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.

Overview of Corporate Governance Framework (As of June 26, 2024)

Institutional design Company with an Audit & Supervisory Board
Number of Directors/Term of office 8/1 year
Number of directors who are independent outside directors 3
Chairman of the Board of Directors Akira Nozaki
Engagement by outside directors in the selection of director candidates Yes
Engagement by outside directors in the determination of remuneration Yes
Independent Public Accountant KPMG AZSA LLC

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. Measures to reinforce the Company鈥檚 governance include the appointment of outside directors since 2007, the establishment of the Governance Committee, which is an optional body, implementation of evaluations of the effectiveness of the Board of Directors, and various other improvements.

Transitions in Governance at SMM

  • The Number of members are after the General Meeting of Shareholders.鈥

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 the execution of management 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.鈥

Percentage of Outside Directors on the Board of Directors

Percentage of Outside Directors in the Governance Committee

Percentage of Female Directors

Percentage of Outside Officers (Directors and Audit & Supervisory Board Members)

Breakdown of Years in Office of Directors

(As of June 26, 2024)

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 system* 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.

  • Independent authority system: Audit & Supervisory Board Members can independently exercise their authority including investigative authority, injunctive authority, and so on.鈥

Decision-Making and Supervisory System

Directors and the Board of Directors

8 directors
(3 outside directors)

Chairman: Akira Nozaki (Chairman of the Board who is not an executive officer)
Term of office: 1 year
Meetings held in FY2023: 16

As of June 26, 2024鈥

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

  • Matters relating to existing and new projects in each business (resolution)鈥
  • Borrowings and other financing (resolution)鈥
  • Establishment or revision of important rules and regulations, including water policy (resolution)鈥
  • Cross-shareholdings (reporting)鈥
  • Dialogue with institutional investors (reporting)鈥
  • Planning and results of auditing by Audit & Supervisory Board members and internal auditing (reporting)鈥
  • Personnel system-related matters, etc. (reporting)鈥
  • Sustainability issues (discussion)鈥
  • Responses for achieving management with an awareness of capital costs and stock prices (discussion)鈥

Other reports on the progress of sustainability activities are made at least twice a year and opinions on sustainability are exchanged once a year. In FY2023, the exchange of opinions was held on the details of progress and issues to be addressed in the future in light of changes in the external environment. 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 FY2023.
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 from the Public Relations & Investor Relations Department once a year.鈥

Governance Committee

4 Governance Committee members
(3 outside directors)

Chair: Taeko Ishii (outside director)
Meetings held in FY2023: 6
(3 nomination meetings, 2 remuneration meetings, 1 general governance meeting)

As of June 26, 2024

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 outside Audit & Supervisory Board members)

Chairman: Koji Imai (Standing Audit & Supervisory Board member)
Meetings held in FY2023: 15

As of June 26, 2024

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 FY2023, Audit & Supervisory Board members attended such meetings 20 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.

Collaboration with Outside Directors

Meetings of the Outside Directors/Audit & Supervisory Board Members鈥 Liaison Committee鈥嬧嬧

Meetings of this committee have been held since FY2022 to facilitate regular exchanges of opinions and the development of shared awareness of issues among the outside directors and the Audit & Supervisory Board members, who are independent from management. In FY2023, the committee met in August and March, and the Audit & Supervisory Board members provided general information on the results of on-site audits and wide-ranging opinions were exchanged.鈥

Other

Action plans for on-site audits, interviews of heads of operational divisions, and so on were shared with the outside directors, and in FY2023, outside directors participated in some on-site audits and attended division head interviews.鈥嬧

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

In nominating 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, provides 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 from the executive officers, comprehensively considers the knowledge, experience, ability, insight and other attributes of the candidates in accordance with the same approach as when nominating candidates for director, and the same procedures shall be used to determine director candidates.
The Governance Committee has opportunities to deliberate on the environment and methods for fostering the next president as well as concerning the candidates. In the event that an executive officer has rendered himself 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, and 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 president comprehensively considers the qualifications, knowledge (including that of finance, accounting, and law), experience, ability, insight and other attributes of the candidates and, after obtaining the prior approval of the Audit & Supervisory Board, proposes the qualified candidates to the Board of Directors, which then determines the nominations.

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 developed 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, 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.
In selecting of the candidates for executive officers who serve as a 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 achieves 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 the Corporate Governance Report, 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 long-term 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 final page of the Corporate Governance Report.

Outside Directors and Outside Audit & Supervisory Board Members

Functions and Roles in Corporate Governance
Taeko Ishii

Outside Director

Attendance (FY2023)
Board of Directors
meetings
15/16 (93%)

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.鈥
Manabu Kinoshita

Outside Director

Attendance (FY2023)
Board of Directors
meetings
16/16 (100%)

Mr. Manabu Kinoshita had served as Senior Executive Vice President of NEC Corporation and has abundant knowledge and experience in managing a company and regarding 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.鈥
Koji Takeuchi

Outside Director

Attendance (FY2023)
Board of Directors
meetings

Mr. Koji Takeuchi has abundant experience in the research and development of substrate materials for semiconductor packaging as well as in the electronic materials business at Ajinomoto Co., Inc. He also had served as Member of the Board and Vice President of its major subsidiary and has abundant knowledge and experience in corporate management and regarding advanced materials. He is expected to participate in the Board decision-making, providing his advice particularly on research and development as well as materials business, which is aimed toward the sustainable growth and mid- to long-term enhancement of the corporate value of the Company and its groups 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 Mr. Koji Takeuchi 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.
Shoji Wakamatsu

Outside Audit & Supervisory Board Member

Attendance (FY2023)
Board of Directors meetings
16/16 (100%)
Audit & Supervisory Board
meetings
15/15 (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.
Tsuguya Ieda

Outside Audit & Supervisory Board Member

Attendance (FY2023)
Board of Directors meetings

Audit & Supervisory Board
meetings 銉

Mr. Tsuguya Ieda has abundant and extensive experience in financial institutions and knowledge about corporate management. He is expected to carry out effective audits based on his main knowledge about and experience in the financial sector, while fully coordinating with full-time Audit & Supervisory Board Members, which is aimed toward the ensuring of the soundness of the Group鈥檚 management and mid- to long-term enhancement of the corporate value of the Company and its groups. In addition, as part of the audit process he is expected to participate in important meetings, including Board of Directors meetings, and during the decision-making process to actively express his frank opinions from an independent and objective standpoint, including not only the legality but also the appropriateness of proposals, and has appointed him as Outside Audit & Supervisory Board Member.
  • The concurrent occupations of outside directors and outside Audit & Supervisory Board members (as of March 31, 2024) are listed in the Document of Matters Subject to Measures for Electronic Provision Regarding the 99th Ordinary General Meeting of Shareholders.

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. Please refer following link.

Outside Officers Council

The Outside Officers Council has been meeting since August 2016 as an informal gathering attended only by outside officers (outside directors and outside Audit & Supervisory Board members) to provide opportunities for exchanging opinions and sharing information. In FY2023, meetings were held in August and March, and opinions were exchanged on a wide range of topics including trends in corporate governance and improving the effectiveness of the Board of Directors.鈥嬧

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 provides 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 provides 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 provides information on other training opportunities such as external seminars.
Including the above, the Company bears 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 nonmonetary) 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.
The detailed outline of the 鈥淧olicy on determining the details of remunerations for each Director鈥 are included in the Document of Matters Subject to Measures for Electronic Provision Regarding the 99th Ordinary General Meeting of Shareholders.
The ratio of fixed remuneration to performance-based remuneration for eligible directors in the current fiscal year will be approximately 2:1.鈥

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*1
    Because the steady implementation of plans with a medium- to longterm 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.
  • *1Growth 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鈥

Method of Determining Amount of Performance-based 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.
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 99th Ordinary General Meeting of Shareholders.
Moreover, there are no sign-on bonuses or recruitment incentive payments, termination payments, clawback systems, or retirement benefits.

Annual Total Compensation Ratios (FY2023)

Ratio of the average annual total compensation for the organization鈥檚 highly-paid individuals to the total compensation for all employees*2 975%鈥
Ratio of the percentage increase in average annual total compensation for the organization鈥檚 highly-paid individuals to that for all employees*3 -鈥
  • *2Average 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.
  • *3Ratio 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 median of the percentage increase of 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 performancebased 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

FY2023 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) JPY345 million JPY252 million JPY93 million 6
Audit & Supervisory Board members (excluding outside Audit & Supervisory Board members) JPY68 million JPY68 million - - 2
Outside directors JPY41 million JPY41 million - - 4
Outside Audit & Supervisory Board members JPY25 million JPY25 million - - 2
  • Directors whose total remuneration, etc. is JPY100 million or more are disclosed individually in the Company鈥檚 Annual Securities Report.鈥

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 decisionmaking for business execution and enhancing monitoring functions. In FY2023, the Board of Directors analyzed and evaluated the effectiveness of the Board of Directors, with the following results.鈥

1. Analysis and evaluation process鈥

The Company engaged a third-party organization, Japan Board Review Co., Ltd., to assist in the analysis and evaluation. A questionnaire to Directors and Audit & Supervisory Board members was prepared based on data for Board meetings, meeting minutes, and prior discussion among the third party, the Chairman of the Board of Directors, who assumes the chairmanship of the Board, and the President and Representative Director, who is the officer with ultimate responsibility for business execution. In addition, individual interviews with all respondents by the third party were conducted for the first time in three years, and a new mutual evaluation within the categories of Inside Director, Outside Director and Audit & Supervisory Board member was conducted in the interviews.
The Board of Directors deliberated on the effectiveness of the Board of Directors at the ordinary meeting held in February 2024, based on the report from the third party and the 鈥渨hat the Board of Directors should ideally be (aiming for a Board of Directors that emphasizes decision-making functions)鈥 confirmed in FY2016, and confirmed its evaluation and future actions.鈥

2. Overview of analysis and evaluation results鈥

1) Questionnaire responses and interview results鈥

Major items related to the roles and composition of the Board of Directors were rated highly and specifically as follows.鈥

  1. With regard to the 鈥渞ole and function of the Board of Directors,鈥 it was shared that the Board of Directors aims to be a 鈥淏oard of Directors that emphasizes decision-making and supervises through decision-making.鈥 A shared understanding of the roles and functions of the chairman, outside directors, and inside directors, and Audit & Supervisory Board members was well established. The idea that changes are necessary toward the future was also indicated.鈥
  2. The decision-making process, which is discussed at the Management Committee and submitted to the Board of Directoes is appropriate and allowed for active and essential discussion.鈥
  3. The size and composition of the Board of Directors is appropriate from the perspective of active discussion, decision-making, knowledge, and experience. There is also an opinion that it is necessary to further ensure diversity in terms of gender and expertise.鈥
  4. Appropriate efforts are being made to address issues identified in the last year as those to be continuously addressed (securing appropriate human resources, etc.) .鈥
  5. Important management issues and sustainability were adequately deliberated by the Board of Directors through open and active discussions. Implementation status of proposals and its results were also appropriately followed up. On the other hand, there is an opinion that medium- to long-term competitive advantages needed to be further discussed for the future.鈥
  6. The composition of the Governance Committee is appropriate, and its role is clearly defined.鈥
  7. The system to support outside directors is adequate. Their cooperation and communication with Audit & Supervisory Board members is also sufficient.鈥

2) Issues identitied from the responses to the questionnaire and the results of the interviews (suggestions for improvement by the thirdparty organization)

  1. Medium- to long-term business direction and strategies, including sustainability, should be further discussed for strengthening supervisory function through decision-making.鈥
  2. The operation of the Board of Directors meetings should be further improved (e.g.,by systematically setting discussion themes).鈥

3) Response to the above issues (deliberations at Board of Directors meetings)鈥嬧

  1. Important themes among the medium-tolong-term business direction and strategies, will be systematically handled as discussion themes. The holding of off-site meetings for this purpose will also be considered.鈥
  2. Board meetings material will be further enriched to improve the quality of discussion.鈥

3. 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

In order to ensure managerial soundness and increase the corporate value of the Company鈥檚 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. In order to confirm and improve the effectiveness of the audits performed by Audit & Supervisory Board members and the Audit & Supervisory Board鈥檚 activities, the Audit & Supervisory Board analyzes and evaluates their effectiveness.
Through this analysis and evaluation of the effectiveness, the Audit & Supervisor Board review the audits and activities during the previous fiscal year, consider issues to be improved and how to address them, and incorporate the findings in the next fiscal year鈥檚 audit plan and day-to-day audit activities.

1. Analysis and evaluation process鈥

We engaged an outside professional organization, Anderson Mori & Tomotsune, to conduct the analysis and evaluation from an independent and objective standpoint. Based on the results, the Audit & Supervisory Board conducted a self-evaluation and discussed key matters.
Specifically, the outside professional organization reviewed documents related to the Company's audit activities and the Audit & Supervisory Board in FY2023, based on which the following process was performed:鈥

  1. Questionnaires for all Audit & Supervisory Board members
  2. Individual interviews with all Audit & Supervisory Board members
  3. Interviews with the administrative office of the Audit & Supervisory Board鈥嬧
  4. Discussions at Audit & Supervisory Board meetings based on results of the evaluation and findings by the outside professional organization.

2. Overview of the analysis and evaluation results (overall rating)鈥

The outside professional organization reported that 鈥渢he evaluation concluded that fruitful audit activities were carried out鈥 by the Audit & Supervisory Board. The Audit & Supervisory Board confirmed this evaluation and the following points and rated that the Audit & Supervisory Board were effectively functioning and the audits were effective.鈥

  1. Again in FY2023, based on audit plans Audit & Supervisory Board members performed audits mainly through attendance at important meetings including Board of Directors meetings and various committees, interviews with executives including representative directors, and on-site inspections at sites and affiliated companies; checked the status of business execution by directors, etc.; confirmed that the establishment and operation of the internal control system had been effectively implemented; and made necessary representations of their opinions as well as remarks.鈥
  2. The Company鈥檚 outside Audit & Supervisory Board members attended important meetings as many as possible and conducted on-site inspections in cooperation with full-time Audit & Supervisory Board members. As a result, outside Audit & Supervisory Board members bore greater burden in conducting audit activities compared to outside Audit & Supervisory Board members at other companies.鈥
  3. In auditing, Audit & Supervisory Board members including outside Audit & Supervisory Board members not only attending important meetings and providing their opinion, but also placed importance on observing sites and affiliated companies with their own eyes and communicating directly with local responsible personnel from the perspective of the independent decision-making system applicable to Audit & Supervisory Board members. In addition, Audit & Supervisory Board members played certain roles because they communicated findings obtained during routine audit activities to management personnel, heads of divisions, and organizations that received on-site inspections in the form of statements made during meetings, delivery of investigation reports, etc. and such findings were utilized for future management.鈥

3. Issues and future actions for them

Based on the overall rating in 2. above and from the viewpoint of further enhancing audit activities by the Company鈥檚 Audit & Supervisory Board, the outside professional organization pointed out issues.
Although many points were discussed on the basis of those issues, the following are the major issues and actions that were confirmed to be addressed and taken by the Audit & Supervisory Board, respectively. The Audit & Supervisory Board will also continue to examine other issues.鈥嬧

  1. Issues concerning information sharing and cooperation among Audit & Supervisory Board members
    Each regular Audit & Supervisory Board meeting is currently held before the succeeding ordinary Board of Directors meeting and therefore the time for discussion at regular Audit & Supervisory Board meetings is limited. Therefore, information is shared and opinions exchanged appropriately among Audit & Supervisory Board members not only during but also outside regular Audit & Supervisory Board meetings. In order to conduct more meaningful audit activities through in-depth discussions on issues identified or questions raised by Audit & Supervisory Board members, establishment of a new forum for discussion between all Audit & Supervisory Board members will be considered, and the results of such discussions recorded.鈥
  2. Issues concerning information sharing with Audit & Supervisory Board members of affiliated companies鈥
    In general, the risk of scandals is increasing in subsidiaries. It is therefore important to communicate with dedicated Audit & Supervisory Board members of affiliated companies. Currently, communication is promoted through the attendance of fulltime Audit & Supervisory Board members at dedicated Audit & Supervisory Board member liaison meetings that are held with full-time Audit & Supervisory Board members of affiliated companies every two months. It will be examined to share information obtained from dedicated Audit & Supervisory Board members of affiliated companies further with outside Audit & Supervisory Board members.鈥
  3. Issues concerning follow-up after audit activities鈥
    It is important to follow up the status of improvement of actions, etc. taken by executives in response to feedback expressed and remarks made by Audit & Supervisory Board members to executives in on-site inspection reports or during Board of Directors meetings regarding results of audits and discussions at Audit & Supervisory Board meetings. Accordingly, the Company will consider confirming and recording the status of follow-up actions taken by executive management regarding highly significant matters among the remarks made by Audit & Supervisory Board members to executives.鈥嬧

The Audit & Supervisory Board and its members will further improve the effectiveness of audit activities and strive to contribute to strengthening the management infrastructure and improving the corporate value of the Company鈥檚 group.鈥嬧嬧

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.

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 crossshareholdings, 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)

FY2019 FY2020 FY2021 FY2022 FY2023
Whole sale 4 3 2 5 7
Partial sale 1 1 3 3 4

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 Mineral Industri Indonesia (Persero), a state-owned Indonesian company, to jointly manage PTVI. In addition, we have also signed an agreement regarding the right and obligation to purchase production with these four companies including PTVI. 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.鈥

  • The shares of PT Vale Indonesia Tbk are not cross-held. Our company holds shares of PTVI but they don't hold ours.鈥

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

  • For FY2020, the number of issues held increased by one due to the exclusion of PTVI from the equity-method affiliates.鈥
  • In FY2023, the number of issues held increased by one due to the acquisition of shares of Nano One Materials Corporation.