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Mitsubishi Heavy Industries, Ltd. : MHI Strengthening Corporate Governance In Tandem with Shift to Domain-based Organizational Structure

10/01/2013 | 02:14am US/Eastern

Tokyo, October 1, 2013 - Effective today Mitsubishi Heavy Industries, Ltd. (MHI) has implemented organizational restructuring to a system of four business domains, and in tandem with this shift the company is strengthening its corporate governance.

In adopting its new domain system, MHI is targeting business expansion in the global market and enhanced profitability through swift decision-making by the domain leaders, who will now have broad authority in managing their respective business domains. In conjunction with the changeover to this domain-based structure, however, the company is assuming that its business risks will diversify and increase. In response, it is therefore moving to strengthen its corporate governance from the dual perspectives of fortifying the supervisory functions of the Board of Directors and improving the company's business execution system, aiming to forge a management system that is both efficient as well as highly transparent and reliable.

The specific measures MHI is implementing toward these ends are as follows.

1.Strengthening of the functions performed by outside directors, etc.

Presently MHI has three appointed outside directors of a total of 19 members on its Board of Directors. Going forward, the company has determined to significantly increase the degree to which it applies the advanced expertise and abundant knowledge possessed by such outside directors, in a quest to strengthen the decision-making and supervisory functions of the Board of Directors and further enhance managerial transparency. It will thereby seek to increase the ratio of external directors on its Board of Directors from the current near-15% to 30% in fiscal 2014. In addition, whereas currently 15 of the 19 members of its Board of Directors are designated as Representative Directors, going forward the company will undertake a review of its Representative Director selection procedures in light of the importance of the authority and responsibility vested in Representative Directors and the actual situation of their administrative duties.

2.Introduction of system of chief officers

As a measure designed to strengthen the company's business execution structure in tandem with its shift to a business domain-based structure, the company will introduce a system of chief officers starting in fiscal 2014. In addition to CEO positions to be filled by the company president as well as the heads of each of the four business domains, standing positions will be instituted for a Chief Financial Officer (CFO), Chief Risk Officer (CRO) and Chief Technology Officer (CTO). Other posts will be designated as the situation may call for in order to deal with important company management issues: for example, Chief Strategy Officer (CSO), Chief Marketing Officer (CMO), Chief Human resources Officer (CHO), Chief Information Officer (CIO), etc. The chief officers will take responsibility for implementing measures within their specific prerogatives from the perspective of companywide management, while liaising with other pertinent chief officers transcending the organizational framework.

3.Further enhancement of operation of Board of Directors Meetings

Board of Directors Meetings will be further improved as a venue for debating the company's important management issues. Specifically, an Advisory Board in the form of a committee will be established and actively used as a forum for timely and lively debate of important management topics such as medium- and long-range business strategies, technology development strategies, global human resources management and response to major business risks.

The business domain system being adopted by MHI commencing today targets global business growth and expansion through enhancement of vertically oriented (business) functions. However, MHI believes that by simultaneously pursuing enhancement of corporate governance the company will also strengthen its horizontally oriented functions (companywide strategy and business support functions) from the optimal companywide perspective as well as its risk response capability - which it views as an important management issue in order for MHI to grow in the global market into a highly profitable business corporation with a business scale of 5 trillion yen. This is the prime impetus behind the company's decision to implement the various corporate governance measures described here, to achieve these overriding aims.

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