Resona Group Integrated Report 2025

The Resona Group is striving to embody its Purpose, “Beyond Finance, for a Brighter Future.” A deeper look into this Purpose in terms of services that the Group intends to provide in areas outside of finance naturally gives rise to great expectations for the ways in which outside directors will contribute to its management team by drawing on their diverse expertise outside the finance field. Could you share your views and thoughts with regard to how you, as outside directors, will contribute to the realization of this Purpose? What are your priorities in these tasks?

Historically, Japanese business corporations have espoused a management approach that is conscious of stakeholder interests. We can see that this approach has taken deep root in corporate culture, with a number of major enterprises remaining loyal to such traditional philosophies as “Sampo-yoshi” (good for the seller, good for the buyer and good for society). And, in recent years, the importance of purpose-driven management and stakeholder engagement has become a subject of vigorous public discussion. Elsewhere, many companies are already embracing a purpose in the form of a corporate credo or management philosophy. In any case, there’s no point in adopting a “purpose” merely because it is the trendy thing to do. Rather, I think one of the most important missions for our Board of Directors is to fully comprehend the spirit of the Purpose and determine the specific path the Group should take to realize it.

During the Board of Directors meetings and outside directors’ meetings where we discussed the Purpose, I repeatedly pointed out that we had to clarify what exactly was meant by the phrases “Beyond Finance” and a “Brighter Future.” Through these diverse discussions, I came to understand that the concept of “Beyond Finance” is a three-layered structure. The first layer refers to banking and other existing core businesses. The second layer refers to non-banking financial businesses and other peripheral operations. The third layer refers to operations totally outside the financial field.

Previous to these discussions, I assumed that “Beyond Finance” simply meant endeavoring to develop operations in the third layer as part of Resona Holdings’ ongoing policy of breaking away from the bank model. However, things started to click after I realized that the executives were intent on working on all three layers, giving me a much more comprehensive understanding or what is really meant by “Beyond Finance.” I now understand this component of the Purpose refers to the Group’s ideal business portfolio. With regard to this portfolio, however, I believe that the Board of Directors has yet to refine the details. Accordingly, we must continue discussing this subject. Also, a “Brighter Future” means the Group’s ideal for a future society it aspires to help create through services “Beyond Finance.” In FY2026, the Group expects to introduce a new MMP to take over from the current one. In line with this schedule, we are engaged in the review of our definitions of materiality. I now feel that our discussions on these matters are essential in terms of clarifying what must be done to realize a “Brighter Future.”

I believe that our Board of Directors should operate on an annual schedule designed to facilitate discussions employing a long-term perspective aimed at realizing the Purpose. Resona Holdings updates its MMP once every three years, while the Board of Directors engages in in-depth discussions dealing with such subjects as the formulation of the Purpose and specific strategies to achieve it.

I also deem it important to monitor the implementation status of each MMP after its launch in the form of periodic reports on quantitative results as well as other outcomes relative to medium- to long-term targets. Accordingly, I intend to engage in deliberations on specific strategies and other issues deemed particularly important by outside directors and, to this end, remain attentive to what the Group has accomplished thus far under the Purpose and the Long-Term Vision. This is essential to rigorously monitoring the likelihood of its success in these endeavors.

Although the Board of Directors’ discussions are expected to focus on the formulation of the next MMP over the course of FY2025, the present economic environment is substantially different from what we saw three years ago, when the current MMP was formulated. It is thus essential that we exercise caution. Japan’s financial institutions have long been operating in a deflationary environment. Therefore, the focus of previous discussions was on increasing top-line income in a world without interest rates. And, the current MMP is based on this scenario. However, thanks to the return to a world with interest rates and resulting changes in the business environment, the Group was able to achieve its initial MMP target a year ahead of schedule. However, it is important to assess whether or not issues identified three years earlier have been genuinely resolved without relying on changes in assumptions.

I believe that we need to work even harder to improve our monitoring of the status of medium- to long-term strategies. Although we are usually furnished with monthly reports on financial results and other materials featuring the status of various projects discussed at regular monthly Board of Directors meetings, I sometimes find these materials lacking in details regarding progress made in the broader sense of the Group developing services “Beyond Finance.” In the course of formulating the next MMP, we need to develop an overarching vision that can be shared among all members of the Board with regard to the nature of the portfolio the Group would like to develop. Once the MMP is introduced, we also need to rigorously monitor its outcomes. I think that it is important for outside directors to take the initiative in these discussions.

Looking at the environment surrounding financial institutions, despite the return of the world with interest rates, these institutions are being called upon to reduce their fees for various procedures to nearly zero. At the same time, the general public has become accustomed to seeing the introduction of one hassle-free service after another, raising expectations for even greater convenience. Against this backdrop, the Resona Group has identified “Beyond Finance” as the way to answer the question of how to increase its economic value while achieving stable profit growth.

Today, the Group could be at risk of losing its growth potential and ability to fully reward its stakeholders unless it succeeds in expanding its businesses outside its existing scope of operations and begins providing an even broader range of services “Beyond Finance.” Failing to do so may cause the Group to become obsolete. That being said, identifying the course of action that will enable the Group to go “Beyond Finance” is a monumentally hard task and I can understand how the members of the Board are struggling to determine the best path.

The formulation of the Purpose enabled the Group to clarify the direction it should take going forward. The Board is now expected to direct the so-called selection and concentration for the Group’s new market entries toward specific business fields. Board of Directors meetings are attended by both executives who have long been focused on financial fields as well as outside directors with non-financial backgrounds. The exchange of opinions between these two types of Board members will certainly facilitate better conclusions with regard to the selection of business fields. Currently, all Board members are striving to develop a consensus regarding the path leading to the Group’s goals and the volume of funds necessary to accomplish these goals. We have also planned agenda items to be regularly deliberated upon by the Board throughout FY2025 to ensure that the quality of discussion is constantly improved.

As part of capital management, the Group’s Board of Directors is now expected to address the setting of a target ROE as a KPI. However, I believe that, prior to setting such a target, the Board should discuss the volume of capital necessary to achieve it. Generally speaking, it is preferred to increase the volume of shareholder returns when there is a capital surplus. If the Group deems it necessary to invest a certain amount, it also needs to provide stakeholders with a plausible justification for setting aside the requisite volume of capital. On the other hand, shareholders, as well as employees, can only enjoy greater returns if the Group successfully develops a structure for securing profit and delivering commensurate distributions through the allocation of sufficient capital and human resources. That being said, it may not be easy to readily determine in the present moment the volume of capital and types of human resources that will be required in five to ten years in order to enable the Resona Group to go “Beyond Finance” and achieve its Purpose. In this regard, could you describe your areas of focus?

The Resona Group’s history is pretty unique as its utmost priority in the post-“Resona Shock” era was firmly on the early repayment of public funds. Only recently has the Group succeeded in securing a volume of equity capital sufficient to cover other activities. Thus, until now the Group has not been able to fully allocate funds to various other areas, such as shareholder returns. Other areas of shortfall include investment in employees and other intangible assets. For many years, the Group has had to take a restrictive approach to investment in human resources and IT infrastructure. It’s now time to increase allocations to these areas. The Board’s most imminent issues going forward are, therefore, delivering shareholder returns and investing in intangible assets as well as determining its priorities in these two endeavors. Furthermore, as the primary methods of securing shareholder returns are cash dividends and share buybacks, we intend to discuss these methods more in depth at Board of Directors meetings to determine the optimal balance between the two. In connection with share buybacks, as the number of shares outstanding has grown extremely large in the course of repaying public funds, we now need to determine the optimal number. With regard to dividends, in order to win over individual shareholders, it is important to carefully plan the volume of dividends to be paid, taking into consideration such factors as the dividend payouts being offered by competitors.

At Board of Directors meetings, our focus should be on not only discussions of individual agenda items related to shareholder returns, such as the volume of dividends and share buybacks, but also overarching discussions aimed at determining the nature of the business portfolio the Group should develop in order to go “Beyond Finance,” as suggested by Mr. Yamauchi and Ms. Iwata. These subjects naturally require deliberation on the allocation of management resources as well as capital management. In this sense, I intend to vigorously play my part in facilitating discussions leveraging a broader perspective in the course of formulating the next MMP.

There are concerns about the negative effect of formulating KPIs, such as an ROE target, as these could prompt employees to develop a superficial focus on achieving numerical results. I believe that roles of Board members, especially outside directors, include exercising check-and-balance functions to avoid such situations.

As far as Resona is concerned, KPIs are set at appropriate levels and robustly managed by the Board of Directors. On the other hand, executives seem to feel pressured by their responsibility to pursue a number of KPIs relative to each issue. Unless these numerous KPIs are streamlined, employees may become overly preoccupied with them. This may, in turn, divert their focus from accomplishing truly essential missions.

When an organization is preoccupied with how to achieve KPIs, its front-line employees tend to focus only on areas related to said KPIs. The Group needs to encourage employees to autonomously develop novel ideas and, in order to better motivate them to do so, I deem it necessary to develop an environment that empowers them to freely exercise their unique strengths, instead of just setting KPIs for a number of detailed tasks.

It is important to ensure that employees understand the true significance of achieving KPIs and what changes the Group aims to effect as a result. Isn’t it?

As part of the officer remuneration system, some people are strongly in favor of linking compensation with share prices as this approach is considered conducive to meeting shareholder needs. On the other hand, providing excessively high compensation to officers might cause them to be more protective, serving as an incentive for adopting a conservative management approach so that they may better cling onto their positions. In this regard, could you describe the status of discussions by the Board of Directors regarding the provision of sound incentives in the form of officer compensation?

We consider this subject a key theme that must be addressed by our Compensation Committee. Having served as a compensation committee chairperson myself at another company, I am keenly aware of the issues arising from seniority-based, lifelong employment systems that have long been in place at many Japanese corporations. This tradition naturally results in an officer compensation system that grants higher compensation to those individuals holding higher titles, and these titles, in reality, do not necessarily correspond to the content of said individuals’ duties and responsibilities. Also, I found many corporations to still maintain vague standards for performance evaluations. How to properly link the amount of compensation with individual recipients’ level of responsibility and the scope of their operations is an important topic deserving intensive discussion. Personally, I believe that the proportion of share-based compensation should be increased in light of recent trends in the business sector. In conclusion, I deem it important to better motivate officers by enhancing the overall volume of compensation through the use of share-based compensation even as we strive to align their interests with shareholder interests.

Please share your thoughts on the operation of the Board of Directors.

For the Board of Directors to enhance the effectiveness of its operations, the proactive involvement of internal directors in discussion is just as important as the presence of outside directors. Looking at how monthly meetings are structured, each session typically involves explanations given by executive officers in response to questions or suggestions from outside directors. In any case, Board of Directors meetings are intended to be a place for all Board members, regardless whether they are internal or outside directors, to play their part in vigorous discussions. Therefore, the proactive involvement of internal directors is no less important in terms of enhancing the effectiveness of the Board’s operations. In addition, outside directors sometimes raise questions or voice opinions due to their lack of understanding of the financial business. Internal directors are expected to correct the direction of the Board’s discussions whenever such questions or opinions cause it to lose focus on the topics at hand. This approach ensures that the Board addresses agenda items in more depth.

Through their attendance at Board of Directors meetings and the exchange of opinions with executives, outside directors with non-financial backgrounds are similarly expected to help correct the direction the Board’s discussions take. Although it may be time consuming, I believe that by engaging in in-depth deliberations, the Board of Directors can improve its effectiveness.

I think it is good for the Group to provide shareholders with explanations of the factors that led to the selection of the current lineup of outside directors. I therefore urge the Group to proactively publicize relevant information. For example, providing more detailed disclosure of selection criteria for director candidates through the notice of convocation of General Meeting of Shareholders would be helpful for shareholders trying to decide on the level of confidence they have in each candidate when voting.

Mr. Kono’s suggestion reminded me of the importance of providing in-depth explanations on individual outside director candidates regarding what they can do for the Resona Group, instead of simply disclosing their fulfillment of certain criteria as a mere formality. Looking ahead, accordingly, we will discuss our mode of information disclosure.

Some external companies disclose the details of each candidate’s accomplishments in terms of director duties and their visions regarding what responsibilities they intend to fulfill on behalf of shareholders.

Exactly. These descriptions are typically outlines of directors’ personal achievements along with self-evaluations. Resona has yet to publicly issue such details, and I would like to urge the Group to address shortfalls in this area and enhance the content of relevant information disclosure. In this regard, I expect the Group to begin by implementing a personal evaluation system for individual directors and then document the rationales for the selection of director candidates based on results of this evaluation.

As mentioned by Mr. Ike, a growing number of businesses began to disclose detailed backgrounds and the achievements of director candidates. I consider this approach to be quite beneficial to investors like us, especially when we engage with asset owners who entrust their assets with us, because such information helps them understand why we may vote for or against the election of particular candidates.

While a corporate purpose is key to successful strategic planning, its functions are instrumental to the prevention of misconduct. Mr. Yamauchi, I would like to have your insight as the chairperson of the Audit Committee regarding causative factors of corporate misconduct. Some people can become obsessed with serving their self-interests or might focus solely on securing profit for business units they belong to. As a result, such individuals might consider the use of illicit business practices permissible. In cases like this, individuals involved in the misconduct rarely feel a sense of guilt, making it hard to eradicate the recurrence of similar incidents. Please share your thoughts on the check-and-balance functions offered by outside directors as part of their expected role in preventing misconduct.

The Audit Committee operates in collaboration with the Internal Audit Division. Although I concurrently serve as an outside director at other companies, I appreciate the robustness of Resona’s in-house structure for monitoring the status of operations and identifying areas in which issues are present. In summary, I consider the Group’s check-and-balance system quite solid and well-functioning. As mentioned by Mr. Kono, misconduct on the part of individual employees obsessed with pursuing their self-interest can be addressed and curtailed by internal control functions. I am more concerned about types of misconduct carried out by an organization as a whole. This is the last thing a company should tolerate and will result in the loss of the trust it has earned from society. Therefore, we need to pay close and constant attention to what is really going on at each workplace and business unit.

The Audit Committee receives monthly reports from various departments’ representatives, while the Internal Audit Division carries out a variety of audit activities to confirm the status of issues and matters of concern. Needless to say, maintaining these mechanisms is important. However, I also deem it important to enable each employee to take pride in their duties, think for themselves about how to best leverage Resona’s unique strength and clearly define their own version of Purpose. These things are of fundamental importance. Accordingly, the Group needs to work even harder to ensure that the Purpose is fully understood by all. I am convinced that the entrenchment of the Purpose will help the Group prevent the occurrence of misconduct.

Please share your thoughts on the Resona Group’s corporate culture.

Generally speaking, I found Resona’s corporate culture to be quite commendable. The most impressive aspect of this corporate culture is the deep-seated entrenchment of the Group’s basic stance—“Customers’ happiness is our pleasure,” which has become an integral part of employee mindset. It is vital to pass down this corporate culture, which underpins Resona’s strength, from generation to generation, irrespective of the changes the future may hold due to such factors as the launch of new business, the diversification of workstyles or growth in the presence of mid-career hires in its workforce. Another noteworthy aspect of its corporate culture is the supportive atmosphere it offers for those who take on new challenges. Having executed a variety of reform initiatives to overcome the “Resona Shock,” the Group is, I believe, now truly confident about its ability to achieve reforms.

For the Group to go “Beyond Finance,” it is extremely important to spread a corporate culture conducive to innovation within its workforce. I have served as an advisor to major IT enterprises and government agencies and, based on my experience gained in the research of growth strategies executed by business corporations at various stages of their development, have provided them with insights into such strategies. In my capacity as outside director, I intend to draw on this experience to help Resona promote an innovation-oriented corporate culture. From this perspective, I highly appreciate the Group’s human resource strategy, under which it annually organizes issues to be addressed and accordingly updates measures to be implemented. For example, the Group has identified “nurturing leader candidates equipped with outstanding management skills” as an issue to be addressed in FY2025. Addressing this issue, the Group is now striving to effect a shift in its human resource management approach, introducing a more flexible personnel system designed to better recognize the value created by individual employees performing their duties and accommodate said employees’ diverse perspectives on work in light of changes in internal and external environments. This shift is, in turn, expected to help create an innovation-oriented corporate culture. As an outside director, I will robustly monitor the progress of this shift and do my best to help facilitate the entrenchment of this human resource strategy.

I believe that the Group should foster a corporate culture in which hard-working employees are fully recognized and rewarded. It is important to promote a culture of this kind as it leads to a virtuous cycle that better motivates employees. Having entered into a new phase of capital utilization, the Group is being called upon to support employees’ pursuit of happiness in the course of its efforts to realize the Purpose, because doing so is as important as securing the happiness of shareholders. In this regard, I have great expectations for what Resona can do going forward. Thank all of you for having me here today.