Basic Policy

The Sumitomo Forestry Group utilizes timber friendly to people and the global environment and contributes to a prosperous society through all types of housing-related services according to the Sumitomo Spirit to be beneficial to society based on the principles of integrity and sound management. Therefore, we strive to ensure management transparency, sound and legal business practices as well as rapid decision-making and business execution.

By further enhancing and strengthening its corporate governance through these efforts, the Company aims to continuously increase its corporate value and conduct management that lives up to expectations of various stakeholders around the Group.

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Corporate Governance and Internal Control

Sumitomo Forestry introduced the executive officer system to separate decision making and management oversight functions from operational execution functions. Comprised of eight directors (seven male, one female) including two outside directors (one male, one female), the Board of Directors is structured to make quick decisions. The oversight function of the Board of Directors has been strengthened, the lines of operational responsibility clarified, and the Chairman of the Board of Directors no longer serves as an executive officer. The Nomination and Remuneration Advisory Committee has been established to provide opinion to the Board of Directors on selecting director and statutory auditor candidates and executive officers as well as compensation of directors and executive officers, for the purpose of ensuring transparency and fairness of decision-making.

Sumitomo Forestry has a board of company statutory auditors. In addition to attending important meetings within the Company, the statutory auditors provide oversight for the directors' execution of duties, through sharing information and opinions with auditors at Group companies and the staff in the Internal Audit Division, and by supervising staff assisting auditing operations.

As of June 23, 2020, eight directors (including two outside directors), five auditors (including three outside auditors) and 19 executive officers were appointed to the Company. The Company notified Tokyo Stock Exchange, Inc. of the designation of the two outside directors and three outside statutory auditors as independent officers as required by its regulations.

Furthermore, the Sumitomo Forestry General Meeting of Shareholders held on June 23, 2020 adopted the resolution to amend a portion of the Articles of Incorporate. The company shortened the term of office of Directors from two years to one year with the view to establishing a management system which can swiftly respond to changes in the business environment and providing more opportunities for our shareholders to indicate their confidence in the Directors.

Corporate Governance System

Corporate Governance System

Board of Directors and Executive Committee 

In principle, the Board of Directors meets once a month, making decisions and carrying out its supervisory function for important issues in accordance with its discussion standards. In addition to making decisions on all important items and confirming business results, it supervises the directors' execution of their duties. Directors and statutory auditors are required to maintain an attendance rate of 75% or higher as a general rule.

The Executive Committee, which is an advisory body for the President, holds meetings twice a month, before the Board of Directors meeting to ensure that there is sufficient prior discussion on important issues. It is attended by those directors who also serve as executive officers, as well as the full-time statutory auditors as a general principle.

The Company ensures prompt decision-making and separation of supervision and operational execution functions, for effective performance of the Board of Directors. Board of Directors meetings were held 15 times while Executive Committee meetings were held 31 times in fiscal 2019.

Attendance of Directors at Meetings of the Board of Directors (FY2019)

Position*1 Name Responsibility and Significant Concurrent Positions*1 Board of Directors*2
Attended Meetings (meetings) Attendance Rate (%)
Chairman of the Board and Representative Director Akira Ichikawa 15 100
President and Representative Director
President and Executive Officer
Toshiro Mitsuyoshi 15 100
Representative Director
Executive Vice President and Executive Officer
Shigeru Sasabe Administering Environment and Resources Division
Divisional Manager of Timber and Building Materials Division
15 100
Representative Director
Executive Vice President and Executive Officer
Tatsuru Satoh Administering Lifestyle Service Division
In charge of General Administration, Secretary, External Relations, Personnel, IT Solutions, Intellectual Property, Internal Audit, and Tsukuba Research Institute
Statutory Auditor of Kumagai Gumi Co., Ltd.
15 100
Director Advisor Ryu Yano Outside Statutory Auditor of Daikin Industries, Ltd. 15 100
Director
Managing Executive Officer
Tatsumi Kawata Administering Housing and Construction Division
In charge of Corporate Planning, Finance, Corporate Communications, and Sustainability
15 100
Director
Executive Officer
Ken Wada Assistant to the President 15 100
Director
Executive Officer
Akihisa Fukuda Assistant to the President 15 100
Outside Director Junko Hirakawa Attorney at Law
Outside Director of Tokyo Financial Exchange Inc.
Outside Director of Hitachi Construction Machinery Co., Ltd.
15 100
Outside Director Izumi Yamashita Outside Director of AEON Bank, Ltd. 15 100

*1 Position, responsibility and significant concurrent positions as of April 1, 2020.

*2 In addition to the Board of Directors above, in fiscal 2019 Sumitomo Forestry has made one resolution deemed approved by the Board of Directors as stipulated in Article 370 of the Companies Act.

Structure of the Board of Directors

The Board of Directors is composed of 17 individuals in a structure built on expertise, such as knowledge, experience, skill, and diversity. Sumitomo Forestry considers diversity such as gender and nationality as well as expertise which includes those who have a wealth of experience and success in the operations of the Sumitomo Forestry Group, those who have a wealth of experience and success in business such as corporate management, industry and policy and those who have specializations such as law and accounting.

Nomination Procedure for Directors

Director candidates are selected at the Board of Directors from a pool of personnel with superior personality traits and acumen, and potential value to the Company through consultation with the Appointment and Remuneration Advisory Committee. Summaries of background and interlocking status of the directors are available on the website.

Analysis, Assessment and Results for the Effectiveness of the Board of Directors

  1. Assessment Method
    We assessed the effectiveness of the Board of Directors in fiscal 2019 by checking whether the Board has been fulfilling its role with respect to our Basic Policy on Corporate Governance (hereinafter “progress check”), and exchanging opinions with the outside directors and outside statutory auditors about the Board of Directors, in addition to conducting questionnaires for all directors and statutory auditors (anonymous questionnaire conducted directly by a third-party agency to ensure anonymity) while receiving advice from external bodies on self-assessments and analysis.
  2. Assessment Results
    • The results of the questionnaires, progress check, and exchange of opinions with outside officers found that the functions of the Board of Directors were effective overall.
    • As efforts to address issues discovered as a challenge in the fiscal 2018 assessment, we strengthened monitoring of the Board of Directors by revising the Board of Directors discussion standards and clarifying the impairment procedures for fixed assets as part of enhancements to defensive governance. Sumitomo Forestry also confirmed that discussions on our human resource strategies and corporate culture reforms were held at the informal meeting of executive officers including outside executives.
    • As future challenges, the exchange of ideas touched on needs for a response to issues pointed out in questionnaires, such as improvements to operational procedures of the Nomination and Remuneration Advisory Committee and better utilization of informal discussions between executive officers to enhance Board of Director deliberations, in addition to the necessity for further debate on the ideal form of future business strategies in light of the COVID-19.

We will strive to further improve the effectiveness at Board of Directors meetings by continually working to heighten the level of discussion with awareness toward highlighted topics in the future.

Board of Statutory Auditors

The Board of Statutory Auditors meets to discuss and make decisions on important matters regarding audits. The five statutory auditors, including the three outside statutory auditors, utilize the deep insights and diverse perspectives they have acquired from their various business backgrounds to provide oversight for the directors' execution of duties. The Board of Statutory Auditors met 15 times during fiscal 2019.

The appropriate human resources are also appointed as statutory auditors at our main subsidiaries for the purpose of improving the effectiveness of auditing and informational exchange at these companies. The Board of Statutory Auditors met 6 times during fiscal 2019.

Attendance of Statutory Auditors at the Board of Directors and the Board of Statutory Auditors (FY2019)

Position*1 Name Responsibility and Significant Concurrent Positions*1 Board of Directors*2 Board of Statutory Auditors
Attended Meetings (meetings) Attendance Rate (%) Attended Meetings (meetings) Attendance Rate (%)
Senior Statutory Auditor Hitoshi Hayano 15 100 15 100
Statutory Auditor Noriaki Toi 15 100 15 100
Statutory Auditor (Outside) Yoshitsugu Minagawa Chief Counselor, Norinchukin Research Institute Co., Ltd. 14 93 15 100
Statutory Auditor (Outside) Yoshimasa Tetsu Certified Public Accountant
External Auditor, Daiwa Motor Transportation Co., Ltd.
15 100 15 100
Statutory Auditor (Outside) Makoto Matsuo Attorney at Law
Outside Director of CAPCOM Co., Ltd. (Member of the Audit and Supervisory Committee)
Outside Statutory Auditor of Solasia Pharma K.K.
15 100 15 100

*1 Position, responsibility and significant concurrent positions as of April 1, 2020.

*2 In addition to the Board of Directors above, in fiscal 2019 Sumitomo Forestry has made one resolution deemed approved by the Board of Directors as stipulated in Article 370 of the Companies Act.

Outside Directors

In the selection procedure for outside directors and statutory auditors, determinations are based on the following standards of independence and professional criteria.

(1)Standards of Independence

Candidates must not be applicable to any of the below listed criteria to insure their independence to the Company.

  1. Company's operations executives
    Executive director, executive officer, operating officer, manager, or other directly hired person by the Company, its subsidiary, or its affiliate (herein; “operations executives”).
  2. Consultants
    • (1) Employee, partner, or any other staff hired by an auditing firm who provide auditing services for the Company or its subsidiaries.
    • (2) Lawyer, certified accountant, tax accountant, or other consultant whose annual compensation and other forms of monetary benefits given by the Company or its subsidiaries, exclusive of director's remuneration, has exceeded ten million yen in the past three years.
    • (3) Employee, partner, associate, or other staff hired by a law, auditing, tax law, consulting or any other advisory firm whose major client is the Company or its subsidiaries. (The major client means a company's received payment in a year by the Company or its subsidiaries has exceeded 2% of its consolidated total sales in the past three years.)
  3. Major shareholder (non-owner)
    Person who directly and or indirectly holds 10% or more of the voting power of the Company; i.e. operations executive if a holder is a company.
  4. Major shareholder (owner)
    Operations executive of a company which holds 10% or more of the voting power of the Company or its subsidiaries.
  5. Business Partners
    • (1) Client (major clients): person or operations executive of a client whose purchase exceeds 2% of the consolidated total sales of the Company
    • (2) Supplier (of which the Company is a major client): person or operations executive of a supplier of which the Company's purchase exceeds 2% of the consolidated total sales of the supplier
  6. Lender
    Lender from which the Company's borrowing exceeds 2% of the consolidated total asset of the company; i.e. operations executive in case of a company
  7. Recipient of contribution
    Individual or operations executive of a corporate recipient of a donation from the Company or its subsidiaries whose annual average amount exceeds ten million yen or 2% of total income of the recipient in the last three years.
  8. Family
    Spouse, next of kin within the second degree, or live-in member of a family of the person whose independency is rejected by this list of criteria
  9. Background Item
    1 is applicable in at any time in the past 10 years, or Item 2 or 7 is applicable at any time in the past 5 years.
  10. Inter-assumption of outside executive officer
    Executive director or statutory auditor of a company whose executive directors or statutory auditors include the Company or its subsidiary's

Two of our current outside directors and three of our outside statutory auditors are considered independent based on the above list of independency criteria, not to pose a conflict of interest with general shareholders.

(2) Standards of Concurrent Board Positions

  • (i) When concurrently holding a board or statutory board member position of another publicly listed company, the number of concurrent board or statutory board member positions will be follows:
    • (a) When serving as an executive director at another company exercising relevant execution of operations, only one company other than this Company;
    • (b) In situations other than (a), up to four companies other than this Company.
  • (ii) An attendance rate at the meetings of the Board of Directors or Board of Statutory Auditors of at least 75%.

Nomination and Remuneration Advisory Committee

The Board of Directors establishes a Nomination and Remuneration Advisory Committee as an advisory body from which it seeks opinions to ensure fairness and transparency in matters including the selection of candidates for the Board of Directors and auditing posts, the selection of executive officers, the dismissal of board members, statutory auditors or executive officers, evaluations of the chief executive officer and other executive officers, and remuneration for board members and executive officers. The Nomination and Remuneration Advisory Committee will consist of the Chairman, the President, and all outside executives (two outside directors and three outside statutory auditors) where the majority must be outside executives, and the chairperson must be an outside director.

The Board of Directors determines the directors and executive officers' remunerations within the amount specified by resolution of the general meeting of shareholders, taking into consideration the opinions stated by the Nomination and Remuneration Advisory Committee.

Nomination and Remuneration Advisory Committee Attendance (FY2019)

Position* Name Nomination and Remuneration Advisory Committee
Attended Meetings (meetings) Attendance Rate (%)
Chairman of the Board and Representative Director Ryu Yano 3 100
President and Representative Director Akira Ichikawa 3 100
Outside Director Junko Hirakawa 3 100
Outside Director Izumi Yamashita 3 100
Statutory Auditor (Outside) Yoshitsugu Minagawa 3 100
Statutory Auditor (Outside) Yoshimasa Tetsu 3 100
Statutory Auditor (Outside) Makoto Matsuo 3 100

*The position as of March 31, 2020.

Risk Management Committee

Information regarding the Risk Management Committee is found in “Risk Management/ Risk Management Framework.”

In fiscal 2019, the Risk Management Committee, Compliance Subcommittee, and BCP Subcommittee met four times, twice, and four times, respectively, while the Board of Directors received four sessions of reporting.

Sustainability Committee

In response to matters including SDGs, final recommendations of TCFD and human rights issues, the Sustainability Committee was established in fiscal 2018 based on the growing requirements for medium to long-term initiatives and informational disclosure about the Environment, Society and Governance (ESG).

The Sustainability Committee is made up of executive officers also appointed as director, and divisional mangers with the President acting as the Committee chairperson. The Committee is convened four times a year to formulate and promote initiatives for medium to long-term ESG challenges related to the sustainability of the Sumitomo Forestry Group including climate change in addition to analyzing risks and opportunities, conducting progress management of the Mid-Term Sustainability Targets, which incorporate business strategies toward achieving the SDGs, including monitoring of implementation and effectiveness of the Our Values and Code of Conduct.

The content of all committee proceedings is reported to the Board of Directors to enable our business operations to become part of the solution for social issues.

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Internal Audits

Sumitomo Forestry's Internal Audit Department draws on risk assessments in selecting about 60 business sites from among the roughly 200 business sites, including subsidiaries, each year to conduct internal audits. The sites are selected by specifying an order of priority based on the two perspectives of operational risk (business results, size, complexity of business, etc.) and control risk (risk management framework).

In the internal audits, the department checks on how a site is executing its operations and managing its office work, including its compliance with laws and regulations, and it reports its findings to the President, the executive officer in charge of internal audits and to internal statutory auditors, as well as to the manager responsible for the site and the executive officer or director in charge of the business site. Furthermore, if any indications have been made, the department checks the improvement efforts implemented at the site, such as by examining documents and conducting quarterly follow-up reviews, in accordance with the necessary compliance to laws and internal regulations, and reports on these to the President and to the executive officer in charge.

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Executive Remuneration

In accordance with laws and regulations, Sumitomo Forestry discloses the remuneration paid to officers (directors and statutory auditors) each fiscal year.

Total Remuneration Paid to Directors and Statutory Auditors (FY2019)

Category Number of Personnel Total Amount (Million yen)
Director 10 541
Auditors 5 79
Total 15 620

*1 It is a requirement in Japan to indicate the names and the remuneration of directors who receive 100 million yen or more in the annual securities reports. However, there are no applicable individuals at this Company.

*2 The total amount of director remuneration does not include compensation as an employee or a compensation for the execution of other duties.

*3 The total amount of director remuneration includes the total bonus of 143 million yen as approved at the 80th General Meeting of Shareholders held on June 23, 2020.

*4 The total amount of director remuneration includes 38 million yen for allocating shares with restriction of transfer to eight directors (excluding outside directors).

*5 Of the total remuneration of directors and statutory auditors, the total amount paid to outside executives is shown in the table below.

Total Remuneration Paid to Outside Executives (FY2019)

Number of Personnel Total Amount (Million yen)
5 55

Content Disclosed Regarding Remuneration Amount or Determination Policy of the Calculation Methods

The Sumitomo Forestry Group regards the establishment of an executive remuneration system as fundamental for directors and statutory auditors to fulfill the duty expected of them by all of its stakeholders toward achieving the Group's Corporate Philosophy.

  1. Remuneration for Directors (Excluding Outside Directors)
    With the exception of outside directors, remuneration for directors comprises three types: monthly remuneration as basic remuneration, shares with restriction of transfer, and bonuses tied to business performance.
    We determine remuneration for each directorship position according to roles and responsibilities.
    While basic remuneration is paid as a fixed cash amount determined by directorship position, a certain percentage of the amount is paid in shares with restriction of transfer. The scope of the cash payment amount is determined by a resolution of the general meeting of shareholders, while the monetary amount to be paid in the form of shares with restriction of transfer is to be determined by the general meeting of shareholders at no more than 100 million yen per year.
    The purpose of remuneration in the form of shares with restriction of transfer is to provide medium to long-term incentive that heightens the desire to increase our corporate value and the sense of pride and motivation, while establishing a sense of values held in common with shareholders.
    Remuneration tied to business performance is determined with the approval of the general meeting of shareholders, with consideration given to consolidated recurring income excluding differences in actuarial calculations used in retirement benefits accounting, and current net income levels for parent company shareholders.
  2. Remuneration for Outside Directors
    Remuneration for outside directors comprises only basic monthly remuneration.
  3. Remuneration for Statutory Auditors
    Remuneration for statutory auditors comprises only basic monthly remuneration.
  4. General Meeting of Shareholders Resolution on Remuneration for Directors
    • The amount of remuneration for directors of no more than 40 million yen per month (no more than 5 million yen per month for outside directors) was approved at the 76th General Meeting of Shareholders held on June 24, 2016.
    • A limit on remuneration for directors (excluding outside directors) through the allocation of shares with restriction of transfer of no more than 100 million yen per year was approved at the 78th General Meeting of Shareholders held on June 22, 2018.
    • The amount of remuneration for statutory auditors of no more than 8 million yen per month was approved at the 74th General Meeting of Shareholders held on June 20, 2014.
    The retirement bonus system for directors was abolished at the conclusion of the 65th General Meeting of Shareholders held on June 29, 2005. In addition, we use the results of a survey conducted by a third party of directorship remuneration at domestic corporations in order to set directors' remuneration at levels that are appropriate from the perspective of ensuring objectivity and appropriateness.

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Sustainability Report