Basic Concept for Corporate Governance

In our approach to corporate governance as the “foundation for achieving sustainable growth,” our company began full-scale initiatives in 2001 and has continued to implement ongoing improvements up to the present day. This journey can be broadly divided into four major stages.

The first stage initiated a corporate governance reform. Initiatives to separate the functions of management oversight and execution included the introduction of the corporate officer system. At the second stage, we implemented various initiatives to create the framework of our corporate governance such as the establishment of the Nomination & Remuneration Advisory Committee (formerly, “the Nomination Advisory Committee”) and the appointment of External Directors. In this way, we have set out objective quantitative and pro forma standards for corporate governance. We enhanced the quality of corporate governance by rigorously employing this framework and actively disclosing the outcomes. At the third stage, in order to achieve sustainable growth, we concentrated authority in the CEO while establishing a system in which the Board of Directors and its committees supervise management execution through rigorous accountability and continuous evaluation. Through this framework, we realized “tense collaboration,” with both governance and execution functioning in a well-balanced manner.

We have entered the fourth stage of our corporate governance. The Company has transitioned to a Company with Three Statutory Committees in order to ensure effective implementation of its strategies even in the increasingly volatile business environment by clearly separating the functions between management oversight and execution of the Company’s business while strengthening each of these functions. The oversight function of the Board of Directors will be reinforced by focusing on determining the basic management policy and management strategy while overseeing the implementation thereof in order to accelerate the overall business execution of the Company in a rapidly changing environment. Nominating Committee and Compensation Committee, each composed solely of Independent Directors are responsible for appointment of Directors and remuneration of Directors and Corporate Executive Officers with fairness, transparency, and objectivity for successful implementation of our business strategy. Furthermore, with the strengthened function of the Internal Audit Department, the Audit Committee conducts highly effective audit, whereas Corporate Executive Officers and Executive Officers are responsible for the execution of the Company’s business through an accelerated decision-making process under the direct supervision of Representative Corporate Executive Officers.
Furthermore, beginning in fiscal year 2025, an Independent External Director has served as Chair of the Board in order to further enhance the transparency and objectivity of the Board of Directors.

The Company’s Articles of Incorporation set the maximum number of Directors at fourteen (14). The optimum number of Directors for appropriate management oversight is determined based on this upper limit and such factors as the Company’s business portfolio and scale.
In addition, from the perspective of ensuring of effectiveness of the oversight function, in principle, the majority of the Board of Directors shall be composed of Independent External Directors.

The Company believes that its Board of Directors should be composed of Directors with various viewpoints and backgrounds in addition to diverse and sophisticated skills, required for effective oversight of the execution of business and important decision making.
When selecting candidates, we place importance on ensuring diversity, taking into account not only gender equality, but also other attributes such as age, nationality, race, personality, and insights and experiences in various fields related to management. In addition, the Company has set a certain maximum term of office for External Directors in order to reflect their independent views to the management of the Company.

The Company establishes its own “Criteria for Independence of External Directors” (the “Criteria”) with reference to foreign laws and regulations and listing rules, etc. for the purpose of making objective assessment on the independence of the External Directors.
In connection with selecting candidates for External Directors, the Company places emphasis on a high degree of independence of the candidate from the viewpoint of strengthening corporate governance and accordingly, the Company makes judgment on whether the candidate has a high degree of the independence in accordance with the Criteria.

The selection of Director candidates is considered and decided by the Nominating Committee, which consists of five（5）Independent External Directors. This process aims to build a Board of Directors and committees that contribute to the realization of the company's mission and the enhancement of corporate value.

Given the CEO’s central role as the head of management, the Nominating Committee recognizes the CEO succession plan as a top priority for ensuring Shiseido Group’s sustainable growth and enhancing corporate value. The committee conducts in-depth discussions from a medium- to long-term perspective, assessing the qualifications and requirements for the next CEO, successor selection criteria, and development policies. It carefully evaluates potential successor candidates, designs an effective development plan to enable them to fully demonstrate their leadership capabilities, and presents the plan to the Board of Directors.
Kentaro Fujiwara assumed the position of CEO in January 2025. Subsequently, the Nominating Committee began its deliberations in the same year on the succession plan for the next CEO following Kentaro Fujiwara. These deliberations include developing a success profile outlining the skills and experience required of the next CEO, identifying internal and external candidates, conducting assessments of candidates by external experts, and discussing development policies. The Committee reports on this in-depth consideration to the Board of Directors and provides its recommendations. In parallel with the standard CEO succession plan, the Nominating Committee also considers an emergency CEO succession plan in the event of unforeseen circumstances affecting the current CEO and presents it to the Board of Directors. The committee will continue to engage in systematic, thorough discussions to ensure that the most appropriate candidate is selected from among all internal and external candidates.

The Company provides new Directors with training regarding legal and statutory authorities and obligations, etc. In addition, when a new independent External Director come on board, the Company provides training regarding the industry it operates in, its history, business overview, business strategy and material risks, etc.
Furthermore, to promote understanding of the Company among independent External Directors, they are provided with such opportunities as attending internal meetings and lectures by external experts on annual business strategies and business management issues.