Corporate Governance

Basic Stance

The JGC Group remains aware that, in line with our purpose of "Enhancing planetary health," sound governance is the foundation for management in pursuit of higher medium- to long-term corporate value and sustained growth. We are therefore strengthening our corporate governance, which we view as a priority material issue.
Our central mechanism for corporate governance is the Board of Directors. Its governance structures, functions, and roles are continuously reviewed, with Board effectiveness analyzed and assessed each year as we seek progress through steady improvement.
In shareholder and investor engagement, we take a proactive stance in highly transparent information disclosure, and viewpoints from this dialogue are applied to strengthen governance and management. In regulatory compliance and other matters essential to appropriate corporate governance as well, our purpose and values call on each employee and officer to maintain high ethical standards in everything they do, so that the Group as a whole works to enhance medium- to long-term corporate value and achieve sustained growth.

Outline of Corporate Governance System

JGC Holdings maintains a board of directors and an audit and supervisory board. The JGC Group has adopted a holding company structure under which operating companies pursue the Group's core business.
Separating management from execution provides greater clarity on roles and responsibilities of the holding company and operating companies. The holding company's role is to formulate management policies and oversee the operating companies from a medium- to long-term Group perspective. Operating companies apply Group management policies and strategies to respond flexibly and rapidly to market characteristics and seek further business expansion. This is intended to maximize corporate value and ensure optimal allocation of management resources for the Group as a whole while enhancing transparency of corporate management and strengthening overall Group governance. Committees have been established to deliberate key Group matters, and an executive officer system has been introduced to ensure efficient managerial decision-making and execution. Main elements of the corporate governance system are as follows.

Outline of Corporate Governance System

Body Purpose Meetings Members Head of organization
Board of Directors
  • Resolves key matters of business execution
  • Oversees directors' executive actions
  • Deliberates on medium- to long-term strategies and issues
Seven directors (including four outside directors)
Five auditors (including three outside auditors)
(For fuller discussions, others also attend as needed, such as operating company officers, executive officers in charge of certain areas, and those in relevant divisions)
Chairman and CEO
Masayuki Sato
Nominating and Remuneration Committees
  • Deliberates on appointment and dismissal of officers, renumeration, etc.
(and as needed)
Chairman and CEO Masayuki Sato
President and COO Tadashi Ishizuka
Three outside directors*
  • *In order to improve fairness and transparency, the majority of the committee consists of outside directors.
Nominating Committee:
Outside Director Shigeru Endo
Remuneration Committee:
Outside Director
Masayuki Matsushima
Audit & Supervisory Board
  • Discusses or resolves issues based on reports of key auditing matters
  • Presents opinions based on the results above to directors or the Board of Directors as necessary
Five auditors (including three outside auditors) Full-time Audit & Supervisory Board Member
Yasumasa Isetani
Group Steering Committee
  • Reports on and discusses the direction that the Group should take as well as steering matters such as management / business strategies for the Group as a whole and each operating company
Chairman and CEO Masayuki Sato
President and COO Tadashi Ishizuka
Auditors (rotating)
(Consists of members such as group company officers appointed by the chairperson)
Chairman and CEO
Masayuki Sato
Sustainability Committee
  • Formulates Group policies and action plans related to sustainability; deliberation to evaluate and promote action supporting sustainability
Chairman and CEO Masayuki Sato
Consists of members proposed by presidents and chairpersons of Group companies and approved by the president of their company
Chairman and CEO
Masayuki Sato
Group Investment and Loan Committee
  • Deliberates on holding company and group investment and lending projects
Standing members: Seven directors, executive officers, and auditors of the holding company and Group companies.
Non-standing members: Three executive officers of the holding company may attend, depending on the agenda.
Chairman and CEO
Masayuki Sato
Group Risk Management Committee
  • Understands and organizes risks posed to the Group as a whole, develops and maintains a groupwide risk management system, and proposes and deliberates on improvements
President and COO Tadashi Ishizuka
Members appointed by the chairperson, and members appointed by the chairperson based on recommendations by the presidents of each operating company
President and COO
Tadashi Ishizuka
Accounting Auditors
  • CPAs Takemitsu Nemoto, Atsushi Nagata, and Takashi Inoue of KPMG AZSA LLC audit JGC accounts.
  • Auditing support is provided by nine other CPAs and 16 assistants.

Corporate Governance System

Corporate Governance System

Improvement Status of Internal Control System

JGC Holdings' Board of Directors determines the basic principles of the internal control system and revises them as necessary.

【Improvement Status】

  1. 1.The Internal Auditing Department monitors, evaluates, and improves the effectiveness of the internal control systems of JGC Holdings and the JGC Group and conducts separate audits as necessary
  2. 2.Rules of Management Authority regulate the duties and authority of each role, and clarify the system of responsibilities in corporate management and business execution
  3. 3.Management rules for Group companies have been formulated and implemented to ensure efficient and appropriate operations across the Group

About JGC's Response to the Corporate Governance Code

We implement all principles laid out in the Corporate Governance Code and provide disclosure according to all 14 general principles, and supplementary principles required by the Tokyo Stock Exchange as stipulated in the revised Corporate Governance Code of June 11, 2021, and are making steady efforts to further solidify our corporate governance.
A Corporate governance report is available on the JGC Group website. (Only in Japanese)

Board of Directors

Board Functions

The Board of Directors is responsible for decision-making on medium- to long-term group strategy and issues, and it provides oversight regarding business execution of the Group companies. Board composition is intended to enable effective and efficient execution of these functions.

Basic Policy on Board Composition and Diversity

From the standpoint of further enhancing discussions on medium- to longterm group strategies and issues and of strengthening oversight regarding business execution of the Group companies, the board consists of the following members.

  1. 1.Consists mainly of directors with broad experience in business markets and directors with a high level of knowledge and expertise in EPC operations, which is the primary Group business.
  2. 2.Independent outside directors are appointed in order to incorporate outside perspectives in management, with the expectation that these directors will provide objective advice to the board and fulfill oversight functions from an independent viewpoint.

As a matter of policy respecting the importance of diverse perspectives, members are appointed not solely based on professional experience and expertise but also on competence, regardless of nationality, race, or sex.

Skills Matrix for Directors and Auditors

  • *the above list does not represent all the expertise that each director and auditor possesses.

Policies and Procedures for Senior Management Appointment and Dismissal

Appointment process

Appointment of senior management and nomination of candidates for directors

  1. 1.Deliberations of the Nomination Committee, which consists of a majority of outside directors and is chaired by an outside director, are focused on the following items.
    1. (1)Qualities such as character and views
    2. (2)Senior management and inside directors: Qualities such as experience, performance, and management capabilities, as defined in succession planning
    3. (3)Outside directors: Qualities such as independence and expertise
  2. 2.After comprehensive deliberation by the Nominating Committee, a decision is made by the Board.
    1. (1)Appointment of senior management and nomination of director candidates follows this process and involves ample discussion before decisions are made, with the understanding that these individuals may one day be candidates to succeed the CEO.

Dismissal process

Dismissal of senior management

In the event of any of the following, the Board decides on dismissal after deliberation by the Nominating Committee.

  1. (1)Wrongdoing, impropriety, or breach of faith
  2. (2)Violation of laws or articles of incorporation
  3. (3)Loss of the qualities and capabilities initially required for appointment

Succession plan

The following succession plan in place informed by discussions of the Nominating Committee and Board is beginning to be initiated, reflecting the Group's recognition of the importance of succession planning in sustainable growth of corporate value.


  • Toward attainment of BSP 2025 and the 2040 Vision, and for lasting enhancement of corporate value beyond this, we recognize the necessity of appointing optimal directors and executive officers for the current business environment and management strategies.
  • Based on the business environment and management strategies, the plan clarifies the knowledge, experience, abilities, and personal qualities sought in top management, guiding development and selection of the Group's next leaders and enabling continuous appointment of these leaders whenever needed.

Stance on leadership criteria

  • In fiscal 2019, leadership criteria were determined through talks with current top management facilitated by a third-party organization, and future needs in leaders are defined from a medium- to long-term management vision.
  • These criteria are classified on minimum essential attributes and ideal attributes (three-level scale), and candidates are assigned to groups with specific level requirements.
  • The requirements of leaders were redefined in fiscal 2022 to suit changes in the business environment, and human resources criteria was revised.

Stance on succession planning

  • The basic stance taken on succession planning involves defining leadership criteria, selecting several individuals for near- and far-term candidate groups, providing opportunities to develop required attributes and gain experience, and monitoring progress each year as candidates are groomed over the medium to long term.
  • In line with the above approach, educational programs for near- and far-term candidate groups are enhanced and built upon by sending candidates to external educational and training programs or inviting external lecturers as part of ongoing lectures.

Message from Outside Director Shigeru Endo

Assembling a potent management structure to sustainably enhance corporate value
Outside director
Shigeru Endo

Reason for appointment

Mr. Shigeru Endo does not have direct experience in corporate management, but he has served as the ambassador extraordinary and plenipotentiary to Saudi Arabia and Tunisia and possesses extensive experience and knowledge of the Group's principal business market. Appointment as outside director reflects the Group's determination that this experience and knowledge will be applied in appropriately performing the duties of providing accurate advice and opinions on management and business and fulfilling a supervisory role from an independent standpoint, which will contribute to sustainable enhancement of corporate value.

In April 2022, the former Appointment and Remuneration Advisory Committee was split into two separate committees—the Nominating Committee and the Remuneration Committee—with each chaired by an independent outside director, of which I was appointed to chair the Nominating Committee. The committee currently comprises two inside and three outside directors as members. In order to prevail through these uncertain times where major changes are constantly afoot, determining how to assemble a potent management structure capable of sustainably increasing corporate value will be the key to the future of the Company—the Nominating Committee is also taking this to heart through its activities.

The primary responsibility of the Nominating Committee is to ensure objectivity, fairness and transparency when selecting members that make up the management structure. We are requested by the Board of Directors to deliberate on the selection and dismissal of senior management such as directors and other executive officers, before providing our reply.
Over the past year and a half, we have been holding serious discussions on the personal qualities required of directors, executive officers and other members of top management, as well as deliberating succession development planning and other matters.

We consider the fundamental essence of diversity as ensuring that each and every individual, from regular employees to the management team, is able to perform to the maximum extent of their capabilities, but we also see the significant potential of women in the workplace. Nurturing human resources is by no means an easy task. Yet it is impossible to foster true leaders without putting in the required effort. More than simply possessing knowledge of the manufacturing industry or the unique engineering aspects underpinning the JGC Group's operations, people suitable for top management positions need to be of a character fusing the perfect blend of decisionmaking capacity and drive, the ability to bring change and the power of imagination, and integrity and grit. The ideal image of a leader will no doubt change along with the circumstances of the day. The top management also needs to be supported by capable human resources. The office in charge of human resources plays a crucial role in formulating, implementing and assessing succession development planning with a long-term perspective, but I hope to see the Nominating Committee also becoming involved in this process.

Director Compensation

Policy on Determining Director Compensation Amounts or Calculation Methods

Basic Policy, General Share-Holders' Meeting Resolutions

  • Under a basic policy to secure the management personnel needed for greater global competitiveness and higher medium- to long-term corporate value, a resolution made at the 113th general shareholders' meeting on June 26, 2009, set maximum annual director compensation at ¥690 million, with maximum auditor compensation at ¥88 million.
  • As for the policy on determining the amount, calculation, and breakdown of compensation for individual directors, compensation shall not exceed the range resolved at the general shareholders' meeting, and details are discussed in advance by the Remuneration Committee (which consists of a majority of outside directors and is chaired by an outside director), whose report is considered by the Board to reach a decision.

Process for Determining of Compensation

  • To ensure fairness, transparency, and consistency with this decision policy, decisions by the chairman and CEO reflect the results of comprehensive deliberation by the Remuneration Committee on evaluation of individual directors and the amount of remuneration.
  • The compensation for individual directors within the range set at the general shareholders'meeting is at the discretion of the chairman of the Board, who as the Company's CEO is most familiar with the duties and responsibilities of each director, their performance, and the extent to which this performance contributes to higher corporate value.
  • The Board has determined that final decisions have been consistent with this policy, and in making this determination, the Board has been informed of a summary and results of Remuneration Committee deliberations, as well as final decisions by the chairman and CEO.

Compensation mix and details

  • Inside directors, excluding outside directors, receive compensation comprising monetary compensation and stock compensation, where monetary compensation comprises fixed compensation and bonuses, and stock compensation comprises restricted stock and performance share units.
  • The compensation mix is designed to provide a higher proportion of variable compensation (bonus and stock compensation) for higher performance and rank.
    (Note) The introduction of performance share units was approved and passed at the shareholders' meeting held on June 29, 2023, so the above includes details of the discussed matter.

Breakdown of Executive Remuneration

Message from Outside Director Masayuki Matsushima

Securing human resources to lead the future is the top priority
Outside director
Masayuki Matsushima

Reason for appointment

Mr. Masayuki Matsushima has extensive experience and knowledge in finance and corporate management, having served as executive director of the Bank of Japan and in other significant positions. Appointment as outside director reflects the Group's determination that this experience and knowledge will be applied in appropriately performing the duties of providing accurate advice and opinions on management and business and fulfilling a supervisory role from an independent standpoint, which will contribute to sustainable enhancement of corporate value.

Securing human resources capable of leading the future is the top priority to ensure sustainable growth in corporate value for the JGC Group. To achieve this, I feel that transparency of the compensation system for employees and executives as well as incentivebased compensation focusing on performance will be essential. To ensure that this is achieved in an objective manner, the process for determining the calculation method for compensation and the policy defining the compensation mix first involves deliberation by the Remuneration Committee that comprises a majority of outside executives (and chaired by an outside executive), and then approval by the Board of Directors.

I would like to take this opportunity to expand on two points in particular regarding the overall compensation system of the JGC Group I have seen during fiscal 2023. The first is that the JGC Group has enhanced company-wide well-being with efforts, such as raising the average salary to counter the 5% increase in prices. The second is that stock compensation linked to company performance has been introduced for director compensation (to begin from fiscal 2024). The introduction of this type of director compensation with a medium- to long-term view forms an incentive for attaining continuous growth in corporate value, which in turn leads to benefits for all employees of the JGC Group in what creates a positive cycle.

Going forward, we will continue creating a rewarding workplace environment with compensation to match each individual's capabilities and achievements, while maintaining an eye on DEI (Diversity, Equity and Inclusion).

Board Effectiveness Evaluation

Board effectiveness is analyzed and evaluated annually, efforts toward improvement are reviewed, and issues linked to further gains in effectiveness are discussed by the Board in pursuit of continuous improvement. Presented below is a summary of the process for evaluating Board effectiveness in fiscal 2022, the state of initiatives based on the Board evaluation results of the previous year (fiscal 2021), and future response policy based on these evaluation results.


Evaluation results

Survey and interview analysis and evaluation have indicated that the Board is functioning appropriately and effectively in its current state. Details of the evaluation results are as follows.

Main Efforts to Date for Improving Board Effectiveness

Message from Outside Director Noriko Yao

Improving effectiveness of Board of Directors
Outside director
Noriko Yao

Reason for appointment

Ms. Noriko Yao does not have direct experience in corporate management, but she possesses professional knowledge and keen insight as an attorney at law with extensive international experience. Appointment as outside director reflects the Group's determination that this experience and knowledge will be applied in appropriately performing the duties of providing accurate advice and opinions on management and business and fulfilling a supervisory role from an independent standpoint, which will contribute to sustainable enhancement of corporate value.

A proper understanding and sharing of the facts and background information must be considered the prerequisites for extensive deliberation at the Board of Directors. In addition to preliminary briefings for outside directors, the JGC Holdings also holds workshops covering topics put forward by outside directors. These provide the opportunity for outside directors and executives to hold lively Q&A sessions, exchange views and acquire essential information, which helps to increase the level of understanding of the underlying facts.

Outside directors also regularly coordinate information and exchange views with members of the Audit & Supervisory Board, and they also provide recommendations to the management team on how to run the Board of Directors to ensure an even higher level of effectiveness, leading to a host of initiatives geared to make improvements.

Board of Directors meetings held with these factors in mind involve recommendations and discussions from a diverse range of perspectives, based on the special expertise and experience of each individual executive officer. I hope to see the Board of Directors implement a range of suggested improvements and ideas related to the running of the meeting and discussions, to infuse even more energy into deliberations held by the Board of Directors.

Fiscal 2023 marks the mid-point of the medium-term business plan "Building a Sustainable Planetary Infrastructure 2025" (BSP 2025). The Board of Directors also held constructive discussions on the awareness of the current business environments based on external environmental factors, progress of key strategies, and studied issues and priority actions, and conducted monitoring and review of BSP 2025 that was raised as a key issue in the fiscal 2021 Board of Directors' effectiveness evaluation. Enhancing monitoring was identified as a key issue in the Board of Directors' effectiveness evaluation for fiscal 2022. Studying in detail the most effective format and method of governance for the execution of operations is essential for the JGC Group to create an even better system, with an eye to the current situation and the future of the JGC Group.

As an outside director, I remain committed to ensuring the Board of Directors functions more effectively on behalf of shareholders, with the view to increasing long-term corporate value and sustainable growth of the JGC Group.


1. Purpose

The Group refrains from cross-shareholdings except in cases where maintaining and strengthening relationships with clients and business partners will contribute to higher medium- to long-term corporate value for the Group. Each year, the Board of Directors reviews the significance of maintaining each cross-shareholding, and both qualitative and quantitative aspects are reviewed. Quantitatively, TSR (total shareholder return) and ROE are checked for each company, as well as whether business advantages are commensurate with the cost of equity. Sale of shares deemed to have lost their significance is investigated accounting for the market environment and changes in stock prices.

2. Basis for exercising voting rights

In exercising voting rights for cross-shareholdings, advantages and disadvantages are weighed based on whether the decision will contribute to sustained growth of the company involved, and thus, higher group corporate value over the medium to long term.

Review Process of Holding Objective and Stock to be Sold

History of Sales and Reductions in Cross-Shareholdings since the Introduction of the Corporate Governance Code