Corporate Governance
SuMi TRUST Group is enhancing its corporate governance structure in line with its business model. In addition to the statutory committees of a company with Three Committees, we have also established a Risk Committee and Conflicts of Interest Committee, both of which function as advisory bodies to the Board of Directors. We also strive to enhance management transparency by appointing an external director as Chairman of the Board of Directors.
Basic Initiative Policy
In order to implement sound management based on a high degree of self-discipline guided by our fiduciary spirit and to gain the unwavering trust of society, we are committed to enhancing corporate governance along the lines of the following basic philosophy with the objective of improving the Group’s sustainable growth and medium- to long-term corporate value.
Having defined the SuMi TRUST Group’s Reason for Existence (“Purpose”) and identified its high-priority management issues (“Materiality”), such as Japan’s declining birthrate and aging population, climate change, and digitalization, SuMi TRUST Group also recognizes that taking on the mission of solving social issues presents the SuMi TRUST Group with growth opportunities, which is why the Company shall place at the core of its management approach the notion of “balanced creation of both social and economic value.”
As the foundation for every activity to be shared by all the officers and employees of the SuMi TRUST Group, the Board of Directors shall establish management principles (“Mission”), an ideal model (“Vision”), and codes of conduct (“Value”).
Basic Philosophy
- SuMi TRUST Group shall respect shareholder rights, and endeavor to develop an environment in which shareholders can exercise their rights appropriately and effectively, and to secure the effective equal treatment of shareholders;
- By recognizing the importance of its social responsibilities and public mission, SuMi TRUST Group shall endeavor to appropriately cooperate with its stakeholders, including shareholders, clients, employees, business partners, and local communities (hereinafter referred to as “Stakeholders”), and to develop 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 Group 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 Group shall adopt the institutional design of the Company with a Nominating Committee, etc. and, by separating the execution and monitoring of business, shall endeavor to ensure the Board of Directors’ role of effective monitoring; and
- SuMi TRUST Group 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 corporate value of SuMi TRUST Group.
Basic Policy on Corporate Governance
Corporate Governance Report
Our Views on Corporate Governance
SuMi TRUST Group is a financial holding company with many subsidiaries under its Group umbrella, including SuMi TRUST Bank, Sumitomo Mitsui Trust Asset Management, and Nikko Asset Management. Guided by our fiduciary spirit, we aim to leverage our significant expertise and creativity to combine our banking, asset management & administration, and real estate businesses to deliver total solutions to our clients as their "Best Partner." In order to fulfill our principles and live up to the expectations of our stakeholders, we make every effort to ensure the soundness and reliability of the Group's business model, as well as management transparency, and continually strive to enhance the Group's corporate governance.
Corporate Governance System
* Mr. Hideki Kanda is an external director of SuMi TRUST Bank.
Independence of Directors
SuMi TRUST Group has established nomination policies of external directors in the Basic Policy on Corporate Governance
. External directors are decided from among those who can address SuMi TRUST Group’s high-priority management issues (Materiality) with deep insight and extensive experience in corporate management, finance and accounting, the areas of legal, risk management, and compliance, the areas of trust, asset management, and asset administration, digital technology/IT, internationality, or in the areas of sustainability, including knowledge and experience about social issues, environment, and DE&I. They shall also exhibit the following qualities: (i) A person who satisfies the Independence Standards of SuMi TRUST Group, and who is deemed unlikely to give rise to conflicts of interest with general shareholders of SuMi TRUST Group; (ii) A person who fully understands SuMi TRUST Group’s management principles and its social responsibilities and roles as a trust bank group, and who can monitor the management of SuMi TRUST Group and give accurate and appropriate opinions and advice. Furthermore, these seven external directors were appointed as independent officers as they satisfied the Independence Standards.
Board of Directors
The Board of Directors determines the basic management policies of SuMi TRUST Group, such as medium- to long-term management strategies and a policy on internal management, and supervises the execution status. In this way and in order to earn trust as fiduciary from all stakeholders of the Group, it distributes resources appropriately to the stakeholders toward the realization of its Purpose and ensures corporate sustainability.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 exective officers, etc.
For more information about roles and responsibilities of the Board of Directors, please see the following document Basic Policy on Corporate Governance
The Board of Directors at SuMi TRUST Group has appointed a sufficient number of directors considered necessary and appropriate for the Board to demonstrate an effective supervisory function as required of a financial holding company tasked with the management of SuMi TRUST Group. In determining the number of directors, due consideration is also given to ensuring diversity and expertise among directors.
In light of the importance of the role of independent external directors in corporate governance, we have established a principle that, at least one-third of the directors on the Board of Directors should be independent external directors.The Company has established and disclosed Independence Standards of Independent Directors. In principle, all statutory committees are chaired by external directors.
When deciding on director candidates, we nominate those who can address SuMi TRUST Group’s high-priority management issues (Materiality) with deep insight and extensive experience in corporate management, finance and accounting, the areas of legal, risk management, and compliance, the areas of trust, asset management, and asset administration, digital technology/IT, internationality, or in the areas of sustainability, including knowledge and experience about social issues, environment, and DE&I. We shall shall ensure a board of diverse and balanced composition that is appropriate to properly monitor the wide range of business areas as a trust bank group, based on the SuMi TRUST Group’s Reason for Existence (“Purpose”).
- All seven external directors have been registered as independent officers with the relevant securities exchange.
- Of the 15 directors, 13 are male and two are female (shown in orange above).
- 16 Board of Directors meetings were convened during the period July 1, 2022 through June 30, 2023.
*1Judged based on whether or not the person has overseas work experience, etc. Internal Directors have experience in global business development related to SuMi TRUST Group’s business operations such as trust.
*2External director as prescribed in Article 2, item 15 of the Companies Act. The overall balance, including areas of expertise above, is taken into consideration when external Directors are selected.
The deliberations of the Board of Directors are based on an annual schedule formulated with reference to the Evaluation of the Board of Directors conducted every year. Accordingly, the topics discussed reflect changes in the internal and external operating environments.
Board deliberations and main topics at the Board of Directors during FY2022
Discussion by the Board of Directors for the formulation of the Medium-Term Management Plan (FY2023–2025)
In May this year, we announced our new Medium-Term Management Plan (“New Medium-Term Plan”). The Medium-Term Management Plan was formulated for the second time after the change in institutional design, and from the viewpoint of utilizing the knowledge of external directors and other information, the Board of Directors deliberated on the overall policy. Meanwhile, the Executive side deliberated on proposals based on the opinions of the Board of Directors, and the Board of Directors discussed the proposals with the results of the deliberation in mind. The deliberation on strategic planning was deepened through a collaborative discussion process between the Board of Directors and the execution departments. During the deliberations, we set management themes*1 and held a series of open-ended discussions. New Medium-Term Plan embodies the 3-year plan from fiscal 2023 through backcasting, while taking Aspiration by fiscal 2030 into account. We feel that we have formulated a plan that is consistent with our long-term vision and that is effective in practice.
Deliberations on the New Medium-Term Management Plan by the Board of Directors
*1 The external directors of SuMi TRUST Bank also participate in discussions on management themes as Board meeting observers, not for the purpose of reaching conclusions, but rather to discuss important management issues and themes from a medium- to long-term perspective freely and openly, so that their viewpoints and opinions are capitalized on for management. In addition, agenda on important management issues at the board of directors of SuMi TRUST Bank that are deliberated together with our external directors are set as “TB Topics.”
Discussion at the Board of Directors on Purpose and Sustainability
SuMi TRUST Group’s Board of Directors deliberates on Purpose and sustainability from a variety of aspects, including the identification of high-priority management issues (materiality) to realize the reason for existence (Purpose), the establishment of internal management systems and compensation framework to support the determination and implementation of management policies, and disclosure for dialogue with stakeholders.
Discussion at the Board of Directors on Purpose and sustainability
Deliberations by the Board of Directors
Main Themes for Deliberations and Topics at the Board of Directors during FY2022
| Theme category | Main topics |
|---|---|
| Purpose/materiality/value creation process | Materiality management, penetration of Purpose throughout the Group |
| Policy on establishing desirable stakeholder relationships | Dialogue policy with stakeholders, sustainability policy, clients’ best interests, strategic shareholdings and voting rights exercise, policy on climate change and human rights, well-being/DE&I/workstyle reforms |
| Medium- to long-term management strategies | Group’s Medium-Term Management Plan |
| Discipline on capital distribution | Human capital, DX strategy, capital policy (including policy for shareholder returns), equity investment policy and discipline |
| Basic policy on internal management | Group governance, risk management based on SuMi TRUST Group’s characteristics, conduct risk management for the Group, conflict-of-interest management, fiduciary duties, cybersecurity, and business continuity resilience |
Every year we conduct an evaluation of the Board of Directors in an effort to enhance its effectiveness by considering and adopting measures aimed at improving issues identified in the evaluation and by implementing the PDCA cycle (please refer to the link below for the results of the evaluation of the Board of Directors in fiscal 2022 (overview)).
PDCA Cycle
(1) Key points for evaluation in fiscal 2022
In fiscal 2022, we confirmed the effectiveness of the current framework, where an effective Board of Directors is defined as “the Board of Directors that strives for sustainable improvement to realize its vision.” We set questions to ask about issues and areas for improvement, and based on our understanding of the current Gap (difference between current and ideal state), we charted the path for enhancement.
(2) Results of the evaluation of the Board of Directors in fiscal 2022 (evaluation results, issues and future initiatives)
At the meeting of the Board of Directors in fiscal 2022, we confirmed improvements in effectiveness through the formulation of the Medium-Term Management Plan, internal management of the Group, enhanced discussions on policies for building desirable relationships with diverse stakeholders and other measures. The evaluation of the Board of Directors indicated that the Board and each committee are aware of their respective objectives and are endeavoring to invigorate discussions and improve their supervisory functions. As a result, we believe that an adequate degree of effectiveness is being sustained.
At the same time, we also recognized the issues that the Board of Directors and various committees need to improve and enhance in order to realize the future vision of the Board. Based on the recognition of these issues, in fiscal 2023, we will deepen discussions on the allocation of management resources based on business portfolio analysis in order to achieve steady implementation of the Medium-Term Management Plan. We will also conduct more effective deliberations on enhancing group management and accountability to stakeholders from both the offensive and defensive perspectives.
| Issues that are recognized in FY2022 evaluation |
| (1) Discussion on business portfolios for improved profitability and growth capabilities of business strategies |
| (2) Organic collaboration with the subsidiaries and affiliates, and discussions to realize the Group strategy based on the collaboration |
| (3) Enhanced discussions in light of expectations from various stakeholders |
Committees
To ensure the effectiveness of corporate governance and further enhance the soundness and reliability of the Group’s business model, as well as the transparency of management, we have established the Risk Committee and the Conflicts of Interest Committee as advisory bodies to the Board of Directors to complement the three committees required under the Companies Act, namely, the Nominating Committee, the Compensation Committee, and the Audit Committee.
Every year, each committee conducts a self-evaluation in an effort to improve its autonomous management by considering and adopting measures aimed at improving issues identified in the evaluation. The results of the self-evaluations are reported to the Board of Directors in April for deliberation.
Meetings of Board of Directors and Committees (July 2022 through June 2023)
Overview of the Board of Directors and Committees
*1July 2022 through June 2023
Succession Plans
In order to achieve sustainable growth for the Group and enhance its corporate value, we have formulated succession plans for the top management of SuMi TRUST Group, SuMi TRUST Bank and Sumitomo Mitsui Trust Asset Management. We have also created management personnel development plans for those in charge of managing each business and those engaged in corporate management. We have defined the ideal qualities and requirements for the nominees required to serve as directors and officers, and systematically manage and cultivate a group of candidates.
Development of Management Personnel Based on Management Team Succession Plan
Training and appointment process
The Nominating Committee selects a pool of top management candidates each year based on the proposals and opinions presented by the executive side. Based on the current and future business environment, the Nominating Committee deliberates on future development policies, assignments to be given to the candidates and other matters based on performance, achievements, evaluations, expertise and experience (skills), and reflects such matters as placement in different departments from the next fiscal year onward, giving candidates an opportunity to develop and to overcome challenges. We also continue to track the status of development. While continuing this cycle, when the Company actually appoints new top management members, the Nominating Committee will deliberate on the candidates’ performance, achievements, evaluations, expertise and experience (skills), in a multifaceted manner, with a focus on candidates who have been trained during the cycle, and will ultimately report to the Board of Directors. The progress of succession plans and development plans are periodically reported to the Board of Directors.
Compensation System for Directors and Executive Officers
In principle, the compensation structure is a combination of monthly compensation (comprising of fixed compensation and individual performance compensation), bonuses for directors and executive officers (performance-linked bonuses) and stockbased remuneration (share delivery trust).
With respect to executive bonuses (performance-linked bonuses) and stock-based remuneration (share delivery trust), the Company has introduced a system whereby each item listed in the table below is set as an indicator (KPI) and reflected in the compensation amount. In fiscal 2022, we changed the rating system for stock-based compensation to better reflect ESG-related contributions. Specifically, the ratio of “Short-term Performance: Medium-term Performance: ESG Overall Rating = 1:1:1” is reflected in the performance evaluation of stock compensation. ESG assessment categories have been reviewed in light of materiality and now is comprised of the following five categories: climate change, fiduciary duties (FD) & client satisfaction (CS), employee engagement, DE&I (empowerment of women), and assessments obtained from ESG assessment organizations. The results are evaluated from both quantitative and qualitative perspectives and reflected in executive compensation.
Indicators (KPIs) Concerning Performance-Linked Compensation
*3(i) and (ii) are fiscal 2022 actual results versus fiscal 2022 forecasts. (iii) through (v) are fiscal 2022 results versus fiscal 2022 targets established under the Medium-Term Management Plan.
*4Compensation with the use of a trust scheme. Points are awarded every fiscal year based on the achievement rates for the KPIs above and delivered in the form of shares upon retirement. Malus (reduction/cancellation before delivery of shares) and clawback (recovery after delivery of shares) provisions apply.
*5Finalized Basel III base *6 “ESG assessment organizations” are MSCI, FTSE and Sustainalytics.
External Directors' Meetings
The External Directors’ Meeting* is a meeting body intended to foster trust among external directors through frank exchange of opinions and shared recognition from an independent and objective standpoint and to utilize the opinions expressed at the meeting to fulfil their roles as external directors by channeling them to the executive level as necessary. In fiscal 2022, two meetings were held to discuss topics such as the “governance framework and management of the Board of Directors,” and “organizing the roles of the holding company and the subsidiary bank and the exercise of their functions.” These discussions led to future discussions by the Board of Directors, improvements in management and other operations.
*Voluntary meetings organized by external directors and not prescribed in any of internal regulations.
Strategic Shareholdings
SuMi TRUST Group has recognized strategic shareholdings as a material management issue and we have hedged the price volatility risk that exceeded our financial risk absorption buffer while constantly working to reduce the overall exposure obtaining the consent of our corporate clients.
SuMi TRUST Group has defined “creating a virtuous circle from increased enterprise value leading to increase in household savings, assets and capital,” as one of our goals. We shall endeavor to foster a virtuous circle framework that facilitates circulation of funds, assets and capital through our asset management and asset administration services, and enhancement of our corporate clients’ enterprise value by offering solution services, with the aim to develop Japanese capital markets.
To realize this objective, we intend to improve our bi-functional expertise as a trust bank Group that assumes the position of an investor as well as an advisor offering solutions to enhance enterprise value, and re-align our policy so that, in principle, we shall not hold any “strategic shareholdings as a conventional stable shareholder.” During the interim policy transition period, we shall strive to fulfill our role as an advisor that “offers solutions to issues to enable sustainable increase in enterprise value through extensive dialogue with our clients.”
- Pace of our strategic shareholding reduction target (announced on May 2023)
We have set a reduction target of 150 billion yen at cost over the three-year period from FY2023 to FY2025. - Policy regarding the exercise of voting rights regarding our strategic shareholdings
During the interim period in which we will continue to hold strategic shareholdings, SuMi TRUST Bank established the voting rights guidelines for strategic shareholdings and disclosed the results of the exercise.
Balance of strategic shareholdings
B/S amount of investment securities held for purposes other than pure investment (Sumitomo Mitsui Trust Bank, Limited)
(Yen bn)
| Mar. 24 | Mar. 23 | |
|---|---|---|
| Listed shares | 1,211.3 | 1,071.5 |
| Unlisted shares | 87.0 | 77.9 |
| Deemed shares | 402.5 | 318.5 |
(*)The amount of the deemed shares is the market value
Strategic shareholdings (Top 10)
Specified investment shares
| Mar. 24 | Mar. 23 | ||||
|---|---|---|---|---|---|
| Number of shares | B/S amount (Yen bn) | Number of shares | B/S amount (Yen bn) | ||
| 1 | ORIENTAL LAND CO.,LTD. | 11,258,000 | 54.5 | 11,258,000 | 50.9 |
| 2 | MINEBEA MITSUMI Inc. | 15,413,900 | 45.4 | 15,413,900 | 38.7 |
| 3 | NIDEC CORPORATION | 7,011,600 | 42.9 | 7,011,600 | 47.9 |
| 4 | DAIKIN INDUSTRIES,LTD. | 1,899,200 | 39.1 | 2,152,400 | 50.9 |
| 5 | SUZUKI MOTOR CORPORATION(*) | 22,000,000 | 38.2 | 5,500,000 | 26.4 |
| 6 | TOKYU CORPORATION | 20,312,200 | 37.4 | 22,395,800 | 39.4 |
| 7 | DAIWA HOUSE INDUSTRY CO.,LTD. | 6,900,000 | 31.2 | 7,200,000 | 22.4 |
| 8 | Sumitomo Realty & Development Co.,Ltd. | 4,800,000 | 27.8 | 4,800,000 | 14.3 |
| 9 | TOYOTA MOTOR CORPORATION | 7,000,000 | 26.5 | 10,000,000 | 18.8 |
| 10 | MITSUI & CO.,LTD. | 3,286,400 | 23.3 | 4,694,800 | 19.3 |
(*)The increase in the number of shares is due to a stock split.
The deemed shares
| Mar. 24 | Mar. 23 | ||||
|---|---|---|---|---|---|
| Number of shares | Market Value (Yen bn) | Number of shares | Market Value (Yen bn) | ||
| 1 | YASKAWA Electric Corporation | 7,439,900 | 47.1 | 7,439,900 | 42.9 |
| 2 | KUBOTA CORPORATION | 17,872,000 | 42.6 | 17,872,000 | 35.7 |
| 3 | Central Japan Railway Company(*) | 10,025,000 | 37.3 | 2,005,000 | 31.6 |
| 4 | Nitori Holdings Co.,Ltd. | 1,440,000 | 33.9 | 1,440,000 | 22.9 |
| 5 | NIPPON STEEL CORPORATION | 6,438,300 | 23.6 | 6,438,300 | 20.0 |
| 6 | AEON CO.,LTD. | 6,370,000 | 22.9 | 6,370,000 | 16.3 |
| 7 | TOYOTA TSUSHO CORPORATION | 1,828,000 | 18.7 | 2,128,000 | 11.9 |
| 8 | Fujikura Ltd. | 6,777,000 | 15.4 | 6,777,000 | 6.3 |
| 9 | Daiwa Securities Group Inc. | 12,444,000 | 14.3 | 12,444,000 | 7.7 |
| 10 | Mitsui O.S.K.Lines,Ltd. | 3,000,000 | 13.8 | 3,000,000 | 9.9 |
(*)The increase in the number of shares is due to a stock split.
Please refer to the company list below for the detail of strategic shareholdings.
