Corporate Governance System

Eisai's Corporate Governance System

Features of Eisai's Corporate Governance

  1. Clear Separation of the Functions between Oversight of Management and the Execution of Business Eisai fully leverages its system of being a company with a nomination committee, etc., with the Board of Directors entrusting a large portion of the decisionmaking authority over business execution to corporate officers, to the extent permitted by laws and regulations, in order to devote its attention to the oversight of management. This enables prompt, flexible decision-making and business execution by corporate officers even in environments that are undergoing turbulent changes. Additionally, in order to achieve a clear separation between the oversight of management and the execution of business, Eisai has established a practice of having the chair of the Board of Directors be an outside director, and of the Representative Corporate Officer and CEO being the only individual to concurrently serve as a corporate officer and a director.
    Clearly separating the oversight of management and the execution of business enhances corporate vitality. The Board of Directors exercises the function of oversight from the perspective of stakeholders to ensure fairness and transparency in management. Meanwhile, the Board of Directors passes resolutions on rules related to “systems for ensuring proper business operations,” and establishes the specific rules for internal controls that should be put in place and implemented by corporate officers, in accordance with the stipulations of the Companies Act. In addition to the matters stipulated in those rules, corporate officers ensure autonomy by establishing and operating internal controls in their assigned duties, thereby increasing the speed and flexibility of business execution. 
    Under this structure, the Board of Directors also checks the status of execution of duties by corporate officers, and examines the appropriateness of the status of internal controls such as the business execution and decision-making processes from the perspective of shareholders and society.
    Directors and corporate officers communicate with each other and build trust when carrying out their respective duties and fulfilling their responsibilities, working together to increase corporate value and contribute to the creation of social value. Mechanisms such as these are the characteristics of good corporate governance.
  2. Diversity of Directors
    Eisai selects directors with diverse backgrounds so that the Board of Directors can meet the expectations of stakeholders and fulfill its management oversight function. For outside directors in particular, we aim to ensure diversity over the medium to long term. This includes not 
    only diversity in terms of nationality, gender, and age, but also diversity in terms of professional expertise, from those experienced in corporate management and global business to experts in law and financial accounting.
  3. System of Operational Divisions for Flexible, Optimal Decision-Making and Business Execution
    a.   Selection and Assignment of Corporate Officers 
    The Board of Directors selects corporate officers who will be responsible for realizing the corporate concept and enhancing corporate value from a global perspective and positions them so that they can effectively and efficiently demonstrate their capabilities. People who are well-versed in the operations in each field of administration, including those with advanced expertise in R&D, science, and the production, quality, and other aspects of pharmaceuticals, as well as those with extensive knowledge in the medical systems and health care markets in particular regions of the world, are selected as corporate officers. 
    b.   Building and Operating a Global Internal Control System
    The Board of Directors has established the “Rules for Preparing Necessary Systems for Ensuring the Suitability in the Performance of Duties by Corporate
    Officers.” The corporate officers implement, maintain, and operate internal control systems in their assigned duties in accordance with the Rules. Eisai also assigns global corporate officers, with the corporate officers who are in charge directly building and operating internal control systems at overseas subsidiaries.
    c. Instilling Management with Accountability and Stakeholder
    Consciousness Once every 3 months, all corporate officers attend a Board of Directors meeting and report to the Board of Directors on decisions made in operational divisions, as well as the status of their business execution. Corporate officers having accountability and reporting to the Board of Directors improves the rationality and transparency of decision-making, policies, and initiatives of operational divisions, while instilling stakeholder consciousness in management.
  4. Management Oversight by the Board of Directors
    The Board of Directors delegates a large portion of the decision-making authority over business execution to corporate officers, and corporate officers are responsible for reporting to the Board of Directors in a timely and appropriate fashion. The Board of Directors has the authority to select and dismiss corporate officers, and confides in corporate officers by verifying the appropriateness and efficiency of business execution processes based on their reports while also evaluating the performance results of the business execution, thus fulfilling the role of management oversight by ensuring the
    appropriateness and efficiency of management.
    The Board of Directors also delegates important management oversight functions of the Board of Directors to the Nomination Committee, Audit Committee and Compensation Committee, and oversees the execution of the duties of these committees based on their respective reports. The fairness and transparency of the Board of Directors are also ensured through oversight of each individual director to verify whether they are making fair judgments, exercising their authority in a way that satisfies the confidence placed in them by all shareholders, and executing their business functions appropriately.
  5. A Sustained, Autonomous Mechanism for Enhancement of Corporate Governance Centered on Outside Directors
    The presence of 7 independent outside directors, who account for the majority of the Board of Directors, supports the effectiveness of the Company’s corporate governance structure. The Company has established and is operating a mechanism to enhance sustained, autonomous corporate governance centered on outside directors, including (1) a system of electing neutral and independent outside directors by a Nomination Committee, (2) operating the Board of Directors, etc., through the leadership of a chair who is an outside director, (3) an “hhc Governance Committee” for broad discussion of corporate governance, including dialogues with stakeholders and the consideration of succession plans, etc., and (4) corporate governance evaluations through Plan-Do-Check-Act (PDCA) cycles of the Board of Directors and each committee. We will continue to work to enhance the content of each of those efforts.

FY2021 Efforts Related to Corporate Governance

      1. Activity status of the hhc Governance Committee

        (1) Sharing of information related to efforts toward sustainability
        ・ Sharing and discussion of the background leading to production of the “Value Creation Report” (the Company’s integrated report on sustained corporate growth through the enhancement of non-financial capital) and information regarding changes in the ESG-related environment
        ・Sharing and discussion of information regarding promotion of active participation by women, human rights due diligence, the results of recent outside ESG evaluation, and efforts toward eradicating lymphatic filariasis
        (2) Dialogues with stakeholders
        ・ Dialogue with early-onset dementia patients (February 2022)
        ・ Hosting lectures from guest institutional investors (analysts) and holding discussions (September 2021)
        ・ Hosting (large) meetings to engage in dialogue with institutional investors, etc., (December 2021) and engaging in dialogue with individual institutional investors (June and December 2021)
        ・ Participation of outside directors in online briefings for individual shareholders (January 2022)
        ・ Hosting of dialogues between labor union representatives and outside directors (February 2022)
        (3) CEO succession
        ・ Sharing and consideration of information related to the succession plan (September 2021, March 2022)
        (4) Evaluation of the effectiveness of the Board of Directors
        ・ The hhc Governance Committee conducted a corporate governance evaluation (a self-review of the Corporate Governance Principles and the Internal Control Regulations, as well as a Board of Directors evaluation by individual directors) (March 2022)
        (5) Others
        ・ Discussed Board of Directors agenda items (August 2021)
        ・ Free discussion (August 2021)
        ・ Discussion of trends in the results of the exercise of voting rights, anti-takeover measures, and shareholder proposals (August 2021)
        ・ Sharing and discussion of the latest information related to corporate governance, led by outside instructors (October 2021)
        ・ Sharing and discussion of information regarding issues in the Nomination Committee (diversity and skill matrix of directors, continued securing of outside director candidates, etc.) (November 2021)
        ・ Sharing and discussion of information related to “the ideal nature of management oversight” that is the responsibility of the Board of Directors (December 2021)
        ・ Sharing of information with the assigned corporate officers about Americas business and platform business (February 2022)
        ・ Consideration of exceptional implementation of performance-based compensation for corporate officers and  disclosure of the compensation of directors and corporate officers in securities reports (February 2022)

      2. Dialogue with Stakeholders
        a) Dialogues with Patients
        ・ Talking with early-onset dementia patients, learning about the way they face the disease and the stern realities of the impact of dementia on their lives provided a renewed recognition of the Company’s social mission. Such dialogue provided a deeper understanding of the importance of empathy with the patient’s emotions, as well as the hhc Corporate Philosophy and its practical application.

        b) Dialogues with Institutional Investors
        ・ Institutional investors (analysts) were invited to give lectures on “What I want to tell outside directors as an institutional investor,” followed by a question and answer session and the exchange of opinions.
        ・ An opinion exchange session was held with approximately 70 institutional investors and others through an online conferencing system, featuring roughly 2 hours of questions and answers, as well as discussions.
        ・ Individual dialogues with institutional investors were held via online and telephone conferencing. Eleven of these sessions were held, sharing information and exchanging opinions with about 8 companies overall.
        ・ Discussions with institutional investors offered the opportunity to hear candid opinions from various perspectives. The matters pointed out and knowledge gained from these dialogues are now being utilized  in discussions and management oversight by the Board of Directors.
        c) Dialogues with Employees
        ・ Dialogues were held (February 2022) with labor union representatives on behalf of employees, and information was shared.

        Dialogue session with institutional investors and others held using an  online conferencing system
      3. Information Sharing and Discussion Regarding the Succession Plan
        • a)
          View Regarding Selection of the Chief Executive Officer (CEO)
          The Company considers the selection of the CEO one of the most important decisions to be made by the Board of Directors. The CEO’s duty is to exhibit strong leadership while also nurturing the next CEO. The Company believes that having outside directors participate in this process with such recognition and having them offer advice, etc., increases the objectivity of the CEO’s proposal of successor candidates. It rationally ensures the fairness of the CEO selection process as the Board of Directors.
        • b)
          Procedures Regarding CEO Selection
          Even after becoming a company with a nomination committee, etc., system in 2004, discussions had been repeated under a consistently optimal corporate governance system regarding the CEO succession process. In FY2016, with consideration given to developments up to that point, discussions were held in the Outside Directors Meeting (now the hhc Governance Committee) on how information should be shared by the Board of Directors in relation to a succession plan formulated by the CEO and how to prepare for unexpected situations. These procedures and other considerations were set out as rules. The outline of the procedures are as follows.
          1) Sharing of Information on the Succession Plan
          (a) Information about the succession plan proposal by the CEO is shared in the hhc Governance Committee twice each year.
          (b) The CEO and inside directors also participate in the hhc Governance Committee, and information on the succession plan is shared among all directors.
          2) Discussion on the Succession Plan
          (a) Criteria for evaluating candidates are expected to change in accordance with the business environment and other factors. For this reason, criteria will be set appropriately when the CEO proposes candidates.
          (b) The CEO evaluates candidates on the criteria that have been set, and presents evaluation results in the succession plan.
          (c) Outside directors provide advice on the succession plan. The CEO considers the advice provided by outside directors, and reflects it in the succession plan as appropriate.
        • c)
          Preparations for Unexpected Situations
          Circumstances, such as unforeseen accidents, that necessitate the sudden selection of a new CEO by the Board of Directors are also possible. Contingency plans for such unexpected situations are also confirmed when considering the aforementioned succession plan.
               
      4. Implementation of Other Various Training Sessions, Etc.

        In order to deepen the understanding of the Company’s business activities and business environment further, enhance deliberations by the Board of Directors, and fully utilize the oversight function, outside directors plan and carry out various training sessions as well as opportunities to interact with operational divisions (corporate officers, employees, etc.).

        a) Training Sessions for Outside Directors  
        ・ Before beginning their terms as newly appointed outside directors, these directors were provided with an overview of the Company and explanations of the Company’s Corporate Philosophy, state of business, important matters concerning corporate governance, various stipulations related to officers, and more.
        ・ After the new directors began their terms, the assigned corporate officers and secretariats held briefing sessions (15 times total) in order to deepen the new directors’ understanding of the Company. Subject matters included the  Company’s business activities, trends in the pharmaceutical industry, the current business environment, and the status of activities of each committee, etc. Directors other than those just beginning their terms also voluntarily joined these briefing sessions to get the latest information.
        ・ Sessions were conducted by outside experts to share and discuss the latest information about corporate governance.
        ・ Compliance training for inside directors and corporate officers was carried out once in the first half and again in the second half of the year, and outside directors also voluntarily participated in this training.

        b) Communication with Corporate Officers
        In regard to communication with corporate officers in FY2021, information on multiple themes related to the status of efforts toward sustainability ((1) the background leading to production of the “Value Creation Report” and information regarding changes in the ESG-related environment (October 2021), (2) the current status of promotion of active participation by women and related issues (November 2021), (3) human rights due diligence, (4) the results of recent outside ESG evaluation, and (5) efforts toward eradicating lymphatic filariasis) was shared and discussed (December 2021).
        Further, in addition to an overview of the business, the corporate officer assigned to the Americas Region explained the FY2021 business plan, the latest business circumstances, and issues for FY2022. Moreover, the assigned corporate officers explained, under the title “the overall picture and manner of implementation of business targeting The People,” matters currently under consideration, and the directors gave their opinions from a variety of perspectives (February 2022).

      5. Implementation of Corporate Governance Evaluation
        The effectiveness of the Board of Directors’ management oversight function is evaluated each year by the hhc  Governance Committee. If any issues related to the operation of the Board of Directors, etc., are identified, a request and proposal for improvement are submitted to the Board of Directors and operational divisions. In the corporate governance evaluation, the status of the activities of the Board of Directors and other management councils is inspected and  evaluated based on the recognition of issues in the previous fiscal year, issues are identified for the next fiscal year, and
        improvement measures are presented, thereby implementing the Plan-Do-Check-Act (PDCA) cycle. Also, the Company has implemented a mechanism in which an outside organization examines the evaluation process, evaluates it, proposes improvements, and inspects the evaluation results, etc., once every 3 years, with the aim of ensuring the suitability of the Board of Directors evaluation and improving the evaluation. The next review by an outside organization is scheduled for FY2023.

        FY2021 Corporate Governance Evaluation Results

        In regard to the Corporate Governance Principles and Internal Control Regulations, no evidence was found of any operation, etc., that deviates from the rules. It was confirmed that the directors and corporate officers, etc., are executing their duties appropriately to improve corporate governance.
        In regard to the Board of Directors evaluation, the state of response in FY2021 to the issues identified in the FY2020 Board of Directors evaluation as issues for FY2021 was checked and evaluated, and the issues, etc., for the next fiscal year were recognized.