Corporate Governance

In April 2023, we set “Passion in Creating Tomorrow” as our PURPOSE. At the same time, taking a backcasting perspective from our long-term vision, we formulated our mid-to-long-term business plan Beyond the OCEAN and, as a mid-term milestone,our mid-term business plan, NEXUS-26.

Furthermore, to realize these goals and achieve the SDGs(Sustainable Development Goals), we are promoting sustainability management Groupwide.

As a foundation for this, we believe it is important to comply with laws and regulations as well as their spirit, and to practice fair and transparent management, and so we are working to strengthen our corporate governance to meet our stakeholders’expectations. Specifically, we will 1. ensure the rights and equality of shareholders, 2. collaborate appropriately with stakeholders other than shareholders, 3. ensure appropriate information disclosure and transparency, 4. fulfill the roles and responsibilities of the Board of Directors appropriately, and 5. conduct constructive dialogue with shareholders.

To further enhance the fairness, transparency, and objectivity of the decision-making process of the board, we are appointing at least one-third of the board as independent outside directors, as well as one female director, to create a management structure with a greater awareness of gender. Additionally, we are implementing initiatives to improve governance, such as establishing a Nomination & Remuneration Committee with a majority of outside directors and reducing policy shareholdings.

Upon approval at the 100th Annual General Meeting of Shareholders held on June 15, 2024, the company has transitioned from a “company with a Board of Corporate Auditors” to a “company with an Audit and Supervisory Committee” for the purpose of strengthening the supervisory function of the Board of Directors and further enhancing the corporate governance system by making Audit & Supervisory Committee members, who are responsible for auditing the execution of duties by board members, members of the Board of Directors. The Board of Directors places importance on fairness, objectivity, and transparency, and has appointed four Outside Board Members who are independent of the company. The Outside board members provide a variety of advice and recommendations on the overall management of the company.The Audit & Supervisory Committee, which audits and supervises the execution of duties by board members, consists of four members, including three outside board members. The company has established a system to ensure that audits by the Audit & Supervisory Committee are conducted effectively by attending major meetings and regularly exchanging opinions with board members who are not Audit & Supervisory Committee members.

[Board Members and Board of Directors]
The Board of Directors, consisting of all board members, meets once a month in principle to make optimal decisions for the entire company and all group companies, and to supervise the execution of duties by board members. Board members who are not Audit & Supervisory Committee members, with the exception of the Representative Director and outside board members, serve concurrently as Executive Officers in order to practice business execution on their own.

[Audit & Supervisory Committee Members and Audit & Supervisory Committee]
The Audit & Supervisory Committee, which consists of all board members who are Audit & Supervisory Committee members,meets once a month in principle to audit the execution of duties by board members who are not Audit & Supervisory Committee members from the viewpoint of legality and validity.

[Nomination & Remuneration Committee]
The Nomination & Remuneration Committee meets twice a year in principle to ensure the objectivity and transparency of the company’s management through deliberation and confirmation of personnel matters and the compensation of board members, and reports to the Board of Directors on proposals to be submitted to the General Meeting of Shareholders concerning the appointment and dismissal of candidates for board members, including outside board members.

We have conducted the following analysis and evaluation of the Board of Directors in order to improve its effectiveness.

(1) Analysis and evaluation
After conducting a questionnaire on the composition, operation,agenda, etc. of the Board of Directors, we compile opinions and recommendations on the background and causes of recognized issues and the direction for improvement, and report them to the Board of Directors for discussion.
Evaluation method: Self-evaluation by questionnaire Evaluation target: All board members including outside board members
Evaluation items:
  (1) size and composition of the Board of Directors,
  (2) operation of the Board of Directors,
  (3) agenda of the Board of Directors, and
  (4) support system for the Board of Directors

(2) Summary of Results
It is our assessment that the size, composition, agenda content,and other items of the Board of Directors are generally appropriate, and that its effectiveness is ensured. In the other
hand, we have identified additional issues in securing sufficient time for deliberation on important topics and in providing information to outside board members. In order to further improve the effectiveness of the Board, we will work on improvements, such as securing more time for deliberation on important themes in management strategy, and providing more information to outside board members to stimulate more effective discussions.

We have established a Nomination & Remuneration Committee to ensure fairness and transparency in the nomination of board members and the determination of their remuneration. A majority of the members of the Nomination & Remuneration Committee are independent outside board members. The Board of Directors makes decisions on the nomination and remuneration of board members and executive officers, respecting the opinions of the Nomination & Remuneration Committee.

■ Board Member Selection Criteria and Procedures
The committee considers factors such as the previous year's performance, diversity, and necessary skills, and reports its deliberations to the Board of Directors.

■ Activity in FY2024
No. of times held : 2

■ Committee composition
Outside Board Member Osamu Motojima(Chairman)
Outside Board Member Masako Hayashi
Outside Board Member Tomoyuki Shinkai
Outside Board Member Kan Kakiuchi
Chairman, Member of the Board Shinya Ogawa
President, Member of the Board Tetsushi Ogawa

■ Content of deliberations
・ Election of board member candidates
・ Review of performance-linked remuneration system

Under our remuneration system, remuneration for board members and corporate officers is composed of basic remuneration (fixed amount), performance-linked remuneration, and stock-based remuneration. With respect to performancelinked remuneration, we have incorporated a mid-to-long-term perspective and adopted consolidated ratio of operating income to sales and consolidated return on equity as indicators. From FY2023, we have incorporated sustainability indicators such as employee engagement improvement, climate change, resource recycling, and water resource conservation into individual performance review items to enhance the effectiveness of sustainability management.

In addition, we provide remuneration to targeted board members and corporate officers for the grant of restricted stock,as an incentive to improve our corporate value over the medium to long term, as well as to promote further value sharing with shareholders. Non-executive board members are only paid the basic remuneration (fixed amount) because they are responsible for supervising and auditing management in an independent capacity.

In June 2024, the company transitioned to a company with an Audit & Supervisory Committee in order to strengthen the supervisory function of the Board of Directors and further enhance the corporate governance system. The Audit & Supervisory Committee is composed of a total of four members,one full-time Audit & Supervisory Committee member and three outside Audit & Supervisory Committee members. A staffed Audit & Supervisory Committee Members’ Office has been established to assist them.

The Audit & Supervisory Committee receives audit reports etc. from the Internal Audit Department and gives instructions to the Internal Audit Department on audit policies, priority audit items, etc. as necessary. The outside Audit & Supervisory Committee members provide advice at meetings with the Board of Directors,etc. using their expertise as professors of universities and professional institutions, lawyers, or certified public accountants.

Audit & supervisory committee members regularly communicate with accounting auditors in order to confirm the appropriateness of accounting audits and share the results of operational audits. In addition, they regularly exchange opinions with representative directors, accounting auditors, and the internal audit department on issues to be addressed by the company, risks surrounding the company, important audit issues,etc., in order to ensure the effectiveness of audits.

The Audit & Business Process Improvement Dept., which is our internal audit department, conducts internal audits, checks how internal controls are performed by each department, finds problems and makes recommendations for improving them,takes all possible measures to ensure that internal controls under the Financial Instruments and Exchange Act are audited properly, while making internal controls more effective by expanding the internal audit range to include other business operations.

Based on our Basic Policy on Internal Control Systems, we endeavor to expand and strengthen internal control systems across the entire Group, including business entities in Japan and overseas. Specifically, we review reports submitted by all departments, subsidiaries, and other entities implementing our internal control systems or conduct on-site inspections to ensure that our internal control systems, including the system for ensuring the adequacy of financial reporting and the compliance system, are well-developed and utilized in an appropriate and efficient fashion.

As a result, we have determined that the internal control relating to financial reporting is effective, and have obtained the unqualified opinion of an audit corporation that the internal control report dated March 31, 2025 was adequate.