Corporate GovernanceJAPANESE

As Japan’s only financial group specialized in trust banking, the SuMi TRUST Group is enhancing its corporate governance system in line with its business model.
When changing into a “company with Three Committees” in June 2017, in addition to the statutory committees required by the Companies Act, SuMi TRUST Holdings established the Risk Committee and the Conflicts of Interest Committee, as advisory bodies to the Board of Directors. Furthermore, an external director serves as chairman of the Board of Directors, in order to increase the Group’s management transparency.

Basic Initiative Policy

In order to adhere to the principles of sound management, based on a high degree of self-discipline with the background of fiduciary spirit, and to establish strong credibility with society, SuMi TRUST Holdings commits itself to enhancing its corporate governance system in line with the following basic philosophy, with the objective of supporting sustainable growth and medium- to long-term enhancement of the enterprise value of the SuMi TRUST Group. In addition, the Board of Directors sets out and discloses the SuMi TRUST Group’s Management Principles (“Mission”), Ideal Model (“Vision”), and Codes of Conduct (“Value”) as the anchor for all of our activities, which is shared by all of the directors, officers, and employees of the SuMi TRUST Group.

-Basic Philosophy-

  • ・ SuMi TRUST Holdings shall respect shareholder rights, and endeavor to develop an environment in which shareholders can exercise their rights appropriately and effectively, and to secure the effectively equal treatment of shareholders.
  • ・ By recognizing the importance of its social responsibilities and public mission, SuMi TRUST Holdings shall endeavor to appropriately cooperate with its stakeholders, including shareholders, clients, employees, business partners, and local communities, and to establish a corporate culture and climate in which it conducts sound business operations based on a high degree of self-discipline.
  • ・ In order to establish a basis for constructive dialogue with its stakeholders, SuMi TRUST Holdings shall separately set out its Disclosure Policy, and endeavor to appropriately disclose corporate information, including non-financial information, and ensure the transparency of its corporate management.
  • ・ As the financial holding company that assumes the corporate management function of the SuMi TRUST Group, SuMi TRUST Holdings adopted the institutional design of a “company with Three Committees,” and, by separating the execution and supervision of business, shall endeavor to ensure the Board of Directors’ role of effective supervision.
  • ・ SuMi TRUST Holdings shall engage in constructive dialogue with its stakeholders in order to contribute to sustainable growth, as well as the medium- to long-term enhancement of the enterprise value of SuMi TRUST Holdings.
Basic Policy on Corporate Governance

Basic Policy on Corporate Governance (62 KB)

(Exhibit 1) Independence Standards of Independent Directors (28 KB)

(Exhibit 2) Standards for Voting on Cross-Shareholding Shares (41 KB)

Perspectives Regarding the Corporate Governance System

SuMi TRUST Holdings is a financial holding company with group companies such as of SuMi TRUST Bank, Sumitomo Mitsui Trust Asset Management, Sumitomo Mitsui Trust Research Institute, Mutual Fund & Insurance Research Institute and JTC Holdings, etc. and aims to be our clients’ “Best Partner,” by providing “Total Solutions” that combine our banking business, asset management and administration business, and real estate business, based on a fiduciary spirit, and by making full use of our significant expertise and creativity. In addition, in order to fulfill our principles and meet the expectations of stakeholders, SuMi TRUST Holdings endeavors to ensure the soundness and reliability of its business model and the transparency of the management of the SuMi TRUST Group, and further enhances the SuMi TRUST Group’s corporate governance.

Board of Directors

(1) Roles of the Board of Directors

The Board of Directors ensures the fairness and transparency of the SuMi TRUST Group’s corporate management as its central role, by setting out the basic management policy of the SuMi TRUST Group and supervising the overall management of the Group. Thus, with the exception of matters that are required by law to be decided by the Board of Directors, the Board of Directors, in principle, delegates decisions on the execution of business to executive officers, and supervises the execution of business by executive officers, etc. Meanwhile, the Board of Directors provides and improves an environment in which external directors may properly supervise the execution of duties by the Board of Directors and the top management, as well as any conflicts of interest that may arise between SuMi TRUST Holdings and the management team, etc. from the standpoint of stakeholders, in order to support sustainable growth and the medium- to long-term enhancement of the enterprise value of the SuMi TRUST Group. In light of the importance of environmental and social issues related to sustainability, the Board of Directors prescribes a basic policy regarding social responsibility that is to be implemented by each Group company (the “Sustainability Policy”). Under this Sustainability Policy, the Board of Directors enhances awareness among its officers and employees, and promotes positive efforts to resolve these issues while taking its stakeholders into consideration, with the aim of supporting the sustainable growth of society and increasing the enterprise value of the SuMi TRUST Group. Furthermore, the Board of Directors establishes policies regarding the provision of products and services suitable for the true benefit of our clients (the “Policies regarding the Fiduciary Duties of the Sumitomo Mitsui Trust Group”), acts to ensure client comfort and satisfaction by sharing our “client-orientation” policy within the SuMi TRUST Group, and promotes the practice of fiduciary duties in the SuMi TRUST Group by supervising each Group company’s commitment to its fiduciary duties.

(2) Composition of the Board of Directors

The Board of Directors of SuMi TRUST Holdings is comprised of no more than 20 directors, which is the number of directors prescribed in the Articles of Incorporation, and includes the number of directors that is necessary and appropriate to provide an effective supervisory system required of a financial holding company that serves the corporate management function of the SuMi TRUST Group. Due consideration is also given to ensuring the diversity and expertise of the Board of Directors.
In light of the importance of the functions of external directors in corporate governance, as a general rule, at least one-third of the directors on the Board of Directors are independent external directors. The Board of Directors establishes and discloses Independence Standards of Independent Directors.
In determining candidates for directors, SuMi TRUST Holdings takes into consideration, among other factors, a balance between individuals who are capable of exerting strength in the management of specific business fields, and individuals who are suitable for corporate management. SuMi TRUST Holdings strives to secure a board that is, as a whole, sufficiently balanced and diverse in terms of knowledge, experience, and capability to properly supervise the wide range of business fields in which SuMi TRUST Holdings has dealings, as a trust bank group.

Composition of the Board of Directors

*  All seven external directors have been registered as independent officers with the relevant financial instruments exchange.

*  Breakdown of 15 directors: 14 men, 1 woman

*  Since changing into a company with Three Committees, 12 Board of Directors meetings were held during the period from June 29, 2017 to March 31, 2018.The attendance rate for all 12 of these meetings was 100%.

(3) External Director Serving as Chairman of the Board of Directors

While a “company with Three Committees” is, in principle, able to delegate important business execution decisions to executive officers, the Board of Directors is required to exercise a greater supervisory function. In light of the role expected of the Board of Directors, SuMi TRUST Holdings has appointed Mr. Isao Matsushita, an external director, as chairman of the Board of Directors.
In addition, SuMi TRUST Holdings has established the Corporate Secretariat as an organization that assists the chairman in fulfilling his duties, and elected a full-time Audit Committee member who is a non-executive director as the deputy chairman of the Board of Directors, thereby providing various types of information, mainly regarding agendas for deliberation at the Board of Directors meetings, and offering assistance regarding matters such as the clarification of points from the perspective of management and supervision.

(4) Results of the FY2017 and FY2018 Evaluations of the Board of Directors

SuMi TRUST Holdings conducts an annual evaluation of the effectiveness of the Board of Directors as a whole (the “Evaluation of the Board of Directors”), and reviews and implements remedial measures for the challenges it recognizes, thereby implementing a PDCA cycle to improve the effectiveness of the Board of Directors.

Committees

In order to ensure the effectiveness of its corporate governance system and further enhance the soundness and reliability of its business model and the transparency of its management of the SuMi TRUST Group, SuMi TRUST Holdings has established the Risk Committee and the Conflicts of Interest Committee as advisory bodies to the Board of Directors, in addition to the Nominating Committee, the Compensation Committee, and the Audit Committee, the establishment of which is required under the Companies Act. Independent external directors participate in the Risk Committee and the Conflicts of Interest Committee.
As a financial group specialized in trust banking, we have established the Conflicts of Interest Committee, which has supervisory functions unparalleled in other financial groups.

1. Nominating Committee

The Nominating Committee determines the content of proposals regarding the election and dismissal of directors to be submitted to the General Meeting of Shareholders, receives requests for consultation regarding the election and dismissal of executive officers including the President, as well as the succession plan for the management team from the Board of Directors, and deliberates and makes reports on these matters. It also receives requests for consultation regarding the election and dismissal of directors and on revision of the succession plan of management from the Board of Directors of SuMi TRUST Bank and Sumitomo Mitsui Trust Asset Management, and deliberates and makes reports regarding these matters. The Nominating Committee consists of three or more directors, and a majority of the members are independent external directors. The chairperson of the Nominating Committee is selected from the pool of committee members who are independent external directors.

2. Compensation Committee

The Compensation Committee prescribes policy regarding decisions on the content of compensation for individual executive officers and directors, and determines the content of compensation for individual executive officers and directors, in accordance with this policy. It receives requests for consultation regarding policies on decisions on the content of compensation for individual directors, etc. from the Board of Directors of SuMi TRUST Bank and Sumitomo Mitsui Trust Asset Management, and deliberates and makes reports on these matters. The Compensation Committee consists of three or more directors, and a majority of the members are independent external directors. The chairperson of the Compensation Committee is selected from the pool of committee members who are independent external directors.

3. Audit Committee

The Audit Committee audits the execution of duties by executive officers and directors, and prepares audit reports. It determines the content of proposals regarding the election and dismissal of a financial auditor, and regarding refusals to reappoint a financial auditor that are submitted to the General Meeting of Shareholders.
In order to fulfill its role and responsibilities, the Audit Committee appropriately exercises its authority to investigate the status of business and the assets of companies belonging to the SuMi TRUST Group. It appropriately utilizes the internal control system of the SuMi TRUST Group, and systematically and efficiently conducts audits by receiving reports from executive officers, directors, and a financial auditor, and through communications with these individuals. The Audit Committee consists of three or more directors who do not concurrently serve as executive officers, and a majority of its members are independent external directors. The chairperson of the Audit Committee is selected, in principle, from the pool of committee members who are independent external directors.

4. Risk Committee

The Risk Committee receives requests for consultation from the Board of Directors on (i) matters concerning the business environment surrounding the SuMi TRUST Group, top risks, and materiality, and (ii) matters concerning the operation of its risk appetite framework, risk management, and monitoring of the effectiveness of the internal control system related to compliance management of the SuMi TRUST Group, and reviews and reports on their appropriateness. In principle, a majority of the members of the Risk Committee are independent external directors and external experts. The chairperson of the Risk Committee is selected from the pool of committee members who are directors with professional knowledge and expertise in the concerned field.

5. Conflicts of Interest Committee

The Conflicts of Interest Committee receives requests for consultation from the Board of Directors on (i) matters concerning the validity of the conflict of interest management framework of the SuMi TRUST Group, (ii) matters concerning the effectiveness of conflict of interest management, client explanation management, and client support management of the SuMi TRUST Group, as well as the enhancement of associated systems, (iii) matters concerning Policies regarding the Fiduciary Duties of the SuMi TRUST Group and the action plans, etc. of each Group company, (iv) particularly important matters concerning the dissemination of conflict of interest management and fiduciary duties in the SuMi TRUST Group, and other matters, and reviews and reports on their appropriateness. In principle, a majority of the members of the Conflicts of Interest Committee are independent external directors and external experts. The chairperson of the Conflicts of Interest Committee is selected from the pool of committee members who are independent external directors or external experts with professional knowledge and expertise in the concerned field.

Corporate Governance System

Members of Committees
(: Chairperson,: Member (external),: Member (internal/non-executive),:Member (internal/executive))

Nominating Compensation Audit Risk Conflicts of Interest
External Directors Isao Matsushita
Soichi Shinohara
Takeshi Suzuki
Mikio Araki
Shinichi Saito
Takashi Yoshida
Hiroko Kawamoto
Experts Hideki Kanda*
Haruyuki Toyama*
Toshinori Kurihara*
Akiko Hosokawa*
Internal Tetsuo Ohkubo
Masaru Hashimoto
Yasuyuki Yagi
Hiroshi Misawa
Yutaka Nishida

*  Mr. Hideki Kanda is an external director of SuMi TRUST Bank. Mr. Haruyuki Toyama, Mr. Toshinori Kurihara, and Ms. Akiko Hosokawa are external experts.

Compensation System for Directors and Executive Officers

(1) Policy Regarding Decisions on the Content of Compensation

  • ・ Compensation for directors and executive officers is intended to function effectively as an incentive for the improvement of corporate performance and expansion of enterprise value.
  • ・ Rather than focusing on a single-year performance evaluation in which short-term contributions to profit are emphasized, we are building a compensation system with a balance of near-term incentives and medium- to long-term incentives, with rewards based on a comprehensive evaluation that reflects earnings contributions over the medium to long term.
  • ・ We accurately assess the roles that directors and executive officers of SuMi TRUST Holdings must perform in corporate management, as well as the results of their efforts, in order for them to adequately discharge their supervisory duties over the Group companies, and determine individual compensation based on highly transparent, fair, and objective evaluations.
  • ・ The Compensation Committee forges deeper collaborations with committees in order to build a higher accountability compensation system, and engages in deliberations with the aim of operating a fair and balanced compensation system.

(2) Overview of the Compensation System

In principle, compensation is paid via a combination of monthly compensation (fixed compensation and individual performance compensation), director/executive officer bonuses, and stock options.

<Reference> President’s Standard Compensation Table

The President’s standard compensation table specifies the composition and range of the President’s compensation, as indicated below. This table is used for reference by the Compensation Committee in determining individual compensation amounts.

  • 1)  The ratio of “fixed compensation” to “individual performance compensation + director/executive officer bonus,” which reflects, and varies depending on, individual performance and corporate performance, shall be 50%:50%.
  • 2)  The “individual performance compensation” range shall be between 70% and 160% of the standard amount.
  • 3)  “Director/executive officer bonus” is determined when necessary, and reflects corporate performance, such as consolidated net business profit before credit costs, consolidated net income, etc.
  • 4)  The number of stock options to be provided as compensation is determined when necessary, and reflects annual performance, etc.
President Fixed compensation portion of monthly compensation Individual performance compensation portion of monthly compensation
+
Director/executive officer bonus
Total
Approx. 50% Approx. 50% 100%

Succession Plan

In order to realize the sustainable growth of the Group and enhance its enterprise value, the Group has created succession plans for the top management of SuMi TRUST Holdings and its core subsidiary, SuMi TRUST Bank. We have also created management personnel development plans for the personnel that will be responsible for the management of each business and corporate management.
These plans identify important positions, define the ideals and requirements of personnel in these positions, and assist with the management and development of a pool of candidates that meet these ideals and requirements.
The status of the progress of succession plans and management personnel development plans is reported regularly to the Nominating Committee, which engages in consultations regarding the appropriateness of this status, and reports to the Board of Directors.

Initiatives for Enriching Agendas at Board of Directors Meetings

The Board of Directors supervises the status of the execution of duties by executive officers, etc., defines basic management policy, and selects business models and makes decisions regarding risktaking by formulating a management plan. In order to play this role, the Board of Directors selects management themes, consisting of legal and regulatory requirements, priority management issues, and medium- to long-term themes, and freely discusses these themes in the Board of Directors meetings, without an obligation to reach conclusions.
Through these initiatives, we utilize the expertise and perspectives of the external directors regarding the major themes that form the core of our corporate management.

Implementation of FY2017 Management Themes
July 2017 Personnel development
August Personnel development
September Business model
November Group corporate governance
December Group corporate governance
January 2018 ESG initiatives

Management Plan Formulation Process

When formulating a management plan, the Risk Committee first discusses the top risks and materiality. Afterwards, the external environment scenarios that will serve as the premises of the management plan are considered, and the management plan is formulated based on these scenarios. In order to improve the effectiveness and objectivity of the management plan, we engage in multiple management plan discussions with external directors before analyzing scenarios or formulating the management plan, leveraging the knowledge of both external directors and external experts from the early stages of plan formulation.

External Directors’ Meetings

In order to further improve the effectiveness of our corporate governance, we hold external directors’ meetings, which are only attended by external directors. These directors engage in exchanges of opinions based on the operation of the Board of Directors, agendas, demonstration of functions, and results of the Evaluation of the Board of Directors. These meetings contribute to the greater objectivity and independence of the Board of Directors.

Dialog between External Directors and Investors

In February 2018, we held “SuMi TRUST IR Day,” at which external director Mr. Isao Matsushita, who serves as chairman of the Board of Directors, provided an explanation of our corporate governance initiatives and conducted a Q&A session with the investors in attendance.

Independence of Directors

SuMi TRUST Holdings has established nomination policies of external directors in the Basic Policy on Corporate Governance. External directors are decided from among a wide range of diversified individuals pursuant to the following nomination policies: (i) A person who satisfies the Independence Standards of Independent Directors of SuMi TRUST Holdings (the "Independence Standards"), and who is deemed unlikely to give rise to conflicts of interest with general shareholders of SuMi TRUST Holdings; (ii) A person who understands SuMi TRUST Holdings’ management principles, and fully understands the social responsibilities and roles of SuMi TRUST Holdings as a trust bank group; (iii) A person who fully recognizes the role of external director, and who is able to oversee SuMi TRUST Holdings’ directors and management, and provide proper and appropriate opinions and advice, by leveraging the person’s knowledge and activities in fields such as corporate management, economy, legal affairs, accounting, tax accounting, and auditing. Furthermore, these seven external directors were appointed as independent officers as they satisfied the Independence Standards.

Report Concerning Corporate Governance

Report Concerning Corporate Governance (Updated on July 8, 2019) (537 KB)

 

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