Fujikura Ltd.

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Governance

Corporate Governance

Basic Views

Fujikura Ltd. established the basic strategy of focusing on an early business recovery in light of the rapid deterioration in performance in FY2019 and narrowed the key measures to “the unreserved selection and concentration of existing businesses” and the “strengthening of Corporate governance”. We are resolutely implementing business structural reform, management reorganization, and organizational restructuring based on the 100-Day Plan, an operational turnaround plan formulated in September 2020. The top priority mission of management is to switch to the phase of creating corporate value through sustained growth after achieving early completion of the operational turnaround. Our basic views on corporate governance aimed at steady implementation of this strategy are detailed below.

Management Structure

Board of Directors

Fujikura adopted a “company with an Audit and Supervisory Committee” organizational structure in 2017 to separate the supervisory and executive functions. More than half of the internal directors resigned on March 31, 2021, creating a structure consisting of 10 directors in total, five of whom are outside directors (all Audit and Supervisory Committee members) and five of whom are internal directors. This raised the percentage of outside directors on the Board of Directors to 50%, strengthening the function of supervising the performance of duties by directors. The outside directors who make up half of the Board of Directors are independent of Company management and possess management experience and expertise in finance, legal matters, and other areas. These outside directors fully discuss important matters (formulation of medium and long-term strategy, business portfolio restructuring, etc.) concerning management with internal directors at Board of Directors meetings and make decision on them after sufficient debate.

Operational Execution Structure

In Fujikura, the Board of Directors may designate a Chief Executive Officer (CEO) and a Chief Operating Officer (COO) from among the executive directors, in principle. The CEO (hereafter, “Director, President and CEO”) serves as the Chair of the Board of Directors and as the CEO of the Group consisting of Fujikura and its subsidiaries (hereafter, collectively called “the Fujikura Group”; each subsidiary is called a “Group subsidiary”). As the person who exercises overall control over the performance of duties in Fujikura, the Director, President and CEO assumes ultimate responsibility for the pursuit of business by each business division and structural reforms, as well as supervision and oversight of corporate divisions. The COO is responsible for overseeing the pursuit of the core businesses of the Fujikura Group.

Audit and Supervisory Committee

The Audit and Supervisory Committee consists of six committee members in total. One committee member is a full-time internal director and five are outside directors who are independent of Company management. The Audit and Supervisory Committee Office was established and is staffed with exclusive, full-time personnel as the organization which supports the activities of the Audit and Supervisory Committee, at its direction.

Nomination and Remuneration of Directors

When making decisions on the following matters concerning the nomination of directors, the Nominating Advisory Committee, an advisory body to the Board of Directors (having an outside director as Chair and outside directors as the majority of committee members), verifies the fairness and appropriateness of the Board of Directors’ decision-making process.
 ・Draft proposals for resolutions of the General Meeting of Shareholders concerning election and dismissal of directors
 ・Criteria for election and dismissal of directors
 ・Successor plans
 ・Criteria for independence of outside directors
When making decisions on the following matters concerning remuneration of directors, the Remuneration Advisory Committee, an advisory body to the Board of Directors (having an outside director as Chair and outside directors as the majority of committee members), verifies the fairness and appropriateness of the Board of Directors’ decision-making process.
 ・Director remuneration and the system for determining the amount thereof
 ・The amount of remuneration for each director

Committee Activities

Corporate Governance Structure

Officers List

Please refer to this page for officers.

Remuneration

Policy and procedures followed by the Board of Directors to determine remuneration for executive management and directors

In addition to handling a large variety of products, Fujikura operates its business globally, and director duties are also highly complex and varied. Our basic policy is that the director remuneration should be at a level appropriate for outstanding human resources who are capable of accomplishing such duties. We have therefore classified director remuneration into the following three specific categories, based on the survey results from multiple research groups, mainly on listed companies. We have renewed our remuneration system based on objective indicators and evaluations while strengthening the linkage to performance.
Fujikura’s Board of Directors determines the amount of remuneration for directors who are not audit and supervisory committee members after it has been discussed by the Nominating Advisory Committee, which is an advisory body to the Board of Directors (and consists of the director in charge of human resources and three outside directors, and chaired by an outside director). The Remuneration Advisory Committee evaluates the performance of each director, examines whether the level of compensation is in line with the market, and confirms that the decision-making process concerning the remuneration structure and specific remuneration is appropriate. It then reports the results to the Board of Directors. The Board of Directors then takes these findings into consideration in determining the remuneration of directors who are not audit and supervisory committee members.

Analysis and evaluation of the effectiveness of the Board of Directors

A survey is conducted on the effectiveness of the Board of Directors and applies to all directors. The survey includes questions on the adequacy of Board meetings overall (time, frequency, management of meeting proceedings, minutes, etc.), adequacy of agenda items (timing, importance, volume of information, etc.), aspects of Board members (participation in discussions, etc.), and executive office function. Fujikura considers the results of the survey and takes remedial measures as necessary.
Based on the findings of this survey, Fujikura works to strengthen the structure to specifically ensure that 1) various materials are improved and explanations are provided to outside directors to give them a deeper understanding of the company and further enhance deliberations by the Board of Directors; 2) strengthen the structure to enable prediction, analysis, and investigation of risks, and rapid response when a risk materializes in operating divisions, to take the risk of incurring losses in business operations into consideration; and 3) review the agenda criteria for Board of Directors meetings to reduce the number of items related to normal business execution, allowing a greater focus on more important areas such as medium-to-long-term strategy.
However, some opinions submitted indicated the need for more discussion of medium and long-term strategy, issues, and the vision for the company.

Policy and procedures followed by the Board of Directors to appoint or remove executive management and nominate candidates for the position of director and auditor

At Fujikura, when the Board of Directors makes decisions on proposed resolutions for the General Meeting of Shareholders concerning the election and dismissal of directors who are not audit and supervisory committee members (excluding outside directors), it does so after the Nominating Advisory Committee, which is an advisory body to the Board of Directors (consisting of the president & CEO, the director in charge of human resources (the president & CEO is currently serving concurrently in this position), and three outside directors, and chaired by an outside director), has discussed them. The Nominating Advisory Committee deliberates on the selection criteria for directors and the reasons for selecting each director, including their performance, based on the candidates originally proposed by the Board of Directors. The committee confirms that the process is fair and appropriate, and presents the results of its deliberations to the Board of Directors. Based on the advice of the committee, the Board then submits a proposal for director candidates to be voted upon at the General Meeting of Shareholders.

Policy on cross-shareholding

Fujikura does not engage in cross-shareholding in principle. However, Fujikura may hold the shares of a company only if it is necessary for Fujikura to enter into a strategic business partnership in the course of its business activities and it will contribute to an increase in corporate value over the medium to long term. Fujikura sells off shares that it has decided to stop holding, and the Board of Directors receives reports on the sell-off of these shares. At the same time, the Board of Directors treats the shares as part of the invested capital of each business division and decides whether to continue holding them after examining their utility.

Measures to ensure that corporate pension funds perform their role as an asset owner

Fujikura has established a corporate pension fund (the Fujikura Corporate Pension Fund) to which it has entrusted the management of Fujikura’s pension assets. Fujikura Corporate Pension Fund subcontracts the entire management of the assets to asset management firms and monitors the management of those assets.
Fujikura takes care to provide the Fujikura Corporate Pension Fund with the necessary personnel and organizational structures to ensure that the fund can monitor the asset management firms (handling practical management) effectively.

Policy on constructive dialogue with shareholders

(i) Fujikura promotes initiatives by which the president and senior management can engage in dialogue with shareholders and investors as a means to achieve sustainable growth and increase corporate value over the medium to long term.
(ii) Fujikura places a director in charge of handling constructive dialogue to ensure the effectiveness of dialogue and information disclosure. This director oversees the IR Group in the Corporate Strategy & Planning Division, which cooperates with related departments to conduct timely, fair and appropriate disclosure of information.
(iii) Other ways in which Fujikura discloses information include its periodic conferences for analysts and institutional investors held four times a year (May, August, November, February), plant tours, and publications such as business reports and annual reports. The president and the director in charge of investor relations (the president & CEO is concurrently serving as the director in charge of investor relations from April 1, 2021) directly visit institutional investors in Europe, North America, and Asia to provide a rundown of business operations, give briefings on earnings performance, and present an explanation of the Mid-term Business Plan. In addition, extensive dialogue is carried out through pertinent visits with investors allowing opportunities to exchange opinions on matters such as the agenda of the General Meeting of Shareholders, the corporate governance structure, and ESG.
(iv) The president & CEO and the director in charge of investor relations (the president & CEO is serving concurrently in this position at present) provide adequate feedback on the results of interviews with the aforementioned shareholders and investors to directors.
(v) Fujikura has established a quiet period to prevent the leakage of financial information and ensuring fairness. During this quiet period, Fujikura does not comment on its financial information and does not respond to questions about this information. , Fujikura also works to prevent the leakage or spreading of important information, and prevent insider trading, under its rules on internal information management.

Messages from Outside Directors

Yoshio Shirai

Yoshio Shirai

Contributing to Fujikura’s growth and development as a global company
This is my fifth year as an outside director at Fujikura, and I have watched the company change first-hand. I think Fujikura is now beginning to see the results of its efforts toward accomplishing the business revitalization plan.
Hereafter, I think it is important to proceed with delegating authority to the operations side through corporate governance reforms. It is also crucial for the Board of Directors to determine what is needed to become a company that will remain competitive in the global market. To this end, the board should deepen discussion on various themes such as Fujikura’s business portfolio, human resource strategy, human resource development, diversity, and DX.
Creating an image of the kind of company Fujikura should be, and making this a reality, requires a strong desire from each and every employee to support and lift up the company. I feel that the fact that most people in management roles see the challenges facing Fujikura as their own challenges, is a sign of positive change.
I hope to use my managerial experience to thoroughly fulfill my role as an outside director, and help ensure that Fujikura can continue to grow and develop as a true global company.

Hamako Hanazaki

Hamako Hanazaki

Helping to create a better governance structure
This is my third year since being appointed an outside director for Fujikura. As a lawyer, I have assisted with the planning and implementation of a system for establishing a risk management framework at Fujikura. Starting in April 2021, the company abolished its former governance system and concentrated authority related to conducting business in the office of COO. At the same time, it established the new Corporate Governance Control Division, and temporarily integrated the functions of legal affairs, internal regulations, and internal auditing. Fujikura aims to accelerate decision-making through a framework in which the CEO demonstrates strong leadership to address management challenges facing the entire company. And it is considering creating a structure that effectively utilizes governance to discover and rectify business management risks while moving forward with business revitalization. At present, management personnel are striving to successfully execute the business revitalization phase. At the same time, they are continuing to discuss how governance can be effectively utilized to prevent recurrence of past mistakes through efforts such as clarifying the role that each director should fulfill. Hereafter, I recognize that an important role will be deeper consideration of a more appropriate governance structure and organizational form for the coming growth phase. I do not believe that there is an endgame for corporate governance reform. So, I hope to continue helping to create a better governance structure at Fujikura from here on out.

Keiji Yoshikawa

Keiji Yoshikawa

Using my own experience to support management while helping to build a system for cultivating management personnel
I served as the CEO of Nippon Sheet Glass Co., Ltd. and have experience in corporate management and in strengthening corporate governance structures. My role as an outside director of Fujikura is to use my experience and ideas to assist managers in making decisions concerning challenges and problems related to management. I will provide advice and recommendations for efforts such as reviewing the company's business portfolio, and formulating a medium and long-term management strategy for a growth phase to make Fujikura’s business sustainable.
Fujikura’s strength lies in its technical prowess. And in order to further enhance this strength, the company needs to cultivate engineers and utilize IT technology such as DX and IoT. Regarding the cultivation of human resources, I think one of the most important challenges at present is training management personnel, including as part of a succession plan. I myself realized the importance of training management personnel following my experience as president. This is a common issue for Japanese companies, but I feel that we lag behind overseas firms when it comes to systematizing the cultivation of management personnel. For managers, changes in the external environment continue to increase the difficulty of corporate management. This makes it necessary to systematize the abilities, experience, and other qualities that leaders of organizations should possess. I hope to help increase Fujikura’s corporate value by continuing to actively recommend this kind of systematization of management training.

Yoji Yamaguchi

Yoji Yamaguchi

Promoting discussion based on objective data and help to improve shareholder value
I have spent a long time as a member of financial institutions and have ample experience in supporting companies in a variety of industries and business conditions. And I also have experience in managerial auditing as a full-time auditor. I hope to use my past experience to help improve Fujikura’s corporate value.
Fujikura’s operations rest on a foundation of extremely high technical capabilities. I see this a the biggest reason the company has been able to persist for over 130 years. At the same time, many of Fujikura’s core lines of business are in the mature stage of their lifecycles. A big challenge facing the company is to leverage its existing high technical prowess while also developing new markets. It is important for the company to regularly review its business portfolio, and realign the vectors of its management resources to future growth areas. But this of course needs to be backed by numerical data.
By pursuing discussions based on objective data with President & CEO Ito and the other directors, I hope to ascertain future trends and work toward improving shareholder value. Moreover, amidst a climate of high uncertainty, further efforts to support globalization and diversity will be necessary in order to successfully execute Fujikura's business revitalization plan and return to a growth phase. To this end, I will also provide proactive recommendations in areas such as foundational development.

Kozo Meguro

Kozo Meguro

Supporting execution of a management plan that front-line workers can understand and take decisive action on
As a certified public accountant, I have thus far been involved in areas such as auditing and due diligence for mergers and acquisitions. While stationed in Germany and China in such capacities, I had to seek the truth, whether good or bad, without judging the other party based on my own way of thinking. This taught me the necessity of communication and the importance of open dialogue. This experience has become my basic stance as an outside director for Fujikura. In particular, I deeply identify with the idea of “bad news first,” which President & CEO Ito advocates.
My role is to use my expertise as a Certified Public Accountant to build the foundation necessary for steadily executing the management plan. Successful execution of the business revitalization plan is essential for transitioning from the business turnaround phase to the growth phase. And data-based monitoring is required to ascertain whether this plan is being appropriately executed. I will check, from an auditing perspective, whether the route to achieving this goal has been established, whether indices have been set which front-line workers understand, and whether there is any disconnect between management and front-line workers.
Meanwhile, as I was only recently appointed, I will work to make sure management and workers are on the same page by deepening communication with front-line workers and gaining a deeper understanding of the current situation at Fujikura.

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