Based on its strategic alliance with Roche, a leading global pharmaceutical company, Chugai’s mission is to “dedicate itself to adding exceptional value through the creation of innovative medical products and services for the benefit of the medical community and human health around the world,” and the company defines its basic management objective as to “become a top Japanese pharmaceutical company by providing a continuous flow of innovative new medicines domestically and internationally.”
While being a member of the Roche Group, Chugai maintains its managerial autonomy and independence as a publicly listed company and will constantly strive to perfect its corporate governance as established in “Chugai Pharmaceutical Co., Ltd. Basic Corporate Governance Policy,” in order to fulfil the mandate of its many stakeholders appropriately and fairly for the achievement of its basic management objective.
To expedite business operations and clarify executive responsibilities, Chugai has adopted an executive officer system to keep decisionmaking on management issues of primary importance separate from business execution. The Board of Directors is in charge of the former, while executive officers are entrusted by the board with the authority to conduct the latter. While the Board of Directors is in charge of decision-making with respect to the most important managerial matters, other decisions on business operations are made at organizations such as the Executive Committee. In execution of business, since March 2012 the chief executive officer (CEO) has ultimate responsibility for decisions on Companywide management strategies and other important matters, and the chief operating officer (COO) is responsible for decisions on business execution.
The Board of Directors makes decisions on management issues of primary importance and receives quarterly reports on the state of business execution as well as reports on key decisions made at the Executive Committee. It is also responsible for oversight of the execution of business operations. The board consists of 10 directors including three outside directors.
In 2015, the Board of Directors convened eight times.
Of note, the two directors appointed by Roche no longer met the requirements for outside director under the amended Companies Act as of the end of the General Meeting of Shareholders held on March 24, 2016.
Decisions concerning important matters related to business execution are made at organizations such as the Executive Committee. It consists of key executive officers, including the CEO and COO, and the full-time Audit & Supervisory Board Members.
In addition, the IR Committee, Risk Management Committee, Corporate Social Responsibility Committee and Healthcare Compliance Committee have been established under the Executive Committee.
As an advisory board to the Board of Directors, the Appointment Committee deliberates on the selection of director candidates and candidates to succeed the executive directors, including the CEO.
The Appointment Committee consists of the CEO and at least three outside committee members, including at least one independent outside director, appointed by the Board of Directors from among the outside directors and persons with experience sitting on an appointment committee.
As an advisory board to the Board of Directors, the Compensation Committee deliberates on remuneration policy and the remuneration of individual directors. It consists of at least three outside committee members, including at least one independent outside director, appointed by the Board of Directors from among the outside directors and persons with experience as outside directors.
Chugai’s Corporate Governance System
To reflect diverse stakeholder viewpoints in business decisions, Chugai has taken measures to obtain outside perspectives, such as nominating outside directors and establishing a council made up of domestic and overseas specialists.
To respond accurately to changes in the global business environment and conduct international business in an appropriate manner, Chugai works to further enhance decision-making by operating the Chugai International Council (CIC), which is composed of Japanese and international professionals in various sectors. Of the 11 council members, one is a woman.
Chugai has appointed outside directors to reflect the views of a broader range of stakeholders in management decision-making.
Outside directors point out issues and give advice concerning Chugai’s management from their abundant experience and knowledge as corporate executives, physicians or university professors.
The rate of attendance by outside directors at the eight board meetings in 2015 was 85.0 percent on average, the highest being 100 percent and the lowest 50.0 percent.*
Of note, the two directors appointed by Roche no longer met the requirements for outside director under the amended Companies Act as of the end of the General Meeting of Shareholders held on March 24, 2016.
|*||In 2015, directors from Roche were also regarded as outside directors.|
|Name||Outside Position||Reason for Election|
|Yasuo Ikeda||Vice-Chairman of the Board of Directors, Musashi Academy of the Nezu Foundation, Chairman of Japanese Medical Specialty Board, University Professor of Waseda University, Professor Emeritus of Keio University||Recommended or appointed based on the Company’s judgment that as an outside director he can provide advice and monitoring with respect to the Company’s management and business by leveraging his abundant experience and knowledge as a doctor and university professor and can properly execute the duties of an outside director. In addition, he meets Chugai’s Independence Standards for an outside officer and the requirements for an independent director set by Tokyo Stock Exchange, Inc., to which notification has been submitted.|
|Masayuki Oku||Chairman of the Board, Sumitomo Mitsui
Financial Group, Inc.,
Outside Director of Kao Corporation,
Outside Director of Komatsu Ltd.,
Outside Director of Panasonic Corporation,
Outside Corporate Auditor of Nankai Electric Railway Co., Ltd.,
Non-executive Director of Bank of East Asia (China)
|Recommended or appointed as the Company expects that he will provide advice and monitoring by leveraging his abundant experience and knowledge of corporate management and other fields and can properly execute duties of an outside director. In addition, he meets Chugai’s Independence Standards for an outside officer and the requirements for an independent director set by Tokyo Stock Exchange, Inc., to which notification has been submitted.|
|Franz B. Humer||Non-Executive Chairman of Diageo plc (U.K.)
Former Chairman, ROCHE HOLDING LTD
|Recommended or appointed based on the Company’s judgment that as an outside director he can provide advice and monitoring with respect to the Company’s management and business based on his abundant experience and knowledge as a manager of global pharmaceutical companies and can properly execute the duties of an outside director.|
|Name||Outside Position||Reason for Election|
|Hisashi Hara||General Representative of the Asia-Pacific region, The Law Office of Nagashima Ohno & Tsunematsu||Recommended or appointed based on the Company’s judgment that he can properly execute the duties of an outside member of the Audit & Supervisory Board because he has abundant experience and knowledge as an expert in corporate legal affairs (attorney at law).|
Representative of Nimura Certified Public Accounting Office,
Outside Director and Chairman of Audit Committee of Sony Corporation
|Recommended or appointed based on the Company’s judgment that he can properly execute the duties of an outside member of the Audit & Supervisory Board because he has abundant experience and knowledge as an expert in corporate accounting (certified public accountant). In addition, he has been designated as an independent member of the Audit & Supervisory Board based on the regulations of Tokyo Stock Exchange, Inc., to which notification has been submitted.|
Chugai has an Audit & Supervisory Board, and audits of management decision-making and business execution are conducted independently from business operations by four Audit & Supervisory Board members, including two outside members.
Audit & Supervisory Board members express their opinions in real time from the standpoint of appropriate corporate governance in a variety of occasions including meetings of the Board of Directors, the Executive Committee (full-time Audit & Supervisory Board members only) and the Audit & Supervisory Board.
The Audit Department, with a staff that includes certified internal auditors and certified fraud examiners, conducts audits of the status of the Chugai Group’s business execution from various standpoints, such as the effectiveness, efficiency and compliance of business activities, including those of subsidiaries in Japan and overseas, reports and makes recommendations to the Executive Committee; and reports to the Audit & Supervisory Board.
In addition, the Audit Department conducts internal control assessments based on the Financial Instruments and Exchange Act, J-SOX, and other criteria to help maintain sound operations. Chugai also dispatches its auditing staff as Audit & Supervisory Board members to subsidiaries in Japan.
KPMG AZSA LLC handles accounting audits and internal control audits.
Audit & Supervisory Board members, the Audit Department and the Accounting Auditor cooperate closely by regularly exchanging information to improve the effectiveness of their respective audits. Audit & Supervisory Board members and the Accounting Auditor confirm each other’s audit plans and hold regular meetings to exchange opinions on matters including the results of quarterly audit reports. In addition, they work to strengthen governance at Group companies by coordinating with Audit & Supervisory Board members at subsidiaries in Japan on quarterly reports, fiscal yearend reports and other matters. The Office of Audit & Supervisory Board Members ensures the independence and enhances the auditing functions of Audit & Supervisory Board members.
Chugai’s fundamental policy for remuneration of directors and Audit & Supervisory Board members is to attract outstanding people and appropriately motivate them in order to continuously increase the Chugai Group’s corporate value. At the same time, remuneration levels and the remuneration system are designed to link compensation of officers with the Company’s performance and promote shared values with shareholders.
Remuneration of directors consists of three components: fixed regular compensation, bonuses paid according to performance, and stock options granted as a long-term incentive. These components are paid by resolution of the Board of Directors based on the Company’s criteria within the limits on remuneration approved by the General Meeting of Shareholders. The Remuneration Committee sets policies and deliberates details concerning remuneration of directors with specific titles to ensure the objectivity and transparency of the remuneration-setting process.
Remuneration of outside directors and Audit & Supervisory Board members (including outside members), which consists solely of fixed regular compensation, is paid by resolution of the Board of Directors for outside directors and through consultation with the Audit & Supervisory Board for Audit & Supervisory Board members. The amounts are set within the limits approved by the General Meeting of Shareholders.
A resolution was passed in the 98th Annual General Meeting of Shareholders held in March 2009 to abolish the retirement benefits system for directors. A resolution was passed in the 95th Annual General Meeting of Shareholders held in March 2006 to abolish the retirement benefits system for outside directors and Audit & Supervisory Board members (including outside members).
Amount of Remuneration Paid to Directors and Audit & Supervisory Board Members (2015)
|1.||Amounts are rounded to the nearest million yen.|
|2.||The table above includes one director and one Audit & Supervisory Board member who resigned during 2015.|
|3.||The amount of remuneration (regular compensation and bonuses) paid to all directors is no more than ¥750 million per year as per the resolution passed in the 96th Annual General Meeting of Shareholders held in March 2007.
Apart from this, the maximum amounts of compensation paid to directors in the form of stock acquisition rights allocated as stock options are ¥125 million per year for common stock options and ¥150 million per year for stock options as stockbased compensation as per the resolution passed in the 98th Annual General Meeting of Shareholders held in March 2009.
|4.||The amount of remuneration for all Audit & Supervisory Board members was no more than ¥100 million per year as per the resolution passed in the 95th Annual General Meeting of Shareholders held in March 2006.|
|5.||The amount of bonuses shown in the table above is the amount of the provision of reserve for bonuses to directors during 2015.|
|6.||The amounts of common stock options and stock options as stock-based compensation and the number of eligible officers shown in the table above are the amounts that were posted as expenses for 2015 and the number of officers in 2015, respectively.|
|7.||In addition to the total remuneration, etc. shown in the table above, the following amounts were paid as retirement benefits corresponding to the period from the time each officer assumed office to the abolishment of the retirement benefits system for directors and Audit & Supervisory Board members.
One retired outside director: ¥2 million
A resolution was passed in the 98th Annual General Meeting of Shareholders held in March 2009, to abolish the retirement benefits system for directors with executive power, and to pay retirement benefits corresponding to the residual term up to the abolishment of the system to each concerned director remaining in office after the closing of the 98th Annual General Meeting of Shareholders, at the respective time of their retirement.
Also, a resolution was passed in the 95th Annual General Meeting of Shareholders held in March 2006 to abolish the retirement benefits system for directors and Audit & Supervisory Board members with no executive power, and to pay retirement benefits corresponding to the residual term up to the abolishment of the system to each concerned director and Audit & Supervisory Board member remaining in office after the closing of the 95th Annual General Meeting of Shareholders, at the respective time of their retirement.
|8.||In 2015, the amount of remuneration received by outside director Daniel O’Day as an officer from the parent company of the Company or subsidiaries of the said parent company totaled ¥1,161 million (converted into yen at the average exchange rate in 2015).|
|9.||In addition to the bonuses in 2015 shown in the table above, and apart from the ¥220 million in provision of reserve for bonuses to directors presented in the Business Report for 2014, ¥6 million has been paid to five directors as bonuses for 2014.|
|10.||In 2015, directors from Roche were also regarded as outside directors.|
Amount of Remuneration Paid to Each Representative Director
|1.||Amounts are rounded to the nearest million yen.|
|2.||Other than the representative directors in the table above, no director or Audit & Supervisory Board member received total remuneration of more than ¥100 million.|
Roche, the parent company of Chugai, owns 59.89 percent of Chugai’s outstanding shares based on the strategic alliance agreement between the two companies. Roche and Chugai have agreed to cooperate in maintaining the listing of Chugai’s common stock on the First Section of the Tokyo Stock Exchange.*
The aim of this alliance is to establish a new business model that differs from conventional corporate acquisitions and joint ventures. Although ROCHE HOLDING LTD includes Chugai in its consolidated accounts, Chugai functions as an independent list self-governanceed company and makes all of its own management decisions based on the principle of self-governance. Chugai believes that autonomy and diversity are key to generating innovation, that maintaining its independent management brings diversity to the Roche Group, and that the pharmaceuticals it creates as a result contribute to all stakeholders, including patients and minority shareholders. In its business dealings with the Roche Group, Chugai conducts all transactions fairly using third-party prices to protect the interests of minority shareholders. Two of Chugai’s ten directors are from the Roche Group. However, they do not comprise a majority of the Board of Directors, and thus Chugai considers its management independence to be secure.
Chugai will continue to manage its business with autonomy and independence as a publicly listed company.
|＊||The Tokyo Stock Exchange requires delisting if the ratio of tradable shares to listed shares is less than 5 percent.|
|Oct. 1, 2002 – Sept. 30, 2007||50.1%|
|Oct. 1, 2007 – Sept. 30, 2012||59.9%|
|Oct. 1, 2012 and thereafter||
Cooperate in maintaining
In maintaining its internal control system, Chugai established the Chugai Business Conduct Guidelines (Chugai BCG) as standards for management decision-making and employee behavior. The Corporate Social Responsibility Committee created under the Executive Committee, together with the Corporate Social Responsibility Department, ensure that the guidelines are implemented throughout the Company.
In addition, Chugai has prepared for the system of internal controls over financial reporting under the Financial Instruments and Exchange Act. We have formulated a basic policy for the establishment, management and assessment of internal controls over financial reporting, formulated a system of controls that ensures reliable financial reporting and implemented effectiveness assessments for internal controls. We select business processes to be assessed based on the results of the assessments of Company-wide internal controls and evaluate the design and operation of internal controls after identifying and analyzing financial reporting risks.
Chugai has established Risk Management Regulations to prevent risks that could affect the Company’s business activities, as well as to ensure prompt and appropriate handling of problems that arise. We have also established a Risk Management Committee under the Executive Committee, and Division Risk Management Committees. The Risk Management Committee identifies Company-wide risks that may significantly affect management and submits a progress report to the Executive Committee concerning preventive measures for such risks. Division Risk Management Committees summarize and create risk maps of all the risks facing their divisions, make proactive efforts to prevent such risks, and submit reports on the progress of those efforts to the Risk Management Committee.
Chugai Risk Management System
Rooted in its belief that corporate ethics take priority over profit, Chugai places paramount importance on respect for life, and strives for fair and transparent corporate activities based on high ethical standards, along with sincere scientific initiatives.
As well as strictly complying with laws and regulations such as the Law for Ensuring the Quality, Efficacy and Safety of Drugs and Medical Devices and the voluntary Code of Practice for the industry established by the Japan Pharmaceutical Manufacturers Association (JPMA), Chugai proactively takes part in the activities of the Fair Trade Council of the Ethical Pharmaceutical Drugs Marketing Industry, the JPMA Code Compliance Committee and other organizations. In addition, by establishing our own two guidelines for transparency, Chugai works to ensure a high level of ethics, morality and transparency in its various business activities including collaboration with medical institutions and other parties and cooperation with patient groups. To further promote compliance in healthcare, Chugai has also established internal organizations such as the Healthcare Compliance Committee and the Medical Affairs Division to promote internal consistency.
Chugai has put in place Compliance Regulations for its compliance system. These regulations are promoted by the Corporate Social Responsibility Committee and the Corporate Social Responsibility Department. In light of increasing societal demands for greater compliance in the pharmaceutical industry, in 2015 we strengthened compliance measures Company-wide. In addition to working to enhance compliance education in each of our training programs, we conducted compliance risk management measures in each organizational unit. Moreover, every six months the Corporate Social Responsibility Department conducted monitoring surveys regarding compliance status. Surveys were conducted internally, as well as for subsidiaries in Japan and overseas affiliated companies, and results were reported to the Corporate Social Responsibility Committee. Each organization works to ensure thorough legal compliance in the workplace through BCG promotion managers and assistants and holds corporate ethics courses twice a year, among other programs.
Chugai conducts interactive corporate communication activities to deepen mutual understanding and build relationships of trust with its stakeholders, such as patients, healthcare providers, shareholders, investors and employees. In order to achieve these objectives, Chugai ensures that information related to its business activities is made available in a transparent, fair and consistent manner to all stakeholders.
Chugai’s policy for disclosing information to shareholders and investors is to make timely, appropriate and fair disclosure of information in accordance with the Financial Instruments and Exchange Act and relevant rules of the stock exchange on which Chugai’s shares are listed in order to receive fair valuation in capital markets. In addition, measures to allow easy access to disclosed information have been established to ensure transparency.
Chugai has established an IR Committee composed of the CFO and general managers of the Corporate Communications Department, the Corporate Planning Department, the Finance & Accounting Department, the Corporate Social Responsibility Department and the General Affairs Department as a corporate management committee. The IR Committee holds regular meetings and is responsible for the establishment, revision and internal dissemination of the information disclosure policy, and for the management and promotion of information collection, disclosure and other related activities.
Top management, including the Chairman and key executive officers, has primary accountability for disclosure. In addition, the Corporate Communications Department takes the lead in coordinating with relevant departments to disclose information promptly.
|Note:||For further details on policies for disclosure to shareholders and investors, securities analysts and other capital market participants, please refer to Chugai’s website.|
In 2015, Chugai was selected as a constituent of the Dow Jones Sustainability Asia Pacific Index for the second consecutive year. A total of 600 leading companies in Asia applied for inclusion and 145 were selected, including 62 Japanese companies.
In addition, since 2003 Chugai has been continuously selected as a constituent of the FTSE4Good Index Series, an index for socially responsible investment (SRI). As of January 31, 2016, 803 companies were listed, of which Chugai was one of 176 Japanese companies.
Chugai has been selected as a component of these global SRI indices in recognition of its proactive initiatives from the standpoint of corporate sustainability in areas including the environment, society and governance. Chugai will continue to fulfill its social responsibility as a healthcare company.
The Nikkei Annual Report Awards have been held each year since 1998 for the further enhancement and diffusion of annual reports issued by Japanese companies, and 71 companies participated in 2015. Conveying the high quality of Chugai’s management and clearly presenting its long-term management strategy, Chugai’s report was recognized for its high degree of completeness as an integrated report comprehensive enough to function as an analyst’s report.
Unlike many Japanese companies, which have fiscal years ending in March, Chugai’s fiscal year ends in December. As a result, we are able to avoid holding our general meeting of shareholders on the same day as other companies. Convocation notices for the general meeting of shareholders are normally sent out more than four weeks prior to the meeting date.
The 105th annual general meeting of shareholders was held on March 24, 2016. After the presentation of the business report through narration and materials, shareholders deliberated on agenda items concerning appropriation of retained earnings and election of directors and Audit & Supervisory Board Members. All agenda items were approved and passed by a majority.
Director, Executive Vice President & CFO Yoshio Itaya was selected as both the sellside (securities companies) and buy-side (institutional investors) “All-Japan Executive Team Best CFO” in the healthcare and pharmaceuticals sector.* This was his third consecutive year of selection by the sell side in recognition of his stance of increasing convenience for and enhancing communication with shareholders, investors and analysts in Japan and overseas.
Coinciding with financial results announcements, Chugai holds information meetings and conference calls for investors, analysts and the media. In 2015, we held an information meeting for Zelboraf, an anticancer agent and BRAF inhibitor that we launched in February 2015. In response to strong demand from institutional investors, we also conducted tours of the Ukima plant and Kamakura research laboratories to introduce Chugai’s advanced biopharmaceutical manufacturing technologies and small-molecule drug discovery research system. In addition, we have conducted tours of the Utsunomiya plant each year since 2013 to increase communication with individual shareholders. Moreover, in addition to participating in domestic and overseas conferences hosted by securities companies, Chugai is enhancing its outreach to individual investors by holding information meetings for them at branches of securities companies throughout Japan.
Senior management also holds overseas roadshows and in 2015 visited institutional investors in Europe, the United States and Asia. To deepen mutual understanding by providing an opportunity for direct discussion between the President and market participants in small groups, we held a series of four informal discussions between the President and a total of 45 institutional investors and securities analysts. We will continue measures to enhance “face-to-face IR with management” to promote understanding of Chugai’s corporate value.
The Chugai website is another tool we use to provide timely and fair disclosure to shareholders and other investors. Information on our website includes news releases, financial results, the status of our development pipeline, information meeting materials, annual reports and an IR event calendar. We work to provide comprehensive information to our stakeholders through measures such as posting webcasts of IR events on the website. Chugai emphasizes fair information disclosure for domestic and overseas investors alike. As a rule, we post presentation materials and other information on our website and send out information by e-mail simultaneously in Japanese and English.
|＊||Initiated by Institutional Investors LLC in 2013, this competition ranks candidates based on a survey of securities analysts and institutional investors around the world, including Japan.|
The Company has established a goal of becoming Japan’s top pharmaceutical company as soon as possible, providing innovative drugs on the market, both domestic and overseas, by capitalizing on our diverse human resources. Under this primary objective, Chugai has placed management priority on promotion of diversity and inclusion, and efforts have been made mainly in three areas: nationality, gender and age. Based on the belief that innovation is generated from diverse values and expertise, promotion of diversity and inclusion is included in the mid-term business plan from 2013.
For promoting the active participation of women, Chugai organized a working team under senior management in 2010 to begin addressing this issue, and then established the Diversity Office in 2012 to enhance and promote broad-based activities. A target has been set to double the number of female managers existing in 2010 to 60 in 2015, while tackling the challenges including the launch of a talent management system that selects and trains human resources based on objective criteria regardless of background, gender or age, and revision of the personnel system. Furthermore, forums for women have been organized in every division as an opportunity for female employees to consider their careers and working styles, while training to nurture female leaders was launched in fiscal 2014. A diversity promotion team established in each division is also addressing issues, including gender-related issues, in consideration of the specific situation of each division.
Additionally, Chugai obtained certification (the Kurumin stamp) in 2008, 2011 and 2015 as a result of its active support of employees who balance work and childcare, based on the Act on Advancement of Measures to Support Raising Next-Generation Children. For newly married medical representatives (MRs) who are forced to live separately from their spouses in their current jobs, we offer a transfer assistance plan to allow MRs to live with their spouses after marriage and continue working. The Company is providing support to employees who balance work and life events, including nursing care, through measures such as the lease of mobile PCs to employees on leave for the purpose of childcare or nursing care, the introduction of a telecommuting system, and the implementation of nursing care seminars. The number of beneficiaries of these programs has been increasing among employees of both genders in all job positions.
As of December 2015, Chugai Pharmaceutical had 62 women in management positions, and women accounted for 10.7 percent of all managers. The goal for the ratio of female managers is set at 13% by 2018. It will cultivate future candidates among female employees to ensure the steady development of female managers to expand the ranks of the next generation of leaders.
The Commendation of Companies Promoting Gender Equality and Work-Life Balance for 2014, sponsored by the Ministry of Health, Labour and Welfare
- The Minister’s Prize for Excellence (Companies promoting gender equality)
- The Tokyo Prefectural Labour Bureau Chief’s Prize for Excellence (Family-friendly companies)
The “Nadeshiko Brand” by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange
- Chosen for the second consecutive year (2014 and 2015)
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