Chapter 5 Corporate Governance
71 Messages from Outside Directors and an Outside Audit & Supervisory Board Member 73 Corporate Governance Initiatives 81 Compliance 83 Directors and Audit & Supervisory Board Members 87 Executive Officers
Kao Integrated Report 2020 70 Messages from Outside Directors and an Outside Audit & Supervisory Board Member
Sonosuke Kadonaga Outside Director Chairman of the Board of Directors
I feel that corporate governance at companies has gone opportunities to learn about what is going on at Kao through the concept of organizational design and internally, but I do not let that stop me from stating establishing the scaffolding of frameworks such as the critical opinions at Board of Directors meetings. In number of Board members and composition of the Board addition, as the Chairman of the Board of Directors, I of Directors, and now the emphasis of enhancing try to create an atmosphere that allows the other corporate governance have shifted to the proper operation Outside Directors to give their frank opinions. That of the system. When we delve into how well governance is Kao’s Executive Officers listen seriously to these implemented, you can tell whether the Executive Officers opinions is one of the strengths of Kao’s corporate have the intention of effectively using Outside Directors governance. through the Board of Directors or other avenues. In this At Board of Directors meetings in FY2019, around sense, Kao’s Inside Directors show open-minded attitude ten Executive Officers, who usually do not have much to incorporate the opinions of Outside Directors into interaction with Outside Directors, discussed with us management, and because of this, we have been able to what they are thinking in their day-to-day work on the raise the effectiveness of corporate governance. I hope this shared theme of “how to keep Kao shining in the new remains an integral part of Kao’s culture going forward as Reiwa Era” (Reiwa is the name of the new Japanese well. era with the ascension of the new emperor in May I believe that the role of an Outside Director is to 2019), and we had a lively exchange of ideas. We also ensure that the company is managed properly with had many opportunities to discuss Kao’s long-term integrity. The one word of “Integrity” is difficult to concisely direction in terms of ESG, and many opinions were translate into Japanese, but I think “Walking the right path” given by Outside Directors in the fruitful discussions. in the Kao Way captures it well. When the thinking behind The next mid-term management plan is a major topic execution becomes too focused on the company, the onus of discussion in FY2020, and as part of this, I believe it is on Outside Directors to bring discussions back to placing will be beneficial if we can hold discussions on what highest priority on whether proper management is being Kao aims for and what it should transform as well as attained. This responsibility must not be yielded. I also deeper discussions on the human capital strategy. attend Management Committee meetings and have many
71 Kao Integrated Report 2020 I have been attending Board of Directors meetings as an What Kao Aims for Outside Director since March 2019. I have also been given opportunities to participate in internal research presentations and other briefings at Kao, and have opportunities to talk directly with Executive Officers, middle managers and younger employees engaged in planning, research and others as needed. Through these opportunities, I have been able to obtain a large amount of information that will be very useful in considering Kao’s long-term strategy. In addition, the Outside Director serving as chairman of the Board of Directors clearly and Monozukuri Strategy concisely communicates the background to the agenda based on information specific to Kao obtained in advance in Management Committee meetings, visits to worksites Chiaki Mukai and the like, and this makes it easier for us Outside Outside Director Directors to participate in the core discussions. We held multiple discussions on the ESG Strategy, the Kirei Lifestyle Plan at Board of Directors meetings in FY2019.
Kao has products that are beneficial in various settings in Kao’s Corporate Strategy daily life. I would like to see Kao firmly establish the Kirei Lifestyle Plan internally the way the Kao Way has become established, and use its total product strengths to spread Kao-style “Kirei” around the world.
Kao has shifted to ESG-driven management. I believe Kao will continue to effectively practice the “Social” part Performance in FY2019 Performance as it has been doing, and how to incorporate the “Environment” part into daily operations is also being discussed in detail, but the “Governance” that supports this is also essential. Kao has established a robust governance framework, but it is people who actually put it into operation. Internal controls function effectively when people monitor the things in the scope of their responsibility, and will be even more effective when people raise their awareness to also encompass related upstream and downstream areas. From a human Corporate Governance capital standpoint as well, bringing in outstanding people and people with different experiences and values will Hideki Amano create opportunities to generate completely new ideas Outside Audit & Supervisory Board Member from the discussion in day-to-day work. FY2020 is the year to formulate the next mid-term management plan. Together with cross-division coordination, I would like to see Kao create a strong vision for its future goals while engaging in top-down and bottom-up communication.
Kao Integrated Report 2020 72 Corporate Governance Initiatives
Corporate Governance with the Corporate Philosophy at Its Core At Kao, we practice corporate governance that places discussions by the Board of Directors, introducing the corporate philosophy, the Kao Way, at its core and performance-based compensation for executives to with a consistent focus on Innovation, which is one of increase awareness for contributing to mid- to long-term values of the Kao Way. Putting in place systems for business performance improvements and enhanced organizational design and the executive team, as well as corporate value, and establishing committees on a effectively implementing them, are key to maintaining an voluntary basis. In FY2019, to achieve greater diversity effective governance structure. To do this, we revise our in our Board of Directors and further enhance its system of corporate governance as necessary to supervisory function, we increased our Outside address changes in the business and management Directors by one to make their number equal to the environment and pursue the most optimum structure for number of inside Directors and appointed a woman as realizing sustainable growth. an Outside Director. We will continue to implement We have also taken actions in the past to this end, corporate governance able to advance corporate including changing the number of Directors to activate management in both offensive and defensive ways.
Basic Approach to Corporate Governance
Our vision by 2030 is to make Kao a company with a structure and an internal control system, timely global presence. In addition to financial strategies and implement the necessary initiatives and achieve initiatives including financial results, non-financial accountability so that we can swiftly respond to strategies and initiatives should be enhanced. It is changes, realize efficient management that is sound, fair important that the fruits from those strategies and and highly transparent, and continuously enhance initiatives are used as investments for sustainable corporate value. We view accomplishing such tasks as growth. We have announced that we recognize ESG one of our most important management issues. We initiatives as an investment for the future, not as a cost, have been actively engaging in activities to listen to and are promoting them. We consider good corporate stakeholders’ voices and based on input from governance as a prerequisite and a driving force for stakeholders and social trends, we conduct reviews of strongly promoting the achievement of such a goal. Our our corporate governance and implement the necessary basic stance on initiatives related to corporate initiatives and improvements, as needed, in an governance is to set up and operate a management appropriate manner.
WEB Report Concerning Corporate Governance www.kao.com/content/dam/sites/kao/www-kao-com/global/en/about/pdf/governance_001.pdf Please see our corporate website for more information about our corporate governance.
Corporate Governance Reform We have also practiced Innovation, which is one of changes in the business environment as well as social values of the Kao Way, in the area of corporate demands, and will continue to take steps to reform our governance from an early stage. We have pursued governance. creation of the most optimal structure to respond to
73 Kao Integrated Report 2020 Evolution of Kao’s corporate governance What Kao Aims for 1999‒ 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
201 Established the Committee for the Examination of Committee for the Nominees for Directors and Executive Officers Examination of 200 Established the Committee for the Examination of Nominees for Nominees for Chairman of the Board and the President 201 Established the Committee for the Directors and Chief Executive Officer Examination of Nominees for Directors
oar of irectors m ers in so i circ es are the 1999 2000 2002 200 2012 201 201 n m er of irectors 2 2 18 11 13 7 3 4
Inside Kao’s Outside 2002 2012 2019 Monozukuri Strategy anagement s pervisio n 2 3 4
A it S pervisory oar em ers m ers in so i circ es are the 1999 n m er of em ers Full-time 2 Outside 1999 2001 201 1 2 3
201 Evaluation of the effectiveness of the Board of Directors
Evaluation of the Kao’s Corporate Strategy a iting effectiveness 201 Evaluation of the effectiveness of the Audit & Supervisory Board 2019 Evaluation of the effectiveness of the Committee for the Examination of Nominees for Directors and the Compensation Advisory Committee
2000 2002 Established the Advisory Committee
2002 Introduced the Outside Director system
200 Commenced meetings to exchange opinions between Representative Directors and Audit & Supervisory Board Members
2010 Established Standards for Independence of Outside Directors /Outside Audit & Supervisory Board Members
201 Appointed an Independent Outside Director as Chairman of the Board of Directors Performance in FY2019 Performance
201 Began meetings to exchange opinions between Audit & Supervisory Board Members and Outside Directors Compensation for ec tives Compensation 200 Established the Compensation Advisory Committee Advisory Committee 201 Participation of Outside Audit & Supervisory Board Members Short-term 2000 ® 200 ® incentive Introduced an EVA performance-based bonus Introduced EVA /sales and ordinary income indicators compensation
Mid- to long-term 2001Introduced a stock option plan 200 Introduced share remuneration 201 Introduced performance-based incentive type stock options share incentive plan compensation Corporate Governance
2001Abolished retirement benefits 201 Revised the Outside Director compensation system to not link to business performance
ec tion system 2002 Introduced the Executive Officer system 200 Appointed the president and lower positions as Executive Officers 201 Delegation agreement with Executive Officers 200 Established the Department of Internal Audit 200 Established the Internal Control Committee 201 2010 Established the Established the Sustainability Committee ESG Committee
2019 Established the ESG External Advisory Board
Kao Integrated Report 2020 74 Corporate Governance Structure
Shareholders Meeting
ppo nt ent d a ppo nt ent d a ppo nt ent d a 9 1 2 4 Committee for the Examination Audit & Supervisory Directors p n on of Nominees for Directors o a orat on Board Members 7 Independent Outside The Board consists of 4 Independent Directors/Independent Outside The Board consists of 3 Independent d t Outside Directors and Audit & Supervisory Board Members Outside Audit & Supervisory Board 4 Inside Directors Members and 2 Full-time 5 Compensation Advisory Committee Report Board of Directors Audit & Supervisory Board Members p n on for Directors and Executive Officers Chairman Independent Outside Director 7 Independent Outside Directors and Audit & Supervisory Board Directors/Independent Outside Audit & Supervisory Board Members attend the meetings Audit & Supervisory Board Members 3 Representative Directors d t Accounting Auditor Outside Lawyers Compliance Hotline 7 Internal Control 6 ESG p n on ESG External Committee Committee Advisory Board per on o a orat on o re o ttee o p an e o ttee In or at on e r t o ttee R r anage ent o ttee d t o ttee or Re pon e are ro ot on a t anage ent o ttee Accounting Auditor d t 3 Certified Public Management Committee Accountants d t d t epart ent o Interna d t Executing Divisions 8 Interna d t e t e er Re pon e or a on Subsidiaries/ o a o ne n t on orporate n t on rat on Affiliates In e t gat on d t o t ng ttendan e on eren e o d tor or o e t ro p o pan e Auditors
1 Audit & Supervisory Board 2 Board of Directors 3 Management Committee Audits the execution of business by Directors Deliberates the management direction including the Makes decisions relating to the execution and others by attending important meetings, management strategy from various perspectives of the mid- to long-term direction and such as meetings of the Board of Directors and including evaluation of risks, and makes decisions strategies as principal members with the the Management Committee, exchanging relating to the execution of business as well as position of Managing Executive Officer or information with Accounting Auditor and internal supervises the execution of business by Directors. higher. Acts to speed up decision- auditing divisions including the Department of making and execution by delegating Internal Audit, conducting interviews at internal wide-ranging authority to the divisions and affiliates and others. Management Committee.
4 Committee for the Examination 5 Compensation Advisory Committee 6 ESG Committee of Nominees for Directors for Directors and Executive Officers Comprising all Outside Directors and Outside Comprising all Representative Directors, all Outside To gain the support and trust of all Audit & Supervisory Board Members, examines Directors and all Outside Audit & Supervisory Board stakeholders, discusses and determines and deliberates the appropriateness and other Members, examine and deliberate the compensation the direction of the group’s activities qualities of Director nominees, including for system and standards for Directors and Executive pertaining to the ESG Strategy, aiming to President and Chief Executive Officer, and Officers, and submit their opinions to the Board of contribute to the sustainable development submits its opinions to the Board of Directors. Directors. of the Kao Group as a company with a global presence and society.
7 Internal Control Committee 8 Department of Internal Audit 9 Accounting Auditor Discusses and determines the direction of the Conducts internal audits on management activities in Deloitte Touche Tohmatsu LLC is the Kao Group’s overall internal control systems to general from the perspective of comply with laws and audit firm appointed as the Accounting ensure the accuracy of financial reporting and regulations, the appropriateness of financial reporting, Auditor based on the Companies Act, achieve cross-organizational integration of and administrative effectiveness and efficiency. It also and for accounting audits based on the functions pertaining to internal control. regularly makes reports to the Management Financial Instruments and Exchange Act. Committee and the Board of Directors.
75 Kao Integrated Report 2020 Attending Members for Meetings of the Board of Directors, the Audit & Supervisory Board and Other Committees ◎ Indicates Chairman of the Board or specified committee. ○ Indicates attending member. Committee for Audit & Supervisory the Examination Compensation Name Board of Directors Board of Nominees for Advisory Committee Directors What Kao Aims for Michitaka Sawada ○ ○ Toshiaki Takeuchi ○ ○ Yoshihiro Hasebe ○ ○ Directors Tomoharu Matsuda ○ Sonosuke Kadonaga Outside/Independent ◎ ◎ ◎ Osamu Shinobe Outside/Independent ○ ○ ○ Chiaki Mukai Outside/Independent ○ ○ ○ Kao’s Nobuhide Hayashi Outside/Independent ○ ○ ○ Audit & Supervisory Board Members
Katsuya Fujii ○ ◎ Monozukuri Strategy Hideko Aoki ○ ○ Hideki Amano Outside/Independent ○ ○ ○ ○ Nobuhiro Oka Outside/Independent ○ ○ ○ ○
Takahiro Nakazawa Outside/Independent ○ ○ ○ ○
(13 persons) (5 persons) (7 persons) (10 persons)
Reasons for Appointment of Outside Directors and Outside Audit & Supervisory Members Kao’s Corporate Strategy
Attendance in Name Reason for appointment FY2019 Board of Audit & Directors Supervisory Board e a a g e e o n g t re ated to nternat ona orporate anage ent g eaned ro ono e on dera e e per en e at ore gn a ated on t ng o pan and a er ed a t e a r an - Kadonaga o t e oard o re tor a an Independent t de re tor n e ar 20 ere e a 14/14 ontr ted to engag ng d on t at tran end t e o ndar e o n de and o t de re tor
e a a on dera e e per en e and e pert e n re at on to g o a orporate anage ent and tsi e irectors a r anage ent a e to eet ang ng need n t e ne en ron ent n d ng n o e ent or an ear n t e a ntenan e d on o a g o a operat ng a r ne o pan ere a et no e 14/14 - and re a t are t e top pr or t and o er op n on and a a e gge t on on atter ater a to o r gro p anage ent in FY2019 Performance
an a trona t and a do tor e a g e e o e pert e n t e ent e d and at oard o a re tor e a t e o er op n on and gge t on e erag ng er e per en e and n g t a 12/12* - a e a er per pe t e a a o an on atter ater a to o r gro p anage ent
e a an a ndan e o e per en e and a g e e o n g t n g o a orporate anage ent to addre ang ng need n d ng an ear o nternat ona e per en e n nan e and nan e o de a a r and er ng a a anage ent e e t e e t e or d o nan e a e per en ng 12/12* - a a ange n t e g o a ne en ron ent and o er a a e op n on and gge t on on atter ater a to o r gro p anage ent
tsi e A it S pervisory e a e pert e a a ert ed p a o ntant and e per en e er ng a e a d tor or arge
de o pan e t o er ea operat on at a ead ng a d t ng r and a a g e e o n g t Corporate Governance ano perta n ng to g o a anage ent ga ned ro e per en e er ng a a e er o t e teer ng 14/14 8/8 oar em ers o ttee o a ead ng nternat ona a d t ng r a gned t t at a d t ng r
a a er e a e pert n g t and on dera e e per en e n orporate ega a a r and o ro orporate go ernan e and a a g e e o n g t nto o r gro p ne ro er ng a an 14/14 8/8 a d t per or oard e er o pr n p e d ar n e 20
e a e pert e a a ert ed p a o ntant and a een n o ed n a d t ng or or arge a a ro o pan e at a ead ng a d t ng r and a a g e e o n g t perta n ng to go ernan e and a a a a nterna ontro at g o a o pan e n d ng ro ad or or re at ng to t e ntrod t on o -** - a o nt ng tandard and Internat ona nan a Report ng tandard I R
* The Board of Directors met 14 times in FY2019, and the Audit & Supervisory Board met 8 times. There have been 12 meetings of the Board of Directors since the appointments of Ms. Mukai and Mr. Hayashi. ** Mr. Nakazawa was appointed in March 2020, and therefore has no attendance recorded for FY2019.
Kao Integrated Report 2020 76 Board of Directors
Topics
a or topics isc sse y the oar of irectors in FY2019
First ● Re on o ne ond t de ne Second ● trateg uarter ● a at on o t e e e t ene o t e oard o re tor uarter ● d to ong ter trateg ● trateg ● rrent tat o Re ear e e op ent ● epart ent o Interna d t e ann a report and top ● ● d t per or oard e er a d t report ar e o p an e o ttee ann a report ● er ea IR road o report
Third ● o et ne trateg Fourth ● Re ear e e op ent progre report uarter ● trateg uarter ● trateg ● d an ed g ta e no og trateg ● Interna ontro o ttee a t t e report ● epart ent o Interna d t e ann a report ● ro are o d ng tat report ● an ap ta de e op ent trateg ● ree d on
The agenda for the mid- to long-term strategy included presentations given by multiple Executive Officers and engaging discussions based on them. In addition to the above, each month we have business execution reports from Directors currently serving as Executive Officers, as well as on matters discussed during the Management Committee from the Executive Officer in charge.
Effectiveness evaluation process
Questionnaire to all Directors Feedback the Discussion and opinion Identify issues based on Ongoing activities and all Audit & Supervisory questionnaire exchange at the Board the evaluation results to resolve issues Board Members results of Directors
FY2019 eva ation of oar of irectors’ effectiveness
Evaluation and efforts to address issues pointed out in the previous fiscal year and future issues
o t ng and de e op ng g o a an ap ta and d er e an ap ta a e een d ed to a erta n e tent Human capital a e ng a ared nder tand ng o t e e o ng or ard deeper d on o an ap ta re re ent strategy and de e op ent p an a ed on o r on or t e t re n d ng nd ng and de e op ng o ng an ap ta and ng an ap ta ro e terna o r e ne e ar
e need to en an e t e a t t o t e oard o re tor and app at on o oard o re tor d on n Interactive e e t on a ed on ntera t e o n at on et een anage ent and e e t on a een po nted o t In communication add t on to t e ar ng o oard o re tor eet ng d on at e t e er eet ng and ont report between e t e er at oard o re tor eet ng t at a e een done p to no n 20 t p e management pre entat on ere g en e t e er on t e d to ong ter trateg o ed on t e t re and d re t and execution ar ng o op n on t e t e er reated deeper nder tand ng on ot de
or e ere per on re red not on or pro ng te t a o or a ng ongo ng od at on on t e operat on de t e n er o n tan e and peed t negat e n or at on get reported p to t e Internal controls oard o re tor a e n rea ed t rt er pro e ent are needed n gett ng report ro operat ona te and n a tat ng ro d on ooperat on oo ng a ead d on on t e a gro nd and ore e e ent o e ent t at a e appened are a o needed
In t e oard o re tor e a e reated ond t on ond e to t de re tor part pat ng n ore d on n d ng a ng t e a r an an Independent t de re tor pro de e p anat on a o t t e a gro nd to t e agenda and ree and e d on t at tran end t e o ndar e o In de and t de re tor are ta ng p a e In add t on t to or te t n and o t de apan and t e e pro de t de re tor t opport n t e to Other o ta n n or at on n p a e apart ro oard o re tor eet ng In 20 t e a et a de or d on on t e trateg re ted n a p de arat on o ntent o ng or ard e a nta n ng t e a a e a pe t o t e oard o re tor e need to de ote ore t e to d on on t e a or d re t on o t e o pan n d ng t e d ter p an t e an ap ta trateg t e g o a trateg and t e trateg
77 Kao Integrated Report 2020 Audit & Supervisory Board What Kao Aims for
Effectiveness evaluation process
Evaluate after referencing the list of focal Create list of focal points by all Audit & Create evaluation results and integrate points and exchanging opinions and Supervisory Board Members into next fiscal year’s audit plan holding discussions
FY2019 eva ation of A it S pervisory oar effectiveness
● d t per or oard e er attend oard o re tor eet ng a d t t e anage ent de on a ng pro e and t e e ta ent and p e entat on o nterna ontro and anno n e op n on a ne e ar Kao’s
● t e d t per or oard e er attend portant eet ng n d ng anage ent o ttee and Monozukuri Strategy Interna ontro o ttee eet ng In add t on t e proa t e ond t on te t nter e and ond t r e o a ated o pan e t n and o t de apan t a p e opport n t e a o pro ded or t de d t per or oard e er to part pate a ed on t e op n on and o ent ga ned ro t e e a t t e Current status op n on e ange are e d t t e Repre entat e re tor and t de re tor o Kao and a or d ar e and d t per or oard e er pro de gge t on a ne e ar ● d t per or oard e er engage n ran e ange o op n on a ed on t e r re pe t e e per en e and pe a at on and t e d t per or oard n t on e e t e o era
● pport n t e are a o pro ded at oard o re tor eet ng to o ent on t e a t t e o t e d t per or oard Kao’s Corporate Strategy
a e t e o o ng tep to re pond e and appropr ate to ange n t e ne en ron ent and to ne e pan on ● a e proa t e gge t on to en re e e t ene and e en n ter o ot t e a ntenan e and operat on Issues o nterna ontro g o a ● n an e ra e or to a e e ore e e t e n t ona t or d t per or oard e er o d ar e ● ont n e to on der o to pro eed t a d t
Compensation System for Directors, Audit & Supervisory Board in FY2019 Performance Members and Executive Officers The compensation system for Directors, Audit & standards for Directors and Executive Officers are Supervisory Board Members and Executive Officers is examined by the Compensation Advisory Committee aimed at (1) securing and retaining diverse and excellent and determined by the Board of Directors. talent to establish and improve competitive advantages; Compensation for Independent Outside Directors (2) promoting prioritized measures for continuous consists solely of a fixed monthly salary. Compensation enhancement in corporate value; and (3) sharing for Audit & Supervisory Board Members also consists interests in common with shareholders. Starting in solely of a fixed monthly salary, and compensation Corporate Governance FY2017, we have introduced a performance-based standards are determined at meetings of the Audit & share incentive plan for our Directors (excluding Outside Supervisory Board. Compensation standards for Directors) and Executive Officers. Serving as a highly Directors, Audit & Supervisory Board Members and transparent and objective remuneration system that is Executive Officers are determined each year after closely linked to company performance, the ascertaining standards at other major manufacturers of performance-based share incentive plan aims to similar size, industry category, and business type as Kao increase awareness of contributing to improvements in using officer compensation survey data from an external our financial performance and corporate value over the survey organization. We do not have a system for mid- to long-term. providing retirement benefits to Directors or Audit & The compensation system and compensation Supervisory Board Members.
Kao Integrated Report 2020 78 Summary of Compensation System for Directors, Audit & Supervisory Board Members and Executive Officers
Base salary Short-term incentive compensation Long-term incentive compensation
Bonus Performance-based share incentive Consolidated net sales/ EVA®-linked part profit-linked part
etho of provision o nt deter ned n o nt o on deter ned n a ordan e t Kao are et are de ered t n a o r ear a ordan e t ro e degree o a e e ent o ng e a ear target target per od o ered t e rrent d ter p an and ran and pro ded and pro ded ● ed part e er a et n er o are et ea ear a ed ont ● er or an e a ed part e er are et a ter t e o pen at on on on o t e d ter p an n a ordan e t t e degree o a e e ent o t e target n t e d ter p an e o pen at on tr t re et at 0 per or an e a ed and 0 ed Performance eva ation perio
ne ear o r ear 20 2020
● ● va ation ● on o dated net a e ● e or e net a e t p ere In t t te in icator R e a at on ● In o e o po nd ann a gro t ro ro t e e ng or d o t t a rate and enera and o pan e d n trat e pen e ● perat ng arg n va ation
criteria egree o target a e e ent egree o target egree o target egree o ear on ear er o e e t on a e e ent a e e ent pro e ent etermination of payo t rate Coefficien t e oe ent or t e per or an e a ed part e pa o t rat o deter ned t n t e range deter ned t n t e range o 0 200 n o 0 200 n a ordan e t t e degree o a ordan e t t e degree o a e e ent o a e e ent o ea nd ator ea nd ator
Compensation on a o nt po t on en t e pa o t rat o e ear are re nerat on a o nt en t e
str ct re 00 per or an e a ed oe ent 00 ● re dent and e e t e er ● o t 0 to 0 o t e a e a ar o t e po t on 0 o a e a ar ● e t e er t t t e 0 o a e a ar (except for the President and Chief Executive Officer) ● t er e t e er 0 o a e a ar igi e for provision ● re tor ● re tor ept or t de re tor ● re tor ept or t de re tor ● e t e er ● e t e er ● e t e er ● d t per or oard e er
* “World’s Most Ethical Companies®” and “Ethisphere” names and marks are registered trademarks of Ethisphere LLC.
Compensation paid to Directors and Audit & Supervisory Board Members in FY2019
Aggregate amo nt of Amo nt of rem neration y type i ions of yen m er of persons C assification rem neration Persons er or an e a ed i ions of yen a e a ar on are n ent e re tor o t de re tor 0（ ） 404（71） 264（71） 35（-） 105（-） d t per or oard e er - - o t de d t per or oard e er 6（3） 78（30） 78（30） 0（ ） 0（ ） ota o t de re tor and d t per or oard e er （ ） 482（101） 342（101） 35（-） 105（-） Note: The above numbers of Directors/Audit & Supervisory Board Members include one Director, one Outside Director and one Audit & Supervisory Board Member who resigned at the conclusion of the 113th Annual General Meeting of Shareholders held on March 26, 2019. FY2019 Remuneration for Individual Directors
Aggregate amo nt of Amo nt of rem neration y type i ions of yen ame irector c assification rem neration er or an e a ed i ions of yen a e a ar on are n ent e
ta a a ada re tor 133 82 16 35
Note: Only Director remuneration amounts totaling over 100 million yen are listed.
79 Kao Integrated Report 2020 Activities to enhance monitoring by Directors and Audit & Supervisory Board Members Having members of management go out themselves to sites each year together with Outside Directors and markets, worksite, plants and retail stores and build their Outside Audit & Supervisory Board Members and strive knowledge of local sites is part of Kao’s DNA. To to improve effectiveness through dialogue. What Kao Aims for achieve sustainable and profitable growth, We visit local
Japan
In September 2019, they toured Toyohashi Plant that uses state- of-the-art robotic Kao’s technology. They also Monozukuri Strategy exchanged opinions about the future supply chain. Kao’s Corporate Strategy
China
In July 2019, they toured the Chinese market as well as our offices and plants in China, and Performance in FY2019 Performance exchanged opinions with local staff to deepen understanding for the business strategy.
Indonesia Corporate Governance
In September 2019, they visited chemicals subsidiary’s offices and plants in Indonesia, and exchanged opinions with local employees.
Kao Integrated Report 2020 80 Compliance
Basic Philosophy Kao regards Integrity, the value inherited from its developing human capital with high ethical standards by founder, as the starting point of its compliance activities. conducting ongoing initiatives to enhance We strive to thoroughly ensure compliance mainly by compliance. Through these activities, we aim to create instilling the Kao Business Conduct Guidelines (BCG), workplaces that are easy to work in and where human which is our code of conduct. Viewing the fostering of capital is fully utilized, and make the necessary individual employees’ compliance awareness as the improvements for a sound corporate culture. foundation of management, we are focusing on
WEB Kao Business Conduct Guidelines (BCG) www.kao.com/content/dam/sites/kao/www-kao-com/global/en/about/pdf/compliance_all.pdf Please see Kao’s corporate website for more information about the Kao Business Conduct Guidelines (BCG).
Initiatives to Enhance Compliance
2000– 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
2000–2 002 2003
Philosophy/regulations Revision of Conduct Principles Establishment/revision of Kao Business Conduct Guidelines (BCG)
1998 Establishment/revision of Guidelines Concerning Business Entertainment, Business Gifts and Monetary Offerings for Celebrations or Condolences
2000 Establishment/revision of Guidelines for Offering Benefits to Government Officials
2001 Establishment/revision of Guidelines for Avoiding Conflicts of Interest
2014 Establishment of Anti-Bribery (Anti-Corruption) Guidelines
2000‒2003 2003
report response system Organization and hotline Corporate Ethics Committee Renamed the Compliance Committee
2000 Establishment of Compliance Hotline Acceptance of anonymous report (Since 2000 in Japan, 2007 in Europe and the Americas and 2008 in Asia) (Since 2007 in Europe and the Americas, 2008 in Asia and 2019 in Japan)
2003 Establishment of Compliance hotline by outside lawyer in Japan
2003 Distribution of Integrity Cards (Cards with compliance hotline information) (Since 2003 in Japan and 2009 in Europe, the Americas and Asia)
2020 Establishment of Rules for Operating Compliance Hotlines Trainings/Announcement 2003–2004 BCG Seminar 2005–2020 Stratified trainings (for new employees, mid-career hire employees and managers in Japan)
2006– 2008 Senior manager developmen（t Asia）2009 Workshops（since 2009 in Asia, 2010 in Europe and the Americas and 2011 in Japan）
2012 Refresher training for managers every three years (outside Japan)
2013 BCG refresher test 2016 Compliance Awareness Month measurements Effectiveness 2003 Self-check at each division 2018 Transitioned to risk surveys
2015 Activities to solicit employee opinion 2016 Compliance awareness survey
2007 External evaluations
* Activities throughout the Kao Group within and outside Japan, unless the region is noted.
81 Kao Integrated Report 2020 PDCA Cycle to Continuously Improve Compliance What Kao Aims for PDCA promotion structure PDCA cycle Plan Do
Compliance Committee ● Formulate the activities ● Promote specific activities Compliance Committee Secretariat policy and annual based on the activities activities plan taking into policy and annual plan. consideration the issues ● Establish and revise rules 3【 e 】 t t e and expectation from Plan Do and regulations e a at on society. ●Provide a variety of
training opportunities 1【 an】 or ate ・ oard o re tor Proactive ● Respond appropriately to a t t e po ・ anage ent o ttee hotline reports. Kao’s and ann a ・ d t per or improvement a t t e p an oard eet ng activities Check 【 o】 e t on Monozukuri Strategy ● n tr t on o 4【 t on】Ident e Internal evaluations and a e Action ● Opinions from the Board of a o e Action Check ne e ar Directors and others ● pro e ent Identify the issues and ● Issues from risk surveys, etc. conduct improvement ● Compliace awareness survey activities. ● Persons responsible for divisions ● External evaluations ● Feedback from external ● Subsidiary presidents evaluation organizations ● Persons responsible for Compliance Promotion The Compliance Committee creates and implements the activities policy 2【 o】 t on and annual activities plan taking into consideration the issues and Kao’s Corporate Strategy expectations from society. It identifies further issues based on internal Employees (Japan/Outside Japan) and external evaluations and connects them to improvement activities.
Response Process for Compliance Hotline Reports
Kao has created various systems to find Compliance Committee improprieties at an early stage. We have set up Compliance Committee Secretariat hotlines in all countries and regions, promptly conduct investigations and take corrective measures striving 2 Report 6 eed a ・In tr t to 5 Report to resolve any issues. in FY2019 Performance ond t o n e t gat on nd ng Reports are made quarterly to the Management ・ a e Internal hotline system orre t e Committee and the Audit & Supervisory Board ea re Japan Members on trends in compliance incidents Kao Compliance Hotline (internal) Person responsible for Kao lawyers’ hotline (external third party) including cases reported to the hotlines, the content of Compliance Promotion Kao Consultation Room (external third party) serious incidents, the response to these and other Outside Japan matters, in addition to which a Management Committee ・ ond t Integrity Line (internal/external) n e t gat on 4 summary report of these matters and an annual ・ a e orre t e ea re activities report are also made to the Board of Directors. 1 Report to ot ne 7 eed a We are strengthening compliance while checking the Corporate Governance Employees Employees (Japan/Outside Japan), appropriateness of the response to hotline reports, (Japan/Outside Japan) third parties of suppliers, etc. sharing issues and discussing countermeasures through the above mentioned reports.
Fourteen consecutive years on one of the World’s Most Ethical Companies® 2020 list We regard being selected as one of the World’s Most Ethical Companies® as an important indicator for the achievement of compliance activities. This award is one of the elements of the evaluation of Executive Officer compensation.
Kao Integrated Report 2020 82 Directors and Audit & Supervisory Board Members （As of March 25, 2020）
Takahiro Nakazawa Hideki Amano Hideko Aoki Yoshihiro Hasebe Outside Audit & Supervisory Outside Audit & Supervisory Full-time Audit & Supervisory Representative Director, Board Member Board Member Board Member Senior Managing Executive Officer
Nobuhide Hayashi Sonosuke Kadonaga Michitaka Sawada Outside Director Outside Director, Representative Director, Chairman of the Board of Directors President and Chief Executive Officer
83 Kao Integrated Report 2020 What Kao Aims for Kao’s Monozukuri Strategy Kao’s Corporate Strategy Performance in FY2019 Performance Corporate Governance
Tomoharu Matsuda Katsuya Fujii Nobuhiro Oka Director, Full-time Audit & Supervisory Outside Audit & Supervisory Managing Executive Officer Board Member Board Member
Toshiaki Takeuchi Osamu Shinobe Chiaki Mukai Representative Director, Outside Director Outside Director Senior Managing Executive Officer
Kao Integrated Report 2020 84 Directors and Audit & Supervisory Board Members (As of March 25, 2020)
Directors
Michitaka Sawada (Date of birth: Dec. 20, 1955) Tomoharu Matsuda (Date of birth: Nov. 15, 1959) Representative Director, Director, Managing Executive Officer President and Chief Executive Officer Apr. 1983 Joined Kao Corporation Apr. 1981 Joined Kao Corporation Jan. 2008 President, Kao (Hong Kong) Ltd. Jul. 2003 Vice President, Sanitary Products Research Laboratories Mar. 2010 Chairman and General Manager, Kao (Taiwan) Corporation Jun. 2006 Vice President, Global Research & Development, Executive Mar. 2013 President, Beauty Care, Skin Care and Hair Care Business Unit, Officer Global Apr. 2007 Vice President, Global Research & Development, Human Health Mar. 2014 Executive Officer Care Jan. 2018 Managing Executive Officer; Senior Vice President, Consumer Jun. 2008 Director, Executive Officer Products, Global; Responsible for Skin Care and Hair Care Business Jun. 2012 Representative Director, President and Chief Executive Officer (current); Responsible for Human Health Care Business (current); (current) Responsible for Fabric and Home Care Business (current); Chairman Jan. 2014 Responsible for Product Quality Management of the Board, Oribe Hair Care, LLC Jan. 2016 Responsible for Corporate Strategy Mar. 2019 Director, Managing Executive Officer (current); President, Jan. 2019 Responsible for Human Capital Development Consumer Products, Global (current); Responsible for Kao Professional Services Co., Ltd. (current)
Toshiaki Takeuchi (Date of birth: Mar. 22, 1959) Representative Director, Senior Managing Executive Officer Sonosuke Kadonaga (Date of birth: Aug. 5, 1952) Outside Director, Chairman of the Board of Directors Apr. 1981 Joined Kao Corporation Mar. 2006 Vice President, Kyushu Office, Kao Customer Marketing Co., Ltd. Apr. 1976 Joined Chiyoda Corporation Mar. 2009 Vice President, Corporate Planning, Kao Customer Marketing Co., Ltd. Jun. 1981 Masters in Science in Chemical Engineering, Massachusetts Mar. 2010 Director, Executive Officer, Kao Customer Marketing Co., Institute of Technology, School of Engineering, U.S.A. Ltd. Aug. 1986 Joined McKinsey & Company, Inc., Japan May 2011 Director, Senior Managing Executive Officer, Kao Customer Jul. 2009 President, Intrinsics (current) Marketing Co., Ltd. Jun. 2012 Director, Kao Corporation (current) May 2012 Representative Director, Senior Managing Executive Officer, Kao Mar. 2014 Chairman of the Board of Directors (current) Customer Marketing Co., Ltd. Jun. 2012 Executive Officer Other material position(s) President, Intrinsics Apr. 2013 Representative Director, Executive Vice President, Kao Customer Director, Business Breakthrough, Inc. Marketing Co., Ltd. Outside Director, Chairperson of the Audit & Supervisory Committee, Sumitomo Mar. 2014 Representative Director, President, Kao Customer Marketing Co., Ltd.; Mitsui Banking Corporation Representative Director, Managing Executive Officer Vice President, Business Breakthrough University Jan. 2016 Representative Director, President, Kao Group Customer Marketing Co., Ltd. (current); Representative Director, Senior Managing Executive Officer (current) Osamu Shinobe (Date of birth: Nov. 11, 1952) Outside Director
Yoshihiro Hasebe (Date of birth: Jul. 30, 1960) Apr. 1976 Joined ALL NIPPON AIRWAYS CO., LTD. (currently, ANA Representative Director, Senior Managing Executive Officer HOLDINGS INC.) Jun. 2007 Member of the Board, ALL NIPPON AIRWAYS CO., LTD. Apr. 1990 Joined Kao Corporation Apr. 2009 Executive Vice President (jomu torishimariyaku), ALL NIPPON Mar. 2008 Director, Research and Development – Fabric and Home Care AIRWAYS CO., LTD. Research – Household Products Research Jun. 2011 Executive Vice President (senmu torishimariyaku), ALL NIPPON Mar. 2011 Vice President, Research and Development – Beauty Research AIRWAYS CO., LTD. – Hair Beauty Research Apr. 2012 Senior Executive Vice President, ALL NIPPON AIRWAYS CO., LTD. Jan. 2014 Vice President, Research and Development – Core Technology; Apr. 2013 Member of the Board, ANA HOLDINGS INC.; President and Vice President, Research and Development – Eco-Innovation Research Chief Executive Officer, ALL NIPPON AIRWAYS CO., LTD. Mar. 2014 Executive Officer, Vice President, Research and Development Apr. 2017 Member of the Board, Vice Chairman, ANA HOLDINGS INC. Mar. 2015 Senior Vice President, Research and Development, Global (current) Mar. 2018 Director, Kao Corporation (current) Jan. 2016 Managing Executive Officer Apr. 2019 Special Advisor, ANA HOLDINGS INC. (current) Mar. 2016 Director, Managing Executive Officer Jan. 2018 Director, Senior Managing Executive Officer Other material position(s) Responsible for Corporate Functions Special Advisor, ANA HOLDINGS INC. Apr. 2018 Senior Vice President, Strategic Innovative Technology, Global (current) Jan. 2019 Responsible for Compliance (current) Mar. 2019 Representative Director, Senior Managing Executive Officer (current)
WEB Standards for Independence of Outside Directors/Audit & Supervisory Board Members of Kao Corporation www.kao.com/content/dam/sites/kao/www-kao-com/global/en/about/pdf/governance_002.pdf
85 Kao Integrated Report 2020 Directors and Audit & Supervisory Board Members (As of March 25, 2020) What Kao Aims for Chiaki Mukai (Date of birth: May 6, 1952) Nobuhide Hayashi (Date of birth: Mar. 27, 1957) Outside Director Outside Director
Apr. 1977 Staff, Department of Surgery, Keio University School of Medicine Apr. 1980 Joined The Fuji Bank, Limited Aug. 1985 Payload Specialist, the National Space Development Agency of Apr. 2007 Executive Officer – Corporate Banking Division #13, Mizuho Japan (currently, the Japan Aerospace Exploration Agency; JAXA) Corporate Bank, Ltd. Jun. 1987 Visiting Scientist, Division of Cardiovascular Physiology, Space Apr. 2009 Managing Executive Officer – Japanese Business Promotion, Biomedical Research Institute, NASA Johnson Space Center Mizuho Corporate Bank, Ltd. Sept. 1992 Research Instructor of the Department of Surgery, Baylor Jun. 2011 Managing Director and Head of International Banking Unit, College of Medicine Mizuho Corporate Bank, Ltd. Apr. 2000 Visiting Professor of the Department of Surgery, Keio Apr. 2013 Deputy President & Deputy President Executive Officer, University School of Medicine (current) Mizuho Financial Group Inc.; Deputy President & Deputy Kao’s Apr. 2015 Vice president, Tokyo University of Science; Senior Technical President Executive Officer, Mizuho Bank, Ltd.; Representative
Advisor, JAXA Director, Deputy President, Mizuho Corporate Bank, Ltd. Monozukuri Strategy Jan. 2016 Corporate Executive Fellow, Kao Corporation Jun. 2013 Director, Deputy President, Mizuho Financial Group Inc. Apr. 2016 Specially Appointed Vice President, Tokyo University of Jul. 2013 Representative Director, Deputy President, Mizuho Bank, Ltd. Science (current) Apr. 2014 Representative Director, President and CEO, Mizuho Bank, Ltd. Mar. 2019 Director, Kao Corporation (current) Apr. 2017 Director, Chairman, Mizuho Bank, Ltd. Mar. 2019 Director, Kao Corporation (current) Other material position(s) Apr. 2019 Senior Advisor, Mizuho Bank, Ltd. (current) Specially Appointed Vice President, Tokyo University of Science Astronaut Other material position(s) Medical Doctor Senior Advisor, Mizuho Bank, Ltd. M.D., Ph.D. Outside Director, Baroque Japan Limited Outside Director, Fujitsu Limited Outside Audit & Supervisory Board Member, JTB Corp. Kao’s Corporate Strategy
Audit & Supervisory Board Members
Katsuya Fujii (Date of birth: Sept. 8, 1957) Nobuhiro Oka (Date of birth: Apr. 5, 1963) Full-time Audit & Supervisory Board Member Outside Audit & Supervisory Board Member
Apr. 1980 Joined Kao Corporation Apr. 1993 Registered as an attorney-at-law, joined Kajitani Law Offices Mar. 2003 Vice President, Investor Relations, Accounting and Finance Apr. 1997 Representative Partner, Takekawa & Oka Law Office Jun. 2011 Vice President, Treasury, Global Oct. 2004 Representative Partner, Takekawa, Oka & Yoshino Law Office Mar. 2017 Full-time Audit & Supervisory Board Member (current) Apr. 2012 Professor, Keio University Law School (current) Oct. 2013 Representative, Oka-Partners Law Office (current) Mar. 2014 Outside Audit & Supervisory Board Member, Kao Customer
Marketing Co., Ltd. in FY2019 Performance Hideko Aoki (Date of birth: Aug. 21, 1954) Jan. 2016 Audit & Supervisory Board Member, Kao Group Customer Full-time Audit & Supervisory Board Member Marketing Co., Ltd. (current) Mar. 2018 Audit & Supervisory Board Member, Kao Corporation (current) Aug. 1982 Joined Kao Corporation Apr. 2007 Vice President, Product Quality Management Division Jun. 2010 Executive Officer Other material position(s) Mar. 2015 Managing Executive Officer Attorney-at-Law Jan. 2019 Responsible for Special Missions Audit & Supervisory Board Member, Kao Group Customer Marketing Co., Ltd. Mar. 2019 Full-time Audit & Supervisory Board Member (current) Outside Director, Yamatane Corporation Professor, Keio University Law School
(Date of birth: Nov. 26, 1953) Hideki Amano (Date of birth: May 30, 1958)
Outside Audit & Supervisory Board Member Takahiro Nakazawa Corporate Governance Outside Audit & Supervisory Board Member Apr. 1976 Joined Arthur Andersen LLP Oct. 1981 Sept. 1980 Registered as Certified Public Accountant Joined PriceWaterhouse Tokyo Jun. 1983 Jun. 1984 Resided in Dusseldorf Office of Arthur Andersen Joined Aoyama Audit Corporation Mar. 1985 Sept. 1992 Representative employee, Inoue Saito Eiwa Audit Corporation Registered as Certified Public Accountant Jul. 2001 Sept. 2011 Vice President (Audit Management), KPMG AZSA LLC; member, Representative Partner, Chuo-Aoyama Audit Corporation Sept. 2006 KPMG Global Audit Steering Group Representative Partner, Arata Audit Corporation (currently, Jul. 2015 Executive Senior Partner, KPMG AZSA LLC PricewaterhouseCoopers Arata LLC) Jul. 2018 Mar. 2017 Audit & Supervisory Board Member, Kao Corporation (current) Director, Nakazawa Certified Public Accountant Office (current) Mar. 2020 Audit & Supervisory Board Member, Kao Corporation (current)
Other material position(s) Certified Public Accountant Other material position(s) Outside Director, TOPPAN FORMS CO., LTD. Certified Public Accountant Outside Audit & Supervisory Board Member, Ajinomoto Co., Inc. Outside Audit & Supervisory Board Member, Seiko Holdings Corporation
Kao Integrated Report 2020 86 Executive Officers (As of March 25, 2020)
Michitaka Sawada Osamu Tabata President and Chief Executive Officer Managing Executive Officer
Senior Vice President, Supply Chain Management, Global; Responsible for TCR Promotion
Toshiaki Takeuchi Yoshihiro Murakami Senior Managing Executive Officer Managing Executive Officer
Representative Director, President, Kao Group Responsible for Consumer Products - Cosmetics Customer Marketing Co., Ltd. Business; Representative Director, President, Kanebo Cosmetics Inc.; Chairman of the Board, Molton Brown Limited
Yoshihiro Hasebe Akemi Ishiwata Senior Managing Executive Officer Executive Officer
Senior Vice President, Research and Development, Senior Vice President, Corporate Communications, Global; Global Senior Vice President, Strategic Innovative Technology, Global; Responsible for Compliance
Tomoharu Matsuda Satoru Tanaka Managing Executive Officer Executive Officer
President, Consumer Products, Global; President, Consumer Products, Responsible for Skin Care and Hair Care Business; Americas and EMEA; Responsible for Human Health Care Business; Chairman of the Board, Kao USA Inc.; Responsible for Fabric and Home Care Business; Chairman of the Board, Oribe Hair Care, LLC Responsible for Kao Professional Services Co., Ltd.
Shigeru Ueyama Kenichi Yamauchi Managing Executive Officer Executive Officer
Senior Vice President, Corporate Strategy, Global Senior Vice President, Accounting and Finance, Global; President, Kao America Inc.
Masakazu Negoro Hideaki Kubo Managing Executive Officer Executive Officer
Senior Vice President, Procurement, Global Vice President, Research and Development, Global; Responsible for Research and Development – Core Technology
Yasushi Wada Ryoichi Harada Managing Executive Officer Executive Officer
Senior Vice President, Product Quality Senior Vice President, Enterprise Information Management, Global; Solutions, Global; Representative Director, Chairman of the Board, Vice President, Strategic Innovative Technology, Kanebo Cosmetics Inc. Global
87 Kao Integrated Report 2020 Hiroaki Taki Masaru Takeyasu What Kao Aims for Executive Officer Executive Officer
Senior Vice President, Consumer Products - Senior Vice President, Legal and Compliance, Marketing Emergence, Global Global
David J. Muenz Toru Nishiguchi Executive Officer Executive Officer Kao’s
Senior Vice President, ESG, Global President, Consumer Products, Asia; Chairman of the Board and President, Kao (China) Holding Co., Ltd.; Monozukuri Strategy Chairman of the Board and President, Kao Corporation Shanghai; Chairman of the Board, Kao Commercial (Shanghai) Co., Ltd.; Chairman of the Board and President, Kao (Hefei) Akio Matsui Co., Ltd. Executive Officer
Senior Vice President, Human Capital Development, Global; Hiroaki Yamaguchi President, Kao Group Corporate Pension Fund; Executive Officer
Chairman of the Board, Kao America Inc. Kao’s Corporate Strategy Vice President, Supply Chain Management - Manufacturing Plant Center, Global
Hideichi Nitta Executive Officer
Vice President, Supply Chain Management – Demand and Supply Planning Center, Global Atsushi Koizumi Executive Officer
Senior Vice President, Consumer Products - Business Planning and Management, Global Masahiro Katayose in FY2019 Performance Executive Officer
President, Chemical Business, Global; Chairman of the Board, Fatty Chemical (Malaysia) Sdn. Bhd.; Chairman of the Board, Pilipinas Kao, Inc.; Presidente, Kao Chemicals Europe, S.L. Kotaro Nuriya Executive Officer
President, Consumer Products - Bioré Business, Shigeo Nakai Global; Executive Officer Responsible for Consumer Products - New Business Challenging Projects
Vice President, Research and Development – Corporate Governance Performance Chemicals Research, Global; Responsible for Research and Development – Environmental New Business
Motomitsu Hasumi Executive Officer Hideki Mamiya Vice President, Research and Development - Executive Officer Household Products Research, Global; Responsible for Research and Development - Representative Director, Senior Managing Consumer Products Technology Executive Officer, Kao Group Customer Marketing Co., Ltd.
Kao Integrated Report 2020 88