Corporate Governance System
We believe that the ultimate goals of corporate governance are “improving management efficiency” and “maintaining sound management” as well as “ensuring management transparency” to achieve the first two goals. Based on this belief, we are working to establish a corporate governance system that serves the interests of shareholders and all other stakeholders.
Our approach to corporate governance is embodied in the "Sumitomo Corporation Corporate Governance Principles".
Features of Our Corporate Governance System
We have adopted a corporate auditor system, believing that it is the most legitimate means of improving the effectiveness of our corporate governance to enhance and reinforce it through auditing from diversified external viewpoints. We have five Corporate Auditors, three of whom are Outside Corporate Auditors. Of these three, two are legal experts (a former President of the Tokyo High Court and a former Prosecutor-General) and one is an accounting expert - ensuring an auditing system that incorporates a diversity of perspectives. Furthermore, two Outside Directors were elected at the 145th Ordinary General Meeting of Shareholders held on June 21, 2013 so that through their diverse perspectives, the Outside Directors help to ensure appropriate decision-making in board meetings and further enhancement of the supervisory function. We believe that we can achieve the ultimate goals of corporate governance by reinforcing management oversight by independent Outside Directors and Outside Corporate Auditors.
Based on “Sumitomo's Business Philosophy,” we have established the Sumitomo Corporation Group's Management Principles and Activity Guidelines, and work to enforce these principles and guidelines among all officers and employees, in order to share the basic values that must be respected by the Sumitomo Corporation Group, including compliance with laws and regulations.
From the perspective of maintaining sound management, we have developed a system for ensuring compliance with laws and regulations by establishing a Compliance Committee and introducing a “Speak-Up System” for internal reporting, among other measures. Guided by the belief that management itself must conduct its duties with high ethical standards, we have clearly stated in the “Sumitomo Corporation Corporate Governance Principles” that in principle, the term of office for the Chairman of the Board of Directors and the President and CEO are each limited to six years in total.
Framework for “Improving Management Efficiency” and “Maintaining Sound Management”
Directors and the Board of Directors
- Optimization of Size of Board of Directors
- We halved the number of Board members from 24 in 2003. As of July 2013, the Board has 12 members. Through this optimized Board of Directors, which oversees the operations of the business and serves as the Company's decision-making body concerning key management matters, we aim to facilitate substantial and active discussion as well as to promote greater efficiency and effectiveness in the decision-making process.
- Limiting Term of Office for Directors
- In June 2005, the term of office for Directors was reduced from two years to one year. We aim to clarify the responsibility of management among members of management each fiscal year.
This, in turn, helps ensure fast reaction times to changes in business conditions.
- Limits on Term of Office for the Chairman of the Board of Directors and the President and CEO
- In principle, the positions of Chairman of the Board of Directors and the President and CEO are clearly defined and separate in order to ensure mutual supervision and both positions cannot be held simultaneously by one person. In principle, the term of office for the Chairman of the Board of Directors and the President and CEO are each limited to six years in total. These limitations on the tenure of top management help minimize the possibility of governance problems.
- Establishment of the Advisory Body to the Board of Directors
- With the aim of enhancing the transparency and objectivity of decision-making processes with regard to the remuneration of Directors and Executive Officers, we established the Remuneration Committee. Functioning as an advisory body to the Board of Directors, no fewer than half of the Committee members are from outside the Company. The Remuneration Committee is in charge of studying remuneration and bonuses of Directors and Executive Officers, and reports the results of its studies to the Board of Directors.
- Election of Outside Directors
- For the purpose of Sumitomo Corporation ensuring appropriate decision-making in board meetings and further enhancement of supervisory functions through diverse perspectives, two Outside Directors were elected at the 145th Ordinary General Meeting of Shareholders of Sumitomo Corporation held on June 21, 2013. They fulfill the standards related to independence set by the Tokyo Stock Exchange and other exchanges.
Reason for selection and brief outline of career of the Outside Directors are as follows:
Akio Harada is deemed to be qualified for the role of Outside Director because he possesses highly specialized knowledge accumulated over many years as a prosecutor and lawyer, and a wealth of practical experience and on the grounds of his character and insight, and was therefore elected to the post.
Brief outline of career| December | 1999 | Superintending Public Prosecutor of the Tokyo High Public Prosecutors Office |
| July | 2001 | Prosecutor-General |
| October | 2004 | Attorney at Law (present position) |
| June | 2005 | Outside Corporate Auditor of Sumitomo Corporation |
| June | 2013 | Outside Director of Sumitomo Corporation (present position) |
Kazuo Matsunaga is deemed to be qualified for the role of Outside Director because he held a series of important posts over many years at the Ministry of Economy, Trade and Industry and possesses broad knowledge and experience in fields including resources, energy, and industrial policy and on the grounds of his character and insight, and was therefore elected to the post.
Brief outline of career| July | 2008 | Director-General, Economic and Industrial Policy Bureau |
| July | 2010 | Vice-Minister of Economy, Trade and Industry |
| June | 2013 | Outside Director of Sumitomo Corporation (present position) |
Corporate Auditors and the Board of Corporate Auditors
- Enhancement of Corporate Auditing Framework
- To further strengthen external views within the corporate auditing framework, we added one external auditor in June 2003, bringing the number of external auditors to three out of the five members on the Board of Corporate Auditors. Of these three, two are legal experts (a former President of the Tokyo High Court and a former Prosecutor-General) and one is an accounting expert—ensuring an auditing system that incorporates a diversity of perspectives. The three external Corporate Auditors fulfill the standards related to independence set by the Tokyo Stock Exchange and other exchanges.
- Ensuring Audit Effectiveness
- Corporate Auditors attend meetings of the Board of Directors and all other important internal meetings, to obtain the information necessary for proper auditing. Corporate Auditors also meet the Chairman of the Board of Directors and the President and CEO every month to exchange opinions on material issues regarding management policy and auditing. Moreover, the Corporate Auditor's Administration Department is assigned to assist Corporate Auditors, so that the auditing system functions effectively and without hindrance.
Reason for selection and brief outline of career of the Outside Corporate Auditors are as follows:
Tsuguoki Fujinuma has a broad range of expertise, including on matters of finance and accounting, and long years of experience as an accountant. He was selected and asked to perform audits from a broad perspective on the grounds that his character and insight are most suited for the position.
Brief outline of career| June | 1993 | Representative Associate, Ota Showa Audit Corporation (now Ernst & Young ShinNihon LLC) |
| May | 2000 | President, International Federation of Accountants (IFAC) |
| July | 2004 | Chairman and President, The Japanese Institute of Certified Public Accountants |
| July | 2007 | Advisor, The Japanese Institute of Certified Public Accountants (present position) |
| June | 2008 | Outside Corporate Auditor of Sumitomo Corporation (present position) |
Mutsuo Nitta has a broad range of expertise and long years of experience as both a judge and lawyer. He was selected and asked to perform audits from a broad perspective on the grounds that his character and insight are most suited for the position.
Brief outline of career| December | 2004 | President of the Tokyo High Court |
| April | 2007 | Attorney at Law (present position) |
| June | 2009 | Outside Corporate Auditor of Sumitomo Corporation (present position) |
| October | 2012 | Chairman of Tokyo Metropolitan Public Safety Commission |
Haruo Kasama has a broad range of expertise and long years of experience as both a prosecutor and lawyer. He was selected and asked to perform audits from a broad perspective on the grounds that his character and insight are most suited for the position.
Brief outline of career| June | 2010 | Superintendent Public Prosecutor of Tokyo High Public Prosecutors Office |
| December | 2010 | Prosecutor-General |
| October | 2012 | Attorney at Law (present position) |
| June | 2013 | Outside Corporate Auditor of Sumitomo Corporation (present position) |
- Collaboration Between Internal Auditing Department and Accounting Auditors
- To ensure audit efficiency, Corporate Auditors interact closely with the Internal Auditing Department, receiving reports on internal audit plans and their results in a timely manner. In addition, Corporate Auditors exchange information with and monitor the auditing activities of the Accounting Auditors through regular meetings. By attending audit review meetings with the Accounting Auditors and observing inventory audits, the Corporate Auditors constantly work to improve audit efficiency and quality.
Furthermore, Corporate Auditors attend meetings of the Internal Control Committee and request reports on the status of internal control systems from other departments responsible for internal control, along with their cooperation on audits.
Introduction of an Executive Officer System
We have introduced an executive officer system with the aim of clarifying the responsibilities and authority for execution and strengthening the monitoring function of the Board of Directors. We currently have 42 Executive Officers (as of July 31, 2013) selected by the Board of Directors. Of these, nine Executive Officers also serve concurrently as Directors, including five who are also General Managers of Business Units. In this way, we aim to prevent gaps between decisions made at Board of Directors meetings and the execution of those decisions.
System for Ensuring Management Transparency
Basic Policy on Information Disclosure
To bring an accurate understanding of the Company's management policies and business activities to all our stakeholders, we shall strive to make full disclosure, not limiting ourselves to the disclosure of information required by law but also actively pursuing the voluntary disclosure of information.
Communicating With Shareholders and Other Investors
- Encouraging the Execution of Voting Rights at the General Meeting of Shareholders
- We send out a Notice of Convocation to shareholders three weeks prior to each regularly scheduled General Meeting of Shareholders. For the convenience of overseas shareholders, we also provide an English-language translation of the notice on our website. We have allowed our shareholders to exercise their voting rights via the Internet using personal computers since 2004 and via the Internet using mobile phones since 2005. In 2007, we introduced the Electronic Voting Platform operated by Investor Communication Japan, Inc. (ICJ), instituted by Tokyo Stock Exchange, Inc. and others. The new platform allows institutional investors sufficient time to thoroughly examine the propositions to be resolved at the meeting.
- Disclosure of Various Information
- Our corporate website endeavors to ensure the provision of proactive and timely disclosure of various documents and materials containing information that may be useful in making investment decisions. These documents and materials include financial results, yukashoken houkokusho (Japanese annual securities reports), and the Company's presentation materials. Moreover, the website provides Sumitomo Corporation's Annual Report. The website also presents features compiled to introduce Group-wide topics such as the projects the Company operates all over the world.
- Investor Relations
- In addition to working to enhance the disclosure of information on our website, in order to ensure direct communication with shareholders and other investors, we hold quarterly meetings attended by management to provide information on our financial results for analysts and institutional investors. For overseas investors, we periodically visit the United States, the United Kingdom, and other countries in Europe and Asia to hold one-on-one meetings with investors in each region. In addition, in fiscal 2004 we began regularly holding meetings with individual investors in Japan. In fiscal 2012, we held five such meetings in four cities, attended by a total of 1,200 individual investors.
While working to strengthen and enhance our corporate governance structure and systems, from the perspectives of “improving management efficiency” and “maintaining sound management,” we will continue to further strengthen internal auditing, risk management and compliance, to further improve the effectiveness of internal control.
Message From an Outside Director
Akio Harada
Outside DirectorLawyer Appointed as outside corporate auditor in 2005
Appointed as outside director in 2013
I Will Do My Best Applying My Knowledge and Experience as an Outside Corporate Auditor
I have gained eight years of experience since my appointment as an outside corporate auditor for Sumitomo Corporation in 2005. I believe Sumitomo Corporation constantly strives to realize a high standard of corporate governance through active investments of its corporate resources, such as organizations, human resources and funds. To date, Sumitomo Corporation has made its corporate governance more efficient by strengthening and enhancing its corporate auditors system.
I consider that the presence of outside corporate auditors ensures that Sumitomo Corporation's corporate governance is sufficiently effective. There are plenty of systems in place to allow the outside corporate auditors to perform their roles to maximum effect; for example, they can look through the minutes of all important meetings that take place in the Company. I myself actively provided advice at Board of Directors meetings as an outside corporate auditor to ensure no problems would arise with regard to leadership by management and risk taking by individual business units. However, the position had limitations too: I was not responsible for participating in the formation of opinions at the Board of Directors meetings.
In 2013, Sumitomo Corporation decided to establish the position of outside director. The purpose is to realize appropriate decision-making at Board of Directors' meetings based on diverse perspectives, and to further strengthen the function for supervising management. I became one of the two outside directors that have been appointed. It is not an easy task for an external person to get an accurate grasp of the situation surrounding important matters for a company and deliberate on them. Looking ahead, as an outside director of Sumitomo Corporation, I will make use of the knowledge I have acquired through my many years of experience in the legal profession, not to mention the knowledge I gained as an outside corporate auditor of the Company. Based on this knowledge, I intend to take a wide perspective as I participate in the opinion-forming process of the Board of Directors.
Sumitomo Corporation is a global company with a long history as an integrated trading company. In responding to the needs of the times, Sumitomo Corporation finds increasing opportunities to create value for society as a project facilitator, in addition to its conventional trading activities. This requires the Sumitomo Corporation to bring together a variety of knowledge and experience, and use them to harness all of its integrated strengths. My objective as an outside director is to ensure that these integrated strengths generate stakeholder benefits through the Group's business activities.
Message From an Outside Corporate Auditor
Tsuguoki Fujinuma
Outside Corporate AuditorCertified Public Accountant Appointed as outside corporate auditor in 2008
The Heart of Our Corporate Governance is Sumitomo's Business Philosophy
I was appointed as an outside corporate auditor of Sumitomo Corporation in 2008. In this role, I have applied my knowledge and experience in corporate accounting from a global perspective, gained from my appointments as Chairman of the International Federation of Accountants and Chairman of The Japanese Institute of Certified Public Accountants, in performing my duties.
I attend the meetings of the Board of Directors of Sumitomo Corporation and I feel that the environment of these meetings is conducive to the exchange of extremely frank and lively opinions. Even in my role as an outside corporate auditor, opportunities are provided to receive briefings in advance on matters that will be discussed at the meetings, enabling us to actively participate in discussions at the Board of Directors meetings. In order to proactively elicit opinions from outside the Company, the Company has a unique system in which outside directors and corporate auditors meet with the Chairman of the Board of Directors and the President and CEO each month to discuss various topics ranging from current affairs to business matters.
One of the characteristics of Sumitomo Corporation is that all officers and employees have a strong awareness of the pertinent issues. This point illustrates just how deeply Sumitomo Corporation Group's Corporate Mission Statement and its underlying 400 year-old Sumitomo's Business Philosophy permeate the organization. Moreover, I believe that this is the heart of Sumitomo Corporation's corporate governance. In this context, from 2013 the Company is appointing two outside directors. This move will further strengthen the corporate governance system, and I expect it to raise the effectiveness of corporate governance.
In 2013, the Company disclosed a vision, “What We Aim to Be,” in time for the 100th anniversary of the establishment of Sumitomo Corporation in 2019. To realize this vision, Company has positioned the two-year period in the BBBO2014 medium-term management plan as the stage to thoroughly enhance Group earning power and head for an even higher level of profit growth by maintaining financial soundness and building a robust earnings foundation. I believe this plan confirms that Sumitomo Corporation's identity is not only the achievement of earnings growth but also the maintenance of financial soundness. The Company's business operations are both global and diverse. Consequently, the Company faces not only a variety of business opportunities, but also a variety of risks, including in the areas of business risk and country risk. As an accounting specialist, I hope to proffer extensive advice while applying my knowledge and experience to minimize these risks to the fullest extent.