Shin Etsu Chemical : Corporate Governance Report


[Translation for reference and convenience purposes]

Corporate Governance Report

Last Update: June 7, 2021

Shin-Etsu Chemical Co., Ltd.

Representative Director-President: Yasuhiko Saitoh Contact: Finance & Accounting Department Tel: +81-3-3246-5051 Securities Code: 4063 https://www.shinetsu.co.jp/en/

The corporate governance of Shin-Etsu Chemical Co., Ltd. (the “Company”) is described below.

  1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and

Other Basic Information

1. Basic Views

It is our fundamental management policy to continue enhancing corporate value, thereby meeting the expectations of our shareholders. In order to realize this policy, our basic approach for corporate governance is to work on accurate and timely information disclosure to our shareholders and investors in terms of improving management transparency and strengthening monitoring functions, as well as to develop an efficient organizational structure and various systems able to quickly respond to changes in the business environment. The Company regards the aforementioned idea as one of our most important management priorities.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

The Company complies with all principles of the Corporate Governance Code.

[Disclosure Based on the Principles of the Corporate Governance Code]

Principle 1-4:Cross-Shareholding

(Policy on cross-shareholding)

The Company may hold shares of the other parties for the purpose of maintaining and strengthening stables relationships therewith. However, the Company will sell the stocks of the parties which it judges not to be beneficial considering the above purposes.

(Verification on significance of ownership and rationality)

At the Board of Directors meetings, the Company verifies medium- and long-term economic rationality of individual policy holdings at least once a year after considering the maintenance and strengthening of relationships and whether the benefits and risks associated with the holding of the stocks are commensurate with the capital cost.

As of the end of March 2018, the number of shares owned by policies, which had 86 issues, was 60 issues as of the end of September 2020. The Company will continue to sell stocks which it judged not to be beneficial, and will continue to reduce policy holdings.

– 1 –

(Exercise of voting rights)

The Company exercises voting rights through comprehensive judgment after considering whether each individual proposal will lead to the damage of shareholder value or whether it will contribute to the improvement of corporate value based on the Company’s sustainable growth and to the enhancement of the corporate value of the investee.

Principle 1-7: Related Party Transactions

Pursuant to the Companies Act and the Regulations of the Board of Directors of the Company, any transaction between the Company and a Director shall require the approval of the Board of Directors, and such Director shall not participate in the discussion or the resolution.

In addition, pursuant to the “Accounting Standard for Related Party Disclosures” and the “Guidance on Accounting Standard for Related Party Disclosures,” we confirm with each Director every year about the existence of any transactions with related parties and the importance of any such transactions. We disclose any such transactions if there is a requirement to do so.

Principle 2-6: Roles of Corporate Pension Funds as Asset Owners

Since the Company does not offer a defined benefits plan, the Company does not assign persons to manage corporate pension funds.

The Company regularly offers its employees briefing sessions concerning the operation of its defined contribution plan, and is implementing measures to assist employees in the management of their pension assets.

Principle 3-1: Full Disclosure

  1. Our business principle and management policies are as follows. For management strategies, please see management messages from the “Annual Report” posted on our website. (https://www.shinetsu.co.jp/en/ir/ir-data/ir-annual/)

The Shin-Etsu Group’s Business Principle: We contribute to people’s living, society and industry through value creation in materials and technologies, while observing all laws and regulations as well as conducting fair corporate activities.

Management Policies: (1)Basic Management Policies

The Company aims to respond to our shareholders’ expectations by contributing to people’s daily lives, society and industries through value creation with our materials and technologies. To achieve this, we will move forward with business management that enables us to establish stable relationships with customers worldwide and to cope adequately with changes in the economic situation and market conditions, while continuously making efforts to improve productivity as well as pursuing the world’s best technology and quality. In addition, keeping the “Sustainable Development Goals (SDGs)” in mind, we will conduct business operations that will contribute to these goals in multiple aspects. We recognize that the Group’s products, businesses and operational methods have an inherent affinity with the SDGs, and we will enhance them further.

(2)Targeting Our Management Objectives: Shin-Etsu’sMid-toLong-term Management Strategies

The management indicator sets a target of increasing revenue and earnings every fiscal year. Among our main products, there are some that are affected by changes in business environment including market conditions. We need to adapt speedily to changes in the external environment in order to manage each business in rapidly changing markets. Based on the policies mentioned in “Basic Management Policies” above, we strive to carry out solid management every day, every month and every year and will focus on increasing sales and earnings. Given the growing need today to realize the sustainable development of human society and the improvement of its quality while minimizing the burden on the environment, it is essential to maximize efficiency. Technologies such as the high-speed processing of data, automatic driving, IoT, 5G and AI should be utilized and continue to evolve for these purposes. We believe we have a significant role to play in this regard. We will make efforts so that many of our products will contribute to these objectives and will pursue tangible results in developing new products to this end.

– 2 –

  1. Basic views on corporate governance Please see “I 1. Basic Views” of this report.
  2. Policies and procedures in determining the remuneration of Directors

Please see “Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods” of “II 1. Organizational Structure and Operation, etc.” of this report.

  1. Policies and procedures with respect to the nomination of Directors/Audit & Supervisory Board Members candidates and appointment/dismissal of executives
    The appointment of Director/Audit & Supervisory Board Member candidates and appointment/dismissal of executives (a) are…



Read More:Shin Etsu Chemical : Corporate Governance Report