Messages
from External Directors
In this section, we would like to share with you specific reflections from each of our external directors. We selected a few key questions often asked by our shareholders and investors, and had our external directors provide answers.
Our newly appointed external director also shared his aspirations.
Question for external directors appointed prior to 2020
(Ms. Oishi and Mr. Iwahara):
Q.
A.
Despite continued evolution through structural reforms under CEO Masahiko Uotani's leadership, Shiseido suffered greatly during COVID-19. Amid such challenges, achieving the goals of WIN 2023, our medium-term strategy for 2021–2023, is a critical step for Shiseido's future. While we have struggled to deliver products to consumers due to the COVID-19 pandemic, we have continued to push forward with structural reforms without cutting corners. I believe we have been able to execute strategic actions, such as transitioning to a more agile structure, focusing management resources on skincare brands that leverage our R&D, and building new consumer touchpoints that integrate online and offline experiences. I hope that Shiseido will continue to strive to provide unique added-value offerings as one-of-a-kind beauty company in the world.
In implementing our strategies, it has also been crucial to have the right leadership, and succession was a critical issue that capable of making a significant impact on the very foundation of our company. It took years of planning and discussions, from involving all our external directors in developing the succession criteria to finally interviewing the new president. I am proud of both the process and our result, and I am pleased to announce the appointment of Kentaro Fujiwara to lead Shiseido into the next chapter.
Member, Nomination & Remuneration Advisory Committee
Kanoko Oishi
(Appointed as External Director in 2016)
A.
At Shiseido, we have been working toward achieving our medium-term strategy WIN 2023, established by the Board of Directors in 2021. In particular, we have made swift and significant progress in structural reforms, such as the transfer of our Personal Care business and three of our makeup brands. I also highly commend our efforts to promote e-commerce and develop new products in response to environmental changes, such as advancement of IT implementation, COVID-19, and changes in consumer awareness.
However, due to the worldwide impact of COVID-19, our operating margin up to 2022 was significantly lower than the target of 15% set in WIN 2023. In our new medium-to-long-term strategy, we are determined to further promote reforms aimed at improving profitability and productivity and to once again aim for an operating margin of 15%. At the same time, we are committed to achieving our sustainability goals.
Last year, after several years of careful consideration regarding the successor to CEO Masahiko Uotani by both the Nomination & Remuneration Advisory Committee and the Board of Directors, we appointed Kentaro Fujiwara as Shiseido’s next President and COO. I believe that over the next two years, Mr. Fujiwara will gain the experience necessary to manage the company alongside current CEO Uotani. To help ensure a smooth transfer of leadership two years from now, I plan to continue supervising and supporting the company in my role as an external director.
Chair, Nomination & Remuneration Advisory Committee
Shinsaku Iwahara
(Appointed as External Director in 2018)
Question for our external directors appointed in 2022
(Mr. Lake and Ms. Tokuno):
Q.
A.
In celebrating the Company’s 150th anniversary, the Board of Directors has deliberated extensively in developing a new medium-to-long-term strategy. As the Corporate Governance Code states, “The board should view the establishment of corporate goals (business principles, etc.) and the setting of strategic direction” as one of its most important roles and responsibilities, and accordingly, the Board of Directors’ engagement in the medium-to-long-term strategic planning is critically important. In an ultra-VUCA (volatile, uncertain, complex, and ambiguous) era, it is also important to address strategic planning from the perspective of integrated risk management, placing risk assessment at the center of strategy. The Board must also integrate deliberate strategies (strategies formulated through conscious and analytical processes) and emergent strategies (strategies created through processes that sense and analyze changes in the environment and evolve through learning) to flexibly meet the expectations of key stakeholders. From this perspective, I am honored to be able to participate in “free, open, and constructive discussions” under Shiseido’s leading-edge corporate governance framework.
In particular, the realization of the new business management structure that integrates strategy development and succession planning has enabled Representative Director, Chairman, and CEO Uotani and Representative Director, President, and COO Fujiwara to work side-by-side in formulating the new medium-to-long-term strategy. I am confident that this will further strengthen the effectiveness of strategic and succession planning processes and their execution. Against this backdrop, in addition to conducting appropriate oversight of operational execution, I will do my utmost to fulfill my responsibilities as an external director.
Member, Nomination & Remuneration Advisory Committee
Charles D. Lake II
(Appointed as External Director in 2022)
A.
The 2022 Nomination & Remuneration Advisory Committee discussed the nomination of Kentaro Fujiwara as our next President, and executive remuneration structure many times. While Shiseido's executive remuneration system has been thoroughly examined in detail, we have concerns regarding whether it truly rewards actions that contribute to the long-term improvement of corporate value, even if they do not show results in the short term. This is especially concerning performance-based compensation. While we understand that measuring these actions using numerical targets is difficult, we would like to continue our discussions and create an executive remuneration system that genuinely contributes to improving corporate value over the long term.
In 2023, we formulated and announced a new medium-to-long-term strategy focusing on the Japanese market and brand equity, key areas for further company development. Shiseido has a 150-year history and is a proud Japanese company. Its longevity is a testament to the constant innovation that has taken place. I am eager for us to move forward and achieve our new medium-to-long-term strategy without forgetting the innovation that has always been part of our DNA. Shiseido can turn the page on these events to start its next chapter and continue to grow with a sense of urgency and the confidence and passion to do so.
Member, Nomination & Remuneration Advisory Committee
Mariko Tokuno
(Appointed as External Director in 2022)
Introducing Our New External Director
On My Appointment as External Director
I am honored to join the Board of Directors at Shiseido, a company that continually provides significant value to society.
A global leader throughout its long history, Shiseido has laid out a forward-looking value creation process to achieve its mission, yet the company is eager to further accelerate its transformation. I believe that one of the roles expected of the Board of Directors is to be a strong supporter of the management team's flexible ideas and sound risk-taking.
I am committed to contributing to Shiseido's continued value creation by understanding the expectations of our diverse stakeholders and engaging in constructive discussions with other board members and the management team.
Yoshihiko Hatanaka
April 2023
