As a trust bank group, the SuMi TRUST Group is proceeding to bolster 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 Group’s reason for existence (purpose) and identified issues of materiality, we also recognize that taking on the mission of solving social issues presents us with growth opportunities, which is why we have placed at the core of our management approach the notion that we must balance the creation of both social and economic value. As a foundation for every activity to be shared by all directors, officers, and employees of SuMi TRUST Group, the Board of Directors has established management principles (mission), an ideal model (vision), and codes of conduct (value).
- 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
Report Concerning Corporate Governance
Our Views on Corporate Governance
SuMi TRUST Holdings 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
Members of Committees
* Mr. Hideki Kanda is an external director of SuMi TRUST Bank.
Independence of Directors
SuMi TRUST Holdings has established nomination policies of external directors in the . 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 ""), and who is deemed unlikely to give rise to conflicts of interest with general shareholders of SuMi TRUST Holdings; (ii) A person who fully understands SuMi TRUST Holdings' management disciplines and the social responsibilities and roles of SuMi TRUST Holdings as a trust bank group, and who is able to oversee SuMi TRUST Holdings' management, and provide proper and appropriate opinions and advice. Furthermore, these seven external directors were appointed as independent officers as they satisfied 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 exective 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.
The Board of Directors at SuMi TRUST Holdings has appointed 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 the 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 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.
When deciding on director candidates, we nominate those that have considerable insight and extensive knowledge of corporate management, financial accounting, legal affairs, risk management, and compliance to address the Company’s priority issues (materiality), as well as an understanding of skills, sustainability, and so-called creative fields, such as IT and digital technology, unique to the trust business that can encourage the creation of new value. We endeavor to ensure that the makeup of the Board is suitable for appropriately overseeing the broad range of a trust bank group services, that each member can offer their astute opinions and advice, and that it is well balanced in terms of diversity.
- 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, 2021 through June 30, 2022. There were only two occasions on which one director was absent.
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, 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.
(1) Board deliberations and main topics of discussion
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.
In FY2021, the Board engaged in discussions about key topics from both offensive and defensive points of view with the aim of increasing corporate value and the amount of time it spent deliberating issues related to management strategies and monitoring, such as medium- to long-term management issues and strategies, increased from last year. Even though the Board discussions regarding risk management and governance topics decreased compared to last year, it continued to deliberate on the visualization of administrative processes and the development of risk maps in order to improve service quality, the source of a trust bank group’s strength. It also continued to discuss ways to further enhance the effectiveness of the internal control system and governance on a Group-wide basis. As such, the time spent discussing these topics was roughly the same as in FY2019 (23% for risk management and 15% for governance in FY2019).
Main topics discussed by the Board in FY2021
|Management strategies and monitoring||
|Relationships with stakeholders||
(2) Discussions of management themes
With a view to determining the Group’s basic management policy and medium- to long-term strategies, the Board of Directors selects and deliberates on management materiality issues and other management themes from a medium- to long-term point of view. The external directors of SuMi TRUST Bank also participate in deliberations on management themes as Board meeting observers, not for the purpose of reaching conclusions, but to enhance Board deliberations with their viewpoints and opinions through free and open discussion.
This fiscal year, the focus of discussions was on the Group’s business portfolio. Through dialogue between the Board and business execution departments, the circumstances surrounding the Group’s business portfolio were discussed by putting the state of the financial industry into perspective and examining the Group’s positioning in light of the market structure and competitive environment, the perspectives of non-financial resources, including the power of trusts, and the highly uncertain operating environment, including digitalization and increasingly complex social issues. These kinds of discussions mean we can identify strategic areas of focus by formulating an outlook for our business portfolio over the medium-to-long term to generate value for stakeholders by balancing the creation of both social and economic value.
Every year we perform 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.
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. As a trust bank group, the Conflicts of Interest Committee possesses supervisory functions unlike at any other financial group.
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.
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 responds to enquiries from the Board of Directors about the management team succession plan and the appointment and dismissal of executive officers, including the president, and then deliberates on such matters before reporting back to the Board. It also conducts the same for 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 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 reports on these matters.
The Audit Committee audits the execution of duties by exective 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 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.
Meetings of Board of Directors and Committees(July 2021 through June 2022)
*1July 2021 through June 2022
*2July 2022 through June 2023
*3For the Audit Committee, audit instructions from the Board of Directors
In order to achieve sustainable growth for the Group and enhance its corporate value, we have developed succession plans for the top management of SuMi TRUST Holdings and its major subsidiaries, 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. These plans set out the ideals and requirements for directors and executive officers and aid in the management and development of a suitable pool of candidates. More specifically, even though candidates for top management are selected every year, the Nominating Committee deliberates on their selection, including future development policies, with reference to such information as performance, track record, assessments, experience, and skills whilst taking the current and future operating environment into account. These factors are reflected in job placement and responsibilities the following fiscal year and also prove useful in the development of top management. Also, when actually selecting a successor to top management, the Nominating Committee thoroughly deliberates on the candidates and the selection process and reports the results to the Board of Directors.
The progress of succession plans and development plans are periodically reported to the Board based on the aforementioned deliberations of the Nominating Committee.
Compensation System for Directors and Executive Officers
- 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 nearterm 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.
- Neither internal nor external committee members participate in decisions regarding their own compensation.
In principle, compensation is paid with a combination of monthly compensation (comprising fixed compensation and individual performance compensation), bonuses for directors and executive officers (performance-linked bonuses), and stock compensation (share delivery trust).
A system has been introduced to derive total bonus (performance-linked) and stock-based remuneration (share delivery trust) for directors and officers by calculating achievement rates for the items listed below with reference to KPIs and then multiplying the rates against a predetermined base. Please note that the method for reflecting evaluations into stock-based remuneration is being reviewed in FY2022.
The main changes are as follows.
- The previous system of taking qualitative assessments of ESG as a component added on to the near-term earnings-linked performance evaluation into account has been changed to a system under which a 1:1:1 ratio for near-term earnings, medium-term financial metrics, and ESG is reflected in the performance evaluation for stock-based remuneration.
- The ESG assessment categories have been reviewed in light of materiality and now comprise the following five categories: climate change, fiduciary duties (FD) & client satisfaction (CS), employee engagement, D&I (empowerment of women, etc.), and ESG assessment organizations. We have therefore changed to a system in which the Compensation Committee determines an overall ESG score by quantitatively and qualitatively assessing these five categories and reflecting it in executive compensation.
New performance assessment system for stock-based remuneration
*MSCI, FTSE, and Sustainalytics
External Directors' Meetings
To further improve the effectiveness of corporate governance, external directors’ meetings*, which are attended exclusively by external directors, are held regularly.
These meetings, at which external directors engage in active and unrestrained discussions and share information and awareness from independent and objective positions, help foster a relationship of trust among the external directors and strengthen the supervisory function of the Board of Directors.
At the external directors’ meetings held in FY2021, taking the results of the Evaluation of the Board of Directors and other factors into account, the external directors discussed, among other matters, operational improvements and topics for future discussion at the Board of Directors meeting, and then offered recommendations to the executive.
*Voluntary meetings organized by the external directors and not prescribed in any of the Company’s regulations.
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 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)
(*)The amount of the deemed shares is the market value
Strategic shareholdings (Top 10)
Specified investment shares
|Mar. 23||Mar. 22|
|Number of shares||B/S amount (Yen bn)||Number of shares||B/S amount (Yen bn)|
|1||ORIENTAL LAND CO.,LTD.(*)||11,258,000||50.9||3,451,600||81.1|
|5||MINEBEA MITSUMI Inc.||15,413,900||38.7||15,413,900||41.5|
|6||Asahi Group Holdings,Ltd.||7,126,000||35.0||7,126,000||31.7|
|7||SUZUKI MOTOR CORPORATION||5,500,000||26.4||5,500,000||23.1|
|8||DAIWA HOUSE INDUSTRY CO.,LTD.||7,200,000||22.4||8,000,000||25.6|
|10||MITSUI & CO.,LTD.||4,694,800||19.3||4,694,800||15.6|
(*)The increase in the number of shares is due to a stock split.
The deemed shares
|Mar. 23||Mar. 22|
|Number of shares||Market Value (Yen bn)||Number of shares||Market Value (Yen bn)|
|1||YASKAWA Electric Corporation||7,439,900||42.9||7,439,900||35.8|
|3||Central Japan Railway Company||2,005,000||31.6||2,005,000||32.0|
|4||Nitori Holdings Co.,Ltd.||1,440,000||22.9||1,440,000||22.1|
|5||NIPPON STEEL CORPORATION||6,438,300||20.0||6,438,300||13.9|
|7||TOYOTA TSUSHO CORPORATION||2,128,000||11.9||2,128,000||10.7|
|8||Sumitomo Metal Mining Co.,Ltd.||2,200,000||11.1||2,500,000||15.4|
|10||Murata Manufacturing Co.,Ltd.||1,155,600||9.2||1,540,800||12.5|