Governance Dialogue

The roles the Board of Directors should play in enhancing corporate governance

  • Toshiyasu SaguchiToshiyasu Saguchi
  • Rie KidaRie Kida
  • Hiroe NakaiHiroe Nakai
  • Osamu KujiraokaOsamu Kujiraoka

BOD meetings that provide a forum for free and vigorous discussions

Saguchi:
Since FY2020, our board of directors (BOD) has had three outside directors. I’d like to begin by asking each of you about your impressions of Gunze’s BOD.

Nakai:
In the previous fiscal year, Gunze increased the number of outside directors from two to three. These directors have different backgrounds, coming from the marketing, medical/publication, and legal fields, so their analyses of our agenda are intriguing, and their participation enables discussions from multi-faceted perspectives. In addition, two of the outside directors are involved in fields Gunze wishes to focus on from now on, making their views particularly valuable. From an external standpoint, the outside directors’ opinions are often in agreement, and a consensus between them can be powerful even in cases where a single individual’s opinion is unpersuasive. So, I would say that at Gunze, the functions of the outside directors are being demonstrated to the fullest extent.

Kujiraoka:
I’m in my second term as an outside director, and from the time I first joined Gunze’s BOD, I have felt that questions are asked and opinions are exchanged in an open atmosphere. I believe one of our main roles as outside directors is to express frank opinions from an external standpoint on management and various other issues based on the experience and insights we have gained. With more outside directors participating and in view of their wide-ranging backgrounds, a diversity of opinions is expressed at Gunze’s BOD meetings. Accordingly, the meetings give me an opportunity to learn and make new discoveries. In the previous fiscal year, our discussions naturally focused on the impact the COVID-19 pandemic would have on Gunze’s management and how to deal with that situation. Regarding this matter as well, we had active exchanges of opinions and question-and-answer sessions based on each outside director’s field of expertise, covering legal matters, risk management, marketing, and SDGs management.

Kida:
On Gunze’s BOD, the ratio of outside directors exceeds one-third of all BOD members, as required by the Financial Services Agency, and women account for more than 20% of all BOD members. Looking at these numbers alone, we can say that Gunze’s BOD has a diverse makeup. Because the outside directors have different backgrounds, BOD meetings witness vigorous exchanges of questions and answers reflecting the various viewpoints of the members, including the Audit & Supervisory Board members as well. Now that a year has passed since I became an outside director, I feel very comfortable speaking out because all the other members actively express their opinions and create a friendly atmosphere. I have felt this way since I first joined Gunze’s BOD. Of course, I receive objective and sometimes tough questions, but all the directors (myself included) share Gunze’s underlying spirt of affection toward all stakeholders, whether internal or external, as well as a passion for promoting the company’s sustainable growth and enhancing its corporate value even if only slightly.

Saguchi:
Ms. Kida, you joined our BOD in the last fiscal year. I would like to hear your frank opinion from a fresh perspective about Gunze’s corporate culture, our strengths, and the areas needing improvement.

Kida:
I had a strong image of Gunze as an apparel maker, but what surprised me when I became an outside director was that its business lines are so wide-raging. I learned that Gunze began as a silk manufacturer and then expanded by launching new businesses in related areas. The image that came into my mind was that of a big tree with firm roots and various branches extending from its thick trunk, bearing large fruits. Even if the fruits of each branch differ according to the trends of the times and changes in the environment, as long as the roots and trunk remain healthy, all the branches can flexibly extend toward the light and grow. I think this is what Gunze’s corporate culture is like. While continuously cherishing its sincere attitude of preserving and carrying forward its founding philosophy, I hope that the company will create new value based on flexible concepts and promote brand communications so that it will gain recognition and acceptance among the younger generation, too.

Saguchi:
Ms. Nakai, you are currently the chair of the Nomination/Remuneration Committee. Could you tell us about the main agenda of the committee and the themes you would like to promote from now on.

Nakai:
The main agenda of meetings of the Nomination/Remuneration Committee includes personnel affairs for directors and corporate officers, and compensation (including bonuses). The most recent issue we need to address is the revision of our rules for directors’ compensation based on the amended Companies Act, which came into force on March 1, 2021. For this we will need to discuss an ideal remuneration system in terms of conformance to the amended law as well as from the perspective of the company’s sustainable growth. Multifaceted approaches such as this are essential to achieving sustainable growth. Above all, human resources development for future leaders is one of our most important challenges. So, as the chair of the Nomination/Remuneration Committee, I want to continuously engage in substantial discussions on the development of executive candidates. In particular, women's empowerment is an issue we need to address, as well as a particularly pressing issue for Gunze, which handles products targeting women. I want to engage in discussions while keeping this in mind.

Efforts toward a medium- to long-term sustainable management vision

Saguchi:
Since 2021, Gunze has been promoting sustainable management. As such, I want to hear from you all about initiatives toward our medium- to long-term vision for sustainable management and ongoing discussions on SDGs and ESG, as well as about future prospects.

Kujiraoka:
In February 2021, I had a chance to participate in an online seminar organized in Akita (my birthplace) to talk about corporate management in rural areas. There, I introduced the origin of Gunze’s name and its founding philosophy as a company that was established in a rural area, to show that the spirit of sustainable management was already present in Gunze’s DNA 125 years ago. For corporate management in the future, it is essential to promote initiatives on SDGs, whether global, urban, or rural, and this can provide us with great business opportunities. From long ago, it has been natural for good companies to work on SDGs, and this is also clear from Gunze’s founding philosophy and the words of our founder Tsurukichi Hatano. In that sense, we can say that Gunze possesses and will continue to possess considerable assets and advantages. As the saying goes, we can discover new things by learning from the past, so it is important to always return to and keep our founding philosophy in mind when developing new businesses. A new initiative that can serve as a model case for SDGs initiatives is the project to build a Circular Factory in Moriyama related to the plastic film business.

Kida:
Speaking of SDGs, envisioning solutions to social issues such as poverty and environmental problems may be easy. But at first glance, addressing these issues appears to be a responsibility of the company and a factor in cost increases. However, if we raise our sights slightly, we see that SDGs are universal challenges that the world faces, and efforts to solve these challenges have the potential to grow into global-scale businesses. ESG investments, which refer to actively investing in businesses with sound management that prioritize resolving social and environmental issues, are spreading among institutional investors, who invest huge amounts over the medium to long term. This kind of initiative is based on the idea that addressing SDGs can lead to the sustainable development of the company itself. Going forward, I look forward to further discussing and developing our SDGs initiatives from a defensive approach focusing on avoiding violating rules to the more offensive approach of using SDGs to create new value.

Nakai:
Today, we need to adopt the viewpoint of sustainability in all aspects of management. As its name implies, Gunze was founded in line with the policy (ze) of a district (gun), that is, to promote local industry. The company’s origin reflects the spirit of SDGs and ESG. From now on, we must promote sustainable management even further while remaining faithful to this philosophy. To date, we have worked to construct a resource-circulating factory and reduce food losses. I believe business management that builds and further improves upon our origin aligns with the demands of society both today and tomorrow. It also serves as a basis for raising our corporate image as well as our business performance. A management policy focusing on 30 years from now when the new employees who joined Gunze this year will have reached the age of 50 may be necessary not just for Gunze but for companies in general, and discussions are needed from this standpoint too.

Saguchi:
Gunze conducts a wide range of businesses. Could you tell me about your hopes for the functional solutions, apparel and lifestyle creation businesses?

Kujiraoka:
Recently in the functional solutions business, we have had some bright news such as the launch of new medical products, mass-production of polymer current collectors for All-Polymer batteries, and the start of construction of the new resource-circulating factory building. Needless to say, this segment assumes a key role in designing the company’s growth strategy. I am anticipating the promotion of collaboration with the apparel and lifestyle creation business segments by taking advantage of its development capabilities and technical prowess. I can see no divisional or business segment barriers and such collaboration will enable us to promote our company’s comprehensive strengths and enhance our corporate value and brand power. Most areas in the functional solutions business segment deal with B-to-B business and mainly handle intermediate materials rather than end products. This limits consumer awareness, but enhanced collaboration with other business segments may overcome this drawback.

Kida:
In the apparel sector, consumer values are moving from changing one’s appearance by following trends to emphasizing personal comfort. I firmly believe this shift represents a tailwind for Gunze as we face a recession in the apparel market. Grasping this opportunity, we should reaffirm the “feeling of comfort” Gunze promises its consumers and raise our brand power. To that end, brand communication and engagement with consumers are as important as product appeal, and our EC site is an ideal tool for strengthening these things, so I hope we will use this tool even more extensively.
The femtech market, aimed at solving women’s health issues through technology, is expected to be worth 5 trillion yen by 2025. This market also relates to SDGs and has a high affinity with Gunze’s products and vision. Some femtech products have already been launched, so we should make efforts to promote sales as well as improve brand value by transcending divisional barriers.

Nakai:
The COVID-19 pandemic has drastically changed lifestyles. Working from home is recommended and eating out and traveling are restricted. People are hungry to connect with others. In the lifestyle creation business segment, I look forward to business management based on consideration for other people’s feelings by identifying what will change, what will remain the same, and people's real desires. Gunze also conducts business in non-lifestyle creation areas, so collaboration with the apparel and medical sectors is especially desirable. This will produce a corporate image that is associated with health, comfort, and sterilization, so Gunze should aim to make a greater contribution to better living through collaboration in these areas, and strengthen each business.

Saguchi:
In closing, what do you expect of young employees from an external viewpoint? Can you offer them some words of encouragement?

Kujiraoka:
“Opportunity comes bearing the face of adversity.” I heard this from someone at a leading ad agency many years ago. COVID-19 has changed all aspects of life and society, from working style and lifestyle to how we interact with others. Standing on the frontlines of this tough situation may mean we are standing face to face with a huge opportunity. We have entered an era when our common sense and conventional wisdom are no longer viable. But the accumulation of unconventional ideas may eventually crystalize into a new common sense and allow us to create a new conventional wisdom. At the forefront of the B-to-C business, Gunze can provide young people with the opportunity to deal with a wide variety of tasks, such as manufacturing and cutting-edge R&D. I hope our young employees will enjoy this opportunity and work independently to create an environment that can enhance their enjoyment. By so doing, they can attempt to create new value by tackling a series of challenges while supporting the penetration of Gunze’s businesses within society.

Nakai:
Today, we are experiencing drastic and unprecedented changes. It’s simply amazing to see what we couldn’t even imagine a few years ago become a reality. It is natural that the younger generation, who were born in the era of mobile phones, and veteran employees who were used to old-style black landline phones for many years have different ways of thinking and ways of life. So, young people should encourage veterans, who tend to stick with old-style phones, to proactively adopt new inventions to avoid becoming behind the times. People tend to wish tomorrow to stay the same as yesterday, but hanging onto yesterday is no longer an option in modern society. Even so, we shouldn’t forget the importance of human connections no matter how our world has changed. It may be a good idea to sometimes listen to veterans’ reminiscences, even if this seems a little tiresome, as they may give you a clue for developing useful products that can become big hits.

Kida:
Many people imagine a long-established company with a history of 125 years is a stable and conservative entity. But in reality, this long tradition proves that the company has responded flexibly to the changing social environment and human values and has proactively and continuously risen to new challenges over the course of 125 years. Within this long history, we are now standing at a turning point marked by major changes in values and lifestyles. I think it is only young people who can create the values that will be needed in the future. So, I hope our young employees will aggressively challenge themselves to do what they think is good without hesitation, just as our predecessors did. Also, we must provide support to help make our young people’s dreams come true. Together, let’s get excited about creating a bright future.

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