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Special Interview
Outside Director
Kazuhiko Toyama
Outside Director
Makiko Shinoda
In September 2023, Mercari transitioned from a Company with an Audit and Supervisory Board structure to a Company with Three Committees structure to enhance corporate governance. A Company with Three Committees is a corporation that has established a Nominating Committee, an Audit Committee, and a Compensation Committee, and where the majority of the members of all three committees are independent outside directors. This is a governance structure that clearly separates the company’s executive and supervisory functions by having executive officers make decisions regarding business execution and the Board of Directors supervise those decisions as a monitoring board. By adopting this governance structure, Mercari aims to speed up the executive officers’ decision-making process and strengthen the supervisory function of the Board of Directors to better support sound risk-taking. In this dialogue, outside directors Makiko Shinoda (Outside Director since September 2020) and Kazuhiko Toyama (Outside Director since September 2023) discuss the role of the Board of Directors and expectations from stakeholders as Mercari works to achieve the Group mission of “circulate all forms of value to unleash the potential in all people.”
How the Board of Directors has evolved in the transition to the new governance structure
——In September 2023, Mercari transitioned from a Company with an Audit and Supervisory Board to a Company with Three Committees. I’ve heard that the Board of Directors has evolved as a result of this transition. As directors, how would you say the board has changed?
The Board of Directors discussions are more targeted and lively as a result
Makiko: I’ve been a member of the Board of Directors since before the transition, and, honestly, I can feel how much it has changed. Even before the transition, ensuring effective corporate governance and compliance has been one of the focus areas of Mercari’s materiality, and I’ve worked hard to achieve that, but since the transition, I’ve felt much more able to speak my mind. In the past, all Senior Vice Presidents participated in discussions of nearly all Board of Directors agenda items. Now, Shintaro Yamada (Director, Representative Executive Officer and CEO) and Sayaka Eda (Executive Officer, Senior Vice President of Corporate, and Chief Financial Officer) serve as the main participants. By having the other Senior Vice Presidents only participate in discussions of agenda items related to their areas of responsibility, they are able to focus more of their time on execution, and the Board of Directors discussions are more targeted and lively as a result.
I also feel that the precision of discussions has increased with the addition of Kazuhiko Toyama and Takuya Kitagawa to the board as outside directors. I had never served as an outside director anywhere before Mercari. Even with my experience making decisions on the execution side and the management side, decision-making on the supervision side involves a very different amount of information and is an entirely different story. But as an outside director, the only influence you have is through your words. By having experienced members such as Kazuhiko and Takuya join, we’ve been able to demonstrate a more high-level direction, and the execution side and supervision side are able to hold discussions with greater focus to enhance Mercari’s corporate value. I think that the Board of Directors has evolved further as a result.
——Kazuhiko, you were appointed as an outside director in September 2023. What was going through your mind when you accepted this role?
My involvement probably meant that succession of the CEO role was the end goal
Kazuhiko: To be honest, I’ve generally avoided taking on outside director positions. To date, the companies where I've worked as an outside director were traditional Japanese companies, and I was involved in processes such as management reorganizations, organizational reforms, and business turnarounds. But I don’t hesitate to speak my mind, however blunt it may be, which once even resulted in me being forced to step down from my position early. (laughs)
I’ve talked with Shintaro a number of times about business management, and I know that he seriously wants to create a sustainable organizational structure, rather than prioritizing his own involvement as the founder and owner. Mercari is no longer a small startup in its growth phase; it’s a major startup company. I was interested in taking part in the management of a company at that stage. I knew that my involvement probably meant that succession of the CEO role was the end goal, and I thought that I could contribute in an environment with that as the goal, so I decided to accept the role.
——What's it like to be in the room during the Board of Directors discussions?
Makiko: We’re able to openly discuss topics that link directly to our understanding of the business. For example, if Kazuhiko were to say “I get points A and B, but I don’t really understand point C,” the execution side would provide us with more detailed information. Once every three months, we have lunch with the VPs, and even there, if we ask, for instance, what the KPIs are for a given business, they’ll all enthusiastically answer.
Kazuhiko: You can never have too much information when it comes to making decisions, after all. This is probably the Chair of the Nominating Committee in me speaking, but I see them all as future CEO candidates. The execution side is involved in the day-to-day operations of the business, so of course it’s important that they know the details, but if you get too caught up in the details, it’s easy to lose sight of what’s really important: why we’re doing what we’re doing. One essential quality of a CEO is understanding what’s really important. As I talk to each of the VPs, I get the sense that even as they overcome various difficulties on the front lines of the business, they have a high-level understanding of their position and can identify what they should do next.
Entrust, but keep an eye on it: The tense, but good, relationship between supervision and execution
——As outside directors, how do you view Mercari as it is now?
Kazuhiko: At traditional Japanese companies, the priority tends to be on reaching consensus and not making enemies, so sometimes not doing anything is the best course of action. But Mercari isn’t like that at all, which was a big relief for me. (laughs)
Makiko: But that doesn’t mean Mercari is reckless like some startups are known to be. It’s a very earnest company, and they take everything they do seriously.
Kazuhiko: Sometimes a little too seriously. (laughs) It’s important for a startup to have Keynsian “animal spirits” and find the right balance, but I think it’s impressive that the founder and CEO himself has such a strong desire to strengthen governance. The sword of Damocles...may be overstating it a bit, but as you can tell by looking at the state of the world, absolute power never lasts.
(Note: The sword of Damocles refers to a legend from ancient Greece. The legend alludes to the ever-present danger that comes with leadership and power.)
That said, all of Mercari’s employees have a strong desire to make decisions and move things along themselves. Over the past year, I’ve noticed that this energy has tended to diverge in different directions. But if it diverges in too many different directions, then the company will lose its driving force, so it’s important to make use of that strength and ensure it converges in the right direction.
——What is that direction?
What I want to value is passion, or as I said earlier, animal spirits
Kazuhiko: What I want to value is passion, or as I said earlier, animal spirits. But that passion is why this tendency toward divergence is so strong, so in order to monetize it and turn it into profit, management needs the power to unify it from the top down. When an organization is small, it’s relatively easy to achieve the right balance, but as the organization grows, it becomes much harder. But it’s also not ideal for the founder and owner to dominate the business and micromanage everything. I think it would be very elegant if Mercari were to have an organizational structure that systematically tied this strength to each of its businesses and converged it in a way that turned it into sound growth, and I also think that Mercari can make that possible.
Makiko: Mercari has become recognized for producing great talent, as it hires excellent mid-career talent who achieve great things and then move on to their next challenge elsewhere. It's not uncommon for this talent to even return to Mercari later on. On top of this, Mercari also has plenty of new graduates and young employees in the early phase of their careers who grow at Mercari and thrive, either within the organization or elsewhere. I think that if Mercari can leverage that ability to develop young talent as the company’s driving force, it will lead to sustainable growth.
——Looking back on the Board of Directors meetings over the past year, how would you describe things?
I’m sure we will face an even wider range of issues going forward
Makiko: In terms of this past year, we weren’t able to reach the enterprise value expected of us by our stakeholders. The Board of Directors takes this fact seriously, and we share a strong sense of danger with the execution side. But we view times when things aren’t going to plan as tests of the capabilities of this structure, and we aim to solve the issues we face more certainly by making critical decisions quickly. That said, it’s still only been one year since we transitioned to this structure. I’m sure we will face an even wider range of issues going forward, so I’d like to gain more experience holding discussions and making decisions to increase the board’s effectiveness.
Kazuhiko: As we’ve chosen a monitoring model that separates supervision and execution, the Board of Directors has a collective responsibility to enhance the company’s enterprise value as our commitment to our shareholders and other stakeholders—in other words, our fiduciary duties. This concept isn’t very familiar to us in Japan, so in many cases, management tends to leave it to the execution side, or go too far in the other direction and micromanage the execution side. If we want to fulfill our fiduciary duties in the most ideal way, the supervision side and the execution side must build a relationship that’s tense, but in a good way—like Konosuke Matsushita’s famous saying of “entrust, but keep an eye on it.”
As part of that, the ideal state of the Board of Directors is a forum for discussing core matters. When encountering a problem, the execution side inevitably tries to deal with the problem as it stands in front of them. When that happens, the Board of Directors’ role is to be able to look at the fundamental points—catch things that the execution side didn’t even think to question, identify the true root cause, and find the most appropriate solution.
Becoming symbolic of a world that circulates all forms of value
——Mercari publishes an annual Impact Report to demonstrate its intention to have both financial impact and social impact. How do you two view the role that Mercari should play in society?
Makiko: One of Mercari’s material topics is “Creating a World That Circulates All Forms of Value.” Terms like “sustainability” and “climate change” tend to be used to foster a sense of crisis, but overusing them is like having alarms going off 24/7—it’s exhausting. With Mercari, people can have fun and gain positive experiences using its services, and help promote a circular economy as a result. You don’t have to be anyone special or do anything special; anyone using Mercari’s services in their daily life helps circulate all forms of value, which leads to the social impact of unleashing the potential in all people. I believe that .
Mercari has plenty of potential as a leading company in the move to a circular economy
Kazuhiko: Companies that produce CO2 emissions as part of their business structure, like infrastructure-related businesses or manufacturers, inevitably talk about these issues in a tone that emphasizes the sense of crisis, because there’s a trade-off between their business growth and their CO2 emissions. But Mercari was established in order to make effective use of limited resources, and to this day that is the core of Mercari’s business model. For items, there’s the Mercari marketplace; for time, there’s Mercari Hallo. Creating that circulation of resources and effectively using resources is Mercari’s value proposition, so its users are able to not only have an impact on society, but have fun doing so.
The part about having fun is important for the business, too—if being sustainability-conscious feels like a chore, it won’t catch on. People tend to view financial impact and social impact as a trade-off, but becoming successful as a business actually increases the business’s social impact. I have high hopes for Mercari to focus on profitability and become a company that is a role model for achieving both financial impact and social impact.
Makiko: I also hope to see Mercari’s employees becoming role models for enjoying their work. I don’t mean “enjoying” in the sense of playing around and not taking their work seriously—Mercari employees take on all sorts of challenges earnestly and work All for One with their fellow team members to aim for ambitious goals. This is quite difficult; the goals may be uncharted territory or require balancing “offense” and “defense” using brand-new methodology. But those difficult interactions are part of the thrill of work, aren’t they? I’d like to see Mercari’s work style of creating new value and discovering new methodologies through work catch on.
Kazuhiko: There are still far too few role models for young people looking to work in Japan. Right now, the options are basically to work at a traditional Japanese company or a consulting firm, to work at a large company that an influential businessperson built up over a lifetime, or to start your own business. I think that Mercari has the potential to become a new type of model case for young people looking to grow. This is similar to what we were talking about earlier, but I believe that the sustainability of a company or a business is linked to the sustainability of society. If you don’t address human rights issues or environmental issues, you can’t survive as a business. In Japan, the population of workers is exponentially decreasing, and society is facing a severe labor shortage, which means that workers are in a position to choose where they work. The sustainability of a business absolutely depends on whether it continues to be chosen by top talent.
I hope to see Mercari create an ecosystem that circulates high-quality talent—one where talented businesspeople get a positive impression of Mercari and want to work there, enjoy their life at Mercari after they join, and either continue to work at Mercari or move on to other things. I think that having that ecosystem will make society more abundant and enjoyable. I’m 64 myself, but even I think that as long as society has the same old faces at the top, young people will find it hard to have hope for themselves. (laughs) That’s why I hope that Mercari can embody its own Group mission to circulate all forms of value to unleash the potential in all people.
Makiko Shinoda
After graduating from Keio University’s Faculty of Economics, Makiko Shinoda joined the Long-Term Credit Bank of Japan (currently Shinsei Bank). She received an MBA from the Wharton School of the University of Pennsylvania, and an M.A in International Relations from Johns Hopkins University. Following this, she went on to work as a management consultant at McKinsey & Company. She then went on to work for Novartis and Nestlé to create and execute their business plans, build their internal management systems, and lead the PMI. She joined Hobonichi in 2008 and led their IPO as CFO, Director & Manager-Administration. In 2018, she left the company to recharge, and joined YeLL’s Board of Directors in March 2020. Makiko was also the translation supervisor for the book “You’re Not Listening: What You’re Missing and Why It Matters” and has been an Outside Director at Mercari since September 2020.
Kazuhiko Toyama
After graduating from the Faculty of Law at the University of Tokyo, Kazuhiko Toyama received an MBA from Stanford University before going on to pass the bar examination. He worked for Boston Consulting Group, as Representative Director and President of Corporate Directions, Inc., and as Representative Director and COO of Industrial Revitalization Corporation of Japan (IRCJ) before establishing Industrial Growth Platform, Inc. (IGPI) in 2007. There, he was involved in management reform and growth support for many companies and went on to become Chairman of IGPI Group in October 2020. He also serves as Chairman of the Japan Association of Corporate Directors. He has been an Outside Director at Mercari since September 2023.
