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Corporate Governance

Corporate Governance

Basic Approach

MRI’s basic corporate governance policy is to ensure the proper execution, based on our management philosophy, of activities that sustainably improve corporate value, which is the aggregate of four values: social value, customer value, shareholder value, and employee value.
Outside directors make up more than one-third of MRI's directorship, and outside audit & supervisory board members form a majority of our audit & supervisory board members. This composition allows us to actively employ an outside perspective in our management decisions. Management meetings settle matters concerning the execution of business in line with the basic management policy established by the board of directors. Executive officers then implement decisions. When deciding on crucial matters, we consult with various internal committees before the management meetings.
MRI also has a common Code of Conduct, the Mitsubishi Research Institute Corporate Governance Guidelines, and a System to Ensure Appropriate Conduct of Operations (Internal Control System) that are shared with Mitsubishi Research Institute DCS and all other Group subsidiaries and affiliates. These shared the aims of codes, guidelines, and systems serve as the foundation of our common values and ethics.
Corporate Governance

Board of Directors, Officer Structure, and Governance Advisory Committee

MRI's Board of Directors consists of eight directors (including four outside directors), and it has the authority to make decisions about our management and to supervise directors in the execution of their duties. Three of the four current outside directors have experience as managers of other companies, and one is an educator with extensive experience in governmental agencies. This structure allows the outside directors to make decisions and monitor management from a broad perspective, based on their individual positions, experience, and knowledge. We work to make efficient and accurate decisions, and to clarify responsibility for business execution by selecting nine executive officers and by separating management from execution.
We have also established a Governance Advisory Committee to serve as an advisory body to the Board of Directors. The board may ask for opinions on the election/dismissal of officers and on officer compensation, and it may request that the committee analyze and evaluate the effectiveness of the Board of Directors.

Audit & Supervisory Board and Audit & Supervisory Board Members

We have adopted a corporate structure of a Company with an Audit & Supervisory Board in accordance with the Companies Act and related laws and regulations. The Audit & Supervisory Board consists of five Audit & Supervisory Board Members (including three Outside Audit & Supervisory Board Members). Audit & Supervisory Board Members exercise their rights under the law to attend the General Meeting of Shareholders and the Board of Directors meetings, and to receive reports from Directors, Executive Officers, employees, and the Accounting Auditor. Audit & Supervisory Board Members effectively audit the Company by attending important meetings such as the Management Meeting and internal committees, receiving internal audit reports, and sharing the report results with all Audit & Supervisory Board Members.

Management Meeting and Executive Officer Meeting

The Management Meeting is composed of Executive Directors, Executive Officers holding a managerial position, and Unit managers. The Management Meeting discusses and decides important general matters concerning management based on the basic policies determined by the Board of Directors. It is held in principle regularly every Wednesday and on a temporary basis as necessary. In addition, Audit & Supervisory Board Members participate in every Management Meeting as monitors. The Executive Officer Meeting consists of Executive Directors, Executive Officers, and research fellows. In principle, Executive Officer Meetings are held once a month. In the Executive Officer Meeting, Executive Directors ascertain the status of business execution on the part of the Executive Officers and inform the Executive Officers of the instructions and decisions of the Board of Directors on behalf of the Board of Directors. The President explains the current status of management to the Executive Officers and issues necessary instructions to each of them. Other Executive Officers and research fellows report on the execution of their own business or the status thereof. 

Various Internal Committees

We have established a variety of internal committees as advisory bodies to the Management Meeting.
Regarding important management matters such as management strategy, consolidated management, internal controls, we ensure transparency and checks, and make it possible to decide on a variety of measures from a broad perspective—not just by specific management lines—by referring such issues to the Management Meeting after sufficient discussion by these internal committees chaired by officers. 

Group Internal Controls

We have subsidiaries and affiliates that include Mitsubishi Research Institute DCS Co., Ltd. We ensure corporate value improvement and appropriateness of operations as a group by sharing the aims of and stringently enforcing the aforementioned “Code of Conduct,” “Mitsubishi Research Institute Corporate Governance Guidelines,” and “System to Ensure Appropriate Conduct of Operations (Internal Control System)” as a corporate group.
In addition, we have signed a business management agreement with Mitsubishi Research Institute DCS Co., Ltd., which is a particularly important subsidiary, requiring prior consultation with us regarding important matters of its management. At the same time, we have a Consolidated Management Committee and have established a system whereby the Executive Directors regularly check on its management situation. Furthermore, through operational auditing by the internal audit department, we have established a system to ensure the appropriateness of operations of each group company to restrain and prevent violations of laws and regulations or unlawful behavior. 

Election / Dismissal of Directors and Audit & Supervisory Board Members

The election/dismissal of our Directors and Audit & Supervisory Board Members is based on the “Basic Policy.” Specifically, the Board of Directors will determine the candidates, and the General Meeting of Shareholders will elect or dismiss them in accordance with the provisions of laws and regulations. Regarding candidates for Audit & Supervisory Board Members, we obtain the consent of the Audit & Supervisory Board in advance.

Basic Policy for Election of Officers
(1) A person who always puts our management philosophy into practice.
(2) A person who demonstrates the necessary insight, high ethical standards, experience, ability and qualifications as an officer.
(3) For outside officers, a person who has the experience, ability and qualifications to rigorously monitor and provide advice from the viewpoint of an outside third party with regard to our management. 

Independence Evaluation Standards for Outside Directors and Audit & Supervisory Board Members

MRI considers outside directors and outside auditors to be independent only when none of the following conditions apply to them.

(1) Main business partners
(a) Persons whose main business partners are MRI or MRI subsidiaries, or persons who execute business on their behalf
(b) MRI’s main business partners or persons who execute business on their behalf
(2) Experts
Consultants, accountants, or legal experts who receive a large amount of remuneration or other assets other than officer compensation from MRI (in the event that said assets are received by corporations, associations, or other organizations, this condition applies to members of said organization)
(3) First and second degree relatives of persons one or more of the following applies (excluding persons not classified as important)
(a) Persons to whom (1) and (2) apply
(b) Persons executing business on the behalf of MRI subsidiaries
(c) Persons to whom (b) have recently applied, or who have recently executed business on behalf of MRI

Officer Compensation

Our officers’ compensation is based on the Basic Policy below. Specifically, after deliberations by the governance advisory committee, the board of directors decides on directors' compensation, and the audit & supervisory board determines its board members’ compensation through discussion.

Basic Policy Regarding Officer Compensation
(1) To put in practice a management policy that responds to the mandate of the shareholders, we will have a fair compensation system that motivates officers to execute their duties.
(2) To ensure accountability to our stakeholders, we will decide officer compensation through an appropriate process that guarantees transparency, fairness, and reasonableness.
(3) To secure talented individuals essential for our continued growth, we will aim to set officer compensation at levels that are attractive over the long term.

The breakdown of officer compensation is as follows.
  • Internal officers: Basic compensation will consist of base pay, variable monetary compensation, and variable stock compensation. The intent of variable stock compensation is to motivate and incentivize officers to enhance business performance and corporate value over the medium to long term by linking their compensation to Group performance.
  • Outside officers: Because these positions are independent of business execution, their compensation consists only of base pay.
  • Audit & supervisory board members: To ensure independence, their compensation consists only of base pay.

Analysis and Evaluation of Effectiveness of the Board of Directors

To enhance the effectiveness of MRI’s Board of Directors, its effectiveness is analyzed and evaluated by the Board of Directors to improve its operations based on the results of reviews conducted by the Governance Advisory Committee. As a result of the analysis and evaluation for the fiscal year ended on September 30, 2021, it is highly evaluated that our Board of Directors is structured in a way that enables it to engage in constructive discussions and open exchanges of opinions and fulfill its supervisory functions, appropriately performing its functions, while based on the opinions of the Directors, there is also a willingness on the part of the management team to improve operation of the Board of Directors, which fosters an appropriate level of tension based on a relationship of trust between the management team and the Board of Directors, resulting in effective performance of its functions.
On the other hand, we recognize, to further enhance the effectiveness of the Board of Directors, the importance in deepening our discussions at the Board of Directors on investment in human capital, including ensuring diversity among core human resources and deepening its involvement in succession planning through the Governance Advisory Committee. Based on such recognition, we will continue to strive to enhance the effectiveness of the Board of Directors.

Accounting Auditor

We strive to ensure the independence of the Accounting Auditor.
The Audit & Supervisory Board takes the following procedures in order to ensure proper audits by the Accounting Auditor.
(1) Standards are formulated in order to appropriately select and evaluate the Accounting Auditor.
(2) Confirmation is made as to whether the Accounting Auditor has sufficient independence and expertise to perform the accounting audit of MRI.

The Board of Directors and the Audit & Supervisory Board take the following procedures in order to ensure proper audits by the Accounting Auditor.
(1) Sufficient auditing time is secured to enable high-quality audits.
(2) Opportunities to consult with the Representative Directors, Executive Directors, Outside Directors and other relevant parties are provided, at the request of the Accounting Auditor.
(3) A system is put in place which allows for sufficient coordination between the Accounting Auditor and the Audit & Supervisory Board Members, the internal audit department and the Outside Directors.

Relationships with Stakeholders

Policy of Dialogue with Shareholders

We strive to engage in constructive dialogue with our shareholders and investors that will contribute to our sustained growth and the improvement of corporate value in the medium to long term. Directors and other officers respond, as necessary, to requests for interviews by shareholders and investors wishing to hold constructive dialogue. We have established the following policy for the development of a system and initiatives toward materializing constructive dialogue with shareholders and investors.

(1) An officer in charge of IR is designated as the officer who oversees the dialogue with shareholders and investors, and organic coordination to support the dialogue is promoted through sufficient information sharing between the relevant divisions including IR, Corporate Planning, General Affairs and Corporate Communications.
(2) Briefings for investors, meetings with the Representative Directors and investor visits, among others, are conducted proactively to encourage greater understanding of MRI. In addition, the MRI Group Report, materials relating to the General Meeting of Shareholders and financial results-related materials are prepared as tools to promote further understanding and offered to shareholders and investors in a timely manner.
(3) Opinions and requests obtained through dialogue with investors and shareholder questionnaire surveys are analyzed by the divisions in charge of IR and offered as feedback to the Representative Directors and the officers in charge.
Furthermore, in the formulation and announcement of MRI’s medium-term management plan, the fundamental policies regarding earnings plans and capital policies, as well as the targets for profitability and capital efficiency and summary of measures for the realization of the targets are disclosed.

Status of Initiatives toward the Revitalization of the General Meeting of Shareholders and the Facilitation of the Exercise of Voting Rights

We are engaged in the following initiatives.
  • Adoption of the exercise of voting rights via the Internet
  • Participation in the electronic voting platform operated by ICJ, Inc.
  • Translation of the convocation notices into English and posting on MRI’s website
  • Early posting (prior to mailing) of the convocation notices on MRI’s website
  • Live streaming of general meetings of shareholders (participatory)
  • Accepting prior questions regarding the purpose of the shareholder meeting

Basic Capital Policies

To improve shareholder value through sustained growth, we consider Return on Equity (ROE) to be an important management indicator and continuously aim for ROE that exceeds shareholders’ equity costs.
Furthermore, we strive to return profits to shareholders mainly through the increase of dividend levels by maintaining stable dividend payments while comprehensively taking into account the balance between business results and financial soundness.

Policy on Cross-Shareholdings

The determination of whether to hold the shares of other listed companies as cross-shareholdings is made after thorough deliberation upon comprehensively taking into account the medium- to long-term effects on the MRI’s business including collaborating and complementing businesses with the investee, maintaining and developing business transactions and creating businesses in the future as well as the risk and returns entailed by the stock investment. Stocks that have been determined inappropriate for cross-shareholding are disposed of or reduced as promptly as possible.
With regard to shares held as cross-shareholdings, the Board of Directors confirms regularly the business conditions of the investee and the risks and returns of investment and verifies the medium- to long-term economic rationale of the holding and future outlook.

Takeover Defense Measures

When adopting takeover defense measures, the Board of Directors and the Audit & Supervisory Board Members deliberate their necessity and rationale, ensures that proper procedures are followed and provides sufficient explanation to the shareholders.
In the event that the MRI’s shares become subject to a tender offer, we shall provide a clear explanation on the position of the Board of Directors, including the proposal of countermeasures. Additionally, we shall not unduly hinder the rights of the shareholders to accept the tender offer and dispose of their shares.
Moreover, in the event that we implement capital policies (including capital increases and MBOs) that entail a transfer of corporate control or a large-scale dilution of shares, the Board of Directors and the Audit & Supervisory Board Members shall, in order to avoid unduly harming the rights of the existing shareholders and from the standpoint of fulfilling their fiduciary responsibilities to shareholders, deliberate the necessity and the rationale, ensure that proper procedures are followed and provide sufficient explanation to the shareholders.
Currently, MRI has not adopted takeover defense measures.

Related Party Transactions

With regard to transactions that fall under related party transactions, pursuant to the provisions of Rules of the Board of Directors, we require the resolution of a meeting of Board of Directors held with the exclusion of the Director involved in the transaction, as a person with special interest. Additionally, we have established a system to manage related party transactions, including questionnaire surveys on all officers of MRI to determine whether there are any related party transactions.
We have established a system to conduct monthly follow-ups on transactions with companies at which the Directors concurrently serve in significant positions and determine whether there are any transactions that pose conflicts of interest.

Roles of Corporate Pension Funds as Asset Owners

We have adopted the defined contribution pension plan to support the unrestricted asset formation of each employee in line with his or her life plan.
We have entrusted the management of the plan to the specialized organization, Mitsubishi UFJ Trust and Banking Corporation and encourage employees to make use of various seminars as part of enrollment education and recommend the use of optional life plan systems.

Internal Control

We have resolved to establish a system to ensure the appropriateness of our operations (internal control system), as described below.
 
  1. Systems to ensure that the performance of duties by the Directors and employees complies with laws, regulations and the Articles of Incorporation
  2. Systems regarding the preservation and management of information related to the performance of duties by the Directors
  3. Regulations and other systems regarding the management of risks for losses
  4. Systems to ensure that the performance of duties by Directors is efficient
  5. Systems to ensure that the corporate value of the corporate group consisting of MRI and its subsidiaries is improved and operations of the corporate group are appropriate
  6. Matters regarding the appointment of employees who support the duties of the Audit & Supervisory Board Members, and systems to ensure the independence of such employees from the Directors and the effectiveness of instructions given to these employees by the Audit & Supervisory Board Members
  7. Systems for Directors and employees to provide reports to the Audit & Supervisory Board Members and other systems regarding reports provided to the Audit & Supervisory Board Members
  8. Matters regarding the policy for procedures for pre-payment or reimbursement of expenses arising with respect to the performance of duties of the Audit & Supervisory Board Members and other disposition of expenses or liabilities arising with respect to the performance of such duties
  9. Other systems to ensure that audits by Audit & Supervisory Board Members are carried out effectively

Handling of Antisocial Forces

Basic Approach toward the Elimination of Antisocial Forces (Basic Policy)

We uphold a basic policy whereby MRI and its group companies are resolutely committed to rejecting any relationships whatsoever with antisocial forces that threaten the order and security of civil society.

Status of Development of Systems to Eliminate Antisocial Forces

1. Status of development of internal rules

The MRI Group has set forth the rejection of relationships with antisocial forces in the Basic Policy on the Internal Control System and the Code of Conduct and has provided for specific measures in its internal rules.

2. Officer in charge of handling antisocial forces, division in charge, and persons in charge at each division

The Compliance Officer has been designated as the officer in charge and determines the handling of antisocial forces. Additionally, the Risk and Compliance Management Division, as the division in charge, operates the reporting and consultation center, leads the handling of antisocial forces and provides support in the handling of antisocial forces to divisions where problems have occurred. Furthermore, persons in charge at each division are designated as compliance staff and engage in the monitoring of their division while serving as the liaison with the division in charge of handling antisocial forces. 

3. Status of cooperation with outside specialized organizations

We handle antisocial forces by cooperating with the local police department, National Center for Removal of Criminal Organizations, attorneys addressing measures against racketeering through intercession in civil disputes, members of Association for Preventing Special Violence in Marunouchi area, among others. 

4. Status of development of manuals and standardized contract formats

Manuals have been prepared covering the following points.
  • The mental preparation and internal framework involved in the handling of antisocial forces
  • Types and characteristics of antisocial forces
  • Cautionary points when forced to deal with antisocial forces, etc. 
Additionally, a termination clause has been added to each of the MRI’s standardized contract formats, in the event that a counterparty is found to have relationships with antisocial forces.

Anti-bribery Policy

Basic Policy

We engage in fair corporate activities that fulfill our accountability toward society at all times and do not take part in bribery or any actions that could raise suspicion of bribery whether in Japan or overseas.

1. Prohibition of bribery

We shall ensure strict compliance with Japan’s Penal Code, Companies Act, Unfair Competition Prevention Act, the Foreign Corrupt Practices Act of the US, the UK Bribery Act and other laws both in Japan and overseas that prohibit acts of bribery, and shall not, directly or through a third party, in a relationship with any counterparty, provide or accept entertainment or gifts for unfair purposes or beyond socially acceptable limits. We shall, similarly, not make facilitation payments (small-amount payments to expedite regular government services). 

2. Thorough record management

To prevent bribery and to protect evidence, we shall record and retain accurate and appropriate accounting treatment of all transactions, payments and the disposition of assets. 

3. Development of internal rules and employee education

We shall establish and strictly enforce internal rules and a structure to systematically prevent bribery. Furthermore, in order to familiarize the employees with these internal rules, we shall establish internal manuals and conduct ongoing employee education on the prevention of bribery. 

4. Whistle-blowing system

We shall promote the early detection and remediation of bribery and acts that could raise the suspicion of bribery through the compliance reporting and consultation center. 

5. Monitoring and ongoing improvements

We shall conduct ongoing reviews of the systems to prevent bribery and make improvements, as necessary. 

Information Disclosure System

Basic Policy

In accordance with the “Timely Disclosure Rules” set forth by MRI, we disclose corporate information on MRI and MRI Group companies to the stakeholders including shareholders and investors in a timely and an appropriate manner.

Basic Policy on Information Disclosure

  1. We engage in fair corporate activities that fulfill our accountability toward society at all times and ensure strict compliance with laws and regulations as well as the timely disclosure rules of the stock exchange, pursuant to the MRI Group’s “Code of Conduct,” which upholds social norms.
  2. Recognizing that the timely and appropriate disclosure of corporate information in accordance with the timely disclosure rules of the stock exchange is the basis for the formation of sound capital markets, we, at all times, disclose important information to our stakeholders including shareholders and investors in a timely, accurate, fair and impartial manner.
  3. In addition to the important information set forth in the timely disclosure rules of the stock exchange, we disclose information that we deem effective in promoting a wider understanding by society of the MRI Group and conducive to the appropriate assessment of the MRI Group’s corporate value, proactively and in a coherent manner.

Education

With respect to timely disclosure, we strictly enforce the “Rules on the Prevention of Insider Trading,” while at the same time provide information and conduct education through briefings and e-learning. Additionally, we have established the “Procedures for Timely Disclosure” and have provided information on the relevant framework and procedures to all employees involved in the practice of timely disclosure.

Decisions, Facts and Events, and Financial Results Information of MRI

We have established divisions in charge, pursuant to internal rules, for each disclosure item required by the Tokyo Stock Exchange (TSE). Accordingly, a timely and appropriate disclosure system has been established in which the division in charge gathers information, as appropriate, regarding the important information for timely disclosure, and the Investor Relations Office, the division in charge of information disclosure (Disclosure Division), centrally manages all important information.

1. Decisions by MRI

With respect to decisions made by MRI, the division in charge and the Disclosure Division coordinate and reach a preliminary decision on the necessity of timely disclosure, and report the decision to the Disclosure Officer (appointed by the President). Matters which have been determined to require timely disclosure by the Disclosure Officer after determination by the decision-making organization (the Management Meeting, the Board of Directors or the General Meeting of Shareholders depending on the type of important information), are registered as timely disclosure materials (Materials) by the Disclosure Division at the TSE and disclosed. 

2. Facts and events which have occurred at MRI

With respect to facts and events which have occurred at MRI, the division in charge reports the facts and events as soon as they are recognized to the Disclosure Division, and the division in charge and the Disclosure Division coordinate and reach a preliminary decision on the necessity of timely disclosure and report the decision to the Disclosure Officer. Matters which have been determined to require timely disclosure by the Disclosure Officer are registered as Materials by the Disclosure Division at the TSE and disclosed. Additionally, urgent matters are also reported to the President and await the instructions of the President. Facts and events which have been disclosed are promptly reported to the Management Meeting and other meetings. 

3. Financial results information

With respect to financial results information of MRI, disclosure documents for the financial results information (e.g. financial results reports) are prepared upon adjustments by the Management Accounting and Finance Division (AFD) with the related divisions, and with the approval of the decision-making organization (Management Meeting and Board of Directors), the disclosure documents are registered by the AFD as Materials at the TSE and disclosed. Additionally, revisions of results forecasts are drafted by the Corporate Planning Division upon receiving reports from the persons managing the budget of each unit and reports of performance outlook from each group company, and with the approval of the decision-making organization (Management Meeting and Board of Directors), the revisions are registered by the Disclosure Division as Materials at the TSE and disclosed. 

System to Monitor Decisions, Facts and Events, and Financial Results Information of the Subsidiaries

With respect to decisions by subsidiaries and facts and events which have occurred at subsidiaries, a system to monitor important information for timely disclosure has been established within the management framework of the subsidiaries such as the prior consultation system relating to important decisions and crisis management agreements relating to facts and events. The primary division in charge at MRI for each subsidiary and the division in charge of the important information gather information; the necessary information is aggregated at the Disclosure Division; and upon following the stipulated procedures, the information is registered by the Disclosure Division as Materials at the TSE and disclosed.
Governance