Corporate Governance

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”).

*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 the areas of expertise and experience (skills) listed above, is taken into consideration when external Directors are selected.

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 Group has appointed Mr. Isao Matsushita, an external director, as chair of the Board of Directors.

In addition, SuMi TRUST Group has established the Corporate Secretariat as an organization that assists the chair in fulfilling his duties, thereby providing information for use in the selection of agendas for Board of Directors meetings, and offering assistance regarding matters such as the clarification of points related to the agendas of Board of Directors meetings.

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.

At the Board of Directors meetings in FY2023, considering the importance of the initial fiscal year to surely realize the current medium-term management plan, we set the business portfolio and the Group’s asset management business strategy as "Management Theme"*2 and discussed over a long period of time. In addition, with regard to the business portfolio, from the perspective of actively utilizing the knowledge of external directors, the Board of Directors deliberated on the overall policy. Meanwhile, the executives deliberated on proposals considering the opinions of the Board of Directors, and the Board of Directors discussed the proposals with the results of the deliberations. The deliberation was deepened through such discussion process between the Board of Directors and the executi. In deliberations on the business portfolio, we analyzed and reviewed each business in terms of profitability, growth, and capital efficiency under two time frames: the medium-term management plan period and 2030. In addition, we discussed businesses to be strengthened and those to be improved or discontinued. In deliberations on the Group's asset management business strategy, taking into account the concept of “Policy Plan for Promoting Japan as a Leading Asset Management Center” published by The Government of Japan, we held a series of discussions on the Group-wide asset management business strategy, the direction for each company’s fulfillment of its functions, and a road map for the implementation of the strategy. As part of the annual management plan, we also discussed the establishment of a Chief Officer (CxO) position and other positions to strengthen the Group's management and clarify the key responsibilities of officers.

*2The external directors of Sumitomo Mitsui 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 Sumitomo Mitsui Trust Bank that are deliberated together with our SuMi TRUST Holdings’ external directors are set as “TB Management Theme.”

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 2023 (overview)).

This fiscal year we once again posed questions to gauge awareness of problems and areas for improvement toward the realization of the “Future vision of the Board of Directors” (see next page), along with questions asking about the evaluation of each supervisory body position in terms of its role. We have also anticipated enhancing the sophistication of Group corporate governance by benchmarking the initiatives of leading companies.

In FY2023, the Board of Directors confirmed steady progress toward realizing the Board of Director's future vision by deepening discussions with the executives about the Group's management strategies, clarifying the structure of internal controls throughout the Group and pursuing supervision according to those controls, enhancing efforts to establish agendas and discussions that consider the relationship with various stakeholders.

The results of the FY2023 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 identified the issues to be improved and enhanced as below, which we will strive to work on in order to realize the Board’s Future vision.

The Nominating Committee makes decisions on the details of proposals concerning the appointment and dismissal of Directors for submission to the General Meeting of Shareholders, and deliberates on and responds to inquiries about the appointment and dismissal of Executive Officers, including the President, and the management team succession plans, as well as the appointment and dismissal of directors, including the president, of SuMi TRUST Bank, and the appointment and dismissal of directors of Sumitomo Mitsui Trust Asset Management.

The Compensation Committee establishes a policy for determining the details of individual compensation for directors and executive officers, and determines the amount of individual compensation for directors and executive officers in accordance with the policy. In addition, it deliberates on and responds to inquiries concerning the policy for determining the details of individual compensation of directors from the Board of Directors of SuMi TRUST Bank and Sumitomo Mitsui Trust Asset Management.

The Audit Committee audits the execution of duties by executive officers and directors, prepares audit reports, and determines the content of proposals regarding the election and dismissal of a financial auditor, and regarding refusal to reappoint a financial auditor to be 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 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.

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 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.

*1July 2023 through June 2024

In principle, compensation is paid with a combination of monthly compensation, director and executive officer bonuses, and stock compensation (RS Trust).

For performance-linked bonuses, and stock compensation (RS Trust), we have established a system in which the items shown in the table below are set as indicators (KPI) and reflected in the amount of compensation. The compensation system for directors and executive officers was reviewed in FY2024. For details, please see “Message from Chair of the Compensation Committee”.

*1The comparative index for TSR is the average relative TSR calculated using the rate of change of the TOPIX Industry (Banking) (inclusive of dividends) and the rate of change of the JPX Nikkei Index 400 (inclusive of dividends).

*2The three “ESG assessment organizations” are MSCI, FTSE and Sustainalytics.