Shiseido Company (4911) Status Update summary

Governance structure and board effectiveness

• Transitioned to a company with a nominating committee and three statutory committees, enhancing separation of supervision and execution for greater agility and flexibility in management.

• Majority of board members are independent outside directors, with 63.6% external and 45.4% female representation as of March 31, 2024; all members of key committees are independent, ensuring transparency and robust oversight.

• Non-executive directors make up 81.8% of the board, and the Audit Committee is chaired by an external director.

• Board meetings now focus more on strategic discussions, with authority for execution delegated to executives, improving decision-making speed and effectiveness.

• Ongoing evaluation and refinement of governance practices are prioritized to align with company vision and stakeholder trust.

Executive compensation and talent strategy

• Compensation system includes fixed base, annual bonuses, and long-term stock-based incentives, with performance-linked elements and enhanced disclosure of structure, KPIs, and achievement status.

• LTI evaluation metrics for FY2024 include KPIs for DE&I, ESG ratings, profit margin, sales growth, CO2 reduction, and female leadership ratios, with ESG evaluation based on the MSCI ESG Rating.

• Compensation levels and KPIs are under ongoing review to ensure global competitiveness and attract world-class talent.

• The compensation committee, chaired by Yoshihiko Hatanaka since March 2024, is actively discussing further changes to align incentives with performance and market standards.

• Q&A addressed considerations for revising executive compensation KPIs and increasing stock-based compensation.

Risk management and growth initiatives

• Board rigorously discusses risk management, including quality, compliance, and geopolitical risks, integrating them into materiality assessments.

• Risks are viewed as opportunities for growth, with the board challenging management to turn risks into strategic advantages.

• M&A is identified as a key growth lever, with recent acquisitions like Dr. Dennis Gross thoroughly vetted for strategic fit and ROI.

• Continuous monitoring and review of investments and ROI are conducted at both board and executive levels.

• Flexibility and speed in execution, especially for M&A, have improved under the new governance structure.