MurakamiYou’re all involved in various activities outside Toyota Tsusho, as well. From that outside perspective, what do you see as the strengths of our current corporate governance, which will help us grow into an even stronger company, and what challenges do you think we will face in achieving that?

MatsudaI think President and CEO Imai’s message of being a trading company that doesn’t dig up the earth is a good encapsulation of one of Toyota Tsusho’s features, and I view Toyota Tsusho’s business model very favorably. The cheery attitudes of employees, their dynamism in the field, and the company’s offensive governance approach to actively capturing business opportunities are all wonderful aspects of Toyota Tsusho. But to become a truly strong company, it will also need to fully take on the challenges of defensive governance. Formulating growth strategies and effectively implementing risk management are two sides of the same coin. Toyota Tsusho is extremely resilient and able to recover from difficult situations. But going forward, the entire organization will need to heighten its defensive capabilities to prevent problems from happening in the first place. To better leverage the power of offensive governance, it will be vital to further polish the corporate functions that serve as checks and balances and the business literacy of its business divisions. The ability to identify even the smallest signs of problems aids companies in achieving sustainable growth. It will be important to effectively implement substantive risk management aligned with the actual state of the company.

YamaguchiI was a member of top management in a manufacturer for many years, so I firmly believe that companies, above all else, exist for their employees, working out in the field. Under the corporate system, companies exist for their shareholders, but if employees aren’t proud of their companies and don’t work hard, then companies won’t produce profits. They won’t make any forward progress at all. The results of this hard work and pride contribute to society and, ultimately, to shareholder returns. The same is true for governance. It’s important not to excessively cling to rules like the Corporate Governance Code but instead to autonomously strive to do what you think is true and just. Toyota Tsusho has a wonderful corporate culture in which people can engage in discussions freely and with open minds. I hope that everyone, from junior employees to veterans, actively engages in these discussions.

MatsudaI think what Mr. Yamaguchi pointed out is important. Even with the new Corporate Governance Code, we don’t need people to get caught up in rules, but to think for themselves. I feel that Toyota Tsusho is the kind of company where those discussions can happen, and I hope the Group brings its distinctive traits to bear.

InoueToyota Tsusho excels when it comes to growth strategy. You can truly sense not only business growth but also personal growth. It’s been six years since I was appointed as an Outside Member of the Board, and I’ve seen with my own eyes how both the leaders and the people in the field have grown. I find everyone to be quite dependable. Because of my global management experience with foreign-owned companies, I see companies as public institutions, and I place great importance on the belief that they are responsible for contributing to the sustainable development of society. With that as our foundation, I think there are also three fundamental principles that each and every employee must embody in their day-to-day operations. The first is to maintain an “external focus.” That is, they must innovate and transform based on changes in the external environment, not just look at internal theory. The second is that they must be responsible enough to confidently explain our operations in the stern gaze of shareholders, and they must be resolutely decisive. The third is that they must propose and implement initiatives with the understanding that they could be reported on in the media. Toyota Tsusho shines when it comes to personal growth, so if these principles become firmly established, I am confident that it will become an even more robust organization.

MurakamiIt’s easy to allow oneself to make decisions based on “in-house logic” alone, but I think it’s important to also think about things from a third-party perspective. So, shifting gears a little, what are your views on the discussions in Board of Directors meetings, and on the Board’s members?

MatsudaFor a company, Board of Directors meetings are the most important places to decide on the company’s future. We live in an age where it’s hard to make predictions, even short-term predictions. To raise the likelihood of successful decision-making, it’s absolutely vital to bring different minds together and engage in multifaceted discussions. The age in which people with similar values could efficiently make decisions entirely on their own is over. I think our current Board of Directors has a good balance of highly individual members. But from a growth investment-focused perspective, I think it would be even more effective to appoint Board members with a startup-like, speedy approach. Improvements are being made, but if Board of Directors meetings involved even more discussions about management strategies and management issues in their discussions of the company’s future, I think the meetings could function at an even higher level.

Also, greater importance is now being placed on the company management supervisory functions of Board of Directors meetings. To improve these supervisory functions, the Board secretariat’s functions must also be strengthened. It will be vital to enrich its functions as a corporate secretary that supports Outside Members of the Board and links supervision and execution.

YamaguchiIt’s important that Board of Directors meetings serve as a place to make ultimate decisions, but the quality of the process that leads to those decisions is also important. If members are scared of failure or risk and avoid making waves, simply making safe decisions instead, there won’t be any chance that the company will achieve significant growth and shape the future. We need to engage in thorough discussions through site tours, offsite meetings, and the like. If we are able to engage in bustling, lively discussions, then I think that even when presented with challenging projects, our Board of Directors will have a mindset of finding the challenge presented to be engaging, with everyone taking the risks involved in rising to the challenge. I think we’ll be able to provide powerful encouragement to company management. I hope to see more discussions like that at Toyota Tsusho.

MurakamiWhile discussions within Board of Directors meetings are important, observing actual worksites and engaging in offsite discussions in advance produce better Board discussions. In that sense, as the Board’s chairman, I plan to actively create spaces and opportunities for deep discussions so that we can fully tap the knowledge of our Outside Members of the Board.

InoueIn Japan, Boards of Directors tend to be expected to serve in a consultant-like capacity as extensions of company execution functions, supplementing shortfalls in the field. However, execution and supervision should actually be clearly separated. Toyota Tsusho’s Board of Directors meetings are functioning effectively, and discussions are focused on the essential agenda items that the Company needs to address, thanks to your leadership as chairman. However, I do think that the meetings could be improved by allocating more time for strategic discussions.

MurakamiThe structure of the current Board of Directors meetings is a good one, and it enables discussions from a variety of perspectives. That said, we need to constantly be thinking about what could be added to make it even better. To close off our discussion, could you each provide a message for our investors?

MatsudaIn governance, what’s important isn’t external trappings; it’s substantive functions. While there has been discussion lately about the need for monitoring boards, some say that the Board in companies with an Audit & Supervisory Board is not a monitoring board. But what’s important is the Board’s substantive functions. In that sense, Board of Directors meetings in Toyota Tsusho are being conducted appropriately by Chairman Murakami, and the Board is functioning effectively as a monitoring board. Another discussion point is whether or not Independent Outside Members of the Board make up more than half of the Board, but it’s more important to make quality improvements than to focus on numbers. The Toyota Tsusho Board of Directors meetings have included multiple discussions regarding corporate governance, and I feel like the Board’s members are even more focused on governance and require an even higher level of governance as a result. Board meetings are also effectively identifying issues through effectiveness evaluations and implementing measures to address them. I would say that these meetings are steadily evolving.

YamaguchiI really hope that investors don’t try to evaluate the true value of the company just by comparing published financial data and surface-level indicators like ROE alone. Behind those numbers are people pouring in their blood, sweat, and tears. To understand Toyota Tsusho’s true latent potential, I hope they come to the company and have honest, one-on-one talks with not only executives but also, if possible, with employees in the field. Looking at it from that perspective, the energy that employees put into taking on the challenges of creating new value, in this free and unfettered corporate culture, is Toyota Tsusho’s greatest appeal. It’s the driving force behind the company’s sustainable growth.

InoueWhen I look at Toyota Tsusho as an Outside Member of the Board, what I often feel quite strongly is that it’s a company brimming with future potential. There are three main reasons for that. The first concerns the material issues it has identified. There is a strong need for these material issues within today’s society, and Toyota Tsusho has the sure-footed foundation and competitive edge to emerge victorious in these areas. The second is the tremendous trust vested in the Toyota brand throughout the global market. The name “Toyota” serves as a badge of quality and reliability around the world. This overwhelming brand strength is extraordinarily powerful when initially building trust, and it provides a solid boost to the company’s smooth global business development. The third is that Toyota Tsusho does not allow itself to be trapped by the “Toyota” name, nor does it rest on its laurels as a Toyota company. Instead, it leverages its superb human capital to pave the way into one new growth area after another. I feel a tremendous sense of scale and potential in the company.

MatsudaI think this resonates with what you all have said, but I think that one of Toyota Tsusho’s challenges going forward will be to communicate the company’s effective strengths and potential to investors in a clear and easy-to-understand way. I will do my part in helping enrich the company’s IR activities so that Toyota Tsusho’s appeal comes across even more clearly.

MurakamiThank you all for your invaluable insights today. I’ve listened closely to the issues you have pointed out and the expectations you have shared, and the entire Board of Directors will do its utmost to further enhance the corporate value of Toyota Tsusho and engage in an even higher level of dialogue with stakeholders.