P.52 Corporate Governance (Effectiveness Evaluation of the Board)
52 02. Foundations for Accelerating Transformation
Corporate Governance
Evaluation of the effectiveness of the Board of Directors
To maintain and enhance the effectiveness of the Board of Directors, we analyze and evaluate its effectiveness each year through assessments and multiple discussions by Directors, and we disclose a summary of the results. Our FY2025 Board effectiveness evaluation̶the first since our transition to a Company with an Audit & Supervisory Committee̶indicated that the transition had mostly achieved its intended objectives, namely, improving the agility and speed of management decision- making and strengthening the Boardʼs monitoring function. In addition, both the survey responses and subsequent discussions confirmed that there are no major concerns regarding the effectiveness of the Board of Directors, which we consider to be functioning effectively.
Evaluation method
- Named (non-anonymous) questionnaire (covering all 15 Directors)
- Function and role of the Board of Directors Composition of the Board of Directors Agenda items Quality and content of discussions 12 evaluation items, including the above
- Based on the survey results, the Board held multiple discussions to evaluate and analyze the results, as well as to identify issues and discuss initiatives for improvement.
Some of the issues identified through the survey had already been recognized as areas requiring attention in FY2024. The Board considers these to be ongoing priorities and will continue addressing them in FY2026. We will steadily implement measures to address these issues, further enhance the effectiveness of the Board of Directors, and support the Groupʼs sustainable growth and long-term corporate value creation.
| FY2025 key priorities | FY2025 progress | FY2026 key priorities and planned actions |
|---|---|---|
| Stabilize operations under the new structure following institutional design changes | Revised submission criteria and reorganized agenda | Enhance the Boardʼs monitoring function |
| Set agendas to enhance discussions on company-wide management themes | Made Outside Directors a majority of the Board | Review and optimize the composition of the Board (skills, diversity, and size) |
| Review the size of the Board and the desired backgrounds of Directors | Conducted in-person reporting on the annual audit policy and plan and established opportunities to share audit status and significant matters | Further leverage insights from the Audit & Supervisory Committeeʼs activities and enhance the Boardʼs monitoring of management execution |
| Review and implement the post-transition audit framework | Established opportunity for semiannual activity report Observer attendance by the full-time Audit & Supervisory Committee Members | Improve nomination and remuneration governance through expanded reporting by the Nomination and Remuneration Advisory Committee |
| Strengthen coordination between the Nomination and Remuneration Advisory Committee and the Board of Directors |
- Further enhance the Boardʼs effectiveness
- Pursue sustainable growth and medium- to long-term corporate value enhancement
Support system for Outside Directors
We have established a dedicated department to help Outside Directors gain a deeper understanding of the Company and maximize their contribution to enhancing the effectiveness of the Board of Directors. We provide ongoing support for Outside Directors by summarizing key points of agenda items for Board meetings, facilitating communication between the Board and management, and providing the information and practical assistance necessary for the performance of their duties.
■ Orientation briefings
Newly appointed Outside Directors receive structured orientation briefings covering the Groupʼs Management Principles, management policies, businesses, financial position, organizational structure, medium-term management plan, and risk management framework. They also receive a handbook that provides a comprehensive overview of the Groupʼs management execution and corporate governance framework, as well as the relevant internal rules and procedures.
■ Site visits
We arrange site visits in Japan and overseas to help Outside Directors deepen their understanding of our business (FY2025: two domestic and one overseas site visit). For newly appointed Outside Directors, we also provide opportunities to visit Sumitomo-related facilities to enhance their understanding of Sumitomoʼs Business Philosophy.
- Site visit to Oshima Shipbuilding Co., Ltd.
- Site visit to Cove Point LNG facility (the United States)
■ Business strategy briefing by Group CEOs
To help Outside Directors better understand the strategies of each business group, Group CEOs are called to provide briefings on their respective groupʼs strategies and execution status as well as hold dialogue sessions with the Outside Directors.
■ Pre-meeting briefings for the Board of Directors
To improve the efficiency of Board discussions, we provide Outside Directors with pre-meeting briefings on the outline and key points of each agenda item (FY2025: 12 sessions for Directors at the time, totaling around 21 hours). We also provide explanations of each agenda item to Audit & Supervisory Committee Members during their meetings, which are held prior to Board meetings. From FY2026 onward, we will continue arranging pre-meeting briefings on each Board agenda item to all Outside Directors, including Audit & Supervisory Committee Members.
■ Discussions at Outside Directorsʼ meetings
To encourage active participation by Outside Directors in Board discussions, we hold a monthly Outside Directorsʼ Meeting, consisting of Outside Directors, where they engage in robust discussion. In FY2025, the meetings included discussions on digital and intelligence-related topics, as well as exchanges of views with the Chairman, Vice Chairman, President and Chief Executive Officer, and securities analysts.