Governance Corporate Governance

Policy and Basic Mindset

Basic Views on Corporate Governance

The basic mission of the UBE Group is to secure sustainable growth throughout the Group and enhance corporate value over the medium and long term. To achieve these goals, it is important to establish effective corporate governance that will enable the UBE Group to ensure the sustainability of appropriate business activities. Likewise, it is imperative that UBE fulfills its responsibilities to all stakeholders, including shareholders, customers, business partners, employees, and communities, while striving to earn their confidence. This is achieved through the establishment of a system by which directors who are Audit and Supervisory Committee members with the right to conduct audits and state opinions have voting rights at the Board of Directors. Thus, as a company with an Audit and Supervisory Committee, UBE will strive to strengthen the supervisory function of the Board of Directors over the execution of business and accelerate such execution by delegating a portion of important executive decisions to the President and Representative Director.

Going forward, UBE will continue striving to enhance corporate governance through activities that include streamlining management, increasing transparency, speeding up decision making, clarifying management responsibility, and strengthening management oversight functions.

• Corporate Governance Report

Corporate Governance System

Overview of Corporate Governance and Internal Control Systems

• *1Internal control departments: Compliance Committee, Security Export Control Committee, Information Security Committee, Crisis Response Committee, Head Office departments working on internal control
• *2Business Division: 4 business divisions, Research & Development Division, Ube Works
• *3UMC Group companies under UBE Machinery Corporation, Ltd.

Board of Directors

The Board of Directors supervises the execution status of particular businesses that are considered important in light of management strategies while monitoring their operating results. Moreover, outside directors are appointed in order to incorporate an independent, third-party perspective into decision making and management supervision, with the aim of securing the efficacy, transparency, and objectivity of business management.

In accordance with laws, regulations, and the Articles of Incorporation, the Regulations of the Board of Directors have been codified to define key managerial issues to be decided by the Board of Directors. These include basic corporate policies as well as business endeavors deemed important due to monetary value involved or associated risks. Thus, the Board of Directors deliberates and makes decisions on these matters by leveraging multifaceted perspectives as well as specialists’ viewpoints. In doing so, the Board gives due consideration to how to best embody UBE’s Corporate Philosophy and Purpose. In addition to delegating other matters to the President and Representative Director, the Board supervises the appropriateness and efficiency of operations executed by each director and executive officer.

The Board of Directors consists of 10 directors, five of whom are independent outside directors and is, in principle, chaired by a director who has no concurrent executive officer position. Furthermore, the Nominating and Remuneration committees are placed to serve as advisory bodies to the Board of Directors. UBE has also adopted an executive officer system to facilitate the clearer separation of supervisory and business execution functions while allowing executive officers to better concentrate on business execution.

Audit and Supervisory Committee

The Audit and Supervisory Committee consists of directors who serve concurrently as Audit and Supervisory Committee members. The Committee monitors and verifies the development and operational status of internal control systems, and also supervises the directors and other business executives, in accordance with laws and regulations and the Regulations of the Audit and Supervisory Committee. In addition, outside directors who serve as Audit and Supervisory Committee members attend meetings of the Nominating and Remuneration committees to supervise the appointment and dismissal of directors (excluding directors who are Audit and Supervisory Committee members) as well as their remuneration, verifying procedures and other related details.

Major activities of the Committee are as follows: 1) holding regular meetings for the exchange of opinions with the President and Representative Director; 2) performing audits of the executive directors, executive officers, business divisions, internal control departments and other business units (including those of subsidiaries); 3) gathering necessary information by, for example, receiving audit reports from UBE’s independent accounting auditors and internal audit departments, attending the Strategic Management Meeting and other important meetings, inspecting important approval documents, and regularly exchanging information with the corporate auditors of subsidiaries; and 4) reporting the results of the audit to the Board of Directors.

In principle, a meeting of the Audit and Supervisory Committee is held every month. Additional meetings are held any time deemed necessary. In fiscal 2023, the Audit and Supervisory Committee met 16 times. The attendance rate was 100% for all of the Audit and Supervisory Committee members.

Nominating Committee

The Nominating Committee serves as an advisory body to the Board of Directors and, with regard to the appointment and dismissal of senior management members, including the President and Representative Director, holds deliberations on such subjects before the Board of Directors reaches a decision. The Committee ensures independent and objective advisory functions, since outside directors account for a majority of the members and an outside director serves as the chair.

Remuneration Committee

Overview of Procedure for Determining Remuneration, etc., for Officers

1. The Remuneration Committee, which is an advisory body to the Board of Directors, chaired by an outside director, and has outside directors (excluding directors who are Audit and Supervisory Committee members) as a majority of its members, deliberates on officer remuneration, etc., for individual directors (excluding directors who are Audit and Supervisory Committee members) to ensure transparency and objectivity. The results of the committee’s deliberations are proposed and reported to the Board of Directors, and the Board of Directors then determines the remuneration, etc., for directors. The amount of individual remuneration for directors who are Audit and Supervisory Committee members is determined in consultation with the Audit and Supervisory Committee members.
2. The process for determining the amount of remuneration, etc., for directors was as follows: At the Remuneration Committee meeting in May 2023, the amount of remuneration, etc., for each individual director (excluding directors who are Audit and Supervisory Committee members) for fiscal 2023 was deliberated based on the degree of achievement of the performance targets by each individual director (excluding directors who are Audit and Supervisory Committee members) in fiscal 2022. At the Board of Directors meeting in June 2023, UBE, respecting the recommendations of the Remuneration Committee, determined the amount of remuneration, etc., for each individual director (excluding directors who are Audit and Supervisory Committee members). The Board of Directors and the Remuneration Committee confirmed that the performance and evaluation of individuals for each index were appropriate and that remuneration was calculated in accordance with the Policy on Determining Remuneration Amounts and Calculation Methods (excluding directors who are Audit and Supervisory Committee members) above, and they determined that the amount of remuneration for each individual was appropriate.
   The individual performance targets for directors (excluding directors who are Audit and Supervisory Committee members) for fiscal 2022 were discussed at the Remuneration Committee meeting in April 2022 and were decided at the Board of Directors in May 2022, respecting the recommendations from the said Committee.

Details of Activities by the Remuneration Committee, etc.

The activities undertaken by the Committee during fiscal 2023 to deliberate and determine remuneration, etc., for directors (excluding directors who were Audit and Supervisory Committee members) were as outlined below.

Strategic Management Meeting

• Chair: President (CEO)
• Secretariat: Corporate Planning Dept.

UBE’s Strategic Management Meeting functions as one of its meeting bodies aimed at making management decisions, ensuring the separation of the supervisory function and the business execution function in running the Company and ensuring transparent and efficient corporate management.

The Strategic Management Meeting deliberates on management policies of, resource allocations for, and matters needing coordination across the UBE Group, as well as business strategies and other key management issues that impact the management structure of the entire Group. UBE has defined the meeting’s mode of operation and matters requiring its discussion in the Strategic Management Meeting Regulations and the Standards for Matters to Be Submitted to the Strategic Management Meeting.

Strategic Management Meeting (Sustainability Committee)

• Chair: President (CEO)
• Vice chair: Officer in charge of the Sustainability Promotion Dept.
• Secretariat: Sustainability Promotion Dept.

The Strategic Management Meeting (Sustainability Committee) deliberates and decides on key matters related to the UBE Group’s sustainability, in accordance with the Basic Policies for Sustainability. It also deliberates and decides on key matters related to the safety management of high-pressure gas and other facilities, serving as the security measures headquarters defined by the High Pressure Gas Safety Act.

In order to promote sustainability activities across the UBE Group, this meeting body provides overall supervision for specialized committees tasked with deliberating individual sustainability issues and formulating countermeasures for each, while the Board of Directors supervises the status of its activities. In addition, it acts in collaboration with the Risk Management Committee to deal with sustainability-related risks and opportunities identified in the course of business execution.

Meanwhile, specialized committees plan and execute various measures to address each material issue in accordance with Company-wide policies. In this way, these committees strive to resolve individual sustainability issues based on action plans deliberated on and approved by the Strategic Management Meeting (Sustainability Committee).

Specialized Committees Related to Sustainability

Environmental Issue Committee

Group Environment & Safety Committee

Group Health Management Implementation Committee

HR & Human Right Committee

Group Quality Assurance Committee

Supply Chain Management Committee

Risk Management Committee

Crisis Response Committee

Compliance Committee

Information Security Committee

Security Export Control Committee

Holdings Meeting

The Holdings Meeting, which is held by UBE as the holding company, deliberates key management issues for the UMC Group and receives reports on important matters that affect the business management of the UBE Mitsubishi Cement Group. UBE has defined the meeting’s mode of operation and matters requiring its discussions in the Holdings Meeting Regulations and the Standards for Matters to Be Submitted to the Holdings Meeting.

Status of Directors’ Attendance at the Board of Directors, the Audit and Supervisory Committee and Other Optional Committees

Evaluation of the Board of Directors’ Effectiveness

UBE conducts periodic evaluations of the Board of Directors’ effectiveness, striving to enable it, as the decision-making body of a company with an Audit and Supervisory Committee, to enhance the effectiveness of corporate governance, to clarify issues to be addressed and improvement measures to be executed in order to secure sustainable corporate growth, and to increase corporate value over the medium to long term. The Board of Directors is thus striving to further enhance the effectiveness of its operations while staying focused on exercising management supervisory functions.

In order to achieve appropriate decision-making and management supervision for business activities, the Board of Directors consists of persons with a wealth of business and operational experience as directors (excluding directors who are Audit and Supervisory Committee members and outside directors), and persons with an independent and objective viewpoint and a high level of insight who are able to actively express their opinions and make recommendations as outside directors. In addition, the Board of Directors is composed of directors with extensive experience and a high level of expertise in the areas of corporate management and management strategy, finance and accounting, sales and marketing, manufacturing, technology, research and development, and IT/DX, compliance and risk management, sustainability (environment and society), human resource management, and internationality, which ensures diversity, including that of gender. UBE appoints persons with the appropriate experience and skills as well as the required knowledge of finance, accounting, and law as directors who are Audit and Supervisory Committee members.

The number of directors is specified as 10 or less (excluding directors who are Audit and Supervisory Committee members), and the number of directors who are Audit and Supervisory Committee members is specified as five or less in the Articles of Incorporation. The Board of Directors is currently composed of six directors (excluding directors who are Audit and Supervisory Committee members), two of whom are outside directors, and four directors who are Audit and Supervisory Committee members, three of whom are outside directors. UBE has determined that the effectiveness of the Board of Directors and the Audit and Supervisory Committee can be ensured through these measures.

UBE convenes an annual Evaluation Meeting for Effectiveness of the Board of Directors composed of all directors, in which the effectiveness of the Board of Directors, based on directors’ self-assessment of the Board of Directors (to be obtained through questionnaires, etc.), is deliberated upon. Specifically, the Board of Directors consolidates and collectively examines results of directors’ self-assessments to finalize an evaluation of its effectiveness. The most recent round of this Evaluation Meeting concluded that the Board of Directors was appropriately structured and operated during fiscal 2023, with active discussions and appropriate deliberations and oversight being conducted, and as such, it was determined that the Board of Directors was effective in focusing on the oversight function of management. In conjunction with this Evaluation Meeting, UBE also received an evaluation by a third-party organization for the first time.

Policies and Procedures for the Nomination of Director Candidates

In order to realize appropriate decision making and management supervision, UBE nominates director candidates based on the required traits described below.

1. Candidates for directors (excluding directors who are Audit and Supervisory Committee members and outside directors): Persons with a wealth of business and operational experience as directors
2. Candidates for outside directors: Persons with independent and objective viewpoints and high levels of insight who are able to actively express their opinions and make recommendations as outside directors with the aim of helping to secure the efficacy, transparency and objectivity of management
3. Candidates for directors who are Audit and Supervisory Committee members: Persons with the appropriate experience and skills as well as the requisite knowledge of finance, accounting and law

On the other hand, UBE may consider the dismissal of a director who is deemed to have failed to fully realize their functions. The procedures for the appointment and dismissal of directors are as outlined below.

1. The appointment and dismissal of directors (excluding directors who are Audit and Supervisory Committee members) shall be deliberated by the Nominating Committee, which serves as an advisory body to the Board of Directors and is attended by outside directors who are Audit and Supervisory Committee members. Then, a proposal regarding appointment or dismissal shall be finalized by the Board of Directors and submitted to the General Meeting of Shareholders to obtain its approval.
2. The appointment and dismissal of directors who are Audit and Supervisory Committee members shall be deliberated by the Nominating Committee. Then, a proposal regarding appointment or dismissal shall be finalized by the Board of Directors after acquiring consent from the Audit and Supervisor Committee and submitted to the General Meeting of Shareholders to obtain its approval.

Skills Matrix

In order to achieve appropriate decision making and management supervision for business activities, the Board of Directors appoints directors (excluding outside directors) with a wealth of business and operational experience as well as outside directors with an independent and objective viewpoint and a high level of insight who are able to actively express their opinions and make recommendations.

With the aim of confirming diversity in the Board of Directors’ composition, has prepared and maintains a skills matrix designed to indicate the skills expected of directors in the eight areas of corporate management and management strategy; finance and accounting; sales and marketing; manufacturing, technology, research and development, and IT/DX; compliance and risk management; sustainability (environment and society); human resource management; and internationality. This skills matrix thus provides a summary list of the knowledge, experience and competencies possessed by each director and is disclosed to all stakeholders, including investors, through the Notice of Convocation for the General Meeting of Shareholders and the Integrated Report.

• General Meeting of Shareholders

Currently, of the ten directors on UBE’s Board of Directors, five are independent outside directors, with some possessing management experience at other companies.

Officer Remuneration

Matters concerning Determination of the Total Amount of Remuneration for Directors

1. The total amount of remuneration for directors was approved at the 113th Ordinary General Meeting of shareholders on June 27, 2019, as follows: As of the conclusion of this General Meeting of Shareholders, the number of directors was nine (including four outside directors).

   6 directors (excluding directors who were Audit and Supervisory Committee members):	An annual amount up to ¥720 million (includes an annual amount up to ¥85 million for outside directors)
   3 directors who were Audit and Supervisory Committee members:	An annual amount up to ¥150 million

2. Regarding the total amount of share compensation for directors, it was resolved at the 116th Ordinary General Meeting of Shareholders held on June 29, 2022, as follows: As of the conclusion of this General Meeting of Shareholders, the number of directors was ten (including five outside directors).

   4 directors (excluding directors who were Audit and Supervisory Committee members and outside directors):	Up to ¥70 million annually (The total amount of monetary claims to be paid as remuneration, etc., relating to restricted stocks, separate from cash remuneration)

Total Amounts of Remuneration, etc. for Each Category of Officer, Total Amounts for Each Type of Remuneration, etc., and the Number of Eligible Officers

• (Notes)
  1. There are no employee-directors.
  2. The remuneration of directors who are Audit and Supervisory Committee members consists solely of a fixed base remuneration.
  3. Stock remuneration (restricted stock remuneration) is the amount recorded as an expense in the current fiscal year in accordance with accounting standards. Therefore, it is not a form of remuneration paid in monetary form, nor is it a form of remuneration with guaranteed payment of money.

Matters Related to the Amount of Officer Remuneration and Policy on Methods for Calculating That Amount

Policy on Determining Remuneration, etc., for Directors (excluding directors who are Audit and Supervisory Committee members)

Items (1) through (7) below were resolved as UBE’s “Policy on Determining Remuneration, etc., for Directors (excluding directors who are Audit and Supervisory Committee members)”.

(1) Basic Policy

The remuneration of the Company’s directors (hereinafter referred to as “directors,” excluding directors who are Audit and Supervisory Committee members) consists of a remuneration structure that functions as a sufficient incentive for the continuous enhancement of corporate value. When determining the individual remuneration for directors, the basic policy is to set an appropriate level of remuneration in line with the responsibilities of each director within the limit of remuneration for directors resolved by the General Meeting of Shareholders.

With regard to the remuneration of directors (excluding outside directors) (hereinafter referred to as “Inside Directors”), the Company will strengthen the linkage with its performance and reflect achievement of not only single fiscal-year company performance but also medium- and long-term targets in remuneration. The Company will also provide share compensation-based remuneration in addition to cash remuneration to ensure that the structure of remuneration incentivizes efforts to improve corporate value over the medium and long term.

More specifically, the remuneration of Inside Directors consists of fixed remuneration for each position as base compensation as well as an annual incentive and a long-term incentive in the form of company performance-linked remuneration. The annual incentive is composed of remuneration based on Company-wide performance and remuneration based on the achievement of annual individual performance targets.

Meanwhile, the long-term incentive is composed of remuneration based on the achievement of medium-to-long-term individual performance targets and is composed of remuneration in the form of cash and restricted stock.

(2) Policy on Determining the Amount of Base Compensation

The annual amount of base compensation for the Inside Directors is determined according to the positions of the directors.

The annual amount of base compensation for outside directors is determined as a fixed amount.

(3) Policy on Determining the Details of Performance-Linked Remuneration (Excluding Restricted Stock Remuneration) and Method for Calculating the Amount

Of performance-linked remuneration for the Inside Directors, that based on Company-wide performance is calculated and determined by multiplying consolidated ordinary profit in the previous fiscal year by the coefficient for each position. Consolidated ordinary profit is used as the indicator because it also reflects the performance of equity-method affiliates, thereby incentivizing efforts to improve the performance of the entire UBE Group each fiscal year.

In addition, remuneration based on the achievement of annual individual performance targets and remuneration based on the achievement of medium-to-long-term individual performance targets are determined according to the level of achievement of targets each officer sets at the beginning of the previous fiscal year and the medium-to-long-term targets are based on a pre-determined evaluation table for each position.

(4) Details of Non-Cash Remuneration and Policy on Determining Method for Calculating the Amount

Non-cash remuneration for the Inside Directors consists of restricted stock. With the aim of increasing the incentive for Insider Directors to achieve medium-to-long-term targets and enhance corporate value, restricted stocks are granted according to the positions of officers. In addition, for the fiscal year following the three-year Medium-Term Management Plan period of the Company only, the number of shares granted is adjusted by 80% to 130% depending on the level of achievement of the management indicators (consolidated ordinary profit, consolidated free cash flow, and consolidated ROE) during the period.

• Note:The number of shares granted is adjusted by 80% to 130% depending on the level of achievement of the management indicators during the period.

(5) Policy on Determining the Ratio for the Amount of Each Kind of Remuneration for Each Inside Director

The composition of the remuneration for each category of Inside Directors is set appropriately, taking into consideration the balance between base compensation and performance-linked remuneration (including restricted stock remuneration), with an emphasis on the enhancement of corporate value over the medium-to-long term while securing the level and stability of base compensation.

More specifically, the payment ratios of the base compensation, annual incentive, and long-term incentive (including restricted stock remuneration) are set roughly at 50%, 30%, and 20% respectively, based on the past records of the average consolidated ordinary profit and the median amount of the annual and medium-to long-term individual performance target evaluation.

• Note:The composition of remuneration for the President and the Chairman of the Board places less weight on base compensation and more on annual incentives.

(6) Policy on Determining the Timing and Conditions for the Granting of Remuneration, etc.

The individual remuneration for directors (excluding restricted stock remuneration for the Inside Directors) is paid for a one-year term of office from July to June of the following year. The total amount is divided into 12 and paid monthly.

Restricted stock for the Inside Directors is allotted and granted within one year of the date of the Ordinary General Meeting of Shareholders for each fiscal year.

(7) Policy on Determining the Details of Individual Remuneration, etc., for Directors

The Remuneration Committee, which is an advisory body to the Board of Directors and chaired by an outside director with outside directors as a majority of its members, deliberates on the individual remuneration for directors to ensure transparency and objectivity. The results of the committee’s deliberations are proposed and reported to the Board of Directors, and the Board of Directors then determines the individual remuneration, etc., for directors.

The level of remuneration for directors is determined through comprehensive consideration while verifying its objective suitability with constant reference to officer remuneration research data from external research organizations and comparison with remuneration levels at major manufacturers that are similar to UBE in size and industry category.

Targets and Results for Indicators Relating to Performance-Linked Remuneration (Excluding Restricted Stock Remuneration

Performance-linked remuneration is composed of the following.

1. Remuneration linked to Company-wide performance;
2. Remuneration linked to the achievement of annual individual performance targets; and
3. Remuneration linked to the achievement of medium-to-long-term individual performance targets.

For item 1, consolidated ordinary profit in the previous fiscal year is used as an indicator for remuneration linked to Company-wide performance, and the amount of remuneration is calculated based on a formula in which the indicator is multiplied by a coefficient for each position (consolidated ordinary profit in the previous fiscal year × coefficient for each position).

For item 2, the annual targets that each officer set at the beginning of the previous fiscal year are used as the indicators for remuneration linked to the achievement of annual individual performance targets.

For item 3, the medium-to-long term targets that each officer set at the beginning of the previous fiscal year are used as the indicators for remuneration linked to the achievement of medium-to-long term individual performance targets.

For item 2 (remuneration linked to the achievement of annual individual performance targets) and item 3 (remuneration linked to the achievement of medium-to-long-term individual performance targets), the amount of remuneration is determined in accordance with the level of achievement of the indicators.

Targets and results of the above indicators are as follows.

Initiatives related to ESG are included in annual targets and medium- to long-term targets. UBE’s most important management issues, which are growth in specialty chemicals and addressing global environmental issues, are based on ESG-related initiatives. UBE incorporates ESG goals that match each officer’s functions, sets targets, evaluates performance and calculates remuneration to strengthen the incentives for achieving the goals. The details of the initiatives set as the targets for ESG goals differ for each officer’s area of responsibility. The amount of remuneration calculated based on the level of achievement of ESG targets accounted for approximately 10% of total remuneration. The same system applies for executive officers.

• *Global environmental issues: Set guidelines in three priority areas in response to changes in the external environment
  1. Addressing Climate Change (Carbon Neutrality)
  2. Contributing to a Recycling-Based Society (Circular Economy)
  3. Contributing to the Conservation and Restoration of the Natural Environment (Nature Positive)

Status of Cross-Shareholdings

Basic Mindset

UBE may strategically hold listed or unlisted stock when it is deemed necessary to maintain and strengthen business alliances and trading relationships and to smoothly promote the Company’s business activities.

For listed shares among the strategically held stocks, the Board of Directors conducts an annual review of individual securities and makes a comprehensive judgment on whether the shareholding is appropriate in consideration of the Company’s capital costs. Strategically held stocks that are considered not to have sufficient significance to hold will be promptly sold, taking into account the trends in the stock market.

Moreover, in the exercise of voting rights for strategic shareholdings, UBE determines its approval and disapproval for proposals after a comprehensive judgement based on whether the proposal will produce a return for the Company through an increase in the shareholder value of the investee company.

Breakdown of Cross-Shareholding

As of March 31, 2024, UBE’s Cross-Shareholdings consist of 72 stocks totaling ¥9,003 million (16 listed stocks totaling ¥8,368 million and 56 unlisted stocks totaling ¥635 million), with the total value of these stockholdings accounting for around 2.1% of consolidated net assets. Trends in these stockholdings are as presented in the chart below.

• Cross-Shareholdings by Number of Stocks, Type, and Balance-Sheet Amount

  

• Four-Year Trend in the Total Number of Stocks in Cross-Shareholding and Their Balance Sheet Amount