Management

Corporate Governance

Basic Approach

SMM views corporate governance as a disciplinary framework both for maximizing the corporate value of the SMM Group and for ensuring sound management practices. As such, it is one of the most important management issues.
SMM has established the SMM Group Corporate Philosophy based on the Sumitomo 婷婷中文视频在线 Spirit. Through striving to enhance our corporate governance, we will conduct efficient and sound business activities, make positive contributions to society, and fulfill our responsibilities to our shareholders and all other stakeholders in order to realize the SMM Group Corporate Philosophy.

Formulating Corporate Governance Guidelines

SMM has established Corporate Governance Guidelines which cover our basic philosophy on corporate governance and our corporate governance framework, including our relationship with stakeholders.

Corporate Governance Framework

In line with its Corporate Governance Guidelines, which summarize the Company鈥檚 basic philosophy for corporate governance and the framework therefore, the Company believes that its governance is a system that ensures that business execution and the associated monitoring and supervision are each functioning fully by using audit and supervisory board and executive officer systems with which to conduct governance through a three-part organizational structure in which decision-making and supervision are addressed by the Board of Directors, business execution by the president and the executive officers, and auditing by the Audit & Supervisory Board members and the independent public accountant.

  • As of June 30, 2023

Initiatives to Strengthen Governance

SMM positions corporate governance as one of the most important issues in our management, and is taking steps to strengthen governance. We continue to constantly review, improve, and deepen the current state of our corporate governance in light of legal revisions and social circumstances in order to achieve even better corporate governance.

Transitions in Governance at SMM

  • The Number of members of the Board of Directors and Audit & Supervisory Board are after the General Meeting of Shareholders.

What the Board of Directors should ideally be

Positioning Mineral Resources, Smelting & Refining, and Materials as its three core businesses, SMM aims to realize its Long-Term Vision of becoming a 鈥淲orld Leader in the Non- Ferrous Metals Industry.鈥 Since all three businesses are related to non-ferrous metals, they have a mutual organic relationship and their business contents and scale are such that the Board of Directors can make decisions itself regarding diverse management issues. Furthermore, from the viewpoint of the stronger coordination currently being promoted among the three businesses, it will further stimulate the Company鈥檚 growth if the Board of Directors itself comprehensively makes decisions rather than giving strong independence to each business segment and permitting them to make their own decisions. To this end, we consider that in principle a management model is appropriate for the Company鈥檚 governance, rather than a monitoring model that oversees overall business execution after the fact.
Furthermore, in view of the distinctive characteristics of the SMM Group鈥檚 business operations, it is important to strengthen the management infrastructure (particularly regarding compliance, safety, and the environment) and therefore necessary to establish a system whereby Audit & Supervisory Board members can point out issues to directors and executive officers without hesitation. From this viewpoint, we have adopted an organizational structure of a company with an Audit & Supervisory Board in which Audit & Supervisory Board members with guaranteed independent authority can be expected to exercise their auditing functions stably over a period of four years. At present, Audit & Supervisory Board members do not have the right of convocation regarding decisions of the Board of Directors or the right to vote on the Board of Directors. The resulting inability of Audit & Supervisory Board members to propose the removal of a director to the Board of Directors is an issue for companies with an Audit & Supervisory Board. We are striving to overcome this issue by appointing multiple outside directors (at least one-third of members), have them become members of the Governance Committee, and deal with the appointment and dismissal of directors and executive officers in the Governance Committee.

Decision-Making and Supervisory System

Directors and the Board of Directors

8 directors
(3 outside directors)

Chairman: Yoshiaki Nakazato (Chairman of the Board without representation)
Term of office: 1 year
Meetings held in FY2022: 17

As of June 30, 2023

The Board of Directors has a diverse composition by including both members from within the Company who are thoroughly familiar with each area of the Company鈥檚 business as well as outside experts with knowledge, experience, ability, insight and other attributes different from that of the members from within the Company and who can supervise management on behalf of shareholders and other stakeholders.
Furthermore, striving for greater managerial transparency, the Company has a policy of appointing at least one-third of its directors as independent outside directors, and of the eight directors, three, including one with management experience, have been appointed as independent outside directors.
Among the Company鈥檚 directors, there are four directors who are also executive officers. Conflicts of interest are addressed in accordance with Japanese law. There are no controlling shareholders.

Main Agenda Items at Board Meetings

  • Related to existing and new projects in each business
  • Borrowings and other financing
  • Establishment or revision of important rules and regulations, including policies on human rights, DX, etc.
  • Cross-shareholdings held
  • Dialogue with institutional investors
  • Planning and results of auditing by Audit & Supervisory Board members and internal auditing

Other reports on the progress of sustainability activities are made at least twice a year. In addition, the status of use of the Whistle-blowing System (Speak Up System) and the status of responses are regularly reported. Also, complaints received by the Japan Center for Engagement and Remedy on 婷婷中文视频在线 and Human Rights (JaCER), a contact point for receiving complaints from suppliers and other external parties, are also subject to reporting as a grievance (remedy) mechanism.
While any matters of critical concern that arise are required to be reported to the Board of Directors, there were no matters of critical concern reported in FY2022.
In stakeholder engagement conducted by the Board of Directors, authority is delegated to business divisions for customers and suppliers, to the Human Resources Department for employees, and to the Public Relations & Investor Relations Department for shareholders and investors.
The status of dialogue with investors is reported once a year.

Governance Committee

4 Governance Committee members
(3 outside directors)

Chair: Taeko Ishii (Outside Director)
Meetings held in FY2022: 5 (2 nomination meetings, 2 remuneration meetings, 1 general governance meeting)

As of June 30, 2023

The Governance Committee is composed of one member who is the chairman of the Board of Directors, who is not an executive officer, and three independent outside directors. It was established to provide the president with advice from an objective standpoint with regard to particularly important matters relating to corporate governance, including the nomination and remuneration of directors, executive officers, and others.

Role and function of outside directors

Outside directors are expected to perform two functions: an advisory function and a monitoring function.
Regarding the advisory function, in order for the SMM Group to achieve sustainable growth and increase its corporate value over the medium to long term, outside directors are expected to enhance the quality of decision-making by the Board of Directors by providing advice and making decisions based on their experience and other factors, without being bound by the Company鈥檚 conventional way of thinking or frameworks.
Regarding the monitoring function, outside directors are expected to serve a check function on management from an independent and objective standpoint via the Board of Directors, as well as to supervise management on behalf of shareholders and other stakeholders by providing advice during decision-making on director nomination, remuneration, and other relevant matters as members of the Governance Committee.

Auditing System

Audit & Supervisory Board

4 Audit & Supervisory Board members
(2 out-side Audit & Supervisory Board members)

Chairman: Koji Imai (Standing Audit & Supervisory Board member)
Meetings held in FY2022: 18

The Audit & Supervisory Board has four members (two standing Audit & Supervisory Board members and two outside Audit & Supervisory Board members). Standing Audit & Supervisory Board members belonging to the Company gather in-house information in an accurate and timely manner, and audit operations appropriately based on this information, while independent outside Audit & Supervisory Board members conduct audits in a manner that takes advantage of knowledge of their respective specialist fields and diverse perspectives.
In order to ensure managerial soundness and increase the corporate value of the Company, and in accordance with the audit policies, audit plans, and other such matters prescribed by the Audit & Supervisory Board, each Audit & Supervisory Board member will attend meetings of the Board of Directors and other important meetings, receive reports from directors, executive officers, and employees regarding the status of the performance of their duties, and, through on-site inspection activities at domestic and overseas business sites, confirm the status of business execution, inherent issues, and the establishment and operation of internal control systems. In addition, information collected by the standing Audit & Supervisory Board members through inspection of important approval and other such documents and reports from related departments is shared with the outside Audit & Supervisory Board members and discussed among all Audit & Supervisory Board members.

Main Agenda Items at Audit & Supervisory Board Meetings

  • Audit plan of the Audit & Supervisory Board members (monthly and annually)
  • Results of the audit of the Audit & Supervisory Board members (monthly and annually)
  • Confirmation of each agenda item of the Board of Directors meeting
  • Information on the business environment
  • Audit report of the Audit & Supervisory Board
  • Results of the evaluation of the effectiveness of the Audit & Supervisory Board

Role and function of outside Audit & Supervisory Board members

In order for the Company to achieve sound management and increase its corporate value over the medium to long term, outside Audit & Supervisory Board members are expected to conduct effective audits based on their knowledge and experience in specialized fields, including finance, accounting, and legal matters, while maintaining sufficient coordination with Standing Audit & Supervisory Board members belonging to the Company.
In addition, as part of the audit process, outside Audit & Supervisory Board members are expected to participate in key meetings, including Board of Directors meetings, and to actively express their forthright opinions from an independent and objective standpoint during the decision-making process, including not only the legality but also the appropriateness of proposals.

Collaboration among the Internal Audit Department, Independent Public Accountant, and Audit & Supervisory Board Members

The Internal Audit Department regularly undertakes internal audits on the status of business execution across the SMM Group.
The Department provides an explanation of its audit plans to Audit & Supervisory Board members and the Audit & Supervisory Board while passing on all relevant information. At the same time, Audit & Supervisory Board members provide details of audit plans determined at meetings of the Audit & Supervisory Board to the Internal Audit Department, accompany staff of the Internal Audit Department as required when conducting internal audits, and attend meetings when reports on the results of internal audits are delivered to executive officers and the heads of operational divisions. In FY2022, Audit & Supervisory Board members attended such meetings 19 times. KPMG AZSA LLC, an independent registered public accounting firm, audits the consolidated financial statements and the effectiveness of the internal control over financial reporting. Audit & Supervisory Board members provide details of audit plans to the independent public accountant. Audit & Supervisory Board members in turn receive explanations regarding audit plans and reports on audit results and reports reviewing each quarter from the independent public accountant. In this manner, close collaboration is maintained between the independent public accountant and Audit & Supervisory Board members.

Standard for Independence

All the Company鈥檚 outside directors and outside Audit & Supervisory Board members have been declared as independent officers, pledging that there is no conflict of interest with that of shareholders. We also publish our standards governing the independence of outside officers on the Company website.

Outside Directors / Audit & Supervisory Board Members鈥 Liaison Committee

In FY2022, liaison meetings were held in May and December. Given reports on most recent internal audit results by the internal audit department and the overview of department heads鈥 hearing results from the Audit & Supervisory Board members鈥 on-site audits, a wide range of opinions were exchanged.

Procedures in the Nomination of Director Candidates, Appointment or Dismissal of Senior Management, and Nomination of Audit & Supervisory Board Member Candidates

With regard to the nomination of candidates for the Board of Directors, the President comprehensively considers the knowledge, experience, ability, insight and other attributes of the candidates with respect to the best lineup for resolving current and future management issues for the sustainable development of the Company (including the positive and negative impacts on the economy, environment, and people, including human rights), and proposes suitable candidates to the Board of Directors. The Governance Committee, which consists of the Chairman of the Board of Directors who is not an executive officer and the independent outside directors who supervise the management team on behalf of shareholders and other stakeholders, will provide the President with advice. The Board of Directors makes the final decision after due deliberation.
With regard to the selection of executive officer candidates, the President, based on the recommendations of the executive officers, comprehensively considers the knowledge, experience, ability, insight and other attributes of the candidates, and determines candidates through the same procedure used to nominate directors.
The Governance Committee has opportunities to deliberate on the environment and methods for fostering the next president as well as concerning the candidates, etc. In the event that an executive officer has rendered him or herself markedly ineligible, for example by having acted unlawfully, improperly, or disloyally, and a dismissal recommendation is made to the Board of Directors after the Governance Committee gives advice on the matter, the individual concerned may be dismissed by resolution of the Board of Directors.
With regard to the nomination of Audit & Supervisory Board member candidates, the policy is for the President to comprehensively consider the qualifications, knowledge (including that of finance, accounting, and law), experience, abilities, and insight of the candidates and, after obtaining the prior approval of the Audit & Supervisory Board, to propose the qualified candidates to the Board of Directors, which will then determine the nominations.
Reasons for the nomination of Director (including directors who are executive officers) candidates and Audit & Supervisory Board Member candidates will be stated in the reference materials of the General Meeting of Shareholders.

The Board鈥檚 Engagement in Succession Planning for the CEO and Other Top Executives

The succession planning for holders of the office of chief executive officer (president and director) is conducted and executed appropriately on the basis of our corporate philosophy and business plans. With regard to the candidate for the successor to the president, the Governance Committee (Chair: Taeko Ishii, Director), composed of the chairman of the Board of Directors who is not an executive officer and three independent outside directors, has opportunities to deliberate on the environment and methods for fostering the next president as well as concerning the candidates, etc.
Regarding the specific procedure for selecting the successor to the president, after consulting with the Governance Committee about the candidate recommended by the president and receiving advice on whether the candidate has the qualifications, knowledge, experience, abilities, and insight worthy of a president and director, the president makes the final proposal to the Board of Directors, which makes the final decision after due deliberation.
With regard to the selection of the candidate executive officers who will constitute the pool of candidates for future president, the president, based on recommendations from the executive officers, consults with the Governance Committee regarding the best lineup to resolve the issues management faces, formulates the final proposal with reference to that advice, and submits the proposal to the Board of Directors. The Board of Directors then makes the final decision after due deliberation.

View on the Balance between Knowledge, Experience, and Skills of the Board as a whole, and Also on Diversity and Appropriate Board Size

The Board of Directors will achieve a diverse composition by including both members from within the Company who are thoroughly familiar with each area of the Company鈥檚 business as well as outside experts with knowledge, experience, ability, insight and other attributes different from that of the members from within the Company. Based on 鈥渨hat the Board of Directors should ideally be,鈥 as stated in 鈥淩easons for selection of present corporate governance system,鈥 the skill matrix for the Company鈥檚 directors and Audit & Supervisory Board members was created and is shown below. Each skill item has been selected through discussions by the Board of Directors, focusing on those required to realize the Company鈥檚 longterm vision and Vision for 2030. As the knowledge, experience, ability, insight, and other attributes required of the Company鈥檚 Board of Directors may change in response to changes in management strategies and the external environment, the Board of Directors will continue to discuss the necessary knowledge, experience, ability, insight, and other attributes, and update the skills matrix as necessary. The size of the Board of Directors will be appropriate to conducting active discussions and ensuring the briskness of the Board. One-third or more of the Directors will be independent outside directors in order to strive for greater managerial transparency.

Skills Matrix for Board of Directors

  • Fields in which Directors and Audit & Supervisory Board Members believe that they can make a particular contribution to the effectiveness of the Board of Directors are indicated with a 鈥溾棌鈥.

Furthermore, the Company has established the guidelines for fulfillment. For the details, please refer to the Corporate Governance Report.

Outside Directors and Outside Audit & Supervisory Board Members

Attendance (FY2022) Functions and Roles in Corporate Governance
Taeko Ishii
Outside Director
Board of Directors meetings
17/17 (100%)
Ms. Taeko Ishii has specialist knowledge and abundant experience as a lawyer, especially in the field of labor law. Ms. Taeko Ishii participates in the Board decision-making, providing her advice regarding compliance and personnel/labor related fields, which is aimed toward the sustainable growth and medium- to long-term enhancement of the corporate value of the Group by utilizing her knowledge and experience. She also performs a check function on management by participating in decision-making at the Board of Directors from an independent and objective standpoint, and to oversee the management on behalf of shareholders and other stakeholders by being involved in decision-making regarding nominations and remunerations of directors and executive officers as a member of the Governance Committee. Accordingly, she realizes the further improvement of quality of the decision-making by the Board of Directors and the enhancement of the monitoring function.
Manabu Kinoshita
Outside Director
Board of Directors meetings
17/17 (100%)
Mr. Manabu Kinoshita has a wealth of knowledge and experience in corporate management and digital business. He participates in the Board decision-making, providing his advice regarding material business and digital fields where the business environment is changing significantly, which is aimed toward the sustainable growth and medium- to long-term enhancement of the corporate value of the Group by utilizing his knowledge and experience. He also performs a check function on management by participating in decision- making at the Board of Directors from an independent and objective standpoint, and to oversee the management on behalf of shareholders and other stakeholders by being involved in decision-making regarding nominations and remunerations of directors and executive officers as a member of the Governance Committee. Accordingly, he realizes the further improvement of quality of the decision-making by the Board of Directors and the enhancement of the monitoring function.
Kanji Nishiura
Outside Director
Board of Directors meetings
Mr. Kanji Nishiura has abundant knowledge and experience in corporate management, non-ferrous metal business, and various other businesses. Mr. Kanji Nishiura is expected to participate in the Board decision-making, providing his advice particularly on long-term projects and comprehensive plans aimed toward the sustainable growth and medium- to long-term enhancement of the corporate value of the Group by utilizing his knowledge and experience. He is also expected to perform a check function on management by participating in decision-making at the Board of Directors from an independent and objective standpoint, and to oversee the management on behalf of shareholders and other stakeholders by being involved in decision-making regarding nominations and remunerations of directors and executive officers as a member of the Governance Committee. Accordingly, the Company expects that he will realize the further improvement of quality of the decision-making by the Board of Directors and the enhancement of the monitoring function, and has appointed him as Outside Director.
Wataru Yoshida
Outside Audit & Supervisory Board Member
Board of Directors meetings
17/17 (100%)
Audit & Supervisory Board meetings
18/18 (100%)
Mr. Wataru Yoshida has a wealth of financial institutional experience and knowledge of corporate management. He carries out effective audits, especially regarding finance and overseas projects, based on his own knowledge and experience in order to ensure the soundness of the Group鈥檚 management and improve its corporate value over the medium to long term, while fully coordinating with the standing Audit & Supervisory Board members. In addition, as part of the audit process, he participates in important meetings, including Board of Directors meetings, and during the decision-making process actively expresses his frank opinions from an independent and objective standpoint, including not only the legality but also the appropriateness of proposals.
Shoji Wakamatsu
Outside Audit & Supervisory Board Member
Board of Directors meetings
16/17 (94%)
Audit & Supervisory Board meetings
18/18 (100%)
Mr. Shoji Wakamatsu has many years of auditing and management experience at an audit firm and a wealth of knowledge about accounting. He carries out effective audits, especially regarding accounting, based on his own knowledge and experience in order to ensure the soundness of the Group鈥檚 management and improve its corporate value over the medium to long term, while fully coordinating with standing Audit & Supervisory Board members. In addition, as part of the audit process, he participates in important meetings, including Board of Directors meetings, and during the decision-making process actively expresses his frank opinions from an independent and objective standpoint, including not only the legality but also the appropriateness of proposals.
  • The concurrent occupations of outside directors and outside Audit & Supervisory Board members (as of March 31, 2023) are listed in the Document of Matters Subject to Measures for Electronic Provision Regarding the 98th Ordinary General Meeting of Shareholders.

Training Policy for Directors and Audit and Supervisory Board Members

The training of directors and Audit & Supervisory Board members is based on the self-improvement of each individual, and therefore the Company contributes to self-improvement by providing opportunities for training either directly or as an intermediary, and provides support for the costs thereof.
Specifically, the Company will provide training on the legal liabilities of officers, compliance, and legal knowledge for newly appointed directors, Audit & Supervisory Board members, and executive officers when assuming office. The Company will provide various kinds of internal training for directors, Audit & Supervisory Board members, executive officers, and others and endeavor to obtain timely and appropriate information through lectures by lawyers and other external experts and through other such means. Additionally, the Company will provide information on other training opportunities such as external seminars.
Including the above, the Company will bear the entire amount of any expenses necessary for director, Audit & Supervisory Board member, and executive officer training.

Basic Policy and Procedures for Remuneration of Directors

Basic Policy

Remuneration for directors of SMM is linked to the business performance of the Company, and designed to motivate directors to achieve medium- to long-term goals, based on the business structure of the Company, so that it functions as a sufficient incentive to contribute to sustainable growth, increase the corporate value of the Group over the medium to long term, and to strengthen and maintain the management base. When determining the remuneration of individual directors, the amount of remuneration is calculated using a predetermined formula in order to ensure fairness, and the Company maintains a basic policy of setting remuneration at an appropriate level based on the responsibilities of each director.
Specifically, the remuneration for directors (excluding the Chairman and outside directors) shall consist of basic remuneration and bonuses. Basic remuneration shall consist of fixed remuneration (remuneration which is neither performance- based nor non-monetary) and performance-based remuneration, etc., while bonuses shall be performance-based remuneration, etc. The Chairman and outside directors shall receive only fixed remuneration and no bonuses.
Basic remuneration is calculated on an annual basis for each individual and paid each month in monthly installments, while bonuses are paid once annually after approval is obtained at the Ordinary General Meeting of Shareholders.
Details are provided in the Corporate Governance Report.

Matters Related to Performance-based Remuneration

The indicators employed by the Company to determine performance- based remuneration include consolidated results (profit attributable to owners of the parent, profit before tax), departmental results (return on capital employed [ROCE], free cash flow, and segment income), the degree of attainment of personal targets under medium- to long-term management strategies, and safety record (number of industrial accidents).

Reason for Selection of Above Indicators

  • Consolidated results (profit attributable to owners of the parent, profit before tax)
    Because these indicators are key measures of the Company鈥檚 corporate management performance, and are the profitability targets that it aims to achieve as part of its long-term vision.
  • Departmental results
    The three absolute values of efficiency, cash flow, and profit were selected in order to evaluate performance in a balanced manner.
  • Degree of attainment of personal targets under medium- to long-term management strategies*
    Because the steady implementation of plans with a mediumto long-term perspective is essential in order to increase our corporate value in a sustainable manner.
  • Safety record
    Because we believe that securing a safe workplace is our operating foundation.
  • Growth strategies, measures to strengthen competitiveness, measures to improve sustainability, etc., set forth in the 2021 3-Year 婷婷中文视频在线 Plan

Method of Determining Amount of Performancebased Remuneration, etc.

The amount of performance-based remuneration, etc. is calculated by adding an amount reflecting individual performance to an amount of position-specific performance-based remuneration, etc. Moreover, there are no sign-on bonuses or recruitment incentive payments, termination payments, clawback systems, or retirement benefits.
The details of each calculation method are provided in 鈥淢atters related to performance-based remunerations, etc.鈥 of the Document of Matters Subject to Measures for Electronic Provision Regarding the 98th Ordinary General Meeting of Shareholders.

Annual Total Compensation Ratios (FY2022)

Ratio of the average annual total compensation for the organization鈥檚 highly-paid individuals to the total compensation for all employees1 1,039%
Ratio of the percentage increase in average annual total compensation for the organization鈥檚 highly-paid individuals to that for all employees2 71%
  • 1.Average annual total compensation for the organization鈥檚 highly-paid individuals is calculated as annual total compensation for internal directors (plus the employee salaries of any directors concurrently serving as employees) divided by the number of internal directors.
    This ratio is calculated as average annual total compensation for the organization鈥檚 highly-paid individuals divided by the median annual total compensation for all employees x 100.
  • 2.Ratio of the percentage increase is calculated as the percentage increase in average annual total compensation for the organization鈥檚 highly-paid individuals divided by the percentage increase of the median annual total compensation of all employees x 100.

Management Remuneration as an Incentive

The Company鈥檚 financial results are significantly impacted by prevailing metal market conditions and exchange rates, and thus do not necessarily correspond with the progress of management strategies and projects. Furthermore, projects related to resource development and the construction of smelting and refining plants require extremely long time periods from start to completion, and it is not unusual for the composition of management to have changed by the time the fruits of those projects can be reaped.
Given these characteristics of its business, the Company has considered how remuneration should operate as a healthy incentive for individual directors and managers and has consequently laid down its current remuneration system composed of performance-based remuneration and bonuses based on consolidated financial results and assessment factors such as the degree of attainment of personal targets under medium- to long-term management strategies. At present, we do not believe that remuneration in the form of Company stock would effectively operate as a healthy incentive for management, and thus have not introduced it.

Details of Procedures for Determining the Amount of Audit & Supervisory Board Member Remuneration

The amount of basic remuneration for each individual Audit & Supervisory Board member will be determined by consultation among the Audit & Supervisory Board members at the Audit & Supervisory Board within the total remuneration amount approved by the General Meeting of Shareholders.

Total Amount of Remuneration, etc. Paid to Directors and Audit & Supervisory Board Members

FY2022 Director and Audit & Supervisory Board Member Remuneration

Officer Classification Total Remuneration Total amount of remuneration, etc. by remuneration type Number of Officers
Fixed remuneration Performance-based remuneration, etc. Non-monetary remuneration, etc.
Directors (excluding outside directors) 楼405 million 楼245 million 楼160 million 5
Audit & Supervisory Board members (excluding outside Audit & Supervisory Board members) 楼68 million 楼68 million - - 3
Outside directors 楼43 million 楼43 million - - 3
Outside Audit & Supervisory Board members 楼24 million 楼24 million - - 2
  • Directors whose total consolidated remuneration, etc. is 楼100 million or more are disclosed individually in the Company鈥檚 Annual Securities Report.

Analysis and Evaluation of the Effectiveness of the Board as a whole, and the Results

The Board of Directors analyzes and evaluates the effectiveness of its performance from the perspective of appropriate decision-making for business execution and enhancing monitoring functions. The following is a summary of the results of the analysis and evaluation of the effectiveness of the Board of Directors in FY2022.

Analysis and evaluation process

The Board of Directors prepares and conducts a questionnaire to directors and Audit & Supervisory Board members with the assistance of an external evaluator (law firm). The Board of Directors outsources the compilation of responses and related analysis to the external evaluator. Based upon the results of the questionnaire, the evaluation by the external evaluator, and the confirmation of what the Board of Directors should ideally be (aim to achieve a Board of Directors focused on decision-making function) conducted in FY2016, the Board of Directors reviewed its own effectiveness at a regular Board of Directors meeting held in February 2023, where it confirmed its evaluation and discussed its response going forward.

Overview of analysis and evaluation results

1) Response to questionnaire and results of analysis and evaluation of the external evaluator

  1. Most of the main items related to the effectiveness of the Board of Directors received a high overall rating, and the Board of Directors can be evaluated as generally functioning effectively.
  2. In the open-ended response section of the questionnaire, many positive opinions were expressed about the current system and operation, and many matters are pointed out as opinions to improve the current situation.
  3. It is desirable to continue to discuss how the Board of Directors should deliberate strategies and visions. Additionally, the matters pointed out in the past fiscal years (such as securing human resources) should be continuously discussed about how to make further improvements toward implementation.

2) Deliberations at the Board of Directors meeting
In response to the external evaluator鈥檚 advice, the Board of Directors conducted deliberations on each of the following matters.

  1. With respect to deliberations at Board of Directors meetings, some responses suggest that the meetings should further extend discussions of business strategy, management issues, sustainability, etc. In response to this, the Board confirmed that the following would be carried out:
    a.Continuously ensure that the agenda includes business strategy and management issues.
    b. Extend opportunities to discuss sustainability in addition to semiannual reports from the Sustainability Committee.
  2. With respect to initiatives related to the matters pointed out in the past fiscal years (in particular, securing human resources, etc.), the Board of Directors confirmed that they would deliberate them based on the measures of the executive side.
  3. The Board of Directors confirmed other matters, such as extending information that facilitates deliberations of the agenda and providing the Board of Directors with more effective feedback concerning opinions on capital markets.

Future steps

The Board of Directors confirmed that steps will be taken with regard to the above matters in order to improve its effectiveness in an ongoing manner.

Analysis and Evaluation of the Effectiveness of Auditing by Audit & Supervisory Board Members and the Audit & Supervisory Board, and the Results

Purpose, etc. of the Evaluation of the Effectiveness of the Audit & Supervisory Board

In order to ensure managerial soundness and increase the corporate value of the Group, the Audit & Supervisory Board members audit the execution of duties by directors and executive officers in accordance with the audit policies, audit plans, and other such matters prescribed by the Audit & Supervisory Board. Through this evaluation of effectiveness, the Audit & Supervisory Board reviews its own audits and activities, examines issues to be improved and measures to be taken, and reflects them in the next year鈥檚 audit plan and daily audit activities, thereby establishing a PDCA cycle.

Evaluation process

In order to carry out the evaluation from an independent and objective standpoint, we requested advice on analysis and evaluation from Misono Sogo Advisory LLC, an outside professional organization. Based on the results, the Audit & Supervisory Board discussed the matter and conducted the evaluation. The specific evaluation process included a questionnaire of all Audit & Supervisory Board members, interviews with the chairperson of the Audit & Supervisory Board (Senior Standing Audit & Supervisory Board member) and with the administrative office of the Audit & Supervisory Board by an outside professional, and discussions with participation by all Audit & Supervisory Board members (four times in total).

Overview of evaluation results

The Audit & Supervisory Board confirmed the following points and evaluated that the audits and activities of the Audit & Supervisory Board members were functioning well and sufficiently effective.

  • Through their attendance at Board of Directors meetings, discussions among Audit & Supervisory Board members, and auditing activities by Audit & Supervisory Board members, the Audit & Supervisory Board members have conducted audits based on a perspective of appropriateness and made necessary representations of their opinions.
  • The Audit & Supervisory Board members, including outside Audit & Supervisory Board members, have attended Management Committee meetings, Sustainability Committee meetings, Internal Control Committee meetings, and other important meetings, and checked the status of business execution by directors, etc. and whether the internal control system is properly maintained and operated. They have also actively expressed their opinions based on their insight and experience.
  • The Audit & Supervisory Board members have regularly conducted interviews with executives, including representative directors, have established an atmosphere where they can openly exchange opinions, and have made recommendations as necessary.
  • On-site audits at domestic and foreign sites, including offices, mines, plants, and affiliated companies, are conducted by a Standing Audit & Supervisory Board member and an Outside Audit & Supervisory Board member as a pair (24 sites were visited in FY2022). Through these site visits, Audit & Supervisory Board members have checked with their own eyes the business execution status, specific issues, and how the internal control system is maintained and operated, and provided advice as necessary.
  • At meetings of the Audit & Supervisory Board, the Standing Audit & Supervisory Board members have shared information they collected through inspection of important approval and other such documents and reports from relevant divisions, as well as the results of their audit activities, with Outside Audit & Supervisory Board members, and have held discussions.
  • Outside Audit & Supervisory Board members spend enough time and effort to fulfill their duties adequately, including on-site audits.
  • Audit & Supervisory Board members share information and exchange opinions with Outside Directors at meetings or in other ways.

Future steps

Through discussion among all members, the Audit & Supervisory Board defined the roles of the Company鈥檚 Audit & Supervisory Board as follows: Monitor and restrain the management, have a strong sense of involvement in corporate management under the condition that they are non-executive, and provide the management with objective opinions as Audit & Supervisory Board members based on their professional insights and experience.
For Audit & Supervisory Board members to fulfill these roles, it is necessary to have initiatives whereby they understand the corporate management from an objective perspective and respond promptly and flexibly in light of internal and external changes. Therefore, the Audit & Supervisory Board confirmed that as matters to be focused on this fiscal year the following actions will be taken.

  • Regular reflection by the Audit & Supervisory Board to maintain an objective perspective on management and fulfill their role as Audit & Supervisory Board members
  • Further enhancement of on-site audit activities by improving information sharing by full-time Audit & Supervisory Board members to outside Audit & Supervisory Board members in advance of on-site audits, etc.
  • Strengthening communication with departments by clarifying our awareness of issues (topics) identified through day-today Audit & Supervisory Board member activities (considering topics such as the Company鈥檚 function of corporate planning)
  • Updating information and knowledge about corporate management and other important topics, including providing training by external instructors.

In addition to the above, we have confirmed that we will continue to examine specific issues identified in the process of evaluating the effectiveness, and strive for improvement. By further improving the effectiveness of audit activities, the Audit & Supervisory Board and its members are striving to contribute to strengthening the management infrastructure and improving the corporate value of the Group.

婷婷中文视频在线 Execution Structures and System

Management Committee

The membership of the Management Committee includes the president, senior managing executive officers, and other related executive officers, and its meetings may also be attended by the chairman of the Board of Directors, outside directors, and Audit & Supervisory Board members.
The Management Committee deliberates on important matters requiring careful consideration from a wide range of perspectives prior to their submission for the Board of Directors resolutions or approval by the president, deciding whether or not matters should be submitted to the Board of Directors, and assisting the president鈥檚 decision-making.
When making investments or equity contributions, we use a project risk check sheet for committees, primarily the Management Committee, to carry out deliberations regarding human rights issues such as discrimination, forced labor, and child labor, and also the political system, economy, law and order, locally-specific diseases, labor issues, religious restrictions, and the impact on the local community. In FY2022, one new investment agreement was proposed to the Management Committee, which conducted screening for human rights issues and confirmed the investment to be unproblematic. We will continue to carry out regular monitoring in the future. No projects were withdrawn.

Sustainability Committee and Internal Control Committee

The Company has systemized its social and environment initiatives as sustainability promotion activities and is expanding them throughout the Group. In order to promote these activities, the Sustainability Committee (headed by the president) has been established. 7 Sustainability Subcommittees and four Management System Working Groups have also been established under the Sustainability Committee, and the Company has also established the Corporate Value Enhancement Strategic Committee, Digital Transformation Committee, and Carbon Neutrality Committee.

Cross-Shareholdings

When advancing our business strategy, the Company may engage in strategic shareholdings with business partners or other companies if it is judged that doing so will contribute to strengthening our business base over the medium to long term. With regard to existing cross-shareholdings, the Board of Directors verifies aspects such as the objectives of holdings and whether the benefits therefrom cover the Company鈥檚 cost of capital every year. As a result of this verification, with regard to shares whose holding is judged to have little significance, including shares considered no longer worth the cost of capital and shares judged to have become less relevant due to recent business changes, we will proceed with concrete consideration based on the premise of reduction. Furthermore, in cases where a company cross-holding the Company鈥檚 shares expresses a desire to sell, we will not prevent such a sale, etc. by suggesting a reduction in the size of the transaction, or by other means.
With regard to the exercise of voting rights in cross-shareholdings, the Company determines whether to vote for or against each proposal after giving comprehensive consideration, based on the financial results and other aspects of the financial condition of each of the issuing companies, to matters such as whether each proposal will contribute to increasing the corporate value of, or enhancing shareholders鈥 interests in, that company over the medium to long term, and what impact it will have on the Company鈥檚 corporate value or shareholders鈥 interests. In order to determine whether to approve or reject proposals, the Company will engage in dialogue with the issuing company regarding the contents of each proposal, etc., as necessary. Decisions on voting are made particularly cautiously in circumstances such as cases of companies affected by major scandals or by persistent losses.

Number of Issues Reduced (stocks other than unlisted stocks)

FY2018 FY2019 FY2020 FY2021 FY2022
Whole sale 0 4 3 2 5
Partial sale 0 1 1 3 3

Relationship with PT Vale Indonesia Tbk

SMM owns 15% of the stock of PT Vale Indonesia Tbk (PTVI), a company in the Republic of Indonesia, and has entered a shareholder鈥檚 agreement with Vale Canada Limited and PT Indonesia Asahan Aluminium (Persero), a state-owned Indonesian company, to jointly manage the company. In addition, we have also signed an agreement with these two companies and PTVI, which gives us the right and obligation to purchase production from these four companies. Due to this, SMM has the right and obligation to purchase 20% of the agreed annual production from PTVI鈥檚 Sorowako mine.
One of the conditions for obtaining the mining business license required for PTVI to continue operations after 2025 was to increase the Indonesian equity stake in the company. In FY2020, SMM sold a portion of its PTVI shares and excluded PTVI from its equity-method affiliates.

Investment shares held for purposes other than pure investment (stocks other than those unlisted stocks, including deemed holdings鈥)

  • For FY2020, the number of issues held increased by one due to the exclusion of PTVI from the equity-method affiliates.