Corporate Governance System

The Company has long been committed to improving the corporate governance through a range of initiatives including the adoption of governance system aligned with the “monitoring board-type system” where the board is putting more focus on oversight responsibilities to ensure transparency and fairness in governance practice, while ensuring effective strategic planning and timely execution thereof. Now, we take this effort a step further, the Company has transited to a Company with Three Statutory Committees in order to maximize corporate value based on resolution of the Ordinary General Meeting of Shareholders held on March 26, 2024.
Under this structure, by clearly separating the functions between management oversight and execution of the Company’s business while strengthening each of these function, the Company ensures effective implementation of its strategies even in the increasingly volatile business environment.
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.

In addition to the above structure, with the recognition that promoting of the Three Lines Model contributes to strengthening corporate governance, the business department on the first line, the function department of the global headquarter and the regional headquarters on the second line and the Internal Audit Department on the third line work together while aiming to promote healthy growth strategies and enhance sustainable corporate value, and establishment and improvement of risk scenarios and risk mitigation activities are continuously carried out.

Of eleven Directors, seven members (64%) are highly independent External Directors who meet the “Criteria for Independence of External Directors” of the Company. Furthermore, of the four internal Directors, two are Directors responsible for business execution and concurrently serve as Corporate Executive Officers, and two are non-executive Directors.
The total number of non-executive Directors, both internal and external, is nine (82%).

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 Company’s Board of Directors is composed of eleven Directors including seven External Directors. The Board of Directors meetings shall be held approximately once a month. It focuses on determining the basic management policy and management strategy, and overseeing the implementation thereof to reinforce the oversight function and accelerate overall business execution of the Company in a rapidly changing environment. In addition, the Board of Directors discusses and decides matters stipulated in laws and regulations, and the Company's Articles of Incorporation as well as matters provided for in the Regulations of the Board of Directors and delegate the authority to decide on other matters to Representative Corporate Executive Officers or Corporate Executive Officers.

We held the Board of Directors meetings 14 times in fiscal year 2023.

In addition to the abovementioned 14 meetings of the Board of Directors, pursuant to the provisions of Article 370 of the Companies Act and Article 26 of the Company's Articles of Incorporation, there was one deemed resolution where a resolution at a Board of Directors meeting is deemed to have been passed.

The Company evaluates the effectiveness of the Board of Directors with the purpose of identifying issues and points to be improved of the Board of Directors, etc. and evolving the Board of Directors into a more effective one.
The Company conducts annual questionnaire surveys and interviews with all Directors to evaluate and analyze the Board of Directors, and the Nomination & Remuneration Advisory Committee. The secretariat of the Board of Directors summarizes, analyses, and identifies issues.
The identified issues and opinions are reported to the Board of Directors, and necessary measures are taken.
In addition, third-party organizations regularly check and evaluate the effectiveness of these assessments to ensure transparency and objectivity.

We conducted the Fiscal year 2022 Effectiveness Evaluation of the Board of Directors for the evaluation period between the previous year's general meeting of shareholders and this year's general meeting of shareholders. The survey focused on the composition aspects such as the diversity of members of the Board of Directors, as well as deliberations and discussion aspects including agenda setting and content of materials and its explanation, operational aspects such as prior distribution of materials and the provision of prior briefings on the agenda, communication aspects such as demonstrating capabilities expected as roles of board members and strengthening of cooperation with Audit & Supervisory Board members and Executive Officers, and how our governance should be.
As a result, although we recognized the effectiveness of the Board of Directors has been ensured, there were opinions and recommendations for further improvement of the effectiveness.

Specifically, lively discussions with enriched diversity of the members of the Board of Directors and prior distribution of materials and briefings at appropriate timing were highly appreciated. On the other hand, we recognize the necessity for more strategic agenda setting to concentrate on discussions on important issues, status updates on the progress of strategy (medium-term strategy and plan), further improvement for prior briefings, materials, and additional information sharing to external directors.

In light of these results, we will continue to make efforts to strengthen the effectiveness of the Board of Directors by setting agenda strategically, preparing easy-to-understand materials which clarifies issues and points, and increasing opportunities for external directors to promote further understanding of the company. In particular, we focus on setting agenda items and enhancing discussions in order to fulfill the roles and responsibilities of the Board of Directors properly.

The measures we have taken so far and the opinions and future efforts to evaluate and improve these efforts in fiscal year 2022 are as follows.

Corporate Executive Officers are responsible for business execution based upon the delegation from the Board of Directors. The Company will expedite decision-making regarding business execution and implementation of business strategies by delegating significant authority to Corporate Executive Officers.

In addition, the Company has established committees to discuss and decide important matters related to business execution of the Company.
The major committees are as follows: