FUJIFILM Holdings

Outside Director Round Table Discussion

FUJIFILM Holdings ensures transparency in the decision-making of its Board of Directors through the raising of active deliberations and monitoring that are backed by the expertise and experience of the outside directors at the Board of Directors. On this occasion, we had interviews with our outside directors on five Company-related themes: its Nomination and Remuneration Advisory Committee; the roles of outside directors; risk management and compliance; deliberations by the Board of Directors; and ESG matters.

Interviewees: Mr. Kawada (Outside Director) and Mr. Kitamura (Outside Director)

More than a year has passed since the establishment of the voluntary Nomination and Remuneration Advisory Committee as an advisory body to the Board of Directors in June 2018. How have the discussions at the Committee proceeded?

Kawada: The Nomination and Remuneration Advisory Committee ensures transparency in the processes relating to the nomination of the CEO’s successor and the determining of remuneration. To fulfill this role, we have been managing this committee with the aim of enhancing both the external aspects, such as the creation of systems, and the content of the discussions. From the aspect of enhancing the discussions, as outside directors we discussed from stakeholders’ perspectives.

Please tell us about the thinking behind the CEO’s succession plan discussed in the Nomination and Remuneration Advisory Committee.

Kawada: Not only achieving short-term results, managers emphasize the assets necessary for a company to grow from a medium- to long-term perspective, such as the human resource and development capabilities or the ability to respond to changes, which cannot be measured in numerical terms. As each company has its own history and culture, a CEO’s succession plan should be formulated based on those factors. Having undergone the drastic changes in its business environment brought about by the development of digital technologies over the past 20 years, Fujifilm has achieved business restructuring from a photographic film company to the present state of boasting a wide range of business fields, including healthcare and highly functional materials. I think that it is necessary to consider the succession plan firmly amid the direction of how the Company is to be managed in the years to come while referring to such a history and process.

Kitamura: How we set up the talent requirements for the next CEO would reflect the history and culture of the Company and very strongly bring out the uniqueness. I think that Fujifilm’s history and culture are well reflected in the human resource requirements of the CEO candidates agreed at the Nomination and Remuneration Advisory Committee.

Kawada: Based on the human resource requirements that we had set, we discussed the next candidates for CEO, where the detail information on the candidates was provided by Chairman Komori. Using that information as the basis, I think that the role that we should take is to properly engage in discussions and clearly demonstrate transparency, objectivity and validity from the so-called stakeholder perspective.

Kitamura: Although we outside directors understand the business of a company by words, it is not like they know the company through “actual experiences” and we don’t know thoroughly about the personnel in that company. Chairman Komori has worked with each of the candidates, and thus it was very useful for our deliberations to be able to obtain his honest and detailed information on each candidate from a manager’s perspective, such as personality and future potential, in addition to career, ability and achievements.

Please tell us about your expectations for Fujifilm from the perspective of the development of human resources, not just of the CEO’s successor.

Kawada: First of all, I think that the basis of human resource development is the idea that “human resources are not something to raise, but rather something to grow.” If you are aiming to become a manager, you have to figure out for yourself how to make use of various opportunities and how to demonstrate your skills. Fujifilm, however, gained valuable experience in successfully achieving business restructuring when facing the crisis of the loss of its core business. I think that the strength of Fujifilm’s human resource development will be to instill and pass on the knowledge gained here to its employees. How was the Company able to make that change, and how did it lead to today’s developments? I think that there are many things that can be utilized for future management of Fujifilm Group. In the years to come, if the greater percentage of employees comprises those who joined the Company after its situation improved, the sense of crisis and tension will fade, taking the current situation for granted. I want the coming generations of employees to firmly learn and utilize what the Company has gained from the experiences through daily work and training.

Mr. Tatsuo Kawada

Chairman and CEO, SEIREN CO., LTD.

Having served as a representative director of a general textile manufacturer, where he took the lead in the transformation of the company’s business model, creation of innovation, and organizational reform, Mr. Kawada has ample experience and a wide range of knowledge. He serves as chairperson of the Company’s Nomination and Remuneration Advisory Committee.

Please tell us about the remuneration plan, which is the other theme within the Nomination and Remuneration Advisory Committee.

Kitamura: The remuneration plan is highly objective and transparent. Fujifilm’s remuneration plan was originally designed to increase the proportion of remuneration linked to results in the form of stock options in accordance with rises in position. This time, however, even with regard to results-linked KPIs and compensation fluctuations in the case of monetary remuneration, we conducted discussions anew in-house while referring to information on other companies’ remuneration plans. We too have firmly deliberated those remuneration plan proposals at the Nomination and Remuneration Advisory Committee. The future challenge is how to think about medium- to long-term performance linkage. I think there is room to consider remuneration to replace current stock options, increasing the linkage with targets that will lead to medium- to long-term performance improvement, for instance.

Mr. Kunitaro Kitamura

Chairman (Director), Sumitomo Mitsui Trust Bank, Limited

Having served as representative director of major financial institutions, Mr. Kitamura has ample experience and a wide range of knowledge in the fields of finance and capital markets. He serves as a member of the Company’s Nomination and Remuneration Advisory Committee.

Kawada: Remuneration was previously positioned as compensation or treatment for results, but now it is becoming more pronounced as an element in incentives for increasing a company’s corporate value. Giving comprehensive consideration to the situation in the industry and the Company’s positioning, business model, corporate culture and others, we will further deliberate at the committee so that incentives may serve to enhance our medium-to long-term corporate value that the Company aims.

Interviewee: Mr. Kaiami (Outside Director)

Please tell us about the current supervisory function of the outside directors at the Board of Directors.

Kaiami: In discussions at Board of Directors’ meetings, outside directors speak from various angles based on their own knowledge and experience. Posing questions and voicing opinions based on their experience—Mr. Kawada as a company manager, Mr. Kitamura as the head of a financial institution, and Ms. Eda, who assumed the position of outside director last year, as a corporate manager with a wealth of international experience—adds depth to the discussion. Coming from the legal profession, I participate in discussions with the recognition that my role is to focus my attention and speak especially on compliance, governance, legal matters, and contracts.

Mr. Makoto Kaiami

Attorney at Law of Otemachi Law Office

Having served in important positions, such as Presiding Justice of the Division of Tokyo High Court and President of Tokyo District Court and others, Mr. Kaiami possesses ample experience and a wide range of knowledge accumulated over many years as a judge.

Do you have any expectations on the Company to strengthen the supervisory function of the outside directors?

Kaiami: As an outside director, if I have questions from an external perspective, I try to raise them in a candid manner. However, thus far there have not been any cases in which I felt doubtful enough to overturn a judgment, and I feel that sufficient discussions are being conducted at the Management Council and others before matters are raised as agenda topics for discussion at the Board of Directors’ meetings. The explanation given prior to a Board of Directors’ meeting, designed to promote the understanding of outside officers is currently being conducted in a very careful manner. If I were to be forced to point out something, I would like the Company to further enhance the explanation such as the internal review process and the different opinions in the discussion. I think that would be helpful to verify agenda topics from a variety of angles.

Interviewee: Mr. Kaiami (Outside Director)

How do you evaluate Fujifilm’s risk management and compliance efforts?

Kaiami: Triggered by inappropriate accounting issues at Fuji Xerox overseas subsidiaries uncovered in 2017, the Company created the Committee for Strengthening Governance and have strengthened governance in a speedy manner. We are regularly receiving reports of the current status of initiatives at the Board of Directors’ meetings and we evaluate that the strengthened system is being properly utilized. What is thought to be fulfilling a major role amid these initiatives is the Company’s establishment of a hotline in as many as 23 languages that allows all Group employees worldwide, to report directly to the head office, thereby bringing about enhancements in the internal reporting system. With regard to the number and content of whistleblowing cases, and whether the content of such whistleblowing poses risks that could lead to serious cases, the Board of Directors receives regular reports and confirms that there have been no problems. It is important that the whistleblowing system continues to function properly in the years to come. Since Fujifilm has clear guidelines that users will not be penalized for using the whistleblowing system, I would like employees to remain thoroughly informed of those guidelines so that they can use the system with peace of mind. Another initiative is the in-house development of a system that automatically extracts improper communications from e-mails. Its feature is that the quality and quantity of problem extraction improves because AI can learn in-house terminology that we have developed independently. The system is expected to serve as a mechanism for strengthening monitoring functions.

Interviewee: Ms. Eda (Outside Director)

Ms. Eda, you have been an outside director over a year now. Could you please tell us how you rate the discussions at Board of Directors’ meetings?

Eda: At the Company’s Board of Directors’ meetings, all the members participating in the meeting deepen the discussion in lively exchanges of questions and opinions without any hesitation. I am also asking questions from a range of angles with an outside perspective, and they are appreciated in a positive manner as an opportunity to deepen the discussion, and I thus receive thorough explanations in return. I think that Fujifilm’s corporate culture is shown to be a characteristic feature in the proceedings of this type of discussion. The other outside directors also make remarks in light of their backgrounds of various experiences and expertise, and questions from new perspectives arise from each other’s remarks, leading to broader discussions.

Interviewee: Ms. Eda (Outside Director)

Please tell us how you evaluate Fujifilm’s ESG efforts.

Eda: Based on the idea of “solving social issues through business activities and providing new value to society,” to my mind the special feature of Fujifilm’s ESG initiatives is that they were being put into practice on an ongoing basis before CSR and ESG even attracted attention. A variety of organizations, including governments and international bodies such as the United Nations as well as NGOs, are working to solve social issues, but corporate efforts can be expected to have a significant impact on society and the continuity of contribution. The corporate side will also be able to view social issues as business opportunities and lead to its own business growth. I think that SVP2030, the Company’s long-term CSR plan targeting 2030, represents an excellent initiative that clearly shows the relationship between SDGs and business. We have positioned VISION2019, the medium-term management plan, as the action plan for SVP2030 and put that into practice throughout the Company. I sense a strong will to work on ESG in the Company because the issues for further progress of the initiative are clarified.

​Ms. Makiko Eda

Chief Representative Officer, World Economic Forum Japan

Through experience as a global company manager and her incumbent position, Ms. Eda possesses ample international experience and a wide range of knowledge.

Please tell us about the global trends with regard to ESG and, in that context, what you expect to be done to bring about the further development of Fujifilm’s ESG efforts.

Eda: In January 2019, I participated in the “Davos Conference” hosted by the “World Economic Forum”, in which I serve as the Chief Representative Officer of Japanese office. I felt that the number of companies that are clarifying and actively disseminating their visions and activities, such as “how to contribute to the various issues occurring in society,” has been increasing primarily in Europe and the United States. Furthermore, not a few companies that collaborate across national and industry boundaries and together seek solutions to social issues centered on environmental issues were prominently seen.

For the Fujifilm Group to grow further as a global company in the years to come I think it will be even more important to increase the number of its supporters around the world, such as shareholders, customers and partner companies, by further clearly communicating the Company’s vision and the value it provides and thereby attracting empathy. I think that Fujifilm’s original philosophy, strong culture, and DNA should be communicated more proactively in a story, if possible, which is backed up by numerical data. This would lead to the gaining of empathy from those in society who want to give more support and work together. Moreover, if employees realize that Fujifilm’s businesses contribute to the resolution of social issues, their commitment will also increase. I hope that such a virtuous cycle will emerge and sustainability will increase.