Sukeno: Since stepping back from executive duties in 2023 to focus on my role as Chairman of the Board of Directors, I have constantly reflected on what form of discussion is most effective in enhancing the Board’s overall effectiveness. Recent discussions on corporate governance in Japan have often leaned toward formalistic debates on how things should be. What I consider most important, however, are the setting of appropriate agendas and the fostering of an atmosphere in which opinions can be freely exchanged. This is precisely my most important role as Chairman. Beyond that, I look to our outside directors to contribute in terms of breadth―by providing a diversity of perspectives grounded in their respective expertise. On the other hand, I look to internal directors in terms of depth―by providing their specialized knowledge rooted in the field. My foremost responsibility is to bring this breadth and depth together in harmony, leveraging both to elevate the quality of Board discussions.
In addition, explanations from the executive side about proposals often tend to be biased toward internal practices, viewpoints and shared understandings, and in some cases the intent is not sufficiently conveyed to the outside directors. In such cases, I ask the executive side to provide additional background and, when necessary, step in myself to offer follow-up. I also supplement with context on the discussion process prior to submission to the Board, thereby ensuring thorough information sharing with the outside directors. We have also created opportunities for the heads of overseas subsidiaries newly added to the Group to talk about their thoughts and outlooks on their businesses. Looking ahead, we also plan to invite securities analysts and other external experts to engage in two-way dialogue aimed at further enriching the Board’s discussions. We believe these efforts will further strengthen the effectiveness of the Board of Directors.
Nagano: The sole purpose of governance is to sustainably enhance corporate value̶in other words, to make the company better. The corporate governance structure and quantitative criteria for Board composition are merely tools. Each Group company must carefully consider the history, culture, business climate and human capital characteristics of the country in which it operates. On that basis, it should take ownership in selecting the combination of measures that will most effectively enhance its corporate value. The relationship of trust between the executive side and the Board of Directors is also important. Only with transparency, where both sides can speak openly and share information freely, can issues and risks be discussed candidly.
For the company to grow stronger, its executives must also act with autonomy and strengthen their own capabilities. Here too, substance is more important than form. Regardless of whether outside directors make up the majority of the Board, it is essential to pursue discussions until the correct conclusion is reached, which requires setting the correct agenda. It is also important to address fundamental themes from a long-term perspective and ensure that the challenges and risks faced by management are shared openly with the Board. By steadily building on these practices, we can foster a relationship of trust between management and the Board, allowing the Board to fulfill its essential role.
Sukeno: I also consistently ask our outside directors to ensure that our business activities―grounded in the corporate culture, technologies and marketing capabilities we have inherited for more than 90 years―are not deviating from the values of society. Monitoring based on the expertise and broad perspectives of the outside directors is extremely important, highlighting the major role they play.
Nagano: From my own experience as well, I often find that what is common sense inside the Company is nonsense in society. That is precisely why we, as outside directors, must raise issues by saying, “Isn’t that strange?” In other words, we need to bring society’s perspective of common sense into the discussion. In this regard, inviting securities analysts and industry experts to Board meetings for open exchanges of views is highly valuable. By sharing our concerns and questions and gaining insight into how analysts view us on a daily basis, we can build deeper mutual understanding. By also helping them recognize that the Board of Directors is engaging in frank discussions on a regular basis, we foster stronger trust and transparency with the stock market. In addition to analysts, this applies equally to engagement with a broad range of stakeholders, including our customers.
Sukeno: Form alone is meaningless if effectiveness is lost. As Mr. Nagano noted, allowing analysts to directly observe the nature of our Board discussions is highly valuable. We have continued sound management under our “open, fair and clear” corporate culture. We believe that valuing this corporate culture and ensuring transparency and objectivity across all business activities will also bear fruit in our company’s performance. Incorporating this approach, we will continue fulfilling our accountability through dialogue to clarify what truly helps enhance the effectiveness of the Board.
Nagano: For example, in terms of corporate governance structures across Japanese companies, roughly 60% still operate as Companies with Audit & Supervisory Board, with many of the remainder structured as companies with Audit & Supervisory Committees. Changing the governance structure does not automatically lead to higher corporate value. What truly matters is fostering open discussions that get to the heart of the issues. Essentially, discussions on transitioning corporate governance structures should be based on the expected effects, so rather than changing the form carelessly, it is important to continue ensuring proper discussions and explanations at Board meetings.
Nagano: I feel that the greatest asset of this company is its people. More than developing talent directly, our true strength is in creating an environment and opportunities to raise awareness and empower individuals to grow on their own. A concrete example of this is the learning symbolized by STPD and +STORY, as well as the diverse experiences through job rotation. By moving between learning and practice, we foster the ability to create new value from scratch. In doing so, we maximize self-driven growth and connect individual development directly to the growth of the Company. Our current directors and core executive members were likewise nurtured in this environment. Since the 2000s, even amid periods of rapid and far reaching business transformation, they have embraced diverse challenges and experienced a virtuous cycle of personal growth and corporate growth. On the other hand, the younger generation today has a strong tendency to value social contribution. I believe they are less likely to be motivated if the Company’s sole focus is growth and improved performance. This is why we need to leverage the Group Purpose, established in 2024, to further encourage autonomy and initiative. In doing so, we can align individual growth with corporate growth to achieve sustainable social contributions. We are engaged in numerous initiatives that address social challenges, giving us ample opportunities to translate social value into economic value. These are not opposites but are dynamically interconnected. I believe this kind of dynamic duality management is exactly what we need in the years ahead.
Sukeno: In terms of human resources strategy, we notice that social interest is expanding from health management to well-being management. One practice I personally adhere to is visiting our manufacturing and research sites at least once a month to engage in direct dialogue with employees. There are two messages I always make a point of sharing. The first is that we have inherited our culture and technologies from those before us and worked to advance them―and it is now our responsibility to pass them on to the next generation. To achieve this, we must continue attracting top talent. I ask employees to reflect on their own workplace from the perspective of “Would you recommend working here to your own child?” and to make this a personal matter. The second message is a request to add their own extra value to what they inherited from their predecessor when handing over their tasks to a successor. These two messages resonate greatly with employees in the field.
Nagano: I totally agree. Being able to take pride in one’s work and workplace with one’s family is very important, and when I mention this in conversations overseas, people’s eyes light up. I believe this holds true universally, regardless of differences in a country’s history, traditions or corporate culture. At the same time, there are potential challenges. When new or growth business areas develop smoothly and get on track, there is a risk of complacency setting in. With generational turnover or talent shifts driven by M&As, moreover, there is concern that our corporate culture might fade. Assuming an average career of 40 years at a single company, this means that after 10 years, roughly a quarter of the workforce would be replaced. A company’s corporate culture will gradually change and could be lost unless it is consciously maintained. We at the Fujifilm Group must remain mindful of this and ensure the continued inheritance of our culture. In addition, the most important thing in developing global human resources is identity. For Japanese employees, it is essential to carry a distinctly Japanese perspective on nature, history and culture―while also embracing the shared identity of the Fujifilm Group.
Sukeno: In training sessions for newly appointed officers, I always emphasize one key point: Never forget to treat others with respect. For people in companies newly joining the Group, we must not unilaterally preach our way of thinking. Instead, we need to gauge how much they understand and make efforts to gain their understanding by putting ourselves in their shoes. Otherwise, communication becomes hollow, and the message we truly wish to deliver will not get across. In our overseas operations as well, I believe that doing good work with local talent requires mutual respect and a sensitivity to the other party’s perspective.
Nagano: That is a very important point. I believe our basic approach should be one of inclusion, rather than an assimilation strategy that compels others to simply adopt our way of doing things. At the same time, we need to ensure that new employees firmly understand the fundamental aspects, such as what we value, the significance of working in the Group and our strengths.
Sukeno: During my tenure as President, I restructured our business portfolio and classified our businesses into a four-category configuration―Earnings Base, Growth Driver, New/Future Potential and Value Reconstruction―with profitability on the horizontal axis and market attractiveness on the vertical axis. We need to leverage the cash as a source of investment), as well as Growth Driver businesses and New/Future Potential businesses (highly profitable investment targets with promising future growth prospects), to make adjustments in our Value Reconstruction businesses. We have consistently fine-tuned our portfolio in pursuit of the optimal balance. Looking ahead, we will not hesitate to review our portfolio and, following repeated discussions at Board meetings, exit businesses that should be discontinued while continuing to invest decisively in those that merit it. Well-defined resource allocation of this kind is indispensable to ensuring sustainable growth over the long term.
Nagano: The key is how we stabilize our portfolio across all four business categories. From a financial sector’s standpoint, constructing an appropriate portfolio allows underperformance in one business to be offset by the strength of another, thereby stabilizing the overall company. This does not mean reshuffling businesses in pursuit of short-term efficiency. Here, the key factor is how we communicate the meaning of holding each business to the stock market to gain its understanding. At the Board level, we continuously monitor how our business portfolio achieves balance, with segments supporting and complementing one another. We also look closely at how we are generating synergies in technology, talent and other areas.
Building on this, we must articulate our desired medium-to long-term portfolio and clearly set out our direction, including restructuring our earnings model or exiting businesses where necessary, while maintaining ongoing dialogue with the stock market. For example, the Business Innovation segment currently generates operating income in the mid-¥70 billion range with a profit margin of around 6%. Under VISION2030, our policy is to raise the margin to above 10% by fiscal 2030.
By realizing this, we will reduce profit volatility across the Group and strengthen overall stability. With a portfolio spanning businesses at different growth stages and market cycles, I believe having operations that generate steady profits is especially significant. We need to more clearly highlight the strengths of our business portfolio and continue explaining the meaning of maintaining it.
Sukeno: While increasing ROE is a given, the crucial point is how to achieve it. The key here is to increase the numerator, rather than simply focusing on reducing the denominator. From a capital efficiency standpoint, I have consistently prioritized ROIC and CCC since my tenure as President. We incorporate both KPIs into the evaluation axes for executive compensation. From an ESG perspective, we also use contribution to carbon neutrality and engagement survey results as evaluation indicators. In this way, we clearly articulate our expectations for each executive’s contribution to improving capital efficiency and achieving sustainable growth. In addition to generating profits, our business divisions must show how much they are contributing to efficiency and sustainable growth. This is the message I have consistently communicated. This mindset has now taken root across the Group. By sustaining initiatives within each business, I believe we can enhance ROE in a sound manner.
Nagano: Looking ahead, it is important to share with the stock market our fundamental principles―how high we intend to raise ROE and how we plan to allocate capital. As Mr. Sukeno noted, for example, our guiding principles include raising ROE through sustainable profit growth without retaining excess capital. In accordance with those principles, it is important to clearly present our thinking on the future ROE target level and shareholder return policy and to seek investors’ understanding.
Sukeno: Thank you. Ultimately, to continue delivering returns to our shareholders and other investors over the long term, we must provide value to a broad spectrum of stakeholders. We aim to realize a workplace environment where employees can feel pride and fulfillment while continuing to invest in human resources development. At the same time, we will develop new products and make capital investments to deliver new value and excitement to customers. To keep this sustainable cycle going, we will continue pursuing substantive discussions at Board meetings.
