Outside Officers Interview
June 2024
Board of Directors’ Contribution to Governance Issues and the Essentials of Global Management
Junko Shimizu (Left)
Outside Audit & Supervisory Board Member
She is a professor at Gakushuin University Faculty of Economics. She specializes in international finance and was formerly chairman of the Council on Customs, Tariff, Foreign Exchange and Other Transactions of the Ministry of Finance. She assumed the post of Audit & Supervisory Board Member of the Company in June 2023.
Haruka Matsuyama (Right)
Outside Director Chairman of the Group Audit Committee
Attorney, Hibiya Park Law Offices. Holds concurrent positions as Outside Director of Mitsubishi Electric Corporation and Audit & Supervisory Board Member of AGC Inc. She assumed the post of Director of the Company in June 2023.
Impressions of Tokio Marine and Our Board of Directors
- Secretariat
- A little over a year has passed since you were appointed as a Director and an Audit & Supervisory Board Member. What is your impression of participating on the Board of Directors and the Audit & Supervisory Board?
- Shimizu
- From 2019 to June 2023, I served as an Audit & Supervisory Board Member of TMNL. After that, I was appointed as an Audit & Supervisory Board Member of Tokio Marine Holdings. At Holdings, management discussions were conducted from a broader perspective and from a more medium- to long-term perspective, and it was a year in which I realized the scale of the discussions.
- Matsuyama
- Since I had worked as an Outside Director of a financial holding company in the past, I felt that the relationship between Holdings and the operating companies and the management on a global scale were similar. On the other hand, last year the price-fixing of corporate insurance premiums was discovered in TMNF, one of our core subsidiaries, and we held discussions at the Board of Directors throughout the year. I felt that there were problems and structural issues specific to the non-life insurance industry.
The Board of Directors’ Contributions to Governance Issues
- Secretariat
- The price-fixing of corporate insurance premiums that occurred in TMNF was a serious issue that called into question the effectiveness of governance. Following the discovery of the incident, the FSA issued a report submission order, an order for business improvement in December, and TMNF submitted a business improvement plan in February. Amidst these series of developments, what were the discussions taking place in Board of Directors and Audit & Supervisory Board?
- Shimizu
- The incident in TMNF, our founding business, caused significant concern to our stakeholders. The management took this situation very seriously and immediately moved to confirm the facts and conduct an in-depth investigation. In the Company’s Board of Directors and Audit & Supervisory Board, the Outside Directors and Outside Audit & Supervisory Board Members, in particular, gave strong advice that a thorough investigation should be conducted not only into cases that might violate the Anti-Monopoly Act but also any conduct that was deemed inappropriate.
- Matsuyama
- Of course, we must take into account the fact of price-fixing seriously and reflect on it. Furthermore, if a similar incident is discovered after the problem has been resolved, we will further lose the trust of our stakeholders, which will be a major blow to our management. I feel that the management policy of resolving all problems at once and eliminating all fundamental problems was appropriate.
- Shimizu
- An in-depth investigation was carried out by the Special Investigation Committee in order to remove the corruption, and the progress was reported to the Board of Directors. After receiving this report, I believe that the “external perspective” of the Outside Directors and Outside Audit & Supervisory Board Members contributed to the depth of the discussions and the objectivity of the decisions in the course of the Company’ s true cause analysis. In particular, the broad perspectives of Mr. Endo, Mr. Katanozaka, and Mr. Shindo, who have extensive experience in corporate management, have been very instructive to me.
- Matsuyama
- I believe that an “external perspective” is indispensable to Tokio Marine today. I am the chairperson of the “Group Audit Committee,” which was established to strengthen the supervisory function of the Board of Directors. As stated in the business improvement plan submitted by TMNF this time, in order to correct the “gap in common sense (business standards)” with the public and society that was occurring unconsciously. It is necessary to incorporate an “external perspective.” One of the roles of the Group Audit Committee is to examine whether there are any gaps with the common sense of society and the general public by delving into the cultures of Tokio Marine and Group companies in Japan and overseas. Based on the discussions at the first committee meeting held in May, I strongly feel the significance of these roles.
- Shimizu
- It’ s not easy to change the structure of the industry or the culture.
- Matsuyama
- As Ms. Shimizu said, the incident that occurred last year was largely related to structural problems, and I think it originated from the formation of the business itself. That’ s why change is so difficult, and Tokio Marine alone cannot solve the problem. However, I believe that Tokio Marine, which should lead the industry, should take the lead in creating rules, and that it is necessary to approach stakeholders and regulatory authorities and work on the issue as a whole. Cultural reform is also an important issue. At the recent meeting of the Group Audit Committee, we shared the voices of mid-career employees of TMNF with the aim of re-inspection of our common sense (historically accepted business practices). For mid-career employees with an outside perspective, Tokio Marine's corporate culture sometimes seems strange. For example, Tokio Marine advocates “freedom and open-mindedness,” but depending on the generation and the environment, it seems that there is a gap between this corporate culture and reality. Employees in the mid-level and above who have joined the Company as new graduates are proud of the fact that the corporate culture of “freedom and open-mindedness,” in which employees think and act independently and have open and frank communication, has nurtured people and built a strong organization. On the other hand, there are cases in which the younger generation and employees hired for careers are not able to feel the corporate culture of “freedom and open-mindedness.” If an organization has become conspicuously homogeneous, there is a danger that it will be difficult to notice gaps in common sense and incongruity with society. To put it another way, if we can accept diverse values and incorporate the awareness gained from an external perspective, we will be able to notice and change the gaps in common sense. I would like to start our discussion on culture by consciously listening to the voices of people in various environments and positions, such as mid-career employees and overseas employees, and sharing their insights.
- Shimizu
- It really leads to the true cause of this incident. There have been cases in which it was decided whether an insurance contract could be won, depending on the results of cooperation in the customer’s business or business-related equities ownership, or in which the company was unable to compete in the essential parts of the products and services. I think that “external perspective” leads to an opportunity to speak out about such a “strange” structure of the industry and to change it. We, the Outside Directors and Outside Audit & Supervisory Board Members, should bring common sense to the execution of business. In the Board of Directors, under the leadership of Mr. Nagano, the Chairman, an environment has been created in which open discussions can be held. If I feel something is irregular, I would like to continue to point it out and engage in lively discussions.
- Matsuyama
- You are right. There might be aspects that are difficult to notice within the company, or there might be information that is difficult to obtain, so I think it is also our role to communicate such awareness and stimulate the company. The Group Audit Committee also deliberates on issues that have arisen in other companies in the same industry or in other industries from the perspective of whether there is a possibility of such incidents occurring at Tokio Marine and whether there are measures that can be considered at the present time. Let this be a lesson to us. As for the price-fixing of corporate insurance premiums adjustment incident, we should reflect on why we could not notice it until now (there might have been an opportunity to notice it), so I would like to play a role from the perspective of detecting future concerns.
What Tokio Marine, as a global insurer, needs to do to further increase its corporate value (the essence of global management)
- Secretariat
- Tokio Marine has used the Purpose as a starting point to solve societal issues and increase corporate value as a result. In this age of uncertainty, what do you think is necessary for Tokio Marine to further increase its corporate value and continue to grow as a global company?
- Shimizu
- At present, North America accounts for a large share of the entire Tokio Marine Group. In the future, it might be necessary to install headquarters functions not only in Japan but also in North America, for example. Including this topic, I think that we need to discuss medium- to long-term strategies for Tokio Marine’ s growth as a global insurer in a more in-depth and realistic manner.
- Matsuyama
- Tokio Marine's International business has achieved an industry leading position within its different segments as a result of respecting the autonomy of each operating company and allowing them to utilize their unique DNA. On top of that, human resources with a high level of expertise and knowledge will gather on a global scale to manage the Group as a whole, enhance the organization, and generate synergies. I have looked at the governance systems of various companies from a lawyer’ s perspective, but it is not possible for any company to expand its business on the basis of such a relationship of trust. As we expand our operations on a global scale, the roles of the Board of Directors will change depending on how we manage our operations from a global perspective. We must deepen our discussions on these issues.
- Shimizu
- On a slightly different angle, when the Noto Peninsula Earthquake occurred in January of this year, the Disaster Response Headquarters was set up immediately after the disaster, and I heard reports that Group employees worked together to grasp the damage, build a support system, and promptly respond to customers in cooperation with agencies. I was very excited to see the employees thinking about what the Group as a whole can do now and what to do in the future and exchanging opinions. Tokio Marine is able to protect customers all over the world when a disaster strikes Japan, or something happens around the world because it spreads risk and expands its businesses. And we have the people who make it happen. Every day, I felt that our Purpose was “protecting our customers and society in their times of need.” To borrow Mr. Komiya’ s words, “Under any circumstances, we will keep our promises to our customers.” This is possible only because Tokio Marine has expanded and grown globally. I think it is also important for our domestic businesses and overseas businesses, as well as domestic employees and overseas employees, to feel more connected to each other through this sense of purpose.
- Matsuyama
- Last year, when a large-scale forest fire occurred on the Hawaiian island of Maui, support was provided remotely from Japan as we have extensive experience in dealing with natural catastrophe damage. The fact that the Group as a whole is protecting people in their times of need in Japan and overseas is also linked to the pride of working at a good company.
- Shimizu
- In addition to in their times of need, we are expanding our businesses in “pre- and post-incident areas,” such as disaster prevention and mitigation, with the aim of “always” protecting our customers. This will certainly increase Tokio Marine’ s corporate value, but I still think it will be difficult to generate large profits immediately in the businesses that have just been launched. I feel that it is important to create a company in which employees involved in these solutions businesses can feel a sense of purpose and work with enthusiasm.
- Matsuyama
- You are right. These businesses will create a new world, contribute to society, and improve Tokio Marine’ s economic interests. For example, in the area of disaster prevention and mitigation, by providing services that reduce damage caused by natural catastrophes and prevent recurrences, we can eventually reduce the number of insurance payment incidents, which will make a significant contribution to profits. It is difficult to quantify the specific impact, but I heard that the Company is starting to take on the challenge of quantitative measurement. I believe that this initiative will give employees involved in our businesses, as well as our stakeholders, a sense of Tokio Marine’ s corporate value.
- Shimizu
- Although we have made steady progress step by step toward the realization of our Purpose, it might be a little difficult to realize this Purpose in your daily work. I would like to discuss with everyone, including young people, how to relate the significance of “always” protecting our customers in their times of need to their work and how to make it more rewarding. Employees can become enthusiastic about what the company is aiming for. There is an enthusiastic purpose. As we expand our businesses globally, I think that if we can share this kind of corporate value with everyone, Tokio Marine will be a unique company.
- Matsuyama
- In discussing strategies for the new MTP, we backcasted from our medium- to long-term vision. We also discussed our strategies based on environmental changes. Looking at Tokio Marine over the past year as an Outside Director, I was convinced that Tokio Marine’s solutions business initiatives and TMNF’s reforms are all important initiatives for the future of Tokio Marine, and that we must steadily implement these initiatives, and that if we do so, our corporate value will surely increase. In terms of the governance issues I talked about at the beginning, it’s a huge opportunity in a way to review the current situation and correct the distortions in the company and the industry. Rather than just improving our own company, we should look at the problems of the entire non-life insurance industry. As a leading company in the industry, we should undertake thorough reforms and Holdings will support the reform of the operating companies and fulfill its responsibility as a supervisor.
- Shimizu
- We, the Outside Directors and the Outside Audit & Supervisory Board Members, as members of this Group, will spare no effort in these initiatives.