Eisai's Corporate Governance System
As of March 31, 2023
Features of the Company’s Corporate Governance
- Clear Separation of the Functions between Oversight of Management and the Execution of Business
The Company fully leverages its system of being a company with a nomination committee, etc., with the Board of Directors entrusting a large portion of the decision-making 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 undergoing turbulent changes. Additionally, in order to achieve a clear separation between the oversight of management and the execution of business, the Company has established that the chair of the Company’s Board of Directors be an outside director and that the Representative Corporate Officer and CEO shall be 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 operated by corporate officers, in accordance with the stipulations of the Companies Act. In addition to the matters stipulated in those rules, corporate officers ensure independence by establishing and operating internal control 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 inspects 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 in executing 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 the Company’s corporate governance.
- Diversity of Directors
The Company selects directors who have various different backgrounds so that the Board of Directors can meet the expectations of stakeholders and exercise the function of management oversight.
For outside directors in particular, we aim to ensure diversity over the medium to long term. This includes diversity in terms of tasks from those experienced in corporate management and global business to experts in law and financial accounting, such as nationality, gender, and age.
- System of Operational Divisions for Flexible, Optimal Decision-Making and Business Execution
a. Selection and Assignment of Corporate Officers
The Board of Directors takes a global perspective in selecting the corporate officers who will implement our Corporate Concept and improve our corporate value, and assigns them in ways that allow them to effectively, efficiently harness 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, safety, 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. The Executive Board, Advisory Boards, Etc.
The Company has established mechanisms to support the decision-making of the CEO, including the Executive Board as the highest decision-making body of business execution, the Eisai Scientific Advisory Board (comprised of professors and researchers from world-renowned research institutions) for consideration of the direction of medium- to long-term R&D and general portfolio strategies and tactics, and the Sustainability Advisory Board (comprised of outside specialists from Japan and abroad who are well-versed in international policies) in order to improve our non-financial capital initiatives focused mainly on ESG and the Sustainable Development Goals (SDGs). Based on authority delegated from the Board of Directors, other meeting bodies include the Compliance Committee, the Risk Management Committee, the Company-Wide Environment and Safety Committee, and the Human Rights Awareness Committee.
c. 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. The Company also assigns global corporate officers, with the corporate officers who are in charge directly building and operating internal control systems at overseas subsidiaries.
d. 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 improve the rationality and transparency of decision making, policies, and initiatives of operational divisions, while instilling stakeholder consciousness in management.
- 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, 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 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.
- A Sustained, Autonomous Mechanism for Enhancement of Corporate Governance Centered on Outside Directors
The presence of 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.
FY2022 Efforts Related to Corporate Governance
- Activity status of the hhc Governance Committee
(1) Dialogues with stakeholders
Once each year, the hhc Governance Committee reflects on its implementation of dialogue with stakeholders and deliberates on and confirms measures for the next fiscal year and items for consideration, etc., in preparation for implementation. We implemented the following efforts in FY2022.
・ Hosting of dialogue with cancer survivors
・ Hosting (large) meetings for the exchange of opinions between institutional investors (approximately 60), etc., and outside directors, and to engage in dialogue between individual institutional investors and outside directors
・ Sharing of information and engaging in discussions between labor union representatives and outside directors
・ Visits to plants and laboratories to share information and engage in discussions between young and middle-ranking employees and outside directors
(2) Consideration of the CEO succession plan
・ Sharing and consideration of information related to the succession plan (twice)
(3) 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)
(4) Consideration and implementation of efficient operation of the hhc Governance Committee
In regard to the increasing frequency of meetings and the time required for them, we considered efficient operation in order to ensure sufficient time for more important deliberation. Specifically, we implemented the following measures.
・ We ensured that there was sufficient time for important deliberation items (CEO succession plan, evaluation of the effectiveness of the Board of Directors, reflection on dialogue with stakeholders, etc.).
・ We established a subcommittee to inspect the status of efforts toward sustainability of ESG, etc., and shared information and engaged in discussion with related corporate officers.
・ In regard to the sharing of each type of information required to deepen discussions by the Board of Directors, we made it possible to catch up on audio/video recordings and materials on demand as well, and otherwise enhanced services.
・ Selection of agenda items for the Board of Directors and the hhc Governance Committee
・ Implementation of free discussion without any set themes
・ Sharing of information and discussion regarding issues in the Nomination Committee (consideration of the basic thinking regarding the election of candidates for directorships, the results of investigations related to the election of directors at listed companies and other matters related to officers, etc.)
・ Sharing of information and discussion regarding issues in the Compensation Committee (revision of the compensation system for corporate officers, etc.)
・ Sharing of information on each type of theme by operational divisions (medium- to long-term business outlook, employee human resources systems and other measures, information related to trends in activism and the exercise of voting rights by institutional investors, etc., efforts related to quality control at manufacturing subcontractors, etc.)
・ Invitation of outside lecturers for the sharing of information and discussion regarding the most recent themes related to corporate governance (benefit corporations)
- Dialogue with Stakeholders
In FY2022, the Company engaged in dialogue with patients and the people in the daily living domain, shareholders and institutional investors, and employees, who together constitute Eisai’s main stakeholders, as follows. Further, in the hhc Governance Committee meeting held at the end of the year, we reflected on and discussed such dialogues in order to apply the results in the oversight function of the Board of Directors.
a） Dialogues with Patients
・ Cancer survivors shared their real-life experiences of fighting cancer and the thoughts and feelings they gained through the experience. Through the dialogue, employees learned about the great impact that cancer has on the body and mind, reaffirming the Company’s mission for society. Such dialogue provided a deeper understanding of the importance of empathy with the patient’s emotions, as well as the hhc Corporate Concept and its practical application.
b） Dialogues with Institutional Investors
・ An opinion exchange session was held with approximately 60 institutional investors etc. and others through an online conferencing system, featuring 2 hours of questions and answers, as well as discussions.
・ Individual dialogues with institutional investors were held via online conferencing and in person. Twelve 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 with labor union representatives on behalf of employees for the third time, and face-to-face for the first time, sharing information and exchanging opinions on “compensation (wages) and investing in human assets,” “strengthening and reinforcing policies and human resources systems regarding employees, workstyles, and health,” and more.
・ Directors visited Tsukuba Research Laboratories to view the facilities and receive a briefing of the new research and development system Deep Human Biology Learning (DHBL), deepening their understanding of the concept of drug discovery and the organizational system. A dialogue session was held with the domain heads and young department managers in positions of responsibility in the execution of drug discovery, from the development of the drug discovery hypothesis to its approval. Directors commented on their expectations for the organization and its employees, offering advice based on their own experience, which led to a lively discussion.
・ Directors visited the Kawashima Plant and received an overview of the plant and the Formulation Research Department, as well as a briefing on the latest topics from the Analytical Technology Section and Formulation Research Department. A question and answer session was held, and opinions were exchanged. In addition to viewing the Naito Museum of Pharmaceutical Science and Industry and formulation and packaging processes, directors visited the state-of-the-art injection and research buildings of Eisai Medicine Innovation Technology Solutions (EMITS), deepening their understanding of the Company’s production environment and production system.
・ Director Yumiko Miwa participated in a gathering of (young and middle-ranking) female employees of Eisai Japan (Japan pharmaceuticals business), engaging in lively exchanges of opinions. She discussed the environment, culture, systems, and workstyles with middle-ranking employees, while touching on the themes of balancing work with family life, careers, and mindsets (values) with the young employees.
- 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 is as follows.1) Sharing of Information about 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) Directors provide advice on the succession plan. The CEO considers the advice provided by directors, and reflects it in the succession plan as appropriate.
c）Preparations for Unexpected Situations
Situations, 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.
- Consideration and Implementation of Efficient Operation of the hhc Governance Committee
As the role of the hhc Governance Committee continues to expand in its efforts to improve the Company’s corporate governance, the number of themes it addresses, the frequency of its meetings, and the time required by its activities have increased over the years, while the scope of activities of the outside directors has also grown. We therefore considered efficient operation of the Committee in order to ensure sufficient time for more important deliberation.
a) Securing Sufficient Time for the Deliberation of Important Matters
As the business environment changes, there will be more opportunities for outside directors to communicate closely and deliberate important matters with all members in attendance. The challenge will be how to secure sufficient time for deliberation. In order to ensure the efficient operation of the hhc Governance Committee, our top priority was to ensure sufficient time for deliberation.
b) Establishment of a Subcommittee to Inspect the Status of Sustainability Initiatives
In addition to being a key management issue, sustainability initiatives present a risk that could affect corporate value. Therefore, in addition to regular reports related to ESG, the Board of Directors receives reports from the assigned corporate officers regarding individual topics and monitors the efforts. The hhc Governance Committee has established a subcommittee to inspect the status of sustainability initiatives in order to enhance discussions on sustainability at meetings of the Board of Directors.
This subcommittee has shared information and held discussions on the following topics, led by the committee members delegated to operate them.
(1) Policy and Issues Related to TCFD* Disclosure and the Orientation Toward Enhanced Disclosure
* Task Force on Climate-related Financial Disclosures
(2) Eco-friendly business activities (evaluation results of water security reports, systems for promoting environmental management, the status of CO2 reductions [Scopes 1, 2, and 3], the status of the introduction and operation of internal carbon pricing, etc.)
(3) Reports related to general sustainability disclosures (CSRD*1, DJSI*2, ATM*3 Index, human rights and sustainable procurement, etc.)
*1 Corporate Sustainability Reporting Directive
*2 The Dow Jones Sustainability Indices
*3 Access to Medicine
(4) Reports on Women’s Participation and Advancement
The status of the subcommittee discussions was promptly reported to the hhc Governance Committee.
c) Information-Sharing Measures to Deepen Discussions at Meetings of the Board of Directors
In preparing the agenda for meetings of the Board of Directors and the hhc Governance Committee in FY2022, we divided and organized the topics into 3 categories, namely, (1) discussion with the participation of all members, (2) action by subcommittees, and (3) information necessary to Deepen. Regarding (3), we also considered how to share the information.
As a result, efforts were made to improve the convenience of information sharing through a new measure that makes it possible to record or film the exchanges of opinions on the Value Creation Report, subcommittee meetings, and training sessions for new outside directors, and make both the sessions and documents available for later viewing on-demand.
- 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 Concept, 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 department managers held briefing sessions (17 times in 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 concrete examples of hhc activities, 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 benefit corporations.
・ Compliance training for inside directors and corporate officers was carried out. Outside directors also voluntarily participated in this training.
b) Communication with Corporate Officers
・ Training for newly appointed outside directors was based on in-person briefings, with corporate officers providing individual explanations of their areas of responsibility and sharing information on the Company’s business contents and activities. Lively discussions were also held.
・ In addition to the in-person briefings, these training sessions utilized online conferences. Outside directors besides the newly appointed ones also voluntarily participated. In addition, by filming the corporate officers’ briefings and Q&A sessions, we have made the sessions available for on-demand viewing by directors.
・ The corporate officer in charge of the China region visited Japan together with the local top management team to share information and hold discussions on the risks present in the region, such as government-concentrated purchasing.
・ Director Richard Thornley paid a visit to Eisai Europe Ltd. in Hatfield, U.K., where in addition to viewing the facilities, he also held a dialogue with the corporate officer in charge of the EMEA region.
- 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.
FY2022 Corporate Governance Evaluation ResultsIn 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 FY2022 to the issues identified in the FY2021 Board of Directors evaluation as issues for FY2022 was checked and evaluated, and the issues, etc., for the next fiscal year were recognized