Governance

Corporate Governance

Basic approach to corporate governance

We recognize corporate governance as a means for maximizing corporate value. As such, we reorganize our organizational structure when appropriate to accommodate the expansion of our business ventures, to manage profits and losses of each of our businesses, and to further clarify authority and responsibilities. We also focus on further enhancing the capabilities of the Board of Directors (which serves as the Company's decision-making body), of Audit & Supervisory Board members and the Audit & Supervisory Board to monitor directors' performance of their duties, as well as on improving the ability of our systems for internal control to prevent improprieties in the execution of business activities.

In addition, to continually increase management transparency and fairness, we regularly disclose statutory disclosure documents and utilize our website and other means to proactively conduct IR activities.

System organization Company with corporate auditors
Number of directors 9 directors, 3 of whom are outside directors
-Outside director ratio: 33% (3 of 9)

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Board of Directors

The Board of Directors has nine members, consisting of six internal directors (currently without female directors) and three outside directors (including one female director). In principle, Board of Directors' meetings are held once monthly, constituting a system that allows speedy and efficient decision-making. To clarify the managerial responsibilities of directors and create a management system that is able to respond swiftly to changes in the management environment, the term of service for directors is prescribed as one year.

Management Council

The Management Council conducts key discussions and decision-making related to business operations. In principle, Management Council meetings are held once a week but may be held whenever necessary. Furthermore, necessary information from Management Council meetings is shared with outside officers.

Audit & Supervisory Board

We are a company with Audit & Supervisory Board members as stipulated in Japan's Companies Act. Our Audit & Supervisory Board has four outside members (including two female Audit & Supervisory Board members), two of whom are full-time (including one female Audit & Supervisory Board member), and in principle meets once monthly. Audits are conducted based on a yearly plan. The results of audits are reported and deliberated in meetings of the Audit & Supervisory Board, which offers appropriate advice to the directors. Overall audits of the Company are conducted in coordination with internal auditors, the Internal Auditing Division, and accounting auditors.

Nomination and Compensation Committee

We have established a Nomination and Compensation Committee consisting of all outside directors, the president, and the director overseeing HR operations. The objective of the committee is to strengthen transparency and objectivity by obtaining the opinions and advice of outside directors before the Board of Directors deliberates matters related to individual nomination proposals and compensation of directors (excluding outside directors).

Nomination and Compensation Committee composition (two internal directors, three outside directors)
Committee chair: Koki Kimura
Member: Hiroyuki Osawa
Member: Satoshi Shima (outside director)
Member: Naoko Shimura (outside director)
Member: Masuo Yoshimatsu (outside director)

Nomination and Compensation Committee responsibilities:
(1) Nominations for and appointments of director candidates along with HR policy proposals
(2) Policy proposals for director compensation systems
(3) Compensation condition proposals for directors (including calculation method)
(4) Compensation condition proposals for individual directors (including calculation method)
(5) Other matters requested by the President

The Nomination and Compensation Committee has met twice so far this fiscal year to make decisions regarding director nominations, compensation amount for individual directors, director compensation structure, and conditions for director compensation. The Company recognizes that there is room for improvement in how compensation was determined by the Nomination and Compensation Committee this fiscal year and plans to improve on it.

Evaluating the effectiveness of the Board of Directors

The Company conducts yearly assessment and analysis of the effectiveness of its Board of Directors with the aim of enhancing its capabilities and maximizing corporate value.

FY2021 Board of Directors effectiveness evaluation:
Between December 2020 and January 2021, a survey was conducted among all directors and Audit & Supervisory Board members. We ensured anonymity by having an external organization record the results. The results of the survey were analyzed, discussed, and evaluated at the provisional Board of Directors' meeting held in March 2021.

Survey focus points:
- Composition of the Board of Directors
- Management of the Board of Directors
- Quality of the Board of Directors' discussions
- How to monitor the Board of Directors
- Director and auditor support systems
- Director and auditor training
- Discussions with shareholders (investors)

Analysis/Evaluation of Board of Directors effectiveness survey:
The responses to the questionnaire were generally positive and respondents believe that the Board of Directors' effectiveness as a whole is adequately ensured. Highly evaluated points have been listed below:
- Sufficient time is allotted for deliberations
- Discussions are held openly and constructively without rigid formalities
- (Outside directors) feel that their opinions are properly reflected in decisions

Along with the above points, the effectiveness of the Board of Directors has been rated more favorably overall when compared to the previous fiscal year; its effectiveness is confirmed to be continuously improving through proactive measures.

Current fiscal year initiatives for improving the effectiveness of the Board of Directors:
Based on evaluations of the Board of Directors from the previous fiscal year, the Board of Directors and Secretariat of the Board of Directors have worked on the following points.

- Management improvements for the Board of Directors
Documents for Board of Directors' meetings are distributed earlier to allow directors ample time to examine proposals. By making deliberations at Management Council meetings, points of discussion are clarified and information necessary for decisions can be prepared before Board of Directors' meetings, resulting in meaningful discussions. In addition, resolutions made by the Management Council, the content of their discussions, and the status of executions are reported by director members of the Management Council when relevant to best ensure informed decision-making at Board of Directors' meetings.

- Feedback collection through discussions with shareholders (investors)
The director in charge has reported on the state of discussions with shareholders (investors) when appropriate, sharing shareholder (investor) feedback at Board of Directors' meetings.

Future initiatives:
We plan to continue improving the management of the Board of Directors and recognize the importance of strengthening discussions regarding governance and medium- and long-term strategies. Using the results of this evaluation, we will continue striving to improve the effectiveness of the Board of Directors as a whole.

Internal control

Our internal structure is developed based on the basic policies of our internal control system.
The Group has established a code of ethics that emphasizes the importance of compliance and ensures that all officers and employees are fully aware of what that entails through an education and information system. In addition, the Group has established an internal reporting system as a check against activities that are illegal or go against our articles of incorporation and to prevent scandals, and has prepared a system to exclude anti-social forces.
For our information management system, we have established rules for information management, clarified denotation for important documents and how they should be stored, and created a system for safely saving and managing personal information, important business secrets, and information regarding director work activities.

Timely disclosure system

1. Our stance and policy on timely disclosure
We believe that timely and appropriate disclosure of information to shareholders, investors, local communities, and other stakeholders promotes greater understanding of the Company, allowing proper evaluation of the Company. We are always working to improve our internal systems to ensure that we can disclose corporate information in a timely, accurate, and fair manner from our stakeholders' perspective.
Also, we ensure that our officers and employees are educated on subjects such as insider trading and information subject to timely disclosure through internal training programs both when they join the Company and annually.

2. Internal system for the timely disclosure of corporate information
To ensure thorough internal management of corporate information and appropriate and timely disclosures, several specialized departments have been set up under the direction and supervision of the management and company-wide initiatives have been launched. In order to improve the accuracy and content of disclosure materials, we have established a system in which multiple departments mutually check each other's work while confirming the quality of our internal control system through regular internal audits. We also have accounting auditors regularly conduct quality and legality checks of accounting information. In addition, the Company's management and specialized departments have established a system in which they collect and report timely and appropriate information that follows our disclosure guidelines from our subsidiaries, which is then disclosed if deemed necessary.

3. Procedure for timely disclosure
(1) Of information regarding important decisions and occurrences
The director in charge of IR business operations works alongside the IR and Legal Affairs departments to analyze information reported by each of the Company's departments and the Group's companies. They then follow the guidelines for timely disclosure, determining whether information needs to be disclosed, what exactly to disclose, the method of disclosure, then disclosing the information promptly.

As a result, any important matters determined subject to timely disclosure are reported to the Management Council or President, then is presented to the Board of Directors (directly depending on the level of importance), and is promptly disclosed if approved by the Board of Directors.

(2) Of information regarding financial results
The accounting department consults with accounting auditors and outside experts as necessary to make a report regarding carefully examined financial results materials (consolidated financial results and quarterly financial results) for the director in charge of IR business operations and, upon approval of the Board of Directors, promptly disclose the information.

4. Method of timely disclosure
The Company discloses corporate information without delay via TDnet and EDINET and also distributes disclosure materials to the press. In addition, the Company posts publicly disclosed corporate information on its website and otherwise strives to provide timely, accurate and fair updates to all shareholders and investors.