Measures to Strengthen the Effectiveness of Corporate Governance

The Company conducts an annual evaluation on the effectiveness of the Board of Directors, and strives to continuously enhance the functions and effectiveness of the Board of Directors from the two viewpoints of “enhancing trust from stakeholders (creating social value)” and “improving organizational performance (enhancing corporate value).” We work on the improvement measures for issues identified by the evaluation, and confirm the status of improvement during the evaluation of the Board of Directors in the following fiscal year, while at the same time continuing to confirm the evaluation of the current issues.

Evaluation Process

Starting from the fiscal year ended March 31, 2022, we have changed to a method of analyzing and/or evaluating the effectiveness of the Board of Directors using a third-party evaluation design (including, among other things, preparation and analysis of questionnaire survey as well as comparison with other companies, identifying issues, drafting action plans).
The analysis and/or evaluation based on the questionnaire survey and interviews using the third-party evaluation design is conducted every other year. During the interval year, we focus on initiatives to improve the issues identified from the questionnaire survey, while at the same time conducting evaluation through monitoring and by collecting opinions at the Independent External Auditors & Directors Meeting for the Effectiveness of Board of Directors.

As for the Evaluation on Effectiveness for the current fiscal year (ended March 31, 2024), we updated the evaluation design using a third party aiming “to secure objectivity and extract issues from the viewpoint of external parties,” and set new evaluation items as follows.

a. Confirmation of the status of improvement measures of the current fiscal year for the issues identified based on the results of the Evaluation on Effectiveness for the previous fiscal year (ended March 31, 2023)
b. The way the Board of Directors should be for the improvement of the medium- and long-term corporate value, etc., including the discussion about the revision of the medium-term management plan announced in November 2023, considering the severe management environment surrounding the Group these days We conducted a questionnaire survey to all of the Directors and Audit and Supervisory Board Members.

Then, with the interview with a third party and the Secretariat of the Independent External Auditors & Directors Meeting for the Effectiveness of Board of Directors, we scrutinized their answers of the questionnaire and their awareness of issues and asked their opinions on the future roles and responsibilities of Directors and the improvement measures to enhance the effectiveness of the Board of Directors.

The evaluation items of the questionnaire survey are as follows:

a. roles and/or responsibilities of the Board of Directors
b. structure of the Board of Directors
c. quality of discussions (agendas, content of materials, etc.)
d. constructive dialogues with stakeholders

As mentioned above, we analyzed the answers and extracted issues based on a third party’s advice, and consolidated improvement measures Then, the improvement measures are discussed at the Independent External Auditors & Directors Meeting freely, and recommendations are provided to the Board of Directors.

Evaluation Results of Effectiveness and Progress on Initiatives for Improvement

With the deliberation by the Board of Directors based on the answers to the questionnaire survey and the opinions collected through the interview, we confirmed that deep and quality discussion is carried out by the Board of Directors of the Company, and the effectiveness is secured.

The reasons why we confirmed that the effectiveness is secured are as follows.

a. External Directors (Independent) and External Audit and Supervisory Board Members (Independent) are engaged in activities to understand the Company’s business outside of the Board of Directors, such as the inspection of business and the opportunity to interact with employees.
b. The Board of Directors, of which the majority is composed of External Directors (Independent), has open and lively discussions based on their knowledge and management experiences gained outside of the Company.
c. For the revision of the medium-term management plan, deep deliberations are made focusing on capital efficiency.

Assessments of the Effectiveness of the Board of Directors and Improvement Measures

	Evaluation Result (Issues and Concerns)	Progress/Plan of Initiatives for Improvement
Previous Fiscal Year (ended March 31, 2023)	Allocation of more time to the consideration of important business matters, such as medium to long-term strategies, and at the same time, utilization of knowledge of External Directors (Independent) and promotion of more active discussion at the meetings of the Board of Directors	Securing sufficient time for the discussions from various viewpoints based on the knowledge of External Directors (Independent) during the process of formulating the revised medium-term management plan as well as their and active involvement in the formulation process (Note: For the details of discussions regarding the revision of the medium-term management plan, please refer to the WACOAL HOLDINGS INTEGRATED REPORT 2023 “Interview with an External Director” (From P.59, the link below). https://www.wacoalholdings.jp/en/ir/pdf/e202320.pdf Discussion about the measures to be elaborated, such as the deep dive of the measures by regions regarding the direction of the overseas business described in the revised medium-term management plan Enhancement of the opportunities to provide information to the Board of Directors, etc. due to the rising importance of brand and promotion strategies for the domestic business
Previous Fiscal Year (ended March 31, 2023)	Further improvement in the quality of deliberations based on communication with our employees and inspection of local business offices in order to understand the reality of business conditions as well as risks and opportunities	Implementation of the visits and inspection trips to stores, distribution centers, domestic and foreign operation sites, factories, etc. to properly respond to the changes in the environment surrounding the business We continued to set up opportunities for communicating with the Independent Officers, Corporate Officers and managers.
Current Fiscal Year (ended March 31, 2024)	Arrangement of the system to make sure to report the status and results of the matters resolved and executed, such as the progress of the medium-term management plan, and work on the amendment of the plan timely and adequately if required	Establishment of the opportunities to report quarterly the progress of each measure of the revised medium-term management plan and other important matters to be reported as a general rule
	Reinforcement of the distribution of meeting materials in advance and the improvement of the quality of discussion by clarifying the argument of the materials	Promotion of the effort to improve the quality of discussions by setting up a unified format for meeting materials and attachment of an executive summary that specifies the background and argument
	Arrangement of the system that allows us to identify risks and opportunities and take the risks adequately accommodating to the changes in the business environment	Specifying the risks and opportunities regarding the agenda and matters to be resolved in meeting materials Reinforcement of the system that allows us to select risks by identifying risks and selecting measures from the management perspective, and continuously monitor and manage risk-taking projects
	Development of a succession plan including the selection of candidates and nurturing process and the implementation of monitoring	For the positions that are Corporate Officer or higher, we have promoted the establishment of succession plan road map from the medium-to long-term viewpoint defining the image of an ideal leader and candidates’ appointment and development processes as well as the creation of the human resources nurturing program. Our plan is to further strengthen the supervisory and/or advisory functions of our Board of Directors by further utilizing the knowledge of External Directors (Independent), while continuing to implement the initiatives described above.

Revisions in Wacoal’s Corporate Governance System

1977	Wacoal issues ADRs*(American Depositary Receipts)	Wacoal becomes the eighth Japanese company to issue ADRs. Upon issuance, the SEC (U.S. Securities and Exchange Commission) requires consolidated financial statements and accounting reports in accordance with U.S. GAAP.
2002	Introduction of the corporate officer system → Number of directors: 13 → 9	In June 2002, the Company employs a corporate officer system in order to delegate authority and clarify responsibility more appropriately and efficiently. At the same time, the number of directors is reduced.
2005	Establishment of a pure holding company	The Company transfers to a pure holding company system to facilitate decision-making on Groupwide strategy, to optimize the allocation of resources, and to clarify the responsibilities and authority of operating companies so that they can execute operations flexibly.
2005	Appointment of outside officers	To promote the fairness and independence of the Board of Directors and the Audit & Supervisory Board, the Group increases the number of outside directors by two members and the number of outside Audit & Supervisory Board members by one member.
2007	Establishment of the Executive Compensation Advisory Committee → Number of committee members (including outside directors): 4	Regarding the appointment, promotion, and remuneration of the directors and executive officers, the Executive Compensation Advisory Committee, chaired by the director of the Administrative Department, is established with outside directors included as members.
2010	Registration of all outside officers with the Tokyo Stock Exchange as independent officers → Number of independent officers registered: 6	All outside directors and outside Audit & Supervisory Board members are registered with the Tokyo Stock Exchange as independent officers.
2015	Establishment of the Independent Outside Officers Meeting	The Independent Outside Officers Meeting is established with the intention of sharing information about improving corporate governance, meetings of the Board of Directors, internal audits, etc. The committee includes independent outside officers.
2018	Establishment of the Executive Compensation Advisory Committee and the Executive Nomination Advisory Committee	The Executive Compensation Advisory Committee, which was established in 2007, becomes the Executive Compensation Advisory Committee and the Executive Nomination Advisory Committee.
2021	Introduction of Compensation Framework in the Form of Restricted Stock	We have introduced a restricted stock compensation plan for Directors (excluding outside directors)and discontinue the share-based stock options, for further sharing of price fluctuation risk with our shareholders and increasing incentives to contribute to the improvement of share price and corporate value.
2022	Revised the ratio of base compensation and stock compensation	Compensation of Officers consists of "base compensation," "performance-based bonuses," and "Transfer-restricted stock compensation. Revised the ratios of stock compensation to basic compensation so that stock compensation accounts for a larger percentage of the compensation of officers as they rise in rank.
2024	Introduction of Performance-Linked Stock Remuneration Plan	We have introduced a Performance Share Unit for directors (excluding External directors) in order to clarify the link between compensation and company performance and our share value, and to further increase motivation to contribute to improving our corporate value.

* In 2013, Wacoal stopped listing ADRs on the U.S. NASDAQ market and de-registered with the SEC.