April 1, 2019
Suntory Beverage & Food Limited (the Company) strives to enhance corporate governance in order to maintain good relationships with shareholders, other investors, and other stakeholders (customers, local communities, business partners and employees, etc.) and to allow us to fulfill our corporate social responsibilities.
This policy sets out the Company’s basic corporate governance framework. The Company’s Board of Directors will review the policy regularly on an ongoing basis, and work toward the creative evolution of our corporate governance to enhance corporate value.
1. Promise and Vision
Below we set forth the Company’s “Promise” (to society) and “Vision.”
Mizu To Ikiru
Water is the source of all the lives on the planet
We promise and declare to society that we make our living with water.
We embrace nature, enrich our society
and encourage our people to take on new challenges.
Enrich our drinking-experiences to be
more natural, healthy, convenient, and fulfilling,
by leading the next drinks revolution
Water is the source of all the lives. Neither mankind nor any creature on this planet can live without water. “Mizu to Ikiru” is our Promise to society that we “make our living with water.” It means that we promise to embrace nature, enrich people’s lives and society, and we continue to take on challenges to pioneer new frontiers of values.
Our consumers’ needs constantly change with the times. Their needs also differ depending on the country or region. To meet the diverse needs of our consumers across the world, we offer “full line-up” of categories, pack types and sizes, and easy and reliable “availability” of drinks whenever and wherever. In addition, we evolve values of drinks by utilizing our own strengths in creating “Natural & Healthy” and “Unique and Premium.” We provide our consumers with enriched drinking-experiences they have never experienced before by striving to make them more natural, healthy, convenient and fulfilling.
To realize our vision, we stay in tune with each of the daily changing markets through our “empowering GENBA” philosophy of empowering our people locally to create new value through ideas and research originated from thoroughly consumer centric approaches. In addition, our people, with their diverse careers and individualities, practice the Suntory founding spirit, “Yatte Minahare” to continually offer value to society and keep ourselves full of vitality.
Each day, we boldly move forward together as a Group to realize the dreams of becoming a world-leading next-generation global beverage company by pioneering a fulfilling beverage culture.
2. Code of conduct
To implement the philosophy described in “Section 1. Promise and Vision,” compliance with laws and regulations as well as social ethics shall be the standard of business conduct for all Directors, executive officers and employees of the Group based on the Suntory Group Code of Business Ethics.
One ethical principle described in the Suntory Group Code of Business Ethics is to accept the existence of diverse values when carrying out business activities. The Suntory Group places great importance on the spirit of taking on new challenges as exemplified by our motto “Yatte Minahare–Go for it!” As a Suntory Group member, the Company is working to build an organization where unique characteristics and individuality can thrive, is striving to diversify the attributes of its Directors, executive officers and employees, and is promoting an environment which makes the best use of these attributes and individuality, believing such promotion of diversity to be an important element in continuing to create new values.
4. Appropriate information disclosure
The Company discloses financial information such as its financial position and business performance as well as nonfinancial information such as corporate strategy, management issues, risks and corporate governance in accordance with laws and regulations. The Company also strives to proactively disclose information other than that mandated by laws and regulations.
5. Dividend policy
The Company believes its prioritization of strategic investments as well as capital expenditures for sustainable revenue growth and increasing the value of its business will benefit its shareholders. In addition, the Company views an appropriate shareholder return as one of its core management principles. While giving due consideration to providing a stable return and maintaining robust internal reserves for the future, the Company intends to pursue a comprehensive shareholder return policy that also takes into account its business results and future funding needs.
Specifically, the Company aims to stably increase dividends on the basis of profit growth with a targeted consolidated payout ratio of 30% or more of profit for the year attributable to owners of the Company. Looking to the medium- and long-term, the Company will also consider increasing the payout ratio depending on such factors as its need for funds and progress in profit growth.
6. General Meetings of Shareholders
- (1) The Company recognizes that a General Meeting of Shareholders is an opportunity for constructive dialogue with our shareholders. At these meetings, it is our basic policy to provide sufficient explanation to shareholders, including a question-and-answer session, about the business conditions, the issues that need addressing, the details of proposals on the agenda, among other information.
- (2) So our shareholders have sufficient time to deliberate the proposals being put forward at a General Meeting of Shareholders, the Company dispatches a convocation notice no later than three weeks before the meeting date. We also post the details of the convocation notice on our website prior to dispatching the notice. Similarly, we post an English translation of the convocation notice on our website no later than three weeks before the meeting date. The Company also discloses other information required for shareholders to make appropriate decisions at the meeting as needed.
- (3) When the Company determines the dates for General Meetings of Shareholders, it considers whether there is sufficient time for Directors serving on the Audit and Supervisory Committee and the Accounting Auditor to conduct an effective audit. It also considers whether there is a meeting place available which would enable the participation of a large number of shareholders.
- (4) The Company offers shareholders the opportunity to exercise their voting rights via the internet, etc. The Company also participates in the Electronic Voting Platform which facilitates voting by institutional investors and overseas investors.
- (5) For shareholders unable to attend a General Meeting of Shareholders, the Company posts presentation materials used in business reports that were explained at the meeting venue on the Company’s website for a certain period promptly after the conclusion of the meeting.
- (6) Institutional investors whose shares are held in the name of trust banks, etc. should give advance notice if they wish to vote at the General Meeting of Shareholders. It is necessary to confirm that they are beneficial shareholders of the Company and avoid voting by the nominee shareholders as well. We will determine beforehand whether it is possible for the shareholders to attend the meeting after discussions with the nominee shareholders.
7. Ensuring shareholders' rights
- (1) To ensure shareholders’ rights, the Company shall create an environment wherein those rights may be exercised.
- (2) Details about ensuring opportunities for shareholders to exercise their voting rights are listed in “Section 6. General Meetings of Shareholders.”
- (3) The Company acknowledges the presence of a major shareholder. In light of this, when a considerable number of votes other than from the major shareholder is cast against a company proposal which nonetheless passes at a General Meeting of Shareholders, the Company will analyze the reasons for the large proportion of votes against and disclose the results of this analysis to the shareholders. At the 10th Ordinary General Meeting of Shareholders, a considerable number of votes other than from Suntory Holdings Limited (Suntory Holdings), the Company’s parent company, were cast against the proposal to elect Mr. Saburo Kogo and Mr. Kazuhiro Saito. The Company believes that the main reason for the votes against their election was that there were concerns that the independence of the Board of Directors may be compromised by the fact that the ratio of the number of Independent Outside Directors becomes less than one third of the number of Directors comprising the Board of Directors. However, the Company’s purpose of establishing the management structure after the 10th Ordinary General Meeting of Shareholders is to strengthen the top management leadership, which aims “To Be the Third Force” as well as to become a world-leading next-generation global beverage company. The current lineup of the Company’s Board of Directors includes three Independent Outside Directors, who continue to monitor the Company from their respective independent standpoints. Furthermore, as set forth in point (3) of “11. Independent Outside Directors,” the Company recognizes the usefulness of Independent Outside Directors and will continue to strive to ensure at least one-third of members of the Board of Directors are Independent Outside Directors.
- (4) When there is a proposal to delegate some of the items to be resolved at the General Meeting of Shareholders to the Board of Directors, the Board of Directors will sincerely discuss whether the Company is appropriately structured for the proposal.
- (5) The Company will ensure the equality of all shareholders and act with consideration toward minority shareholders. We will also give due consideration to the exercise of minority shareholders’ recognized rights.
8. Communication with shareholders
- (1) The Financial Planning and Analysis Department is responsible for communication between the Company and its shareholders.
- (2) The Financial Planning and Analysis Department will take the appropriate course of action for communication with shareholders upon discussions with the Representative Director, President & Chief Executive Officer and officers in charge of Corporate Strategy Division.
- (3) The investor relations division, the finance & accounting division, the legal affairs division and the public relations division hold regular internal meetings. They exchange opinions from their own professional viewpoints about the disclosure and explanation of results, cooperate regarding necessary actions, and support dialogue with shareholders.
- (4) The Company undertakes activities to enhance shareholders’ understanding of its corporate strategy and business conditions through financial results briefings, reports for shareholders and the disclosure of information on the Company’s website, etc.
- (5) The Board of Directors actively reviews the Company’s management strategy and other matters at board meetings following financial results briefings in light of the views expressed by shareholders and analysts.
- (6) As a rule, the Company conducts a survey of its beneficial shareholders twice a year and as otherwise necessary to obtain a firm understanding of the share ownership composition.
9. Role of the Board of Directors
- (1) The Company has chosen to be incorporated as a company with an Audit and Supervisory Committee for its corporate governance structure. The aim of this decision is to improve the effectiveness of auditing and supervisory functions through the auditing performed by Directors, who have the right to vote at board meetings and serve on the Audit and Supervisory Committee, as well as to improve the effectiveness of internal controls through the implementation of auditing that utilizes the internal audit division.
- (2) The Company’s articles of incorporation state that the Company may delegate all or part of a decision regarding the execution of important duties to a Director upon a resolution of the Board of Directors. This aims at enabling wide-ranging and practical discussions regarding corporate strategy, medium- and long-term plans, and management issues at board meetings that include Outside Directors. This should facilitate the implementation of corporate strategy and the achievement of management targets. Moreover, by having individual business actions decided in line with the Company’s internal regulations, the Company aims to speed up decision making and strengthen the audit function of the Board of Directors. The Company has determined that important business actions including M&A, organizational restructuring, and major asset acquisitions and disposals are to be decided by the Board of Directors. However, individual business decisions as a rule are delegated to the management team including the Representative Director, President & Chief Executive Officer. The regulations of the Board of Directors and Company’s internal regulations clarify the distinctions among these.
- (3) The Company has well-defined the areas of responsibility for Executive Directors and executive officers under board resolutions and the Company’s internal regulations. Further, the Company has made a clear distinction between responsibilities of its own Executive Directors and executive officers and those of representative Directors, CEOs and other managing Directors and executive officers in the domestic and overseas Group companies. Thus, we manage the Group taking full advantage of each individual’s knowledge and experience.
- (4) To ensure substantive and lively discussion at the board meetings, the Company believes the appropriate number of Directors shall be ten to 15. At present we have ten Directors. The Company selects Directors with superior character and knowledge, regardless of whether they are from inside or outside the Company. For Outside Directors, the Company selects those with abundant track records and experience, and professional insight, and based on this insight and experience, these individuals participate in formulating the Company’s corporate strategy and overseeing the execution of business.
- (5) In principle, the Company dispatches materials used in board meetings to each Director no later than three business days before the date of the meeting. Further, as a rule the board secretariat explains to each Outside Director individually details of proposals and the business conditions which form the background to such proposals ahead of the board meeting. Through these explanations ahead of time, we are working to improve the understanding of Outside Directors and make deliberations active at the board meeting.
- (6) If an Outside Director needs a matter explained, the board secretariat or the Director or division in charge will explain the matter to him or her. In this manner, the Company provides Outside Directors necessary and sufficient information regarding the Company’s business and proposals.
- (7) The Company also provides opportunities for Outside Directors to exchange opinions with each other on a regular basis.
- (8) The Company makes efforts to provide Directors with sufficient knowledge to execute their duties such as by providing the Board of Directors with lectures held by external lecturers. Furthermore, with the aim of deepening their knowledge about the Group’s business and issues that it faces, from time to time the Company explains to Outside Directors about our business and issues, and conducts site inspections at its facilities. In July 2018, a board meeting was held at the “New Products Development Center” a research and development hub for the Suntory Group. As part of this, a product development activity and strategy report related to the Company’s business activities was presented, a facility inspection was carried out, and opinions were actively exchanged among Directors regarding product development activities and strategies.
- (9) In 2018, there were 15 board meetings at which various matters concerning management issues and the execution of business were actively discussed. , including the long-term strategy, the medium-term plan, corporate governance, capital expenditures, and the status of executive candidate training.
- (10) Once a year, the Company requires all Directors to conduct self-evaluation on the effectiveness of the Board of Directors. In 2018, a questionnaire survey, which required a signed response, was distributed to all Directors regarding awareness of current conditions and how discussion should proceed in the future regarding the important issues of the Company’s management. The purpose of the questionnaire was to evaluate the effectiveness of the Board of Directors, including its role, composition and suitability of operations, and to provide an opportunity to grasp each Director’s awareness of the issues involved. Based on the results of the questionnaire, at the board meeting held in January 2019, the Directors discussed issues concerning the Board of Directors and policies for responding to these issues in 2018, it was confirmed, that improvement had been obtained regarding the enhancement of discussions relating to the management plan, which had been an issue in the 2017 evaluation; and that the deliberations performed for medium and long term management strategies and management issues, etc. are being enhanced each year. In addition, discussions regarding the medium and long-term management strategies and management issues deserving of prioritized deliberation in 2019 were also carried out. Looking forward, we will work on further improving the effectiveness of the Board of Directors.
10. Nomination and remuneration, etc. of Directors
- (1) Of its own volition, the Company has established a human resources committee (hereinafter in this section, the committee).
- (2) The committee currently consists of six members: three Outside Directors, the Representative Director, Chairman of the Board & Chief Executive Officer, the Representative Director, President & Chief Executive Officer, and the Director in charge of the human resources division.
- (3) The committee will deliberate on proposals for selection of candidates for Directors or dismissal of Directors and report to the board. Further, the committee will discuss the levels and criteria of remuneration for Directors (excluding Directors serving on the Audit and Supervisory Committee) and report to the Board of Directors about its appropriateness.
- (4) When deliberating proposals for selection of candidates for Directors or dismissal of Directors, the committee considers the following factors: ・Qualification as a Director: whether the candidate appropriately exercises his or her duty of care and duty of loyalty when conducting business, and whether he or she has the qualities to contribute to the Company’s sustainable profit growth and improve corporate value. ・Qualification as an Executive Director: whether he or she is familiar with the Group businesses and possesses the ability to appropriately manage the Group business. ・Qualification as an Outside Director: whether he or she possesses the ability to utilize insight and experience gained from various specialist fields to formulate the Company’s corporate management strategies and oversee the execution of business.
- (5) The Board of Directors will nominate candidates to be selected or Directors to be dismissed based on the content of the report from the committee while also considering the experience, knowledge and performance evaluation of such candidates for Directors. In addition, when proposing selection or dismissal of a candidate for Director at the General Meeting of Shareholders, the Company will explain the reasons for their selection or dismissal in the notice of convocation.
Please review the “Reason for the Selection” sections in the tables of Proposals 2 to 4 in the Notice of Convocation of the 10th Ordinary General Meeting of Shareholders.
Notice of Convocation of the 10th Ordinary General Meeting of Shareholders
- (6) Remuneration, etc. for the Company’s Directors are structured at levels commensurate with their role and responsibilities in a manner that motivates them to improve the Company’s performance and corporate value and secures outstanding personnel. Remuneration, etc. for the Executive Directors consist of base compensation (monthly, fixed amount) and a bonus (annual, performance-based) and this level is set depending on responsibilities. Bonuses are mainly determined by a benchmark related to consolidated operating income (excluding one-time income and expenses).
Remuneration, etc. for non-executive Directors shall in principle only consist of base compensation (monthly, fixed amount). Full-time Audit and Supervisory Committee members shall be paid, in addition to base compensation, a bonus (annually, performance-based) in consideration of the contribution to the Company’s performance. Bonuses are mainly determined by a benchmark related to consolidated operating income (excluding one-time income and expenses).
In addition, the Company does not have a retirement allowance system or a stock option system.
- (7) The budget for remuneration, etc. for Directors (excluding Directors serving on the Audit and Supervisory Committee) is determined by resolution of a General Meeting of Shareholders. The amount is up to ¥1 billion per year (of which the amount for Outside Directors is up to ¥100 million). The Company thinks that its current remuneration structure provides sound incentives, and has not adopted another remuneration system (stock options) which uses the Company’s own shares.
- (8) During the period from the date following the 9th Ordinary General Meeting of Shareholders until April 1, 2019, the human resources committee meeting was held four times, and the composition of the Company’s Board of Directors, the desired qualities for Directors, and the levels and criteria for remuneration of Directors were discussed.
- (9) The human resources division selects candidates for senior management including the prospective CEO and conducts systematic training for them. Furthermore, the division reports on the status of training and future training plans to the Board of Directors.
11. Independent Outside Directors
- (1) The Company views Outside Directors as independent if they do not fall into the categories below. ・A close relative (of first or second degree) of the relevant Outside Director is currently or has in the past been an Executive Director of the Company or its subsidiaries. ・A company where the relevant Outside Director currently serves as an executive officer or employee has transactions with the Group and the monetary amount of such transactions was greater than 2% of consolidated revenue for either company in the past three business years. ・The relevant Director has, as an expert or consultant in the field of law, accounting, or tax, received remuneration of over ¥10 million directly from the Company in the past three business years. This excludes remuneration as a Director of the Company and remuneration paid to the organization or business to which the relevant Outside Director belongs. ・A nonprofit organization of which the relevant Director is an Executive Director has received donations from the Company of over ¥10 million and this amount exceeded 2% of the relevant organization’ s total business income in the past three business years.
- (2) At present, three of the Company’s ten Directors are Outside Directors, and all Outside Directors of the Company do not fall into the categories listed in (1) and are viewed as independent. In addition, the Company has reported to the Tokyo Stock Exchange that all of the three Outside Directors as independent officers.
- (3) The Company recognizes the usefulness of Independent Outside Directors and judges them to be beneficial for enhancing corporate governance by stimulating discussions at the board meetings through questions and opinions, and by enabling appropriate decision-making and oversight through the provision of their perspectives from a variety of viewpoints. The Company will continually strive to ensure that the Independent Outside Directors comprise more than one third of the Company’s Directors.
- (4) The Company believes that if Outside Directors concurrently serve as Directors or officers of other firms, the number of such posts he/she holds should be limited such that the individual is able to devote the necessary time and effort to discharge their duties and responsibilities as a Director of the Company appropriately.
Please review the “Responsibilities and Important Concurrent Positions” column in the tables of 3. Status of Directors, (1) Names, etc. of Directors in the attached Business Report in the Notice of Convocation of the 10th Ordinary General Meeting of Shareholders.
Notice of Convocation of the 10th Ordinary General Meeting of Shareholders
12. Accounting Auditor
- (1) The Company has a policy of selecting as its Accounting Auditor an audit corporation which is able to use a network of member firms that operates in many countries and regions and can conduct high-quality audits.
- (2) The Company ensures that the Accounting Auditor has ample time to prepare a high-quality audit, and that the auditor is able to have direct discussions with the Company’s management team as well as the cooperation of the Audit and Supervisory Committee and the internal audit division. For details, please refer to the Company’s internal control system basic policy
Basic Policy on Establishing Internal Control Systems
- (3) The Audit and Supervisory Committee formulates criteria for evaluation and selection of the Accounting Auditor, and in accordance with these criteria, the committee receives reports from the accounting division and Accounting Auditor every year regarding the auditing structure and activities of the Accounting Auditor. It evaluates the Accounting Auditor’s audit quality and the appropriateness of remuneration levels, as well as confirming the auditor’s independence and expertise.
13. Shares owned by the Group
- (1) The Group owns shares of some of its counterparties as cross-shareholdings to strengthen business relationships. When looking to newly acquire shares of counterparties, the finance division and any departments (or companies) controlling transactions will give consideration to the current and future profitability of the target company. Moreover, the judgment of whether or not it is appropriate to acquire the aforementioned shares will be made from the viewpoint of whether or not the strengthening of business relationship with the target company will contribute to the maintenance and improvement of the Group’s corporate value.
- (2) With respect to the shares of counterparties owned by the Group, the Company’s finance division performs an annual examination of each of the relevant securities, whereby it confirms with any departments (or companies) that are controlling transactions with said counterparties about the status of transactions etc. including the initial purpose of acquiring the shares, the current amount of business transactions and the nature of the business transactions. If there are shares the ownership of which does not match the initial purpose of the share acquisition, the ownership of these shares will be reduced by sale etc. In a board meeting held in February 2019, inspections were carried out about shares of counterparties owned by the Group, detailing such securities, the purpose and the rationale of their holdings.
- (3) With regard to exercising its voting rights on the cross-shareholdings, the Group exercises such voting rights appropriately based on a judgment on whether the contents of the proposal will maintain and improve the corporate value of the Group, and add shareholder value. The Group arrives at such judgment by arranging for any departments (or companies) controlling transactions to hold discussions with target company and for specialist departments such as the finance division or the legal affairs division to carry out verification. The Group will not exercise voting rights in the affirmative for proposals that impair the Group’s corporate value or shareholders value regardless of whether they are company proposals or shareholder proposals.
14. Policy on related party transactions
- (1) Transactions between the Suntory Group including Suntory Holdings are examined by the Company’s legal affairs division and accounting division beforehand to confirm the necessity of the transaction, and the appropriateness of its terms and conditions, and decision-making process. Working to ensure its independence from the parent company, the decisions regarding transactions with the parent company and other Suntory Group members, deemed to be particularly important, are taken after sufficient deliberation by the Board of Directors including several Independent Outside Directors in respect to the necessity and appropriateness of the said transactions. In regard to a transaction with the Suntory Group that is scheduled to be conducted in fiscal 2019, it was deliberated upon at a board meeting held in December 2018 and approved after being deemed necessary and appropriate.
- (2) In addition to deliberation beforehand, the internal audit division conducts a post-transaction check on details of the transaction and whether it was based on the contents of the deliberation. Also, the Audit and Supervisory Committee conducts an audit to assess the soundness and appropriateness of the transaction.
- (3) The Company has a policy regarding transactions between the Company and its Directors involving conflicts of interest. Before any such transaction is executed, the Board of Directors and Audit and Supervisory Committee deliberate the necessity of the transaction, and the appropriateness of its terms and conditions, and decision-making process before making a decision.
- (1) The Company reports to the Board of Directors regarding compliance with the Group’s code of conduct, mentioned above, on a regular basis. In 2018, the Company again distributed to the domestic employees a questionnaire survey on corporate culture and workplace environment, including the status of compliance with this code of conduct, and reported the findings of this survey to the Board of Directors.
- (2) The Company has established three channels for whistleblowing as follows.
1) Division in charge of compliance (via telephone or email)
2) Through external channels including a law firm and other providers of services to receive whistleblower disclosures (via telephone or email)
3) Through the Audit and Supervisory Committee (via email)
The Group employees in both Japan and overseas have been made aware of the existence of these channels through their publication on the Group’s intranet.
The Company’s internal regulations prohibit any adverse treatment of whistleblowers.
16. Management of corporate pension fund
- (1) The Company, together with Suntory Holdings, has adopted the Suntory Pension Fund.
- (2) A board of representatives, board of governors, and asset management committee have been set up for the Suntory Pension Fund. The board of representatives carries out reviews of the appropriateness and rationale of the investment products selected by the asset management committee, and makes the final decision on what investment products are to be invested in. The asset management committee selects the investment products and checks the status of the asset management portfolio.
- (3) The composition of membership of the board of representatives and asset management committee includes persons possessing expert knowledge relating to the management of reserve funds, and this includes those who are or were responsible for the finance division of the Company and Suntory Holdings.
- (4) The investment products purchased by the Suntory Pension Fund are selected from the perspective of securing income on a long-term and stable basis. After such products have been purchased, the asset management status of investment products is checked each month and a report concerning the administration and asset management of investment products is received from the institution managing the investment products each quarter.