Today, Denka is undergoing the most drastic change in its history, which spans more than 100 years.
Specifically, the Company is developing functional materials for use in IoT and 5G communication devices as well as materials for EVs and other emerging mobility infrastructure. Denka is also engaged in proactive investment in the life science business, such as infectious disease and lifestyle-related disease countermeasures. Thus, Denka’s business portfolio is in the process of radical transition. Furthermore, Denka is now serving markets worldwide, with its R&D and production network becoming ever more globalized. These changes necessarily entail a number of new challenges that have to be overcome. Accordingly, Denka must redevelop its organizational structure and management system while raising the awareness of each employee.

In recent years, a string of corporate mishaps have been exposed in a range of business sectors, causing the general public to severely scrutinize their governance models and question whether these models are truly effective. First and foremost, businesses are being called to contribute to society via the creation of new products and new value. This kind of pursuit requires forward-looking conceptualization capabilities that help blaze a new trail into the future and a pioneering spirit that encourages frontline employees to engage in dynamic action and risk-taking to achieve higher goals. However, this pursuit must also be supported by sound corporate governance, an essential component of any business’s efforts to achieve medium- to long-term growth in corporate value.

With these factors in mind, I will explain the status of Denka’s corporate governance from the perspective of outside director.
Denka’s Board of Directors consists of 12 directors, five of whom are outside directors, with members of the Audit Committee being appointed from both in-house directors and outside directors. Prior to assuming office as one of Denka’s outside directors, I had been an expatriate for 15 years as part of my experience in a trading company in addition to being deeply involved in human resource development and legal compliance. The other four outside directors, appointed from a diverse range of business fields, also boast abundant experience and extensive expertise in their areas of specialty.

Notable features of the Board of Directors’ operations include a significant volume of information being offered to outside directors to help them understand Denka’s operations as well as active interaction between board members. For example, Denka holds periodic “Strategy and R&D Policy Presentation Meetings” in which outside directors are briefed on strategies and R&D policies being implemented by each business division as well as the Company’s financial strategies, human resource management policies and other key information regarding its overall operations from a medium- to long-term perspective. By encouraging attendees to actively deliberate on important management matters, these meetings have proven effective. Also, presentations are given to outside directors prior to monthly Board of Directors meetings, with the aim of ensuring that they are well-informed about all agenda items to be submitted to Board of Directors meetings. These presentations are followed by Q&A sessions as well as the serious and unreserved exchange of opinions, which sometimes include harsh objections. In the course of these sessions, outside directors often contribute valuable insights regarding the positioning of agenda items in the context of medium- to long-term business strategies while furnishing advice as specialists with regard to the management of various risk factors in the face of business and geopolitical situations, the handling of legal affairs associated with domestic and overseas operations, the preparation of financial statements and Denka’s approach to ESG issues and the United Nations SDGs. In short, all agenda items are carefully examined before they are discussed and finalized by the Board of Directors. In addition, tablet terminals furnished to all directors provide comprehensive updates on topics to be addressed by the Board of Directors. So, prior to each meeting, they are expected to intensively review a large volume of information. 　　Moreover, the monthly “D&A Round Table” meetings provide directors with opportunities to engage in the frank exchange of opinions on Denka’s corporate philosophy, growth strategies, corporate governance and other foundational issues affecting the Company’s business operations. Denka also maintains such bodies as the Audit Committee, the Nomination and Remuneration Advisory Committee and the Outside Director Liaison Meetings in an appropriate manner. As such, Denka’s efforts to improve its corporate governance have been supported by a number of discussions at the Board of Directors and other key meetings. Over the course of this process, outside directors and in-house directors, the latter of whom are charged with the execution of day-to-day operations, seriously engage one another, prioritizing improving the effectiveness of Denka’s governance framework and management approach.

On a day-to-day basis, it is often hard to immediately determine whether our business judgments will succeed or fail. Also, there is a lingering sense of uncertainty regarding future global megatrends. Predictably, Denka will face various challenges and changes in its business environment. However, its robust corporate culture, which values sincerity and steadfastness and has been nurtured over the course of 100 years, is being steadily passed down to younger generations despite drastic changes in its business portfolio. As I expect Denka to engage in a variety of ongoing initiatives to achieve its future ideals via the implementation of effective growth strategies and corporate governance measures, I am determined to fulfill my duties as an outside director and help the Company realize sound corporate growth and improve its corporate value.

Independence standards for Outside Directors

The independence standards for the Company’s Outside Directors are that they must be persons who do not fall under any of items (1) to (5) below.

（1）

An operating officer(*1) of a main customer(*2), main supplier(*3) or main lender(*4) that is a main business partner of the Company.

（2）

A consultant, accountant, lawyer or the like who has received money or other property from the Company exceeding a yearly amount of 10 million yen, other than officer’s remuneration, in the most recent fiscal year.

（3）

In the event that the party receiving the property referred to in item (2) above is an organization, a person belonging to an organization in which the amount paid by the Company to that organization in the most recent fiscal year comprised 2% or more of that organization’s net sales or gross revenue.

（4）

A person who fell under items (1) to (3) above within the period of the past year.

（5）

A person who is the spouse or a relative within the second degree of kinship of a person listed below

• ①A person falling under items (1) to (4) above;
• ②A person who is currently, or was within the period of the past year, an operating officer at the Company or a subsidiary of the Company;

*1 Operating officer:

an Executive Director, Operating Executive, Executive Officer, or other employee or the like.

*2 Main customer:

a customer that paid to the Company an amount that comprised 2% or more of the Company’s net sales in the most recent fiscal year.

*3 Main supplier:

a supplier to which the Company paid an amount that comprised 2% or more of that supplier’s net sales in the most recent fiscal year.

*4 Main lender:

a lender that, at the end of the most recent fiscal year, was essential to the Company’s financing and is relied upon by the Company to the extent that there is no substitute.