Compliance with Corporate Governance Codes

Reasons for Appointing Independent Directors

The Board of Directors specifies regulations for outside directors and creates and releases criteria for determining the independence of candidate independent outside directors. Furthermore, effort is made to select candidates expected to contribute frank, lively, and constructive considerations during Board of Directors meetings. Appointed independent outside directors contribute to strengthening the system for executing appropriate administrative processes by offering valuable suggestions regarding management in general and compliance, based on their extensive experience and outstanding capabilities/discernment.

Reasons for Appointing Independent Directors and Description of Main Activities

Independent Director Name Reasons for Appointment Description of Main Activities
Outside Directors Taketsugu Fujiwara Appointed due to extensive management experience and broad knowledge acquired through many years of managing a global company. Attended 14 of 14 Board of Directors meetings
Hiroko Wada Appointed due to diverse management experience, such as from being a corporate director of a multinational company and a chief executive officer of a Japanese subsidiary of a foreign company, and broad knowledge about global marketing. Attended 14 of 14 Board of Directors meetings
Outside Audit & Supervisory Board Members Takashi Iida Appointed due to extensive specialized knowledge and experience from practicing law for many years, from managing a law office, and from serving as an outside director or outside corporate auditor for various companies Attended 14 of 14 Board of Directors meetings
Attended 17 of 17 Audit & Supervisory Board meetings
Masahiro Nishio Appointed due to extensive specialized knowledge and experience from being a certified public accountant and due to his experience outside Shimadzu, which is expected to be useful as a corporate auditor. Attended 13 of 14 Board of Directors meetings
Attended 17 of 17 Audit & Supervisory Board meetings

Director Compensation System

The composition of director compensation is determined based on the improvement in results achieved during each fiscal year and the director's management duties with respect to increasing medium and long-term corporate value. In FY 2017, a new performance-based stock compensation system was introduced to clarify the correspondence between director compensation and Shimadzu stock value.

Total Value of Compensation to Directors and Auditors for FY 2018

  Total Value of Compensation Fixed Compensation Short-Term Performance Compensation Expenses Recognized as Long-Term and Performance-Based Stock Compensation Number
Directors(excluding outside directors) 361 million yen 212 million yen 111 million yen 38 million yen 5
Auditors(excluding outside auditors) 59 million yen 59 million yen 2
Outside Directors and auditors 55 million yen 55 million yen 5

Composition and Method for Determining Director Compensation

Title Composition/Determination Method
Directors
(Excluding Outside Directors) and
Executive Officers with Specific Duties
1. Fixed Compensation
Determined based on position or title, using the compensation levels at other companies surveyed by an outside organization as an important reference index.
2. Short-Term Performance Compensation
Determined by comprehensively taking into account overall results and other factors for the Shimadzu Group during each fiscal year.
3. Performance-Based Stock Compensation System
The range varies between 50 % and 200 %, depending on the degree to which medium-term management plan performance targets were achieved, for example, during the corresponding three years.
Outside Directors Fixed compensation only

Evaluating the Effectiveness of the Board of Directors

We analyze and evaluate the effectiveness of the Board of Directors for the purpose of making continuous organizational or operational improvements and ensure it functions properly. The forth such evaluation involved conducting a survey in FY 2019 about the Board of Directors' effectiveness. An analysis and evaluation of the survey results were then deliberated at a Board of Directors meeting. An overview of that process was published in the Corporate Governance Report.

Results from Evaluating the Effectiveness of the Board of Directors

Criteria for Evaluating Effectiveness FY 2018 (Applicable year: FY 2017) FY 2019 (Applicable year: FY 2018)
Composition of the Board of Directors Evaluation results for the current size and composition were positive, with a high Board of Directors composition level comparable to the previous year Evaluation results for the current Board of Directors size and composition were positively high, similar to the previous year. A new candidate director that is knowledgeable about technology research and development will be added with anticipation this year.
Operation of Board of Directors Meetings The frequency and length of each meeting were considered appropriate and an atmosphere and environment that allowed all members to freely express their views were maintained, which were positive evaluation results similar to the previous year. On the other hand, efforts to operate the meetings more efficiently and improve the content, quantity, and timing of provided documentation are to be made continuously. The frequency and length of each meeting were considered appropriate and an atmosphere and environment that allowed all members to freely express their views were maintained, which were positive evaluation results similar to the previous year. On the other hand, we will continue to implement improvements in terms of providing time for discussions by operating the meetings more efficiently and achieving deeper discussions by improving the content of documents submitted and method of reporting.
Roles and Responsibility of the Board of Directors We received positive evaluation results for following up on important issues from the medium-term management plan and discussing them divided over several Board of Directors meetings, but we will engage in deeper discussion about the long-term vision Shimadzu should pursue. We received positive evaluation results for spending significant discussion time at Board of Directors meetings following up on important issues from the medium-term management plan. On the other hand, we will engage in deeper discussions about important management issues, such as about business strategies and our business portfolio.
Support for and Cooperation with Directors and Audit & Supervisory Board Members Necessary information was exchanged and shared appropriately among outside directors, between outside directors and Audit & Supervisory Board members, and coordination with Accounting Auditor was appropriate. Necessary information was exchanged and shared appropriately among outside directors, between outside directors and Audit & Supervisory Board members.
Self-Assessment by Directors All directors adequately understood the basic philosophy of the company, endeavored to achieve that philosophy, and had spent adequate time and effort fulfilling their roles and responsibilities as directors, which is a similar result as the previous year. All directors adequately understood the basic philosophy of the company, endeavored to achieve that philosophy, and had spent adequate time and effort fulfilling their roles and responsibilities as directors, which is a result that is equivalent to or better than the previous year.
Status of Measures to Address Issues Identified in the Effectiveness Evaluation Results Last Year Evaluation results indicated improvements continued to be made for supporting outside directors, but we will improve the effectiveness of support by improving the timing of briefing the outside directors and having those involved in executing measures explain the projects in advance in some cases. Evaluation results indicated improvements in the operating efficiency of Board of Directors meetings and explaining issues in advance, but additional improvements will be made for providing appropriate feedback about the content of discussions at Board of Directors meetings to administrative corporate executive officers.

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