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    4568   JP3475350009

DAIICHI SANKYO COMPANY, LIMITED

(4568)
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Daiichi Sankyo : Corporate Governance Report

06/22/2021 | 04:25am EST

Corporate Governance Report

Daiichi Sankyo Co., Ltd.

Last update: June 22, 2021

Sunao Manabe, Representative Director and President & CEO

Contact: Junichi Onuma,

Vice President, Corporate Communications Department

Securities Code: 4568

https://www.daiichisankyo.com/

  1. Basic Views of Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views

Updated

In addition to creating a management structure that can respond speedily and flexibly to changes in the business environment, Daiichi Sankyo (the Company) is working to secure legal compliance and management transparency and to strengthen oversight of management and the conduct of operations. We place great importance on building up a corporate governance structure that is responsive to the trust of our stakeholders, especially our shareholders.

Corporate Governance Structure

  • To clarify Directors management responsibility and reinforce their oversight of management and the conduct of operations, their terms of office are set at one year, and four out of our nine Directors are Outside Directors. Since June 2020, an Outside Director has been appointed chairperson of Board of Directors.
  • To ensure management transparency, nomination of candidates for Director and Corporate Officer, succession plan of CEO and executive compensation system thereof are deliberated on by a Nomination Committee and a Compensation Committee, respectively, which are advisory bodies to Board of Directors and are established as voluntary committees.
  • Both Committees are composed of four Outside Directors, and one Outside Audit & Supervisory Board Member participates as an observer.
  • For audits of legal compliance and soundness of management, the Company has adopted an Audit
    • Supervisory Board system and established Audit & Supervisory Board comprising five Audit & Supervisory Board Members, including three Outside Audit & Supervisory Board Members.
  • The Company prescribes specific criteria on the judgment of independence of Outside Directors and Outside Audit & Supervisory Board Members and basic matters regarding execution of duties by Directors and Audit & Supervisory Board Members.
  • The Company employs a Corporate Officer System which contributes to appropriate and swift management decision-making and the conduct of operations.
  • With the aims of ensuring effectiveness and efficiency of operations, ensuring reliability of financial reporting, complying with applicable laws and regulations relevant to business activities, and safeguarding assets, the Company structures its internal control system to consist of self- monitoring carried out by respective organizations which execute its functions (primary controls), policy development and monitoring for respective organizations carried out by the corporate organization (secondary controls), and internal auditing encompassing monitoring carried out by the Internal Audit Department (tertiary controls).

[Reason for not implementing each principle of the Corporate Governance Code]

The Company complies and implements all principle of the Corporate Governance Code.

[Disclosure Based on the Principles of the Corporate Governance Code]

Updated

Principle 1.4 Policies Relating to the Reduction of Shares of Other Listed Companies as Cross- Shareholdings and Rationale for Exercise of Voting Rights

The Company in principle shall not hold shares of other listed companies except the case where it is believed to contribute to increasing corporate value of the Company in connection with maintaining and strengthening long-term business relationships. The Company has successively sold the shares by comprehensively taking matters such as impact to the market into consideration. During fiscal year 2020, we sold shares for approximately 2.5 billion yen (6 brands). For the shares of listed companies held, Board of Directors regularly examines profitability and financial benefits of each individual company in reference to certain management indicators, capital cost and the like and reviews rationality of shareholding as appropriate by comprehensively taking their business strategy and business relations into consideration.

Concerning the exercise of voting rights on cross-shareholdings, we will check, in accordance with criteria concerning exercise of voting rights established internally, whether the proposals will contribute to increasing the corporate value of the issuing company in the medium- to long-term. Based on comprehensive consideration of such matters as non-financial side of the issuing company and contents of dialogue held with the issuing company, we will decide whether to approve or reject the proposal.

Principle 1.7 Related Party Transactions

In addition to prescribing in the Directors Regulations the duty of care and the duty of fiduciary of Directors and conflict of interest transactions and competitive transactions, the Company also prescribes in Board of Directors Regulations the requirement that the consent of the Board shall be received in relation to conflict of interest transactions and competitive transactions of Directors. Moreover in the Audit Standard for Audit & Supervisory Board Members, it prescribes that Audit & Supervisory Board Members monitor and verify for the existence of violations of the duties of Directors with regard to conflict of interest transactions and competitive transactions.

Matters concerning transactions with major shareholders shall be considered to be "Important Matters Related to Company Management" as prescribed by the matters referred to Board of Directors, and these matters shall require approval by Board of Directors.

Principle 2.6 Roles of Corporate Pension Fund as Asset Owner

The Daiichi Sankyo Group (The Group)'s corporate pension fund has announced that it will accept the "Principles of "Responsible Institutional Investors"" (Japanese Stewardship Code)"as an institutional investor holding assets. The fund fulfills their stewardship responsibilities to investment trustees that outsource asset management, and enhance corporate value and sustainability (medium- to long-term sustainability including ESG factors) through dialogue with investee companies. By doing so, the funds request that they will take actions to increase the medium- to long-term investment returns of the fund.

The Group has assigned persons dedicated to the fund, in charge of pension management and administration office respectively for the operation of the fund. The Group has also assigned appropriately qualified persons including executives of human resources and finance divisions of the Company as members of an asset management committee and a delegates committee. Delegates of the labor union also participate in the committees on behalf of the participants of the fund.

The fund has established basic policies to ensure safe and efficient asset management while maintaining robust risk management. The fund develops a strategic asset portfolio at Asset and Liability Management (ALM) while referring to opinions of external professionals. It has also regularly monitored the status of asset management by entrusted asset managers including initiatives of stewardship activities

engaged by the asset managers.

In addition, the fund has striven to ensure that conflicts of interest which could arise between the Group and the beneficiaries are appropriately managed by having the delegates committee, the board and the auditors consisting of the same number of delegates elected by the employers and delegates elected through mutual election of the participants and regularly reporting the fund's financial condition, performance results, stewardship activities of entrusted asset managers and others to beneficiaries.

Principle 3.1

(i) Company objectives (e.g., business principles), business strategies and business plans)

The corporate philosophy, visions and mid-term plan are disclosed on the Company's corporate website. Please view this information at the following URL:

The Company's corporate website: https://www.daiichisankyo.com/about_us/mission-strength/

  1. Basic views and guidelines on corporate governance (Basic views on corporate governance)
    In addition to creating a management structure that can respond speedily and flexibly to changes in the business environment, the Company is working to secure legal compliance and management transparency and to strengthen oversight of management and the conduct of operations. We shall place great importance on building up a corporate governance structure that is responsive to the trust of its stakeholders, especially its shareholders.

Corporate Governance Structure

  • To clarify Directors management responsibility and reinforce their oversight of management and the conduct of operations, their terms of office are set at one year, and four out of our nine Directors are Outside Directors. Since June 2020, an Outside Director has been appointed chairperson of Board of Directors.
  • To ensure management transparency, nomination of candidates for Director and Corporate Officer, succession plan of CEO and executive compensation system thereof are deliberated on by a Nomination Committee and a Compensation Committee, respectively, which are advisory bodies to Board of Directors and are established as voluntary committees.
  • Both Committees are composed of four Outside Directors, and one Outside Audit & Supervisory Board Member participates as an observer.
  • For audits of legal compliance and soundness of management, the Company has adopted an Audit & Supervisory Board system and established Audit & Supervisory Board comprising five Audit & Supervisory Board Members, including three Outside Audit & Supervisory Board Members.
  • The Company prescribes specific criteria on the judgment of independence of Outside Directors and Outside Audit & Supervisory Board Members and basic matters regarding execution of duties by Directors and Audit & Supervisory Board Members.
  • The Company employs a Corporate Officer System which contributes to appropriate and swift management decision-making and the conduct of operations.
  • With the aims of ensuring effectiveness and efficiency of operations, ensuring reliability of financial reporting, complying with applicable laws and regulations relevant to business activities, and safeguarding assets, the Company structures its internal control system to consist of self-monitoring carried out by respective organizations which execute its functions (primary controls), policy development and monitoring for respective organizations carried out by the corporate organization (secondary controls), and internal auditing encompassing monitoring carried out by the Internal Audit Department (tertiary controls).

(Basic guidelines on corporate governance)

While giving importance to the basic views on corporate governance, the Company shall understand and respect the gist and spirit of the Corporate Governance Code, and shall continue to make efforts to

further improve corporate governance based on this code.

(iii) Policies and Procedures in Determining the Compensation of the Directors and Audit & Supervisory Board Members

  • Please refer to"Disclosure of Policy on Determining Compensation Amounts and Calculation Methods," [Matters Related to Compensation to Directors] on .1. Organizational Composition and Operation.

(iv) Policies and Procedures for Appointment of Directors, Audit & Supervisory Board Members and

CEO

  • The candidates for Directors shall meet the requirement of being personnel of excellent character and insight who contribute to maximizing the corporate value of the Group.
  • The candidates for Directors shall meet the requirements of being appropriate candidates with respect to term of office and age, and of being suitably competent of performing timely and accurate judgment, looking at the changes in the business environment while giving importance to the continuance of management policies, etc.
  • The candidates for Directors shall meet the requirements that there shall always be Outside Directors included to strengthen the decision-making functions based on various perspectives and to strengthen the function of supervising conduct of operations.
  • The candidates for Outside Directors shall meet the requirements that they are the individuals with expertise, experience and insight in fields including corporate management, finance and accounting, science & technology, global business, sustainability and ESG.
  • The Company shall confirm that the status of material concurrent positions of candidates for Outside Directors is within a range in which they are able to perform their duties as Directors of the Company appropriately.
  • The Company recognizes that ensuring the diversity of Directors particularly in terms of gender and nationality as well as incorporating diverse opinions into management are important for strengthening the supervisory function and decision-making of Board of Directors. The Company will continue to discuss the selection of candidates for Directors going forward, taking into consideration such aspects.
  • When appointing the candidates for Directors, Board of Directors shall appoint the candidates after they have been sufficiently deliberated by the Nomination Committee, of which Outside Directors form a majority.
  • The Directors Regulations of the Company stipulate that Directors must attend meetings of Board of Directors except where there is an unavoidable reason.
  • The candidates for Audit & Supervisory Board Members shall be examined prudently concerning their suitability as Audit & Supervisory Board Members, such as whether they can fulfil their duties, ensuring their independence from the representative directors, Directors, and corporate officers.
  • When nominating the candidates for Audit & Supervisory Board Members, Board of Directors shall nominate the candidates that have been deliberated by the Nomination Committee, and agreed by Audit & Supervisory Board.
  • The candidates for Outside Directors and Outside Audit & Supervisory Board Members shall be confirmed to have no problems according to specific criteria on the judgment of independence.
  • When appointing the candidates for Directors and Audit & Supervisory Board Members, the General Meeting of Shareholders shall appoint the candidates after the relevant proposal.
  • Candidates for CEO shall be nominated based on the succession plan and defined eligibility requirements, etc. that have been repeatedly discussed at the Nomination Committee.
  • Appointment of CEO (including reelection) shall be determined by resolution of Board of Directors over a recommendation from the Nomination Committee that the Committee submits after sufficient deliberation.

(v)Policies and Procedures for Dismissal of Directors and CEO

  • If any Director is found not meeting eligibility requirements or requirements for execution of duties defined in the Companies Act or the Directors Regulations, following deliberation at the Nomination Committee and Board of Directors, the General Meeting of Shareholders shall deem that it meets criteria for dismissal of Directors, and resolve dismissal of such Director after the relevant proposal.
  • Dismissal of CEO shall be called into account in light of the Companies Act, defined CEO eligibility requirements or requirements for execution of duties, and determined in the same manner as appointment, by resolution of Board of Directors over a recommendation from the Nomination Committee that the Committee submits after sufficient deliberation.

() Disclosure of Reasons for Nomination of Candidates for Directors and Audit & Supervisory Board Members

The Company shall disclose matters considered important for nomination of candidates for Directors and Audit & Supervisory Board Members, and career history and reasons for nomination of each of them in the Reference Documents for General Meeting of Shareholders.

()Disclosure of Reason for dismissal of CEO, Directors or Audit & Supervisory Board Members and CEO

The Company shall disclose reasons for dismissal in the Reference Documents for General Meeting of Shareholders and others when the Company dismisses CEO, any Director or Audit & Supervisory Board Member during their terms of office.

For Convocation Notice of the Ordinary General Meeting of Shareholders,

please visit the following URL: https://www.daiichisankyo.com/investors/shareholders/meetings/

Supplementary Principles 4.1.1 Roles and Responsibilities of the Board (1)

The Company prescribes in Board of Directors Regulations the matters referred to, and reported to Board of Directors by the management team. In the Daiichi Sankyo Group Management Committee Policy, and the approval policy, the decision-making scope entrusted to the management team is clearly prescribed. Important matters related to management (business plans, personnel and organization, financing, etc.) shall be referred to Board of Directors, and the decision of other business execution allowable under laws and regulations shall be ultimately entrusted to the Chief Executive Officer (CEO) and Representative Director, President.

Principle 4.8 Roles and Responsibilities of Independent Directors (Outside)

Aiming to strengthen the decision-making functions based on various perspectives, and to strengthen the supervising function for execution of operation, the Company prescribes in the Directors Regulations that candidates for Directors must include Outside Directors whose independence from the Company has been secured. Currently four of nine Directors are appointed as Independent Directors (Outside), and they provide proactive opinions and pertinent observations in Board of Directors Meetings.

Principle 4.9 Independence Standards for Outside Directors

Concerning the independence of the Outside Directors, the Company judges this independence based on the precondition that the independence criteria set by the Tokyo Stock Exchange and the Company's criteria for independence of Outside Director are satisfied and on the viewpoint of whether the Company can expect the proactive opinions and pertinent observations about issues concerning the Company's business.

In line with the criteria for independence of Outside Director prescribed by the Directors Regulations, the Company nominates Outside Directors of excellent character and insight who possess specialist knowledge. The Company's criteria for independence of Outside Director and Outside Audit & Supervisory Board Member is also stated in the Internet Disclosure Accompanying the CONVOCATION

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Daiichi Sankyo Co. Ltd. published this content on 22 June 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 June 2021 08:24:07 UTC.


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