■ Masako Orii  Independent Director
Served as senior managing director and member of the board of Suntory Wellness Limited, and executive director of Suntory Foundation for the Arts. Became an independent director of Obayashi Corporation in 2020.

■ Yukiko Kuroda  Independent Director

Founder of People Focus Consulting Co., Ltd. Became an independent director of Obayashi Corporation in 2022.

■ Yoshihiro Ikegawa  Independent Director

Served as representative corporate executive officer at Mitsubishi Chemical Holdings Corporation. Became an independent director of Obayashi Corporation in 2024.

Obayashi　The domestic construction business is delivering solid performance at this present time. However, history tells us that the construction industry is susceptible to economic fluctuations. In the past, any cooling in building construction demand among private corporations could be supplemented by civil-engineering-focused public investment. That complementary relationship helped support overall industry demand. Heeding the lessons from this historical background, as well as experiences such as the bursting of Japan’s economic bubble in the early 1990s and the crisis following the Lehman Brothers collapse in 2008, the Obayashi Group has built a robust revenue base and organizational structure that is less susceptible to changing external environments. The profitability of the Obayashi Group’s domestic construction business has improved considerably, and I would like to ask our independent directors to evaluate its current performance.

Kuroda　I think the emergence of more equitable and healthy relationships between clients and contractors in recent years is an extremely positive trend. Given the changing environment, we take a positive view of the current strong performance, but this might not always be the case. Instead of resting on its laurels, Obayashi needs to use this successful period to prepare for the future and promote active investment. All major construction companies are developing unique growth strategies, and we are now at a crucial stage where the quality of those strategies will be put to the test.

Shime　As Ms. Kuroda said, construction demand is steady, so this is precisely the time not only to expand other businesses outside core domestic construction but also to invest in future growth and nurture new businesses. Obayashi needs to strengthen both its technological and information-related capabilities to clearly differentiate its domestic construction business and achieve further growth. In particular, the marketing division’s ability to acquire high-quality information ahead of its competitors will be a key factor in ensuring this growth.

Obayashi　The recent surge in materials prices and costs including those for labor has resulted in higher construction costs, impacting not only clients’ capital expenditure plans but also their growth strategies. It is easy to turn down a project simply because it is unprofitable, but I do not believe we should leave it at that. It is important to remain in close, regular communication with our clients and swiftly pick up on any information related to their plans. I believe it is our job to create robust supply chains by cooperating with suppliers and subcontractors, using our technological and proposal capabilities to devise optimal solutions within clients’ budgets. As Mr. Shime pointed out, top-notch communication skills are fundamental to enhancing our information-gathering capabilities and differentiating ourselves from other companies. I also think the technology development division should directly witness and hear about the challenges that our frontline operations, marketing division, and clients are facing, and channel any knowledge gained in solving those challenges into developing even more refined techniques and technologies. Now I would like to ask what added value and competitive advantages we should pursue going forward. 

Orii　It goes without saying that the current improvement in domestic construction business profitability stems from profit-focused order selection and relentless efforts to improve earnings in individual projects. However, the supply/demand balance in the construction market also has a significant impact. So, Obayashi should focus on establishing robust competitive advantages that are impervious to industry trends. The top priority is to secure and expand production capabilities through innovation. I have witnessed the diverse technologies being used at construction sites firsthand during site visits and on other occasions, but Obayashi is expected to increase its production capabilities in terms of both quality and quantity by swiftly implementing such technologies as remote control and the digitalization of skilled worker techniques. It is vital that the Company accurately and swiftly addresses emerging market needs for data centers and defense-related facilities. I also have high hopes that the Obayashi Group will build a sustainable competitive edge by demonstrating value that only it can offer in carbon neutrality and well-being and turning efforts to solve social challenges into business opportunities, as stated in Medium-Term Business Plan 2022.

Ikegawa　Thorough and close communication with clients is vital for maintaining appropriate profit levels in the face of rising construction and labor costs. That said, using such means as M&A to drive growth is another way of expanding construction business capacity. It is therefore vital to rigorously evaluate any M&A candidates in accordance with the overall business strategy. On a separate note, the spread of environmentally friendly buildings such as ZEB has brought them to the level of potential profitability. I believe these initiatives should be accelerated through the use of AI and other digital technologies.

Kato　I consider the Obayashi Group human resource capabilities to be its greatest strength. Regarding the innovation mentioned by Ms. Orii and the AI and digital technologies highlighted by Mr. Ikegawa, I believe that by accurately capturing the relevant trends and actively adopting these technologies to promote the mechanization of routine tasks and reduce related labor, it is possible to further enhance the Group’s human resource capabilities. Using robots to perform hazardous tasks on construction sites would also help address the priority management commitment to safety and quality. Promoting cooperation with companies worldwide that are knowledgeable in AI would help accelerate more sophisticated AI applications and strengthen the Obayashi Group competitiveness.

Kuroda　I recognize that Obayashi’s competitive advantage in the domestic construction business is underpinned by its strong marketing and proposal capabilities. Proposal capabilities are particularly hard to observe from outside the Company, but Obayashi has worked hard to reinforce this strength. Boosting this capability was a challenge in the past, but ongoing investment in education and training has helped to steadily raise the bar. In other words, I believe that Obayashi is already writing a clear value creation story in which proactive human capital investment helps nurture strong proposal capabilities, which translate into competitive strength and ultimately lead to improved corporate performance. The challenge going forward will be to recognize and articulate the Group’s particular strengths more clearly. Then, Obayashi will need to establish and entrench frameworks for continuously refining those strengths. It is also important to convey those strengths logically and clearly to investors. I want to help enhance market understanding and evaluation of the Obayashi Group’s essential strengths by conveying pertinent information, as we are doing in this discussion.

Orii　When I talk with employees, I sometimes feel that the Group has not been able to fully communicate its excellent technological prowess and advanced expertise to the outside world. The capacity to make proposals is not just about giving presentations. I believe it is essential to accurately identify market needs and societal challenges, leverage our technological capabilities to address them, and clearly communicate the process through which we create new value in a compelling manner.

Obayashi　I would now like to ask for your views on the expansion of businesses other than domestic construction. Our goal is to build a robust Group business framework centered on the domestic construction business and in which other businesses also ultimately generate performance that is equal to or greater than that of the domestic construction business. What are your thoughts on this organizational aim?

Kuroda　Part of the Obayashi Group’s key growth strategy has involved seizing growth opportunities in global markets by fully leveraging the solid regional business foundations built in North America, Asia, and Oceania. The M&A deals executed to date have not only expanded business scale, but have also strengthened the Group’s business foundations and profitability in each region. I think Obayashi’s success in tracing a steady future growth trajectory is to be highly commended.

Shime　I have high expectations for the Group to pursue business domain and geographical expansion in North America through strategic M&A and for those efforts to generate solid results. I also feel the time has come to rigorously assess whether the relatively new business areas being developed, such as green energy, can grow into new core businesses supporting overall corporate growth over the next five to ten years. It is vital to avoid expanding the Group’s business domain and regions indiscriminately, but instead to accurately identify promising businesses and geographical areas and channel investment accordingly.

Orii　We have actively discussed the green energy business and the initiatives in North America stemming from the grand design* at Board meetings and Directors’ Roundtable Meetings and seen these efforts start to yield steady results. Now, Obayashi needs to use the business developed so far by each segment as a base from which to visualize its optimal business portfolio and plot a clear path toward realizing that
vision from a Group-wide, holistic perspective, then draft a business blueprint.

* A description of the ideal North American business in 2050, complete with roadmap and concrete growth strategies to reach that ideal future, formulated by the North American Regional Headquarters

Obayashi　We are developing an increasingly globalized business as we expand international investment and increase the number of Group companies. As such, the strengthening of governance, human resources, and organizational structures is becoming an increasingly important management issue. How should the Obayashi Group address these challenges?

Kuroda　I have great respect for the very effective process employed in M&A conducted to date involving overseas construction companies. The Group identified potential areas for fully leveraging its expertise and made investment decisions while deepening mutual understanding with target companies. Having said that, I sometimes feel that current supervision of overseas construction companies does not extend beyond individual project management. The Group needs to strengthen supervisory systems for North America and other overseas business so the Head Office in Japan can properly monitor and oversee local Group company CEOs and other officers with respect to their management capabilities and succession plans.

Kato　Increasing the number of Group companies also comes with a certain amount of risk. It is important to ensure that future M&A target companies already operate at a certain business scale and demonstrate autonomous governance. It might also be possible to integrate multiple Group companies over the medium to long term. In terms of organizational management, it is a good idea to give local personnel a leading role in the management of overseas operations, supervised by the Head Office. It is important to set up a system for training talent to supervise subsidiary company management. One example would be to dispatch young personnel to assist overseas Group company CEOs and CFOs and require them to submit weekly reports to the Head Office. This will help achieve more effective and precise Head Office supervision and nurture global talent at the same time and at an advanced level.

Ikegawa　Mr. Kato has a point, but remuneration for top overseas personnel has risen considerably due to the weaker yen, so one option might be to dispatch employees from Japan to manage local companies for long periods. In terms of organizational structure, I believe the business has reached a stage where the Head Office management team should not seek to directly manage everything. Instead, it should establish regional headquarters and transition to a decentralized framework for more effective governance.

Shime　We had an effective system in my former company for strengthening the governance of overseas group companies that involved detailed, regular, and thorough reporting. Obayashi must implement effective governance based on strict Head Office checks and other means when conducting important business such as signing major contracts, rather than leave everything up to the local Group company.

Orii　As the Obayashi Group grows in scale, maintaining strong cohesion across the Group is becoming increasingly important alongside the centrifugal forces that naturally accompany growth. The Obayashi Philosophy and the spirit of the Obayashi Three Pledges to quality, value, and efficiency, which have guided Obayashi Corporation since its founding, are cornerstones for nurturing global affinity and respect. I hope Obayashi will clearly state its policy of instilling that philosophy and spirit and ensure that they are shared more broadly and put into action across its operations in Japan and overseas. Obayashi also needs to keep on communicating its values, which prioritize safety and quality. In this regard, honest craftsmanship, as stipulated in the Obayashi Philosophy, is an inherent commitment that is intrinsically linked to safety and quality assurance, and it should be further entrenched throughout the entire Group. I also hope that the active participation of diverse personnel including women and senior employees will enrich Obayashi’s organizational knowledge with various insights and encourage innovation. I will be closely following the Group’s efforts to build a more robust talent pipeline for nurturing female leaders.

Shime　Building on Ms. Orii’s point about diverse talent utilization, there is no single right answer when it comes to personnel systems, and it is important to optimize Obayashi’s system in light of changing environments and circumstances. As Konosuke Matsushita, the founder of Panasonic, said “Business is people,” talent development is fundamental to all business operations. Obayashi must consistently pursue frameworks that enhance employees’ sense of belonging and motivation, and appropriately revise those systems when situations and circumstances change.

Kuroda　In relation to governance, I would like to add a point on the revision of the directors’ and executive officers’ remuneration system. As I have often said in the past, the long timespan between order receipt and revenue recognition in the construction industry results in relatively low correlation between management efforts in individual fiscal years and short-term performance. Based on that fact, I think the recent system changes are extremely reasonable and highly commendable. The new system increases the proportion of performance-linked remuneration by placing greater emphasis on medium- to long-term incentives (LTI), thereby encouraging the development and consistent execution of growth strategies. 

Kato　I believe it was appropriate to increase the proportion of performance-linked remuneration. Sufficient consideration must be given to the unique nature of the construction industry. The focus should not be solely on quantitative data but also on qualitative evaluations such as degree of contribution to current fiscal year performance. It is vital to balance quantitative and qualitative factors and ensure the remuneration system is implemented with a high degree of transparency and objectivity.

Obayashi　Finally, can you share your thoughts on the kind of value creation story we should present when formulating the next medium-term business plan?

Ikegawa　I have high expectations that the plan will be based on President Sato’s ideas. The next medium-term plan would define management policy and specific measures for the years ahead and serve as an extremely important message that conveys the Obayashi Group’s value creation story to various stakeholders. The plan should weave different strands into a consistent story that encompasses enhancing the Group’s presence in the core domestic construction business, strengthening overseas construction business in North America, Asia, Australia, and other regions, developing concrete green energy projects in Oceania and elsewhere, and enhancing the overseas real estate development business. After raising thorough awareness of the ROIC standard set for each business segment, it is important to comprehensively consider optimizing equity, interest-bearing debt, and cash flow from operating activities when determining cash allocation among growth investments, technology investment, shareholder returns, and other expenditures. Meanwhile, the Group is now at the stage where it needs to consider prevailing constraints in hydrogen and other green energy businesses such as high marine transportation costs for hydrogen and challenges associated with investment in receiving, storage, and distribution infrastructure. These factors should be carefully assessed to ascertain the viability of continued investment and thoroughly explore future business strategies, including a potential redefinition of the business.

Kuroda　I think ROIC criteria for each business should be disclosed to encourage more appropriate capital market evaluations. I also think the Company needs to provide investors with a logical and highly convincing explanation of the significance of the Obayashi Group’s green energy business. It is important to clearly present evaluation criteria such as ROIC for each business and capital costs to both internal and external stakeholders, and to persistently optimize the Group’s business portfolio.

Kato　In addition to promoting overseas expansion of the construction business as a core competence of the Group, the overseas real estate development business should also be actively expanded as a key segment because it is closely linked to the construction business. I am not, however, suggesting holding onto the assets that the Group builds up in the process because it is important to sell those assets at the appropriate time for healthy asset turnover and flexible control of the balance sheet.

Orii　In view of the Group’s global business development, we need to revisit and thoroughly discuss the necessary equity level. It is crucial that the next medium-term business plan presents a comprehensive business blueprint organically linking each business based on the Obayashi Basic Principles and Obayashi Sustainability Vision 2050. I hope to advance discussions on developing a robust story that incorporates human capital and proprietary technologies as growth-drivers. To add another
point, I believe the Group should make effective use of the International Horticultural Expo 2027, viewing it as a great opportunity to widely advertise the value that the Obayashi Group brings to society.

Shime　When formulating the next medium-term business plan, it is important to first thoroughly examine the current plan and deeply analyze the reasons why any specific measures were not achieved before defining the intended future direction. While it is good to actively develop new businesses, Obayashi will be expected to swiftly evaluate and withdraw without hesitation from any projects that do not promise an adequate return. As for the real estate development business, I think it necessary to shed any current framework shackles and engage in deeper multifaceted discussions on the effective utilization of asset holdings.

Obayashi　Thank you for sharing so many valuable opinions in this roundtable discussion. When it comes to decisions on whether or not to continue a business or investment, it is important to make timely and appropriate judgments based on objective evaluations of future potential, and not be swayed by history. I hope our independent directors will continue to voice opinions from diverse perspectives to help the Obayashi Group select and steer optimal solutions and generate sustainable growth.

(This dialogue took place in April 2026.)