Sumitomo Dainippon Pharma Annual Report 2017
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Compensation for the Directors is determined based on a system including performance-linked compensation to enhance incentives for increasing shareholders’ value and for achieving sustainable growth. The Board of Directors seeks recommendations for the compensation of the Directors from the Nomination and Compensation Committee, the majority of which consists of Independent Outside Directors, and determines the compensation based on the recommendations from the Nomination and Compensation Committee.Compensation for the Directors consists of base compensation and bonuses, and its total amount is within the scope of total compensation approved at the Shareholders’ Meeting. Base compensation is set according to position, such as the Representative Directors, while bonuses are determined based on the performance-linked elements according to the degree of achievement in light of the performance goals in the Mid-term and Long-term Business Plans and the individual performance. The Directors contribute a certain ratio of their base compensation every month to the Sumitomo Dainippon Pharma Officers Shareholders’ Association to acquire shares of the Company. The Directors hold the shares they acquired during their term of office and for one year after their retirement.Compensation of the Outside Directors consists of base compensation, and the Company adopts a compensation system where the business performance of the Company is not reflected, for the purpose of securing the supervisory function and independence of the Outside Directors.Compensation of Audit & Supervisory Board Members consists of base compensation determined by the Audit & Supervisory Board within the scope of total compensation approved at the Shareholders’ Meeting.circumstances of the Board of Directors in the fiscal year ending March 2017; and (ii) matters to be discussed for the further enhancement of the effectiveness of the Board of Directors.Based on the analyzed results of the questionnaire, opinions were exchanged at the meeting of the Board of Directors in April 2017. It was confirmed that the effectiveness of the Board of Directors of the Company has been ensured in general, and it was agreed that the improvements were seen as to the agenda of the fiscal year ended March 31, 2016. At the same time, suggestions were made regarding the prior explanations to the Outside Directors and the Outside Audit & Supervisory Board Members and the provision of information to them at the meeting of the Board of Directors, which would be helpful to further stimulate the discussion by the Board of Directors. In the fiscal year ending March 31, 2018, the Company considers these suggestions as presenting an important agenda, and takes action based on these suggestions.The Company conducted a questionnaire survey on all the Directors and Audit & Supervisory Board Members during the period from February 2017 to March 2017 in order to find out: (i) whether there are any differences between the ideal status of the roles and duties, etc. of the Board of Directors of the Company that are set forth in the Basic Policy and the actual Executive RemunerationAnalysis and Evaluation of the Effectiveness of the Board of DirectorsTopics of the questionnaire:1) Composition of the Board of Directors;2) Roles and duties of the Board of Directors;3) Status of the operations of the Board of Directors;4) Functions of the Nomination and Compensation Committee;5) Support system for Outside Directors and Outside Audit & Supervisory Board Members;6) Roles of Independent Outside Directors;7) Roles of Audit & Supervisory Board Members and the expectations for the Audit & Supervisory Board Members;8) Relationship with stakeholders; and9) Improvements over last fiscal yearStrategic ShareholdingsSumitomo Dainippon Pharma does not hold any shares of other companies except when such shareholding supports the sustainable enhancement of its corporate value, such as establishment or maintenance of corporate alliances and other types of relationships with important business partners and customers. The Company has the Board of Directors evaluate the reasonableness and the economic rationale of major strategic shareholdings on an annual basis. With respect to exercising voting rights for such strategic shareholdings, the Company examines the proposal from the viewpoint of whether it will lead to enhancing not only the corporate value of the relevant issuing company, but also that of the Company.Related Party TransactionsThe Board of Directors supervises transactions between the Company and any of its Directors, Audit & Supervisory Board Members, major shareholders, etc. (i.e., related party transactions) appropriately in light of the importance of such transactions, and in accordance with the Company’s relevant procedures such as the requirement of approval at the meeting of the Board of Directors at which Independent Outside Directors are present, in order to ensure that such transactions are fair and reasonable from the viewpoint of enhancing the corporate value.Amount of Executive Remuneration (FY2016)(Note) 1. The above includes the amount of remuneration and the like for Outside Directors and Outside Audit & Supervisory Board Members, five persons in total, which is 62 million yen in total.2. The above includes two Directors who reached the end of their tenure at the conclusion of the 196th Ordinary General Meeting of Shareholders held on June 23, 2016.3. The respective amounts of remuneration and the like for Directors and Audit & Supervisory Board Members that were determined in the shareholders’ meeting do not exceed 400 million yen annually for Directors, and 100 million yen annually for Audit & Supervisory Board Members.Amount of Remuneration(Millions of Yen)NumberCategory34610Directors 905Audit & Supervisory Board Members44Sumitomo Dainippon Pharma Co., Ltd. Annual Report 2017

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