JT places importance on dialogue with capital markets, and our Outside Directors have been participating in meetings with institutional investors since 2023. We asked those Outside Directors to share what they learned, and to talk about their role as Outside Directors and the challenges and expectations for the growth of the JT Group.
What did you learn or take away from your discussions with institutional investors?
ShojiI think that dialogue with institutional investors is very important for helping them gain a deeper understanding of JT’s business and initiatives. I feel such dialogue is extremely meaningful as it provides an opportunity to learn and think about how JT can properly communicate information to remain attractive in the capital markets. In the Japanese market, in particular, institutional and regulatory support is driving an increase in individual investors, and JT has seen a significant increase in the number of individual shareholders. While it is difficult to communicate directly with all of JT’s shareholders, it is extremely valuable to have an opportunity for a face-to-face conversation even with just some of them.
YamashinaAs part of its efforts to increase corporate value, JT is looking to strengthen investor engagement, including IR activities, and as Outside Directors, we are also very interested in this. Being able to talk directly with institutional investors and exchange opinions with them was a valuable experience.
Outside Directors see the Company from an outside perspective that is independent and objective. However, since we are also members of the Board of Directors, we were able to communicate our own recognition and evaluation of the effectiveness of the Board of Directors and the status of its discussions, which tend to be hidden from the outside. We were also able to get a deeper understanding of the concerns and expectations of investors, and their awareness of surrounding issues. We will share with the executive side investors’ concerns and the issues they have raised, but I think this was also an opportunity for me personally to refamiliarize myself and think more deeply about these issues.
NagashimaI also have the same opinion in general. Through these discussions, I felt very strongly that the institutional investors have a deep interest not only in what can be inferred from the skill matrix, but also in the thinking of the Board members and the status of their involvement with each individual agenda item. The discussions reinforced for me the responsibility we as Outside Directors with different backgrounds have in participating in Board of Directors meetings. I was also able to gained a tangible understanding through candid conversations that investors are focused not only on business, but also on the quality of governance and the evolution of our ESG initiatives.
Since the role of Outside Directors is to supervise management, we are separated from the business front lines to a degree. I realized again that this is why our contribution is expected—and also scrutinized—from a governance perspective.
How will the opinions and feedback from investors be utilized in discussions at Board of Directors meetings?
ShojiI was impressed by their opinions and feedback regarding the business portfolio. JT has been progressing towards becoming a multifaceted, international company, and since being privatized it has opened up new markets in an environment of free competition. Each of the businesses that it has developed along the way was carefully verified and discussed with regard to growth potential and so forth.
These days, we are constantly being asked by the market, “What is the optimal business portfolio for increasing corporate value?” So, we are discussing seriously within the Board of Directors how to respond to the expectations and feedback from the capital markets and investors. Since business portfolio discussions are undertaken from a long-term perspective, it is not easy to provide specific information in our communications, but we consider it important to indicate that we recognize the relevant issues and provide appropriate disclosure of our thinking regarding the business portfolio in order to gain trust from the capital markets.
NagashimaAs an outsider with an independent point of view, I believe I am expected to participate in management by objectively understanding and assessing the JT Group’s potential and risks. On the other hand, I personally understand the value of luxury products that enrich life, such as alcohol and coffee, so I have also expressed my opinion in terms of the significance and purpose of the tobacco business from a qualitative standpoint. However, I was struck by how the institutional investors we spoke with emphasized the importance of quantifying even qualitative aspects to ascertain a company’s value. This interaction prompted me to reconsider what my own stance should be as an outsider on JT’s Board of Directors.
YamashinaRecently, at JT we have been promoting unifying the tobacco business as One Team. The business had been divided into Japan and overseas, and this move to unify has brought up questions such as whether the initiative increases the distance with our overseas operations, how we are managing governance, and how the Outside Directors are involved. While JT delegates the growth of the businesses it has acquired to the JTI management team, which has deep knowledge of local business, it has long faced the difficult problem of how to ensure effective governance across the entire Group. The current system, built through trial and error, is considered to be one of JT’s strengths, but it has been pointed out, rightly I feel, that outside observers are not easily able to see who is implementing governance, and how. We should not be complacent because the system is currently working; rather, I think we should be even more proactive in assessing how to update the system to ensure it works when changes occur going forward.
How do you think you can contribute as an Outside Director to enhancing the effectiveness of the Board of Directors and its supervisory function?
ShojiWorking toward the shared goal of increasing corporate value, our role as Outside Directors is to provide support for decision-making by the Board of Directors and to offer advice when the Board is considering countermeasures in cases of risk. Even if we are not experts in each of JT’s business domains, we are able to provide specific advice based on our sense of business judgment and experience cultivated through our careers. I am certain that this is what is expected of us from the executive side as well. Furthermore, we have regular opportunities to visit the workplaces of those actually carrying out operations and talk with them. One look is worth a thousand words, and the information and sense of actual conditions that we get from talking directly to people on the front lines really help when participating in Board deliberations.
I believe that JT’s Board of Directors is appropriately managed. Information is provided in advance, matters for discussion are clearly prioritized, and the environment is constantly updated to enable us Outside Directors to fulfill our responsibilities.
YamashinaIn last year’s evaluation of the Board’s effectiveness, the Company held individual interviews and shared their content with everyone. What I felt through this exercise was that we Outside Directors and Outside Audit & Supervisory Board Members make important contributions as individuals speaking based on our own skills and from our own experience, but I also thought that we might be able to contribute to enlivening discussions at Board of Directors meetings by synergizing our diverse mix of backgrounds.
For example, there are times when, after another Outside Director has spoken, I add my perspective to help foster a more constructive discussion. If we Outside Directors and Outside Audit & Supervisory Board Members had a space to freely share our own thoughts about issues with one another, I believe it could further enhance the effectiveness of the Board of Directors and enable us to make an even broader contribution.
NagashimaLet me share a specific regarding the dialogue among Outside Directors. We have opportunities to make site visits to deepen our understanding of business operations. We gain various insights from visiting sites, and before they fade away, we promptly share and discuss observations among ourselves. Given our diverse backgrounds, even when visiting the same site, our perspectives on findings can differ from each other, resulting in an opportunity for mutual learning.
YamashinaThe sharing of information among Outside Directors is not simply to increase the amount of information, but rather to enable us to share our respective views and awareness of issues. In some cases, participation from Outside Audit & Supervisory Board Members, who have many opportunities for engagement with the front lines, can enable even deeper discussion. By combining our respective experiences and perspectives, we can enrich the discussion. If we are able to build a shared understanding of the issues that warrant attention, I believe this will lead to more effective feedback for the Board of Directors.
What are your aspirations as Outside Directors, and what are your expectations of JT in the future?
YamashinaMy background is in the finance sector. For many years, I have gone outside the scope of financial services to engage in new challenges. For many years, my primary company sought out new challenges outside the scope of financial services, always looking one step ahead. At times, I found myself wondering where we started, but I have always thought it is important to be willing to try things out. Naturally, there are difficulties, but several of the businesses that have been created through taking up challenges have become firmly established pillars. Based on this experience, I feel that it will become increasingly important to develop new businesses in line with the JT Group Purpose, “Fulfilling Moments, Enriching Life,” beyond the tobacco business.
I believe that the current situation calls for a flexible approach, with a change in mindset from the conventional tobacco business, for a more agile, thinking-on-the-go style. I think the important elements for JT going forward will be agility, speed, and a culture that tolerates failure and uses it to continue driving forward.
NagashimaThey say that failure breeds success. I believe it is extremely important to be ready to carefully review failures and continue to the next attempt. But time waits for no one. Just realizing that a certain path is not correct is progress, and we need to swiftly change our direction and pivot towards a new course. This relates to a question I once received from a shareholder at one of JT’s General Meetings of Shareholders, but given my background in leading various business models, I recognize the need to encourage the executive side to be more agile and flexible in their approach to decision-making. My intention is to contribute with a greater awareness than ever before of the potential need for a strategic pivot in management or business direction.
In addition, in light of the current global situation, it is going to become even more important to have a strong sensitivity to changes in the world, such as global intelligence. I feel it is necessary for me to update my knowledge so that I can understand the background to executive decisions and provide appropriate supervision and advice when necessary.
ShojiI have a background in IT, and as AI penetrates further into our daily lives going forward, I imagine that eventually it will be possible to use AI for providing various support related to smoking habits themselves and diversify smoking experiences. For example, just as automobiles are evolving from something we drive into something that drives us, tobacco has the potential to transform and develop from a simple luxury product to something that offers new added value including “fulfilling moments.” I would find it highly rewarding if my own knowledge could also be applied in these future-oriented discussions.
JT has firmly established a positive culture that encourages people to take on challenges and an environment that allows them to act autonomously. I aim to continue to support the Company from an objective standpoint so that it can maintain and further invigorate this excellent culture.
