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Interview with an Outside Director

We asked one of our outside directors, Christina Ahmadjian, who specializes in corporate governance, to share with us her impressions about governance at MHI and the issues that we need to address as we work to enhance our corporate value. [ Christina Ahmadjian ] Profile:Professor of Hitotsubashi University Graduate School of Commerce and Management Outside Director

Impression of MHI

To tell the truth, my impression of MHI was that of an “old Japanese company.” But when I met Chairman Omiya (at that time, president), I began to think that maybe I had been mistaken. When I actually joined the Board, my impression of the Company changed when I realized that MHI does operate strategically and from a global perspective. I was particularly surprised when I first heard about MHI’s business integration with the thermal power generation systems of Hitachi, Ltd. That’s not the sort of decision a typical Japanese company makes.

With regard to governance, I think we have made steady progress since I was first appointed two years ago. At first, the numerous people attending Board meetings, the detailed level of execution, and the technical topics were a little overwhelming. Recently, though, the Company has reduced the number of directors and introduced a Chief Officer System, and the talk has turned toward deliberations that befit a Board of Directors, such as global strategy and human resources, risk management, and IT.

As an outside director, I feel that I receive materials and briefings as necessary and support several days prior to Board of Directors’ meetings to fill in gaps in my knowledge. During Board meetings, as well, I sense that the opinions of outside directors and outside statutory auditors are taken into serious consideration, rather than ignored.

In terms of governance—and this may seem to be trivializing recent issues involving outside directors—I think the actual system itself is a problem. In particular, if management does not have much of an interest in corporate value, it really doesn’t matter how many outside directors a company has. I think governance at MHI functions largely due to the acute awareness that President Miyanaga has shown. MHI’s high levels of ROE for a Japanese manufacturer attest to this success.

Issues to Address in Enhancing Corporate Value

The direction we are currently moving is appropriate; above all, we must maintain our course. As we do so, I see several points that we need to focus on if we are to win out amid the global competition.

The first item is to secure global human resources, meaning both Japanese employees who are global-minded and overseas employees. Diversity, along with the inclusion of women, will be a key focus. Unless the Company can succeed in this area, competing with global mega-players is likely to be difficult.

I would also say that progress on accelerating decisionmaking speed is too slow. While MHI is spending time on consensus-building, global competitors will have already made their decisions and will be moving forward.

From a corporate governance standpoint, I would suggest incorporating perspectives gained over a broader experience base. To this end, I recommend increasing the number of outside directors who are non-Japanese managers as well as Japanese managers who have extensive management experience overseas.

Roles I Would Like to Play

Although this is hard for somebody with ties to the Company to say, I believe that the role being asked of me as an outside director is to speak frankly and encourage deliberation on points that concern me. Japanese culture tends to eschew divergent opinion; that is precisely the reason why outside directors need to adopt the vantage point of shareholders, overseas employees, and a host of other stakeholders. The experience that the Company gains in responding to the questions of outside directors serves as a sort of training in external accountability. In many cases, overseas audiences require specific explanations. Success in this area is linked with the globalization of MHI’s corporate culture. Naturally, I will continue to offer advice proactively in line with my university research theme: global human resources.

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