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 15 of 15 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 15 of 15 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 15 of 15 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 15 of 15 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 2017

  Number  Total Value of Compensation
directors Ten 396 million yen(including 33 million yen to three outside directors)
Audit & Supervisory Board members Four 78 million yen(including 19 million yen to two outside Audit & Supervisory Board members)

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 third such evaluation involved conducting a survey in FY 2018 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 2017 (Applicable year: FY 2016) FY 2018 (Applicable year: FY 2017)
Composition of the Board of Directors Evaluation results for current size and composition were positive, exceeding the previous year. Evaluation results for the current size and composition were positive, with a high Board of Directors composition level comparable to the previous 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 roughly similar to the previous year. On the other hand, efforts to improve the content and quantity of documentation provided were 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 roughly similar to the previous year. On the other hand, efforts to improve the content and quantity of documentation provided were 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, efforts to operate the meetings more efficiently and improve the content, quantity, and timing of provided documentation are to be made continuously.
Roles and Responsibility of the Board of Directors We received high evaluation results for actively and constructively discussing the outline, policies, and strategies used to prepare the new medium-term management plan and appropriately discussing the direction and vision the company should pursue in the plan, which was a remarkable improvement from the previous year. This year, we will provide an opportunity at Board of Directors meetings to adequately discuss how to follow up on those results. 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.
Support for and Cooperation with Directors and Audit & Supervisory Board Members Outside directors were briefed appropriately about the agenda before Board of Directors meetings and necessary information was exchanged and shared appropriately among outside directors, which was an improvement from the previous year. 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.
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. 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.
Status of Measures to Address Issues Identified in the Effectiveness Evaluation Results Last Year An environment where outside directors could freely access and view materials was provided, but further improvements were to be made to ensure adequate time for reviewing the materials in advance. 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.

Related information