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Corporate Governance

Chugai has positioned the enhancement of corporate governance as an important management task. We are committed to responding appropriately and fairly to the requests of shareholders and other stakeholders, and increasing corporate value continuously.

Basic Approach

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 fulfill the mandate of its many stakeholders appropriately and fairly for the achievement of its basic management objective.

Management Decision-Making, Execution and Oversight of Business Operations

To expedite business operations and clarify executive responsibilities, Chugai has adopted an executive officer system to keep decision-making 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 Company-wide management strategies and other important matters, and the Chief Operating Officer (COO) is responsible for decisions on business execution.

Board of Directors

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 2016, the Board of Directors convened nine times.

Executive Committee

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 Compliance Committee have been established under the Executive Committee.

Appointment Committee and Compensation 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 as outside directors.

Chugai’s Corporate Governance System
System chart

Introduction of Outside Perspectives

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.

Chugai International Council

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, including the CIC Chair, one is a woman.

Chugai International Council (CIC) Composition
International Advisory Council (CIC)

Outside Directors

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 nine board meetings in 2016 was 90.3 percent on average, the highest being 100 percent and the lowest 66.7 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.

* The rate of attendance for the two directors from Roche includes the number of board meetings that they attended as outside directors prior to the end of the General Meeting of Shareholders on March 24, 2016.
Reasons for Election of Outside Directors
Name Outside Position Reason for Election
Yasuo Ikeda Vice-Chairman of the Board of Directors,
Musashi Academy of the Nezu Foundation,
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 properly provide advice and monitoring with respect to the Company’s management and business because he has abundant experience and knowledge as a doctor and university professor. 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 Director of 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 based on the Company’s judgment that as an outside director he can properly provide advice and monitoring because he has abundant experience and knowledge of corporate management and other fields. 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.
Yoichiro Ichimaru Executive Advisor of Toyota Motor Corporation,
Representative Director, Chairman of the Board,
Aioi Nissay Dowa Insurance Co., Ltd.
Recommended or appointed based on the Company’s judgment that as an outside director he can properly provide advice and monitoring with respect to the Company’s management and business because he has abundant experience and knowledge of corporate management. 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.
Reasons for Election of Outside Audit & Supervisory Board Members
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).
Takaaki Nimura 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.

Auditing System

Audits by Audit & Supervisory Board Members

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.

Internal Audits

The Audit Department, with a staff that includes certified internal auditors and certified fraud examiners, conducts audits of the status of business execution of the Chugai Group, including subsidiaries, from various standpoints, such as the effectiveness, efficiency and compliance of business activities; reports and makes recommendations to the Executive Committee; and reports to the Audit & Supervisory Board. In addition, Audit Department staff serve as Audit & Supervisory members at subsidiaries.

In addition, the Audit Department assesses whether effective internal controls are established and being implemented in accordance with internal control standards generally accepted as fair and appropriate in Japan to ensure the reliability of financial reporting based on the Financial Instruments and Exchange Act.

Accounting Auditors

KPMG AZSA LLC handles accounting audits and internal control audits.

Cooperative Auditing

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 on quarterly reports, fiscal year-end reports and other matters. The Office of Audit & Supervisory Board Members ensures the independence and enhances the auditing functions of Audit & Supervisory Board members.

Officer Remuneration

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.

In order to further clarify the link between remuneration and the Company’s business performance and shareholder value, and to raise directors’ motivation and morale to improve performance, remuneration of executive directors consists of bonuses paid according to performance in each fiscal year and stock options granted as a long-term incentive, in addition to fixed regular compensation. These three 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) consists solely of fixed regular compensation, and 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).

At the 106th Annual General Meeting of Shareholders held on March 23, 2017, a resolution was passed to newly introduce shares with restriction on transfer in place of the current stock options for executive directors of the Company in order to further promote shared value with shareholders and provide an incentive for directors to strive for continuous improvement of corporate value by further increasing the linkage between their remuneration and the Company’s mid-to-long-term performance. The aggregate amount of such compensation shall not exceed ¥345 million on top of the aforementioned fixed regular compensation and bonuses.

Amount of Remuneration Paid to Directors and Audit & Supervisory Board Members (2016)

1. Amounts are rounded to the nearest million yen.
2. The table above includes one Audit & Supervisory Board member who resigned during 2016.
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 stock-based 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 2016.
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 2016 and the number of officers in 2016, respectively.
7. 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 retirement.
8. The amount of compensation received by director Daniel O’Day from the parent company of the Company or subsidiaries of the said parent company as an officer while serving as an outside director of the Company in 2016 totaled ¥258 million (converted into yen at the average exchange rate in 2016). In line with the enforcement of the “Act for Partial Revision of the Companies Act” (Act No. 90 of 2014), Mr. O’Day changed from outside director to director (non-executive) as of the closing of the 105th Annual General Meeting of Shareholders held on March 24, 2016.

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.

Relationship with Roche and Ensuring the Rights and Equal Treatment of Shareholders

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 listed 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.

As of April 1, 2017, three 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.

Chugai believes that securing substantially equal treatment of shareholders is very important. We therefore emphasize giving due consideration to minority and foreign shareholders and to maintaining an environment that allows them to exercise their rights.

Therefore, recognizing that business plans are a commitment to shareholders, Chugai promotes the disclosure of a variety of information and constructive dialogue with shareholders and investors. Directors and executive officers make every reasonable effort to meet requests for interviews from shareholders and investors.

* The Tokyo Stock Exchange requires delisting if the ratio of tradable shares to listed shares is less than 5 percent.
Restrictions on Roche’s Shareholding
Period Maximum Shareholding
Oct. 1, 2002 – Sep. 30, 2007 50.1%
Oct. 1, 2007 – Sep. 30, 2012 59.9%
Oct. 1, 2012 and thereafter Cooperate in maintaining Chugai’s listing

Maintenance and Management of Internal Controls

On May 18, 2006, the Company approved the Board of Directors’ resolutions concerning the Internal Control System as its basic policies in maintaining systems for ensuring appropriate business operations. The status of implementation of the Internal Control System will be reported regularly at Board of Directors meetings, and any necessary revisions will be made in a timely manner to maintain effective internal controls.

Risk Management

Chugai has established Risk Management Regulations based on its Risk Management Policy 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. 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. The Risk Management Committee identifies Group-wide risk issues that may have a material impact on management and submits a progress report to the Executive Committee concerning preventive measures.

Chugai Risk Management System
System chart


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.

In light of increasing societal demands for greater compliance in the pharmaceutical industry, we have 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 conducts monitoring surveys regarding compliance status. Surveys are conducted for the entire organization, including subsidiaries and affiliated companies in Japan and overseas, and the results are 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.

The BCG Hotline and internal and external Harassment Hotlines have been established to receive employee inquiries and reports concerning laws, Company rules, the Chugai Business Conduct Guidelines (BCG) and other related matters.

In January 2017, the compliance oversight functions that were previously handled by multiple committees to comply with pharmaceutical regulations, general laws, industry standards, Company rules and healthcare compliance, were consolidated, and the Compliance Committee, a corporate management committee, was established to create an administrative system linked more directly to management. Compliance oversight functions (Corporate Social Responsibility Department, Quality & Regulatory Compliance Unit) were established to monitor, lead and support the compliance of the Chugai Group as a whole, including overseas subsidiaries, creating a horizontal global compliance management framework.

Addressing the Corporate Governance Code

Chugai implements all of the principles of the Corporate Governance Code of the Tokyo Stock Exchange. Based on these principles, we enacted the Chugai Pharmaceutical Co., Ltd. Basic Corporate Governance Policy on November 25, 2015 to institute our basic approach to corporate governance, and announced it on our website.

Disclosure Policy

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.

External Recognition

In 2016, Chugai was selected as a constituent of the Dow Jones Sustainability Asia Pacific Index for the third consecutive year. A total of 600 leading companies in Asia applied for inclusion and 146 were selected, including 68 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 February 28, 2017, a total of 843 companies were listed, of which Chugai was one of 158 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.

Chugai Receives Grand Prize at 19th Nikkei Annual Report Awards

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 85 companies participated in 2016. Chugai started to publish the annual report in an integrated form, from “Annual Report 2012,” and made various efforts to promote a better understanding of its unique strengths and corporate value among a wide range of stakeholders. As a result, “Annual Report 2012” and “Annual Report 2013” won the Second Prize, and “Annual Report 2014” and “Annual Report 2015” won the Grand Prize. We have received high evaluation for the fourth year in a row since we started publishing the integrated report.

Communication with Shareholders and Investors

General Meeting of Shareholders

Unlike many Japanese companies, which have fiscal years ending in March, Chugai’s fiscal year ends in December. As a result, we can 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 106th annual general meeting of shareholders was held on March 23, 2017. After the presentation of the business report through narration and materials, shareholders deliberated on agenda items concerning appropriation of retained earnings, election of directors and Audit & Supervisory Board Members, and the amount and details of remuneration to be paid to directors in the form of shares with restriction on transfer. All agenda items were approved and passed by a majority.

IR Activities

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 fourth 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 2016, we held an information meeting for Bonviva Tablet, an osteoporosis agent that we launched in April 2016. After an important overseas academic conference, we held an “R&D call” to explain and answer questions in a conference call format about information of great interest to investors. We also held a “CEO Day” for investors and analysts where we presented the current conditions and future direction of the pharmaceutical industry and the CEO spoke about Chugai’s strategies. In addition, we have conducted tours of the Utsunomiya Plant each year since 2013 to increase communication with individual shareholders. Moreover, Chugai is enhancing its outreach to individual investors by holding information meetings for them at branches of securities companies throughout Japan.

In 2016, senior management continued to hold overseas roadshows and, in addition to visiting institutional investors in Europe, the United States and Asia, planned IR Group-led roadshows as an additional initiative to cultivate new institutional investors, mainly in North America. To deepen mutual understanding through opportunities 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.

As a rule, we disclose information simultaneously in Japanese and English, and endeavor to provide information in a prompt and fair manner in Japan and overseas.

* 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.

Promotion of the Active Participation of Women

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. Under IBI 18, we will complement the themes of gender, nationality and age through initiatives that put inclusion into practice with a focus on individual diversity. Our aim is to use diversity to energize our organization and contribute to the success of our business.

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. In addition to 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, revision of the personnel system, and organization of forums for women in every division as an opportunity for female employees to consider their careers and working styles, training to nurture female leaders was launched in fiscal 2014.

Additionally, based on the Act on Advancement of Measures to Support Raising Next-Generation Children, the Company enhanced flexibility of work systems including telecommuting in order to support employees to balance work and childcare or nursing care, and to arrange environments for everyone to be able to demonstrate their abilities.

Results and goals:

  • Results: Percentage of female managers were 11.3% (as of end of 2016)
  • Goal: Percentage of female managers to be 13% (by 2018)

External Recognitions:

The “Nadeshiko Brand” by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange

  • Chosen for the third consecutive year (2014, 2015 and 2016)

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)

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.

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