The Board of Directors

How the Board of Directors Should Function

Kao’s Board of Directors will conduct a substantial delegation of authority to the executive organizations, and further strengthen its monitoring function to encourage appropriate risk-taking by management and prompt and bold decision-making. In particular, the Board of Directors will effectively supervise the appropriate allocation of management resources, including human capital, and the adequate implementation of strategies by management. It also recognizes that it is the responsibility of the Board of Directors to develop internal controls and risk and crisis management systems, and will build and operate these systems appropriately.

Stance on Balance among Knowledge, Experience and Skills, and on Diversity and Size of the Board of Directors

The Directors and Audit & Supervisory Board Members who attend the Board of Directors meetings provide broad direction regarding business strategies and deliberate on their appropriateness and the risks related to their realization and other matters in an objective and multidimensional fashion.
The Kao Group Mid-term Plan 2027 “K27” includes the vision of “Protecting future lives.” To accomplish this, the Company’s management is executing business in line with the Company’s strategies of (1) becoming an essential company in a sustainable world, (2) transforming to build robust business through investment (a. revitalize existing businesses <Reborn Kao>; b. create new businesses <Another Kao>), and (3) maximizing the power and potential of employees.
The Board of Directors considers it important for Inside and Outside Directors and Audit & Supervisory Board Members to complement each other with each of their knowledge, experience, and abilities, and to be able to demonstrate high effectiveness as a whole, in order to supervise that management is implementing business execution in a framework for transparent, fair, prompt and decisive decision-making accordance with the above strategies.

As of March 24, 2023

Attributes Experience / Knowledge / Expertise Main reasons for marking “✓”
Term of office Gender Nationa
-lity
Manage
-ment
Global Consu
-mer
goods
industry
Chemi
-cal
industry
Human
capital
strategy
Resea
-rch
Environ
-ment/
society
IT/DX Legal/
risk
manage
-ment
Finance/
account
-ing
Directors 14 years and 9 months Male Japan - Experience as the Company’s Representative Director, President and CEO
- Experience as the Company’s officer responsible for Human Capital Development
- Experience in the Company’s Research and Development (fundamental and applied technologies)
- Chair of Japan Clean Ocean Material Alliance (CLOMA)
7 years Male Japan - Experience in the Company’s Research and Development (including experience in global operations, and knowledge of fundamental and applied technologies and matter cycle research)
- Experience at the Company’s overseas business promotion projects
- Experience as the Company’s Senior Vice President of Strategic Innovation Technology, Global as well as experience as the Company’s officer responsible for Human Capital Development
Male Japan - Experience in the Company’s Chemical Business and management experience at overseas subsidiaries (Chemical Business)
- Experience at the Company’s Procurement, Global (including promotion of sustainability activities in procurement)
- Experience as the Company’s officer responsible for Finance Department
Male Japan - - Experience in the Company’s Consumer Products Business - Experience in management at the Company’s overseas subsidiaries
1 year Male United States - Experience in research and business at the Company’s overseas subsidiary - Experience in the Company’s ESG, Global
5 years Male Japan - Experience as the top executive of a major international airline (including experience as Chairman of CSR and Environmental Management Committee)
4 years Female Japan - Knowledge of space science research (medicine and life)
- Experience with NASA
4 years Male Japan - Experience as the top executive of a major international financial institution
- Mostly worked on international assignments, including more than 13 years of work outside Japan
1 year Female Japan - - - - Experience as the head of a global division and the regional head of a major U.S. chemical company
- Experience in overall human resources strategy including compensation, development, and assignment in global businesses
- Knowledge of sustainability in the chemical field
Male Japan - - - - - - - Experience as the top executive of a major food company
- Experience in management of overseas subsidiaries
- Experience in the human resources department of such major food company
Audit & Supervisory Board Members Male Japan - Experience in the Company’s Product Quality Management
- Experience at the Company’s global production sites
- Experience in the Company’s process engineering development and plant management
2 years Male Japan - Experience in the Company’s Finance Department
- Experience in the Company’s Department of Internal Audit
6 years Male Japan - Certified Public Accountant
- Served overseas and the head of the global audit network for the Asia-Pacific region
- Experience in human capital strategy, risk management, etc., as the COO of audit and consulting operations
5 years Male Japan - Attorney-at Law
- Professor at Keio University Law School
3 years Male Japan - Certified Public Accountant

(Scroll horizontal bar to view all items.)

  • * The areas of experience, knowledge, and expertise of each Director and Audit & Supervisory Board Member that are particularly expected of them are marked with a “✓.”
Experience/
knowledge/expertise
Reasons for selection as experience/knowledge/expertise
Management In order to effectively supervise the business execution by management, it is useful for Directors to have their own experience as top management. We
believe that their experience as top management is necessary for the Company’s management to realize appropriate risk-taking and aggressive
governance that encourages prompt and bold decision-making.
Global As part of its global strategies, the Company aims to provide one-of-a-kind value that is less likely to be involved in fierce competition with competitors
and price competition. We will also accelerate global growth by shifting to a local production for local consumption model based on local value, cost
performance, and manufacturing. In order to properly offer advice and supervise the execution of these activities, we believe that it is necessary to have
experience and insight in management positions outside Japan and at non-Japanese companies.
Consumer goods industry
Chemical industry
In order to effectively supervise business execution by management, it is necessary to discuss matters from a higher perspective with taking a bird’s-eye
view of the Company’s entire business domain. To this end, it is important to have a deep understanding of the business environment and market
characteristics in the consumer goods and chemical industries, which are the Company’s business domains, as well as to gain insight into future
prospects.
Human capital strategy The Company has formulated a human capital strategy based on its corporate strategy, and has defined roles and human resource requirements that will
be necessary for future growth, rather than as an extension of existing strategies. The Company is working to secure human resources by systematically
developing and appointing them from outside organizations. We believe that it is necessary to supervise the adequacy and progress of this human capital
strategy from expert knowledge and experience.
Research The Company’s research is the driving force behind generating constantly innovative and high-value products. The Company is committed to Essential
Research and uses its accumulated technological assets to create innovation. We believe that it is necessary to supervise whether we are able to maintain
and develop a research system that continues to generate innovation, and whether we are able to expand our business and increase our corporate value
while effectively using the created technological assets.
Environment/society In April 2019, the Company announced its ESG Strategy, the Kirei Lifestyle Plan, and began ESG management. In order to realize a Kirei World in which
all life lives in harmony, which is our purpose, we will implement the Kirei Lifestyle Plan based on corporate strategies that are integrated with the ESG
Strategy, in consideration of social changes and demands. We believe that it is necessary for the Board of Directors to supervise these matters
appropriately in light of public trends.
IT/ digital transformation (DX) In order to realize K27, we believe that innovative initiatives that actively utilize IT and digital transformation, such as new business creation, digital
marketing and digital communications, which are not an extension of existing initiatives, are essential. With regard to experience, knowledge, and
expertise related to IT/DX, we will utilize executive officers and external human resources to compliment supervision by the Board of Directors.
Legal/risk management Various risks are expected to arise in daily corporate activities, as well as in the creation of new businesses and business innovation. The Company
believes that it is an important challenge in management to recognize these risks, manage them appropriately, and respond strategically, proactively, and
ex post facto to legal matters.
Finance/accounting It is a natural responsibility to ensure the reliability of financial reporting that influences investment decisions. In order to achieve sustainable growth in
corporate value, it is essential to conduct management in consideration of the improvement of profitability and capital efficiency, based on appropriate
capital allocation from a company-wide perspective. For this reason, we believe that the Board of Directors needs experience,
knowledge, and expertise in finance and accounting.

In addition to knowledge, experience and ability, the Company recognizes that diverse perspectives that come from diversity of the Board of Directors in terms of gender, nationality, race and age contribute to the promotion of business, global expansion and proper supervision and auditing, and promotes the appointment of such diverse personnel as Directors and Audit & Supervisory Board Members. The Company’s target for the ratio of women on the Board of Directors is 30% by 2025.
The Company sets the appropriate size of the Board of Directors in consideration of the balance between having diverse personnel required to conduct the proper deliberations and supervision of execution and a small Board of Directors to accelerate decision-making for dealing with business expansion and other matters, on the premise of the delegation of responsibility to appropriately placed Executive Officers. The Company aims to have Outside Directors comprise half of the Board of Directors to ensure its diversity and influence and emphasizes their independence. In addition, the Company aims to have a majority of Outside Audit & Supervisory Board Members who meet the Standards for Independence.

Attending Members for Meetings of the Board of Directors, the Audit & Supervisory Board and Other Committees

◎ Indicates Chairman of the Board or specified committee. ○ Indicates attending member.

Name Age
(as of March 24, 2023)
Board of
Directors
Audit &
Supervisory
Board
Committee
for the
Examination
of the Nominees
for Directors
and Audit &
Supervisory
Board
Members
Compensation
Advisory
Committee for
Directors and
Executive Officers
Compensation
Advisory
Committee
for Audit &
Supervisory
Board Members
Attendance
Board of
Directors
Audit &
Supervisory
Board
Directors 67 14/14
62 14/14
63 *1
61 *1
62 11/11*2
Outside/
Independent
70 14/14
Outside/
Independent
70 14/14
Outside/
Independent
65 14/14
Outside/
Independent
62 11/11*2
Outside/
Independent
63 *1
Board Members
Audit & Supervisory
63 *1 *1
63 14/14 9/9
Outside/
Independent
69 14/14 9/9
Outside/
Independent
59 14/14 9/9
Outside/
Independent
64 14/14 9/9
  • * 1 Assumed at the Shareholders Meeting in March 2023.
  • * 2 The Board of Directors met 11 times since Mr. Muenz and Ms. Sakurai assumed the position.

Activities of the Board of Directors in FY 2022 — Discussion and implementation of further strengthening supervisory functions and delegation of authority to executive organizations

In FY2022, the Board of Directors, the Committee for the Examination of the Nominees for Directors and Audit & Supervisory Board Members, and the Compensation Advisory Committee for Directors and Executive Officers deliberated with a focus on the following issues:

How the Board of Directors should function

Discussed the ideal way the Board of Directors should be, and based on this topic, we also discussed the following content.

  • Revision of the criteria for submission of agenda items to the Board of Directors
  • Monitoring the progress and issues of the Mid-term Plan
  • Discussion of knowledge, experience, and skills required by the members of the Board of Directors

Succession plans for the President and Chief Executive Officer

The Committee for the Examination of the Nominees for Directors and Audit & Supervisory Board Members reviewed the requirements for successors to the President and Chief Executive Officer, selected multiple candidates based on such requirements, and deliberated on the appropriateness of the training plan.

Evaluation and compensation

The Compensation Advisory Committee for Directors and Executive Officers deliberated on the evaluation of Directors and Executive Officers and their compensation. From FY2023, the individual evaluation of short-term incentive remuneration applied to all Directors except Outside Directors will be reflected to a greater extent. The Company has decided to introduce an evaluation confirmation process by Outside Directors and Outside Audit & Supervisory Board members. The Company has also decided to introduce an evaluation confirmation process by Outside Directors and Outside Audit & Supervisory Board members to ensure objectivity and transparency in the evaluation process. In terms of the overall structure of executive compensation as a support for Kao’s future reforms, the Committee continue to discuss the state of compensation in general in FY2023.

Human capital strategy

Discussions were held on the portfolio of human resources and organizations to confirm whether strategies and plans for maximizing the power and potential of employees and maximizing the use of human resources are appropriately formulated and implemented. It was pointed out that the Company should define roles and human resource requirements that will be necessary for future growth, rather than as an extension of existing strategies, and secure human resources strategically by systematically developing employees and appointing them from outside organizations. We will continue to confirm that these measures are being implemented, leading to fruitful results. We also discussed the progress and the results of the Objectives and Key Results (OKR). We will confirm that members of the Group will increasingly take on a variety of challenges and that further collaboration will be promoted through dialogue.

M&A strategy

After indicating the direction of corporate strategy and business transformation based on the business environment and competitive situation, we discussed the areas, factors, and estimated scale that should be acquired through M&A to strengthen our business portfolio. We will continue to review the effectiveness of the strategy and progress of the plan.

Sustainability (Climate Change Risks/Human Rights, etc.)

The Board of Directors received reports on the latest trends and Kao Group’s initiatives on major ESG issues, such as climate change risks and opportunities (TCFD compliance), sustainable palm oil procurement (including human rights), and biodiversity, and confirmed the status of their promotion. We also discussed the need for ESG to be included into growth strategies and profitability. We will continue to review issues related to sustainability.

Evaluation of the Effectiveness of the Board of Directors

On an annual basis, an evaluation is conducted at a meeting of the Board of Directors in order to make improvements aimed at enhancing the effectiveness of the Board of Directors. Based on the idea that the roles and responsibilities of the Board of Directors must be shared by the entire Board of Directors, the Company believes that it is effective for all members who participate in meetings of the Board of Directors, including Audit & Supervisory Board Members, to conduct an evaluation using a method that entails expressing their own opinions and engaging in free and open discussion. Accordingly, evaluation of the effectiveness of the Board of Directors is currently conducted through self-assessment by participating members at a Board of Directors meeting, without the evaluation of a third-party consultant from outside the Company. However, the Company recognizes the usefulness of an objective evaluation by a third party, and continues to consider the introduction of third-party evaluations with an eye to introducing activities that further enhance the effectiveness of the Board of Directors.
For the FY2022 evaluation, prior to the exchange of opinions for self-assessment at the meeting of the Board of Directors held in January 2022, a survey of the nine Directors and five Audit & Supervisory Board Members was conducted on the topics below. Feedback on the results was then provided before the meeting, during which the discussions and exchange of opinions were conducted. The Committee for Examination of Nominees for Directors and Audit & Supervisory Board Members and the Compensation Advisory Committee for Directors and Executive Officers were evaluated at the same time. The following is a summary.

FY2021 Issues FY2022 Initiatives Evaluation Future Initiatives
Structure, Status of
Operation and Deliberations
of the Board of Directors
Further improvements are
expected to ensure substantial
discussion at meetings of the
Board of Directors, including
using effective presentation
methods.
  • Sent materials before meetings and received questions in advance.
  • Allocated half of the available meeting time to presentations and the other half to Q&As.
  • The Board operated effectively in general.
  • There were times when the information in reports was too granular, resulting in unfocused discussion.
  • Participants engaged in free, open, and constructive discussion, but in some cases, there was not enough time for substantial discussion.
  • Use a report format to clarify the key points for discussion and reports.
  • Share Q&As with all participants in advance so that more time can be allocated to substantial discussion based on those Q&As.
Agenda Item Selection
and Discussion
Necessary measures will include
deepening discussions of issues
that impede the achievement of
Kao Group Mid-term Plan 2025
(“K25”), measures to resolve
those issues, and actions to be
prioritized, as well as
conducting regular verification
with greater awareness of PDCA
for the realization of K25.
  • Discussed M&A strategies and global strategies for achieving K25.
  • Created and distributed a table showing the status of progress of K25.
  • Had each of the businesses make reports.
  • Information on the progress of K25 was shared.
  • Issues to be addressed in achieving K25 and interim summaries needed to be discussed in greater depth, including quantitatively.
  • There was a need for stakeholder relations strategies.
  • Further visualize management indicators and deepen discussion of issues to be addressed in achieving K25 and interim summaries.
  • Present reports at the Board of Directors meetings before and after IR activities.
Human capital strategy is a
management issue for ongoing
consideration, and it is
necessary to deepen
discussions of issues including
the allocation of human capital
needed for realizing K25,
promotion and training of
human capital for that purpose,
and the evaluation of executive
staff.
Discussed human capital
strategy reflecting business
environment changes and
business strategy (three times).
Human capital strategy was
thoroughly discussed in
FY2022. There was a need for
further discussion regarding
matters such as how human
capital strategy relates to
business strategy.
Have Executive Officers engage
in deeper discussion of human
capital strategy, present reports
at Board of Directors meetings
for discussion by the Board of
Directors.

Although ongoing initiatives and improvements are needed for continuing verification and discussion of internal control, the FY2022 evaluation concluded that internal control was being properly supervised. Some participants felt that there was a need for priority discussion of structural reforms under “Reborn Kao,” (revitalizing existing businesses) progress toward “Another Kao” (creating new businesses) including new business and M&A and other matters in addition to the verification of K25 and human capital strategy.

Results of the FY2022 Evaluation of Effectiveness of the Committee for Examination of Nominees for Directors and Audit & Supervisory Board Members

FY2021 Issues FY2022 Initiatives Evaluation Future Initiatives
  • To a certain extent, the committee was able to discuss the composition of the Board of Directors required for accomplishing K25 and the ESG strategy, but discussion of structural reinforcement must be further enhanced.
  • Ongoing discussion of the succession plan for the CEO is necessary.
  • Re-evaluated the skills needed by Directors and Audit & Supervisory Board Members based on the vision for the Board of Directors.
  • Confirmed the requirements of successors to the CEO, selected multiple candidates and discussed the suitability of candidate development plans using a skill matrix.
  • The committee needed to continue discussing the Company’s vision for the Board of Directors, as well as the board’s composition.
  • The CEO succession plan was confirmed to be operating properly. There was a need for ongoing verification and deeper discussion
  • Continue discussing the factors necessary for realizing the vision for the Board of Directors, as well as the board’s composition.
  • Continue discussing succession plans.

Results of the FY2022 Evaluation of Effectiveness of the Compensation Advisory Committee for Directors and Executive Officers

FY2021 Issues FY2022 Initiatives Evaluation Future Initiatives
  • There should be ongoing proactive, objective and transparent discussion regarding overall compensation for Directors and Executive Officers, including performance-based compensation.
  • Discussed a clearly defined compensation system based on individual evaluation of Directors and Executive Officers, as well as how compensation should reflect these evaluations.
  • Discussed what form and direction the compensation system for Directors and Executive Officers should take to serve as a mechanism for supporting future transformation of the Kao Group.
  • Matters were discussed thoroughly from a variety of angles.
  • There was a need for ongoing discussion regarding the form of the compensation system for Directors and Executive Officers.
  • Further discuss policy concepts of overall compensation for Directors and Executive Officers and based on this, discuss designs for a detailed system.
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