Sumitomo Chemical has long dedicated itself to improving its corporate governance, and has undertaken a number of initiatives to further that end, including implementing the Corporate Governance Code. The Company also makes continual improvements to ensure that its corporate governance structures serve their functions appropriately, including executive nomination and remuneration, and that the Board of Directors is highly effective, with the aim of further improving corporate governance.

Basic Stance

Sumitomo Chemical cherishes deeply the Sumitomo Spirit which has been passed down through generations over nearly 400 years, the basic teaching of which is not to seek its own corporate interests alone, but to contribute to society through its business activities. In accord with this business credo, the Company strives to constantly take on the challenges of creating new value by capitalizing on its proprietary technologies toward achieving the Company’s sustained growth while at the same time cultivating a corporate culture full of vigor and growing as a Company that earns trust from the public at large. Recognizing that highly effective corporate governance is vital to attaining these ends, the Company keeps working to further enhance its corporate governance in accordance with the following policies and principles, centering particularly on closer cooperation with shareholders and various other stakeholders, faster decision making, proper oversight of business execution, enhanced systems of compliance and internal control, and active dialogue with stakeholders.

• Sumitomo Chemical not only shall respect the rights of shareholders, but shall endeavor to provide an environment where shareholders can exercise their rights smoothly and also to ensure the effectively equal treatment of shareholders.
• Recognizing that cooperation with various stakeholders (including shareholders, employees, customers, business partners, creditors, and local communities) is essential to sustained growth, Sumitomo Chemical shall proactively work to fulfill its corporate social responsibility and strive to cultivate the corporate culture of a company that can be trusted by society.
• As part of efforts to build a foundation for constructive dialogue with stakeholders, Sumitomo Chemical shall endeavor to provide information that is highly reliable and useful to recipients.
• Sumitomo Chemical’s Board of Directors shall fulfill its role and mission properly, based on their fiduciary responsibilities and accountability to shareholders and recognizing the important role of Independent Outside Directors & Auditors, through such measures as presenting appropriate corporate management policies and business strategies that have taken into account changing socioeconomic conditions, and conducting highly effective oversight over the execution of business.
• Sumitomo Chemical shall endeavor to promote constructive dialogue with shareholders with the aim of seeking to attain the Company’s sustained growth and to enhance corporate value in the medium to long term.

Measures to Date for Strengthening Corporate Governance

Date		Major Initiatives	Board Composition	Appointment of Board Members	Executive Remuneration	Other
2003	June	Introduced Executive Officer system (reduced number of Directors from 25 to 10)	●			●
	July	Established Compliance Committee				●
2004	June	Eliminated system of retirement benefits for Directors and Audit & Supervisory Board Members			●
2007	May	Established Internal Control Committee				●
	September	Established Remuneration Advisory Group			●
2010	September	Established Nomination Advisory Group		●
2011	November	Drew up standards for appointment of Independent Outside Directors	●	●
2012	June	Appointed 1 Outside Director	●
2015	June	Selected 3 Outside Directors (increased by 2)	●
	October	Established Remuneration Advisory Committee in place of Remuneration Advisory Group			●
		Established Nomination Advisory Committee in place of Director Nomination Advisory Group		●
2016	December	Formulated Sumitomo Chemical Corporate Governance Guidelines				●
2018	June	Selected 4 Outside Directors (including 1 woman) (increased by 1)	●
2021	June	Board of Directors consisting of more than 1/3 Outside Directors	●
2022	June	Introduction of a restricted stock compensation plan for Internal Directors and Executive Officers			●

Corporate Governance Organization

Corporate Governance Organization (As of July 1, 2023)

(1) Board of Directors

The Sumitomo Chemical Board of Directors decides important matters concerning the Company’s management, including management policy and business strategies, in accordance with the law, the Articles of Incorporation, and the Board of Directors’ own rules. It also receives reports from Directors and others on the performance of duties, the financial situation, and operating results, and oversees the performance of duties by each Director.

It also analyzes and assesses the effectiveness of the Board of Directors, and follows up on the results to ensure and improve effectiveness. In accordance with the Nomination Advisory Committee’s advice, candidates for Director are nominated by the Board of Directors and are elected once a year at the General Meeting of Shareholders.

Major Agendas Discussed at Meetings of the Board of Directors in Fiscal 2022

Financial results, dividends, financing

Management strategy, sustainability, assessment of the effectiveness of the Board of Directors

R&D, digital innovation, IT promotion

Internal controls, responsible care, risk management, compliance

Nomination, remuneration, important personnel changes

Audit & Supervisory Board Members, accounting auditors

Status of important investments

Other Important matters for operating businesses of listed subsidiaries Carbon neutral strategies Human capital Stakeholder dialogue etc.

(2) Board of Audit & Supervisory Board Members (FY2022 15 times held)

We have a Corporate Auditor system, with the Board of Audit & Supervisory Board Members consisting of five Audit & Supervisory Board Members. The Audit & Supervisory Board Members and the Board of Audit & Supervisory Board Members play a vital role in our corporate governance by auditing the performance of duties by Directors in accordance with the law and the Articles of Incorporation. The Board of Audit & Supervisory Board Members meets monthly as a rule and strives to obtain timely information, including important compliance-related information.
Standing Audit & Supervisory Board Members and Outside Audit & Supervisory Board Members attend meetings of the Board of Directors and the Board of Audit & Supervisory Board Members. In conducting their audits, they receive reports and explanations as needed from the Internal Control & Audit Department, operating divisions, and accounting auditors. In addition, Standing Audit & Supervisory Board Members attend meetings of the Internal Control Committee and other important Company meetings.

The results of audits and the objective views of Outside Audit & Supervisory Board Members are appropriately reflected in internal audits, Audit & Supervisory Board Members' audits, and accounting audits, so as to raise the effectiveness and efficiency of auditing.

The Audit & Supervisory Board Members’ Office has been established with staff dedicated to providing assistance in auditing functions under the direction of Audit & Supervisory Board Members.

Breakdown of 5 Audit & Supervisory Board Members

(3) Nomination Advisory Committee

An advisory committee of the Board of Directors relating to the selection of senior management^*3 and the nomination of Directors and Audit & Supervisory Board Members. The committee, whose members are Directors (the majority of whom are Outside Directors) makes recommendations to the Board of Directors when selecting executives, with the aim of ensuring even greater transparency and fairness in executive selection and also clarifying the process of executive selection.

1. Senior management means Executive Officers above Senior Managing Executive Officer, and Managing Executive Officers who are immediately under the President, supervising certain functions.

(4) Remuneration Advisory Committee

An advisory committee of the Board of Directors relating to the remuneration system and remuneration levels for Directors and Executive Officers, as well as other related issues. The committee, whose members are Directors (the majority of whom are Outside Directors) makes recommendations to the Board of Directors when determining systems for and levels of executive remuneration, among other issues, with the aim of further increasing transparency and fairness.

In addition, upon authorization by the Board of Directors, the committee determines the amount of compensation for each individual senior management and Directors in accordance with the policies for determining compensation of senior management and Directors.

Composition of the Nomination Advisory Committee and the Remuneration Advisory Committee and Attendance Status (Meetings Attended / Meetings Held) in Fiscal 2022

	Nomination Advisory Committee	Remuneration Advisory Committee
Chairman of the Board　Masakazu Tokura (Chairman)	2/2 time (100%)	4/4 times (100%)
Representative Director & President　Keiichi Iwata	2/2 time (100%)	4/4 times (100%)
Outside Director　Koichi Ikeda	2/2 time (100%)	4/4 times (100%)
Outside Director　Hiroshi Tomono	2/2 time (100%)	4/4 times (100%)
Outside Director　Motoshige Itoh	2/2 time (100%)	4/4 times (100%)
Outside Director　Atsuko Muraki	2/2 time (100%)	4/4 times (100%)

Note: Constituent members: Outside Directors and the Chairman of the Board, and the President

Activities of the Advisory Committees in Fiscal 2022

Nomination Advisory Committee	Deliberation on officers for fiscal 2023
Remuneration Advisory Committee	Deliberation on basic remuneration Deliberation on the bonuses of officers Deliberations related to revising the policies and procedures for determining compensation of senior management and Directors   Deliberation on basic remuneration of officers Deliberations and decisions on the amount of remuneration of each Director and individual executive management team member

(5) Executive Officers

We have appointed Executive Officers to expedite the implementation of business operations. Executive Officers are responsible for carrying out operations in accordance with the policies adopted by the Board of Directors. The term of office for Executive Officers is one year.

Breakdown of 37 Executive Officers (FY2023)

	Male	Female	Total
Japanese	32	3	35
Non-Japanese	2	0	2
Total	34	3	37

(6) Management Meetings

Management Meetings support decision making by management as an institution for debating such important issues as corporate strategy and capital investment, including matters to be deliberated in the Board of Directors and reports to be made to the Board. Management Meetings consist of the Executive Officers who are in charge of or who supervise key management functions, the Standing Audit & Supervisory Board Members, and the Chairman of the Board. In principle, the meetings are held 24 times a year.

(7) Company-wide Committees

We have established internal meetings (committees) to deliberate on important matters concerning the management of the Company and the Group from a broad and diverse range of viewpoints. The content of these meetings is reported to the Board of Directors as needed, and the committees receive instructions from the Board of Directors in an effort to enhance business execution and oversight functions. Several of these committees are attended by the Standing Audit & Supervisory Board Members, who serve as observers, including the Internal Control Committee, the Compliance Committee, and the Responsible Care Committee.

We regard the promotion of sustainability as a core issue for the entire Group. In 2018, we established the Sustainability Promotion Committee to further strengthen our sustainability initiatives. The Responsible Care Committee also examines specific measures to address climate change and other environmental issues. To further promote initiatives related to respect for human rights, the Human Rights Promotion Committee was established in fiscal 2019.

Overview of Committees and Number of Meetings

Name	Details	Number of Meetings Held in FY2022
Internal Control Committee	By debating various measures to build or expand internal control systems, and monitoring their implementation status, this committee is intended to continually improve the internal control systems of the Sumitomo Chemical Group.	3
Sustainability Promotion Committee	This committee suggests measures to accelerate the Sumitomo Chemical Group’s contributions to sustainability, taking in a comprehensive perspective on risks and opportunities with regard to medium- to long-term issues in the environment and society.	2
Responsible Care Committee	This committee formulates annual policies, medium-term plans, and specific measures concerning responsible care (safety, health, environment, and quality), including climate change issues.	1
Risk and Crisis Management Committee	This committee deliberates on policies for specific risks and crises, such as earthquakes, wind and flood damage caused by extreme weather, pandemics, and breakdowns in public security.	1
Committee on Antitrust Compliance and Corruption Prevention	This committee reviews the regulatory trends and cases related to domestic and foreign antitrust laws and anti-corruption regulations and deliberates on the operation of compliance systems in the Group, new initiatives based on those, and action plans going forward.	1
Compliance Committee	This committee deliberates on the Group’s compliance policies and action plans, and the status of the operation of the compliance system, including responses to internal reports and the results of activities.	1
Human Rights Promotion Committee	This committee promotes increasing awareness of human rights issues, and drafts and executes policies to respect human rights in the entire value chain including Sumitomo Chemical Group.	1

Note: Each committee separately held subcommittee meetings on specific important topics and secretariat meetings.

Efforts to Substantively Strengthen Corporate Governance

Changes in the Method of Operation of the Board of Directors

In FY2015, Sumitomo Chemical drastically reconsidered its various policies relating to the method of operation for the Board of Directors and corporate governance with the major aims of further strengthening the monitoring functions of the Board and further improving the transparency and objectivity of management, among other goals. At the time, a great deal of emphasis was placed on maximizing the use of the functions of Outside Directors and Audit & Supervisory Board Members, so a variety of measures were considered to achieve this, centered on the thought that it would be essential to address the information asymmetry between internal executives and Outside Directors and Audit & Supervisory Board Members. As a result of the numerous improvements made each year since then, meetings of the Board of Directors, as well as the operation of various related meetings before and afterwards, follow the procedures laid out in the table below.

Through this sort of effort for improvement, the Board of Directors has grown more active each year, and the amount of time required for their meetings is steadily increasing.

Average Length of Board of Directors Meetings

Utilizing the Oversight and Advisory Functions of Outside Directors and Audit & Supervisory Board Members

As a result of efforts such as reviewing the way the Board of Directors operates, Outside Directors and Audit & Supervisory Board Members have expressed the view that meetings of Sumitomo Chemical's Board of Directors feature free, frank, constructive, and lively debates. In addition, we have received numerous suggestions and advice from Outside Directors and Audit & Supervisory Board Members on how to operate the Board of Directors, support systems for Outside Directors and Audit & Supervisory Board Members, and various corporate governance improvement measures, during the meeting of Board of Directors as well as informal meetings of Outside Directors and Audit & Supervisory Board Members relating to the assessing the effectiveness of the Board of Directors. Based on these suggestions and advice, we have implemented the following measures.

Example Initiatives Based on Recommendations from Outside Directors and Audit & Supervisory Board Members

There are any number of other cases where the Company’s efforts were advanced by explicit or implicit suggestions from Outside Directors and Audit & Supervisory Board Members, and their monitoring and advisory functions have been a driving force for continually strengthening corporate governance at Sumitomo Chemical.

Assessing the Effectiveness of the Board of Directors

The effectiveness of the Board of Directors is assessed in terms of its composition, operational status, deliberation/reports at its meetings, auditing status of its business execution, the operations of the non-mandatory Nomination Advisory Committee, Remuneration Advisory Committee, and dialogues with shareholders. The Company conducts surveys of each Director and Audit & Supervisory Board Member about their assessment of the effectiveness of the Board of Directors. Based on the results of these surveys, there is then a frank exchange of views in meetings of the Board of Audit & Supervisory Board Members, in informal meetings with Outside Directors and Audit & Supervisory Board Members, and in management meetings. Afterward, the Board of Directors then conducts a review of its own effectiveness in one of its meetings based on the views expressed in the prior meetings.

Improvements over and Assessment of FY 2022

Of the various points highlighted as needing improvement in the effectiveness evaluation of the previous fiscal year, the Company conducted the following actions. 1) Regarding the monitoring of Group companies and the enhancement of support and guidance, in addition to more timely reporting and deliberation on important Group companies at Board of Directors meetings, the Company conducted periodic surveys of Group companies from multiple and quantitative perspectives, and reported and confirmed the results at Board of Directors meetings Through these efforts, the Company confirmed that effective Group governance is assured and overall appropriate supervision is conducted. 2) Regarding holding deeper discussions at Board of Directors meetings, in explaining and reporting at Board of Directors meetings, the Company also explained the discussions and points raised during the review process, the reasons for decisions, assumed risks, and measures to deal with them with the overarching aim of making the internal decision-making process, including risk management, more transparent. The Company also held informal meetings regularly to discuss important management issues, such as human capital. Through these efforts, the company confirmed that the Board deliberations have been further stimulated, leading to more effective supervision.

Initiatives for the Future

To further enhance the effectiveness of the Board of Directors going forward, the following initiatives will be continued.

1. Toward Further Enhancement of Corporate Value
   Aiming to realize merits unique to a diversified chemicals manufacturer and to create both economic and social value, including by addressing climate change problems, the Company, of course, steadily implement various measures and achieve various targets. Given the importance of having a wide range of stakeholders understand and empathize with our management policies and strategies, the Company will continue to disclose information about our corporate value creation story and engage in more active dialogue with stakeholders to ensure that our corporate value is properly evaluated.
   
2. Further Strengthening of Group Governance
   Due to the expansion of business risks, including economic security, regional conflicts, and IT security, there are calls to further strengthen Group governance. Therefore, departments in charge of management, supervision, and auditing of Group companies work together to implement more efficient and effective measures. In doing so, the Company utilizes the advantages of both face-to-face and web-based communication to further enhance communication. In particular, with respect to overseas subsidiaries, the Company also seeks to promote understanding of and disseminate its management philosophy, management policies, basic compliance policies, and more, which form the foundation of Group governance. In addition, for important Group companies, opportunities will be set up for direct dialogue between the top management of the relevant company and Outside Directors and Audit & Supervisory Board Members, leading to a deeper mutual understanding of management strategies, issues, and more.
3. Others
   As a result of various initiatives taken to date based on effectiveness evaluations, the Company’s overall governance is at a high level. Going forward, the Board of Directors will continue to regularly discuss and deliberate the roles it should fulfill and the design of the Board of Directors based on these roles, taking into consideration the Company's business structure and management direction, as well as trends in the legal system and other topics, while also utilizing informal meetings.

Policies and Procedures for Reshuffling Senior Management and Nominating Candidates for Directors and Audit & Supervisory Board Members

Remuneration (Applied to Directors and Executive Officers)

Directors’ and Audit & Supervisory Board Members’Compensation (FY2022)

(Millions of yen)

Title	Number of people	Total amount of compensation	Total amounts of compensation by type
			Basic Compensation (Fixed remuneration)	Bonuses (performance-linked remuneration)	Stock Compensation (non-monetary compensation)
Directors (Of which, Outside Directors)	13 (5)	692 (66)	532 (60)	66 (6)	94 (-)
Audit & Supervisory Board Members (Of which,  Outside Audit & Supervisory Board Members)	5 (3)	122 (43)	122 (43)	̶	̶
Total	18	813	654	66	94

The numbers of people and the amounts of compensation listed above include one Director who retired during this fiscal year.

Listed Company with Listed Subsidiaries

Our Thinking Regarding Listed Companies with Listed Subsidiaries

For a publicly listed subsidiary, the advantages of being publicly listed include better employee morale, enhanced ability to recruit employees, greater trust from customers, and greater influence within the industry. In addition, the parent company can expect to benefit from synergies in collaboration and cooperation with its subsidiaries. Because of these benefits, in seeking to maximize the overall corporate value of the Sumitomo Chemical Group, we think that holding listed subsidiaries is one of the effective options on premise of preserving each subsidiary’s autonomy and respecting the rights of minority shareholders.
For the publicly listed subsidiaries in Japan of the Sumitomo Chemical Group, because they play an important role in our management strategy, we are not thinking of selling them at present. On the other hand, as for converting them into wholly owned subsidiaries, while we always keep it in mind as one option, it is not a high priority because, in addition to not being able to enjoy the benefits of having listed subsidiaries, the financial burden of buying out the holdings of minority shareholders would be significant. Accordingly, at the present time, we think that, from an overall perspective, keeping these subsidiaries as publicly listed subsidiaries is the optimal position. We are constantly monitoring our relationship with each listed subsidiary and, in accordance with the Sumitomo Chemical Group’s management strategy and changes in our operating environment, considering changes, including in our shareholdings.

The Significance of Being a Listed Companies with Listed Subsidiaries

Company Name	History	Position in Group	Synergies
Sumitomo  Pharma Co., Ltd.	Sumitomo Chemical’s pharmaceutical business began with the acquisition of the Japan Dyestuff Manufacturing Company in 1944. After being spun off as the subsidiary Sumitomo Pharmaceuticals in 1984, it merged with Dainippon Pharmaceutical in 2005 to become Sumitomo Dainippon Pharma. (currently Sumitomo Pharma)	The company’s core pharmaceuticals business is a pillar of Sumitomo Chemical’s life sciences business, along with the agricultural chemicals business, and is a source of innovation. In the current Corporate Business Plan, it has positioned “healthcare” as one of the priority areas in making efforts for acceleration of the development of next-generation businesses, and further innovation is expected in this area in the future.	Research at the Bioscience Research Laboratory, which consolidates and integrates parts of the research organizations of the company and Sumitomo Chemical Contract Development and Manufacturing Organization in regenerative medicine and cell therapies (combines the company’s expertise in regenerative medicine and cell therapy with Sumitomo Chemical’s expertise in the CMO business) Theranostics (combines the company’s antibody design technology with Sumitomo Chemical’s biological mechanism analysis technology and the radioactive isotope technology of Nihon Medi-Physics) Having locations on Sumitomo Chemical’s premises enables close collaboration in such areas as quality and production management, reducing indirect expenses
Koei Chemical Co., Ltd.	Sumitomo Chemical invested capital in 1951 for relationship-building because the company was Sumitomo Chemical’s largest customer for methanol. Thereafter, when the company ran into a financial crisis, the collaboration was strengthened in order to rebuild the company, including dispatching executives from Sumitomo Chemical.	Through production outsourcing in both directions for such items as catalysts and electronic materials based on its unique organic synthesis technologies of the company, the company has contributed to the expansion of the Sumitomo Chemical Group’s business in the field of fine chemicals.	Optimization of the Sumitomo Chemical Group’s production of active pharmaceutical ingredient and intermediates through a new multi-purpose manufacturing equipment (multi-plants) approach Joint research from the earliest stage into such areas as battery materials and additive agents Having locations on Sumitomo Chemical’s Works enables close collaboration in such areas as quality and production management, reducing indirect expenses
Taoka Chemical Co., Ltd.	In 1955 Sumitomo Chemical invested capital in the company, a leader in the dye business, to strengthen its own dye business.	Through production outsourcing in both directions for such items as electronic materials and pharmaceutical and agro chemical intermediates based on its various organic synthesis technologies and numerous multi-plants held by the company, the company has contributed to the expansion of the Sumitomo Chemical Group’s business in the field of fine chemicals.	Expanded contract manufacturing of pharmaceutical and agrochemical intermediates with numerous multiplants of the company
Tanaka Chemical Corporation	Sumitomo Chemical invested capital in the company in 2013 and began joint development of high-capacity cathode materials for automobiles. Afterwards, in light of the smooth progress in joint development work, and in light of expectations that, in line with the future growth of the environmentally friendly vehicles market, there would be significant medium- to long-term growth in the market for lithium-ion secondary batteries, the company was converted to a majority-owned subsidiary in 2016.	Through integration of the technologies relating to precursors held by the company and the findings related to cathode materials held by Sumitomo Chemical, the company accelerates joint development of new products and contributes to the full-scale market entry and expansion of the Sumitomo Chemical Group’s cathode materials business.	Contribute to a drastic rationalization of the manufacturing process and optimization of research and development through integration of the technologies of both companies. Sumitomo Chemical’s capital investment and guidance has improved the company’s management level in such areas as labor accidents and internal control

Building an Effective Governance System

When Sumitomo Chemical and its listed subsidiaries jointly work on maximizing Group synergy, Sumitomo Chemical respects independent decision making by listed subsidiaries and, at the same time, makes its best efforts to establish an effective governance system in order to avoid any conflicts of interests with minor shareholders.
With respect to the listed subsidiaries, we are taking the following measures to ensure appropriate supervision of such areas as transactions with the parent company and nomination of officers and remuneration of officers, from an independent and objective position.

Design of the Organization, Composition of Independent Outside Directors and Establishment of Non-mandatory Committees in Each Company

Cross-Shareholdings

Sumitomo Chemical strategically holds shares in other companies only when judged necessary for ensuring smooth business operation or maintaining and enhancing mutual business relations, after such factors as medium- to long-term economic rationality and prospects of future business developments have been considered as a whole. Also, at the Board of Directors meeting, each year, we shall assess our shareholding policy for all listed shares it owns, in light of medium- to long-term economic rationality and significance to hold such shares for each individual issuer. According to such review, if it becomes less necessary to hold a share by reason of changes in the business environment, etc., we shall sell such shares, as appropriate, taking into consideration such factors as the share price and market trends. Continuing from the prior year, we sold a portion of these shareholdings in FY2022. 

Cross-Shareholdings at the end of the fiscal year

Expertise and Experience of Directors and Audit & Supervisory Board Members

As a diversified chemical company, our management requires expertise and business experience in a variety of fields. In light of these business characteristics, the Company's Board of Directors, in principle, consists of a diverse range of members, including those with extensive knowledge and experience in corporate management, the Company's business, finance and accounting, legal, compliance, and internal controls, etc., as well as international experience.