Corporate Governance Report


Last Update: April, 4, 2016

Shiseido Company, Limited.

President and CEO, Representative Director: Masahiko Uotani

Contact: +81-3-6218-5530

Securities Code: 4911 http://www.shiseidogroup.com /


The corporate governance of Shiseido Company, Limited (the "Company") is described below.


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


    The Shiseido Group including the Company sets out "to inspire a life of beauty and culture" as the corporate mission, and defines the corporate governance as our "platform to realize sustainable growth through fulfilling the corporate mission".

    The Company is committed to maintaining and improving management transparency, fairness and speed, by putting into practice and reinforcing the corporate governance, and strives to maximize medium- and long-term corporate and shareholder value through dialogues with all stakeholders, "consumers", "business

    partners", "employees", "shareholders", and "society and the Earth". In addition, while fulfilling social responsibilities, the Company aims to achieve optimized distribution of values to respective stakeholders.



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


    , which was disclosed as a non-compliance matter in the Corporate Governance Report dated July 31, 2015, was removed from this Clause in the said report disclosed as of December 31, 2015 owing to the establishment of "Guidelines for Deliberation on the Appointment, Reappointment, Dismissal, or Non-reappointment of Accounting Auditor" by the audit & supervisory board at its meeting held in November 2015.In addition, and , which were disclosed as non-compliance matters in the Corporate Governance Report dated December 25, 2015, have been removed from this Clause in this report disclosed as of March 7, 2016 owing to the actions taken after much deliberation at the Board of Directors, etc. of the Company during the period from July to December 2015.


    As of March 7, 2016, the Company has implemented each Principle of the Corporate Governance Code.

    [Disclosure Based on the Principles of the Corporate Governance Code] The actions taken by the Company with regard to , and are summarized and newly disclosed in this Clause. Furthermore, to help readers have a better understanding of the Company's corporate governance in a structured manner, the Company has changed the order of information disclosure about each Principle and has updated some of the information. Items newly disclosed or updated are marked with a circle in front of the numbering.


    Initiatives for the Company's corporate governance are disclosed in convocation notices of general meetings of shareholders, annual securities reports, annual reports and others, in addition to this report.

    Descriptions of the items disclosed based on each Principle of the Corporate Governance Code are as follows:


    1. The Company's corporate philosophy, corporate strategies and business plans
    2. The Company's corporate philosophy, corporate strategies and business plans are contained and disclosed in the Company's Notice of Convocation of the 116th Ordinary General Meeting of Shareholders (pages 20 to 25). http://www.shiseidogroup.com/ir/shareholder/e1606shm/pdf/shm_0000.pdf

      In addition, the Company's corporate mission, "Our Mission," "Our Values" which defines a frame of mind that must be shared by each and every employee of the Shiseido Group in order to realize the mission, and "Our Way" and the "Shiseido Ethical Conduct Standards," both of which set out the standards of conduct for each and every employee of the Shiseido Group, are also stated in 2. of "Other" of this report.


      2. Basic Policy on Corporate Governance

      The basic stance and basic policy on the Company's corporate governance are shown in 1. of "Basic Stance on Corporate Governance, Capital Structure, Corporate Attributes and Other Basic Information" in this report. In addition, reasons why we adopted the current corporate governance system are shown in

      3. of the "Status of Management Structure for Management Decision-Making, Operational Execution and Supervising, and Other Corporate Governance Systems" in this report.


      3. Separation of monitoring and execution functions

      The Company has specified matters to be determined by resolution of the Board of Directors in the Regulation on the Board of Directors. Such matters consists of items relating to the general meeting of shareholders, personnel/organization, account settlement stock/bonds, and stock acquisition rights, corporate property, etc., business management and others of the Shiseido Group, that are matters provided in the Companies Act and other laws and regulations, and any other important matters equivalent thereof. Meanwhile, with the aim of clarifying the allocation of responsibility for the business management and accelerating decision making by delegation of authority, the Company introduced a corporate officer system in 2001. Authority for making decisions on matters relating to business executions other than those specified in the Regulation of the Board of Directors has been delegated to the extent appropriate so that President and CEO can make decisions after deliberation at the Executive Committee, Meetings for Development of Medium-term/Annual Plans, and other meeting bodies.

      After extensive discussions at the Board of Directors were held with regard to the corporate governance of the Company during fiscal 2015 and also assessment of the effectiveness of the Board of Directors was performed, and in light of the decision that the Company will adopt the "monitoring board-type corporate governance", the Company made revisions of matters that needed to be deliberated and decided at the meetings of the Board of Directors.


      4. Diversity of Directors and Audit & Supervisory Board Members

      The Company believes that the Board of Directors of the Company should be composed of directors with various viewpoints and backgrounds, on top of multilateral sophisticated skills, for effective supervision over the execution of business as well as decision-making on critical matters. Furthermore, the Company

      believes that audit & supervisory board members should have the same diversity and sophisticated skills as the directors as they have a duty to attend meetings of the Board of Directors and state opinions as necessary.

      When considering the diversity, it is a policy of the Company to appoint appropriate persons based on their personality and insight irrespective of gender, age, and nationality, etc., to stress not only diversity of these attributes, but also diversity in terms of tasks including professional knowledge and experiences in various fields related to the business management. In addition, the Company has set a certain maximum term of office for external directors and external audit & supervisory board members in order to reflect their views, which are free from the Company's existing structure, to the management of the Company, and by allowing a handover period from long-serving external directors and audit & external supervisory board members to newly-appointed external directors and audit & external supervisory board members to ensure appropriate transition.


      5. Ratio of External Directors at the Board of Directors

      After extensive discussions at the Board of Directors were held with regard to the corporate governance of the Company during fiscal 2015 and also assessment of the effectiveness of the Board of Directors was performed, and in light of the decision that the Company will adopt the "monitoring board-type corporate governance", the Company established its view on the ratio of external directors at the Board of Directors.

      In the Company's articles of incorporation, the maximum number of board members is set at 12. Respecting this upper limit and in consideration of the Company's business portfolio and scale, an optimum number of directors is elected such that they are able to appropriately supervise the management.

      For external directors, the number is set at three or above to allow such members a certain degree of influence within the board. In addition, the Company has established the target of electing half or more of its directors from outside.

      For selecting external directors and audit & supervisory board members, high priority is given to independence. Our basic principle is that candidates of external directors and audit & supervisory board members are required to meet the Company's independence criteria as well as possess high independence in mental attitude.


      1. Criteria for Independence of "External Directors and Audit & Supervisory Board Members"

        The Company established criteria for independence of external directors in 2012, which are included in the convocation notices of general meeting of shareholders and the like for disclosure. Specific descriptions can be found in the Notice of Convocation of the 116th Ordinary General Meeting of Shareholders of the Company (pages 39 to 41), and [Independent Directors] in 1. Organizational Composition and Operation of "Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" in this report.

        http://www.shiseidogroup.com/ir/shareholder/e1606shm/pdf/shm_0000.pdf


      2. Policies and Procedures in Appointing the Senior Management and Nominating Candidates for Directors and Audit & Supervisory Board Members by the Board of Directors

      In nominating candidates for directors and audit & supervisory board members and appointing corporate officers, it is a policy of the Company to nominate or appoint appropriate persons who are able to fulfill their duties and responsibility, fully taking into consideration their personality and intellectuality and the like regardless of gender, age and nationality. In addition, the Company also takes into consideration "the importance of roles to fulfill in response to entrustment on management by shareholders" for candidates for directors, and "the importance of audit and functions of audit & supervisory board members for the corporate management" for candidates for audit & supervisory board members, in nominating them respectively.

      Nomination of candidates for directors and appointment of corporate officers are determined upon resolution by the Board of Directors after the Company receives a report from the Nomination Advisory Committee chaired by an external director on whether or not the candidates are adequate. In addition to

      following the procedure, appointment of President and CEO is further carefully reviewed by the Nomination Advisory Committee. The candidate for President and CEO is selected from both inside and outside of the Company without excluding all sorts of possibilities from the standpoint of realizing the corporate philosophy and corporate strategies of the Company, and is bound to be subject to deliberation at the Nomination Advisory Committee chaired by an external director and a special working group established by the Chair of the Committee, starting from this selecting stage.

      For nomination of candidates for audit & supervisory board members, the representative directors select candidates, and the Company receives a report from the Nomination Advisory Committee on whether or not the candidates are adequate. Then the Board of Directors determines the nomination of candidates for audit & supervisory board members upon receiving consent of the audit & supervisory board on submitting a proposal for the election to the ordinary general meeting of shareholders.


      8. Explanations with Respect to the reasons for Nominations of Candidates for Directors and Audit & Supervisory Board Members by the Board of Directors

      With respect to all candidates for directors and audit & supervisory board members, the Company has clarified "Reasons for Nomination of the Candidate" in relevant proposals for the election of the Notice of Convocation of the Ordinary General Meeting of Shareholders (Reference Document). The "Reasons for Nomination of the Candidates" for seven directors and one audit & supervisory board member proposed for election at the 116th Ordinary General Meeting of Shareholders are shown below. In addition, reasons for nomination for election of four auditors & supervisory board members other than one member identified above out of five members in the office of the audit & supervisory board members as of the conclusion of the 116th Ordinary General Meeting of Shareholders are also shown below.

      [Directors] Masahiko Uotani:

      Mr. Masahiko Uotani has a proven track record in business management and is particularly highly

      regarded within the marketing field. As a result of this and other factors, the Company invited him to become President and CEO, and in April 2014 he assumed that office. Following his appointment as a director of the Company at the 114th ordinary general meeting of shareholders held on June 25 that year, he was selected as representative director by the Board of Directors and since then has undertaken the mandate given by our shareholders to steer the Company's management. In fiscal 2015, the Company initiated VISION 2020, the medium- to long-term strategy, and he continuously exerted his sophisticated marketing capabilities and leadership. For the Company to become a "Japanese company that leads the world's beauty industry," he concentrated on reconstructing the business foundation. Embracing a mindset of "Think Global, Act Local (conduct activities in a manner closely linked to regional locations and onsite, while thinking from a global perspective)," he created a new global organization to commence full-fledged operations in January 2016, transferring responsibility and authority to the regions.

      Due to these facts the Board of Directors has continuously selected him as a candidate for director. (The 116th Ordinary General Meeting of Shareholders)


      Tsunehiko Iwai:

      Mr. Tsunehiko Iwai has actively made statements at the Board of Directors as director of the Company and performed appropriately, determining important managerial events and matters and supervising business execution. Since assuming the office of corporate officer, he has served as officer responsible for quality management, technical planning, pharmaceuticals affairs, CSR, environmental affairs, and frontier science business. Thereafter, he served as officer with overall responsibility for research and development, SCM (Supply Chain Management) and technical strategy, and strove to reinforce R&D by leading innovations in product development to cooperate with and be fused with marketing. He also, as a member of CSR Committee of the Company, has actively made statements at the meetings of the Committee.

      Due to these facts the Board of Directors has continuously selected him as a candidate for director. (The 116th Ordinary General Meeting of Shareholders)

    Shiseido Co. Ltd. issued this content on 04 April 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 04 April 2016 09:22:12 UTC

    Original Document: http://www.shiseidogroup.com/ir/account/governance/pdf/egover.pdf?fk=r00001