Special Feature : INTERVIEW BETWEEN AN OUTSIDE DIRECTOR AND THE PRESIDENT REGARDING GOVERNANCE
A group interview in regard to Shinsei Bank's corporate governance was conducted among Mr. Ernest M. Higa, Outside Director, Mr. Hideyuki Kudo, President and Chief Executive Officer, and Mr. Shigeki Toma, Advisor to Shinsei Bank (the previous President and Chief Executive Officer), with Mr. Ken Takamiya, a bank sector analyst at Nomura Securities Co., Ltd., serving as the moderator. (Interview was conducted in April 2015)
- Shigeki Toma
- Advisor, Shinsei Bank
- Hideyuki Kudo
- President & CEO, Shinsei Bank
- Ken Takamiya(Moderator)
- Bank Sector Analyst Nomura Securities Co., Ltd.
- Ernest M. Higa
- Outside Director, Shinsei Bank
Takamiya:We have observed a rapid rise in the awareness of and the sensitivity of company management to governance in the past six months, partly due to the introduction of the Corporate Governance Code. As a result, Japanese companies are seriously beginning to consider how to instill real substance into their governance frameworks. Mr.Higa, what functions and roles do you think the shareholders and investors of Shinsei Bank expect its Outside Directors to take on?
Higa:Firstly, we are expected to monitor that Management is strictly in compliance. Secondly, as representatives elected by the shareholders, we must engage in discussions which enhance corporate value for the shareholders. With four of the six Directors being Outside Directors, Shinsei Bank has an environment which makes it easy for Outside Directors to speak up. (Note: As of June 17, 2015, 5 of the 7 Members of the Board of Directors are Outside Directors).
Takamiya:From Management's perspective, have you had any experiences of receiving poignant or extremely helpful comments from the Outside Directors in past Board of Directors discussions?
Toma:There have been many times when the Outside Directors made me aware of different views in regard to particular situations, and there have been instances in which they have functioned as a type of "insurance" of sorts for the views and opinions of Management. The Outside Directors have drawn attention to things which are unlikely to be focused upon by internal Directors, and they prevent us from becoming entrapped by our own ways of thinking. Additionally, providing explanations to Outside Directors forces us to review things in an unbiased manner as we must engage in discussions with them from a point where we lack a common understanding in regard to the topic at hand. An example of assistance we received was the introduction of a company named Forval Corporation ("Forval") by Mr.Higa. Forval supports small- and medium-sized enterprises (SMEs) in expanding their business overseas. His advice led to the creation of a business model where Shinsei Bank provides financing to Forval, and Forval provides business support to companies entering markets in Southeast Asia1. This is an exciting initiative with strong potential for further development in the future, and is an example of being able to leverage Mr.Higa's network as an entrepreneur to accelerate the growth of the Bank.
- 1Forval and Shinsei Bank entered a business partnership to support the expansion of SMEs' businesses into the ASEAN markets. Support for expansion into ASEAN commenced in April 2014.
Higa:In the future I hope to be able to contribute even more through such business matching activities and support initiatives that will lead to the improvement of corporate value by offering a different perspective due to the fact I am not directly involved in the Japanese banking business itself.
Takamiya:Shinsei Bank's Board meetings have a high average participation rate of 98%. Please tell us about the atmosphere of the discussions from the perspectives of the Outside Directors and of the Management.
Higa:The meetings provide more than sufficient time for us to engage at length in various discussions and in an atmosphere which encourages all Outside Board Members to speak frankly and freely. As the career backgrounds of the outside Board members are quite diverse; we are able to ask questions from our own perspective regardless of our specific knowledge of the banking business without hesitation. I believe that in many ways, we have already been implementing the spirit of the Corporate Governance Code even prior to its drafting.
Toma:The Board meetings are attended by four Outside Directors, two internal Directors who also serve as Executive Officers, one Audit & Supervisory Board Member (Full-time), and two External Auditors. (Note: As of June 17, 2015, there are a total of 5 Outside Directors) In addition, the Board meetings are attended by the Group Head of each business line. Since the observations of the Outside Directors extend across a broad range of matters, during lengthy meetings, it's challenging for the Management in that regard. At the time I assumed the presidency there were major concerns regarding risk, and the focus of discussions was investigating the cause of individual cases of deals going bad, whereas now the focus has shifted to the risk policies of the Bank. By exhaustively responding to all the issues identified by the Outside Directors, the Management is able to organize their thoughts and at times see things in a different light, which is all very useful.
Takamiya:Speaking of risk, which is an extremely important topic for financial institutions, Mr.Kudo, have you had any experiences of receiving valuable advice from the Outside Directors whilst in your role as Chief Risk Officer of the Bank?
Kudo:In the first two years of Mr.Toma's presidency, the disposal of socalled legacy assets was a major issue, and in the process of explaining the progress in doing so to the Board of Directors, we also discussed how this issue would be perceived from external stakeholders including investors. Now that the disposal of nonperforming loans is largely complete, I feel we are having more opportunities to explain our policies of assuming new risk in new business areas. The Outside Directors contribute views that are different and unlikely to be raised from within the Bank.