Corporate governance

1. Engine design

Since immediately after the Company's listing on the Tokyo Stock Exchange, the Company's Board of Directors has been made up of multiple outside directors (including independent outside directors, the same applies below) in addition to the executive board of directors, and has striven to ensure the fairness and transparency of management. Therefore, as for the organizational design under the Companies Act, we have chosen to continue to be a company with an audit and supervisory board, and will continue to oversee management through both the Board of Directors and the audit and supervisory board, striving to ensure fairness and transparency.

2. Board of Directors

(1) Roles and Responsibilities of the Board of Directors

• Our Board of Directors is responsible for formulating and revising our Company Philosophy and disseminating it to all Group employees both in Japan and overseas. It is also responsible for verifying, as appropriate, whether our Company Philosophy is always respected within the Group and serves as the standard of behavior for our employees.
• Our Board of Directors is responsible for establishing a system to ensure that our subsidiaries are managed lawfully and appropriately and that management matters are shared between our subsidiaries and our company, and for continually enhancing and strengthening this system, based on the recognition that our company is a global company with subsidiaries both in Japan and overseas.
• Our Board of Directors, as the final decision-making body regarding important business operations of the Company, recognizes that its primary role and responsibility is to set the Company's strategic direction. In order to fully fulfill its accountability to stakeholders, the Board of Directors will conduct constructive and fair deliberations on specific business strategies and plans, etc., and make decisions based on the strategic direction.
• The Board of Directors of the Company considers that one of its primary roles and responsibilities is to create an environment that supports appropriate risk-taking by the Company's executive Board of Directors. While welcoming proposals based on a sound entrepreneurial spirit from the executive Board of Directors, the Board of Directors will thoroughly consider such proposals from multiple perspectives from an independent and objective standpoint in order to ensure accountability, and will respect the prompt and decisive decision-making of the executive Board of Directors when implementing approved proposals.
• The Board of Directors of the Company delegates to the Representative Director and President the execution of matters approved by the Board of Directors as important business execution of the Company and other matters that arise as part of daily operations. Based on the delegation by the Board of Directors of the Company, the Representative Director and President delegates authority to the decision-maker specified in the Decision-Making Authority Regulations depending on the level of risk of the matter, and executes the business.
• The Company has adopted an executive officer system to enhance and streamline the business execution system of the Board of Directors. Executive officers who directly supervise and direct the Group's domestic and overseas companies and divisions are appointed by the Board of Directors and perform the responsibilities set by the Board of Directors. When the Board of Directors appoints executive officers and nominates candidates for the Board of Directors and Auditors, based on recommendations from the Representative Board of Director President, the Board of Directors identifies the skills that each person should possess in light of the management strategy, and then makes a comprehensive judgment, taking into consideration the specialist knowledge, experience, and ability of the nominee, as well as their personality, popularity, legal compliance, morality, and ethics, and determines the candidates in a way that balances diversity, including gender, internationality, work history, and age, with appropriate size. In addition, when making a judgment, the target person may be asked to attend the Board of Directors. In addition, a skills matrix that lists the knowledge, experience, and abilities of each Board of Director (candidate) is disclosed in the Notice of General Meeting of Shareholders.
• The Board of Directors of the Company will appropriately evaluate the Company's business performance, etc., and will reflect that evaluation in personnel decisions, such as the appointment and dismissal of executive Board of Directors and executive officers, through fair and transparent procedures, including through deliberations at the Board of Directors.
• Our Board of Directors will explain the reasons for appointing the Board of Directors and Audit & Supervisory Board Members in the business report.
• The Company has established a policy for determining the remuneration of each Board of Director. The content of the remuneration of each Board of Director is determined by consulting the Board of Directors on a remuneration determination method that is based on an appropriate level taking into account each director's responsibilities and is within the remuneration limit resolved at the General Meeting of Shareholders. The Company then fully respects the opinions of independent outside directors regarding the remuneration proposal.
• The compensation system will be linked to shareholder interests so that it will function adequately as an incentive to sustainably increase corporate value. Compensation for each Board of Director will be determined by comparative consideration of the levels of executive compensation data from external research institutions, and an appropriate level will be set based on each job's responsibilities. Compensation for executive Board of Directors will consist of fixed compensation, performance-linked compensation, non-monetary compensation, etc. Outside Board of Directors who perform supervisory functions will receive only fixed compensation in consideration of their duties.
• Our Board of Directors leaves the decision on the compensation of each Director to the Representative Director/President, and does not implement performance-linked compensation or grant treasury stock. However, in order to prevent bias, we have established a system whereby compensation can be reviewed at any time in light of any advice or suggestion made by an Outside Board of Directors, a Full-time Audit & Supervisory Board Member, or the Audit & Supervisory Board if the compensation is inappropriate.
• Our Board of Directors will establish a system for dealing with issues raised by the corporate auditors or accounting auditors.
• Our Board of Directors will closely monitor and appropriately oversee the development of our human resources and the training of future executives.

(2) Composition of the Board of Directors

• Our Board of Directors is the body that oversees management and is the final decision-making body, and is therefore composed of one or more executive Directors and multiple external Directors.

(3) Internal control system

• In order to ensure swift business execution under appropriate control, our Board of Directors will determine basic policies regarding the establishment of an internal control system and, as a global company, will oversee the establishment and operation of the system at our company and its subsidiaries both in Japan and overseas, utilizing the Internal Audit Department for its operation.

(4) Conducting and disclosing analysis and evaluation of the effectiveness of the Board of Directors

• Our Board of Directors, which includes the external Board of Directors and external auditors, makes important management decisions through lively discussions and deliberations, and strives to demonstrate effectiveness. We will consider disclosing the results of the analysis and evaluation of the effectiveness of the Board of Directors as a whole, as necessary in the future.

3. Board of Corporate Auditors

• In carrying out its roles, such as auditing the Board of Directors' execution of their duties, and exercising its authority to appoint and dismiss external accounting auditors and to select and pay audit fees, the Company's Audit & Supervisory Board is fully aware that it has been entrusted by shareholders and other stakeholders with overseeing overall management, and is responsible for making appropriate judgments from an independent and objective standpoint.
• The Board of Corporate Auditors of the Company will endeavor to establish a system to ensure the effectiveness of audits.
• The Board of Corporate Auditors of the Company will cooperate with the Internal Audit Office to exchange opinions and information as appropriate and strive to improve the effectiveness of audits.
• Our Board of Auditors will provide the External Board of Directors with information obtained through its audit activities.
• The Board of Corporate Auditors of the Company will take the following measures to ensure proper audits by accounting auditors.
  • The Audit & Supervisory Board of the Company ensures a system that enables the accounting auditors to conduct sufficient and appropriate audits so that they can conduct high-quality audits.
  • The Board of Corporate Auditors of the Company formulates evaluation criteria and appointment criteria for the proper evaluation of accounting auditors, and confirms their independence and expertise.
  • The Audit & Supervisory Board of the Company will request the Accounting Auditor to explain whether the Accounting Auditor complies with the quality control standards necessary to properly conduct accounting audits.
  • The Board of Corporate Auditors of the Company will ensure a response system when the accounting auditor discovers fraud and requests an appropriate response, or points out deficiencies or problems.
  • The Board of Corporate Auditors of the Company will hold interviews with the Accounting Auditor, the Company's Representative Director and President, and the Chief Financial Officer as appropriate.
  • The Board of Corporate Auditors of the Company holds regular meetings with accounting auditors.

4. Board of Directors and Auditors

(1) Board of Directors for Business Execution

• The Company's executive Board of Directors, as members of the Company's Board of Directors, will understand the responsibilities of the Board of Directors and perform their duties in the common interest of the Company and its shareholders while ensuring appropriate collaboration with stakeholders.
• The Board of Directors who execute our business will always practice our company's philosophy and motto, have a high level of legal compliance, morality and ethics, and perform their duties while maintaining a fair and comprehensive perspective.
• Our Board of Directors, which executes our business, will not neglect to collect information necessary for the execution of our business.
• The Board of Directors responsible for the execution of our business recognizes that the announced performance forecast is one of our commitments to shareholders, and will make every effort to achieve it. If we end up failing to achieve our targets, we will thoroughly analyze the reasons for this and the measures we have taken, provide an explanation to shareholders, and reflect that analysis in our future plans.
• The Board of Directors, which executes our business, will constantly strive to improve themselves in order to properly fulfill their roles and responsibilities.

(2) External Board of Directors

• As members of the Company's Board of Directors, the Outside Board of Directors will be responsible for overseeing the execution of business by the Executive Board of Directors, in particular, and for providing advice to the Executive Board of Directors and reflecting the opinions of the Board of Auditors and stakeholders in the proceedings of the Board of Directors, from the perspective of promoting sustainable growth of the company and increasing corporate value over the medium to long term, based on their own knowledge about improving profitability and capital efficiency, etc., for the common benefit of the Company and shareholders, while ensuring appropriate collaboration with stakeholders.
• Our Outside Board of Directors will hold regular meetings with other Outside Board of Directors and the Audit & Supervisory Board to exchange information about our management.
• Our External Board of Directors may request information from us at any time as necessary to fulfill their responsibilities.
• The independence criteria for the Independent Outside Board of Directors conform to the standards set by the Tokyo Stock Exchange.
• Our external Board of Directors will constantly strive to improve themselves in order to properly fulfill their roles and responsibilities.

(3) Audit & Supervisory Board Member

• As a member of the Board of Corporate Auditors of the Company, the Audit & Supervisory Board Members of the Company understand the responsibilities of the Board of Corporate Auditors of the Company, ensure appropriate cooperation with stakeholders, and audit for the common interests of the Company and shareholders. Performs duties as a role.
• The Company's Audit & Supervisory Board Members have the legal, financial, accounting, management, and other specialized knowledge required of an Audit & Supervisory Board Member, as well as a high level of awareness of legal compliance, morality, and ethics, and have a fair and comprehensive perspective. Do your business without forgetting.
• Our corporate auditors will conduct operational and accounting audits in accordance with laws and regulations, and in order to fulfill their roles, will actively and proactively exercise their authority and express their opinions at meetings of the Board of Directors or to individual Board of Directors.
• Our Audit & Supervisory Board Members will conduct audits to verify the legality and appropriateness of the execution of duties by the Board of Directors and the fulfillment of the supervisory duties of the Board of Directors.
• Our Audit & Supervisory Board Members audit the performance of the Board of Directors' duties, appoint and dismiss the accounting auditor, and exercise authority over audit fees.
• Our auditors will monitor and verify the decision-making of the Board of Directors and the establishment and operation of the internal control system.
• Our corporate auditors always strive for self-improvement in order to properly fulfill their roles and responsibilities.

(4) Full-time Audit & Supervisory Board Member

• Among the corporate auditors of the Company, full-time corporate auditors actively strive to improve the audit environment, including exercising investigative authority based on laws and regulations, based on their characteristics as full-time employees, and are important within the company such as the management meeting. We will endeavor to collect in-house information by attending various meetings and visiting domestic and overseas companies.
• Our full-time corporate auditors share the information they have learned in performing their duties with other corporate auditors.

(5) Outside Audit & Supervisory Board Member

• Among our corporate auditors, the outside corporate auditors enjoy a relatively high level of independence and therefore are able to provide fairer and more appropriate opinions to the Board of Directors.
• Our outside corporate auditors independently exercise their authority to investigate in accordance with laws and regulations and strive to collect information within the company.

(6) Support system

• In order to enable the Board of Directors and Audit & Supervisory Board Members to have sufficient discussions at the Board of Directors meetings, the Company will establish a Board of Directors Secretariat, which will be operated as follows:
• Regarding the holding of Board of Directors meetings, an annual meeting schedule will be prepared before the start of the fiscal year to ensure that meetings are easily attended.
• Appropriate materials and facilities will be prepared to enable sufficient discussion at the Board of Directors meeting.
• When the resolution involves the approval of a substantial amount of documentation, materials relating to the agenda item will be distributed a reasonable number of days prior to the date of the Board of Directors meeting.
• Without limiting the above, the Board of Directors Secretariat will provide the Board of Directors and Auditors with information necessary for their decision-making in a timely manner.
• When the Board of Directors and Audit & Supervisory Board Members are requested to provide information necessary for deliberations at the Board of Directors meetings, each division of the Company will proactively support them by appointing a person in charge, etc.
• The Company will provide regular opportunities for the Internal Audit Department, Board of Directors, and Audit & Supervisory Board Members to exchange information with each other.
• The Company will bear the costs of obtaining advice from external experts when requested by the Board of Directors and Audit & Supervisory Board Members.

(7) Training policy

• The Company will provide the Board of Directors and Audit & Supervisory Board Members with the necessary training and information in a timely manner so that they can properly fulfill their roles and responsibilities.
• If necessary, we will give lectures and training on our business content, management philosophy, management policy, law, accounting, and corporate governance.
• The Board of Directors will provide an opportunity to explain the progress and challenges of our business every month.