This Policy establishes the basic views, framework and operational policy regarding corporate governance of the Sompo Group (hereinafter “the Group”).
1. Basic Views on Corporate Governance
The Group management philosophy sets out that the Group will at all times carefully consider the interests of our customers when making decisions that shape our business. We will strive to contribute to the security, health, and wellbeing of our customers and society as a whole by providing insurance and related services of the highest quality possible.
At the core of management strategy lies “Sompo’s Purpose” which is to address various social challenges from a medium- to long-term perspective based on the management philosophy and realize a society where everyone can enjoy a healthy and prosperous life in one’s own way with “A Theme Park for Security, Health & Wellbeing“.
Sompo Holdings, as the holding company of all Group companies, considers continuous improvement of transparency and fairness of the Group’s corporate governance and fulfillment of corporate social responsibility through business as essential for maintaining strong relations of trust with stakeholders. The Board of Directors has accordingly established this Policy to clarify basic policies regarding the overall vision for the governance structure and the development of governance framework. We continue to make efforts to enhance corporate governance in pursuit of the best corporate governance.
2. Overall Governance Structure
Sompo Holdings, Inc. (hereinafter “the Company”) has changed its governance structure to "Company with committees", effective June 2019, as part of efforts to strengthen corporate governance structure by separating management supervision from business execution in order to reinforce the supervisory function of the Board of Directors and to accelerate business execution by delegating substantial authorities from the Board of Directors to executive functions. The Company also established three committees; Nomination Committee, Audit Committee, and Compensation Committee and established a governance structure that works to improve transparency and fairness.
The Board of Directors sets the basic policies for Group management and for internal control which forms the foundation of Group management, appoints Executive Officers and Senior Vice Presidents, and supervises the performance of duties by Directors and Executive Officers. The Board of Directors also delegates executive decisions to Executive Officers in principle, as far as the laws permit, to further strengthen the supervisory function of the Board of Directors and accelerate business execution.
In addition, by appropriately executing the duties of the Nominating Committee, Audit Committee, and Compensation Committee, which have the Chairman and a majority of its members as Outside Directors, the Company ensures transparency in the appointment of Directors, Executive Officers, and Senior Vice Presidents, the audit of their duties, and the compensation of Directors, Executive Officers and Vice Presidents to develop and maintain the structure for enhanced functioning of corporate governance.
On the structure for business execution, Executive Officers make executive decisions and perform duties on the matters delegated from the Board of Directors under the overall supervision of the Group CEO and the Group COO, while Business Owner System and Group Chief Officer (hereinafter “Group CxO”) system are in place to ensure agile and flexible decision-making and business execution, with clearly defined authorities and responsibilities.
Additionally, the Company established the Global Executive Committee (hereinafter “Global ExCo”) which is the highest executive committee and an advisory body to the Group CEO to discuss important matters that significantly impact management, such as Group management strategy and business executive policy. The Company also established Managerial Administrative Committee (hereinafter “MAC”) as an advisory body to the Group COO to discuss important matters related to execution of business strategies and managerial administrative matters of the Company and Group companies.
3. Board of Directors and Committees
(1) Directors and the Board of Directors
(4) Compensation Committee
4. Business Executive Structure and Executive Officers
In the Company, Executive Officers shall make executive decisions on matters delegated by the Board of Directors and execute business under the overall supervision of the Group CEO and the Group COO. Additionally, the Group introduced Business Owner System and Group CxO System in order to perform agile and flexible decision-making and business execution, in the Group's best interest with the objective of increasing corporate value of the Group.
(1)Executive Officers and Senior Vice Presidents
Executive Officers shall make executive decisions on matters delegated by the Board of Directors and execute business, and within the scope of duties in accordance with laws and regulations or the Articles of Incorporation, internal rules, etc., execute business based on management strategy of the Group. Senior Vice Presidents execute business following a partial delegation of business execution authority from Executive Officers.
As the Chief Executive Officer of the Group, the Group CEO oversees the overall management of the Group by strategically assigning Business CEOs that are the heads of each business segment and Group CxOs that are the heads of each function of the Group to realize agile and flexible Group management in response to discontinuous changes in business environment.
(3) Group COO
As the Chief Operating Officer of the Group, the Group COO supports the Group CEO in overseeing the overall management of the Group, makes decisions and supervises businesses in accordance with the role sharing with the Group CEO.
(4) Business CEO
Business CEOs as heads of each business (CEO of Domestic P&C Insurance, CEO of Overseas Insurance and Reinsurance, CEO of Domestic Life Insurance, CEO of Nursing Care & Seniors and CEO of Digital) are delegated the authority of business strategy formulation, investment decisions, and personnel deployment to enable agile and flexible decision-making and business execution by the business division that is closer to customers.
(5) Group CxO
Group CxOs as heads of each function in the Group (Group CFO (finance), Group CSO (strategy), Group CDO (digital), Group CHRO (human resource), Group CERO (external relations), Group CRO (risk management), Group CIO (IT), Group CVCO (value communication), Group CSuO (sustainability), Group CPRO (public relation) oversee Group-wide operation of each function to enable agile and flexible decision-making and Group-wide business execution in the Group's best interest.
(6) Global ExCo
Global ExCo as an advisory body to the Group CEO and the highest executive committee, is held six times a year in principle to discuss themes that significantly impact group-wide management strategy and business executive policy.
Global ExCo is chaired by the Group CEO and comprised of Group COO, Business CEOs, Chairman of Overseas M&A, Group CFO, Group CSO, Group CHRO and others.
(7) Managerial Administrative Committee (MAC)
Managerial Administrative Committee (MAC) as an advisory body to the Group COO is held monthly in principle to discuss important matters related to execution of business strategy and managerial administrative matters of the Company and Group Companies.
Managerial Administrative Committee (MAC) is chaired by the Group COO and comprised of Group CxOs, Business CEOs and others.
5. Policies for Appointment of Directors and Executive Officers
The appointment of Directors and Executive Officers is conducted in accordance with the following policies for appointment of Directors and Executive Officers. The candidates for Directors selected by the Nomination Committee are approved at the General Shareholders Meeting, and the candidates for Executive Officers are selected by the Nomination Committee and approved by the Board of Directors.
(1) Policies for appointment of Directors
The Company supervises and guides its subsidiaries, formulates management strategy for the Group that encompasses management strategies for subsidiaries that are engaged in the P&C insurance business and other various businesses, and is responsible for ensuring the execution and realization of these strategies.
From this perspective, the Board of Directors selects Outside Directors to facilitate objective decision-making with respect to management issues from a diverse and independent viewpoint and perspective with consideration of diversity such as gender and nationalities, and the majority of the Board of Directors consists of Outside Directors.
Additionally, the Directors are selected based on the selection criteria that incorporate the Comprehensive Guidelines for Supervision of Insurance Companies. Outside Directors are selected based on I. "Ability Requirements", II. "Standards regarding Independence of Outside Directors", and III. "Requirements for Terms of Office".
For the purpose of carrying out substantive discussions, the number of Directors shall be limited to 15 (fifteen) in accordance with the Articles of Incorporation.
Note: In this policy, gender refers to all gender-related events, knowledge, and values, including the existence of the gender division of labor and LGBTQ.
In the event that a candidate for Outside Director falls within any of the categories listed below, the Nomination Committee, a committee primarily constituted of Outside Directors, will examine his/her independence. Following the final determination by the Board of Directors, the proposal for appointment will be submitted to the General Meeting of Stockholders of the Company and the Company will submit notification of such Outside Director as an independent director as prescribed by each Financial Instruments Exchange.
(2) Policies for the composition and criteria for appointment of Executive Officers and Senior Vice Presidents
- Able to realize transformation based on SOMPO's management philosophy and purpose
- Able to develop the next generation of leaders who will drive transformation
- Able to foster a culture in which employees have confidence and pride, and boldly take on challenges with high aspirations
- Is driven by one’s own mission and able to take actions
- Has a high level of expertise and insight regarding the mission and roles to be assumed
- Has experience and a track record related to the mission and roles to be assumed
- Understands the value of diversity and is able to leverage it for value creation
- Has the ability to make fair and impartial judgments and to achieve goals
- Has a fair and honest personality
6. Policies for Training of Directors and Executive Officers
To facilitate a deeper understanding of the business environment surrounding the Company, training is provided for newly appointed Outside Directors on the current state of the Company and the P&C insurance industry, risk management, overseas businesses, life insurance business,nursing care and seniors business, and digital business. Outside Directors also continue to deepen their understanding of business in a practical manner through various opportunities to communicate with executive functions.
Also, executive study sessions are held regularly for Executive Officers and Senior Vice Presidents to acquire knowledge outside the areas of their responsibilities and training is undertaken through participation in seminars and executive training provided by various associations and organizations.
In addition to the aforementioned training, education programs are offered to develop executive mindset and leadership skills in collaboration with outside specialized companies to educate the next generation executives.
7. Policies for Determining Compensation for Directors and Executive Officers
The Company regards compensation for Directors and Executive Officers as important matter from the viewpoints of improving business performance and corporate value, and sets policies for determining compensation for Directors and Executive Officers as follows:
(1) Basic concept of Compensation for Directors and Executive Officers (Group-wide policy)
(2) Compensation system for Directors and Executive Officers
The following is applied to the Company’s compensation system for Directors and Executive Officers. However, in case there is a justifiable reason for not applying the following, the amount and composition of compensation are determined individually by the Compensation Committee.
Compensation for Directors shall consist of monthly compensation, performance-linked compensation and performance-linked stock compensation. With regard to monthly compensation, performance-linked compensation and performance-linked stock compensation, fixed amount shall be determined for monthly compensation, while a base amount and the number of base point (one point = one common share of the Company) shall be determined for performance-linked compensation and performance-based stock compensation, depending on whether the Director is an Outside Director or not, and whether the Director is a full-time or a part-time Director.
However, performance-linked compensation and performance-linked stock compensation are not paid to non-executive Directors.
Any Director who also serves as an Executive Officer shall be paid with the sum of the compensation for Director and the compensation for Executive Officer.
The overview of the performance-linked compensation and performance-linked stock compensation is described below in (iii) and (iv).
Compensation of Executive Officers and Senior Vice Presidents shall consist of monthly compensation, performance-linked compensation and performance-linked stock compensation. The amount and composition of compensation of Executive Officers and Senior Vice Presidents are determined based on the business environment and market average executive compensation, reflecting the magnitude of the mission, strategic importance thereof, achievements and skills.
Additionally, fixed amount shall be determined for monthly compensation, while base amount and the number of base point (one point = one common share of the Company) shall be determined for performance-linked compensation and performance-linked stock compensation.
The Company has introduced performance-linked compensation system to align compensation for Directors and Executive Officers and business strategy and heighten the Directors’ and Executive Officers’ awareness of performance improvement for the Group’s growth. The overview of the system is described below.
- Performance-linked compensation shall be determined by reflecting the degree of achievement of financial target and strategic target for a single fiscal year in the base amount of performance-linked compensation.
- The base amount of performance-linked compensation is defined as the amount to be paid when financial target and strategic target are achieved. This base amount is determined individually for each Director and Executive Officer.
- Performance-linked compensation consists of financial performance-linked compensation and strategic performance-linked compensation, and the allocation ratio of each base amount is determined by the Compensation Committee in accordance with the nature of the mission of each Director and Executive Officer.
- Performance indicators that are applied to financial target are adjusted consolidated ROE and others for the fiscal year and the coefficient is determined according to the actual figures vs. target figures (numerical target in business plan).
- Performance indicators that are applied to strategic target are the indicators agreed by the Group CEO, Business CEO or other Director or Executive Officer responsible for evaluation in accordance with the mission of each Director or Executive Officer, and the coefficient is determined according to the degree of the achievement.
The company introduced performance-linked stock compensation system using employee benefit trust to increase correlation between compensation and increase in corporate value over the mid-to-long term. The overview of the system is described below.
- Performance-linked stock compensation shall be determined by reflecting the mid-to-long term stock value and consolidated performance against market averages in the number of base point for performance-linked stock compensation.
- Coefficient for stock value relative to market averages shall be determined by comparing the growth rate of the Company’s stock value over the past 3 (three) fiscal years to the TOPIX growth rate.
- Coefficient for consolidated performance relative to global averages shall be determined by comparing the growth rate of the Company’s consolidated net income over the past 3 (three) fiscal years to the growth rate of peer groups (global companies in the insurance industry and others).
- Coefficient that are applied when paying performance-linked stock compensation is calculated by adding the above-mentioned coefficient for stock value and coefficient for consolidated performance, and the payment points are calculated by multiplying the number of base point for performance-linked stock compensation by the coefficient for performance-linked stock compensation.
8. Information Disclosure
The Company fulfills accountability to stakeholders through timely, appropriate, fair and accurate disclosure of financial as well as non-financial information, including management strategies and issues, risks, and governance. Disclosure systems, including internal rules, shall be established to accurately and promptly provide required information.
9. Policies for Managing Group Companies
To increase the Group’s corporate value, the Company supervises the businesses of the entire Group with the Business Owner System and Group CxO system. For this, the Company establishes structures, including internal rules, to appropriately manage Group companies.
The Company formulates Group management philosophy and basic policies for the Group and notifies these to Group companies as well as appropriately manages Group companies through monitoring and other means. The Company also establishes appropriate systems, including risk management system, regulatory compliance system, conflict of interest management system, customer information management system, and internal audit system, to ensure effectiveness of internal control system of Group companies.
Group companies shall adhere to basic policies of the Group and formulate business plans based on Group management philosophy and others.