Corporate Governance System

The Group aims to create and maintain optimal corporate governance from the standpoint of improving the soundness, transparency and efficiency of management in order to gain the trust of its stakeholders.

Mitsui Fudosan has both a Board of Directors and a Board of Corporate Auditors. To ensure transparency with respect to director compensation and appointments of directors and auditors, we maintain a Compensation Advisory Committee and a Nomination Advisory Committee. In addition, we have adopted a corporate officer system to enhance the soundness and efficiency of management by separating and strengthening management and executive functions. Mitsui Fudosan also invites and appoints outside directors in order to strengthen the oversight functions of the directors and enhance management transparency.

In addition, auditors conduct audits in a bid to evaluate the status of business execution by directors while coordinating with the Corporate Auditor’s Department, which serves as the internal audit department of the Company, as well as certified public accountants. Moreover, steps have been taken to put in place the Mitsui Fudosan Group Compliance Policy as well as a structure that will ensure that Group directors and employees engage in business activities in an appropriate manner.

Corporate Governance Structure

(1) Board of Directors

The Board of Directors, headed by Chairman Masanobu Komoda and comprising twelve members, including eight internal directors (Masanobu Komoda, Takashi Ueda, Takashi Yamamoto, Takayuki Miki, Yoshihiro Hirokawa. Shingo Suzuki, Makoto Tokuda, and Hisashi Osawa) and four outside directors (Tsunehiro Nakayama, Shinichiro Ito, Eriko Kawai, and Mami Indo), decides on issues material to Mitsui Fudosan and monitors the execution of business by managing directors.

Matters concerning the Board of Directors are as follows, set in accordance with the Company’s Articles of Incorporation and company rules such as those regarding the Board of Directors.

• Role of the Board of Directors

  The Board of Directors shall determine matters deemed vital to the Company, and oversee execution of duties by the directors.

• Composition

  The Board of Directors shall comprise no more than 15 directors.

• Term of office for directors

  The term of office for directors shall be from selection until the close of the General Shareholders' Meeting for the fiscal year ending within two years of selection.

• Chairperson

  The Board of Directors shall be chaired by the Chairman of the Board.

• Decision-making process

  Decisions made at the Board of Directors will require more than half of the directors to be in attendance, and will need the support of more than half of those in attendance.

• Matters to be determined

  The following matters shall be decided and reported.

  (1) Matters related to shareholders’ meetings

  (2) Matters related to directors

  • Preliminary selection of director candidates
  • The appointment and dismissal of representative directors
  • The appointment and dismissal of executive directors
  • Compensation, bonuses, and restricted stock compensation for directors
  • Other important matters

  (3) Matters related to the Company’s structure

  (4) Important matters related to compliance, etc.

  • Formulating a compliance promotion plan for the fiscal year
  • Reporting on the results of compliance promotion activities implemented during the fiscal year
  • Formulating an audit plan for the fiscal year
  • Reporting on audit activities implemented during the fiscal year
  • Evaluating internal controls concerning financial reporting during the fiscal year and formulating audit-related policy (J-SOX activities)

  (5) Important matters related to personnel

  • The appointment and dismissal of corporate officers and executive corporate officers
  • The appointment and dismissal of key employees
  • Compensation and bonuses for corporate officers, etc.

  (6) Important matters related to finance and assets

  (7) Other matters that are especially important in regard to managing the Company or executing duties

  • Single-fiscal-year plans
  • ESG plans
  • Risk management reports
  • Studies related to shares held as part of cross-shareholding policies
  • Other important matters

【Director nomination policy】

Taking into account Company and Group management philosophies and strategies, candidates deemed suitable to be directors are nominated, after overall consideration of diversity-including personal qualifications, capabilities, views, and gender. At present, four of the seventeen directors and auditors are women (23.5%), and in the future we will work to ensure even greater diversity for the Board of Directors.

Managing Directors' Expertise, Experience (skills matrix), and Attendance at Board of Directors Meetings *1

(2) Compensation Advisory Committee

The Compensation Advisory Committee, headed by independent outside director Tsunehiro Nakayama as Chairman and comprising six members, including four independent outside directors (Tsunehiro Nakayama, Shinichiro Ito, Eriko Kawai, and Mami Indo), President and Chief Executive Officer Takashi Ueda, and one internal director (Makoto Tokuda), meets on matters pertaining to the compensation of managing directors. The committee met three times in fiscal 2022 and all committee members were in attendance on each occasion.

(3) Nomination Advisory Committee

The Nomination Advisory Committee, headed by independent outside director Tsunehiro Nakayama as Chairman and comprising six members, including four independent outside directors (Tsunehiro Nakayama, Shinichiro Ito, Eriko Kawai, and Mami Indo), President and Chief Executive Officer Takashi Ueda, and one internal director (Makoto Tokuda), meets on matters pertaining to the nomination of managing directors and corporate auditors, as well as the appointment and dismissal of managers. The committee met twice in fiscal 2022 and all committee members were in attendance on each occasion.

(4) Board of Corporate Auditors/Corporate Auditor's Department

The Board of Corporate Auditors, headed by senior corporate auditor Hiroyuki Ishigami, comprises two internal auditors (Hiroyuki Ishigami and Wataru Hamamoto) and three outside auditors (Yukimi Ozeki, Minoru Nakazato, and Mayo Mita), for a total of five auditors, and formulates auditing policies and determines assignments. It also receives reports and discusses material items on audits conducted according to these policies and assignments. Note that the Corporate Auditor’s Department has been established specifically to assist the corporate auditors with their work, and there are two dedicated employees. See “Governance-related Data” for details on the number of meetings held annually and the attendance status.
⇒ https://www.mitsuifudosan.co.jp/english/esg_csr/esg_data/governance/

(5) Corporate Officer System

Mitsui Fudosan has introduced a corporate officer system with the aim of creating a business execution framework that best suits its operating environment and activities. By promoting the separation and reinforcement of the management and executive functions, a role that was previously undertaken by company directors, the system enhances management soundness and efficiency. In addition, seeking to further reinforce the management of the Mitsui Fudosan Group, we have expanded the range of managers across the Group and introduced a Group corporate officer system, under which executives at Group companies have been given a status and mission similar to those of the corporate officers.

(6) Executive Management Committee

The Executive Management Committee, consisting of executive corporate officers, has been formed to deliberate and report on important matters related to business execution and supervises internal control and risk management. Full-time corporate auditors also attend meetings to stay informed of important decision-making processes and the status of business execution, and provide opinions as necessary.

(7) Financial Auditing

Mitsui Fudosan has concluded an auditing contract with KPMG AZSA LLC as its certified public accountant, which conducts audits. There is no shared interest between the auditor and the Company, nor between employees conducting operations for the auditor and the Company. The continuous auditing period of the auditor, the names and years of continuous auditing of the certified public accountants engaged in auditing in this fiscal year, and the composition of the assistants involved in auditing duties are as follows.

Continuous auditing period: 54 years
* This is the number of years since the Asahi Accounting Company, the predecessor of KPMG AZSA LLC, became an audit corporation.

Name of certified public accountants who have executed audits
Designated limited liability employee business executives: Yutaka Terasawa (1 year); Hiroyuki Ito (7 years); Hironori Hashizume (5 years)
* Number of years of continuous auditing are shown in parentheses.

Breakdown of assistants involved in financial auditing duties
Certified Public Accountants: 12; Passed CPA exam: 9; Others: 24

Strategy Planning Special Committee

Formulates and deliberates Group strategy and management plans and supervises business risk management at a Company and Group level, with the goal of discussing and managing the execution of those plans and other specific management issues.

Risk Management Special Committee

Formulates risk management policies and plans; tracks, evaluates and formulates responses and recurrence prevention measures for risk issues; and shares information as necessary throughout the Company and the Group for the purpose of comprehensively managing operational risks (disaster risk, system risk, administrative risk and compliance, etc.) in the conduct of operations throughout the Company and the Group.

ESG Promotion Committee

Formulates ideas and policies, sets goals, creates activity plans, manages progress and evaluates results related to ESG topics and the SDGs, with the goal of promoting action at a Company and Group level that contributes to ESG activities and the achievement of the SDGs, and initiatives aimed at decarbonization.

Internal control

The Group has set up and manages an internal control system that conforms to the Companies Act. Mitsui Fudosan endeavors to put in place systems to ensure that the execution of business by directors and employees complies with laws and regulations and the Company’s Articles of Incorporation. With this in mind, the Board of Directors formulated the following basic policy and maintains its proper operation.

Internal Auditing System

The Audit Department verifies the effectiveness of risk management and internal control systems from the perspective of the entire Group. At the same time, the Department puts in place audit activity plans in order to evaluate and improve risk management and internal control systems, and undertakes internal audits following authorization by the Board of Directors.

Results of the internal audits are reported to the officers in charge with feedback directed to the appropriate departments. Thereafter, follow-up activities are undertaken to assess the status of improvement progress. Moreover, details of audit activities are reported every six months to the Executive Management Committee, Board of Directors, and Board of Corporate Auditors. Every effort is made to share information and coordinate with auditors.

Based on Japan’s Financial Instruments and Exchange Law, Mitsui Fudosan evaluates the status of internal control relating to the current Group financial report at the end of each period. An Internal Control Report is then submitted and disclosed publicly. Results of the most recent Internal Control Report have been audited by KPMG AZSA LLC and deemed appropriate.

Reasons for Selecting Outside Directors and Their Attendance

Mitsui Fudosan appoints its outside directors with the expectation that they will contribute their extensive experience and broad knowledge to the Company’s management, and that they will play an appropriate role in strengthening the audit function of the Board of Directors and ensuring transparency.

The Company also appoints its outside auditors with the expectation that they will bring an objective stance to auditing the directors in the performance of their duties, based on their expert knowledge and extensive experience. Note that, in line with Tokyo Stock Exchange requirements for judging the independence of independent officers, the Company uses the following standards for judging said independence: whether there is a risk of conflicts of interest with any of the Company’s general shareholders; whether any special interests exist with the Company; and whether in working to enhance the soundness and transparency of the Company’s management, the individual is capable of making objective, fair and impartial judgments.

Executive Compensation

Managing directors’ compensation consists of basic compensation in an amount within the scope set and approved by resolution of the 106th Ordinary General Shareholders’ Meeting, bonuses paid as short-term incentives that comprehensively take into consideration such things as business results achieved in each fiscal year which must be approved by resolution at the Ordinary General Shareholders’ Meeting, and restricted stock compensation paid as medium- to long-term incentives in an amount within the scope set and approved by resolution of the 108th Ordinary General Shareholders’ Meeting for the purpose of sustainably increasing the corporate value of the Group and further sharing shareholder value with shareholders. Compensation paid to managing directors (outside directors) is solely basic compensation. Compensation paid to corporate auditors will be within the scope of the total amount approved by a resolution at the 106th Ordinary General Shareholders’ Meeting.

The Company has established the Compensation Advisory Committee, comprised of the following 6 members: 4 independent outside directors who make up the majority and 2 internal directors, with one of these independent outside directors serving as chairman. The amount of compensation for directors is determined by the Board of Directors following consultation with the Compensation Advisory Committee. Corporate Auditor’ compensation is determined based on discussions among corporate auditors.

The Board of Directors determines the details of compensation, etc. for individual managing directors for the fiscal 2020 under review pursuant to the above policy after consultations with the Compensation Advisory Committee. As a result, the details of compensation are deemed to follow the policy.

【Restricted stock compensation system】

At the 108th Ordinary General Shareholders' Meeting held on June 26, 2020, the introduction of a restricted stock compensation system for managing directors of the Company, other than outside directors, in place of stock options was approved. The purpose of this was to provide an incentive for continual improvement of the corporate value of the Group, and to share greater shareholder value with shareholders. Stock acquisition rights which have already been granted as stock options but have not yet been exercised will continue to exist. However, no new stock options will be granted.

Furthermore, we have also introduced a restricted stock compensation system to managing officers and Group officers who do not concurrently serve as managing directors.

【Policies relating to the determination of payment ratios for performance-based compensation and other forms of compensation】

Compensation for directors consists of a bonus and restricted stock compensation, which are performance-based compensation, and basic compensation, which is compensation other than performance-based compensation. The payment ratio for performance-based compensation is around 50-60% (60-70% for the President), and around 40-50% for other forms of compensation (30-40% for the President).

【Indexes relating to performance-based compensation, reasons for selecting indexes for performance-based compensation, and method used to determine the amount of performance-based compensation】

In regard to the bonus and restricted stock compensation - i.e. performance-based compensation -comprehensive consideration is given to factors such as performance for the current term, status of ESG-related initiatives, redistribution of profits among shareholders based on our returns policies, progress of "VISION 2025," our Group's long-term management policies, the economic climate, and the business environment. In regard to the reasons for selecting these indexes, this is to increase the interrelationship between director compensation and performance and stockholder value. The amount of performance-based compensation is determined by the Board of Directors following consultations with the Compensation Advisory Committee, instead of leaving determination to the sole discretion of the President.

Analysis and Evaluation of Board of Director Effectiveness

Each year, the Company analyzes and evaluates the efficacy of the Board of Directors, continually aiming to further enhance its functions. As for the method of analysis and evaluation, we used a third-party body for the development of a questionnaire and the analysis of the result.

An overview and results of our evaluation of the Board of Directors’ efficacy are provided below.

• (1) Evaluation method

  The Company conducted the questionnaire to all directors and corporate auditors regarding the Board of Directors’ efficacy and interviews based on the issues recognized through the questionnaire. The results were then analyzed and evaluated at a meeting of the Board of Directors held on May 21, 2024.

• (2) Evaluation items
  • Board of Directors structure (number of members, ratio of executive to non-executive members, diversity, etc.)
  • Status of operation of the Board of Directors (number of meetings held, attendance rates, time spent for deliberation, number of items deliberated, provision of information, questions and answers, etc.)
  • Other (issues raised in the previous evaluation of Board of Directors’ efficacy; Compensation Advisory Committee; Nomination Advisory Committee; meetings of outside directors and outside auditors; etc.)
• (3) Evaluation results

  Each evaluation item in the questionnaire received a high evaluation in general. According to the evaluation on the questionnaire and interviews, it was confirmed that the Board of Directors’ efficacy was properly maintained because the improvement initiatives are being implemented on the basis of the previous efficacy evaluation as listed below to achieve sustained increases in the Group’s corporate value.
  [Major Initiatives Based on the Previous Efficacy Evaluation]

  • i) Report on the status of communication with investors
    
    • The status of communication with investors will continue to be reported at Board of Directors in a timely and appropriate manner, as there was an opinion in this efficacy evaluation that this initiative was appreciated.
  • ii) Deepening the discussions at Board of Directors
    
    • The discussion at the execution side was further shared during the explanation of each agenda item and the criteria for the agenda for the Board of Directors were changed so that the discussion time can be used more effectively for the discussion of more important topics.
  • iii) Discussion on brand and PR strategies
    
    • Opportunities were set up at Board of Directors to report on PR strategies, brand strategies, etc., and discussions at Board of Directors were fed back to the execution side for action, etc.
• (4) Issues and future initiatives

  For further improvement of the efficacy of the Board of Directors, the following initiatives will be implemented to solve the issues identified through the questionnaire and interviews:

  • i) Monitoring of the Group’s Long-Term Vision
    
    • The Board of Directors continuously monitors the progress of future plans and other aspects of both financial and business strategies from the perspective of achieving the goals of the Group’s Long-Term Vision.
  • ii) Discussion on priority areas of business strategies and infrastructure to support the strategies.
    
    • In making progress on the Group’s Long-Term Vision, discussions on necessary topics are held through Board of Directors and external officer meetings, etc., and the results are fed back to the execution side.

Shareholder Voting Rights

• The principle of one vote per share of stock shall be applied to all corporate voting matters
• Disclosure of voting results
• Appointment and dismissal of managing directors and corporate auditors by shareholders