My contribution to a board
My usefulness to another board would come from four years of making, as president, the decisions that many Japanese listed manufacturers are now facing. I have taken a company from below book value towards its cost of capital and know that the work lies in the plant register, not in the buyback announcement. I have unwound 33 cross-held positions, including some in companies that held ours, and I know which conversations preserve a relationship and which ones end it. I have answered an activist investor at a contested general meeting, accepted part of its argument in public and seen my own approval fall from 97 to 81 per cent. And I have disclosed a quality-data failure in my own company before the investigation was finished.
That combination is less common among outside directors in Japan than it should be. Many outside directors are former executives of banks, trading houses or government, and many are lawyers or accountants. Their perspective is valuable. A board considering whether to sell a founding business, how to report process capability or whom to appoint as the next president may also want someone who has had to do those things and live with the result.
I would also bring a particular discipline about succession. I have argued in writing that a retiring president should leave the board, and I intend to do so. On another company's nomination committee I would press for candidates the president did not propose, for meetings with candidates in the president's absence and for an honest comparison with outside executives. I would bring that view with courtesy, and I would expect to be outvoted sometimes.
I would not bring expertise in accounting or law, and I would not seek to chair an audit committee. My contribution is operational and strategic judgement, and a willingness to ask about the plant when others ask about the share price.
My first year on a board
In the first months I would try to understand the company as its plant managers see it before I tried to understand it as its investors do. I would ask to visit at least two plants, to read the last three years of internal audit reports with their open findings, and to see the register of customer specifications if the company keeps one. I would read the board minutes and the corporate governance report for the past three years, the capital policy the company has published in response to the exchange, and its list of cross-held shares with the board's annual reasoning for each.
I would then meet the president, the chair of the nomination committee and each outside director individually. I would ask each the same question: what is the decision this board has been postponing? The answers would tell me more about the board than any briefing pack.
For the remainder of the first year I would speak less than I listen. I would ask questions in committee rather than in the full board where I could, and I would avoid comparing the company with Hatsuseki in front of its executives, because nothing irritates a management team faster. At the end of the year I would ask the board chair whether my questions had been useful and which ones had not, and I would want a direct answer.
Conflicts and their management
Three relationships would need managing. The first is Hatsuseki itself: while I am president, its interests come first, and I would not join any company that buys from or sells to Hatsuseki, holds its shares or competes with it in chemicals, resins or semiconductor materials. The second is Jinzu Electrochemical, on whose board I sit for Hatsuseki's minority stake. Any company that buys soda or chlorine in material quantities would be excluded while I hold that seat. The third is personal: I would disclose every relationship with the company's executives, lenders and advisers, however old.
If a conflict appeared after I joined, for instance because the company began to buy from one of Hatsuseki's customers on terms linked to us, I would tell the board chair the same day, leave the discussion and, if the conflict seemed likely to recur, offer to resign rather than recuse myself repeatedly. Time is the remaining conflict. A Prime Market chief executive's year is full, and I have committed eighteen days to an outside seat, including plant visits and preparation. I would agree the meeting calendar a year in advance and decline any second seat until I retire as president.
My independence statement
My test for myself is whether I could vote against the president of the company I serve without any cost to Hatsuseki, to Jinzu Electrochemical or to me. For that to be true, the company must not buy from us, sell to us, hold our shares, lend to us or employ anyone close to me, and I must not owe its leaders a favour from earlier in my career. I would list every relationship I could find before the company considered me, including indirect ones through our customers and our banks. Whether I meet the Companies Act requirements for an outside director and the exchange's independence standards is a judgement the company makes against its own published criteria, not one I can make for myself.
Judgement in practice
01Declining a takeover defence plan when an activist arrived
When an activist fund crossed the 5 per cent reporting threshold in October 2024, two of our directors proposed adopting an advance-warning takeover defence plan, which some Japanese companies have used to slow an investor's purchases. I argued against it. The fund had not proposed to take control, and adopting a plan would have told every other shareholder that the board was more concerned with the fund's presence than with its arguments. I proposed instead that we test which of its points were right, and the board agreed. We accelerated the cross-shareholding sales, published segment returns and moved to a board with a majority of independent outside directors. On another board I would apply the same test to any defensive proposal: does it answer the investor's argument or only the investor?
02Abolishing senior adviser posts, including my predecessor's
In 2024, as the nomination advisory committee reviewed our succession process, I proposed abolishing the senior adviser posts that former presidents had held at Hatsuseki for decades. One post was held by my predecessor, who had also been chairman until that June and who had supported my appointment. I discussed the proposal with him privately before it reached the board, and he accepted it with more grace than I had any right to expect. The board approved it and we disclosed the change in our corporate governance report. The lesson I would take to another board is that the hardest governance changes concern people the proposer likes, and that the proposal should be discussed with them before it is decided, not after.
03Cutting my own bonus after the certificate disclosure
Our pay committee's formula for the year to March 2023 would have paid me a bonus close to its standard level, because the certificate disclosure had not yet affected the measures it used. I asked the committee to reduce my bonus to zero and to add measures of quality governance and return on invested capital to the formula for all executive officers from the following year. The committee did both. I would not argue that a chief executive's pay should be cut for every problem found on his watch. I would argue that a formula unable to register a failure of that kind is measuring the wrong things, and on another board I would ask what failure the pay formula could not see.