Nippon Paint : Q&A Summary

A1Let me first talk about succession planning for our partner companies. In line with our policy of autonomous and decentralized management, the succession plan for the management team of each partner company is discussed within the respective partner company group (PCG; grouped by region/business). The co-presidents report the content of such discussions to the Board of Directors, and the Board provides feedback.

Those taking on key management roles within Nippon Paint Group are referred to as "global key persons" (GKP), and there are indeed many GKP candidates within each PCG. The Board is constantly searching among the GKP for a person with the right attributes to become the next-generation president of the Company. There are many similarities between the qualities necessary for operating a partner company and those necessary for taking on management at the holding company. Yet, there are also differences. Therefore, in selecting a candidate for the next-generation president, we consider both options: choosing someone from within or bringing in external talent.

In response to your next question, our co-president structure adopted at end-April 2021 is working extremely well. The current co-presidents have outstanding communication skills, and the two always communicate with each other to determine, for instance, how soon they need to make a decision or in what way they can complement each other (i.e., who will take the lead in a particular situation and who will take on a support role). The Board believes that the current co-president structure is absolutely the best setup for managing the Company as of now. As a clear proof, Co-President Wee, who has a wealth of knowledge and experience operating businesses across many countries and regions as CEO of NIPSEA Group, is also delivering solid results in the structural reform and profitability improvement of the Japan business, together with Co-President Wakatsuki.

The appropriate term of office for co-presidents cannot be discussed simply in terms of age or the actual length of tenure. The key lies in keeping the motivation levels of the co-presidents and other GKP high, and the Board bears the responsibility of monitoring the status and making appropriate nomination decisions as necessary.

Regarding the actual selection process, let's take the adoption of the co-president structure in 2021 as an example. More than a year before the shift to a new structure, the Board began expressing concerns over the state of affairs. It was roughly six months later that I felt it was time for us to reach a decision. Over the course of the next six months, we considered multiple candidates and narrowed down the pool. Since we had already interviewed a number of high-potential candidates in the past, the selection process made headway in a very speedy manner. Several years in, we do not see any need to dissolve the co-president structure. The Board's biggest challenge now lies in motivating the co-presidents even more so that they can fulfill unfinished endeavors with flying colors.

In the selection of director candidates, we ourselves are constantly on the lookout for suitable candidates within our spheres. NPHD does not use the method of creating a short list, which is then narrowed down. Instead, we select candidates mainly from our personal networks and consider their fit vis-à-vis the current co-president structure. Please take note that we are currently undergoing this process.

Lastly, when evaluating the co-presidents' performances, we factor in assessments by the GKP in addition to quantitative results. The co-presidents evaluate the GKP, but we also have in place a mechanism allowing each director to directly communicate with the GKP. The Board conducts a hearing of the evaluations on both sides: from the co-presidents to GKP and vice versa.

As for my own succession plan, if I feel I can contribute to the Board even more than before, I will tell the nomination committee that I wish to be reappointed for the next fiscal year. That said, I am not too worried because many of my fellow independent directors are more than capable of taking on the role of lead independent director.