Shiseido Company (4911) Status Update summary

Governance structure and board effectiveness

• Transitioned to a company with a nominating committee and three statutory committees, separating supervision and execution to enhance flexibility, oversight, and strategic alignment in a volatile environment.

• Board consists of 11 directors, with 63.6% independent outside directors, 45.4% female representation, and over 80% non-executive directors; all members of key committees are independent or external.

• Authority has been transferred to executives, streamlining board agendas and increasing time for strategic discussions.

• Board meetings are now more focused, with clearer roles and responsibilities, leading to more effective discussions.

• Effectiveness of the new governance structure is continuously evaluated, with improvements noted in board focus and agility.

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 composition, 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; ESG evaluation shifted from DJSI to MSCI from 2024.

• Ongoing discussions in the Compensation Committee focus on aligning compensation with global standards and increasing stock-based compensation to attract top talent.

• The proportion and structure of performance-based and stock-based compensation are under review to ensure competitiveness.

Risk management and growth initiatives

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

• Risks are viewed as opportunities for growth, with a focus on leveraging challenges for future expansion.

• Continuous monitoring and verification of ROI for investments, with strict benchmarks and regular reviews at board and executive meetings.

• Recent M&A, such as the acquisition of Dr. Dennis Gross, was thoroughly discussed for strategic fit and growth potential, with ongoing post-acquisition oversight.