to enhance the independence of its External Directors, the Company has set forth the following criteria regarding “important concurrent positions” assumed by its Directors, and describes the status of the concurrent positions assumed by its Directors in the Business Report based thereon.

▪Skills and Expertise Required of Directors

■Oversight function

(ⅰ) Board of Directors

The Company’s Board of Directors is composed of eleven Directors including seven External Directors. The Board of Directors meetings shall be held approximately once a month. It focuses on determining the basic management policy and management strategy, and overseeing the implementation thereof to reinforce the oversight function and accelerate overall business execution of the Company in a rapidly changing environment. In addition, the Board of Directors discusses and decides matters stipulated in laws and regulations, and the Company's Articles of Incorporation as well as matters provided for in the Regulations of the Board of Directors and delegate the authority to decide on other matters to Representative Corporate Executive Officers or Corporate Executive Officers.

We held the Board of Directors meetings 14 times in fiscal year 2023.

In addition to the abovementioned 14 meetings of the Board of Directors, pursuant to the provisions of Article 370 of the Companies Act and Article 26 of the Company's Articles of Incorporation, there was one deemed resolution where a resolution at a Board of Directors meeting is deemed to have been passed.

Title Name Attendance status (Attendance rate)
Representative Director Masahiko Uotani Fourteen attendances of all fourteen meetings (100%)
Representative Director Kentaro Fujiwara Eleven attendances of all eleven meetings (100%)
Director Yukari Suzuki Fourteen attendances of all fourteen meetings (100%)
Director Norio Tadakawa Fourteen attendances of all fourteen meetings (100%)
Director Takayuki Yokota Fourteen attendances of all fourteen meetings (100%)
External Director Kanoko Oishi Fourteen attendances of all fourteen meetings (100%)
External Director Shinsaku Iwahara Fourteen attendances of all fourteen meetings (100%)
External Director Charles D. Lake Ⅱ Fourteen attendances of all fourteen meetings (100%)
External Director Mariko Tokuno Thirteen attendances of all fourteen meetings (93%)
External Director Yoshihiko Hatanaka Ten attendances of all eleven meetings (91%)

Note:

The titles in the table above are as of fiscal year 2023.
The number of board meetings attended and the attendance rate for Mr. Kentaro Fujiwara and Mr. Yoshihiko Hatanaka represent those for Board of Directors meetings held after they became Directors in March 2023.

【Key Topics Discussed by the Board of Directors and Meetings of Directors in 2022】

  • Overall direction and specific measures for business transformation
  • Strategies for Future Business in Japan and China
  • Corporate Governance
  • Transition to a Company with Three Statutory Committees
  • Material Risks Faced by the Shiseido Group
  • Digital transformation
  • Reports on Investor Relations (e.g., Investor Feedback)

〔Evaluation of the Effectiveness of the Board of Directors 〕

Our Approach

Shiseido conducts an annual evaluation of the effectiveness of the Board of Directors to identify issues and areas for improvement and evolve into a more effective board. Based on the findings of the board evaluation, we are hard at work to strengthen the functions and improve the Board's effectiveness through the following PDCA cycle.

PDCA cycle

Evaluation Process

From April to June each year, we conduct questionnaires and interviews targeting all directors to evaluate and analyze the Board of Directors and the Nomination & Remuneration Advisory Committee* for the period between each annual Ordinary General Meeting of Shareholders.
The secretariat of the Board of Directors then compiles, analyzes, and extracts the issues. The extracted issues and opinions are reported to the Board of Directors, and measures and responses thereto are formulated and implemented as necessary.
In addition, third-party organizations regularly (approximately once every three years) check and evaluate our effectiveness to ensure transparency and objectivity.

  • *Based on a resolution passed at the ordinary general meeting of shareholders on March 26, 2024, Shiseido has transitioned to a structure with three statutory committees: the Nominating Committee, Compensation Committee, and Audit Committee.

Initiatives for 2023–24, evaluation findings, and future plans

The evaluation was conducted for the period between the end of the Ordinary General Meeting of Shareholders in March 2023 and the beginning of the Ordinary General Meeting of Shareholders in March 2024. Below, we outline the main performance dimensions and findings for initiatives during the evaluation period. Based on these findings, we will implement the following measures from 2024 to 2025 to further accelerate the improvement of the Board’s effectiveness.

(ⅱ) Nominating Committee

The Nominating Committee resolves matters such as proposals regarding appointment and dismissal of directors to be submitted to general meetings of shareholders and matters regarding the succession of directors. In addition, the Nominating Committee deliberate appointment and dismissal of the representative Corporate Executive Officers and Corporate Executive Officers, areas for which Corporate Executive Officers take responsibility, appointment and dismissal of the CEO, as well as matters regarding the succession of the CEO etc. and reports results of the deliberations to the Board of Directors.
The Committee is composed of solely External Directors and its chairperson is selected from the committee members with the resolution of the Nominating Committee.

(ⅲ) Compensation Committee

The Compensation Committee resolves policies on decisions regarding remuneration of directors and Corporate Executive Officers, designs of the remuneration policy for Corporate Executive Officers and directors, and details of remuneration to individual Corporate Executive Officers and Directors, etc.
The Committee is composed of solely External Directors and its chairperson is selected from the committee members with the resolution of the Compensation Committee.

(ⅳ) Audit Committee

The Audit Committee conducts audit and prepares audit reports on performance of duties of Directors and Corporate Executive Officers, and makes decisions on proposals for appointment, dismissal, or non-reappointment of accounting auditors submitted to general meetings of shareholders.
The Committee is composed of the majority of External Directors and its chairperson is selected from the committee members with the resolution of the Audit Committee.

■Business Execution function

Corporate Executive Officers are responsible for business execution based upon the delegation from the Board of Directors. The Company will expedite decision-making regarding business execution and implementation of business strategies by delegating significant authority to Corporate Executive Officers.

Title Name
Representative Corporate Executive Officer Masahiko Uotani
Representative Corporate Executive Officer Kentaro Fujiwara
Corporate Executive Officer Yoshiaki Okabe
Corporate Executive Officer Norio Tadakawa
Corporate Executive Officer Ayako Hirofuji
Corporate Executive Officer Toshinobu Umetsu

In addition, the Company has established committees to discuss and decide important matters related to business execution of the Company.
The major committees are as follows:

(ⅰ) Global Strategy Committee

Prior to decision-making by the CEO/COO, this committee deliberates on group policies, organizational transformations, new businesses/brand launches and other particularly import matters for the Shiseido Group.

(ⅱ) Business Plan Meeting

This meeting discusses business strategies and plans for core brands, regions, and key corporate functions.

(ⅲ) Global Transformation Committee

This committee chaired by CEO was established in 2024 to “reinforce oversight and monitoring functions” to deliver expected results from the business transformation. Each task force will implement actions plans to realize our dual ambitions: “driving gross profit” and “implementing extensive cost reduction measures and improving personnel productivity.”

(ⅳ) Global Risk Management & Compliance Committee

The committee aims to accurately grasp global and regional social changes and the current situation of the Group. Based on this, it identifies management risk factors, deliberates prioritized material risks and countermeasures against the risks as well as the important matters regarding ethics and compliance.

 

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