GovernanceBoard of Directors
Skills Matrix
We have identified seven specific skills required for the Board of Directors based on our corporate philosophy and sustainability key policy, considering our relationships with stakeholders and material issues. We ensure that these skills are balanced across the directors. This policy has been approved by the Governance Committee on Nominations & Remuneration.
| Current positions at Sawai | Corporate management | Legal affairs / risk management | Finance, accounting, tax affairs | Production and quality | Marketing and sales | Research, development, technologies | Medicine and pharmaceuticals | |
|---|---|---|---|---|---|---|---|---|
| Mitsuo Sawai | Chairman and President, Representative Director, member of the Governance Committee on Nominations & Remuneration | ● | ● | |||||
| Shoji Yokota Ph. D. | Director | ● | ● | ● | ||||
| Masatoshi Ohara | Independent External Director, Chairman of the Governance Committee on Nominations |
● | ||||||
| Nawomi Todo | Independent External Director, member of the Governance Committee on Nominations |
● | ||||||
| Masayuki Mitsuka Ph. D. | Independent External Director, member of the Governance Committee on Nominations |
● | ● | ● | ||||
| Tadao Tsubokura | Full-time Audit & Supervisory Board Member | ● | ||||||
| Takanobu Tomohiro | Independent External Audit & Supervisory Board Member | ● | ||||||
| Junichi Hirano | Independent External Audit & Supervisory Board Member | ● |
Reasons why we consider it important.
| Corporate management | Experience in making decisions in line with the corporate philosophy and being responsible for business is important for the Group’s management decisions. |
|---|---|
| Legal affairs / risk management | Balancing set rules and risk tolerance is important when attempting to maximize corporate value. |
| Finance, accounting, tax affairs | These are important for accurately ascertaining and calculating the Group’s corporate value and properly paying taxes. |
| Production and quality | Advanced quality and production management are important so that consumers can use the Group’s products, etc. with peace of mind. |
| Marketing and sales | Communicating the merits of products and services that the Group produces and provides and broadly gathering information on needs are important. |
| Research, development, technologies | This is important to continue to provide high value-added products and services that the Group produces and meet the needs of society. |
| Medicine and pharmaceuticals | Medicine and pharmaceuticals–related skills are important for the Group, which aims to become a general healthcare company related to life and health. |
Improving the operation of the Board of Directors
The Board of Directors deliberates important matters at the Group Investment Committee and the Group Strategy Council before referring them to the Board of Directors, in order to ensure that in-depth discussions focus on the most important points. In addition, based on “the Regulations on Affiliated Company Management”, the Board of Directors is informed of the important management status of Group companies, and delegates authority to Group companies to make decisions on matters within certain criteria, thereby achieving a balance between supervision of Group companies and speedy decision-making.
| Key questions and comments from external directors at the 2023 Board of Directors meeting |
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Corporate Officer Remuneration System
Remuneration plan for Directors (excluding external directors) consists of a basic remuneration (fixed remuneration), performance-linked remuneration (bonuses), and stock options (stock acquisition rights) as medium- to long-term incentive. External directors are paid only fixed remuneration.
The ratio of basic remuneration to performance-linked remuneration shall be approximately 3:1. Stock options shall be based on the position and years of service, and shall be at least 10% of total remuneration in accordance with the internal rules separately established.
We shall adopt two types of indices for performance-linked remuneration: performance evaluation indices and department evaluation indices. In principle, as performance evaluation indices, we shall use “core operating profit before investment expenses,” which is before deducting investment expenses such as R&D expenses from “core operating profit,” which excludes the profit and loss from non-recurring factors determined by the Group, as a base. Department evaluation indices mean the evaluation indices for each director are consistent with the Company's annual targets, and are based on the degree of achievement of annual targets in the area of responsibility.
The remunerations of the Chairman and the President are determined based on the performance evaluation indices, to which Governance Committee on Nominations & Remuneration adds and subtracts according to certain rules to reflect the assessment of initiatives related to ESG such as environment, human capital, risk management, and compliance. The calculation of the remuneration of the other members of the Board of Directors with departments in charge shall be determined after the end of each fiscal year in accordance with the calculation rules laid down in advance in the internal rules, on the basis of the degree to which these two indices are achieved in relation to their position. The amount of the performance-linked remuneration shall be determined on the basis of the standard amount determined for each position, and shall be calculated in principle in accordance with the calculation formula determined by the internal rules, depending on the degree of achievement of the above performance evaluation indices. However, in the case of members of the Board of Directors who have departments in charge, the amount shall be determined by taking into account both the performance evaluation indices and the degree of achievement of the evaluation target of the department in charge.
The amount of remuneration for each position shall be determined on the basis of the standard amount of remuneration for each position in the company, taking into account data from research organizations on the remuneration for directors of listed companies. In addition, the remuneration system shall be such that the standard amount of the total amount and the composition of the total amount as a whole shall be consistent with the following: (i) incentives for executives to contribute to the medium- to long-term and sustainable increase of the corporate value, (ii) the ability to retain excellent human resources as the management team, and (iii) the suppression of excessive risk-taking.
The reason for adopting the above indices is that we judged that the performance evaluation indices would more accurately reflect the contribution to the enhancement of corporate value. In addition, concerning the evaluation of directors with the relevant department in charge, we set the evaluation targets for the department in charge, including qualitative evaluation for each financial year in addition to quantitative evaluation items, which the Governance Committee on Nominations & Remunerations evaluates together with the level of achievement. These evaluations include initiatives related to ESG, such as environment, human capital, risk management, and compliance. This policy on remuneration calculation was determined by the Board of Directors based on a proposal for the policy and a report of the deliberations of the Governance Committee on Nominations & Remuneration, a majority of which is constituted by external directors, on matters related to directors' remuneration.
The remuneration limit for Directors is ¥670 million per year (of which, no more than ¥100 million is for External Directors). There is also a remuneration limit for Audit & Supervisory Board Members of ¥50 million per year. The remuneration system, including for Director remuneration, will be reviewed every three years, in principle, based on a comprehensive accounting of market trends concerning Director remuneration, the Company’s performance trends, and cost of living trends.
Taking seriously the administrative punishment for inappropriate testing found at Sawai Pharmaceutical in FY2023, the Governance Committee on Nominations & Remuneration carefully deliberated on the appropriateness of the punishment of the officers concerned and the offer to return executive remuneration, and made a recommendation to the Board of Directors, which then resolved the punishment at its meeting.
Distribution of remuneration for Directors and Audit & Supervisory Board Members (A & SB Members)
| Classification | Total remuneration (Millions of yen) |
Total remuneration by category (Millions of yen) |
Number of eligible persons |
||
|---|---|---|---|---|---|
| Fixed salary | Performance-linked remuneration |
Stock options |
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| Directors (not including External Directors) |
118 | 77 | 26 | 15 | 5 |
| A & SB Members (not including External A & SB Members) |
18 | 18 | - | - | 1 |
| External Directors and A & SB Members | 42 | 42 | - | - | 5 |
Training policy for Directors and Audit & Supervisory Board members
We will proactively provide directors and Audit & Supervisory Board members with a variety of information, including the current status of our business and finances, so that they can appropriately fulfill their expected roles and responsibilities. We will also provide information on various systems and rules related to the industry and governance, as well as opportunities for training, etc., as necessary.
Supporting system for External Directors and/or Audit & Supervisory Board members
In the event that external directors require expenses for research or other purposes in the performance of their duties, they are granted the right to claim such expenses from us within a reasonable range, and in addition, some members of the Group General Affairs Department assist the external directors in their administrative work so that they can concentrate on their duties, thereby sharing information with them and strengthening the supervisory function of the external directors.
We have established a system to ensure that the auditing work of each external Audit & Supervisory Board member is efficient, such as having full-time Audit & Supervisory Board members serve as the contact point between the Audit & Supervisory Board, the Board of Directors and the accounting auditor, as well as reporting from relevant internal departments and communicating information to the relevant departments via the full-time Audit & Supervisory Board member. We have adopted a system under which full-time Audit & Supervisory Board members compile opinions and reports from each external Audit & Supervisory Board member, prepare agenda items for the Audit & Supervisory Board, and otherwise ensure the smooth operation of the Audit & Supervisory Board. In addition, in the event that the external Audit & Supervisory Board members require expenses for research or other purposes in the performance of their audits, they are granted the right to claim such expenses from us within a reasonable range, and in addition, some members of the Group Internal Inspection Office assist the external Audit & Supervisory Board members in their administrative work so that they can concentrate on their duties, thereby sharing information with them and strengthening the supervisory and auditing functions of the external Audit & Supervisory Board members.
The External Board members Liaison Committee, consisting of the external directors, external Audit & Supervisory Board members, and full-time Audit & Supervisory Board members, is held periodically, in principle once a month, to exchange opinions and information. In addition, the Corporate Secretariat of the Board of Directors (Group Sustainability Management Office) sends materials in advance to all participants in the Board of Directors meetings, including external directors and external Audit & Supervisory Board members, and provides them with prior explanations as necessary in order to enhance the quality of deliberations at the Board of Directors meetings.
Independence Standards for External Directors / Audit & Supervisory Board members
Reasons for Appointment of Outside External directors
| Name | Designation as Independent director | Reasons of Appointment |
|---|---|---|
| Masatoshi Ohara Attended Meetings (FY2023) Board of Directors: 13/14 (92.9%) |
Applicable |
Except for his service as an external director of SAWAI PHARMACEUTICAL, Mr. Masatoshi Ohara is not, and has never been, an officer or employee of the Sawai Group, a major shareholder or investor, a major business partner, a consultant, an accounting expert or a legal expert who receives a large amount of money or other assets, nor is he from any of them, nor is he a close relative of any of them, and is not thought to pose a risk of conflict of interest. In addition, he has a wide range of legal knowledge through his activities as an attorney and has experience as an external director of other companies. Therefore, we believe that he can be expected to provide useful advice and judgment from an independent standpoint, which will strengthen the supervisory function of the Board of Directors and improve transparency. He attended 13 of the 14 Board of Directors meetings held between April 2023 and March 2024. At every meeting, as an external director, he asked questions about reports and resolutions and shared his views from an external standpoint. In consideration of the above, he has been appointed as an external director and Independent Officer. |
| Nawomi Todo Attended Meetings (FY2023) Board of Directors: 14/14 (100%) |
Applicable |
Except for her service as an external director of SAWAI PHARMACEUTICAL, Ms. Nawomi Todo is not, and has never been, an officer or employee of the Sawai Group, a major shareholder or investor, a major business partner, a consultant, an accounting expert or a legal expert who receives a large amount of money or other assets, nor is she from any of them, nor is she a close relative of any of them, and is not thought to pose a risk of conflict of interest. In addition, as she has extensive expertise, experience, etc., as a physician, we believe that she can be expected to provide useful advice and judgment from an independent standpoint, which will strengthen the supervisory function of the Board of Directors and improve transparency. She attended all 14 of the 14 Board of Directors meetings held between April 2023 and March 2024. At every meeting, as an external director, she asked questions about reports and resolutions and shared her views from an external standpoint. In consideration of the above, she has been appointed as an external director and Independent Officer. |
| Masayuki Mitsuka Attended Meetings (FY2023) Board of Directors: 11/11 (100%) |
Applicable |
Mr. Masayuki Mitsuka is not, and has never been, an officer or employee of the Sawai Group, a major shareholder or investor, a major business partner, a consultant, an accounting expert or a legal expert who receives a large amount of money or other assets, nor is he from any of them, nor is he a close relative of any of them, and is not thought to pose a risk of conflict of interest. In addition, as a former top executive of a leading manufacturer and distributor of ethical pharmaceuticals in Japan, he has a wealth of expertise and experience. Therefore, we believe that he can be expected to provide useful advice and judgment from an independent standpoint, which will strengthen the supervisory function of the Board of Directors and improve its transparency. Since he was appointed at the General Meeting of Shareholders held in June 2023, he attended all 11 of the 11 Board of Directors meetings held between June 2023 and March 2024. At every meeting, as an external director, he asked questions about reports and resolutions and shared his views from an external standpoint. In consideration of the above, he has been appointed as an external director and Independent Officer. |
Reasons for Appointment of Supervisory Board members
| Name | Designation as Independent director | Reasons of Appointment |
|---|---|---|
| Takanobu Tomohiro Attended Meetings (FY2023) Board of Directors: 14/14 (100%) Audit & Supervisory Board: 13/13 (100%) |
Applicable |
Mr. Takanobu Tomohiro, except for his term of office as an external Audit & Supervisory Board member of SAWAI PHARMACEUTICAL, is not currently or has not been an officer or employee of the Sawai Group, a major shareholder or investor, a major business partner, a consultant, an accounting expert or a legal expert who receives a large amount of money or other assets, nor is he from any of them, nor is he a close relative of any of them, and is not thought to pose a risk of conflict of interest. In addition, as a partner of a law firm, he has extensive legal expertise and experience in office management through his activities as an attorney. Therefore, we believe that he can provide useful advice and audits from an independent standpoint and can appropriately perform his role as an external Audit & Supervisory Board member. He attended all 13 Audit & Supervisory Board meetings and all 14 Board of Directors meetings held between April 2023 and March 2024. At every meeting, as an external director, he asked questions about reports and resolutions and shared his views from an external standpoint. In consideration of the above, he has been appointed as an external Audit & Supervisory Board member and Independent Officer. |
| Junichi Hirano Attended Meetings (FY2023) Board of Directors: 14/14 (100%) Audit & Supervisory Board: 13/13 (100%) |
Applicable |
Mr. Junichi Hirano, except for his service as an external Auditor of SAWAI PHARMACEUTICAL, is not currently or has not been an officer or employee of the Sawai Group, a major shareholder or investor, a major business partner, a consultant receiving a large amount of money or other assets, an accounting expert or a legal expert who receives a large amount of money or other assets, nor is he from any of them, nor is he a close relative of any of them, and is not thought to pose a risk of conflict of interest. He also has considerable knowledge of taxation, finance and accounting through his activities as a tax accountant with his own tax accounting office and his previous positions at the National Tax Agency and as head of several tax offices, as well as his experience as an external Audit & Supervisory Board member of other companies. Therefore, we believe that he can provide useful advice and audits from an independent standpoint and can appropriately perform his role as an external Audit & Supervisory Board member. He attended all 13 Audit & Supervisory Board meetings and all 14 Board of Directors meetings held between April 2023 and March 2024. At every meeting, as an external director, he asked questions about reports and resolutions and shared his views from an external standpoint. In consideration of the above, he has been appointed as an external Audit & Supervisory Board member and Independent Officer. |
Evaluation of the effectiveness of the Board of Directors
It is the Company’s policy to analyze and evaluate the effectiveness of the Board of Directors once a year and make improvements as necessary. Below is a summary of the results of the evaluation of the effectiveness of the Board of Directors in fiscal 2023.
Evaluation method
We adopted a self-evaluation method for directors and Audit & Supervisory Board members based on a questionnaire survey prepared by a third-party organization.
- The third-party organization administered self-evaluation by anonymous questionnaires
- The third-party organization collected the questionnaires and analyzed the results
- The Board of Directors verified and discussed the results based on the report received from the third-party organization
Evaluation items
The evaluation items comprised a total of 40 questions in 11 categories, including 31 questions in the form of an evaluation on a scale of one to five and nine questions in the form of a free description of opinions on the evaluations and improvements for each theme.
- Composition of the Board of Directors
- Operation of the Board of Directors
- Discussion of the Board of Directors
- Monitoring function of the Board of Directors (including issues derived from the results of the previous effectiveness evaluation)
- Performance of inside directors
- Performance of external directors
- Support system for directors and the Audit & Supervisory Board members (including training)
- Dialogue with shareholders (investors)
- Directors’ own efforts
- Operation of the Governance Committee on Nominations & Remunerations
- Summary
Main opinions
The main opinions raised were as follows.
- Opinions are exchanged quite frankly at the Board of Directors.
- The quality of the analysis and discussion at the Board of Directors has been improving year after year, and we have achieved a certain level of effectiveness through its governance system.
- Active discussion and suggestions on developing and operating the succession planning for the CEO, etc., are required.
- There are some inadequacies in the follow-up of matters resolved by the Board of Directors.
- Improvements have been made in terms of group governance, but there are issues with the enhancement of systematic and regular reporting and feedback on the subsidiaries' business operations.
- The Board of Directors has made efforts to enhance responses based on the evaluation results of the previous year, including management strategies, capital policy, and discussions focusing on relationships with stakeholders.
- We need to discuss the Group's long-term (5-10 years) business strategy more actively.
- It would be even better if we could exchange opinions on the goals we aim for in society as a company and hold discussions with a view to improving employee engagement.
- The Board of Directors should avoid a skills (map) shortage associated with the relative decline in the number of internal directors.
- The Board of Directors is required to increase opportunities for information sharing and opinion exchange with the internal audit department.
- The information sharing is sufficient on the opinions of major shareholders and responses to them. We should deepen the discussion on the results of the dialogue with more shareholders at the Board of Directors.
- We are required to omit the detailed resolutions that are left to the operating companies and devote more time to discussions on major management issues.
Evaluation results
The Board of Directors meeting on May 13, 2024, discussed the evaluation results compiled by the third-party organization and assessed that the Board of Directors of the Company has generally fulfilled its role and functions adequately.
Challenges and directions for further improvement in effectiveness
Based on the evaluation results, the Board of Directors plans to improve the following five areas in fiscal 2024 to further enhance the effectiveness of the Board of Directors
- Succession planning
- Follow-up monitoring of progress
- Further enhancement of discussions on management strategies and plans
- Composition and skills of the Board of Directors
- Operational method of the Board of Directors
Policy and Process for Appointing Executive Officers, Candidates for Directors and Candidates for Audit & Supervisory Board Members
The policy of the Board of Directors in appointing senior management and nominating candidates for directors who will be responsible for the sustainable growth of our company and the enhancement of its corporate value over the medium to long term is to consider the size, balance and diversity of the Board of Directors as a whole, while fully respecting the advice and recommendations of the Governance Committee on Nominations & Remuneration. Decisions are made based on a comprehensive assessment of the extensive experience and expertise appropriate to the position, the business performance, and the high level of insight and character. The procedures for this are stipulated in the “Regulations of the Board of Directors” and the “Regulations of the Governance Committee on Nominations & Remuneration”.
Executive officers are appointed by the Board of Directors after deliberation by the Governance Committee on Nominations & Remuneration, from among persons who have a record of consistent high performance in management positions, the experience and expertise required for the responsibilities of their positions, and the integrity of character and the high degree of insight and dignity appropriate for senior management positions.
The policy for nominating candidates for Audit & Supervisory Board members is determined in accordance with the “Auditing Standards for Audit & Supervisory Board members,” which includes ensuring independence from executive officers and maintaining a fair and unbiased attitude. The procedures are set forth in the “Regulations of the Audit & Supervisory Board.”
The policy for the dismissal of senior management, including directors, is determined by comprehensively considering the following matters, while fully respecting the advice and recommendations of the Governance Committee on Nominations & Remuneration.
- When the requirements for the appointment of senior management are no longer met
- Violations of laws, regulations, the Articles of Incorporation, or other acts that damage the Company's credibility
- Inability to perform duties due to mental or physical loss or other health reasons
- In the event that he or she violates the duty of care of a good manager and causes significant loss to the Company.
These procedures are also stipulated in the “Regulations of the Board of Directors” and the “Regulations of the Governance Committee on Nominations & Remuneration.”
Succession Planning for the CEO and other executives
In fiscal 2023, the Governance Committee on Nominations & Remuneration deliberated on the overall succession plan for the CEO and other top executives, and developed an outline of the plan. From now on, the committee will formulate a more specific succession plan, including criteria for the selection of candidates for succession and a successor training plan, and propose it to the Board of Directors.
Policy for Cross-Shareholdings, and Voting Guideline
In order to achieve sustainable growth and enhance corporate value over the medium to long term, the Sawai Group may hold listed shares as it deems necessary as part of its management strategy. In principle, we do not hold investment shares purely for investment purposes. In addition, we believe that strategic shareholdings can be an effective means of strategic alliances. When the Group holds listed shares, the Board of Directors periodically reviews the rationality of holding major strategic shareholdings in line with the purpose of holding the shares, including the consideration of the cost of capital, and reduces its shareholdings when it judges that such shareholdings are not rational. In addition, we have set out a plan to reduce cross-shareholdings in our mid-term business plan in line with the "Basic Policy for Reviewing Business Portfolio and Capital Policy" resolved at the Board of Directors meeting in January 2024.
In exercising voting rights, we have not established uniform standards for the exercise of voting rights, as the content of each agenda item and its background differ from one another. We will exercise its voting rights appropriately after examining each proposal individually to determine whether it will contribute to the sustainable growth and medium- to long-term enhancement of the Group's corporate value by conducting dialogue with the companies in which we hold shares and deepening our understanding of their management policies and the contents of their proposals.