The Board of Directors’ Role in Overseeing the Group Management Reform: Outside Director Chairperson of the Board Michitaka Sawada and Outside Director Ryusuke Shigetomi

In 2025, the Panasonic Group embarked on an unprecedented challenge: “to reform while profitable.” To end the prolonged slump in corporate value and regain the trust of capital markets, the Board of Directors is conducting discussions with unprecedented speed and determination.

In this dialogue, Michitaka Sawada, Outside Director and Chairperson of the Board, and Ryusuke Shigetomi, an Outside Director since June 2024, discuss the Group Management Reform process, structural changes within the Board of Directors, and address the fundamental question: “What kind of company will the Panasonic Group become?” From collaboration with employees and the strategy for the Solutions area to critical discussions about capital allocation, they delve into the “determination” and “vision” shaping the future Panasonic Group.

Original article: Edited excerpt from the Panasonic Group Integrated Report 2025. For the full text, please refer to the Panasonic Group Integrated Report 2025.

With the Group recently reporting operating profitability, what kind of discussions have taken place at the meetings of the Board of Directors regarding the implementation of the Group Management Reform? In addition, what is the primary objective of the Group Management Reform?

Sawada: In the fiscal year ended March 31, 2025 (fiscal 2025), both sales and profits increased more than the Company’s forecasts, and operating profit increased in all segments, excluding deconsolidation of Automotive. However, the Board members expressed concern that the Company was struggling to meet shareholder expectations in the absence of prospects for strong growth, even if the Company was profitable. This led to the start of discussions on the Group Management Reform. The discussions mainly centered on addressing the higher fixed-cost structure to improve profit, as well as clarifying which businesses the Company must focus on moving forward, or in other words, accelerating business portfolio management. As to the primary objective of the Group Management Reform, the Company must ensure it achieves what it has announced and live up to the expectations of its shareholders. In the case of this reform, it is improving fixed-cost structure and accelerating business portfolio management. I believe that achieving a profit improvement of 150 billion yen or more in fiscal 2027(April 1, 2026–March 31, 2027), among other targets, can restore the trust of the capital markets.

Shigetomi: I assumed my position of outside director on June 24, 2024, and have been actively involved in various discussions since July 2024. I believed it was important for the Board to discuss the formulation of a future vision for the Panasonic Group with a sense of urgency. Initially, the Board planned to discuss the Group Management Reform over a period of six months to one year. However, there was a consensus among Board members of the importance of reaching a conclusion within a shorter time frame of three months, which led to the announcement of the Group Management Reform on February 4, 2025. Both the executive and supervisory sides of the Company had a strong awareness of the long-term stagnation in corporate value, so no time was wasted in pursuing those discussions. As Mr. Sawada mentioned, I believe that fulfilling the commitments made is of utmost importance. The Board will therefore closely monitor the Company’s progress in this regard. 

During the Board discussions on the Group Management Reform at Board meetings, as an outside director, did you feel any changes in the determination and sense of crisis among the executives, centered around Group CEO Yuki Kusumi?

Shigetomi: The Company’s perspective on the time frame has completely changed from the past. As mentioned earlier, regarding the Group Management Reform, the initial plan was to discuss it over a period of six months to one year; however, a conclusion was reached within three months. Under the leadership of Group CEO Yuki Kusumi, it was all brought together with a sense of urgency, which I feel is a significant point of difference from the past. Discussions with an awareness of the Company’s share price and market capitalization have become a regular occurrence at Board meetings. We are lending our ears to the opinions of capital market participants and engaging with them to enhance our approach to determining what we should do.

Sawada: I have felt that Group CEO Yuki Kusumi has maintained a strong sense of crisis for some time, but I sensed that not all of the executives were on the same page in a sense of crisis, especially at the Operating Company level. In all of this, as earnest and serious discussions progressed at the meetings of the Board, the sense of crisis and determination within the executive team significantly increased. I believe this owed to the considerable burden involved in the fixed-cost structural reform. As it became clear what kind of corporation the Panasonic Group must be in order to survive, there would be inevitably some businesses that we needed to withdraw from, which made it a pressing issue for everyone involved. I think that, under the Company’s previous time frame, the announcement of the Group Management Reform on February 4 would not have been realized. While discussions have progressed rapidly this time, we are still at the starting point, so this is where the real challenge begins.

The appointment of an outside director as the Chairperson of the Board of Directors is a first for the Company. How do you view the significance of this?

Sawada: From the perspective of strengthening governance by way of separating oversight and execution, I believe there to be great significance in having an outside director serve as the Chairperson of the Board of Directors. During my time as president of Kao Corporation, I also had an outside director assume the role of chair of the board starting in 2014. Based on that experience, I think the chair having a deep understanding of the inner workings of the executive side can work to the advantage of the Company, but it can also have negative effects. For example, even if our common sense differs from common sense in society, the Board might proceed with discussions without much concern, and there may be times when valuable opinions are not taken seriously. Also, the tacit understanding among executives may lead to the omission of explanations during Board meetings, which could make it difficult for outside directors to express their opinions. Of course, there will probably be times when the chair is unable to smoothly manage the proceedings of the meeting due to insufficient knowledge of internal matters. However, considering the importance of strengthening governance from an external perspective, I believe there is value in having an outside director serve as Chairperson. In particular, I feel it is meaningful to adopt a new structure that differs from the past, given that the Company is in a significant period of transformation.

Shigetomi: The greatest advantage of having an outside director serve as Chairperson of the Board is the ability to conduct meetings without being constrained by internal circumstances or customs. That said, it is not simply a matter of having an outside director become the Chairperson. The role requires someone qualified, like Mr. Sawada, who has management experience in large corporations and understands how to navigate discussions with the right amount of discretion. That is why I believe the appointment of Mr. Sawada this time is really significant. I also want the Board of Directors Secretariat to engage openly and honestly with Mr. Sawada. Having also worked at a large corporation, I understand very well that people have a tendency to consider how best to present agenda items from the perspective of whether the presented items can be accepted by the chair or the president. Since we have the opportunity to have someone like Mr. Sawada serve as Chairperson, I certainly want the secretariat to engage with him without any hesitation in order to facilitate substantial discussions at Board meetings.

On the topic of large-scale investment projects, such as automotive batteries and Blue Yonder, how do you plan to oversee them at future Board meetings, and if investment returns can no longer be expected, how do you intend to respond as an outside director?

Shigetomi: Considering the Company’s future, automotive batteries and Blue Yonder are extremely important businesses. The management and operating conditions of these businesses need to be thoroughly monitored. On top of that, I believe we can have the Company’s executives present strategic options as required, or we can develop thoroughgoing countermeasures at Board meetings. For example, with regard to Blue Yonder, the absence of successful role models in the software industry may hinder rapid business growth, so it is important that some success stories are quickly created. We also need to consider the possibility that management of the business may not go as planned. The worst thing we can do is to let the situation continue unchecked even though its business is deteriorating. We need to analyze the causes of such deterioration, promptly prepare various options to address them, and set a clear deadline for making decisions by that time. In terms of the deadline, while there is the question of where to set the starting point, I generally believe that it should not extend beyond 24 months. I think deadlines between 12 and 18 months need to be set so that we can check whether pre-established KPIs and milestones have been achieved.

Sawada: It is my understanding that the decision to invest heavily in automotive batteries and Blue Yonder stemmed from the need for the Company to change its management approach and create a new model. Given the significant changes in the automotive battery market, swift and finely honed management decisions on how much to accelerate or brake are needed. At Blue Yonder, management skills for running a solutions-driven software business are required. As a Board, we will monitor whether these businesses are progressing as initially planned, and if course corrections are necessary, we will promptly request the Company’s executives to take action. Furthermore, we will also keep checking whether these large investments are contributing to the transformation of the Company’s management approach.

For many years, the capital markets have continued to ask what will become of the Panasonic Group. As the Chairperson of the Board, how do you plan to respond to this question at Board meetings?

Sawada: Based on the Company’s current situation, my direct answer is that the Panasonic Group will become a company that generates profits and achieves growth in the Solutions area while achieving higher profitability in the Devices and Smart life areas. In my view, what is not visible to the capital markets is how the Company will generate profits and realize growth in the Solutions area. It is imperative that cases of success, even if they are small ones, continue to be accumulated. Moreover, the Company has long faced challenges head-on until now. As a result, margins deteriorated when competition intensified, and the Company was sometimes forced to withdraw from certain businesses. So far it has chosen a strategy of fighting, but I feel that this structure needs to change. In Japanese, the two Kanji characters used to write the word “strategy” mean “shorten the fight,” so in other words, the essence of strategy is to win with as little conflict as possible. To win without fighting, differentiation is required, such as by changing one’s perspective, being proactive, acting swiftly, and adopting significantly advanced technology. To succeed in the Solutions area, these are the kinds of things that may be necessary. If the Company can achieve multiple success stories, it should lead to growth and profit expansion in the Solutions area. As a result, I believe that corporate value will increase, thus meeting the expectations of the capital markets.

Shigetomi: While the Company possesses a host of world-class technologies, there are doubts as to whether these have translated to profit-generating business developments. As Mr. Sawada pointed out, I also question whether it is really best for the Company to operate its businesses in a fiercely contested red ocean market. There are countless businesses in the world with a reasonable market size, despite having a limited number of players. Concentrating resources on such markets and competing there would be a way for the Company to minimize risks while expanding returns. This is exactly what has been discussed at Board meetings regarding business portfolio restructuring and allocation of capital and resources, and it is a fundamental theme that ought to be discussed at Board meetings. In order to maximize profitability in five to ten years, the Company needs to consider which businesses can generate ample cash and which businesses or business fields the Company should allocate the cash and resources to. It is high time for the Company to restructure its businesses without being bound by the shackles of the past or company traditions. If it can accomplish these tasks, I believe the Panasonic Group can once again become a leading company in Japan and a world-class brand.

Are you aware of any other issues or challenges in the Company?

Sawada: The Panasonic Group brings together many talented individuals, but I feel that once discussions reach a certain point, rather than thoroughly debating and challenging each other’s opinions, there is a tendency for discussions to be neatly organized and summarized. More often than not, this kind of summarization ultimately does not lead to growth. While I can understand how employees try to organize and summarize their discussions in a way, I still feel that there is a lack of excitement. Going forward, I believe the Group’s employees need a certain kind of insatiable desire and a stronger commitment to pursuing their dreams.

Shigetomi: I feel that the Board has yet to engage in truly in-depth discussions on capital and resource allocation. For example, regarding capital allocation, it is my understanding that we have not yet discussed how those specific amounts of capital expected to emerge in the next six or 12 months will be allocated. Given that the Group Management Reform has been announced, the Group’s specific businesses will need to be placed on the table at Board meetings so that capital allocation can be discussed in order for the reform to be achieved most efficiently. By having this discussion at Board meetings, I believe that returns on invested capital will become clearer, and the requirements for making the Company stronger will come together. Another issue, in my view, is that the Company has not introduced performance-based stock compensation. I believe that performance-based stock compensation is a global standard, and as a global company, its implementation cannot be avoided.

Sawada: I believe that stock compensation is important even at the general employee level. In the Panasonic Group Employee Shareholding Association, shares are purchased through automatic deductions, so employees are not properly aware of the asset value of the stock. When stock compensation is granted, employees start to pay attention to the share price and asset value, and they begin to consider their own company’s strategy, performance, and how their company is perceived by the capital markets. As a result, I believe that employees will shift from being overwhelmed by immediate tasks to considering what work contributes to corporate value, thereby driving a significant change in their working styles.

Shigetomi: There are two main purposes for performance-based stock compensation. One objective is to provide a strong incentive for a higher share price by increasing profitability over the long term. The other is that, since shares are granted instead of cash, it instills a psychological deterrent against lowering the share price and a sense of responsibility for management. I believe that stock compensation as an incentive is effective not only for the management team and executives, but also for general employees. It is important for an entire company to be in the same boat as its shareholders and investors, operating the business along the same lines.

Sawada: I hope to see Panasonic Holdings completely renew its approach so that it can become a truly Japan’s leading company. As the Chairperson of the Board of Directors, I will ensure that in five or ten years, people will say the Company has changed significantly.