Fuji Oil : Corporate Governance Report (872.34KB)

Corporate Governance Report

CORPORATE GOVERNANCE	FUJI OIL HOLDINGS INC.
Last Update:	Dec 21, 2023
	FUJI OIL HOLDINGS INC.

Mikio Sakai, President and Representative Director

Contact: Yoshiharu Okamoto, Chief of

Corporate Communication Group

Securities Code: 2607

https://www.fujioilholdings.com/en/

The corporate governance of FUJI OIL HOLDINGS INC. (the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and

Other Basic Information

1. Basic Views

Through the realization of effective corporate governance, the Company aims to prevent theoccurrence of situations that could harm the Company's corporate value, including legal violations, corruption, or scandals, as well as promote sustainable growth and increase our medium- to long-termcorporate value. We position corporate governance as a vital framework for meeting the expectations of our stakeholders, including shareholders, clients and business partners, Company executives and employees, and general society, and ensuring fair and rapid decision-making.

Moreover, the Company believes that strengthening the monitoring functions of the Board of Directors while flexibly and rationally making decisions and executing business is very important to meet the trust and expectations of our shareholders and other stakeholders. Therefore, we shifted from being a company with an Audit and Supervisory Board to being a company with an audit and supervisory committee with a resolution at our 94th Ordinary General Meeting of Shareholders. That will further enhance our corporate governance by strengthening the supervisory functions of the Board of Directors with Audit and Supervisory Committee members responsible for auditing the execution of duties by Directors serving as members of the Board of Directors. At the same time, we are delegating the authority to make important business execution decisions to Directors, and promoting the execution of growth strategies.

Reasons for Non-compliance with the Principles of the Corporate Governance Code ■ Supplemental Principle 2-4-1:Ensuring Diversity in the Promotion of Core Personnel

• Concept of Ensuring Diversity
  ＜Concept of Ensuring Diversity＞
  The Company believes that respecting and promoting diversity is a very important social responsibility for

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us as we are involved in business activities globally. We also think that diversity of personnel isindispensable to achieve sound business development and social contribution amid a greatly changing business environment.

We have not announced target achievement rates for the recruitment of women, foreigners and mid-career personnel from the perspective of promoting and placing the right personnel in the right places. Nevertheless, we are actively working on the promotion of women in particular to core positions by ensuring half of our new graduate recruits (excluding in production employees) are women in addition to providing women with fair opportunities.

For details on metrics concerning our ratio of female managers, please refer to our 95th Marketable Securities Report under Status of Employees (4) Metrics Related to Diversity. (https://www.fujioilholdings.com/ir/library/negotiable/)

As for foreigner personnel, our efforts towards globalization have resulted in overseas human resources constituting 70% of our 6,000 total employees.

For career-oriented personnel, we are aggressively engaged in hiring with the aim of securing the new global business management skills required for our business strategy and incorporating diverse new perspectives into our business management.

One of the basic policies of our Midterm Management Plan is to implement sustainability strategy that is linked to our business strategy. One of the sustainability strategies we outline is the utilization of human resources, which includes evaluating the placement of the management-level human capital necessary to realize our management plans.

For the CEO, we have built scheme for a CEO succession plan through which we will evaluate the necessary requirements of future CEOs, select candidates, and outline development plans.

For directors, we will use a skills matrix to evaluate individual expertise and experiences while giving weight to diversity and changes in our operating environment. Director candidates are evaluated by the Nomination and Compensation Advisory Committee and further discussed annually at the General Meeting of Shareholders.

For executive officers and human resources who will serve in management posts at major Group companies, we select and train personnel for growth opportunities and management experience to enhance their perspective and their ability to support Group business activities.

To foster the development of future leaders, current management engages in multifaceted discussions to develop human resources strategically based on the future outlook for the Group. We started human resource development meetings as a place for evaluating the development of future leaders. We select and encourage the development of candidates to create successors at each level. We also select trainees for overseas placement to promote the development of future overseas human resources.

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The Company has disclosed our thoughts and efforts relating to diversity on Integrated Report, Sustainability Report and our website.

-Integrated Report

https://www.fujioilholdings.com/en/pdf/ir/library/integrated_report/fujioil_integrated_report2023_01_en.pdf -SustainabilityReport

https://www.fujioilholdings.com/en/sustainability/ -DiversityManagementhttps://www.fujioilholdings.com/en/sustainability/social/diversity/

• Personnel Training Policy, Internal Environment Development Policy and Other Situations to Ensure Diversity
  Please refer to our 95th Marketable Securities Report under Sustainability Approach and Initiatives (6) Human Capital and Diversity.
  https://www.fujioilholdings.com/ir/library/negotiable/

(Corporate Governance Code Standards Revised in June 2021)

Disclosure Based on the Principles of the Corporate Governance Code

■ Principle 3-1(ⅰ)：Corporate Philosophy / Mid-Term Management Plan / Corporate Governance

Policy

The Company established the Fuji Oil Management Philosophy as our corporate philosophy and publish this Management Philosophy on our website.

(https://www.fujioilholdings.com/en/about/constitution/)

On April 1, 2023, we outlined a new vision for the Fuji Oil Group Management Philosophy. This new vision indicates the direction we will take to overcome issues and achieve continuous growth in an operating environment that has seen dramatic change in recent years,

Our Midterm Management Plan is available via our website: (https://www.fujioilholdings.com/en/ir/policies_and_systems/interim_results/).

■ Supplemental Principle 5-2-1: Business Portfolio

The Company is promoting product development and business strategies which accurately capture the trends sought by the market in the expansion and conversion of business that responds to mid- to long-term changes in the business environment. We are reviewing our business portfolio in anticipation of

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future changes in the business environment and optimizing our production bases overall in a timelymanner. Moreover, we have been determining the allocation of management resources for investment and other areas by verifying whether that would create cash flows which exceed the profitability set in the Group according to investment profit standards.

Under the Mid-Term Management Plan, Reborn 2024, for the three-year period between FY2022 and FY2024, we will combine our Group's technology with the products of various business divisions to pioneer new markets and customers by approaching new markets. And we will create new value and realize highly profitable business portfolio by shifting our portfolio from a focus on commodity products to high value-added solutions. We will concentrate allocation of management resources into growth and strategy areas and redistribute management resources to prioritize industrial chocolate business in the North and South America and the plant-based oils business. This will increase Group revenue and promote stable growth.

■ Principle 5-2: Action to Implement Management That Is Conscious of Cost of Capital and Stock Price

For more information on our actions to implement management that is conscious of cost of capital and stock price, please refer to the following URL.

-Integrated Report Pages32-39

https://www.fujioilholdings.com/en/pdf/ir/library/integrated_report/fujioil_integrated_report2023_01_en.pdf The company has decided to introduce ROIC as a management indicator to measure capital efficiency in each business and have set a company-wide ROIC target of 5% for FY2024. In each business, we will improve ROIC by implementing pricing policies, recovering operating income through increased sales volume and other measures, and improving productivity, we will continue to build a business portfolio with high capital efficiency.

-Investors Meeting for Business Results of 4Q/FY2022 https://www.fujioilholdings.com/en/pdf/ir/library/hosoku/230511_presentation.pdf

■ Principle 5-1：Policy on Constructive Dialogue with Shareholders

Under "Dialog with Shareholders" in the Fuji Oil Holdings Corporate Governance Guidelines, theCompany outlines and discloses provisions requiring the creation of a structure and initiatives to promote constructive dialogue with shareholders.

https://www.fujioilholdings.com/pdf/en/ir/policies_and_systems/governance/guidelines.pdf

; Conducting dialogue with capital markets

We recognize that dialogue with capital markets is an important part of contributing to improvements in corporate value. Led by the Company's CEO and CFO, directors, including outside directors, and senior

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management personnel proactively engage in dialogue. We listen closely to the opinions of investors and analysts, share issues at the management level and work to incorporate that feedback into improving the Company's management.

■ Principle 3-1(ⅱ)：Basic Stance and Basic Policy on Corporate Governance

The Company established the Fuji Oil Holdings Corporate Governance Guidelines as principles and guidelines to be referenced in relation to corporate governance and these guidelines on our website.

https://www.fujioilholdings.com/pdf/en/ir/policies_and_systems/governance/guidelines.pdf

■ Supplemental Principle 3-1-3: Sustainability Efforts

; Sustainability Efforts

The Company Group has embraced a Vision in the Fuji Oil Group Management Philosophy: "Together with our stakeholders, we will co-create a sustainable future for food, based on plant-based ingredients that are both delicious and healthy" and is promoting sustainability management.

All employees in the Group will promptly grasp social issues in the value chain (environmental issues, human rights, and physical and mental health, etc.) and then strive to provide solutions to meet the expectations of all our shareholders and to create social value. That will allow us to aim to realize a sustainable food future and improve the corporate value of the Group.

The Company established the ESG Committee (the name changed to the Sustainability Committee from2022) in 2015 as an advisory body of our Board of Directors in Fuji Oil Holdings and is operating it with the purpose to strengthen sustainability management.

Chaired by an internal director in charge of ESG, the committee receives advice from external experts, identifies the Group's ESG materiality, applies a multi-stakeholder perspective to discussing and supervising initiative targets and strategies, and provides reports to the Board of Directors. The Committee also serves an advisory and monitoring functions by receiving progress and performance reports on each initiative theme from managers in charge of promotion.

The Subcommittee on Group Significant Risks, which operates under the ESG Committee, works to mitigate the risk of damage to corporate value by identifying major Group-wide risks and evaluating the appropriateness of countermeasures.

-SustainabilitySitehttps://www.fujioilholdings.com/en/sustainability/ -ESGData Bookhttps://www.fujioilholdings.com/pdf/en/sustainability/download/esg2023.pdf -GRIStandard Comparison Charthttps://www.fujioilholdings.com/pdf/en/sustainability/download/gri2023.pdf

The Group announced our endorsement of the Task Force on Climate-related Financial Disclosures (TCFD) in May 2019. We are disclosing information in regard to four items - governance, strategies, risk

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management, and indicators and targets - based on the recommendations of the TCFD. -Risk Management System https://www.fujioilholdings.com/en/sustainability/governance/risk/

; Investment in Intellectual Property

We have provided high value-added products utilizing the research results and technological capabilities we have accumulated over many years by using palm, cocoa, soybean and other plant-based raw materials as our basic raw materials since our foundation. We have built the results we have refined based on our core technologies into a patent portfolio to ensure the market superiority and pricing power of differentiated products. We have the leading share in Japan of important patents (based on number of patent citations) that can affect market superiority and pricing power in vegetable oils and fats business, industrial chocolate-related business, plant-basedfood-related business. Furthermore, we are also located near the top when it comes to human resource investment (≈ number of new inventors: number of inventors who have made a new patent application) to generate important patents in the future compared to our competitors both in and outside of Japan.

Moving forward, we will collaborate with our overseas sites to formulate and implement intellectual property strategies on a business-specific basis in order to enhance our global market superiority and pricing power.

Since last year, we have been utilizing external experts to analyze patent information and the value of products, disseminating intellectual property information that is useful to researchers, and reporting to management on proposals that are useful for business and R&D policies.

; Investment in Human Capital

For information on our Group's approach to human capital, our human resource strategy, and policies for achieving human resource strategy targets, please refer to our 95th Marketable Securities Report under Sustainability Approach and Initiatives (6) Human Capital and Diversity.

(https://www.fujioilholdings.com/ir/library/negotiable/)

■ Principle 1-4：Cross-shareholding

Since the corporate governance code was adopted in 2015, we have worked to eliminate cross-shareholding in accordance with the spirit of Principle 1-4. We currently hold 17 stocks in our cross-shareholdings. Comparing the end of FY2015 with the end of FY2022, we sold all our cross-shareholdings in 16 stocks. We have also continued to work on the partial sale of our cross-shareholdings. We have sold approximately 74% of the total acquisition price of our crossshareholdings as of the end of FY2015 by the end of FY2022.We have also been exercising voting rights for our individual cross-shareholdingsby comprehensively taking into account compliance with our shareholding policy and contribution to an improvement in the corporate value of the issuing company.

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We will continue to review the situation concerning our cross-shareholdings at the Board of Directors' meeting at the end of the fiscal year. We will consider the propriety of our shareholdings by closely examining in concrete terms whether the purpose of the shareholding is appropriate and whether the benefits and risks associated with that shareholding correspond to the capital costs for each of our individual cross-shareholdings.At the same time, we will work to reduce our cross-shareholdingsforstocks that are not compatible with our shareholding policy.

■ Principle 2-6：Functioning as the asset owner of the corporate pension

The Company has posted a person in charge of the operation of contract-type defined benefit corporate pensions to the HR & Administration Division. We are promoting the operation of reserve funds and the building of a structure as an asset owner.

1. On the human resources side, we appoint former members of the Public Pension Asset Management Committee, securities analysts, and other employees with the appropriate qualifications expected of corporate pension asset owners to serve as advisors. These advisors provide advice and support towards ensuring the appropriately implements monitoring activities of consigned asset managementinstitutions.
2. We hold quarterly Asset Management Committee meetings to select asset management institutions based on the results of fund management monitoring by the consigned asset management institution. Furthermore, during the consignment of asset management, we confirm that all asset management institutions (total of six institutions) have adopted the Stewardship Code.
3. To manage any conflicts of interest between corporate pension beneficiaries and the Company, we leave the selection of individual investment targets and judgments on the exercising of voting rights to the discretion of each asset management institution to ensure there are no conflicts of interest.

■ Supplemental principle 4-1-1：Scope of decision-making by the Board of Directors and transition

of authority to the management team, etc.

Under " Roles and Responsibilities of the Board of Directors" in the Fuji Oil Holdings Corporate Governance Guidelines, the Company outlines and discloses provisions stipulating that excludingmatters requiring resolutions by the Board of Directors in accordance with provisions outlined in law or internal regulations, decision-making related to the execution of business shall be delegated appropriately to managing directors and executive officers.

■ Principle 3-1(iii)： Compensation decisions, nomination policies for Management team and

Directors (excluding Directors who also serve as Audit and Supervisory Committee Members), etc.

The Company outlines and discloses provisions stipulating as below for " Compensation, etc., of Directors who are not Audit and Supervisory Committee Members and Directors who also serve as Audit and Supervisory Committee Members " in the Fuji Oil Holdings Governance Guidelines,

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1, Compensation of Directors who are not Audit and Supervisory Committee Members shall be an amount within a scale resolved by the General Meeting of Shareholders. The Nomination andCompensation Advisory Committee shall deliberate fairly and transparently, and it shall be decided by the Board of Directors.

2.Compensation of Directors who also serve as Audit and Supervisory Committee Members shall be a separate system from compensation of Directors who are not Audit and Supervisory Committee Members.

It shall be an amount within a scale resolved by the General Meeting of Shareholders, and the audit and supervisory committee shall decide it through consultation.

■ Principle 3-1(iv)：Policy on nomination, election and removal of management team and Directors

(excluding Directors who also serve as Audit and Supervisory Committee Members), etc.

Under "Selection Criteria, etc., for Director Candidates and Audit & Supervisory Board Member Candidates" in the Fuji Oil Holdings Corporate Governance Guidelines, the Company outlines selection standards and procedures for choosing director or Audit & Supervisory Board member candidates.

■ Supplemental principle 3-1(v)：Explanation of reasons for nominating individual candidates for

directors and audit & supervisory board members, etc.

The Company outlines that the reasons for nominating candidates of Directors who are not Audit and Supervisory Committee Members and Directors who also serve as Audit and Supervisory Committee Members must be deliberated by the Board of Directors and then reported to the Nomination and Compensation Advisory Committee, an advisory body to the Board of Directors that is chaired by anOutside Director. As of the 88th Ordinary General Meeting of Shareholders, the individual reasons for nominating each director or Audit & Supervisory Board member candidate had been disclosed via publication in the reference materials included with the convening notice for the Ordinary GeneralMeeting of Shareholders. To ensure the independence of the Audit and Supervisory Committee, during the selection process for candidates of Directors who also serve as Audit and Supervisory Committee Members, highest priority is placed on the opinion of the audit and supervisory committee, which also references the Nomination and Compensation Advisory Committee report.

■ Supplemental principle 4-14-2：Training policy of Directors （including Audit and Supervisory

Committee Members)

Under "Support System and Training Policy for Directors " in the Fuji Oil Holdings Corporate Governance Guidelines, the Company outlines and discloses provisions stipulating that directors continuously be provided the information and knowledge concerning business activities required to monitor operations both at the time of their appointment and after their appointment. The Company also outlines guidelines for the training of directors in order to provide the opportunities necessary to fulfill the roles required of them.

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■ Principle 4-9： Criteria for determining the independence of independent Outside Directors and

their qualifications

To ensure the independence of Outside Directors, we select Independent Director candidates based on the parameters for Independence outlined in the financial instrument exchanges on which our Company is listed as well as in accordance with the standards for judging the independence of Outside Directors we outline. Our standards for judging the independence of Outside Directors are as outlined below. Furthermore, to ensure the independence of Outside Directors, we believe it is appropriate to set maximum terms of six years for Independent Outside Directors.

As standards for judging the independence of Outside Directors, we outline that candidates not be applicable to any of the following. This information is indicated in the Reference Documents for theGeneral Meeting of Shareholders.

1. Director, Audit and Supervisory Board Member (excluding Outside Director and Outside Audit and Supervisory Board Member), Executive Officer, or employee of the Company or a subsidiary of the Company (hereinafter, collectively referred to as the "Group")
2. Director, Audit and Supervisory Board Member, Executive Officer, or employee of a major shareholder* of the Group

• Top ten major shareholders listed on the latest shareholder registry at the time of assuming office (including those holding Company's shares indirectly)

1. Director, Audit and Supervisory Board Member, Executive Officer, or employee of person for whom the Group is a major business partner*

• Business partner defined as a party who receives payments from the Group amounting to the equivalent of 2% or more of the business partner's annual consolidated sales during the most recent fiscal year

1. Director, Audit and Supervisory Board Member, Executive Officer, or employee of person who is a major business partner* of the Group

• (i) Business partner who makes payments to the Company amounting to the equivalent of 2% or more of the Group's annual consolidated sales during the most recent fiscal year
• 1. Business partner who provides loan to the Group amounts to the equivalent of 2% or more of the Group's total consolidated assets as of the end of most recent fiscal year

1. Director, Audit and Supervisory Board Member, Executive Officer, or employee of a company to which the Group assigns Directors
2. A consultant, accounting professional, or legal professional who received monetary and/or other economic benefit amounting to 10 million yen or more on average per annum over the past three years other than officers' remuneration from the Group
3. A person who falls or fell under item (1) above currently or for the past ten years
4. A person who falls or fell under any of items (2) to (6) above currently or for the past five years

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1. A spouse, relative within the second degree of kinship or other relative living together of a person who falls under any of items (1) through (8) above

■ Supplemental principle 4-10-1：Establishment of the Nomination and Compensation Advisory

Committee

The Company has established the Nomination and Compensation Advisory Committee as an advisory body to the Board of Directors. In order to enhance transparency and objectivity, the committee is chaired by an Independent Outside Director and consists of a majority of Independent Outside Directors.

The Nomination and Compensation Advisory Committee deliberates on matters related to the nomination, succession planning, and compensation of senior management and directors, including the CEO, as requested by the Board of Directors, and reports to the Board of Directors.

■ Supplemental principle 4-11-1：Balance of board of directors and diversity of each director, skill

matrix, etc.

Currently, we have twelve directors (including 6 independent Outside Directors (of which two is female) and 1 Outside Director). Outside Directors represent a majority of all directors.

When selecting director candidates, we believe that diversity (gender, nationality, expertise, etc.) among members of the Board of Directors is important. In the Reference Documents for the General Meeting of Shareholders, we include a skill matrix indicating the domains in which each director is able to apply his/her expertise and experience.

The matrix of skills required by the Board of Directors in light of the business strategy is as follows (https://www.fujioilholdings.com/en/about/governance/system/)

Furthermore, during the nomination of director candidates, we work to ensure objectivity and transparency for the nomination process through the report issued by the Nomination and Compensation Advisory Committee, which is chaired by an Outside Director.

■ Supplemental principle 4-11-2：Concurrent positions held by Directors （including Audit and

Supervisory Committee Members)

The status of Company Outside Directors (including Audit and Supervisory Committee Members) with simultaneous appointments at other listed companies is disclosed in the reference materials included with the convening notice for the Ordinary General Meeting of Shareholders and we disclose Ordinary General Meeting of Shareholders convening notices on the Company website.

■ Supplemental principle 4-11-3：Evaluation of the effectiveness of the Board of Directors

To assess the efficacy of the Board of Directors for FY2022, we conducted interviews with CEO and the Outside Director who is the chairman of the Nomination and Compensation Advisory Committee. We also conducted a survey of all directors. To set the survey questions, the Board of Directors secretariat

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